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HomeMy WebLinkAboutFire and Police Employees' Retirement System, City of Baltimore - Public Financial ReportFIRE & POLICE Employees’ Retirement System City of Baltimore, Maryland popular Annual Financial Report A Component Unit of the City of Baltimore, Maryland Year Ended June 30, 2021 2 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 AAbboouutt tthhee FFiirree aanndd PPoolliiccee EEmmppllooyyeeeess’’ RReettiirreemmeenntt SSyysstteemm ((FF&&PP)) The Popular Annual Financial Report (PAFR) summarizes the Comprehensive Annual Financial Report for year ended June 30, 2021. The F&P’s annual report is prepared in accordance with the principles of governmental accounting and reporting promulgated by the Governmental Accounting Standards Board. The PAFR provides you with a general understanding of the F&P’s overall financial condition for the fiscal year ended June 30, 2021. The information in this report does not replace the Comprehensive Annual Financial Report. For more detailed information, please refer to the Comprehensive Annual Financial Report which can be viewed on the F&P website at www.bcfpers.org. If you would like to obtain a copy of the Comprehensive Annual Financial Report, please contact the F&P administrative section at 410-497-7929, Option 3. IInnttrroodduuccttiioonn The F&P would like to give special thanks to Gino Inocentes, Office of Public Information, of the Baltimore Police Department and Stanley J. Jaworski, freelance fire photographer for the photographs in the Popular Annual Financial Report. The Baltimore City Fire and Police Employees' Retirement System (F&P) was established July 1, 1962, by City law and has been amended periodically. The F&P is a contributory, defined benefit plan that covers all sworn uniformed officers of the Baltimore City Fire and Police Departments. Membership in the F&P is mandatory on the first day of employment. The Plan also covers certain Maryland Aviation Administration firefighter/paramedics and certain Maryland Transportation Authority police officers. These State of Maryland employees were grandfathered into F&P plan coverage by State law. The Board of Trustees is responsible for the general administration and the proper operation of the F&P and the enforcement of the provisions in Article 22 of the Baltimore City Code. The Board has a fiduciary responsibility for the management and administration of the F&P. The Executive Director is responsible for the day-to-day operations of F&P. The staff administers the determination and payment of benefits and provides other support services. Board of Trustees 3 Executive Director 4 GFOA Award 4 Funding the F&P 5 Quick Profile 6 Membership Trends 7 Investment Performance 8-9 Financials 10-11 Inside this issue: Popular Annual Financial Contact Information Baltimore Area 410-497-7929 Toll Free 1-888-410-1600 Fax 1-888-443-7008 Email ContactBCFP@bcfpers.org Website www.bcfpers.org Fire and Police Employees’ Retirement System 7 E. Redwood Street, 18th Fl. Baltimore, MD 21202 www.facebook.com/bcfpers 11 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 Member Contributions $31.7mil Amount Contributed by City of Baltimore $150.2mil Amount Contributed by State of Maryland $917,959 Financial Statistics FFiinnaanncciiaallss 10 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 FFiinnaanncciiaallss The information provided on this page indicates total additions (revenues) and total deductions (expenses) for fiscal years ending June 30, 2021, and 2020. Additions to Net Position (Revenues) for the year were $956.9 million, an increase of $793.8 million from the prior year revenues of $163.1 million. The increase in revenues was caused by higher investment earnings that were uniformly up across all asset classes for fiscal year 2021 compared to the prior year. Deductions from Net Position (Expenses) were $273.5 million in the current year, an increase of $5.6 million from the prior year expenses of $267.9 million. The increase in expenses was driven by post-retirement benefit increases, effective January 2021, and increased retirement allowance payments. Employer contributions increased to $151.1 million in fiscal year 2021, up from the employer contributions made in fiscal year 2020. Member contributions increased by $0.3 million in fiscal year 2021 due to the increase in members covered payroll. The net position restricted for pension benefits increased by $683.3 million during the fiscal year from $2,645.5 million at June 30, 2020, to $3,328.8 million at June 30, 2021. The increase in fiscal year 2021 was mainly due to the strong performance across the entire portfolio. 3 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 Peter E. Keith, Esquire, Chairman Partner, Gallagher, Evelius & Jones, LLP Appointed by the Mayor William R. Hudson, Vice Chairman Captain, Baltimore City Fire Department Elected by the active Fire Department members Term expires June 30, 2022 Bill Henry Comptroller, City of Baltimore Ex-officio Robert Cenname Budget Director, City of Baltimore Appointed by Director of Finance Henry Raymond Ex-officio Michael Harrison Commissioner, Baltimore Police Department Ex-officio Arlen Doles Deputy Chief, Baltimore City Fire Department Appointed by Fire Chief Niles Ford Ex-officio Benjamin F. DuBose, Jr. IRS Agent, Retired U.S. Department of Treasury Appointed by the Mayor McKinley E. Smith Sergeant, Baltimore Police Department Elected by the active Police Department members Term expires June 30, 2024 Paul S. DeSimone Lieutenant, Retired Baltimore City Fire Department Elected by the retired Fire Department members Term expires June 30, 2022 Robert A. Haukdal Lieutenant, Retired Baltimore Police Department Elected by the retired Police Department members Term expires June 30, 2024 BBooaarrdd ooff TTrruusstteeeess SSeerrvviinngg BBaallttiimmoorree CCiittyy’’ss PPuubblliicc SSaaffeettyy OOffffiicceerrss This past year has been a remarkable one for the F&P and all of our members. All of us were forced to deal with the devastation of the COVID pandemic, which has caused much suffering throughout the world, including sickness and death of active and retired F&P members, family members, and even F&P staff. We grieve for all who have suffered and died from COVID. Our heartfelt thanks go out to our F&P active members, who have served the City so well during the pandemic and put their lives at risk each day in carrying out their duties. Despite the pandemic and restrictions, the F&P staff worked tirelessly to serve our members throughout the year. Hopefully the coming year will see far fewer COVID-related illnesses and deaths, as the level of vaccinations increases and medical knowledge of how best to combat the virus advances. The past fiscal year was also extraordinary from a financial perspective. Over the past year our highly-diversified investment portfolio earned a positive 29.3% return, the highest annual return ever achieved by the F&P. As a result, in a single year our funded status based on the fair value of assets increased dramatically, from 65.0% to 79.5%. The value of our portfolio as of June 30, 2021 was approximately $3.33 billion, the highest ever. During the fiscal year the F&P paid nearly $268.6 million in benefits to our retired members and their beneficiaries, again the highest amount ever. We should not expect to reap such enormous investment returns in the coming year. Instead, the F&P Board is conservative and we assume that investment returns will be lower over the next decade. The financial markets are volatile and unpredictable. We also continue to face demographic challenges, based upon a reduced number of active employees contributing to our system, increased number of retirees, and longer life spans. Over the past year we again experienced a decline in the number of our active members and an increase in our number of retirees. Despite these challenges, the F&P remains in a strong position. During the fiscal year ending June 30, 2021, the City contributed $150.2 million to the F&P. This was the largest annual contribution ever made by the City. The annual City contribution will continue and it will be challenging for the City to fund these contributions. Our principal long-term goal continues to be to make our plan fully-funded, so that our active members, retirees and beneficiaries will continue to receive their full benefits in the years to come. Peter Keith Board Chairman 4 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 AAwwaarrdd ffoorr OOuuttssttaannddiinngg AAcchhiieevveemmeenntt iinn PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrttiinngg The Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to the Fire and Police Employees’ Retirement System for the City of Baltimore, Maryland for its Popular Annual Financial Report for the fiscal year ended June 30, 2020. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. In order to receive an Award for Outstanding Achievement in Popular Annual Financial Reporting, a government unit must publish a Popular Annual Financial Report, whose contents conform to program standards of creativity, presentation, understandability and reader appeal. An Award for Outstanding Achievement in Popular Annual Financial Reporting is valid for a period of one year only. The Fire and Police Employees’ Retirement System for the City of Baltimore, Maryland has received a Popular Award for the last six years (fiscal years ended 2015, 2016, 2017, 2018, 2019, and 2020). We believe our current report continues to conform to the Popular Annual Financial Reporting requirements, and we are submitting it to GFOA to determine its eligibility for another Award. On behalf of the Fire and Police Employees’ Retirement System (F&P) staff, I am pleased to present our Popular Annual Financial Report (PAFR) for fiscal year ended June 30, 2020. The PAFR illustrates the recent performance of the F&P and it is my hope that the PAFR will help members to better understand the overall financial health of the F&P. The COVID-19 pandemic continues to be a challenge, which requires all of us to think and act in new ways. I continue to remain in close communication with NEPC, the F&P’s investment advisor, and managers to determine any allocation shifts or adjustments to our investment lineup, as the COVID-19 crisis lingers exposing both areas for improvement and areas of opportunity. As such, I have pivoted the F&P investment portfolio where necessary. The portfolio’s rate of return of 29.3% was slightly below the median of 29.4% which ranked the F&P portfolio in the 25th percentile of the Investment Metrics Public Defined Benefit > $1 Billion Universe at June 30, 2021. The three-year, five-year, and ten-year performance numbers for the portfolio were 10.9% which ranked in the 52nd percentile, 10.7% which ranked in the 67th percentile, and 8.4% which ranked in the 65th percentile, respectively. The staff of the F&P is dedicated to the entire membership. It is an honor and a pleasure to serve the brave men and women of the Baltimore Police Department and Baltimore City Fire Department who put their lives on the line each day for the citizens of the City of Baltimore. While the membership protects the community, it is the job of the F&P to protect the members, both active, retired and their beneficiaries. I hope you find the information presented in this report helpful in understanding the F&P as we look forward to continuing to secure the financial futures of our membership. N. Anthony Calhoun Executive Director SSeerrvviinngg BBaallttiimmoorree CCiittyy’’ss PPuubblliicc SSaaffeettyy OOffffiicceerrss 9 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 IInnvveessttmmeenntt PPeerrffoorrmmaannccee Over the last 10 years, BCFPERS Defined Benefit Plan's Investment Portfolio has increased 56% of its size from $2.13 billion to $3.33 billion. The F&P Board of Trustees cautiously undertook the challenging task of achieving its long-term risk and return objectives in compliance with the system’s investment policy. Stocks 56% - Historically, stocks have provided nearly 10% over the long term compared to U.S. Treasuries at 5%. Stocks make us part owner and beneficiary of many successful companies around the world. Bonds 13% - Bonds can contribute an element of stability to almost any portfolio. They are a safe and conservative investment, and provide a predictable stream of income. Private Equity 16% - Although providing capital to fund private companies seemed riskier than other investments, it offers us the opportunity of generating higher returns while improving portfolio diversification. Real Estate 8% - Purchasing future income stream from property can offer advantages over other types of investments, including potentially higher returns, stability, inflation hedging and diversification. Hedge Funds 7% - An alternative investment that brings the possibility of higher returns that are uncorrelated to the stock and bond markets. 8 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 IInnvveessttmmeenntt PPeerrffoorrmmaannccee The F&P’s investment policy is to preserve the capital value of the F&P adjusted for inflation; to ensure adequate liquidity to meet benefit liabilities as they fall due; to meet the actuarial interest rate assumptions over the longer term while maintaining appropriate risk levels; and to exceed the investment return by the astute management of F&P assets. The F&P’s investment policy is designed to provide broad diversification among asset classes in order to maximize returns at a prudent level of risk. In addition, asset allocation ranges, target allocations and a process of periodic rebalancing are used to maintain compliance with policy. The long- term expected rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Within each asset class, the Board of Trustees employ several investment managers to further diversify the investment approach and to minimize style biases. The Trustees may employ both active and passive investment strategies to obtain the desired asset allocation mix in a cost effective and efficient manner. 5 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 FFuunnddiinngg ooff tthhee FF&&PP The most important information for any retirement system is its level of funding. If the funding level is adequate, the ratio of total accumulated assets to total liabilities will be larger and more funds will be available for investment purposes. More importantly, an adequate funding level assures the membership that their future retirement benefits are secure. The F&P’s funding objective is to meet benefit obligations through investment income, employer contributions and member contributions. The earnings assumption rate for FY 2021 was 7.0% as of June 30, 2021, the date of the F&P’s last actuarial valuation. The F&P’s AVA funded ratio, the ratio of the actuarial value of assets over liabilities, increased from 69.1% as of June 30, 2020 to 71.6% as of June 30, 2021. Similarly, the F&P’s Plan Net Fiduciary Net Position as a percentage of the Total Pension Liability increased from 65.0% as of June 30, 2020 to 79.5% as of June 30, 2021. Both ratios are calculated using the Entry Age Normal Cost Method. As a result of the actuarial valuation performed for the fiscal year ended June 30, 2019, a total City and State contribution due to the F&P for fiscal year 2021 was $151.1 million. Member contributions make up a small part of the F&P’s revenues. Employer contributions and investment earnings make up 97% of the F&P’s revenues. The cost of programs include retirement benefit payments and administrative expenses factor into the expenses of the F&P. The F&P spends 98% of its expenses in paying benefits to retirees and beneficiaries. 6 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 QQuuiicckk PPrrooffiillee -- 22002200 aatt aa GGllaannccee The F&P has become a “mature” plan with the number of retired benefit recipients outnumbering the number of contributing active employee members. Membership Statistics Active Members – 3,839  Fire - 1,449  Police - 2,388  Crossing Guard - 1  Airport – 1 Retired Members - 4,845 Beneficiaries - 1,515 Active DROP/DROP 2 Members 507 Average Annual Benefit (Retirees) $44,931 DROP Retirees 2,160 Disability Retirement (Retirees) 918 Service Retirement (Retirees) 3,927 DROP 2 Retirees 393 Average Annual Benefit (Beneficiaries) $21,694 7 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 BBeenneeffiitt PPaayymmeenntt TTrreennddss The plan benefit payments trend over the past 5 years indicates the growth in benefit payments to retirees and beneficiaries, as well as the growth in the retired membership. Over the last five years the F&P benefit payments to retirees and beneficiaries increased by 9.6% from about $245.1 million to $268.6 million as shown in the graph below. Member Services Virtual Appointments 206 Website Visits wwww.bcfpers.org 99,390 Change of Address Processed for Retirees 360 Pension Verification Letters Mailed 307 Scanned and Index Member Documents 4,822 Pieces of Mail Processed by Member Services 842 Member Statements Mailed 10,298 Disability Hearings Held 28 Retirement Estimates Processed 208 Withdrawals Processed 115 Retirement Estimates Processed 208 Membership Statistics Enrollments 222 MMeemmbbeerrsshhiipp TTrreennddss 6 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 QQuuiicckk PPrrooffiillee -- 22002200 aatt aa GGllaannccee The F&P has become a “mature” plan with the number of retired benefit recipients outnumbering the number of contributing active employee members. Membership Statistics Active Members – 3,839  Fire - 1,449  Police - 2,388  Crossing Guard - 1  Airport – 1 Retired Members - 4,845 Beneficiaries - 1,515 Active DROP/DROP 2 Members 507 Average Annual Benefit (Retirees) $44,931 DROP Retirees 2,160 Disability Retirement (Retirees) 918 Service Retirement (Retirees) 3,927 DROP 2 Retirees 393 Average Annual Benefit (Beneficiaries) $21,694 7 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 BBeenneeffiitt PPaayymmeenntt TTrreennddss The plan benefit payments trend over the past 5 years indicates the growth in benefit payments to retirees and beneficiaries, as well as the growth in the retired membership. Over the last five years the F&P benefit payments to retirees and beneficiaries increased by 9.6% from about $245.1 million to $268.6 million as shown in the graph below. Member Services Virtual Appointments 206 Website Visits wwww.bcfpers.org 99,390 Change of Address Processed for Retirees 360 Pension Verification Letters Mailed 307 Scanned and Index Member Documents 4,822 Pieces of Mail Processed by Member Services 842 Member Statements Mailed 10,298 Disability Hearings Held 28 Retirement Estimates Processed 208 Withdrawals Processed 115 Retirement Estimates Processed 208 Membership Statistics Enrollments 222 MMeemmbbeerrsshhiipp TTrreennddss 8 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 IInnvveessttmmeenntt PPeerrffoorrmmaannccee The F&P’s investment policy is to preserve the capital value of the F&P adjusted for inflation; to ensure adequate liquidity to meet benefit liabilities as they fall due; to meet the actuarial interest rate assumptions over the longer term while maintaining appropriate risk levels; and to exceed the investment return by the astute management of F&P assets. The F&P’s investment policy is designed to provide broad diversification among asset classes in order to maximize returns at a prudent level of risk. In addition, asset allocation ranges, target allocations and a process of periodic rebalancing are used to maintain compliance with policy. The long- term expected rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Within each asset class, the Board of Trustees employ several investment managers to further diversify the investment approach and to minimize style biases. The Trustees may employ both active and passive investment strategies to obtain the desired asset allocation mix in a cost effective and efficient manner. 5 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 FFuunnddiinngg ooff tthhee FF&&PP The most important information for any retirement system is its level of funding. If the funding level is adequate, the ratio of total accumulated assets to total liabilities will be larger and more funds will be available for investment purposes. More importantly, an adequate funding level assures the membership that their future retirement benefits are secure. The F&P’s funding objective is to meet benefit obligations through investment income, employer contributions and member contributions. The earnings assumption rate for FY 2021 was 7.0% as of June 30, 2021, the date of the F&P’s last actuarial valuation. The F&P’s AVA funded ratio, the ratio of the actuarial value of assets over liabilities, increased from 69.1% as of June 30, 2020 to 71.6% as of June 30, 2021. Similarly, the F&P’s Plan Net Fiduciary Net Position as a percentage of the Total Pension Liability increased from 65.0% as of June 30, 2020 to 79.5% as of June 30, 2021. Both ratios are calculated using the Entry Age Normal Cost Method. As a result of the actuarial valuation performed for the fiscal year ended June 30, 2019, a total City and State contribution due to the F&P for fiscal year 2021 was $151.1 million. Member contributions make up a small part of the F&P’s revenues. Employer contributions and investment earnings make up 97% of the F&P’s revenues. The cost of programs include retirement benefit payments and administrative expenses factor into the expenses of the F&P. The F&P spends 98% of its expenses in paying benefits to retirees and beneficiaries. 4 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 AAwwaarrdd ffoorr OOuuttssttaannddiinngg AAcchhiieevveemmeenntt iinn PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrttiinngg The Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to the Fire and Police Employees’ Retirement System for the City of Baltimore, Maryland for its Popular Annual Financial Report for the fiscal year ended June 30, 2020. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. In order to receive an Award for Outstanding Achievement in Popular Annual Financial Reporting, a government unit must publish a Popular Annual Financial Report, whose contents conform to program standards of creativity, presentation, understandability and reader appeal. An Award for Outstanding Achievement in Popular Annual Financial Reporting is valid for a period of one year only. The Fire and Police Employees’ Retirement System for the City of Baltimore, Maryland has received a Popular Award for the last six years (fiscal years ended 2015, 2016, 2017, 2018, 2019, and 2020). We believe our current report continues to conform to the Popular Annual Financial Reporting requirements, and we are submitting it to GFOA to determine its eligibility for another Award. On behalf of the Fire and Police Employees’ Retirement System (F&P) staff, I am pleased to present our Popular Annual Financial Report (PAFR) for fiscal year ended June 30, 2020. The PAFR illustrates the recent performance of the F&P and it is my hope that the PAFR will help members to better understand the overall financial health of the F&P. The COVID-19 pandemic continues to be a challenge, which requires all of us to think and act in new ways. I continue to remain in close communication with NEPC, the F&P’s investment advisor, and managers to determine any allocation shifts or adjustments to our investment lineup, as the COVID-19 crisis lingers exposing both areas for improvement and areas of opportunity. As such, I have pivoted the F&P investment portfolio where necessary. The portfolio’s rate of return of 29.3% was slightly below the median of 29.4% which ranked the F&P portfolio in the 25th percentile of the Investment Metrics Public Defined Benefit > $1 Billion Universe at June 30, 2021. The three-year, five-year, and ten-year performance numbers for the portfolio were 10.9% which ranked in the 52nd percentile, 10.7% which ranked in the 67th percentile, and 8.4% which ranked in the 65th percentile, respectively. The staff of the F&P is dedicated to the entire membership. It is an honor and a pleasure to serve the brave men and women of the Baltimore Police Department and Baltimore City Fire Department who put their lives on the line each day for the citizens of the City of Baltimore. While the membership protects the community, it is the job of the F&P to protect the members, both active, retired and their beneficiaries. I hope you find the information presented in this report helpful in understanding the F&P as we look forward to continuing to secure the financial futures of our membership. N. Anthony Calhoun Executive Director SSeerrvviinngg BBaallttiimmoorree CCiittyy’’ss PPuubblliicc SSaaffeettyy OOffffiicceerrss 9 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 IInnvveessttmmeenntt PPeerrffoorrmmaannccee Over the last 10 years, BCFPERS Defined Benefit Plan's Investment Portfolio has increased 56% of its size from $2.13 billion to $3.33 billion. The F&P Board of Trustees cautiously undertook the challenging task of achieving its long-term risk and return objectives in compliance with the system’s investment policy. Stocks 56% - Historically, stocks have provided nearly 10% over the long term compared to U.S. Treasuries at 5%. Stocks make us part owner and beneficiary of many successful companies around the world. Bonds 13% - Bonds can contribute an element of stability to almost any portfolio. They are a safe and conservative investment, and provide a predictable stream of income. Private Equity 16% - Although providing capital to fund private companies seemed riskier than other investments, it offers us the opportunity of generating higher returns while improving portfolio diversification. Real Estate 8% - Purchasing future income stream from property can offer advantages over other types of investments, including potentially higher returns, stability, inflation hedging and diversification. Hedge Funds 7% - An alternative investment that brings the possibility of higher returns that are uncorrelated to the stock and bond markets. 2 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 AAbboouutt tthhee FFiirree aanndd PPoolliiccee EEmmppllooyyeeeess’’ RReettiirreemmeenntt SSyysstteemm ((FF&&PP)) The Popular Annual Financial Report (PAFR) summarizes the Comprehensive Annual Financial Report for year ended June 30, 2021. The F&P’s annual report is prepared in accordance with the principles of governmental accounting and reporting promulgated by the Governmental Accounting Standards Board. The PAFR provides you with a general understanding of the F&P’s overall financial condition for the fiscal year ended June 30, 2021. The information in this report does not replace the Comprehensive Annual Financial Report. For more detailed information, please refer to the Comprehensive Annual Financial Report which can be viewed on the F&P website at www.bcfpers.org. If you would like to obtain a copy of the Comprehensive Annual Financial Report, please contact the F&P administrative section at 410-497-7929, Option 3. IInnttrroodduuccttiioonn The F&P would like to give special thanks to Gino Inocentes, Office of Public Information, of the Baltimore Police Department and Stanley J. Jaworski, freelance fire photographer for the photographs in the Popular Annual Financial Report. The Baltimore City Fire and Police Employees' Retirement System (F&P) was established July 1, 1962, by City law and has been amended periodically. The F&P is a contributory, defined benefit plan that covers all sworn uniformed officers of the Baltimore City Fire and Police Departments. Membership in the F&P is mandatory on the first day of employment. The Plan also covers certain Maryland Aviation Administration firefighter/paramedics and certain Maryland Transportation Authority police officers. These State of Maryland employees were grandfathered into F&P plan coverage by State law. The Board of Trustees is responsible for the general administration and the proper operation of the F&P and the enforcement of the provisions in Article 22 of the Baltimore City Code. The Board has a fiduciary responsibility for the management and administration of the F&P. The Executive Director is responsible for the day-to-day operations of F&P. The staff administers the determination and payment of benefits and provides other support services. Board of Trustees 3 Executive Director 4 GFOA Award 4 Funding the F&P 5 Quick Profile 6 Membership Trends 7 Investment Performance 8-9 Financials 10-11 Inside this issue: Popular Annual Financial Contact Information Baltimore Area 410-497-7929 Toll Free 1-888-410-1600 Fax 1-888-443-7008 Email ContactBCFP@bcfpers.org Website www.bcfpers.org Fire and Police Employees’ Retirement System 7 E. Redwood Street, 18th Fl. Baltimore, MD 21202 www.facebook.com/bcfpers 11 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 Member Contributions $31.7mil Amount Contributed by City of Baltimore $150.2mil Amount Contributed by State of Maryland $917,959 Financial Statistics FFiinnaanncciiaallss 10 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 FFiinnaanncciiaallss The information provided on this page indicates total additions (revenues) and total deductions (expenses) for fiscal years ending June 30, 2021, and 2020. Additions to Net Position (Revenues) for the year were $956.9 million, an increase of $793.8 million from the prior year revenues of $163.1 million. The increase in revenues was caused by higher investment earnings that were uniformly up across all asset classes for fiscal year 2021 compared to the prior year. Deductions from Net Position (Expenses) were $273.5 million in the current year, an increase of $5.6 million from the prior year expenses of $267.9 million. The increase in expenses was driven by post-retirement benefit increases, effective January 2021, and increased retirement allowance payments. Employer contributions increased to $151.1 million in fiscal year 2021, up from the employer contributions made in fiscal year 2020. Member contributions increased by $0.3 million in fiscal year 2021 due to the increase in members covered payroll. The net position restricted for pension benefits increased by $683.3 million during the fiscal year from $2,645.5 million at June 30, 2020, to $3,328.8 million at June 30, 2021. The increase in fiscal year 2021 was mainly due to the strong performance across the entire portfolio. 3 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 Peter E. Keith, Esquire, Chairman Partner, Gallagher, Evelius & Jones, LLP Appointed by the Mayor William R. Hudson, Vice Chairman Captain, Baltimore City Fire Department Elected by the active Fire Department members Term expires June 30, 2022 Bill Henry Comptroller, City of Baltimore Ex-officio Robert Cenname Budget Director, City of Baltimore Appointed by Director of Finance Henry Raymond Ex-officio Michael Harrison Commissioner, Baltimore Police Department Ex-officio Arlen Doles Deputy Chief, Baltimore City Fire Department Appointed by Fire Chief Niles Ford Ex-officio Benjamin F. DuBose, Jr. IRS Agent, Retired U.S. Department of Treasury Appointed by the Mayor McKinley E. Smith Sergeant, Baltimore Police Department Elected by the active Police Department members Term expires June 30, 2024 Paul S. DeSimone Lieutenant, Retired Baltimore City Fire Department Elected by the retired Fire Department members Term expires June 30, 2022 Robert A. Haukdal Lieutenant, Retired Baltimore Police Department Elected by the retired Police Department members Term expires June 30, 2024 BBooaarrdd ooff TTrruusstteeeess SSeerrvviinngg BBaallttiimmoorree CCiittyy’’ss PPuubblliicc SSaaffeettyy OOffffiicceerrss This past year has been a remarkable one for the F&P and all of our members. All of us were forced to deal with the devastation of the COVID pandemic, which has caused much suffering throughout the world, including sickness and death of active and retired F&P members, family members, and even F&P staff. We grieve for all who have suffered and died from COVID. Our heartfelt thanks go out to our F&P active members, who have served the City so well during the pandemic and put their lives at risk each day in carrying out their duties. Despite the pandemic and restrictions, the F&P staff worked tirelessly to serve our members throughout the year. Hopefully the coming year will see far fewer COVID-related illnesses and deaths, as the level of vaccinations increases and medical knowledge of how best to combat the virus advances. The past fiscal year was also extraordinary from a financial perspective. Over the past year our highly-diversified investment portfolio earned a positive 29.3% return, the highest annual return ever achieved by the F&P. As a result, in a single year our funded status based on the fair value of assets increased dramatically, from 65.0% to 79.5%. The value of our portfolio as of June 30, 2021 was approximately $3.33 billion, the highest ever. During the fiscal year the F&P paid nearly $268.6 million in benefits to our retired members and their beneficiaries, again the highest amount ever. We should not expect to reap such enormous investment returns in the coming year. Instead, the F&P Board is conservative and we assume that investment returns will be lower over the next decade. The financial markets are volatile and unpredictable. We also continue to face demographic challenges, based upon a reduced number of active employees contributing to our system, increased number of retirees, and longer life spans. Over the past year we again experienced a decline in the number of our active members and an increase in our number of retirees. Despite these challenges, the F&P remains in a strong position. During the fiscal year ending June 30, 2021, the City contributed $150.2 million to the F&P. This was the largest annual contribution ever made by the City. The annual City contribution will continue and it will be challenging for the City to fund these contributions. Our principal long-term goal continues to be to make our plan fully-funded, so that our active members, retirees and beneficiaries will continue to receive their full benefits in the years to come. Peter Keith Board Chairman 2 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 AAbboouutt tthhee FFiirree aanndd PPoolliiccee EEmmppllooyyeeeess’’ RReettiirreemmeenntt SSyysstteemm ((FF&&PP)) The Popular Annual Financial Report (PAFR) summarizes the Comprehensive Annual Financial Report for year ended June 30, 2021. The F&P’s annual report is prepared in accordance with the principles of governmental accounting and reporting promulgated by the Governmental Accounting Standards Board. The PAFR provides you with a general understanding of the F&P’s overall financial condition for the fiscal year ended June 30, 2021. The information in this report does not replace the Comprehensive Annual Financial Report. For more detailed information, please refer to the Comprehensive Annual Financial Report which can be viewed on the F&P website at www.bcfpers.org. If you would like to obtain a copy of the Comprehensive Annual Financial Report, please contact the F&P administrative section at 410-497-7929, Option 3. IInnttrroodduuccttiioonn The F&P would like to give special thanks to Gino Inocentes, Office of Public Information, of the Baltimore Police Department and Stanley J. Jaworski, freelance fire photographer for the photographs in the Popular Annual Financial Report. The Baltimore City Fire and Police Employees' Retirement System (F&P) was established July 1, 1962, by City law and has been amended periodically. The F&P is a contributory, defined benefit plan that covers all sworn uniformed officers of the Baltimore City Fire and Police Departments. Membership in the F&P is mandatory on the first day of employment. The Plan also covers certain Maryland Aviation Administration firefighter/paramedics and certain Maryland Transportation Authority police officers. These State of Maryland employees were grandfathered into F&P plan coverage by State law. The Board of Trustees is responsible for the general administration and the proper operation of the F&P and the enforcement of the provisions in Article 22 of the Baltimore City Code. The Board has a fiduciary responsibility for the management and administration of the F&P. The Executive Director is responsible for the day-to-day operations of F&P. The staff administers the determination and payment of benefits and provides other support services. Board of Trustees 3 Executive Director 4 GFOA Award 4 Funding the F&P 5 Quick Profile 6 Membership Trends 7 Investment Performance 8-9 Financials 10-11 Inside this issue: Popular Annual Financial Contact Information Baltimore Area 410-497-7929 Toll Free 1-888-410-1600 Fax 1-888-443-7008 Email ContactBCFP@bcfpers.org Website www.bcfpers.org Fire and Police Employees’ Retirement System 7 E. Redwood Street, 18th Fl. Baltimore, MD 21202 www.facebook.com/bcfpers 11 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 Member Contributions $31.7mil Amount Contributed by City of Baltimore $150.2mil Amount Contributed by State of Maryland $917,959 Financial Statistics FFiinnaanncciiaallss 2 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 AAbboouutt tthhee FFiirree aanndd PPoolliiccee EEmmppllooyyeeeess’’ RReettiirreemmeenntt SSyysstteemm ((FF&&PP)) The Popular Annual Financial Report (PAFR) summarizes the Comprehensive Annual Financial Report for year ended June 30, 2021. The F&P’s annual report is prepared in accordance with the principles of governmental accounting and reporting promulgated by the Governmental Accounting Standards Board. The PAFR provides you with a general understanding of the F&P’s overall financial condition for the fiscal year ended June 30, 2021. The information in this report does not replace the Comprehensive Annual Financial Report. For more detailed information, please refer to the Comprehensive Annual Financial Report which can be viewed on the F&P website at www.bcfpers.org. If you would like to obtain a copy of the Comprehensive Annual Financial Report, please contact the F&P administrative section at 410-497-7929, Option 3. IInnttrroodduuccttiioonn The F&P would like to give special thanks to Gino Inocentes, Office of Public Information, of the Baltimore Police Department and Stanley J. Jaworski, freelance fire photographer for the photographs in the Popular Annual Financial Report. The Baltimore City Fire and Police Employees' Retirement System (F&P) was established July 1, 1962, by City law and has been amended periodically. The F&P is a contributory, defined benefit plan that covers all sworn uniformed officers of the Baltimore City Fire and Police Departments. Membership in the F&P is mandatory on the first day of employment. The Plan also covers certain Maryland Aviation Administration firefighter/paramedics and certain Maryland Transportation Authority police officers. These State of Maryland employees were grandfathered into F&P plan coverage by State law. The Board of Trustees is responsible for the general administration and the proper operation of the F&P and the enforcement of the provisions in Article 22 of the Baltimore City Code. The Board has a fiduciary responsibility for the management and administration of the F&P. The Executive Director is responsible for the day-to-day operations of F&P. The staff administers the determination and payment of benefits and provides other support services. Board of Trustees 3 Executive Director 4 GFOA Award 4 Funding the F&P 5 Quick Profile 6 Membership Trends 7 Investment Performance 8-9 Financials 10-11 Inside this issue: Popular Annual Financial Contact Information Baltimore Area 410-497-7929 Toll Free 1-888-410-1600 Fax 1-888-443-7008 Email ContactBCFP@bcfpers.org Website www.bcfpers.org Fire and Police Employees’ Retirement System 7 E. Redwood Street, 18th Fl. Baltimore, MD 21202 www.facebook.com/bcfpers 11 PPAAFFRR PPooppuullaarr AAnnnnuuaall FFiinnaanncciiaall RReeppoorrtt ffoorr tthhee yyeeaarr eennddeedd JJuunnee 3300,, 22002211 Member Contributions $31.7mil Amount Contributed by City of Baltimore $150.2mil Amount Contributed by State of Maryland $917,959 Financial Statistics FFiinnaanncciiaallss FIRE & POLICE Employees’ Retirement System City of Baltimore, Maryland 7 East Redwood Street, 18th Floor Baltimore, Maryland 21202 410-497-7929 or 1-888-410-1600 www.bcfpers.org