10-08-2014 Council Agenda - Laserfiche WebLink

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515 Little Canada Road, Little Canada, MN 551174600 (651) 766-4029 / FAX: (651) 766-4048 www.d.little-canada.mn.us MEMORANDUM TO: Mayor Blesener and Members of the City Council FROM: Joel Hanson, City Administrator DATE: October 3, 2014 RE: Fire Relief Funding Considerations MAYOR Bill Blesener COUNCIL Rick Montour John Reis Michael McGraw Shelly Boss ADMINISTRATOR Joel R. Hanson We have been working with the Fire Department for the last year on revised contract language. The primary challenge in finalizing this document has been the City's contributions for Fire Relief Benefits. Our negotiating committee, consisting of Mayor Blesener, Council Member Kies and me, submitted the attached proposal to the Fire Department earlier this summer. Based on recent conversations, it appears the Relief Association is unwilling to consider a Defined Contribution Plan (Option A of the proposal). However, we did make progress with the Option B concept at our last negotiating session. Based on that discussion, the following parameters are being considered: • The fund balance after factoring in a potential benefit increase must maintain a funding ratio of 110%. (111.7% was also discussed in a meeting with the Relief Association by their financial advisor and this could still be in play.) By maintaining a funding ratio of at least 110%, we buy some protection from market volatility if a pull-back occurs. This is important to us given that State Law requires the City to retire any fiend deficits over a 10 -year period. In past years, this has required levy support more than double our $15,000 annual contribution. • City Contribution of $31,000. This amount was provided for in the 2014 budget. Additional cash flow to the Relief Association will help with future benefit increases, but investment earnings remain the largest factor in the annual income stream if benefit increases are to be possible. (It was also discussed that this amount should be $1,000 per fire fighter. If LCFD only has 30 fire fighters, the amount would drop by $1,000. If they have 34, then another $3,000 would be needed. This contribution would be paid quarterly with our payments on the Fire Department Contract instead of annually with the Fire State Aid payment as has been done it the past. • Inclusion of an inflationary adjustment to the City's contribution was mentioned but not agreed to. If it is to be considered, staff's concern is that this amount should not exceed cost of living adjustments for our employees. (Note: Earlier discussions were focused on a COLA for the benefit level. Our committee would not consider this because of the dramatic increase it would have on fund liability. This is due to the fact that an 1