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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 MUNICIPAL TANK AND TOWER CO. Box 248, Sioux Falls,So.Dak.57101 PHONE 605-743-5425 WELDING NEW ROOFS PAINTING NEW RISERS SANDBLASTING NEW SHELLS BOARD OF HEALTH AND AWWA APPROVED INTERIOR COATINGS INSULATED FROST JACKETS OF DOUBLE METAL CONSTRUCTION BONDED INSURED MEMBER AMERICAN WATER WORKS ASSOCIATION TWENTY-FOUR HOUR EMERGENCY SERVICE 22 MINNESOTA CITIES 11 • 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 - r' f a t 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. . • • 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