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Home My WebLink AboutItem 06.fIL November 3, 2013 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 $6,742 effective January 1, 2015; and to increase the benefit level to $6,877 effective January 1, 2016 per year of service for firefighters. Overview The Lakeville Fire Relief submitted a request for a 2 year agreement to increase the pension level from $6,610 to $6,742 effective January 1, 2015; and to increase the benefit level to $6,877 effective January 1, 2016 per year of service for firefighters. The personnel committee concurred with the increase. The Lakeville fire fighters voted on October 6, 2014 and approve the request. The pension increases becomes effective January 1, 2015 and January 1, 2016. Primary Issues to Consider • What are the funding sources for Lakeville Fire Relief pensions • What is the history of Lakeville Fire Relief pensions and how does it compare with other metro area cities? • What are the financial (tax levy) impacts to the City of Lakeville? Supporting Information Michael Meyer, Fire Chief If more than a sentence or two needed to explain the financial impact, add to notes page. Financial Impact: _Budgeted: Y/N _YES_ Source: General Fund- Tax Levy Related Documents (CIP, ERP, etc.): 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 31 day of November, 2014 CITY OF LAKEVILLE Matt Little, Mayor ATTEST: Charlene Friedges, City Clerk Appendix A benetit Level per Year of Interest Rate for Date Benefit Benefit Level Active Deferred Pension Approved by Effective Date Service Benefit Municipality Janary 1, 2016 $6,877.00 Separate Account November 3, 2014 Janary 1, 2015 $6,742.00 Separate Account November 3, 2014 Janary 1, 2014 $6,610.00 Separate Account March 18, 2013 April 1, 2013 $6,513.00 Separate Account March 18, 2013 January 1, 2012 $6,417.00 Separate Account December 19, 2011 April 6, 2009 $6,230.00 Separate Account April 6, 2009 January 1, 2009 $6,230.00 5.00% December 1, 2008 January 1, 2008 $6,000.00 5.00% November 5, 2007 January 1, 2007 $5,820.00 5.00% December 18, 2006 January 1, 2006 $5,725.00 5.00% January 1, 2006 January 1, 2005 $5,550.00 5.00% January 1, 2005 January 1, 2004 $5,400.00 5.00% January 1, 2004 January 1, 2003 $5,300.00 5.00% January 1, 2003 January 1, 2002 $5,100.00 5.00% January 1, 2002 January 1, 2001 $4,750.00 5.00% January 1, 2001 January 1, 2000 $4,500.00 5.00% January 1, 2000 January 1, 1999 $4,000.00 5.00% January 1, 1999 January 1, 1998 $3,850.00 5.00% January 1, 1998 January 1, 1997 $3,750.00 5.00% January 1, 1997 Memorandum To: Mr. Steven Mielke, City Administrator From: Lakeville Fire Relief Association Copy: Mike Meyer, Fire Chief Dennis Feller, Finance Director Date: June 18, 2014 Subject: Fire Relief Pension Benefit Increase Proposal Mr. Mielke, The Lakeville Fire Relief Association is respectfully proposing a 2 year, 2% pension increase per year for the 2015 and 2016 calendar years. Previously, the Lakeville Fire Relief Association and the City of Lakeville approved a 1.5% pension increase for 2013 and 2014. Benefit Level Recommendation Analysis: Below are some factors considered in developing this recommendation. 1. Long Term Fund Stability: The Special Fund investment account that is managed by the Lakeville Fire Relief Association is currently beyond a fully funded status at 123.7%. During the previous 10 years, 8 have seen the Special Fund at 100% or greater. 2. The Value of Consistent Community Support: The Lakeville Fire Relief Association believes there is a value in consistent community support. The 10 -year average for past municipal contributions is $79,564.00 and the 5 -year average is $65,597.00. 3. Reasonable Pension Increase Request: The average annual pension benefit level increase from 2003-2014 is 2.2%. The Lakeville Fire Relief Association believes this request is reasonable and necessary to stay competitive with similarly situated Metro area lump sum relief association benefits. This is a method to retain and motivate firefighters who give considerable commitment and sacrifice to the City. The following pages have been submitted for further historical and statistical information, analysis and impact. Respectfully, Derrick Gaborski Treasurer, Lakeville Fire Relief Association Pension Funding Sources The primary revenue sources for financing the fire relief pensions are investment earnings; State Aids and municipal contributions (tax levies). The following is a historic overview of the revenue sources. Investment State Municipal Year Earnings Aid Contribution Total 2016 2015 2014 $60,000 2013 $1,156,305 $309,365 $60,000 $1,525,670 2012 $420,119 $219,958 $44,804 $684,881 2011 $(93,663) $217,067 $44,804 $168,208 2010 $560,847 $199,224 $178,331 $938,402 2009 $976,119 $191,073 $- $1,167,192 2008 $(1,264,827) $224,674 $94,833 $(945,320) 2007 $375,096 $264,923 $92,071 $732,090 2006 $383,941 $304,523 $85,933 $774,397 2005 $181,458 $ 284,395 $83,511 $ 549,364 2004 $274,403 $291,147 $81,000 $646,550 2003 $395,012 $221,209 $125,140 $741,361 The following sources represent the Lakeville Fire Relief Associations annual revenue streams historically over the last 10 years. Investment Earnings: 47.7% State Aid: 39.7% Municipal Contribution: 12.6% Pension Benefits Benefit Provisions. Authority for payment of pension benefits is established in Minnesota Statute § 69.77 and 424A and may be amended only by the Minnesota State Legislature. The benefit provisions are delineated in the Lakeville Fire Relief Association bylaws and are consistent with Minnesota statutes. The following is a historical perspective of Lakeville benefit levels. Pension Year Benefits % of Change 2016 Proposed $6877 $135 2.0% 2015 Proposed $6742 $132 2.0% 2014 $6,610 $97 1.5% 2013 $6,513 $96 1.5% 2012 $6,417 $187 3.0% 2011 $6,230 $0 0.0% 2010 $6,230 $0 0.0% 2009 $6,230 $230 3.8% 2008 $6,000 $180 3.1% 2007 $5,820 $95 1.7% 2006 $5,725 $225 4.1% 2005 $5,500 $100 1.9% 2004 $ 5,400 $100 1.9% 2003 $5,300 $200 3.9% Between 2010 - 2014, the average pension increase has been 1.2% Between 2003 - 2014, the average pension increase has been 2.2% Lump Sum Benefit Comparison The following is a list of the Metro Area fire relief associations with lump sum benefits compared to Lakeville. Relief Association Population Benefit Level Benefit Level Benefit Level 2013 2014 2015 Plymouth 71,930 $7,500 Northfield 20,515 $7,500 $7,500 Shakopee 38,744 $7,500 Minnetonka 49,491 $6,910 Rosemount 22,420 $6,900 Seeking Increase Woodbury 59,338 $6,720 Golden Valley 20,776 $6,700 Lakeville 55,772 $6,513 $6,610 Proposed $6,742 Prior Lake 23,754 6,500 Excelsior 2,230 6,250 Maplewood 39,337 6,000 Hopkins 17,982 5,800 New Brighton 21,867 5,700 City Financial Impacts Benefit Provisions. Pension levels adjustments in one year will affect the Municipal Contribution (tax levy) in the subsequent year. The extent of the Municipal Contribution is also affected the Associations portfolio investments earnings as well as State Aid Revenues. The following is an overview of the Municipal Contribution (tax levy) in 2016 if the Council approves a proposed 2% pension level benefit increase for 2015. Pension Benefit Benefit per year of service Investments Rate of return - estimated Investment earnings State Aid (estimated) Municipal Contribution Required Certification Scenario's A H 2f115 $ 6,742 $ 6,742 1.5% 3.0% $105,343 $ 210,686 $ 309,365 $ 309,365 NONE NONE Increase/(decrease) over N/A N/A prior vear