03-14-2018 Council Packet - Laserfiche WebLink

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STAFF REPORT TO: Mayor Keis and Members of the City Council FROM: Joel Hanson, City Administrator DATE: March 9, 2018 RE: Fire Relief Benefit Increase Attached is a request from Fire Chief Don Smiley on behalf of the Little Canada Fire Department Board of Directors requesting an increase in the per year of service benefit amount from $3,380 to $3,940 (an increase of $560) effective 1/1/18. As you know, we entered in to a five year agreement with the Fire Department that addressed funding for the relief association. Essentially, we agreed to increase our voluntary contribution from $15,000 to $31,000 per year. In return, an increase in benefit levels would only be made when the funding level remained at 110% or above. For 2017, the Relief Association’s investments performed very well. They ended the year at a funding level of 127.35 percent. This allows them, pursuant to our agreement, to request an increase of $560 in the benefit level. If approved, the funding level would be 110.06%. When we entered in to this agreement, there was concern about future market corrections and the impact it could have on the City’s contribution. As you know, if there is a deficit in the Association’s program, the City will have a “required contribution” to help eliminate the deficit over time. It is typically 10% of the deficit. Staff conducted a “sensitivity analysis”. The results of this analysis are as follows: Assets – 12/31/2017 ------------------------------- $1,928,634 Liabilities ($3,380 Today’s Benefit Level) -------- $1,514,401 Surplus ------------------------------------- $ 414,223 127.35% With Benefit Increase to $3,940 (Increase of $560 per year of service) Assets – 12/31/2017 ------------------------------- $1,928,634 Liabilities (New Benefit Level) ------------------- $1,752,324 Surplus ------------------------------------ $ 176,310 110.06% If we have a 20% loss in the Asset Balance --- $1,542,907 Liabilities (New Benefit Level) ------------------ $1,752,324 Deficit ------------------------------------ $ -209,417 Required Contribution Calculation: Normal Cost ----------------------------- $ 119,540 Adm Expenses -------------------------- $ 8,082 Amortization of Deficit (10%) --------- $ 20,942 Subtotal ------------------------ $ 148,564 State Aid --------------- $ 56,255 5% Return on Assets - $ 96,432 (12/31/17 Balance) Subtotal ----------------------- $ 152,687 REQUIRED CONTRIBUTION ---------- $ -4,123 That is $0