09/15/1982 - City Council SpecialMEMO TO: HONORABLE MAYOR & CITY COUNCILMEMBERS
FROM: CITY ADMINISTRATOR HEDGES
DATE: SEPTEMBER 15, 1982
SUBJECT: SPECIAL CITY COUNCIL MEETING
The referendum is over and what a relief to have all eleven pre-
cincts soundly vote yes on the city hall expansion project! It
was a long several months and everyone that participated in the
referendum is totally excited today. I feel the results of the
election indicate both community awareness and acceptance to a
much needed project as well as a vote of confidence for the Mayor
and Council, Citizens' Advisory Committee Members and management
team that recommended the facility to the voters.
Enclosed is a copy of a memorandum on some proposed increases to
the defined benefit plan with a lump sum alternative as suggested
by the City Council following the meeting with the general fire
department on August 30, 1982. The City Administrator has worked
out various calculations based on certain assumptions if the lump
sum payment was increased for the defined benefit program to $30,000
or $36,000. Please refer to the attached memorandum as prepared
by the City Administrator for a review of the functions and cost
estimates as they relate to and would impact the City of Eagan.
\1
ity A ministr or
MEMO TO: HONORABLE MAYOR & CITY COUNCILMEMBERS
FROM: CITY ADMINISTRATOR HEDGES
DATE: SEPTEMBER 15, 1982
SUBJECT: PROPOSAL TO CONSIDER INCREASE IN VOLUNTEER FIRE FIGHTERS'
RELIEF ASSOCIATION PENSION FUND
Since the City Administrator has not had an opportunity to prepare
the cost estimate and effects on the unfunded liability regarding
any increase in a lump sum payment under the defined benefit plan
as suggested by the City Council, it seemed appropriate to Fire
Chief Childers and the City Administrator that the City Council
have an opportunity to review and discuss the proposals at the
special City Council meeting on the September 16 without the pension
committee present. As soon as the City Council has a recommenda-
tion, it would seem appropriate to have an early evening meeting
to discuss the proposal with members of the pension committee and
possibly before a fire department meeting and prior to a regularly
scheduled budget meeting during one of the next few weeks.
Following a special City Council meeting that was held at Fire
Station #1, it was suggested to the City Administrator by members
of the City Council that numbers be calculated to determine what
the accrued liability would be if there was an increase in the
lump sum benefit from $24,000 to $30,000, and for comparitive pur-
poses to illustrate a lump sum increase to $36,000. Obviously
the accrued liability can be calculated for any amount between
$24,000 and $36,000 by utilizing the formula that calculates the
accrued liability. The formula is simply a division of the new
value by $24,000 which equals an amount taken times $ 937,069
which is the accrued liability for the $24,000 figure and that
will give the new accrued liability amount. The City Administrator
will review that formula at the City Council meeting on Thursday
if a value is to be calculated other than the $30,000 or $36,000
figure.
Without the new actuarial report, there were a number of assumptions
that had to be made by the City Administrator and Director of
Finance with the assistance of Jerry Wobschall, a consulting
accountant who has been working with a number of the debt service
funds and assessments for the community during the past two years.
First of all, for assumption purposes, we are using either twenty
years of service or fifty years of age, whichever is the longer
time period.
The ages and years of service were researched for every volunteer
fire fighter who is presently an active fire fighter. Accrued
Pension Fund Memo
September 15, 1982
Page Two
liability was established as of September 1, 1982 for (1) $24,000
Lump sum, $937,069; (2) $30,000 lump sum, $1,171,336; and (3)
$36,000 lump sum, $1,405,603. According to Marquette National
Bank, the assets as of September 14, 1982 for the relief association
special fund are $459,518. As of December 31, 1978, according
to the last actuarial report, the unfunded accrued liability was
$186,752. Since the City has made payments that have applied to
the unfunded liability during the past four years, there has been.
a portion of the unfunded liability retired. However, there are
certain assumptions that must be considered regarding the ages
of the fire fighters whereas the unfunded accrued liability will
increase according to the actuarial studies; and, therefore, based
on the accrued liability projection for September 1982, less assets,
the accrued liability is $436,185 for a $24,000 lump sum. The
amount for the accrued liability for $30,000 and $36,000 is $670,452
and $904,719, respectively. The amount required for budget purposes
to handle normal costs and unfunded liability cannot be determined
until the actuarial study is completed.
In summary, to resove the lump sum amount for the pension increase,
it would be appropriate to consider either a lump sum amount or
a budgetary appropriation for the pension account. With a budgetary
appropriation of $65,000 and the state aid insurance premium tax
of approximately $46,000, the City Council has a total, of approxi-
mately $111,000 to consider. Since the accrual is required before
a final payment is possible, it is suggested that the City Council
approve a budgetary appropriation for the pension plan. This allows
City Council flexibility to determine the final amount of the lump
sum benefit once the new actuarial report based on lump sum benefits
only is prepared.
ity ministr for
MEMO TO: HONORABLE MAYOR & CITY COUNCILMEMBERS
FROM: CITY ADMINISTRATOR HEDGES
DATE: SEPTEMBER 15, 1982
SUBJECT: SPECIAL CITY COUNCIL MEETING
The referendum is over and what a relief to have all eleven pre-
cincts soundly vote yes on the city hall expansion project! It
was a long several months and everyone that participated in the
referendum is totally excited today. I feel the results of the
election indicate both community awareness and acceptance to a
much needed project as well as a vote of confidence for the Mayor
and Council, Citizens' Advisory Committee Members and management
team that recommended the facility to the voters.
Enclosed is a copy of a memorandum on some proposed increases to
the defined benefit plan with a lump sum alternative as suggested
by the City Council following the meeting with the general fire
department on August 30, 1982. The City Administrator has worked
out various calculations based on certain assumptions if the lump
sum payment was increased for the defined benefit program to $30,000
or $36,000. Please refer to the attached memorandum as prepared
by the City Administrator for a review of the functions and cost
estimates as they relate to and would impact the City of Eagan.
\1
ity A ministr or
MEMO TO: HONORABLE MAYOR & CITY COUNCILMEMBERS
FROM: CITY ADMINISTRATOR HEDGES
DATE: SEPTEMBER 15, 1982
SUBJECT: PROPOSAL TO CONSIDER INCREASE IN VOLUNTEER FIRE FIGHTERS'
RELIEF ASSOCIATION PENSION FUND
Since the City Administrator has not had an opportunity to prepare
the cost estimate and effects on the unfunded liability regarding
any increase in a lump sum payment under the defined benefit plan
as suggested by the City Council, it seemed appropriate to Fire
Chief Childers and the City Administrator that the City Council
have an opportunity to review and discuss the proposals at the
special City Council meeting on the September 16 without the pension
committee present. As soon as the City Council has a recommenda-
tion, it would seem appropriate to have an early evening meeting
to discuss the proposal with members of the pension committee and
possibly before a fire department meeting and prior to a regularly
scheduled budget meeting during one of the next few weeks.
Following a special City Council meeting that was held at Fire
Station #1, it was suggested to the City Administrator by members
of the City Council that numbers be calculated to determine what
the accrued liability would be if there was an increase in the
lump sum benefit from $24,000 to $30,000, and for comparitive pur-
poses to illustrate a lump sum increase to $36,000. Obviously
the accrued liability can be calculated for any amount between
$24,000 and $36,000 by utilizing the formula that calculates the
accrued liability. The formula is simply a division of the new
value by $24,000 which equals an amount taken times $ 937,069
which is the accrued liability for the $24,000 figure and that
will give the new accrued liability amount. The City Administrator
will review that formula at the City Council meeting on Thursday
if a value is to be calculated other than the $30,000 or $36,000
figure.
Without the new actuarial report, there were a number of assumptions
that had to be made by the City Administrator and Director of
Finance with the assistance of Jerry Wobschall, a consulting
accountant who has been working with a number of the debt service
funds and assessments for the community during the past two years.
First of all, for assumption purposes, we are using either twenty
years of service or fifty years of age, whichever is the longer
time period.
The ages and years of service were researched for every volunteer
fire fighter who is presently an active fire fighter. Accrued
Pension Fund Memo
September 15, 1982
Page Two
liability was established as of September 1, 1982 for (1) $24,000
Lump sum, $937,069; (2) $30,000 lump sum, $1,171,336; and (3)
$36,000 lump sum, $1,405,603. According to Marquette National
Bank, the assets as of September 14, 1982 for the relief association
special fund are $459,518. As of December 31, 1978, according
to the last actuarial report, the unfunded accrued liability was
$186,752. Since the City has made payments that have applied to
the unfunded liability during the past four years, there has been.
a portion of the unfunded liability retired. However, there are
certain assumptions that must be considered regarding the ages
of the fire fighters whereas the unfunded accrued liability will
increase according to the actuarial studies; and, therefore, based
on the accrued liability projection for September 1982, less assets,
the accrued liability is $436,185 for a $24,000 lump sum. The
amount for the accrued liability for $30,000 and $36,000 is $670,452
and $904,719, respectively. The amount required for budget purposes
to handle normal costs and unfunded liability cannot be determined
until the actuarial study is completed.
In summary, to resove the lump sum amount for the pension increase,
it would be appropriate to consider either a lump sum amount or
a budgetary appropriation for the pension account. With a budgetary
appropriation of $65,000 and the state aid insurance premium tax
of approximately $46,000, the City Council has a total, of approxi-
mately $111,000 to consider. Since the accrual is required before
a final payment is possible, it is suggested that the City Council
approve a budgetary appropriation for the pension plan. This allows
City Council flexibility to determine the final amount of the lump
sum benefit once the new actuarial report based on lump sum benefits
only is prepared.
ity ministr for