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HomeMy WebLinkAboutItem 06.s. December 19, 2011 �� Item No. Resolution Amending the Fire Relief by -laws relating to Pension Benefits Proposed Action Staff recommends adoption of the following motion: Move to approve Resolution Amending the Fire Relief by -laws relating to Pension Benefits. Passage of this motion will increase pension benefits to $6,417 per year of service for firefighters. Overview The Lakeville Fire Relief submitted a request to increase the pension level from $6,230 per year of service to $6,417 per year of service. The Lakeville City Council considered the request at its November 28 work session and indicated they concurred with the increase. The Lakeville fire fighters voted unanimously on December 5 to approve the request. If approved, the pension becomes effective January 1, 2012. Primary Issues to Consider Tax Levy. The 2012 pension increase would result in an approximate $40,000 tax levy in 2013 if the Fire Relief has a 5% return on investments. The City is currently providing $44,804 tax levy for fire relief benefits. Supporting Information • Letter from Fire Relief Association Mike Meyer, Fire Chief Financial Impact: To Be determined Budgeted: Yes Source: General Fund — Tax levy Related Documents: Notes: CITY OF LAKEVILLE RESOLUTION NO. RESOLUTION AMENDING FIRE RELIEF BY -LAWS BE IT RESOLVED by the City Council of the City of Lakeville, Minnesota that the Fire Relief Association's by -laws are hereby appended as per Appendix A attached hereto. DATED this 19` day of December, 2011. CITY OF LAKEVILLE Mark Bellows, Mayor ATTEST: Charlene Friedges, City Clerk Appendix A Benefit Level Effective Date January 1, 2012 April 6, 2009 January 1, 2009 January 1, 2008 January 1, 2007 January 1, 2006 January 1, 2005 January 1, 2004 January 1, 2003 January 1, 2002 January 1, 2001 January 1, 2000 January 1, 1999 January 1, 1998 January 1, 1997 Benefit Level per Year of Active Service $6,417.00 $6,230.00 $6,230.00 $6,000.00 $5,820.00 $5,725.00 $5,550.00 $5,400.00 $5,300.00 $5,100.00 $4,750.00 $4,500.00 $4,000.00 $3,850.00 $3,750.00 Interest Rate for Deferred Pension Benefit Separate Account Separate Account 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Date Benefit Approved by Municipality December 19, 2011 April 6, 2009 December 1, 2008 November 5, 2007 December 18, 2006 January 1, 2006 January 1, 2005 January 1, 2004 January 1, 2003 January 1, 2002 January 1, 2001 January 1, 2000 January 1, 1999 January 1, 1998 January 1, 1997 LAKEVILLE FIRE RELIEF ASSOCIATION Benefit Level Change Recommendation August 1, 2011 Benefit Level Change Process (from 2004 — 2009) In 2004, the City of Lakeville and the Lakeville Fire Relief Association "Relief' approved a Memorandum of Understanding to eliminate the need to annually negotiate benefit levels. The Memorandum stated that the City contribution and the benefit level would increase annually by the Minneapolis \ St Paul Consumer Price Index, The Memorandum indicated that the City and the Relief could consider increasing benefit levels by more than the Consumer Price Index when the investment funds exceed 110 - 120 %. In an underfunded position, the benefit levels would be decreased to the extent that the City Municipal Contribution would not increase above the previously approved by the City. In 2009, the Memorandum of Understanding between the Relief and the City ended when the Relief members voted to leave the Benefit level unchanged rather than decrease the Benefit level in the tough economic times. Current Benefit Level Change Process (began in 2010) The current understanding is that the Relief and the City of Lakeville will negotiate proposed benefit level changes annually. The Relief Board previously met with the Lakeville City Administrator to provide guidance to the Relief Board. After these discussions in 2010, the Relief Board decided not to bring a benefit level increase recommendation to the City Council. As a result the benefit level has remained unchanged at $6,230 for 2009, 2010, and 2011. Benefit Level Recommendation Analysis: Below are relevant factors that were considered in developing this recommendation. • The benefit level has remained unchanged at $6,230 for the previous three years (2009, 2010, & 2011) • The Special Fund investment account that is managed by Parr McKnight Wealth Management Group of Wells Fargo Advisors is currently fully funded. • The municipal contribution in three of the last four years (2009 -2012) has been significantly below the average contribution. • The projected contribution for a pension level increase on January 1 2012, payable in 2013, is significantly below the average contribution. • A recruitment tool to retain and motivate firefighters who give a substantial time commitment, accept significant inherent risk and demonstrate sacrifice to the City. Memorandum Current & Historic Benefit Levels Year Lakeville Benefit Level 2013 2012 2012 $3,367 2011 $6,230 0.00% 2010 $6,230 0.00% 2009 $6,230 3.83% 2008 $6,000 3.09% 2007 $5,820 1.66% $125,410' Avg. % Change previous 5 years 1.71% Municipal Contributions: The Relief Board reviewed Municipal Contributions from 2004 — 2012. The average Municipal contribution over the past 9 years has been $71,782. Year Municipal Contribution 2013 Proposed 2012 $3,367 2011 $44,804 2010 $178,332 2009 - Level $92,071 _ 2008 2007 $85,933 2006 $83,511 2005 $81,000 2004 $125,410' Required Municipal Contributions to support a Benefit Level change: The Relief Board calculated the projected impact of a 3% increase with the municipal contribution payable in 2013. The proposed benefit level would start on January 15t 2012. Current % of Benefit Level Proposed Projected Year of Benefit Change Change Benefit Municipal Payment Level Level Contribution $6,230 3.0% $186.90 $6,417 $39,571.00 2013 Benefit Levels for Reliefs with the 10 Largest Lump -Sum Benefits: Relief Association 2008 Benefit 2009 Benefit 2010 Benefit Northfield $7,500 $7,500 $7,500 Shakopee $7,500 $7,500 $7,500 Hopkins $7,000 $7,000 $7,000 Rosemount $6,900 $6,900 $6,900 Woodbury $6,720 $6,720 Unknown Golden Valley $6,700 $6,700 $6,700 Prior Lake $6,500 $6,500 $6,500 Excelsior $6,250 $6,250 Unknown Alexandria $6,190 $6,190 $6,190 Lakeville $6,000 $6,230 $6,230 The Relief Board contacted other city Fire Departments Reliefs in order to determine what other Relief Boards were proposing for benefit level changes in 2012. The results were inconclusive, as the typical response was that the individual Fire Relief Boards were working with their cities. Relief Board Benefit Level Change Recommendation: The Lakeville Fire Relief Board strived to create a recommendation that would be considered reasonable based on the historic data provided, projected financial impact to the city and financial support to its Lakeville Fire Relief members. With those considerations made, it is the Lakeville Fire Relief Board's proposal to adjust the current benefit level of $6,230.00 on January 1 2012 to $6,417.00. This change represents a 3.00% increase and would require a projected Municipal Contribution of $39,571.00, payable in 2013.