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1o Approval of Fire Deparetment Bylaws & Pension Benefits .la. MEMORANDUM CITY OF CHANHASSEN TO: Mayor & City Council 7700 Market Boulevard PO Box 147 Chanhassen, MN 55317 FROM: Todd Gerhardt, City Manager ~. DA TE: February 13, 2006 Administration Phone: 952227.1100 Fax: 952.227.1110 SUBJ: Approval of Amendment to Chanhassen Fire Department Relief Association Bylaws and Increase in Pension Benefits Building Inspections Phone 952.227.1180 Fax: 952227.1190 BACKGROUND Engineering Phone 952.227.1160 Fax 952227.1170 The City of Chanhassen has a 42-member on-call volunteer/paid Fire Department (established in 1966). Volunteer firefighters often receive payments due to the time commitment needed to perform the duties of a firefighter, such as training, 24-hour on-call for service, and weekly meetings. In Chanhassen, volunteers are compensated in two forms-an hourly rate of $8 for call-outs, training, meetings, etc., and the Fire Relief Association Pension. Finance Phone: 952.227.1140 Fax: 952227.1110 Park & Recreation Phone: 952227.1120 Fax: 952227.1110 Currently a firefighter would be fully vested after 5 years of service. As an example, a firefighter with 7 years of service would receive the following pensIOn: Recreation Center 2310 Coulter Boulevard Phone: 952227.1400 Fax: 952227.1404 7 years of service x $4,000 = $28,000 x 48% (40% + 4% per year early vesting) = $13,440 Planning & Natural Resources Phone: 952.227.1130 Fax: 952227.1110 All current members are on a lump sum pay-out based upon their years of service; however, we do still have 12 retired members receiving a monthly annuity of $4 I 0 per month. The last time we increased the pension fund was in 2001 with a rate increase of 48.15% (see Attachment #1). Public Works 1591 Park Road Phone: 952227.1300 Fax: 952227.1310 ACTION REQUIRED Senior Center Phone: 952227.1125 Fax: 952.227.1110 Staff has met with representatives of the Fire Relief Board and has negotiated a three year increase of 8.75% per year beginning in 2006, with the condition that the funding ratio remains above 75% (see Attachment #2). These increases will help the Fire Depattment in recruiting new firefighters and also help to retain our more experienced firefighters. Web Site www.ci.chanhassen.mn.us One of the areas you need to pay attention to when considering a rate increase is the funded ratio. Attachment #3 shows two forecasts of the pension fund's assets and liabilities. In both cases, the funding level never dips below 75% over the next three years. You will also notice that the City of Chanhassen does The City 01 Chanhassen · A growing community with clean lakes, quality schools, a channing downtown, thriving businesses, winding trails, and beautiful parks. A great place to live, work, and play Mayor & City Council February 13, 2006 Page 2 not have to make a contribution, based on these assumptions, over the next three year period. The funding source for the benefit increase would come from state fire aid and investment earnings derived from the pension fund assets (see Attachment #4 for the history of city contributions, state aid, and investment income). RECOMMENDA TION Staff would recommend that the Mayor and City Council approve the attached resolution amending the bylaws and authorizing a $4,350 increase in 2006, a $4,700 increase in 2007, and a $5,050 increase in 2008 to the Chanhassen Fire Department Fire Relief Association with the condition that the funding ratio remains above 75%. Approval of this resolution requires a simple majority vote of those City Council members present. A TT ACHMENTS 1. Resolution Amending the Bylaws. 2. History of Chanhassen Pension Fund Increases. 3. Key Financial Cities Comparison and Proposed Rate Increases. 4. Forecasts of the Pension Funds with a 5% and 7% Return. 5. Revenues and Expenses by Source 1995-2004. 6. Chanhassen Fire Relief Association Investment Review. G:\admin\tG\fire relief assn increase request cc approval.doc Resolution Amending Bylaws Attachment #1 CITY OF CHANHASSEN CARVER AND HENNEPIN COUNTY, MINNESOTA RESOLUTION Date Resolution No. Motion By Seconded By RESOLUTION AMENDING THE BY -LA WS OF THE CHANHASSEN FIREFIGHTERS RELIEF ASSOCIATION WHEREAS, the Chanhassen Firefighter's Relief Association has requested the City to approve amendments to Article X, Section 10.1, Article XII, Section 12.1 B., and Article XV, Section 15.1 of the Association's By-laws; and WHEREAS, it is in the best interest of the City and of the Relief Association that the By-law amendments be approved. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Chanhassen, Minnesota The attached amendments to Article X, Section 10.1 modifying pension benefits; Article XII, Section 12.1 B. modifying death benefits; and Article XV, Section 15.1 modifying amending By-laws, of the Firefighter's Relief Association By-laws be approved. APPROVED AND ADOPTED this _ day of ,2006. CITY OF CHANHASSEN By: Thomas A. Furlong, Mayor ATTEST: Todd Gerhardt, City Manager 123034 v2 AMENDMENT TO ARTICLE X, SECTION 10.1 Section 10.1. Pension. . Effective January 1,2006. If the pensions plan balance does not drop below 75% funded as determined by the annual audit in May of said year and upon request of a retired member, who has at least 20 years of active service, and approval of the Board of Trustees, the member may be entitled to a full service pension computed on the basis of $4,350.00 per year of active service of said member in the Chanhassen Fire Department. The Value of a full pension shall be based on the account balance at the end of the year in which the member retired from the Chanhassen Fire Department. The pension shall start on the first day of the month following retirement from the Association. Payments are to be made retro active. Effective January 1,2007. If the pensions plan balance does not drop below 75% funded as determined by the annual audit in May of said year and upon request of a retired member, who has at least 20 years of active service, and approval of the Board of Trustees, the member may be entitled to a full service pension computed on the basis of $4,700.00 per year of active service of said member in the Chanhassen Fire Department. The Value of a full pension shall be based on the account balance at the end of the year in which the member retired from the Chanhassen Fire Department. The pension shall start on the first day of the month following retirement from the Association. Payments are to be made retro active. Effective January 1,2008. If the pensions plan balance does not drop below 75% funded as determined in May of said year and upon request of a retired member, who has at least 20 years of acti ve service, and approval of the Board of Trustees, the member may be entitled to a full service pension computed on the basis of $5,050.00 per year of service of said member in the Chanhassen Fire Department. The Value of a full pension shall be based on the account balance at the end of the year in which the member retired from the Chanhassen Fire Department. The pension shall start on the first day of the month following retirement from the Association. Payments are to be made retro active. AMENDMENT TO ARTICLE XII, SECTION 12.1B. Section 12.1. Death Benefits. B. Active Member Who is Not a Vested or a DefelTed Vested Member. Effective January 1,2001. A death benefit of $25,000.00 shall be paid to the designated beneficiary of an active member of this Association who is also an active member of the Chanhassen Volunteer Fire Department who is not a Vested or Deferred Vested Member under Section leA) of this Alticle. This benefit shall be paid out of the Special fund. 123034 v2 AMENDMENT TO ARTICLE XV, SECTION 15.1 Section 15.1. Amending By-Laws. Rewrite section on amending. The By-laws of this Association may be amended at any regular or special meeting thereof by a favorable vote of two-thirds of the members present and voting, provided that a quorum of 50% of voting members are present and provided further that notice of any proposed amendment or amendments shaH be given by reading the same at a regular or special meeting not more than 31 days next preceding that upon which such amendment or amendments are acted upon and that a notice be mailed to each member at his/her last known address not less than ten (10) days prior to such meeting. If such amendment or amendments shaH change the amount of benefits or pensions, aH such amendments shaH be submitted to the Chanhassen City Council for approval. Approved by the Chanhassen City Council September 10, 1984 Approved by Amendment by the Chanhassen City Council March 3, 1986 Approved by Amendment by the Chanhassen City Council October 24, 1988 Approved by Amendment by the Chanhassen City Council January 28, 1991 Approved by Amendment by the Chanhassen City Council November 25,1991 Approved by Amendment by the Chanhassen City Council October 25, 1993 Approved by Amendment by the Chanhassen City Council April 9, 2001 Adopted by the Chanhassen Relief Association October 29, 1984 Amended by the Chanhassen Fire Relief Association March 17, 1986 Amended by the Chanhassen Fire Relief Association December 14, 1988 Amended by the Chanhassen Fire Relief Association October 15, 1990 Amended by the Chanhassen Fire Relief Association December 16,1991 Amended by the Chanhassen Fire Relief Association August 31, 1993 Amended by the Chanhassen Fire Relief Association 123034 v2 History of Chanhassen Pension Fund Increases Attachment #2 '" 'J Q) OJ ro a... - ~ -::R ~ "*' ~ ~ ~ ~ ~ ~ ~ -0 ~ 0 0 0 0 0 0 0 0 0 0 Q) e....- CO I!) 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OOCOO ...... 0000000 ("'I r-l r-\ ("I r-l ,,\ t" 1 ---- --.. --. -- --- -- -- .................. __ r--I ~ -- -... ~- ~-. -....... ...........f""""l.............-- r-4 ("'I (") --' 00 N N --- --- ...... ,....., ...... I""- o r-l rl '<:t t"l Vl C\ 0'. r- C\ V"l 0 I""- r- rl") '-C \D I""- ......... ~ ................... if) VlVl-b'Tv}t.'7V}V}V}V}V} ...... Vi C\ co "'" ...... (/) o r- o N ("') (") if) tIl "5 o ..... C':l ~ c;C\~ ......~\O ~~ co...... (A- N ("'1 ('I C"l N N N C"I C"1 C"~ ("'I "'T'<:l"-;:t-;:t"<t'<T"<t-::l"V"tt7 ~ o v Vl 0000000000 "noVioonoonOono (")r-ovr-- -;:too v: '<:l" "tt V"l "n on '" \0 \0 r-- r- VlViVlVl'-AY'1(A-\7'7V)V} '<;ton 00 r-I 1"1 -- ...... -,- .--- ) 'n "'<:t" r-- (A- VJ (:j "';::: b.o ~ l: .... ~ Revenue & Expenses by Source 1995-2004 Attachment #5 \;. CHANHASSEN.'FIRE DEPARTMENT RELIEF ASSOCIATION SPECIAL FUND .:.., PENSION TRUST FUND REVENUES BY SOURCE AND EXPENSES BY TYPE Years 1995 through 2004 (Unaudited) . Fiscal Year. 1995 1996 . 1997 1"998. 1999 2000 2001 ' 2002 . 2003 2004 Fiscal Year 1995 . 1996 1997, 1998 1999 2000 2001 2002 2003 2004' Exhibit 4 . . Revenues by Source . City State Contributions . Contnbutions " 2% Aid Supplemental . .. Irivestment .' Income . Total' .. $ 14,789 $ 41,111 $ .$' 128,762 ' $ 184,662' 17,614 56,262 39,162 113,038 : 14,214 56,786 1,000 . 152,702 224,702' , 10,574 61,426 2,000 135,936 '209,936 , 24,058 63,481-. 2,000 : 179,603 269,142 17,101, 66,223 (46,313) 37,011" 99,315 82,921.. (86,543) .' 95,693 48,651 96,113 . .'1;000 (137,301) 8,463 . 12,227 . 118,745 ' 2,000. 331;012 463,984 154,033 " .1,000: 163,948 318,981 Expenses By Type . ,~ Benefit . Administrative. Payments Expenses Total $ 33,704 . $ 2,913 $ 36,617 54;020 3,115 57,135 132,013 ,9,303,', 141;316 . 42,914 6,806 49,720. 150,522 5,732 . 156,254 94,522 8,924 . 103,446 . . 59,256 . 5,788 65,044 46,150 5,060 5 1,2 I 0 208,150 7,670 215,820 59,786 6,685 66,471 20 Chanhassen Fire Relief Association Investment Review Attachment #6 ........ - .-.... -----.. ..~j;. ~~.~.- ,,-. . .I .......~~~.~*I._ ll,_ ""~~ 'I " .~ ~4/J ~. -', :{) t\ ~4.. tJ ,.....,. Chanhassen Fire Relief Association Investlllent Review July 5, 2005 The Parr Financial Group of Wachovia Securities 80 South 8th Street, Suite 3400 Minneapolis, MN 55402 Anthony Parr First Vice President - Investments (612) 340-4553 anthony.parr@wachoviasec.com Brian McKnight Associate Vice President - Investments (612) 340-4555 brian.c.mcknight@wachoviasec.com - .-... .-... The Parr Financial Group Your Team at Wachovia Securities -... " Who We Are Collectively, the professionals of The Parr Financial Group of Wachovia Securities have more than 50 years of experience in providing clients with sound financial solutions. Backed by the resources of one of the nation's largest brokerage firms, we use state-of-the-art technology and conservative investment products and services to help our clients reach their financial dreams. The mission of The Parr Financial Group is to help individuals, corporations and other institutions develop the best strategies for achieving the goals they value without undue sacrifice while avoiding unnecessary investment risk. What We Do ........... As part of our private client services, we provide comprehensive wealth planning, retirement-plan analysis, investment research and screening, and portfolio-management services. Anthony J. Parr First Vice President - Investments 612-340-4553 anthony. parr@wachoviasec.com Brian C. McKnight Associate Vice President - Investments 612-340-4555 brian .c.mcknight@wachoviasec.com Barbara J. Folz Senior Registered Account Administrator 612- 340-4512 barbara.j. folz@wachoviasec.com Jodi Benson Houglum Account Administrator 612-340-4545 jodi. bensonhougl um@wachoviasec.com Fax: 612-332-4071 Toll-free: 800-331-4923 http://www.parrfinancialgroup.wbsec.com WACHOVIA SECURITIES, LLC, MEMBER NYSE AND SIPC. (03/05) ,...,. ,-.,. -Chanhassen Fire Department Integrated Performance Monitor as of December 31, 2004 A 0;' fT DIl W.h d N W h N W h 12/31/03 C h PI / ccount 00 ota o ar elgl te ct ort ct ort as OW+ - Special Account 24% 6.16% S 419,239.10 S 872,770.07 S (491,337.10 FundSourcc Account 19% 4.00% S 337,155.89 S - S 325,000.00 Pru-Advisor Account 19% 9.56% $ 327,957.91 S 357,173.45 S (60,000.00 MPMG Account 18% 17.40% S 323,622.53 $ 309,182.78 S (25,000.00 DMA-Agg Gr II Account 20% 15.20% S 342,622.48 S - S 300,000.00 Total 100% 10.64% $ 1,750,597.91 $ 1,539,126.30 $ 48,662.90 Total Assets $ 1,750,597.91 Allocation Table Indices as of 12/31/04 Small Cap 6.37% Mid Cap 14.01% In tema tional 16.35% Large Cap 32.33% Bonds/Bond Funds 14.13% Cash and Equivalents 16.70% Specialty 0.11% Total 100.00% S&P 500 10.90% DIIA 30 5.30% Russell MidCap 20.20% Russell 3000 18.30% EAFE 20.70% LB Govt/Credit 4.20% SBI I ncome Share 9.20% 60%S&P500/40%LB Agl!r 8.30% '" Allocation Chart Bonds/Bond Funds, 14.13% Cash and Equivalents, 16.70% Specialty, 0.11 % Small Cap, 6.37% International, 16.35% Large Cap, 32.33% ,....,. CI Small Cap . Bonds/Bond Funds . Mid Cap 0 International l:J Cash and Equivalents . Specialty o Large Cap Information contained on this page is believed to be reliable. It has not been verified for accuracy or completeness by Wachovia Securities Incorporated or any of its employees. ~ ~ . , . .. Chan..hassen. Fire. Departm,ent ReJJef AssQci:ati'on Understanding Your Five Accounts. D~ >Pi-imarily Diversified Mutual Fyn.ds >FocusOn High Category Rankin'gs . ' ~ .. >CDs,/and Preferred' Used OccasionaWy " I, '~ >Retirement~Payments ~~adeFronl'fhis Account ~1 , i':(O~DM~ACC~U nt', Div.~riified!Ma'ria "~d'AI16catiofisJ'1:~j, If :!:~. ~.~ .,,~,,' >fy1JJltiple.-M6ney'fv1ariager~:in:Orie':l A'ccou,nr'.:.'{ ," ~:"r~"~. -'{ " .' :/,:~' :,. 'J: ''-' " JAss;efAilod~tion' J , 1,<;' .', -, .,. ,~ <r":f ,r- "' ','" ''''; , . 'l "'." :....t ',1'. c. .i-;"(,~.),..~.), ,.t."" ;.,,'., ",-,'-','. "." '~}>lr:_,,\ ~,I' , .,' ,! "', .,Re.t>ala. nC1llg .~.' " ',' '.., .- ' . j' ;-~'i ,~, ~ .; , - ;I ,'1'T'" , . -~ "., ~ -.-, __ .. . ,)*-., I,.., · :. .r~ ';""~One ~erf9rh1ahfe.~~1Port~(!e~~.s,f~~n,~i>~, i" ~4~' . ;" ~~ - ~ " :.:.;,./~ ' ",'>Wor.la Class Manage,rs. ,,', ~ '}~lh:: j',;\,~t; ,~:~ ," ,i '. _ ~ ,,!.. '-'i-(i~, jJ1 ..'.'' ,J.I~ " ~"." r,.... ~ ",'.. '.. '... '",. -1', i~# J' ",' <:,"~"i"~'~'qJ'~Dilig,~nt p-,e?ears~"and~ Ove~~ig,~t ;by:~~q~8\{i.~.~~\t : ,::.1:':::/.' ,:,'~I,'~',~." i~;c: . '.' '. '. '''. '., ,..'..... ....~. "..' ..... '. '. "'. '. . '., '. ", ' . ',' (,"if,.," ,fo}$ . ,,',~'l --~ 'i" "<'t'~..' ,"', " . ,'._, .,~,J:; ;' ',; . . ,,_ . {..,. ",",; ,'. J:'" '" .. .,j.' ,~11 '~3-'., . . _. j ~:~~c3;fI!S:har's'Index.:Ai:co;ultt:, . '.~,,' ",'" '/ ;i1~ ,'. .,\'. :,~ic-~<f~!"fk,W ..!t.','<,~ "'f f1.~ ,'Re'pllcate~~Market~Index . ~;;I", (;,1;. J~:';) .:f-{: ;,: ,i ~ " . ' .. . \ ., .c.,: ,~ . :~;., >7. .....Div"rrsifica~ipn. Nt " .j. ,r- ' .,. ,< f:'" , '/ ; "~. ...,~/~" ii. ::.!'.. l 1'~'. . > Lower Costs. f. ..IE. ". '. ,~ ;, . , :- d' " .' ~--n:~~ (F-' - _ _,' ~- _, _'~ -"t -~ _" ',' .1"- i. ,/. ':~/~ ; :;:~:r'~;." :',,:, · ,Sector Overyyeight F,RotatigQ~; :' ~', i.~/... ,.,.71jl~~ '~. .,:~~'~ :,:' ;~!t).iM1Wiie~ oli~~~offtciliolMaria" errttht~~~cf~2tJ',t:\~if(;j...:"l.. : ,ii...:.,''- "'f \-priv~te~~ccouf1.t:~Efh~ger:-(Yo.u(OWD~Mutu~r<FI.tri9J'j:~;/i;~.}~ j i"'i,. ' ~ ,,' c: >S~per;ioj-'Long..Te~m Track-Record~f< i., . :.' ,." .~,., '/ .J" "Ii.;' "fl.: " ,i~ . A" it. -,i !>20'to 25Stoc~ positiOn.S ",{- '. '. ,i;~...~~lt . ~.. '.",. ,"; _!-,J"" \;'#, "~~..'" ,'..-"..,' '!(;~.;T")~"~,:\J/ rtValue'orientation' 'r; t ""I: .~,:; t ~. ~:r.,)l~ '. "'~ tJ,",ri'Q''.-' ,', :~i~~{{t:','.:,;A { . qfJ;.';,'(' .:r ;;'. ;~':' /~;.. ~. "~,~:~ : '. 'It' ,'"r/tf.L;' '>l.r'Yiri,;~ .,~~\:;J,'); ,"c? .JAj\'F"~';;.IS .....1 . t r ,.A-... d, ~'~!/t ,;;",~, ? ,j(., .,i"">i!l,,.~,;;t~.~. ;.,.;.,-, '-~;: 1.i..I.~ . ", .;. .1,--/,9; ,'" ;/;( r ";,,t''f:~.,,;;;;:'''"J,' ....;"f;Jr, '. , . " . .'iManaged and Supervised.~fv1y.t.yal F~fl~,~.p;rogt~M'J:t'-:.' ~,:,.:~...: ;'-:;': ~l .t .; >Over 12,000 Funds'Scree'ned" High Level of Du~ Diligence ;;..Optimal Blend Portfolios (Puzzle vs. the Pieces) . . ;;..High Level of Diversification ,Automatic Annual Rebalancing, Many Institutional Class Shares -. Asset Allocation Presentation r"\ J"""\ CHANHASSEN FIRE DEPARTMENT Current vs Strategic Allocation -I\IIarket Capitalization Analysis Current Custom-FRA 60/40 'E.Ji.-~'" '~l"""'>" .~~ . Large Cap (30.70%) . Mid Cap (14.01%) o Small Cap (6.37%) . International Equity (16.35%) . Multi-Class (3.25%) m Fixed Income (12.50%) o Cash Equivalent (16.70%) . Real Estate Investment Trusts (0.11 %) . Other (0.00%) ~.+1! j~,~ ~.... r.".,.... .;!Ij',...- ~ .'~, ,I, ~:'F;';/.\ ~(,' '''''', '.:,.' ";":"~ ~:>>~~~:. '/'\, ' , .-. . ~ ,:' . , ~i';_. o.."l;'J . Large Cap (25.00%) . Mid Cap (10.00%) o Small Cap (10.00%) . International Equity (15.00%) [] Fixed Income (35.00%) o Cash Equivalent (5.00%) Long Positions Market Cap Current Strategic Difference Large Cap $ 537,468.85 30.70% $ 437,649.48 25.00% $ 99,819.37 - 5.70% Mid Cap $ 245,190.19 14.01% $ 175,059.79 10.00% $ 70,130.40 - 4.01 % Small Cap $ 111,597.06 6.37% $ 175,059.79 10.00% $ - 63,462.73 3.63% ,..... International Equity $ 286,259.75 16.35% $ 262,589.69 15.00% $ 23,670.06 - 1.35% Multi-Class $ 56,924.44 3.25% $ 0.00 0.00% $ 56,924.44 - 3.25% Fixed Income $ 218,844.28 12.50% $ 612,709.27 35.00% $ - 393,864.99 22.50% Cash Equivalent $ 292,296.03 16.70% $ 87,529.90 5.00% $ 204,766.13 -11.70% Real Estate Investment Trusts $ 1,951.79 0.11% $ 0.00 0.00% $1,951.79 - 0.11 % Other $ 65.52 0.00% $ 0.00 0.00% $ 65.52 0.00% Total: $ 1,750,597.91 100.00% $ 1,750,597.91 100.00% $ 0.00 0.00% The Disclosures at the end of the report include definitions of the terms on this page and other detailed information. Market Values are based on previous day's closing price and positions. ......... Copyright@ 2005. Wachovia Securities, LLC. All Rights Reserved. Page 7 of 23