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HomeMy WebLinkAbout9A Amend PLFRA Bylaws Report Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com 4646 Dakota Street SE Prior Lake, MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: NOVEMBER 20, 2017 AGENDA #: 9A PREPARED BY: FRANK BOYLES, CITY MANAGER PRESENTED BY: FRANK BOYLES AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING A LUMP SUM PENSION INCREASE FOR THE PRIOR LAKE PAID ON-CALL FIRE DEPARTMENT RELIEF AND PENSION ASSOCIATION DISCUSSION: Introduction The purpose of this agenda item is to consider a request by the Prior Lake Paid On-Call Fire Department and Relief Association to increase the pension benefits as of January 1, 2018 from $7,200/year of service to $8000/year of service. History Prior Lake (and Spring Lake and Credit River Townships) are served by a paid on-call fire department of 45 paid per call firefighters and a full-time Fire Chief. Firefighter compensation is provided through a payment of $12.20/hour for fire call responses and training and a lump sum pension benefit paid at retirement. Fire officers also receive an additional annual stipend in recognition of additional duties. Unlike other City employees whose pension is through Public Employees Retirement Association (PERA), paid per call paid on-call firefighters receive their pension through an established Fire Relief and Pension Association. The Prior Lake Fire Relief and Pension Association is overseen by a Pension Board comprised of six members appointed from the Fire Department membership, the Prior Lake Fire Chief, the Prior Lake Mayor and the City Manager. The Board is responsible for investment of pension funds, annual audit, preparing an annual status report to the membership and recommending any adjustments to the investment policy, bylaws or pension terms. To maximize assets, the Board and membership have retained an investment firm to manage their funds in accordance with state statute. The City Council must approve any compensation adjustments which means an amendment to the bylaws of the organization. State statute also imposes limitations on the maximum allowable pension of $10,000 per year of service. Current Circumstances 2 To qualify for a pension benefit, a firefighter must have served the Prior Lake Fire Department for 10 years or more meeting certain participation requirements, reached the age of 50 years and been a member of the Relief Association for at least 10 years. With 10 years of service credit, a member is 60% vested. The vesting schedule increases incrementally until a member is fully vested at 20 years of service. Current 2017 Rate Years of Service % Vested Lump Sum Pension 10 60 $43,200 20 100 $144,000 Proposed 2018 Rate Years of Service % Vested Lump Sum Pension 10 60 $48,000 20 100 $160,000 The fire department pension benefit is funded through a combination of resources: • Investment earnings of the Relief Association Pension Fund • State Aid (received by the City and passed-through to the Relief Association) • Annual City Pension contribution ($20,000/year since 2003) • City deficit contribution (when required) Pension increases are not proposed by the membership or recommended by the Pension Board unless the pension Fund and its investment performance are expected to support the increase. The same is true for the increase proposed by this agenda item. Conclusion The Fire Department membership has voted in support of an annual pension increase from $7200 to $8000/year of service. Likewise, the Pension Board also voted to recommend the increase to the City Council. ISSUES: As part of its consideration of the proposed pension increase, the Pension Board prepared an overview of firefighter compensation structure, funding sources and comparison data/metrics (if data was available). Staff met with a fire department subcommittee to discuss and update the report. This report is attached for Councilor information and provides an overview of the department structure, estimated time commitment by firefighters, compensation history, funding history, cost per household and some comparison data. Also included for council information are the bylaws including the proposed amendment as well as a two page analysis of the fund performance under the current and proposed pension levels. We have redacted the private data from those reports. 3 Many firefighters will tell you that they join the fire service because of the camaraderie and their desire to give back to the community. This is true, but as we all lead busier lives, it becomes more and more difficult for people to make the time commitments required of firefighters for training, business meetings, fire calls and community events, in addition to their work and family responsibilities. It is critical that the City remain competitive with our neighbors in wages and pension so that we can address recruiting needs and are appropriately rewarding dedicated service. Like all employers, the City will continue to face recruitment and retention issues within the Fire Department because of retirements, but the fire Department has the added challenge of the time commitment demands. FINANCIAL IMPACT: For the first time in its history, the City was required to make deficit contributions in the cumulative amount of $227,372 to the Pension Fund over a four-year period (2010-2013). These deficit contributions were triggered by the investment losses in the Pension Fund during the economic downturn. State statute requires that the City step in to assure the pension liability is appropriately funded. The Pension Fund has now recovered to exceed its projected liability. At the present pension level, $7200/year of service the fund is at 116% of the calculated liability. At the proposed new pension level of $8000/year of service the fund is at 107% ($307,095 surplus). No contribution in addition to the $20,000 is necessary from the City in 2017, and the Pension Fund can support the proposed increase. The City’s annual contribution to support the firefighter lump sum benefit is among the lowest of the communities we compare with and has been so since 2003. The biggest contributor (in addition to the funds which have been amassed over the years by wise investing) come from the 2% homeowners insurance premiums we receive in the form of fire state aid each year. The services provided by the Fire Department continue to be one of the City’s best values for the property taxpayer dollar in my opinion. ALTERNATIVES: 1. Motion and second to adopt a Resolution Authorizing a bylaw revision providing for a Pension Increase to $8000/year of service credit for the Prior Lake Fire Department Firefighters Relief and Pension Association effective 1/01/2018. 2. Motion and second to deny the pension increase. 3. Take no action and provide staff with additional direction. RECOMMENDED MOTION: Alternative 1. 4646 Dakota Street SE Prior Lake, MN 55372 RESOLUTION 17-___ A RESOLUTION AUTHORIZING REVISIONS TO THE BYLAWS AND A PENSION INCREASE FOR THE PRIOR LAKE FIRE DEPARTMENT FIREFIGHTERS RELIEF AND PENSION ASSOCIATION Motion By: Second By: WHEREAS, WHEREAS, The bylaws of the Prior Lake Paid On-Call Firefighters Relief and Pension Association provides for a defined contribution benefit; and, The city attorney has reviewed the bylaws and made certain revisions to assure compliance with Minnesota Statutes; and, WHEREAS, The present annual benefit in effect is $7,200 in 2017 for paid on-call firefighters that are eligible under the vesting schedule; and, WHEREAS, The Relief and Pension Association Pension Fund is over 100% funded and the investment earnings of the fund can support a benefit increase to $8000 per year of service now and in the future without the need for additional city contribution; and, WHEREAS, It is in the best interest of the City of Prior Lake to provide a pension level that is comparable with other paid on-call fire departments in order for the City to continue to recruit, retain and reward paid on-call fire service. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. The Prior Lake Paid On-Call Firefighter Relief Association Bylaws dated November 14, 2017 are hereby approved. 3. A $8000 per year of service credit for pension, disability and death benefit purposes within the Bylaws of the Prior Lake Fire Department Firefighter Relief and Pension Association is hereby approved effective 1/1/2018. PASSED AND ADOPTED THIS 20TH DAY OF NOVEMBER 2017 VOTE Briggs McGuire Braid Burkart Thompson Aye ☐ ☐ ☐ ☐ ☐ Nay ☐ ☐ ☐ ☐ ☐ Abstain ☐ ☐ ☐ ☐ ☐ Absent ☐ ☐ ☐ ☐ ☐ ______________________________ Frank Boyles, City Manager 1 BYLAWS OF THE PRIOR LAKE FIRE RELIEF ASSOCIATION ARTICLE I MEMBERSHIP SECTION I : Any paid on call member of the Prior Lake Fire Department (“Fire Department”) shall be eligible to apply for membership in the Prior Lake Fire Relief Association (“Association”). SECTION 2 : Written application accompanied by an application fee of $5.00 may be made at any regular or special meeting of the Board of Trustees (“Board”). The Board shall conduct an investigation of the applicant to determine if the applicant, due to some medically determined physical or mental impairment or condition, would constitute for the Association a predictable and unwarranted risk of liability for benefits or if the applicant is otherwise ineligible pursuant to Federal or State laws, rules or regulations. If no such impairment, condition or ineligibility exists, the Board shall appoint the applicant to membership in the Association. If the applicant is not approved, the application fee shall be returned to the applicant. SECTION 3 : Any member who ceases to be a paid on call member of the Fire Department shall cease to be a member of the Association. However a member who has served for at least the minimum number of years required by ARTICLE VIII of these bylaws for vesting pension rights as an active member of the Fire Department shall retain membership in this Association, regardless of resignation, expulsion, or removal from the Fire Departme nt, subject to payment of dues and such other regulations which may be imposed from time to time. SECTION 4 : Any member who shall, in the opinion of a majority of the Board : (i) fraudulently claim benefits from, or defraud or attempt to defraud the Association in any way; (ii) fail to comply with these bylaws or the rules and regulations of the Association; or (iii) otherwise act in any manner that constitutes good cause for removal, shall be suspended from membership by the Board, and shall forfeit all further rights to benefits from this Association. SECTION 5 : Any suspended member can only be reinstated upon his/her application therefore in writing, presented at a regular or special meeting of the Association, plus a reinstatement fee of $10.00, upon the favorable vote of 2/3 members present and voting at such meeting. If the application for reinstatement is rejected, the money accompanying the same shall be returned to the applicant. SECTION 6 : Each member shall be entitled to one vote on any matter voted upon by the Association. Voting by proxy is not permitted. All votes, unless specified prior to the vote, shall be conducted by voice vote. If a majority cannot be determined by voice vote, the President shall ask for a show of hands. ARTICLE II BOARD OF TRUSTEES SECTION 1 : The Board shall be composed of the following President Vice President Secretary Treasurer Two (2) General Trustees 2 each of whom shall be elected and qualified, at the Annual Meeting of the Association from its members. The Board shall also include three statutory ex officio trustees: the Chief of the Fire Department, the Mayor of Prior Lake, and the City Manager of Prior Lake. SECTION 2 : At the first election following the adoption of these bylaws, the two (2) general trustees shall be elected for terms of one (1) year; the President and Treasurer shall be elected for terms of two (2) years; and the Vice President and Secretary shall be elected for terms of three (3) years. Thereafter, as their respective terms of office expire, two 2) officers or general trustees shall be elected for three (3) year terms at each Annual Meeting. If a vacancy occurs during the term of office of any officer or general trustee, the members of the Association shall elect a member to serve for the unexpired term of the vacated position. SECTION 3 : A general trustee or officer may be removed for cause. Causes for removal shall include, but shall not be limited to, the breach of duties as set forth in ARTICLE II and III of these bylaws. One or more of the trustees or officers may be removed by a 2/3 vote of those present and voting at a meeting of the membership which is called for that purpose. Notice of the meeting at which removal is to be considered shall be given to each member and shall include the purpose of the meeting. The general trustee or officer shall be furnished with a statement of the particular charges at least five (5) days before the meeting is to be held. At the meeting, the general trustee or officer shall be given an opportunity to be fully heard on each charge. If a general trustee or officer is removed, his/her replacement shall be elected at the same meeting, and such replacement shall serve out the unexpired term of the removed general trustee or officer. SECTION 4 : It shall be the duty of the Board to prepare modes and plans for the safe and profitable investment of the funds of the Association, and whenever loans or investments are made, to investigate and pass upon the securities offered and to attend to the drawing and execution of the necessary papers. The Board shall order an audit of the books and accounts of the Secretary and Treasurer annually, according to law, and shall submit a written report of the condition of the Association to the members at the Annual Meeting. SECTION 5 : The investment of the funds of the Association shall be in the exclusive control of the Board, in conformance with State Statutes. SECTION 6 : The members of the Board shall act as trustees with a fiduciary obligation to the members of the Association, to the City of Prior Lake, and to the State of Minnesota. ARTICLE III DUTIES OF OFFICERS SECTION 1 : It shall be the duty of the President to attend and to preside at all meetings of the Association and of the Board. He/she shall enforce the due observance of the Articles of Incorporation and the bylaws, and see that the officers properly perform the duties assigned to them. The President shall be a member of all committees and shall exercise careful supervision over the affairs of the Association. He/she shall receive such salary as may be fixed from time to time by the Board, subject to approval of the Association, and payable from the Special Fund of the Association. SECTION 2 : It shall be the duty of the Vice President to perform the duties of the President in his/her absence. In the event of the absences of both the President and the Vice President, it shall be the duty of the Association to elect a President pro tem, who shall perform the duties incident to the office. The Vice President shall receive such salary as may be fixed by the Board from time to time, subject to approval of the Association, and payable from the Special Fund of the Association. SECTION 3 : It shall be the duty of the Secretary to keep a true and accurate record of the proceedings of all meetings of the Association and the Board. He/she shall keep correct record of all amendments, alterations, and additions to the Articles of Incorporation or the bylaws in a separate book from the minute books of the Association. He/she shall sign all checks issued by the Treasurer and all other papers which require his/her signature. The Secretary shall cause due 3 notice of all special meetings of the Association and of the Board to be given. He/she shall receive all moneys due the Association and pay the same over to the Treasurer, and in failing to do so, he/she may be impeached and expelled from the association. The Secretary shall keep a roll of membership, with the date of joining, resignation, discharge, leaves of absence, suspension, dues and assessments paid, and relief or pensions furnished. His/her books shall at all times be open to inspection by the Board. Prior to entering upon the duties of this office, he/she shall be given a bond in such amount and with such sureties as may be required and approved by the Board, conditioned upon the faithful discharge of his/her trusts and full performance of the duties of this office. Such bond will be paid for from the Special Fund of the Association. He/she shall sign all orders for payments issued to the Treasurer, and jointly with the Treasurer, prepare and file all reports and statements required by law. He/she shall receive such salary as may be fixed from time to time by the Board, subject to approval of the Association, and payable from the Special Fund of the Association. SECTION 4 : It shall be the duty of the Treasurer to receive from the Secretary all funds belonging to the Association and hold them subject to the order of the President countersigned by the Secretary. He/she shall keep separate and distinct accounts of the Special and General funds, and shall prepare and present to the Board a full and detailed statement of the assets and liabilities of each fund at each meeting of the Board, and prior to the Annual Meeting of the Association. Failing in his/her obligations, he/she may be impeached and expelled from the Association. He/she shall deliver to his/her successor in office or to any committee appointed by the Board to receive the same, all moneys, books, papers, and other items pertaining to the office immediately upon the expiration of his/her term of office. Prior to entering upon the duties of this office, he/she shall give a bond in such an amount and with such sureties as may be required and approved by the Board, conditioned upon the faithful discharge of his/her office, to be paid for from the Special Fund of the Association. Jointly with the Secretary, the Treasurer shall prepare and file all reports and statements required by law. He/she shall receive such salary as may be fixed by the Board from time to time, subject to approval of the Association, and payable from the Special Fund of the Association. ARTICLE IV MEETINGS SECTION 1 : The Annual Meeting of the Association, for the election of officers and trustees and for other business, shall be held on the last Thursday of January of each year. If such a day falls on a holiday, the Annual Meeting shall be held on the following Thursday. SECTION 2 : The Board shall meet at least quarterly during each year. SECTION 3 : Special meetings of the Association, or of the Board may be called by the President, or by two (2) members of the Board, and shall also be called upon written request of six (6) or more members of the Association. Members of the Association shall be notified by the Secretary of such special meetings, and the object of the meeting shall be contained in such notice. SECTION 4 : A majority of the Board then in office, and 40 % of the members of the Association shall constitute quorums for the transaction of business at their respective meetings. Less than a quorum may adjourn a meeting to a future time, which the Secretary shall make known to the affected members. SECTION 5 : All reports and resolutions shall be submitted in writing and no report shall be accepted unless it is the report of a majority of a committee, provided, however, that a minority shall be permitted to present its view in writing. SECTION 6 : All meetings shall be conducted according to Robert's Rules of Order, as revised from time to time. SECTION 7 : The order of business shall be : 1. Call to order 2. Roll call 3. Reading of minutes of previous meeting 4. Reading of reports and minutes of Board meetings 5. Reports of officers 4 6. Propositions for membership 7. Reports of special committees 8. Unfinished business 9. Election of officers or trustees (annual meeting) 10. New business 11. Adjournment ARTICLE V FUNDS SECTION 1: The funds received by the Association from dues, fines, application fees, entertainment, and other miscellaneous sources shall be recorded in the books of the Secretary and the Treasurer and placed in the General Fund of the Association. These funds may be disbursed for any purpose reasonably related to the welfare of the Association or its members, as authorized by a majority of the members present and voting at any meeting. SECTION 2 : All funds received by the Association: (i) from any tax sources; (ii) as state aid; (iii) from the City; (iv) all funds or property donated or granted to the Association for the benefit of the Special Fund; and (v) any interest or investment return upon the assets of the Special Fund shall be kept in the Special Fund and recorded in the books of the Association by the Secretary and the Treasurer. Monies in the Special Fund shall not be disbursed for any purpose except those specifically authorized by Minn. Stat. § 424A.05 , subd.2. SECTION 3 : No disbursements of funds of the Association shall be made except by checks drawn by the Treasurer and countersigned by the Secretary. Except when issued for salaries, pensions, and other fixed charges, the exact amount of which has previously been determined and authorized by the Board (or members, in the case of disbursements from the General Fund), no check shall be issued until the claim to which it relates has been approved by the Board. SECTION 4 : All money belonging to the Association shall be deposited to the credit of this Association in such banks, trust companies, savings and loan associations, or other depositories as the Board may designate. SECTION 5 : The Board shall comply with Minnesota Statutes 356A.06, Subd. 8b that requires the Association to provide annually to any brokers, a written statement of investment restrictions pursuant to State Statute or the Investment Policy that apply to the Special Fund. Upon receipt of the written statement of investment restrictions, each broker handling investments of the Association shall acknowledge, in writing annually, the receipt of the investment restrictions. The acknowledgment shall contain a statement of the brokers' agreement to handle the Association's investments pursuant to the written restrictions. ARTICLE VI APPLICATION FOR BENEFITS SECTION 1 : All applications for relief or pension benefits shall be made on forms furnished by the Secretary. SECTION 2 : All applications for disability benefits shall be submitted to the Board at a regular or special meeting of the Board. The application shall be accompanied by a certificate from the attending physician or surgeon setting forth the nature of the illness or injury, the cause and duration thereof, the length of time the applicant has been unable to perform any of the duties connected with his/her regular occupation and those of a firefighter, and an estimate of the time at which the applicant will be able to return to his/her regular occupation and to perform the duties of a firefighter. SECTION 3 : All applications for pensions shall be submitted to the Board at a regular or special meeting of the Board. Applications shall be verified by an oath of the applicant and shall state the age of the applicant, the period (or periods) of service in and the date of retirement from active duty in the Fire Department, the length of time he/she has been a member of the Association, and such other information as the Board may require. SECTION 4 : All applications for death benefits shall be submitted to the Board at a regular or special meeting of the 5 Board. Applications shall be verified by an oath of the applicant and shall state the date and cause of death, a certified marriage certificate for a surviving spouse and a certified birth certificate for a surviving child, and such other information as the Board may require. SECTION 5 : No benefits or pensions shall be paid until the application therefore has been approved by a majority vote of the entire Board. Decisions of the Board shall be final as to the payment of such benefit or pensions. No other benefits shall be paid to or on behalf of any member who has received a service pension. SECTION 6 : For purposes of computing benefits or pensions under ARTICLES VII and VIII, a "year of service" shall be defined as the number of full months of active duty in the Fire Department, beginning on the date when the member became a paid on-call member of the Fire Department, divided by twelve, rounded to the nearest tenth. Section 7 : RETURN TO SERVICE. Any member who has ceased to perform or supervise fire suppression and fire prevention duties for at least 60 days, including former members who have received payment of a service pension or disability benefit, will be eligible to resume active membership in the Association should the firefighter resume active firefighting duties with the Fire Department. If the member has previously received payment of a service pension or disability benefit, the member may be eligible for a second pension or benefit for the resumption period of service if the member meets the vesting requirements defined in these bylaws based on the resumption years of service. No member may be paid a service pension twice for the same period of service. If the member has not received payment of a service pension or disability benefit, the member must complete at least five years of active service with the Fire Department upon a resumption of active service. If the member completes the minimum period of resumption service specified in this Section prior to a subsequent cessation of firefighting duties, the member will receive a service pension, if vested, for all years of active service calculated at the benefit level in effect on the date of the member’s final cessation of duties. If the member does not complete the minimum period of resumption service specified in this Section prior to a subsequent cessation of duties, the member will receive a service pension, if vested, for all years of active service calculated at the benefit level in effect at the time of the member’s original cessation of duties. A member who has been granted an approved leave of absence not exceeding one year by the Fire Department or by the Association is exempt from the minimum period of resumption service requirement under this Article. A member who has a break in service not exceeding one year but who has not been granted an approved leave of absence and who has not received a service pension or disability benefit from the Association is subject to the minimum period of resumption service requirement under this Article. Section 8 : UNIFORMED SERVICES.1 A volunteer firefighter who is absent from firefighting service because of service in the uniformed services may obtain service credit for the period of the uniformed service, not to exceed five years, unless a longer period is required by Federal law, if the volunteer firefighter returns within the time frame required by Federal law to firefighting service with coverage by this same Association or its successor upon discharge from service in the uniformed service. Service credit will not be given if the firefighter separates from uniformed service with a dishonorable or bad conduct discharge or under other than honorable conditions. ARTICLE VII DISABILITY BENEFITS SECTION 1: If an active member of the Association shall become totally and permanently disabled, to the extent that a physician or surgeon acceptable to the Board shall certify that such disability will permanently prevent said member from performing his/her duties in the Fire Department, the Association shall pay to such member a sum equal to the pension benefit in Article VIII Section 3 of these bylaws for each year that he/she has served as an active member of the Fire Department. If a member who has received such a disability pension should subsequently recover and return as a paid on-call member of the Fire Department, any amount paid to him/her as a disability pension shall be repaid to the Association before he/she can become an active member of the Association. 1 Minn. Stat. § 424A.021. In some instances service other than service with the Armed Forces may qualify. See 38 U.S.C. § 4303(13) (“service in the uniformed services”). 6 SECTION 2 : In addition to any disability benefit payable by the Association the member shall also receive a supplemental benefit from the State of Minnesota equal to 10% of the benefit , up to a maximum of $1,000. This benefit shall be paid by the Association. The Association will apply to be reimbursed by the State for the payment of the supplement benefit in accordance with Minn. Stat.§ 424A.10. ARTICLE VIII DEATH BENEFITS AND PENSION SECTION 1 : Upon the death of any active member of the Association who is in good standing at the time of his/her death, the Association shall pay to the surviving spouse, if any and if there is no surviving spouse, to surviving child or children, if any, and if no child or children survive, to the designated beneficiary, if any, and if none to the estate of such deceased member a sum equal to the pension benefit in Article VIII Section 3 of these bylaws for each year that he/she served as an active member of the Prior Lake Fire Department. For a member who is on the deferred pension roll at the time of their death the death benefit shall be an amount equal to their deferred pension as of their date of death. SECTION 2 : Any member of the Association who becomes a full time employee of the Fire Department shall be eligible to receive their service pension if they have met all eligibility requirements as stated in Article VIII, Section 3. SECTION 3 : The Association shall pay to each member who has served as a paid on-call member of the Fire Department for a period of twenty (20) years or more prior to his/her separation of service from the Fire Department, and who has reached the age of fifty (50) years or more, and who has been a member of the Association in good standing for at least ten (10) years, the sum of $ 7,200.00 $8,000.00 for each year that he/she served as an active member of the Prior Lake Fire Department. SECTION 4 : A member of the Association who has served as a paid on-call member of the Fire Department for at least twenty (20) years, but has not reached the age of fifty (50) years may retire from the Fire Department and be placed on the deferred pension roll. When he/she reaches the age of 50 years, and provided that at that time he/she has been a member of the Association in good standing for at least ten (10) years, upon application therefore he/she shall be paid a sum equal to the pension benefit in Article VIII Section 3 of these bylaws for each year that he/she served as aa paid on call member of the Fire Department. During the time that a member is on the deferred pension roll he/she will not be eligible to receive any of the benefits provided for in ARTICLE VII. SECTION 5: During the time that a member is on the deferred pension roll or early vested pension roll, the Association shall add to the amount payable to such member interest of 5% on December 31st of each full year that the member was on the deferred pension roll. SECTION 6: No less than thirty (30) days before becoming eligible to receive a lump sum pension, a member of the Association may make an irrevocable election that such pension shall be rolled over to a named IRA. If the member who has made such an election dies before all of his/her pension has been paid to him/her, any amo unt thereof remaining unpaid at the time of his/her death shall be paid to his/her named beneficiary, and if no beneficiary has been named, to his/her surviving spouse, child or children, or estate , in that order. SECTION 7: If a member shall have served for more than ten (10) years, but less than twenty (20) years, as a paid on-call member of the Fire Department, he/she may retire from the Fire Department and be placed on the early vested pension roll. When he/she reaches the age of fifty (50) years, and provided that at that time he/she has been a member of the Association in good standing for at least ten (10) years, he/she shall upon application therefore, be paid in the following manner as designated by Minnesota Statute: a) For active duty of more than ten (10) years, but less than eleven (11) years, 60% of the 7 pension amount per year of service as stated in Article VIII Section 3 of these bylaws. b) For active duty of more than eleven (11) years, but less than twenty (20) years, an additional 4% of the amount per year of service shall be added for each additional year of service between 11 and 20 years. c) During the time that any member is on the early vested pension roll, he/she will not be eligible to receive any of the benefits provided for in ARTICLE VII. Pensions payable to members on the early vested pension roll shall be based on the amount payable per year of service in effect at the time of such early retirement. SECTION 8 : In addition to any death or pension benefit payable by the Association the member shall also receive a Supplemental Benefit from the State of Minnesota equal to 10% of the benefit up to a maximum of $1 ,000. This benefit shall be paid by the Association which will be reimbursed by the State in accordance with Minn. Stat.§ 424A.1002. subd 10. Any death benefit paid due to the death of an active member of the Association shall include an additional amount of $1,000 for a total of $2,000 to be paid by the Association and reimbursed by the State in accordance with Minn. Stat. § 424A.10 ARTICLE IX AMENDMENTS SECTION 1 : The bylaws of the Association may be amended at any regular or special meeting of the Association by a favorable vote of 2/3 of the members present and voting, provided that a quorum is present, and provided furth er that notice of any proposed amendment or amendments shall be given by reading the same at a regular or special meeting not less than thirty one (31) days preceding that date upon which such amendment or amendments are to be acted upon, and provided further that if such amendment or amendments change the amount of benefits or pensions, approval of the City Council of Prior Lake must be obtained before such change may take effect. ARTICLE X STATE LAW In the case of a conflict between these bylaws and Minn. Stat. Chap. 424A, as may be amended from time to time, Minn. Stat. Chap. 424A shall govern. 8/25/16 PRIOR LAKE FIRE DEPARTMENT COMPENSATION REPORT October 2017 2 OVERVIEW Mission. The mission of the Prior Lake Fire Department is to minimize the loss of life and property from fires, natural disasters, and life threatening situations. The Department performs these services with a paid, on-call volunteers through education, prevention, and training. When called upon, the Fire Department assists other emergency agencies. History. In 1916, the City purchased its first chemical wagon and fought fires with a baking soda mixture that was pumped onto fires. The Prior Lake Fire Department was officially founded in 1929 and the first motorized fire truck was purchased in 1937. The first modern Fire Station was built in 1994-95 and continues to serve as the main office for the Department. To improve response times on the northwest side of Prior Lake, Fire Station No. 2 was constructed in 2007/2008. Prior Lake hired its first full-time Fire Chief in January 2010. Services. The Fire Department serves the 16 square miles corporate limits of the City of Prior Lake. The Department also provides service for Spring Lake Township and for Credit River Township through contracts with each entity. Together the service area reaches approximately 74 square miles, serving a combined population nearing 40,000. Though safer, modern construction techniques and stricter building codes have made building fires less common, firefighters work has grown to include motor vehicle accidents, calls for medical help, natural disasters and other emergencies. The department responds to a variety of emergency calls including: Fire suppression on structure, wildland and vehicle fires including mutual aid to neighboring communities; Hazardous material response including chemical, natural gas leaks and carbon monoxide events; Rescue response for motor vehicle accidents, off road recreational vehicle accidents, water rescue, horseback riding accidents, vulnerable or lost person searches, life threatening medical response; Good intent calls and fire, smoke, carbon monoxide alarms. Service Demand. Historically, the department experienced increases in call volume over several years peaking at 1,100 annually. Changes in response criteria (we are no longer the primary ambulance provider), improvements in building codes/inspections, enhanced alarm systems and fire prevention education have reduced and stabilized call numbers. The anticipated population growth of the area suggests a steady increase in call volume of 3-5% totaling approximately 500 calls annually. YEAR 2006 2007 2008* 2009 2010 2011 2012 2013 2014 2015 2016 of Calls 1034 1116 804 406 432 443 478 450 404 454 440 In 2008, the Department transitioned away from medical call response when Allina became the primary agent for life-threatening medicals. 3 Below is a breakdown of the major areas of response by call number and type: ORGANIZATIONAL STRUCTURE The Fire Department reports to the City Manager. The Fire Chief is supported by three assistant chiefs, five captains and 37 fire fighters. All personnel, except for the Fire Chief, are paid, on-call positions. Administrative support is provided by the receptionist based in City Hall. Firefighters. Members of the Prior Lake Fire Department are selected through an application process. Applicants must be at least 18 years of age, a high school graduate, hold a valid driver license, and reside within a reasonable response time of a Prior Lake Fire Station. All applicants must pass a basic skills test, a physical agility test, and a pre-employment drug test and physical. Firefighters respond to calls 24 hours/7 days a week with little notice, often at night. Calls can range from 1 hour to 12 hours and have a significant impact on their personal lives. The average age of a Prior Lake firefighter is 43. More than half the staff is under the age of 45. The average tenure of a Prior Lake firefighter is 10.8 years of service. 0 20 40 60 80 100 120 Fire Calls by Type Series2 Series3 42 53 61 89 84 87 43 44 40 91 97 119 25-34 35-4445-54 55+ Firefighter Age Composition 20%26% 26% 28% Fire Medical Accidents Hazmat False Alarms 2016 2015 2014 50 50 32 4 Requirements. Members of the Fire Department are required to meet a minimum of 35% of all fire calls bi-annually. In addition, members are required to participate in 75% of maintenance and training exercises biannually and attend mandatory quarterly business meetings. First-year firefighters are required to complete 140 hours of training and complete Firefighter II certification. In 2015, the average response rate of all firefighters was 42%. Prior Lake Fire Relief Association. Prior Lake firefighters are members of the Prior Lake Fire Relief Association. The Association is the administrator of the single-employer defined benefit pension plan, which was established November 1, 1957 and operates under the provisions of Minnesota Laws 1965, chapter 446. It is governed by a Board of Trustees made up of six members elected by the members of the Association for three-year terms, and the Mayor, City Manager and Fire Chief. Although not part of the operational structure, the Board of the Fire Relief Association Board provides oversight of the fire fighter pension fund. The Board is responsible for investment of the Association funds, annual audits, and annual report to the membership. BUDGET The annual Fire Department budget is funded by the City’s general fund, cost-sharing contracts with the surrounding townships, and state aid. General fund expenditures can be categorized into four primary areas, which are explained below: Personnel. The largest expenditure for the Department is personnel, accounting for almost half of the annual budget. Personnel costs include volunteer firefighter wages, pension contributions, workers compensation and the compensation package for the full-time Fire Chief. SUMMARY 21% 0-7 years 11% 8-14 years 9% 15-21 years 4% 22+ Average Tenure of POC Firefighters Almost a quarter of the POC firefighters have been with the department for less than 7 years. Of those, 70% have been with the City for less than 5 years. 5 Operations. Operational expenses include expenditures for small equipment, fuel, materials and supplies, utilities and facilities expenses for the two fire stations, and minor capital costs. Pension. The City contributes $20,000 annually toward the Fire Relief Pension Fund. The City passes through the expenditure budget the state pension contribution. The Pension Fund details are explained in depth below. Training and Education. Training and employee development, memberships and subscriptions, public education and uniform expenses are included in this category. NOTE: The replacement of capital equipment, such as fire trucks and tankers, is tracked in the Equipment Replacement Plan and reviewed annually as part of the Capital Improvement Plan. Cost per Household. Chart below reflects the annual cost for fire services in per household. Revenues Year Total Fire Operating Budget Township Service Contracts State Aid City Pension Deficit Contribution Net General Fund Cost of Households General Fund Cost per Household 2009 780,878 311,207 122,953 0 346,718 8,385 41.3 2010 862,159 348,331 127,482 82,372 468,718 8,447 55.5 2011 851,139 357,923 141,411 80,175 431,980 8,541 50.6 2012 807,684 343,017 143,938 55,925 376,654 8,647 43.6 2013 857,539 362,106 206,356 58,990 348,067 8,821 39.5 2014 904,430 325,976 195,194 0 383,260 9,009 42.5 2015 880,919 279,094 208,087 0 393,738 9,180 42.9 2016 902,031 311,068 214,891 0 376,072 9,300 est. 40.4 49% 23% 20% 8% Personnel State Pension Contribution pass-through) Operations Training/Uniforms 2017 GENERAL FUND BUDGET -$905,149 49% 23% 20% 8% 6 COMPENSATION Compensation for firefighters is a combination of an hourly wage paid for call response and training activities and a pension benefit. Firefighters do not receive additional PERA, health, dental or life insurance benefits from the City. Wages. Members of the Fire Department are compensated on a monthly basis for call response and for training at the rate of $12.20/hour in 2016.The Assistant Chief of Training receives an additional $6,000 annual payment and the remaining two Assistant Chiefs $5,000. Five Captains earn a $2,000 stipend each per year in consideration of additional duties. Rate increases are assessed annually as part of the budget process and evaluated against market comparisons. Most recent wage adjustments: Year Hourly Rate 2014 2015 2016 2017 11.50 11.85 12.20 12.20 Peer Cities. Below is a table that outlines the hourly rate and pension contributions of other Minnesota cities with volunteer fire departments: Pension. The pension is established through the Prior Lake Fire Relief Association. Firefighters are eligible for participation upon hire and begin to earn service credit immediately. Members are “vested” and eligible for a partial or full pension based upon years of service. To achieve full pension, a member must have reached the age of 50 and have 20 years of service credit. A member who has reached the age of 50 and retires with 10 years of service is eligible for a partial benefit (60%). City 2015 Hourly 2016 Hourly 2017 Hourly 2015 Pension 2016 Pension 2017 Pension Apple Valley $14.65 $15.00 $15.35 $6,700 $6,700 $6,700 Chanhassen $10.00 $10.00 $12.00 $5,050 $6,000 $6,000 Cottage Grove $13.26 $13.53 $13.53 $4,700 $4,700 $6,000 Farmington $10.75 $10.97 $11.24 $4,575 $4,575 $5,500 Golden Valley $15.44 $15.83 $16.23 $7,500 $7,750 $8,000 Inver Grove Heights $12.50 $12.50 $13.00 $6,800 $6,800 $7,900 Lakeville $12.00 $12.00 $12.00 $6,742 $6,877 $7,225 Rosemount $10.00 $10.00 $10.00 $7,000 $7,000 $7,200 Savage $13.36 $13.69 $14.07 $5,537 $5,572 $5,725 monthly option) Shakopee $14.00 $14.00 $14.00 $7,700 $7,700 $8,025 Woodbury $15.32 $15.84 $16.32 $6,720 $6,720 $6,720 Prior Lake $12.20 $12.20 $12.20 $7,100 $7,100 $7,200 AVERAGE $12.79 $12.96 $13.29 $6,344 $6,458 $6,850 7 Year Annual Pension Sum at Retirement 1-9 $7,200 $0 10 (60% vested) $7,200 $43,200 20 (100% vested) $7,200 $144,000 The statutory maximum pension contribution is $10,000 annually. The contribution amount remained flat at $6,500 during the Great Recession. Since then, there have been two pension increases. PENSION The Prior Lake Fire Department pension benefit is funded through a combination of resources: Fund Investment Earnings State Aid City Pension Contribution City Deficit Contribution (if necessary) 5,900 6,500 $6,500 $6,500 $6,500 $6,500 $6,500 6,800 7,100 $7,100 $7,200 5,000 6,000 7,000 8,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Pe r n s i o n C o n t r i b u t io n Year Pension Benefit History 0 50,000 100,000 150,000 200,000 250,000 300,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Pension Contribution History state aid city annual city deficit During the great recession, the city contributed an additional $277,462 to keep the fund balance at 100%. The city’s $20,000 annual contribution has not been adjusted in 10 years. 8 Pension Increase. Fire State Aid amount is determined by the State of Minnesota. At the monthly Relief Association meeting in October, the membership reviews the investment performance of the pension fund. Historically, pension increases have been considered based upon the pension fund balance. If the membership votes to recommend an increase, the recommendation is presented to the Relief Association Board for consideration and then to the City Council for approval. Pension Increase Criteria. The goal of the Relief Association is to be self-funded without any contribution from the City. The Relief Association is committed to providing the best possible pension to its members while minimizing the risk to the City of a required contribution. The following criteria is used when considering a pension increase: Fund balance: The fund should have a positive balance with assets being greater than liabilities. Investment Performance: Projected investment returns should be stated by using the projected annual income as stated in the most recent Combined Snapshot Report. Peer Department Pension Level: It can be difficult to compare peer department pension levels due to many factors that influence benefit level. The desire of the Relief Association is to maintain the benefit at a level comparable to our peer group. Effect on Recruiting and Retention: The pension is important for the recruitment and retention of volunteer firefighters. The positive effect a pension increase can have on these areas contributes to the consideration of increases. 118.5% 110.0% 69.2% 79.6% 87.7%89.7% 99.4% 113.7%115.4% 102.6%107.3% 0% 20% 40% 60% 80% 100% 120% 140% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Pe r c e n t F u n d e d Year Pension Fund Balance History 9 FUTURE CHALLENGES The Prior Lake Fire Department faces several challenges in the future: Equipment. Over the next 5 years, important and expensive pieces of equipment will need to be replaced include Self-Contained Breathing Apparatus, and two new fire engines. Recruitment and Retention. Nationally, the number of volunteer firefighters has dropped by around 11 percent since the mid-1980s, according to the National Fire Protection Association. As the population ages, fewer young people are available or inclined to assume this responsibility. Compensation and benefits will need to be assessed continually to encourage volunteers to come forward and to keep existing volunteers engaged. Time Commitment. The time commitment for volunteer firefighters is significant. Calls occur 24 hours a day, 7 days a week, often at inconvenient times, which is especially difficult on families. In addition, training requirements are significant and demand more time away from home and work. As firefighters’ lives get busier, the incentive to commit such intense volunteer hours weakens. Cost. The cost of running a Fire Department is significant. Equipment, vehicle replacement, training, and emerging and mobile technology costs are high and continue to grow. Staffing. In the next five years, the City will need to consider a second full-time staff member to assist the Fire Chief with expanding duties and responsibilities, including training, administration and inspections. Fire Inspections. Proactive life safety inspections of high-density housing, elderly living facilities and other City-licensed facilities are not currently happening as regularly nor as often as necessary. Current benefit of $7,200/year of service. There is a surplus of $649,191 and is funded at 116% as of September 30, 2017 PLFRA pension fund report and inclusive of the 2017 State Fire Aid deposit. 2018 proposed benefit of $8,000/year of service. There is a surplus of $307,095 and is funded at 107% as of the September 30, 2017 PLFRA pension fund report and inclusive of the 2017 State Fire Aid deposit.