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6.H r W OF 14669 Fitzgerald Avenue North, Hugo, MN55038 • (651) 762-6300 • www.ci.hugo.mn.us EST. 1806 TO: Honorable Mayor Tom Weidt and Members of the City Council FROM: Ron Otkin, Finance Director SUBJECT: Firefighter's Relief Association Pension Increase DATE: For the City Council Meeting of June 5, 2017 DESIRED COUNCIL ACTION Motion to Ratify Board of Trustees Request for $200 Increase in Lump -Sum Pension and Approve Revised By -Laws OPTIMUM PENSION BENEFIT LEVEL On April 2, 2012, the City Council adopted a Resolution Adopting Firefighter Relief Pension Fiscal Policy. The policy sets the optimum pension benefit level as the average lump -sum benefit provided by relief associations that receive state fire aid within 10% of the amount received by the Hugo Firefighter's Relief Association, as last reported by the Office of the State Auditor. According to the Office of the State Auditor, nine other lump -sum relief associations received state fire aid in 2016 within 10% of the amount received by Hugo. These associations are located in: Becker, Ham Lake, Isanti, Little Falls, Mahtomedi, New Prague, Park Rapids, Vadnais Heights, and Waconia. Staff feels that this is a very good sampling of associations: Four are in the 7 -county metro area and three are in economic development regions that border the 7 - county metro area. Using data from these nine associations, we can establish the optimum pension benefit level at $3,708 per year of service. While this average is $400 above our current benefit amount, staff recommends that we reach this average through multi-year step increases. To begin, staff recommends an immediate increase of $200. The Board of Trustees voted to increase their lump -sum pension benefit from $3,300 per year of service to $3,500 and is asking the City Council to ratify this increase as well as approve a revision to the by-laws incorporating this new benefit level. FINANCIAL STATISTICS The Finance Department has reviewed the financial status of the relief association and finds that the recommended increase will result in the following: Total Pension Assets: $1,475,749 (as of 03/31/17) Total Pension Liability: $1,050,448 (after $200 increase) Surplus: $ 425,301 (40.5% of liability) Staff has run some projections (see attachment) that show the investment portfolio can withstand a 25% market correction while still maintaining a surplus.