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515 Little Canada Road, Little Canada, MN 55117 -1600 <br />(612) 484 -2177 / FAX: (612) 484 -4538 <br />MEMO <br />TO: Mayor Hanson <br />Members of the City Council <br />FROM: Joel Hanson, City Administrator <br />DATE: April 8, 1994 <br />RE: Fire Relief Benefit Increase <br />MAYOR <br />Raymond G. Hanson <br />COUNCIL <br />Beverly Scalze <br />Jim LaValle <br />Steve Morelan <br />Bob Pedersen <br />ADMINISTRATOR <br />Joel R. Hanson <br />Enclosed for your review are the projections of financial <br />requirements for the relief association based on the current <br />benefit level of $2050 per year of service and a proposed <br />increase to $2100 per year of service. These projections deal <br />with actual roster changes in 1994 and planned retirements of the <br />two highest members in terms of accrued liability for the years <br />1995 through 1997. <br />In looking at this data, one will notice the following: <br />* A one percent (1 %) difference in interest rates means about <br />$9000 per year in terms of required City support. <br />* For the $2050 benefit level, the average normal cost in the <br />years 1995 through 2000 is $76,900. For the $2100 benefit <br />level, the average normal cost per year is $78,700. (Normal <br />cost is defined as the amount of income needed annually to <br />sustain the stated benefit level. The three sources of <br />income to meet this requirement are state aid, city <br />contributions, and interest earnings.) <br />* A surplus will exist for the years indicated under any of <br />the assumptions. However, even with the existence of a <br />surplus, city support is required at the lower interest <br />assumptions due to the need to generate sufficient dollars <br />to meet normal cost requirements. Therefore, the existence <br />of a surplus does not necessarily guarantee sufficient <br />resources to meet the costs associated with higher benefit <br />levels. <br />The association has paid out some fairly large benefits the <br />last couple of years. In reviewing the roster information, <br />the retirement assumptions made seem reasonable for future <br />projections. Therefore, this approach presents a realistic <br />view as we attempt to evaluate the future financial impact <br />of benefit increases. <br />Page 16 <br />