4.1. SR 07-14-1997City of
iver
TO:
FROM:
MEMORANDUM
Item #4.1.
Mayor & City Council
Lori Johnson, Asst. City Administrator/
Finance Director
DATE:
SUBJECT:
July 14, 1997
Request for Fire Relief Pension Benefit
Increase
Introduction
The Fire Relief Association is prepared to make a presentation to the City
Council on Monday regarding an increase in the 1998 per year of service
pension benefit. As you may recall, the Relief Association is required to
notify the City Council of its minimum required municipal contribution prior
to August 1. Any increase in the per year pension must also be approved by
the Council unless the fund would be 110 percent funded based on the
increase. This memo will not address all of the technical Fire Relief
information that has been presented in detail in memo form in previous
years; if you have questions of that nature, please contact me prior to the
meeting.
Background
The current benefit level is $2,500 per year of service, and the Relief
Association is requesting that it be increased to $2,674 per year of service.
Attached for your review is a packet of information from Randy Sykes in
which the Relief Association provides support for the requested increase to
$2,674. As you can see from Schedules I and II based on $2,674, the requesed
increase does not require a city contribution. Even though a city contribution
has not been required in the past (with the exception of one year which had a
required contribution of approximately $680), the city has annually
contributed to the Relief Association.
Also included as background from the Relief Association is a memo, schedules
for a $2,900 per year benefit, a five year projection spreadsheet based on an
increase to $2,674 in 1998, and a page from the 1996 Fire Relief Association
audit.
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
The audit page provides good background information on the revenues,
expenses, and past levels of funding. The Association was 104.9 percent
funded in 1996. The pension will be approximately 100 percent funded if the
$2,674 per year benefit is approved.
Action Requested
The Council is asked to consider the Fire Relief Association's request for an
increase in the per year of service pension benefit to $2,674. This is an
increase of $174 per year of service.
July 10, 1997
Elk River City Council Members
July 14, 1997, Council meeting agenda for the Elk River Fire Department Relief Association
Schedules I and II on the pension benefit.
Schedule I and II attached showing an increase in the service pension amount to $2674.00 per year. This is
a request by the Board of Directors of the Relief Association.
Also attached is some supporting data from the Auditors annual statement and a five year projection using
these same schedules.
The Auditors statement shows that we funded at 97.5% to 104.9% for the past 6 years. The next four years
shows that we were funded at 85.6% to 93.8 %. These lower funded percentages were due to how the
Auditor was calculating our fund value. They used original purchase price rather than current value. This
issue was discussed and worked out between the Auditor and the State of Minnesota. If these four years
were corrected then our fund would show a near 100% funding for the past ten years.
Projections for the next five years were provided by Gus Welter, whom we have hired as a consultant to
help us each year with our schedules for the State. These are projections based on the following
assumptions.
The State 2% contribution will increase by $2000.00 per year
The City of Elk River contribute $17,500.00 per year
Retirements of two each odd numbered year and one on each even numbered year
Adding Fire Fighters only as Fire Fighters retire keeping the total roster at 34.
Fund gains of 6% per year (conservative figure)
Elk River Fire Department Relief Association
SCHEDULE I-II FOR STATE FIRE AID YEAR 1998
ELK RIVEN COUNTY OF SHERBURN
FIREFIGHTERS' RELIEF ASSOCIATION
Report of financial condition to end of 1997
and requirements for 1998
SCHEDULE I
CALCULATION OF SPECIAL FUND LIABILITY FOR ALL MEMBEHM AT
PENSION LEVEL OF $2,674 PER YEA~ OF ACTIVE SERVICE
ENTRY TO END OF 1997 TO END OF 1998
NO NAME DATE YRS LIAB YRS L]AB
1 Jul-65
2 Jun-66
3 Dec-67
4 Jun-68
5 Jan-73
6 Sep-76
7 Apr-78
8 Sep-78
9 Nov-78
10 May-80
11 Nov-80
]2 Feb-8]
13 0ct-81
34 May-82
15 Aug-83
]6 Au§-83
17 Jan-85
]8 Jan-85
19 Jun-88
20 3un-88
21 Jun-88
22 Sep-89
23 Sep-89
24 Sep-89
25 Aug-92
26 ' Au§-92
27 Aug-92
28 Apr-95
29 Apr-95
30 0u]-96
31 Aug-96
32 Mar-97
33 Mar-97
34 Mar-97
35
36
37
38
39
4O
41
42 DEF
43 C O 4/75-4/95 20 X 2350
44
45
46 E.V.
47 P LeF 10/81-10/93 .64X2100Xll
48 B B 9/89-1/96 .44X2350X6
49
5O
32 85 568
32 85 568
30 80 220
30 80,220
25 66.850
21 56 154
20 53 480
19 49 309
]9 49 309
18 45 405
17 41 714
]7 4] 7]4
16 38185
]6 38.]85
14 31.660
.]4 3].660
13 28 612
13 28 6]2
10 20 322
]0 20 322
10 20 322
15 402
15~402
8 ]5.402
5 8.931
5 ~.93]
5 ,931
3 ~ 08]
081
1 ~ 604
604
] i 604
1 604
]. 1604
53,760
14,784
6,204
ACCRUED LIAB FOR ACTIVE MEMBERS
1,084,574
53,760
20,988
ACCRUED LIAB FOR DEFERRED MEMBENS
ACCNUED LIAB FOR EARLY VESTED MBRS
ACCRUED LIAB FOR UNPD INSTALLMENTS
ACCRUED LIABILITY THROUGH.
ACCRUED LIABILITY THROUGH
L.A - L.B; NORMAL COST FOP
]998
1997 1,159,322
1998
.33
33
31
31
26
22
.2]
20
_20
19
18
18
17
17
15
15
14
]4
11
]]
11
9
9
9
6
6
6
4
4
2
2
2
2
2
88 242
88.242
82~894
82,894
69.524
58,828
56 154
53 480
53 480
49 309
45 405
45405
41,714
34.869
34 869
31 660
3] 660
22 943
22 943
22 943
17809
17.809
]7.809
10.963
]0~963
10 963
952
952
316
316
316
.316
3],316
56,448
14,784
6,204
1,175,972
56,448
20,988
],253,408
1,159,322
94,085
SCHEDULE II
Section 1.
ASSETS AT JANUARY ], 1997 (]2/3]/96)
PROJECTION OF SPECIAL FUND ASSETS 7'0 DECEMBER 31, 1997
]. $ ],00],056
PROJECTED INCOME TO DECEMBER 31, 1997
A) Minn. State Aid $ 55,793
B) City Contribution 35,000
C) Donations, etc. 0
D) Investment Income 70,074
E) Realized Gains (losses) 0
F) Unrealized " (losses) 0
G) Other income 0
TOTAL OF LINES A THROUGH G
PHOJECTED ASSETS PLUS INCOME 12/3]/97
Projected Disbursements through end of this year
H) Pensions $ 0
I) Other benefits 0
J) Administrative 2,200
TOTAL OF LINES H-I-J
PROJECTED ASSETS AT 12/3]/97 (L.3 - L.4)
2. $ ]60,867
3. $ ],]6],923
4. $ 2,200
5. $ ],159,723
Section 2. Determination of projected SURPLUS or DEFICIT @ 32/33/97.
Projected Assets (Line 5) 6.~ ~,159,723
Accrued Liability (Line B, Schedule ]) 7. $ ],
159
,322
If L.6 > L. 7, enter difference: SURPLUS 8a. ~ 401
If L.7 > L.6, enter difference: DEFICIT Bb. 0
**Go to Section 3 if SURPLUS *** To Section 4 if D~FICIT**
Section 3.
Normal Cogt (line C, Schedule 1)
Calculated Adm. Expense (96 amt x 1.035)
Less:
K) Minn. State Aid $ 55,793
51 of Line 5 57,986
101 of Line 8a 40
Total Subtractions
Determination of 1998 Municipal Contribution (if SURPLUS)
9. 94,085
10. ~ 2,277
1998 City Contribution if SURPLUS exists (L.
333,839
32. Sro.. (37,457)
Section 4.
Amortization of deficit(s) incurred
prior to end of 3997
Determination of Municipal Contribution (if DEFICIT)
3{ .30 ...... 33a. $
OX .10 =
YR ORIGINAL AMT RET AMT LEFT
/NCUR. AMOUNT PREV TO RETIRE
(1) (2) (3~
39
19 0
39 0
Totals 0 0 0
TOT gRIG DEF 0
Deduct col (3) total from L. Bb.
If co] 3 < L.Sb, difference is a
NEW DEFICIT. $
Normal. Cost (Line C, Sch
Calculated adm. Expense (96)amt x 1.035)
Total. Costs lines 13a+13b+14+35
LESS:
q) Minn. State. Aid ~ 0 '
r) 5% of Line u .... $ 0
Total Subtractions
1998 City Contribution, if DEFICIT exists
13b. $ 0
14. 0
15. ~ 0
]6. 0
i7. $ 0
38. $ o
ACTV
FF
33
32
34
AVERAGE SPECIAL FUND INCOME (non-investment) PER MEMS~H
FOR PREVIOUS THREE YEAR PERIOD.
YEAR STATE LOCAL 1/10 ANNUAL
AID TAXES SURPLUS TOTAl,
1996 55,793 16,387 72,180
3995 42,09] 663 42,754
1994 41,526 19,000 60,526
3YR TOTAl,/3 5,304 / 3 - $],768
Max pension (Avg. X 1.85, from ch~rt) $3,250
AVERAGE 3 YR
PER MBR TOTAL
2,187
],336
1,780 5,304
CERTIFICATION OF SPECIAl, FUND REQUIREMENTS
This information must be certified to the clerk of the municipality or
tO the independent non-profit firefJ§htin9 corporation by 08/0]/97.
We, the officers of the Elk River Firefighters' Relief ~s~ociatioq,
state that the accompanying schedules have been prepareo an accoroance
with the provisions of ~he Minn. Stat. Ch. 69.772, subd 4. The average
amount of available financing per active member fo~ the past three years was
$1,768 Further, benefit levels have been established in accordance
with the average amount of available financing, as required by Minn.]aw.
The minimum city contribution for 1998 is:-O- ($17,457)
, President Date
, Secretary Date
, Treasurer Date
These Schedu3es were prepared
from information provzde~ by
Officers of the Relief Association
and State Auditor Reports.
Calculated as 12/3]/97
Prepared by:
Gus Welter, consultant
190] Meadowv~ew ~oad
Bloomington, MN 55425
(632) 854-8856
CLERK'S CERTIFICATION
I am the clerk (or other designated official) of the city of Elk River.
~ have received the completed Office of the State Auditor Schedules ] & ]]
from the Elk River Fire~ighters Relief Association on , 1997.
I have reviewed SectSon 2~ lines 8, 12, and ]B of Sch. II. II: Jlne 12 or ]~ne 38
reflects a required municzpal contribution~ I certify that I will
so advise t~e municipal governing body at ]ts next. regularly schedu]gd
meeting. If the Certification of the Officers discloses that the Bylaws
have been amended to provide a benefit increase, I certify that the
municipal governing body has passed a resolution which approves the change
in the bylaws. A copy of the resolution 5s attached (if required).
Date ,1997 Signature
Phone # Title City Clerk
(Note: Failure to f~]e this document in a timely manne~', whether or not
a municipal contribution is required, will resul[ in loss of state aid.)
SCHEDULE I-II FOR STATE FIRE AID YEAR 1998
ELK RIVER COUNTY OF SHERBURN
FIREFIGHTERS' RELIEF ASSOCIATION
Report of financial condition to end of ]997
and requirements for 1998
SCHEDULE I
CALCULATION OF SPECIAL FUND LIABILITY FOR ALL MEMBERS
PENSION LEVEL OF $2,900 PER YEAR OF ACTIVE SERVICE
ENTRY TO END OF 1997 TO END OF 1998
NO NAME DATE YRS L]AB YRS LIAB
] Dui-65
2 Jun-66
3 Dec-67
4 Jun-68
5 ~ Jan-73
6 Sep-76
7 Apr-78
8 Sep-78
9 Nov-78
10 May-80
11 Nov-80
]2 Feb-8]
13 Oct-81
]4 May-82
15 Aug-83
]6 Au§-83
17 Jan-85
]8 Jan-85
19 Jun-88
20 3un-88
21 3un-88
22 Sep-89
23 Sep-89
24 Sep-89
"5 Aug-92
6 Aug-92
27 Aug-92
28 Apr-95
29 Apr-95
30 Jul-96
31 Aug-96
32 Mar-97
33 Mar-97
34 Mar-97
35
36
37
38
39
40
41
42 DEF
43 C O 4/75-4/95 20 X 2350
44
45
46 E.V.
47 P LeF 10/81-10/93 .64X2100Xll
48 B B 9/89-]/96 o44E2350X6
49
50
32 92 800
32 92 800
30 87 000
30 87 000
25 72500
21 60.900
20 58,000
19 53.476
]9 53.476
18 49 242
17 45 240
]7 45 240
16 41 412
]6 41 4]2
14 34 336
]4 34 336
13 31030
]3 3]'030
10 22.040
]0 22.040
10 22.040
8 ]6 704
8 16 704
8 ]6 704
5 9 686
5 ~ 686
686
3 ~ 510
510
] I 740
1 1740
3 ~.740
1 .740
] ].740
53,760
14,784
6,204
ACCRUED LIAB FOR ACTIVE MEMBERS
1,176,240
53,760
20,988
ACCRUED LIAB FOR DEFERRED MEMBEH$
ACURUED LIAB FOR EARLY VESTED MBRS
ACCRUED LIAB FOR UNPD INSTALLMENTS
ACCRUED LIABILITY THROUGH
ACCRUED LIABILITY THROUGH
L.A - L.B; NORMAL COST FOR
3998
1997 1,250,988
3998
33
33
33
31
26
22
23.
2O
20
19
18
18
17
37
15
35
14
34
11
33
11
9
9
9
6
6
6
4
4
2
2
2
2
2
95 700
95 700
89 900
89 900
75400
63.800
60.900
58.000
58 000
53 476
49 242
49 242
45 240
45 240
37 816
37 8]6
34.336
34.336
24'.882
24,882
24,882
]9 3]4
19 314
]9 3]4
11 890
]] 890
]1 890
7 540
540
596
.596
596
56,448
14,784
6,204
i,275,362
bb,44~
20,988
[352,798
250,988
Section 1.
SCHEDULE II
PROJECTION OF SPECIAL FUND ASSETS TO DEC~H 31, 1997
ASSETS AT JANUARY 1, 1997 (12/3]/96)-
PROJECTED INCOME TO DECEMBER 31, 1997
A) Minn. State Aid $ 55,793
B) City Contribution 35,000
C) Donations, etc. 0
D) Investment Income 70,074
E) Realized Gains (losses) 0
F) Unrealized " (losses) 0
G) Other income 0
TOTAl. OF LINES A THROUGH G.
?HOJ~CTED ASSETS PLUS INCOME ]2/3]/97
Projected Disbursements throughsend of this year
H) Pensions 0
I) Other benefits 0
J) Administrative 2,200
TOTAL OF LINES H-I-J-
PHOJECTED ASSETS AT ]2/3]/97 {L.3 - 1..4)
I. $ 1,001,056
2. $ 160,867
3. $ ],16],923
4. $ 2,200
5. $ 3,359,723
Section 2. Determination of projected SURPLUS or DEFICIT @ ]2/31/97.
Projected Assets (Line 5) 6.
Accrued Liability (Line B, Schedule ]) 7. ~
,250,988
If L.6 > L.7, enter difference: SURPLUS Sa. ~ 0
If L.7 > L.6, enter difference: DEFICIT Bb. 91,265
**Go to Section 3 if SURPLUS *** To Section 4 if DEFICIT**
Section 3. Determination of ]998 Municipal Contribution (if SURPLUS)
Normal Cost (line C, Schedule 1) ·
Calculated Adm. Expense (96 amt x 1.035)
Less:
~/ Minn. State Aid $
5% of Line 5
10% of Line 8a
Total Subtractions
0
0
9. 0
10. i 0
1]. $ o
1998 City Contribution if SURPLUS exists (L. 8a) 12. $
Section 4.
Amortization of deficit(s) incurred
prior to end of ]997
Determination of Municipal Contribution (if DEFICIT)
TOT OHIG DEF 0 X .]0 ...... ]3a. $
Deduct col (3) total from L. Bb.
If co] 3 < L.Sb, difference is a
NEW DEFICIT. $ 91,265 X .10 ......... 13b. $
Normal Cost. (Line C, Scb
Calculated adm. Expense (9'6)a mt x 1.035)
Total Costs lines ]3a+13b+]4+15.
LESS:
q) Minn. State. Aid ~ 55,793
r) 5% of Line D ~
57
,986
Total Subtractions
1998 City Contribution, if DEFICIT exists
14.
..... 15.~
16.
9,127
101,810
2,277
113~214
17. $ 113,779
]8. $-O- (565)
YR ORIGINAL AMT RET AMT LEFT
INCUN. AMOUNT PREV TO RETIRE
(1) (2) (3~
]9
19 0
39, 0
Totals 0 0 0
ACTV
FF
33
32
34
AVERAGE SPECIAL FUND INCOME (non-investment) PER MEMB~H
FON PHEVIOUS THREE YEAR PERIOD.
YEAR STATE LOCAL 1/10 ANNUAL AVERAGE 3 YR
AID TAXES SURPLUS TOTAL PER MBR TOTAL
1996 55,793 16,387 72,180 2,187
]995 42,09] 663 42,754 1,336
1994 41,526 19,000 60,526 1,780 5,304
3YR TOTA%/3 5,304 / 3 -
Max pension (Avg. X 1.85, from ch~rt}
3,250
CEHTIF]CAT]'ON OF SPECIAl. FUND HEQUIRFJ~F~TS
This information must be certified to the clerk of the municipality or
to the independent non-profit firefighting corporation by 08/D1/97.
We, the officers of the Elk River Firefighters' Relief Association,
state that the accompanying schedules have been prepared in accordance
with the provisions of the Minn. Stat. Ch. 69.772, subd 4. The average
amount of available financin9 per active membe~ for the past three years was
$1,768 Further, benefit levels have been established in accordance
with the average amount of available financing, as required by Minn.]aw.
The minimum city contribution for 1998 is: -O- ($565)
~ President Date
, Secretary Date
, Treasnxer Date
These Schedules were prepared
from information provxde~ by
Officers of the Relief Association
and State Auditor Reports.
Calculated as ]2/31/97
Prepared by: .
Gus Welter, consultant
]90]. Meadowview Road
Bloomington, ~ 55425
(612) 854-8856
CLERK'S CERTIFICATION
I am the clerk_(of other designated official) of the city of Elk River.
] have received the completed Office of the State Auditor Schedules I & II
from the Elk River Fire~ighters Relief Association on ¢ 1997.
I have reviewed Section 2~ lines 8, 12, and 18 of Sch. II. l~ J]ne 12 or line
reflects a.~equired mugiclpal ~ontfi~utipn,.I certify t~at.I will...
so aGvise the municipa~ govern]n~ DOGy at its next regularly scneG~]gG
meeting. If the Certification of the Officers discloses_that the ~yxaws
have been amended to provide a benefit increase, I certify that ~e
municipal governing body has passed a resolution ~hich approves ~ge change
in. the bylaws. A copy of the resolution is attached (if requires;.
Date ,1997 Signature
Phone ~ Title City Clerk
(Note: Failure to file this document in a timely manner, whetber or not
a municipal contribution is required, will result in loss of state aid.)
JUL, ii, 1997 8'37AMERMC NO, 5441 P.
Elk River Fire Department Relief Association
5 year projections.
Scedule I!
-"Year'
1998
2001
2OO2
A_mp_un__t(. Yr_ ...........
"$'~',~ 5~- "$~'9 ¥-~-~0~' 322
· ,, $1,159, oo
-.$2,~?-~]b0' -~'i.,'i ~-o;i~08.oo $1,15...7., 5.69.....0_0
"~;2,900.00 "~;1,166,;1'0~'.'00', $1,154,382.00
$3.,050.0(~' $1,187,742.00 $1,174,022.00
'.'..~[200.00
........ 'l"i~e #~
....... o
100.03%
97.67%
101.02%
101.17%
_., 10_0.1__7_.%_
$1,246,~-~'.'~-~' --' ~ 00.12%
Line #7 Line #6/Line #7
Projection assumptions
State 2% contribution will increase at $2000.00/year
The City of Elk. River contributions is $17,500.00/year
Retirements of two each odd year and one each even year
Adding Fire Fighters only' as Fire Fighters retire keeping the total roster at 34
Fund gains of 6% per year
L
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note 4: CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
The total contribution, which was not actuarially determined, in 1996
amounted to $73,630 of which $16,837 was contributed by a City tax levy
and $56,793 (including $1,000 supplemental aid) was from State of
Minnesota Aid.
Note 5: HISTORICAL TREND INFORMATION
Historical trend information related to the pension plan is presented here.
The information is presented to enable the reader to assess the progress
made by the Relief Association in accumulating sufficient assets to pay
pension benefits as they become due.
Ten-year historical trend information is required by GASB Statement No. 5.
This information is intended to help readers of the financial statements
assess the Relief Association's funding status on a going-concern basis,
assess progress made in accumulating assets to pay benefits when due, and
make comparisons with other relief associations.
Net Asset Pension
Available Benefit Percentage
for Benefits Obliqation Funded
1996 $ i 001 056 $ 953 938 104.9%
1995 895 562 906 891 98.8
1994 759 890 779 372 97.5
1993 764 918 763 098 100.0
1992 658 625 636 918 100.0.
1991 568 624 567 949 100.0
1990 475 001 553 039 85.9
1989 466 410 497 085 93.8
1988 408 808 447 660 85.6
1987 336 071 409 696 89.3
Funded
(Unfunded)
Pension
Benefit
Obliqation
$ 47 118
(11 329)
(19 482)
1 820
21 707
625
(78 038)
(30 675)
(68 852)
(73 625)
Revenue by Source
City, State
and Other Investment Other
Contribution Income Income
1996 $ 73 630 $ 60 923~! $ -
1995 43 754 93 246(z) -
1994 60 526 19 402 -
1993 57 514 48 449 2 816
1992 58 590 33 450 506
1991 60 907 39 373 33 295
1990 56 321 33 357 (8 374)
1989 51 297 32 358 13 672
1988 48 509 25 785 (405)
1987 41 837 29 073 (45 420)
ExDenses by Type
Adminis-
Benefit trative
Payments ExDenses
$ 26 850 $2 209
- 1 328
82 400 2 556
2 486
2 545
38 000 1 767
70 200 1 563
38 500 i 225
- 1 152
- 1 232
(1)Includes decrease in market value of $7,569.
cZ)Includes increase in market value of $45,354.
-9-
July 10, 1997
Elk River City Council Members
RE: July 14, 1997, Council meeting agenda for the Elk liver Fire Department Relief Association
Schedules I and II on the pension benefit.
Schedule I and II attached showing an increase in the service pension amount to $2674.00 per year. This is
a request by the Board of Directors of the Relief Association.
Also attached is some supporting data from the Auditors annual statement and a five year projection using
these same schedules.
The Auditors statement shows that we funded at 97.5% to 104.9% for the past 6 years. The next four years
shows that we were funded at 85.6% to 93.8 %. These lower funded percentages were due to how the
Auditor was calculating our fund value. They used original purchase price rather than current value. This
issue was discussed and worked out between the Auditor and the State of Minnesota. If these four years
were corrected then our fund would show a near 100% funding for the past ten years.
Projections for the next five years were provided by Gus Welter, whom we have hired as a consultant to
help us each year with our schedules for the State. These are projections based on the following
assumptions.
The State 2% contribution will increase by $2000.00 per year
The City of Elk River contribute $17,500.00 per year
Retirements of two each odd numbered year and one on each even numbered year
Adding Fire Fighters only as Fire Fighters retire keeping the total roster at 34.
Fund gains of 6% per year (conservative figure)
Elk River Fire Department Relief Association