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HomeMy WebLinkAbout2015-10-30 - Agendas - Archive Special Final Agenda October 30,2015 Page 1 of 179 City of Fayetteville, Arkansas 113 West Mountain Street Fayetteville, AR 72701 (479) 575-8323 e Form-M Meeting Agenda - Final Agenda Friday, October 30, 2015 5:30 PM City Hall Room 219 City Council Special Meeting Adella Gray Ward 1 Sarah Marsh Ward 1 Mark Kinion Ward 2 Matthew Petty Ward 2 Justin Tennant Ward 3 Martin W. Schoppmeyer, Jr. Ward 3 John S. La Tour Ward 4 Alan Long Ward 4 Special Final Agenda October 30,2015 Page 2 of 179 City Council Special Meeting Meeting Agenda-Final Agenda October 30,2015 Call To Order Roll Call Pledge of Allegiance Mayor's Announcements, Proclamations and Recognitions City Council Meeting Presentations, Reports and Discussion Items: Agenda Additions: A. New Business: A. 1 2015-0466 FAYETTEVILLE FIRE PENSION AND RELIEF FUND PROPOSAL TO CONSOLIDATE WITH LOPFI: AN ORDINANCE TRANSFERRING ADMINISTRATION OF RETIREMENT COVERAGE FOR ELIGIBLE MEMBERS OF THE FAYETTEVILLE FIRE PENSION AND RELIEF FUND TO THE ARKANSAS LOCAL POLICE AND FIRE RETIREMENT SYSTEM (LOPFI) AND AUTHORIZING THE MAYOR TO ENTER INTO AN IRREVOCABLE AGREEMENT WITH LOPFI AND APPROVING AN EMERGENCY CLAUSE Attachments: 2015-0466 Local Firemen's Pension Consolidation City Attorney Memo Regarding Legality of Assuming Pension Debts 092915 City Attorney Memo Addional Information Fire Pension Board Resolution 093015 MAYOR LIONELD JORDON AND FAYETTEVILLE CITY COUNCIL B. 1 Additional Fire Pension At the October 6, 2015 City Council meeting, this ordinance was left on thefirst reading. At the October 20, 2015 Ciry Council meeting, this ordinance was left on the second reading. B. Announcements: C. Adjournment City of Fayetteville,Arkansas Page 2 Printed on 1012212015 Special Final Agenda October 30,2015 Page 3 of 179 City Council Special Meeting Meeting Agenda-Final Agenda October 30,2015 NOTICE TO MEMBERS OF THE AUDIENCE All interested persons may address the City Council on agenda items of New and Old Business. Please wait for the Mayor to request public comment and then come to the podium, give your name, address, and comments about the agenda item. Please address only the Mayor. Questions are usually answered by the Mayor,Aldermen or Staff after the public comment period is over. Please keep your comments brief and respectful. Each person is only allowed one turn at the microphone for discussion of an agenda item. All cell phones must be silenced and may not be used within the City Council Chambers. Below is a portion of the Rules of Order and Procedure of the Fayetteville City Council pertaining to City Council meetings: Agenda additions:A new item which is requested to be added to the agenda at a City Council meeting should only be considered if it requires immediate City Council consideration and if the normal agenda setting process is not practical. The City Council may only place such new item on the City Council meeting's agenda by suspending the rules by two-thirds vote. Such agenda addition shall be heard prior to the Consent Agenda. Consent Agenda:Consent Agenda items shall be read by the Mayor and voted upon as a group without discussion by the City Council. If an Alderman wishes to comment upon or discuss a Consent Agenda item, that item shall be removed and considered immediately after the Consent Agenda has been voted upon. Old business and new business. Presentations by staff and applicants. Agenda items shall be introduced by the Mayor and, if an ordinance, read by the City Attorney. City staff shall then present a report. An agenda applicant(city contractor, rezoning or development applicant, etc.)may present its proposal only during this presentation period, but may be recalled by an alderman later to answer questions. Staff and applicants may use electronic visual aids in a City Council meeting as part of their presentation. Public comments. Public comment shall be allowed for all members of the audience on all items of old and new business and subjects of public hearings. No electronic visual aid presentations shall be allowed, but the public may submit photos,petitions, etc. to be distributed to the City Council. If a member of the public wishes for the City Clerk to distribute materials to the City Council before its meeting, such materials should be supplied to the City Clerk office no later than 9:00 a.m. on the day of the City Council meeting.Any member of the public shall first state his or her name and address, followed by a concise statement of the person's position on the question under discussion. Repetitive comments should be avoided;this applies to comments made previously either to the City Council or to the Planning Commission when those Planning Commission minutes have been provided to the Aldermen. All remarks shall be addressed to the Mayor or the City Council as a whole and not to any particular member of the City Council. No person other than the Aldermen and the person having the floor shall be permitted to enter into any discussions without permission of the Mayor. No questions shall be directed to an Alderman or city staff member except through the Mayor. City of Fayetteville,Arkansas Page 3 Printed on 1012212015 Special Final Agenda October 30,2015 Page 4 of 179 City Council Special Meeting Meeting Agenda-Final Agenda October 30,2015 Courtesy and respect. All members of the public, all city staff and elected officials shall accord the utmost courtesy and respect to each other at all times. All shall refrain from rude or derogatory remarks, reflections as to integrity, abusive comments and statements about motives or personalities. Any member of the public who violates these standards shall be ruled out of order by the Mayor, must immediately cease speaking and shall leave the podium. Interpreters or TDD for hearing impaired are available for all City Council meetings, a 72 hour advance notice is required. For further information or to request an interpreter,please call 479-575-8330. A copy of the complete City Council agenda is available at www.fayetteville-ar.gov or in the office of the City Clerk, 113 W. Mountain, Fayetteville, Arkansas. City of Fayetteville,Arkansas Page 4 Printed on 1012212015 Special Final Agenda October 30,2015 City of Fayetteville, Arkansas Page5of 179 113 West Mountain Street Fayetteville,AR 72701 - - (479)575-8323 Text File File Number: 2015-0466 Agenda Date: 10/30/2015 Version: 1 Status: Second Reading In Control: City Council Meeting File Type: Ordinance Agenda Number:A. 1 FAYETTEVILLE FIRE PENSION AND RELIEF FUND PROPOSAL TO CONSOLIDATE WITH LOPFI: AN ORDINANCE TRANSFERRING ADMINISTRATION OF RETIREMENT COVERAGE FOR ELIGIBLE MEMBERS OF THE FAYETTEVILLE FIRE PENSION AND RELIEF FUND TO THE ARKANSAS LOCAL POLICE AND FIRE RETIREMENT SYSTEM (LOPFI) AND AUTHORIZING THE MAYOR TO ENTER INTO AN IRREVOCABLE AGREEMENT WITH LOPFI AND APPROVING AN EMERGENCY CLAUSE WHEREAS, the Board of Trustees of the Fayetteville Fire Pension and Relief Fund has elected to have its Pension Fund administered by LOPFI as stated by Resolution dated September 30, 2015, and WHEREAS, the Board of Trustees has requested by Resolution that the City of Fayetteville, Arkansas to act as its agent henceforth. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE,ARKANSAS: Section 1. If accepted by LOPFI, the administration of the Fayetteville Fire Pension and Relief Fund shall be transferred to LOPFI under authority of Act 364 of 1981, as amended. Such transfer shall mean the administration of the Pension Fund only and not a change in the Pension Fund's benefit program unless a benefit increase is approved by the City of Fayetteville, Arkansas. Section 2. Mayor Jordan is hereby authorized to enter into the irrevocable agreement, using a twenty-five (25) year amortization schedule with LOPFI to administer the Fayetteville Fire Pension and Relief Fund as stated in Section 1 above and attached as Exhibit A. Section 3. It is the intent of the City Council and it is hereby ordained that the provisions of this Ordinance shall be codified into the Code of Ordinances of Fayetteville, Arkansas and the sections thereof may be re-numbered and re-lettered as necessary to accomplish such intention. Section 4. Due to the need to consolidate administration of the Fayetteville Fire Pension and Relief Fund with LOPFI in less than one month, an emergency is hereby declared to exist and this Ordinance shall be in full force from and after the date of its passage and approval. City of Fayetteville,Arkansas Page 1 Printed on 1072212015 Special Final Agenda October 30,2015 Page 6 of 179 City of Fayetteville Staff Review Form 2015-0466 Legistar File ID 10/6/2015 City Council Meeting Date-Agenda Item Only N/A for Non-Agenda Item Paul Becker 10/1/2015 Chief Financial Officer/ Finance & Internal Services Department Submitted By Submitted Date Division/Department Action Recommendation: Proposal to consolidate the Fayetteville Local Firemen's Pension Fund with LOPFI by the Local Firemen's Pension Board. Budget Impact: Account Number Fund Project Number Project Title Budgeted Item? NA Current Budget $ Funds Obligated $ Current Balance $ Does item have a cost? NA Item Cost Budget Adjustment Attached? No Budget Adjustment Remaining Budget $ Previous Ordinance or Resolution# v20140710 Original Contract Number: Approval Date: Comments: Special Final Agenda October 30,2015 CITY OFFq1V Page 7 o 179 TayL, CITY COUNCIL AGENDA MEMO ARSAS MEETING OF OCTOBER 6, 2015 TO: Mayor and City Council FROM: Paul Becker, Finance Director DATE: October 1, 2015 SUBJECT: Proposal to consolidate the Local Firemen's Pension and Relief Fund with LOPFI by the Local Firemen's Pension Board RECOMMENDATION: The City Administration is forwarding this request to the City Council without making a recommendation because of the many uncertainties that exist. The Mayor has continually maintained that he would support consolidating the plan if no costs or minimal costs would be incurred. The Mayor does not feel that all his questions have been adequately answered at this time and is waiting for additional information that has been requested from the Pension Review Board (PRB) actuary. DISCUSSION: The Fayetteville Local Firemen's Pension Fund was classified as insolvent by the PRB in 2009. On September 29, 2015 representatives of the PRB (specifically Jody Carreiro the PRB actuary and David Clark the Executive Director of LOPFI and the PRB) came to a special City Council meeting and gave a presentation on the current position of the Local Firemen's Pension Fund and the possible long term solutions to the funding problems. Based on that presentation the Local Firemen's Pension Trust Board is requesting the City Council approve its request that the plan be consolidated with LOPFI. During the presentation, it was shown that the Fund's assets have an 80% risk of being depleted within the next 10 to 15 years. Potential solutions included allowing the Fund to be depleted; subsidizing the Fund with additional General Fund Revenue by between $150,000 and $200,000 for somewhere between 15 and 30 years; or sending the Fund to LOPFI for administration and management, which is termed consolidation. The consolidation options would be to amortize the unfunded liability over either a 15 or 25 year period and to include or exclude a COLA. It was quickly determined that the only financially feasible option would be a consolidation over a 25 year period without a COLA. If the Fund was sent to LOPFI for consolidation under the plan to amortize the liability over a 25 year period without a COLA, the actuary indicated the City would not incur additional costs provided the actuarial assumptions were met and the property tax collections increased by 3% per year due to increased assessed property values. Generally this also means the assumed mortality table proves accurate and an 8% rate of return on current assets is achieved. The amount the City would pay LOPFI in 2016 would be 33.3% of covered payroll (current fire personnel working). This would be an increase from 24.5% which is the current LOPFI rate. Mailing Address: 113 W. Mountain Street www.fayetteville-argov Fayetteville,AR 72701 Special Final Agenda October 30,2015 Page 8 of 179 That is an increase of$561,262 in dollars, which would be covered in what we currently collect from property taxes and insurance turnback for the Fund. We would, of course, send all of the amounts collected from these sources to LOPFI to reduce the unfunded liability as quickly as possible. This is in keeping with the actuary's recommendation. However, that percentage rate is only certain for 2016 and subject to change after that. It is important for the Council to understand that currently the Pension Fund is primarily responsible for the unfunded pension liability and that if the Council agrees to consolidate the Fund the City becomes primarily responsible for that liability. Again, if all actuarial assumptions aren't met, including an 8% rate of return on investments or if the mortality patterns do not meet expectation, the City would be liable for any additional costs over and above the amounts being collected for the old Fund, which would have to paid for by the General Fund and those costs could be significant. The chance of that happening are speculative and potential amounts if any are difficult to determine. BUDGET/STAFF IMPACT: Unknown Attachments: Fayetteville Firefighters Pension Fund Special Report LOPFI Consolidation Report Fire Pension Fund 2014 Annual Actuarial Report 2 Special Final Agenda October 30,2015 Page 9 of 179 Fayetteville Firefighters Pension Fund Special Report Presented September 29, 2015 Jody Carreiro Osborn, Carreiro & Assoc. Special Final Agenda October 30,2015 Page 10 of 179 Purpose of Our Report & Presentation • Current status of Pension Fund • Changes since our last report • Projections of Current Plan • Projections of LOPFI consolidation Special Final Agenda October 30,2015 Page 11 of 179 Recent Valuation Results £,., ',. ,,. :; f 3x `-"�^iT'.<" i ",� tri tly� a� �, '� .F .. t •,'�: r� ..�.. 12/31/2009 $15,061, 19 ,: $5,787,509 27.8% 12/3.1/2010 $14,937, 189 $5,573,909 ' 27.2% ... 12/31/2Oa y" . $R .c� 5; 14 , i w $5;0 24.90` 12/31/2012 $14,990,957 $4,6821930 23.8% 1}2/31;/2013 - $`14, 19,95 $4�62 ;857 � 24.G% 12/31/2014 $ 13,979,405 $4,377,557 23 .8% Special Final Agenda October 30,2015 Page 12 of 179 Recent Valuation Results 1ai L .w . 1 sa � 5M' : f2M5611 o 4/o 12/31/2010 3,240,353 631, 157 T� ` 19.5% r ' 7" rri'a, Urs .` �` v �' -x ''kTs."E$r. 'a b F'r' a w,syw, xm "-G"w �:. ='�i'-'�Yxvsa-p4 WM sc 142f 31`f 2011 `3 6;65'5 x " s b�9;91$` 189 12/31/2012 3,402,323 741,09146 yn 21.8% v g .., � aE`" . £ r 0%4751320675 -mw s ?mm 2923 ^�" 12/31/2014 31214,908 75`6,819 23 .5% n - Special Final Agenda October 30,2015 Page 13 of 179 Financial History — pages 9- 10 • Note Non - Investment Cash Flow. — Over $600,000 outflow per year. • Assets from $9 . 6 million to under $4. 4 • Ratio of Assets to Expenses : 3 . 1 • Average 10 year return, 5 . 63 Special Final Agenda October 30,2015 Page 14 of 179 Sources of Income — page 9 • No Actives, so no employee/employer match contributions • Local Millage — Increased 9% per year first four years — Increased 1.5% per year last five years • Premium Tax formula changes in 2011 — Almost $ 1001000 per year more beginning in 2012 Special Final Agenda October 30,2015 Page 15 of 179 Page 17— Benefit Increases • 50% to 65% base benefit December 6, 1996 • 65% to 90% base benefit June 6, 2001 • 3 year temporary 3% compound COLA, November 20, 2003 • No Change Based on a January 4, 2007 cash flow study based on December 31, 2005 valuation results. • December 2009, PRB declared "Projected Insolvent," we met with boards October, 2010. Special Final Agenda October 30,2015 Page 16 of 179 Changes since 2010 Report • 2010 report projected Unfunded about $ 1 . 5 million larger than actual 12/31/2014. • Cover letter, page 2 • About $900,000 more investment income in 2010-2014 than expected — One of the best 5 year periods in the market • Over $300,000 additional premium tax due to 2011 law change . • About $200,000 in gains from mortality worse than expected . k Special Final Agenda October 30,2015 Page 17 of 179 Where is the Fund headed ? Cash Flow Simulation Process • Valuation vs . Cash Flow • Snapshot vs . Yearly Projection • Liability assumptions vs . Added Asset assumptions • Single Interest Assumption vs . Rate Simulations • Guess vs . Assumption vs . Prediction • Assumptions — pp 18-34 Special Final Agenda October 30,2015 Page 18 of 179 Results • Charts found in Exhibit 2, page 3 • 2, 000 simulations over 30 years of 6 classes of assets • Arrange results from worst to best • The worst 5% of the results are below the first red line • The worst 10% of the results are below the first blue line Special Final Agenda October 30,2015 Page 19 of 179 Fayetteville Fire Pension Fund 1/1/2015 Current Plan, Projected Assets Simulation 6,000,000 +A Y { �5"°a. ' tz �# `s+Mi,l .x' ���u"es= � 5 � , 5,000,000 4,000,000 v QJ 5 N 1 y fx 3 3,000,000 > v � 2,000,000 5 _ 1,000,000 L ry 0 2014 2019 O ercentage of 'Rvlatio'' below this 859 2034 2039 ,2044 —5% —10% .. :.:-,-:-25% —50% , -- 75% —90% —95% Special Final Agenda October 30,2015 Page 20 of 179 What this graph tell us • 80+% Risk of Ruin : Risk of depleting assets before all benefits are paid . • CANNOT earn our way out, need 10% every year (without variance), with liquidity concerns restricting investment options quickly. Special Final Agenda October 30,2015 Page 21 of 179 Fayetteville Fire Pension Fund 1/1/2015 Current Plan with Additional $150,000 per Year for 30 Years, Projected Assets Simulation 6,000,000 'it d ry ° ?+tis, , 5,000,000 F 4,000,000 N i 1 L a O d rt 3,000,000 > m .x r C 2,000,000 1,000,000 i 0 2014 2019 Percentage of �nsbelowthis 059 2034 2039 2044 —5% —10% . ---25% —50% --75% —90% —95% Special Final Agenda October 30,2015 Page 22 of 179 Fayetteville Fire Pension Fund 1/1/2015 Current Plan with Additional $200,000 per Year for 15 Years, Projected Assets Simulation 6,000,000 k 4 X 5,000,000 - u- 4,000,000 .# k k d � a 3,000,000 Yel 5n 2,000,000 IK n 4 M1 1,000,000 1 0 Percentage of elations below this ' 2014 2019 �� 859 2034 2039 2044 —5% —10% ':...,:....-=25% —50% =•:.,75% —90% —95% Special Final Agenda October 30,2015 Page 23 of 179 What these graphs tell us • Solved for the amount of money necessary to keep Local Plan solvent, with only 5% risk of ruin . • $ 150,000-$200,000 is less than the calculated contribution in the reports, but still much higher than currently available. • As will be shown, these amounts are also higher than LOPFI consolidation amounts. Special Final Agenda October 30,2015 Page 24 of 179 Possible Actions — Local Plan Exhibit 1, Appendix A • Maintain Current Direction • Additional Contributions • These choices appear to have too high a monetary and/or political cost . Special Final Agenda October 30,2015 Page 25 of 179 LOPFI Consolidation — What Happens ? • Plan assets transferred to LOPFI • Local Pension Board dissolved • City signs an agreement to pay the calculated LOPFI rate • Benefits are guaranteed Special Final Agenda October 30,2015 Page 26 of 179 LOPFI Consolidation — Payment Plan ? • 15 year or 25year ( new) • Closed • Level Percentage of Pay • Based on 8% interest • And 4% salary growth Special Final Agenda October 30,2015 Page 27 of 179 Canal Dollar Amortization _------ _w.___. -------.ON - I i I ray i ,_ $1161 X32554 I { j 50'404000 _____ _. _____ ___ ._ ___ _ .... .___ _ _ . ..... 4 € 1 -7 r C a I 0 t 1 2 3 4 5 5 7 8 9 10 11 12 13 14 15 16 Year Special Final Agenda October 30,2015 Page 28 of 179 Level Percentage of Pad moi atio 4, row ---- f.,m._r.. ......_.�_,...__.... __ .._.... __f... € ,,.._.... ...... ......_.... € CO $600,000 yYI 40 i l... 3 3 i € € x i 00 $92,535.29 1 4 5 6 10 11 12 13 14 15 16 Year Outstanding Balance payment Special Final Agenda October 30,2015 Page 29 of 179 What this means ? � I COAL ;u I� cop.a€�0 � 000 25 year amortization .063092 063092 .063092^ "Nal Y' ,N `' 4"5r .a2 First year payment6 ;Q92 x< 63,492' Total City Salary 900,000 900,000 900,000 E ?tel= p-E IPFI CLe ddl d e xy aw yV c it wR .rcz a A 7,01% Expected UAL year 2 110141384 11014,384 11014,384 7.<r, c- t x � x 4 x si�r�. s ` ,r.:.' `' .,<y .. x. ,+ svn•,a. s ' tt°!,, z} ,�`te r i4ctual`(Ga,n)jLoss 0 5 ,,000 25; 00 Actual UAL year 2 11014,384 11064,384 989,384N i : i 3 54 �taa 24 yearwamoa nation 46 m 064677 064677 Second year payment 65,607 68,84163,990 r , Tota Ci y Salary '' - 936, 0 936100 LOPFI Rate Added 7.01% 7.35% 6.84% Special Final Agenda October 30,2015 Page 30 of 179 Important Consideration • Regardless of the consolidation option — any excess revenue can be used to pay down the unfunded liability • Better to pay down debt while the calculated contribution is lower ( in dollar terms), because funds should be available (ARM ) • Don't just look at first year payment— important to keep increase/liability in mind !