10d Fire Relief Association settlement /0cC
4
C ITYOF
f {
I ..,
1g :
r
1 . $i {
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
I MEMORANDUM
TO: Mayor and City Council
1 FROM: Don Ashworth, City Manager
i DATE: August 19, 1993
SUBJ: Fire Relief Association Settlement
1
As the Mayor brought out in our last meeting, # have reached a tentative settlement with the
I Fire Relief Association in regards to fire relief Wit. The memorandum outlines the specifics
of the tentative agreement. The agreement needs o be ratified by the Relief Association as a
whole. Prior to submitting it to their membership, we thought a review by the Council was
1 warranted. x #'
As I noted in my memorandum, the May and I have \been working on attempting to reach a
1 tentative agreement with the Fire Relief kssociation for "early a year I can assure City Council
members that achieving resolution ofi enefit levels hat, been a very excruciating process in
1 pevious years. This years process,:early split the Fire Department in half. I cannot state
strongly enough that this is not the time 'to restart those, negotiations or to head in a new
direction. I am unaware as to thepositions of council members, but I can state that the proposed
I agreement is a fair one for all sides. I would hope that the Mayor and I have the support of the
City Council during this endorsement process. This meeting provide the opportunity for
Don or I to respond to rpuestions,and/or obtatau }addiitianal information which may be desired from
II the council prio I to theft e hat the nal$ Ta ut ent.ik submitted for approval.
' >
x
i'1
e 1
1
1
,,,, ,
,, CITYOF
1
0 1
, ,
-„ , G : _ 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 1
(612) 937 -1900 • FAX (612) 937 -5739 1
MEMORANDUM 1
TO: Mayor and City Council 1
FROM: Don Ashworth, City Manager
DATE: August 6, 1993 1
SUBJ: Chanhassen Volunteer Fire Department, Consider Adjustments to Fire Pension Plan 1
eA
In the course of the last 6 months, there have beenno less than 20 meetings between myself, the 1
Mayor, the Fire Chief (Jim McMahon), ReefAssociation (Fritz Coulter), and the Fire
Department itself to consider potential fire pension adjustments. Most of the meetings involved
2 or 3 of the above, with the outcomes then -being shared with the entire Relief Association to
I
see whether or not potential solutions were being unveiled. Several of the Relief Association
meetings whereat points brought out at the smaller grohp meetings were discussed, were quite
heated. Primary issues presented at those included the level of increase which should
I
be requested, the reasonableness of that request, and w hether the increase would be applied
retroactive to retired firemen. The last issue was probly the most decisive in that current
firemen realize that retroactive funding will come at the pence of current members. 1
Background - There are 5 pie of background informationvhich the Council should be aware
of:
g1, 1
Timing - An increase tn_fire relief :benefits cannot be° ought until after an actuarial has
been corleted.,,.To ensure thatmiredoggotpay. g rt w aul . .off ` , an and als d to reduce
the pain for rbo the firemen and the City Council, tray ition. ly mcations to the 1
pen plan have o every 3 years. It has been 3 years s l :R - Aii last actuarial was
completed and adjustment made =As part of this,year propos 1, we are seeking a 5 year 1
package.
S 9
0,
Primary Funding - The State of Min ota enacted a 2% tax against all commercial/ 1
industrial insurance policies within the State of Minnesota. Those funds are dedicated
solely for fire relief benefit and are distributed back to individual cities based upon the
total value of policies written within that community. For 1993, the city will receive 1
approximately $35,000 for fire pensions.
1
1
1
Mayor and City Council
August 6, 1993
Page 2
' Secondary Source of Funding - Most cities have set fire relief benefits at an amount equal
to the insurance distribution within that community. Others, like Chanhassen and Chaska,
1 have picked a random number to supplement pension costs, i.e. for Chanhassen/Chaska
1 /3 of 1% of the property tax base. Typically, the supplemental source is used where a
community did not feel that their relief benefits were sufficient to attract new firemen
1 and/or where the 2% monies did not provide reasonable dollars in comparison to other
communities.
1 General Fund - In addition to funding the amount required by the actuarial to fully fund
fire relief benefits, the city additionally pays to the Fire Department $1 per man per fire
call. These dollars are put into a separate pension fund referred to as the General Fund.
The original purposes for the general fund were to ensure that a fireman who may retire,
or may be forced to leave the city prior to becoming vested, could receive some benefit
for the years of service he had contributed. The general fund also makes loans to
members. As vesting time frames have continued to decrease, the necessity of having the
general fund can be questioned and/or necessity to see this fund continue to grow can be
questioned.
Comparison To Other Cities - Comparisons of benefit levels between cities is almost
' impossible. The reason is the significant disparity that occurs with cities that have a high
commercial/industrial base, and therefore receive higher state distributions versus
communities that do not have that type of a tax base. Additionally, some communities,
' such as Eden Prairie and Lakeville, have determined that they are simply willing to pay
a higher level of fire relief benefits, i.e. Eden Prairie and Lakeville are approximately 3
times higher than most of the cities in this area including Chanhassen. Included in the
1 packet is a comparison of benefit levels to some of our neighboring communities.
Current Proposal - The current retirement benefit is $13 /month per year of service, i.e. a fireman
1 reaching age 50 with 20 years of service would be entitled to a monthly benefit of $260. If that
same fireman did not wish to she the benefit in the form of a monthly annuity, he could elect a
lump sum payment of $39,000 upon retiring. The Relief Association is requesting that the City
1 Council consider increasing the monthly benefit by $1 per year for each of the next 5 years. The
actuarial report was completed on the basis of having the increase effective for both current as
' well as retired firemen.
Analysis - Three primary factors were taken into consideration in making an analysis of the Fire
Department's proposal: 1) projecting state aids using a relatively conservative increase per year
in those amounts; 2) projecting future property tax levels using the existing 1 h of 1% formula
in conjunction with recognized increases in the tax base; and finally, 3) comparing the total
projected revenue in comparison to levels of funding anticipated to be necessary to pay the
increased benefit level for each of the next five years.
1
1
Mayor and City Council
August 6, 1993
Page 3
My analysis revealed that the city can fund the current increase that is being requested, including 1
applying the new benefit levels retroactively to retired firemen, without necessitating a property
tax increase during the next 5 year period of time. Although the city can fund the current request
without increasing property taxes, it must be stated that the funding level almost exactly matches
revenues to expense in that fifth year. This issue is important as the city would not then have
the funds available to look to an additional increase in 5 years, unless 3 policy issues are agreed
to at this time. To ensure that we are in a reasonable position to negotiate with the Fire
Department 5 years from today, I would strongly recommend that both the City Council and
Relief Association agree to the following 3 points:
1
1. Future Retroactivity - The increase provided approximately 3 years ago was
applied to retired firemen. Based on the limited number of firemen, the overall
financial impact of that decision was relatively minor. As stated, the current
proposal, including offering those increased benefits to retired firemen, can be
funded without increasing property taxes; but such is nearing a "breaking of the
bank." I am confident that a tremendous financial burden will exist 5 years from
today and that the arguments occurring over retroactivity will be just as fierce as
they were this year unless all parties agree that any benefit levels approved after '
1998 will not be applied retroactively.
2. General Fund Dedication - By the end of the 5 year period, the general fund can
reasonably grow to somewhere between $200,000 and $250,000. This would
equate to approximately $5,000 for each fireman leaving the department. I would
recommend that both the City Council and Fire Relief Association agree that the
fund can be capped at $250,000, or to the balance existing in 1997 with future
"dollar per man per call" payments being dedicated to the special fund. If this
policy is agreed to by both parties, we can reasonably assume that the negotiations
occurring in 1998 will be relatively painless.
3. Approval of Ne'w Appointments - The total funding requirements for the Fire 1
Department are directly related to the number of firemen. Currently, each
additional fireman placed into service generates the necessity to increase revenues
by $1,000 per year to fully fund the benefits paid to that fireman when he retires.
Although the overall membership cannot exceed 60 without City Council action,
I would ask that the Fire Department seek the approval of the City Manager prior
1
to increasing the number of firemen, except if such is solely a replacement.
Currently, the department has approximately 45 firemen.
Recommendation
I would recommend that the Fire Relief Association and the City approve a $1 (one dollar)
1
increase in fire relief benefits for 1994, 1995, 1996, 1997 and 1998, and that such be offered to
1
1
Mayor and City Council
August 6, 1993
Page 4
both current and retired firemen subject to both the Association and city agreeing to the following
conditions:
' 1. All parties agree that benefit levels after 1998 will be looked at as two separate
tracks, i.e.
' a. Active Member Modifications - Increases for active firemen after 1998
will be based on funds available to the city and contributions anticipated
to be made by current members which will then set the new benefit levels
that may be available to active members; and
b. Retired Relief Association Members: Benefit changes occurring after 1998
will be looked at in a different light than those of current members
' recognizing that benefit levels for retired firemen, and therefore the
contributions that were made for those retired firemen, were established
prior to 1998. Accordingly, the modifications or increases to the relief
' benefits for retired firemen would be limited to potential betterment of
investment earnings than had originally been seen, the city's ability to
provide cost of living type of increases, etc.; and
2. That both the City Council and Fire Relief Association agree that the fund can be
capped at $250,000, or to the balance existing in' 1997 with future "dollar per man
1 per call" payments being dedicated to the special fund.
3. That the Fire Department seek the approval of the City Manager prior to
' increasing the number of firemen, except if such is solely a replacement.
1
1
1
1
1
1
Relief Association Benefits
Pop Dept. Retirment Benefit Vesting
16,391 Hopkins $3,000 per yr of service 5 yr
($20 per month /yr of service) 1
9,586 Mound $19.75 per month /yr service 20 yr
($2,962 per yr of service)
1
11,966 Shakopee $2,135 per yr of service 5 yr
( $14.25 per month /yr of service)
15,717 Hastings $2,100 per yr of service 10 yr
($14 per month /yr of service)
1 12,339 Chanhassen $2,100 per yr of service 10 yr
$13 per month /yr of service
14,406 Robbinsdale $1,875 per yr of service 10 yr
($12.50 per month /yr service)
11,730 Prior Lake $1,750 per yr of service 10 yr
($11.66 per month /yr service)
11,727 Chaska ($1,650 per yr of service) 15 yr
$11 per month /yr service
10,851 Savage ($1,575 per yr of service) N/A
$10.50 per month /yr service
12,607 N.St.Paul $1,500 per yr of servicel5 yr
($10 per month /yr service)
1
9,129 Rosemount $1,400 per yr of service 10 yr
($9.33 per month /yr service)
/ /n/ � . � �+ CC�N Gt ' /E0` A1 1-
/ _ 1 71e /1 G O vdR.NG
1- X )%-.5 Se-r
`ma c /),
// ; /3 x .20 x pro
p / / / M
7 J
9 0.0
•
f '