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515 Little Canada Road, Little Canada, MN 55117 -1600 <br />(612) 484 -2177 / FAX: (612) 484 -4538 <br />Date: October 15, 1997 <br />To: Mayor Fahey and Members of the City Council <br />From: Joel Hanson, City Administrator <br />Re: Fire Relief Pension Benefit Increase <br />MAYOR <br />Michael 1. Fahey <br />COUNCIL <br />Beverly Scalze <br />Jim LaVaile <br />Steve Morelan <br />Bob Pedersen <br />ADMINISTRATOR <br />Joel R. Hanson <br />Two years ago, we adopted a plan to govern Fire Relief pension benefit increases as well as the <br />annual city contribution. The goal of this plan was to provide for at least a $25.00 increase in <br />benefits per year of service every two years. A greater than $25.00 per year of service benefit <br />increase could be provided for if the pension fund performs well. The city's contribution would <br />be frozen at $18,000.00 over the term of this agreement (four years at a minimum and possibly <br />six years) if both sides feel it is working well. <br />The pension fund plan has performed well due to better than anticipated investment perforluance <br />as well as a greater amount of fire state aid than was estimated at the time of our projections. As <br />a result, the Relief Association is seeking an increase in benefits equal to $100.00 per year of <br />service bringing their benefit level for a fully vested member to $2,200.00 per year of service. <br />Attached are two surveys showing benefit increases of comparably sized departments (same <br />cities we used on our salary comparisons) as well as a survey of other departments proposed by <br />the Relief Association. Based on this information, this increase is reasonable. Schedules I and II <br />as well as the financial projection prepared by our auditors, indicates this benefit increase can be <br />made while still maintaining at least 100% funding level. It should be noted that because this <br />increase exceeds $50.00 per year of service, we (the City) could reopen this agreement for <br />discussion at the conclusion of the initial four years. <br />I have attached the agreement between the Relief Association and the City for your reference. <br />Based on this information, I would recommend we approve the increase as requested subject to <br />the proper steps taken on the part of the Relief Association Board of Directors. <br />Page 97 <br />