SPECIAL CITY COUNCIL MEETING MINUTES
COUNCIL CHAMBERS – CITY HALL
1000 CITY CENTER CIRCLE
MARCH 22, 2011
THE SPECIAL CITY COUNCIL MEETING of the City of Port Orange was called to order by Mayor Allen Green at 5:30 p.m.
Pledge of Allegiance
Roll Call: Present: Councilman Bob Ford
Councilman Bob Pohlmann
Councilman Donald Burnette
Vice Mayor Dennis Kennedy
Mayor Allen Green
Also Present: Kenneth W. Parker, City Manager
Margaret T. Roberts, City Attorney
Robin Fenwick, Deputy City Clerk
GENERAL EMPLOYEES’ PENSION BOARD REPORT
Ken Parker, City Manager, addressed Council and advised that the actuaries for each of the pension plans are present to present their status report.
John Shelley introduced David Leonard to discuss the General Employees’ Pension Plan. Mr. Leonard explained the request he was given. He discussed the items on page 4, which shows future levels of annual required contributions and unfunded actuarial accrued liabilities. He advised that it is hard to judge what is going to happen in 30 years from now. He doesn’t like to go beyond 5 years. The fun is up approximately 12%
Councilman Ford’s first concern is the unfunded liability. Mr. Leonard stated that it is normal to have unfunded liability in a defined plan, this plan is 81% funded. Councilman Ford agreed that this is the least troublesome plan the City currently has. He asked what the cause of high unfunded liability is. Mr. Leonard stated that it happens when returns don't match projections. The stock market crash of a few years ago hurt this plan. Councilman Ford wants to see how he can make sure we don't add debt on our children. Mr. Leonard advised that the only way to assure you will not have an unfunded liability is to not have a defined plan.
Councilman Burnette questioned last year's unfunded liability correction. Mr. Leonard explained the correction and advised that the error will not increase the amount contributed by the City.
Councilman Pohlmann asked if everything is tied to the stockmarket. Mr. Leonard said yes, plus salary raises for employees. Councilman Pohlmann asked who determines the level of contribution of the City. Mr. Leonard said the actuary makes recommendations and it is discussed with the Board. His recommendation right now is 13%. Councilman Pohlmann asked how do we get the unfunded liability down. Mr. Leonard replied that the City could put $5 million in the plan, but since that’s not likely, the City could cut back benefits. Councilman Pohlmann asked if the City underfunded the plan. Mr. Leonard answered no, not at all. Councilman Pohlmann asked if Mr. Leonard has any recommendations for the plan. Mr. Leonard said it’s not his money but he has faith in the investments and does not believe it is in a crisis mood.
Vice Mayor Kennedy expressed his displeasure in Mr. Leonard’s response that it is not his money. Vice Mayor Kennedy believes it is Mr. Leonard’s job to make recommendations. Mr. Leonard responded further and explained that the question would need to be more specific. Vice Mayor Kennedy asked how the number of active members decreasing affects the contribution rate to keep the plan sound. Mr. Leonard responded that the City will need to contribute more now if the fund is going to earn 6%.
Mayor Green is uncomfortable saying we will make 6% and doesn't think this is going to turn around in 5 years. He believes we need to clearly define if we have control but he doesn't think we have control. He appreciates the information but doesn't see the stock market turning around. He doesn't see growth going up in this area. Mayor Green believes we need to make adjustments.
POLICE PENSION BOARD REPORT
Chad Little, Actuary, presented a powerpoint presentation and explained unfunded liability and the plan; explaining that 1) investment returns; 2) salary growth; 3) plan changes from 01-02, which are the causes of the unfunded liability balance.
Vice Mayor Kennedy ~ excellent presentation. Where does the salary growth come from? Mr. Little explained that the growth is from the salary increase of an employee who is active this year and was active last year. New employees’ salary increases won't affect the fund like those close to retiring. Vice Mayor Kennedy asked how have the numbers of active members increased and how many retirees are we dealing with. Chad Little explained that the active popular in 2009 was 80 and now there are 65 members. There were 3 DROP members a year ago and now we are at 16, and last year there were 23 retirees and now we have 25.
Councilman Pohlmann asked what the 10 year rate was. Mr. Little said 3.6%. Pointed out the 2006 report showing the breakdown. Councilman Pohlmann asked if the .5% contribution rate of the City was consistent with other Cities. Mr. Little said he wasn’t sure off the top of his head but the State provides a report of those amounts.
Councilman Burnette asked why we are still assuming such a high number. Mr. Little discussed the historical figures and explained that the stock market was the worst decade in the stock market. He will be checking into lowering the number but recommends that the City and Board take it slowly. Councilman Burnette believes that we need to get that number in line to be more realistic. He wants to deal in realty.
Councilman Ford asked how can we gradually drop the rate to get a slow and steady return to reality. He acknowledged that the bleeding has stopped, but we will be paying for this for years to come. He feels we need a policy to ask our boards to work with us.
Mayor Green explained that defined benefit is extremely difficult and he wants to be realistic. He does not believe we are going to get to 8% any time soon.
FIRE PENSION BOARD REPORT
Drew Bastain introduced Patrick Donian, Actuary, who explained that the fire pension fund is a mirror image of the police plan. He explained the increase in the City’s contributions and the decrease in the member’s contributions. He advised that members have agreed to increase the member contribution rate to 8.5%; average final compensation change from 3 years to 5 year average; COLA after 5 years get 3% but tied into CPI; DROP 6.5% given now but members have agreed to match whatever the plan gets the member gets.
Mayor Green clarified that the changes Mr. Donian mentioned have not been implemented yet. Mr. Donian agreed.
Councilman Pohlmann asked Mr. Donian if the city has properly contributed to the fund as has been recommended. Mr. Donian replied yes.
Vice Mayor Kennedy asked for the number of retirees and active members. Mr. Donian advised that the plan has 47 non DROP employees, 10 in DROP and 34 people drawing benefits. 5 people are vested but not employed with city currently. Vice Mayor Kennedy asked if there will be more people in the DROP. Mr. Donian advised that there may be at most 3 but 1 already went into the drop program recently.
Councilman Burnette stated that the 23 year average is only 6.4% yet we assume an 8-8.5% return. We need to deal in reality. He believes the 8.5% needs to be dropped but he doesn't know what to change because there is nothing to look at for the future. He wants to do it right but needs guidance. Mr. Donian explained the smoothing process that is going on now.
Councilman Ford confirmed that Mr. Donian understands the Council’s concern that we have paid what we've been told to pay and it's never enough. He believes there needs to be more professional responsibility. The board sets the assumptions and year after year it's bad and we go deeper and deeper.
Mayor Green believes it is their responsibility to do this right and is frustrated that the City has been responsible and loyal to the firefighters. He believes that it's time for them to return the favor.
ADJOURNMENT: 7:00 P.M.
Mayor Allen Green
Kenneth W. Parker, City Manager