2018.05.21 CC packet - Laserfiche WebLink

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U I CITY OF 14669 Fitzgerald Avenue North, Hugo, MN55038 (651) 762-6300 www.ci.hugo.mn.us EST. 1906 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 May 21, 2018 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, seven other lump -sum relief associations received state fire aid in 2017 within 10% of the amount received by Hugo. These associations are located in: Becker, Isanti, Mahtomedi, New Prague, Park Rapids, Vadnais Heights, and Waconia. Staff feels that this is a very good sampling of associations. Using data from these seven associations, we can establish the optimum pension benefit level at $3,954 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 $3,500 per year of service to $3,700 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: $1,690,216 (as of 05/16/18) Total Pension Liability: $1,247,656 (after $200 increase) Surplus: $ 442,560 (35% of liability) Staff has run some projections (see attachment) that show the investment portfolio can withstand a 27% market correction while still maintaining a surplus. RECOMMENDED PENSION BENEFIT LEVEL INCREASE Staff is recommending the City Council approve a motion to ratify the Board of Trustees request for a $200 increase in the lump -sum pension benefit and approve a change to the by-laws incorporating this new benefit level. This will bring Hugo's pension benefit to $3,700 per year of service (within $254 of the optimum level described above).