07/09/1980 - City Council Finance Committee MEMO TO: FINANCE COMMITTEE
FROM: CITY ADMINISTRATOR HEDGES
DATE: JULY 9, 1980
SUBJECT: FIREMENS RELIEF ASSOCIATION MEETING
Enclosed is a copy of pages 22-23 of the September, 1979, League of Minne-
sota Cities magazine article which pertains to Fire Relief Associations.
Also enclosed is a copy of a memo prepared by Councilman Parranto, dated
March 28, 1980, entitled "Proposal - Firemens Pension". If any additional
information is required, please let me know.
A meeting is tentatively scheduled for 7:00 p.m. , Thursday, July 10, 1980,
at Fire Station #1 to discuss the aforementioned proposal. As soon as I
receive official notification as to whether the meeting is set for that date,
I will notify the committee and post accordingly.
rye ey„
City Administrator
4
officials about benefit increases, by the city clerk or finance
the entire responsibility for clecid- officer and the mayor and
ing whether to grant the increase council?
and how much to grant is that of 5. Would the requested increase
d' you the council and mayor. Though violate the flexible service pen-
only the last two are mentioned in sion maximums of M.S. 424A.02,
the statutes, factors the city should Subd. 3?
know • consider when making this deci- The 1979 legislation legitimized
sion include the following: an approach to firefighter relief
1. What type and amount of which, because of its simplicity of
retirement, disability, and sur- concept, has been put into effect
EDITOR'S NOTE: The questions below vivor's benefit is necessary to in a significant number of Minne-
are typical of the thousands of inquiries attract and keep competent sota cities. Under this defined
the League receives each year. For more �� ��
comprehensive treatment of questions, volunteer firefighters? contribution or share the pot
the information service of the League is 2. If fire state aid, present and type plan, each relief association
always available:o municipal officials. conservatively projected, is in- member is given an individual
sufficient to finance a desirable account which is credited each
level of relief association ben- year with his pro rata share of the
efits, what level of local tax levy fund that will be available to pay
FIRE RELIEF ASSOCIATIONS or general fund transfer is the portion of his eventual pension
Did 1979 legislation expand the needed to produce the desir- earned by service that year.
role of mayors and council able benefit level? Specifically, his year's credit con-
members in the volunteer fire- 3. What priority does the sists of his pro rata share of: (1) fire
fighter pension area? proposed local funding commit- state aid received by the relief
Yes. Laws 1979, Ch. 201 eliminat- ment have when stacked against association; (2) municipal contribu-
ed the statutory dollar maximum other necessary local expendi- tions from local taxes or other
on volunteer firefighters' service tures? The council should revenue sources; (3) assets of the
pensions and substituted a liberal recognize that once the deci- fund attributable to any former
flexible limit based on current sion to approve a relief associa- member who left without meeting
(latest three-year average) funding tion benefit increase is made, minimum service requirements for
going into the relief association. It the city will be required to fund a pension and has not returned to
also gave municipal officials powers it in future years even in the active fire department service for
over and responsibilities for retire- unlikely event that fire state aids at least five years; and (4) assets of
ment benefits provided by non- should decrease. the fund credited to a member
profit firefighting corporations 4. Have the projected annual who retired without obtaining a
similar to those they would have if costs, projected fire state aid full non-forfeitable interest in the
the volunteer department was a amounts, and mathematical amount credited to his individual
city-operated department. computations used by the account pursuant to M.S. 424A.02,
This means that when a council requesting relief association Subd. 2. His pro rata share of the
is approached by relief association officers been carefully checked annual investment income is also
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credited to his account. When the when one seems desirable, risks GTS Elects Officers and Welcomes
member retires after at least ten loss or impairment of a very sig- New Board Members
years of service, he is entitled to nificant community service.
the non-forfeitable portion of the The 1979 legislation also re- New officers of the Government
assets in his account. That portion quires that the board of each Training Service (GTS) have been
varies with his years of service (e.g. volunteer firefighters' relief as- elected. Elected to second one-
60 percent with ten years of sociation have three ex-officio year terms were: Ron Kaliszewski,
service, up to 100 percent with 20 officials (normally the mayor, clerk, Office of Local and Urban Affairs,
years of service or more). and fire chief)as board members in State Planning Agency, Chairman;
Assuming no disability coverage, addition to six elected members of Maureen Bye, Council Member,
or assuming disability coverage the board of trustees. If the relief Duluth, Vice Chairman; and Ray
provided through purchase of association is subsidiary to an Eckes, Nicollet County Commis-
disability insurance for members, independent non-profit firefight- sioner, Treasurer. New representa-
such defined contribution plans ing corporation which contracts tives of the Association of Minne-
have the advantage of always being with more than one municipality, sota Counties will be Larry
fully funded. Thus, not only are the ex-officio board members must Granger, Director of Program
future generations of tax payers be drawn from the contracting Development, and Dennis Hron,
protected from unexpected pay- municipalities. Each ex-officio Scott County Commissioner. Wil-
ments for services rendered long
board of trustees member has full liam Bassett, City Manager, Manka-
ago,but current actuarial surveying powers of the office except power to, has been appointed as an
and reporting requirements are to serve as president, secretary or additional representative of the
greatly simplified. With a defined treasurer of the board. The League of Minnesota Cities.
contribution plan no member fiduciary duty of the board of GTS is an independent, public
need fear manipulation of the trustees including the ex-officio organization which offers assis-
benefit structure, since each is city members is clearly established tance to public agencies and
entitled to a definite portion of the as a duty to implement laws in jurisdictions in training, confer-
fund assets. Thus, members of local conformance with the expressed ences, brokering, organizational
associations can spend more time intent of the legislature and a duty development, publications, and
and effort on maximizing return on to manage the fund in the best consultation. It was founded in
investments and less time on interests of the state, the taxpayers, 1976 by the League of Cities, the
benefit formula adjustments. and the beneficiaries of the fund. . Association of Counties, the
The defined contribution or The intent was to mandate the University of Minnesota, the State
"share the pot" plans have been participation of city officials in the Planning Agency, and the State
criticized as unfair to volunteer operation of volunteer firefighter- Department of Personnel, whose
relief associations. representatives comprise the
firefighters because cities are not governing Board of Directors.
required by law to pay any locally
raised moneys into the plan.
However, the answer to this fVENSEN-DODGE, INC.
criticism seems to be that cities 111111
can contribute locally raised tax
11111 -I
money. Moreover, all the 2 per- Public Finance and Management
cent premium tax on fire insurance formerly T.C. Evensen-Associates. lnc.
in Minnesota is returned on a
formula basis to cities and towns
providing fire protection, and is WHY EVENSEN-DODGE?
entirely committed to the local
relief association if there is one.
Thus, there is mandatory tax • The nation's first independent financial consultant
support for volunteer firefighters' • Over 50 years market experience
relief. Furthermore, any city which
depends on the state fire aid alone, • Responsible for one billion dollars in municipal
without frequent evaluations of finance over the last three years alone
the adequacy of the relief program
to attract and retain sufficient
numbers of competent volunteers 1900 Midwest Plaza Bldg• Minneapolis, Minnesota 55402
and without a willingness to make 612/338-3535 800/328-8200 (Hasid•..innr,ot,,
a sufficient local tax contribution
September 1979 23
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MEMO TO: FIREMENS RELIEF ASSOCIATION
FROM: CITY COUNCIL MEMBER MARK PARRANTO
DATE: MARCH 28 , 1979
SUBJECT: PROPOSAL - FIREMENS PENSION
1. Annual payment by City to Firemens Pension Plan.
2. State Aid Funds also paid to Firemens Pension Plan.
3 . Benefits after 20 years.
4 . Vesting of benefits after 10 years at rate of 10% per
year. i.e. , fireman would get 50% of accrued benefits after
15 years.
5. Death benefit entire account balance paid to survivor.
Same for dismemberment.
6. Annual accounting for each man showing total in pension
accounts per man.
7. No set benefit - each man gets what is in his account.
Advantages to City
1. Annual contribution known in advance.
2. No unfunded liability.
3. Easy to set contribution rates.
Advantages to Firemen .
1. Each man knows at any time what his pension plan is worth.
2. Advantages of higher interest rates go to the fireman, not
the City.
3. A fireman can collect something if he is forced to quit
before reaching 20 years service.
.
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All Figures Based on Firemens Proposal
Projected 1978 Contribution $48 ,619
Number of Eagan Firemen 64
Contribution per man/year 759. 67
State Aid - projected $20 ,313
Number of Eagan firemen 64
Contribution per man/year 317 . 39
Assuming payment in advance:
Future value $759. 67/year @ 5% 20 years $25 ,119 .21
Future value $317 . 39/year @ 5% 20 years 10 ,494 .80
Value per man after 20 years $35 ,614 .01
Assume payment after 1 year
Future Value $759. 67/year @ 5% 19 years $23 ,199. 57
Future Value $317. 39/year @ 5% 19 years 9,692 .77
Total $32 ,892 . 34
Add 20th pmt. 759. 67 + 317 . 39 1,077 .06
Total per man $33,969.40
Assume investments average 7. 5%
Future value $759. 67/year @ 7 . 5% 19 years $29 ,895. 44
Future value $317. 39/year @ 7. 5% 19 years 12 ,490 .31
Total $42 ,385.75
Add 20th payment 1,077 .06
$43,462 .81.
Y` ;s , w.
EAGAN VOLUNTEER FIRE DEPT.
3940 RAHN ROAD EAGAN, MINN. 55122
February 20, 1979
Mr. Mark Parranto, Councilman
Eagan City Hall
3795 Pilot Knob Road
Eagan, MN 55122
Dear Councilman:
Per your request, this memo describes the pension vesting plan proposed by
the Relief Association bylaws committee and approved by the membership.
This is exactly the same plan as described in our "Firefighters Pension
Funding for 1979" memo to the City, on September 8, 1978, and as approved
by the City for purposes of 1979 budgeting. Final approval of the plan is
now hereby requested.
VESTING PLAN
Retired members with 10-14 years of service shall receive 75% of the earned
benefit. Retired members with 15 or more years of service shall receive 100%
of the earned benefit. A member must be at least age 50 to collect. Payments
for less than 20 years of service shall be lump sum payments (as opposed to
lifetime monthly payments) .
The bylaws committee has done considerable research on various vesting plans
and considers this a fair one. Some of the considerations were:
1. This is the only plan permitted by State law. Any deviation
from this plan (either for greater or lesser benefits) would
require special legislation.
2. The funding for this plan is only $1900.00 more per' year (from
the City) than the current retirement program without vesting.
3. No significant loss of manpower is expected to occur when this
plan is instigated. This assumption seems especially justified
in view of the fact that, although a firefighter may retire prior
to age 50, he may not collect retirement benefits until attaining
age 50. And, of course, as long as he remains active, the higher
his ultimate retirement benefit will be.
In conclusion, the Fire Department heartily seeks your earliest study and
approval of the proposed vesting plan.
1.
e
.w
2.
In case you need additional information or discussion prior to presentation
of the plan to the City, please notify one of the undersigned.
Sincerely, 1
Albert Horrocks
Relief Association President
454-4246
AH: do
Dewey Gaudette
Bylaws Committee Chairman
454-5287
Bob Childers
Fire Chief
454-2883
John Flood •
Relief Association Treasurer
454-2631
•
MEMO TO: PUBLIC WORKS COMMITTEE
FROM: CITY ADMINISTRATOR HEDGES
DATE: JULY 8, 1980
SUBJECT: PUBLIC WORKS COMMITTEE MEETING
A Public Works Committee meeting is scheduled for Wednesday, July 9, 1980,
at 5:10 p.m. to perform an on site visual inspection of two (2) proposed
public improvements:
1. Highview Avenue between Highridge Terrace and Pilot Knob Road
2. Wescott Road between Denmark Avenue and Lexington Avenue
All members of the City Council are welcome to attend the meeting
dmini trat
Ci ty. r s o
cc: City Council
Public Works Director