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<br /> <br /> <br /> <br />14669 Fitzgerald Avenue North, Hugo, MN 55038 • (651) 762-6300 • www.ci.hugo.mn.us <br /> <br /> <br /> <br /> <br />TO: Honorable Mayor Tom Weidt and Members of the City Council <br />FROM: Anna Wobse, Finance Director <br />SUBJECT: Firefighter’s Relief Association Pension Increase, Deferred Interest Rate and Bylaw Revisions <br />DATE: For the City Council Meeting of July 7, 2025 <br /> <br />DESIRED COUNCIL ACTION <br /> <br />Motion to Ratify the Board of Trustees Request for a $500 Increase in the Lump-Sum Pension Benefit <br />Motion to Ratify the 5% Interest Rate for Deferred Members <br />Motion to Ratify Revised Bylaws <br /> <br />OPTIMUM PENSION BENEFIT LEVEL <br /> <br />On April 2, 2012, the City Council adopted a Resolution Adopting the Firefighter Relief Pension Fiscal Policy. The policy <br />sets the optimum pension benefit level as the average lump-sum benefit provided by relief associations that receive <br />state fire aid within 10% of the amount received by the Hugo Firefighter’s Relief Association, as last reported by the <br />Office of the State Auditor. <br /> <br />According to the Office of the State Auditor, thirteen other lump-sum relief associations received state fire aid in 2024 <br />within 10% of the amount received by Hugo. Four are historical comparisons: Waconia, Ham Lake, Little Falls and <br />Albertville. Four are comparable associations that joined the list last year: Bayport, Willmar, Sartell and Detroit Lakes. <br />Hugo’s continued growth in both population and market value leads to increased state fire aid allotments and brings <br />five new associations within the 10% range. These include: Lake Elmo, Hopkins, Red Wing, Grand Rapids and Sauk <br />Rapids. Many of the newer comparable associations have benefit levels significantly higher than those of the historical <br />comparable associations. <br /> <br />Using data from these thirteen associations, staff can establish the optimum pension benefit level at $6,754 per year of <br />service. With the addition of the new comparable relief associations, the optimum benefit level is $1,654 above the <br />current benefit amount. A noticeable gap between the current pension level and the optimum level was already evident <br />last year, prompting staff to recommend reaching the average through multi-year step increases. This phased approach <br />is fiscally responsible, as large annual increases in liabilities could trigger a required City contribution to the Association. <br />In 2024, the pension was increased by $500, and staff recommends another immediate increase of $500. <br /> <br />The Relief Association voted to increase their lump-sum pension benefit from $5,100 per year of service to $5,600 per <br />year of service and is asking the City Council to ratify this increase as well as approve a revision to the bylaws <br />incorporating this new benefit level. <br /> <br />FINANCIAL STATISTICS <br /> <br />The Finance Department has reviewed the financial status of the Relief Association and finds that the recommended <br />increase will result in the following: <br /> <br />Total Pension Assets: $3,290,508 (projected) <br />Total Pension Liability: $1,969,234 (after $500 increase) <br />Projected Surplus: $1,321,274 (67% of liability) <br /> <br />The attached projections show that the investment portfolio can withstand a 35% market correction while still <br />maintaining a surplus.