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HomeMy WebLinkAbout_1996 04 30 City Commission Special Minutes SPECIAL MEETING CITY COMMISSION APRIL 30, 1996 The Special Meeting of April 30, 1996 was called to order by Mayor John F. Bush at 7:00 p.m. ROLL CALL: Mayor John F. Bush, present Deputy Mayor John Ferring, present City Manager Ronald W. McLemore, present City Attorney Tom Lang, present COMMISSION: Larry Conniff, present John Langellotti, present Cindy Gennell, present David McLeod, present Commission Approval of Retirement Plan Improvements: Manager McLemore stated that the Commission has been provided with the information relative of this issue, which made the Commission aware of the recent meeting of the Pension Board and what their recommendations were. We need the Commission's direction as to which alternatives, ifany the Commission would like to pursue. Commissioner Ferring asked for a recess so he could speak with the City Manager. Mayor Bush called a recess at 7:03 p.m. and reconvened the meeting at 7:06 p.m. Commissioner Ferring stated that he doesn't feel there is enough documentation to warrant consideration for this agenda item and would mike to table this. Motion was made by Commissioner Ferring to table this item pending further discussions with the City Manger regarding this particular issue. Seconded by Commissioner Langellotti. Discussion. Vote: Commissioner Conniff: nay; Commissioner Ferring: aye; Commissioner Langellotti: aye; Commissioner Gennelt: nay; Commissioner McLeod: nay. Motion fails. Commissioner Ferring read a statement into the record (which is attached hereto and made part of the record) and gave the Commission a copy of his statement. Commissioner Ferring mentioned that he was the Chairman of the Pension Plan when it was originally overhauled and that it took two years to research to have an equitable pension system, which was put in place at that time. Commissioner Ferring said it was his personal goal at that time to have a partnership between the employees of the City and our government and that at some given point the City Government and employees would be able to join together in a plan where both parties would have a vested interest. The request is asking the Commission to vote on this item and it is about $173,000 increase over and above the present pension plan. Before the Commission allows anything like this to happen the Commission has to do some research and said that it is important that the commission does this. Special Meeting City Commission April 30, 1996 95-96-15 Page 2 Commissioner Ferring read a section from the City Manager's employment contract (Section l3(d)). Art Hoffinann, Chairman of the Board of Trustees, spoke regarding this agenda item. John Ketteringham, General Services Director, gave a description of surrounding Cities, Seminole County and the Sheriff's Office pension plans stating the employer and employee's contribution. John Govoruhk, the City's former City Manager and Police Chief, spoke regarding his recommendation for the pension plan. Motion was made by Commissioner GenneU that the Commission approve the City Manager's recommendation as outlined: the employer contribution in the pension fund be increased from 6% to 10% and that the Commission does it at 2% in 96-97 and 2% in 97-98. Seconded by Commissioner Connitt Discussion. Vote: Commissioner Ferring: nay; Commissioner Langellotti: nay; Commissioner Gennell: aye; Commissioner McLeod: nay; Commissioner Conniff: aye. Motion fails. Motion was made by Commissioner McLeod that the Commission moves the pension plan from 6% to 100/0 over a two year period, from 6% to 7% contribution this year by the City with a 1 % mandatory contribution by the City employees and the foUowing year to be brought to 8% by the City and an additional 1 % by the City employees. Seconded by Commissioner Langellotti. Discussion. Vote: Commissioner Langellotti: aye; Commissioner Gennell: nay; Commissioner McLeod: aye; Commissioner Conniff: nay; Commissioner Ferring: aye. Motion passes. Commissioner McLeod said he would like to see further studies done on this by the Pension Board from the standpoint that within the next two year period the Pension Board can bring back to the Commission information to look at the long teIin and not necessarily a short term fix. Manager McLemore handed out to the Mayor and Commission a paper regarding the budget and asked what time the Commission would like to meet. Manager McLemore reminded the Commission that the 27th of May is a holiday and asked the Commission if they wanted to meet. The Commission was in consensus that they will not meet on the 27th of May. Commissioner Conniff mentioned that he would be out of town for the May 13, 1996 meeting. Mayor Bush asked the Commission to study what the Manager gave them regarding the budget and at the next meeting will discuss this with the Manager. The meeting adjourned at 8:45 p.m. Respectfully SUb~j!' / . ~1I1kM~. ~ ' ~;;o q; Hopkins City Clerk PRO~;~ OlIN F. BUSH, MAYOR SPECIAL MEETING CITY COMMISSION APRIL 30, 1996 The Special Meeting of April 30, 1996, was called to order by Mayor John F. Bush at 7:00 p.m. ROLL CALL: Mayor John F. Bush, present Deputy Mayor John Ferring, present City Manager Ronald W. McLemore, present City Attorney Tom Lang, present COMMISSION: Larry Conniff, present John Langellotti, present Cindy Gennell, present David McLeod, present Commission Approval of Retirement Plan Improvements: Manager McLemore stated that the Commission has been provided with the information relative of this issue which made the Commission aware of the recent meeting of the Pension Board and what their recommendations were; we are here to answer any questions you may have and get the Commission's direction as to which alternatives if any the Commission would like to pursue. Commissioner Ferring said (to the City Manager) that he received the agenda and said there is a question he has to ask in all due respect and said he doesn't recall this Commission mandating the City Manager to overhaul the Pension System to the best of his knowledge. Commissioner F erring said he searched through all his minutes and anything else he could think of and said other than the conversation he had with the Manager in his office, that is the only conversation that took place that he is aware of, and said that is why he is trying to establish where the mandate came from. Manager McLemore stated he thought it was in his actual employment agreement, and if not it was certainly talked about during the interview, but said he thought the language was in the employment agreement. Commissioner Ferring asked for a recess so he could speak with the City Manager. Mayor Bush called a recess at 7:03 p.m. Mayor Bush reconvened the meeting at 7:06 p.m. Commissioner Ferring said because of the agended item and because of the incomplete information regarding this particular very important item, he doesn't feel that there is enough documentation to warrant consideration for this particular agenda item and as such (he said) he would like to make a motion to table this. Motion was made by Commissioner Ferring to table this item pending further discussions with the City Manager regarding this particular issue. Seconded by Commissioner Langellotti. Discussion. Vote: Commissioner Conniff: nay; Commissioner Ferring: aye; Commissioner Langellotti: aye; Commissioner Gennell: nay; Commissioner McLeod: nay. Motion fails. Special Meeting City Commission April 30, 1996 95-96-15 Page 2 Commissioner Ferring said that being the fact (that the motion failed) he will distribute something he made up. Commissioner McLeod said the reason he voted in the fashion he did he would like to know what . .. IS mIssmg. Commissioner Ferring gave to the Commission and read into the record a statement. (Which is attached hereto and made part of the record), and said the Commission can judge accordingly and maybe the Commission will reconsider his motion. Commissioner Ferring said he was the Chairman of the Board of Trustees when the Pension Plan was originally overhauled, it took the Board two years to research and bring an equitable pension system that we put in place at that time. Commissioner Ferring said his personal goal at that time was to have a partnership between the employees of this City and our government; that at some given point we would be able to join together in a plan where both would have a vested interest. Commissioner Ferring said the information that has been given to the Commission on this particular meeting and asking the Commission to vote regarding any item here; you are talking about $173,000 increase over and above the present pension plan. Commissioner Ferring said he thinks before the Commission allows anything like that to happen, the Commission has to do some real hard looking and real hard research. Commissioner Ferring said he feels that it is important that the Commission does this. Commissioner Ferring said as far as the mandate is concerned, he believes that a mandate has to be done by this Commission. Weather it is a ad hoc discussions or whatever, he doesn't believe there was a mandate. Commissioner Ferring said he thinks the Pension Committee was not given enough information to make a logical recommendation in this particular point. The City has a contract with the City Manager and read a section from the contract (Section 13(d)). Commissioner Ferring asked the Commission to consider this before the Commission makes any major decisions. Manager McLemore stated that he requested at the prior Commission meeting, that we hold this meeting on this subject and the Commission agreed. We are not proposing to change the plan, only the rate of contribution, we are not proposing to change it's basic structure in any way. Based one his (Manager) meetings with employees and Department Heads and the turn-over problems that we are having, there is no question that this retirement issue is the issue of prime importance to our people. Manager McLemore said he has discussed this with each Commissioner individually, and it was his understanding that this was something that was very important to the Commission also. At the timing at which the Commission desires to deal with this is not an issue to him (Manager) and said he thinks we need to do it but that is what we are here tonight to talk about. Manager McLemore said he doesn't what other information he can disclose to the Commission, I Special Meeting City Commission April 30, 1996 95-96-15 Page 3 have Mr. Ketteringham here to tell you what our competition is that we are having, potentially our public safety people. Where we are having our worst problem obviously is in the Police Department because of the competition we have with the State Retirement System and the bigger systems like the City of Orlando and when you look at what benefits in one of those plans, even this 10% planning, although it's a very solid plan, is not competitive; it's better but it doesn't offer what that competition offers and in the end it puts us in a much better position to offer a good package to our employees. Manager McLemore stated he has no alterative motive here other than to do what the Commission wants to do, and said he wants to point out again, we are not proposing to change the basic nature of the City's plan, only the contribution. Commissioner McLeod said the way it sounded by Commissioner Ferring, it wasn't the plan but you felt this was more self-serving to the City Manager than the rest of the employees. Commissioner F erring said he never said that. Commissioner McLeod said it came across that is the way he (Commissioner Ferring) felt about it because he read the City Manager's contract. Commissioner Ferrlng said he looks and researches everything that he does and has to look at all aspects of whatever he is looking into. Commissioner Ferring said he does his research and it came to his attention that this was there in the contract that the Commission agreed on, that is not making any statement as far as being self-serving and said he didn't mean it that way. Commissioner McLeod said he (Commissioner Ferring) referred to the City Manager a couple of times regarding it and wanted to see if that was the Commission's problem here that we are addressing or are we addressing the plan. Commissioner Ferring said prior to his reading the contract was the reason why he asked the City Manager ifhe would step in the back with him and said he pointed out this part of the agreement to the City Manager and said to the City Manager that rather than get into this particular situation, he told the Manager that he would like to make a motion to table this so we can do further research on it; this would be an escape clause without having to bring this out. Commissioner McLeod said one of the things that we also want to point out where Commissioner Ferrlng spoke about the employees, where the money would be returned to them, that is true in the plan of the nature you are talking, it would be only returned to them ( employees), their portion of contribution or their portion of vested rights. Commissioner McLeod asked if the City's present plan percentaged over time or do the employees have to be seven years - fully vested. Commissioner Ferring said it is over time, it is ten years to be fully vested in the City plan at this particular point. Commissioner McLeod said then if the employee took the money out upon quitting, of course the money would be taxed at that time. Commissioner McLeod said also Commission Ferrlng said one of the things mentioned here was $173,600 additional to the City, that would only be based upon ifwe elected to have no contribution by the employees, so it could be $130,00; or it could be $86,000 or $43,000, so it depends upon if we go through the discussion as the outlines we have been given as option "B" was. Special Meeting City Commission April 30, 1996 95-96-15 Page 4 Commissioner McLeod said he would like to point out, and said he would like to know why the Commission feels perhaps that we have a Board that sits and meets on this and advises the Commission and yet this is in front of us to be discussed. It talks about some of the options, it talks about the Board unanimously recommends to the Commission certain things and yet then are we saying that this Commission doesn't need that Board? Does it mean the Commission doesn't feel strong enough that the Board's findings/information that they have given the Commission is adequate to work with at this meeting or to respond on? Commissioner Ferring said he can't answer that, it would have to be answered by the Pension Board themselves, the Chairman of the Pension Board is present and another member of the Pension Board is present also. Commissioner McLeod asked if the information in front of the Commission wrong? Commissioner Langellotti asked the City Manager if the employees have been approached with this plan, consulted in some way and what was their feelings about it? Manager McLemore said he has discussed this at the monthly employee meeting that he holds. Manager McLemore stated that every employee attends that meeting and to get additional feed-back from the employees if that is what you (Commissioner Langellotti) desire is certainly something he could support. Manager McLemore said he has talked about it at the Staff meetings and had planned, obviously, to talk to the employees tomorrow night when he has next employees meeting, based on what the Commission's decision is tonight. Commissioner Langellotti said six years ago he started this whole situation with the two City Managers before and our plan at that time was awful; what we have now is a great improvement and if anything he would like to see the City improve it even more but he would also like to see the employees contribute something to it also. Commissioner Conniff stated he thinks the City's new City Manager saw a problem and he is trying to rectify that and from what he (Commissioner Conniff) can ascertain is that the City has a 19% "brain drain" from this City, we are loosing it and from what the City Manger can identify it's is because of our pension system. Commissioner Conniff said he would like to commend the City Manger for taking the personal initiative to bring this to the Commission's attention. Commissioner Conniff said he would like to see if the City is going to go with the 10% and said he thinks that is a fair and equitable number, to allow the employees to contribute their maximum, which would be 3%. If the City is going with the "banking rule" of72, all multiples of72 says your money doubles more; the vast majority of the older mutual funds have averaged at about 19% a year, over the last 20 years. Commissioner Conniff said he can not see the Commission penalizing our employees for trying to get ahead. If they work for the City 20,30 years and want the initiative to put money on the side, said he thinks the employees should be allowed to do that. Commissioner Ferring said he has no argument with Commissioner Conniff's facts as he states them except for the fact of the 19%; that 10% drain in this City is mainly coming from one specific area and that specific area if the police department. Commissioner Ferring said there is no other exodus or any other departments in this City; to use that 19% figure on a City wide basis, as opposed to the Special Meeting City Commission April 30, 1996 95-96-15 Page 5 real "main drain" is, he doesn't think it equals out. Commissioner Ferring said he has no problem in improving the employees pension fund, what is before the Commission, he was in complete shock, he thought the Commission was going to have a discussion tonight; Commissioner Ferring said that he didn't think the Commission was going to have to vote on approval of a plan. Commissioner Ferring said he is sure the Commission and everyone must realize that you just vote on a plan without documentation, without specific facts to look at and said he can't honestly say that whatever is put in the packet needs to be looked at, for the Commission to rush into something and make a motion now to approve something without having all of the facts and figures before the Commission, he thinks is ill advised and that is why he brought this forward in this direction and said he tried not to make this long and drawn out. Mayor Bush said he doesn't think the Commission is under any pressure to approve this plan tonight, there is no rule that says the Commission has to approve it tonight, but he certainly thinks it needs to be discussed. Mayor Bush said he recalls some of budget deliberations, not long ago where the Commission as a group was very focused on making sure our Police and Fire Departments especially were adequately compensated and staffed. Mayor Bush said he thinks the Commission feels that is one of the major responsibilities of our City, if the Commission does have a high percentage of J turnover in the Police Department, he thinks that is something that definitely needs to be looked at if this is part of the solution and obviously it should be discussed by the Commission and it is what the Commission is doing now. Manager McLemore said he believes 19% is the overall City average and believes the Police Department is up around 50 or 60 percent. Mayor Bush said obviously the City has a problem. Manger McLemore said he can't tell the Commission the reason is all pension and wouldn't try to, he is saying it is a factor. Manager McLemore said he hopes we can stop the turnover, and will not tell the Commission that this one thing is going do it, he thinks that there are several things that will be needed to be done but this is important in that package. Commissioner Ferring said one point, and he is drawing back on his experience as a Fiduciary for many years regarding pensions. Commissioner Ferring said he served for many years with pension funds that dealt with a lot more dollars than we are dealing with here in the City of Winter Springs, the point of the matter is in 1993 the Commission raised the pension contributions to 6% (the City) now we are contemplating raising it to 10%, two years from now we may contemplate it to raising to 12 or 14%, where does it end? Commissioner Ferring said what he is trying to do is to get enough research and enough data where we can memorialize a pension rate that will be fixed for the future whereby the employees will still benefit by that fixed rate with increments in their salaries as opposed to constantly raising the cost to the City and if the Commission memorializes a rate, and say that is the fixed rate, you have to have a fixed rate so that you can project in the years to come. So when you get into negotiations with your employees and get to your structures for increments you will be able to then just fix your concentration on those increments because the increments will take care of the raises in the pension system - that's the point I'm trying to bring out, we still need to have some background documentation before we can make that kind of educated decision. Commissioner Ferring said he is all for increasing the benefit to the employees in the City, somewhere there has to Special Meeting City Commission April 30, 1996 95-96-15 Page 6 be accountability on both the employer and employee and to do that correctly you have to have the facts and figures to work with. Commissioner Conniff said he remembers saying if the Commission agrees to the 10% that he would like to allow the employees to put in their maximum which would be 3%, which would cap it, that would be the ratio of6 to 1 or 6.5 to 1. Commissioner McLeod said he thinks Commissioner Conniff was referring to what was in our packet which showed a 10%, a 3% and a 7%, the way it was put out it sounded like 13 until he studied it further. Commissioner McLeod said he doesn't know that the Commission can fix a pension plan in a fashion that in the future other Commissions can undo it, any different that we are doing here this evening, discussion something that has been brought before us. In the future the Commission can take anything that this Commission set up as an 8/4 ration ( or whatever) and say that's fixed and from hear on for eternity that will be it; Commissioner McLeod said it was his understanding that this Commission doesn't have that kind of power, we can't fix anything of that nature. Attorney Tom Lang said that is true unless you have a collective bargaining contract that locked you in that you would have to bargain over the reduction, the next Commission that comes along could propose a change in the rate. Commissioner McLeod said what he sees before the Commission this evening, there has been a couple different examples, one of which the City picking up 100% of the tab which came up to the $173,000+ but the other things that are also on the table in front of us is saying contribution by the employees of 4% and the City at the present 6% would basically leave the dollar value as the input by the City the same as it is today and it would be shifting the burden to the employees that would want to contribute more to their pension plan as a savings. We also have a 7/3 and 8/2 and a 9/1 or 100%, so we do have something to discuss this evening whether we end up voting on it or not, I think we should end up discussion the findings that has been put in front of us, my understanding the research has been done by the pension board and they have recommended to the City to do something to do something to the Commission and has given us some different recommendations and I think we should at least walk through those and then see if we agree or disagree. Art Hoffmann, Chairman of the Board of Trustees for the employee Pension Plan, stated that he needs to clear the air a little bit, he wasn't invited to come to this meeting so he did it on his own, neither did Mr. Bryant. Hoffinann stated that the Pension Board did not recommend this change, we were asked to consider whether it would be a good idea and that is all we did. We had a meeting a week ago which we reviewed the results of the last quarter and Mr. McLemore presented this plan and he (McLemore) asked the Board what they think we should do and our consideration was, and I asked the question at that time "what percentage of the employees participated in the 401 K voluntary plan?", which gives them the opportunity to put some of their money away and they have a menu of investments they can put it in and I was told only about 20-25% participate in a voluntary savings plan which, in a way is similar adding to your pension if you consider it something you are putting aside for a much later time. So, based on that the Board suggested forcing the employee the extra 2 or whatever you are going to ask for, might be difficult or hurt the moral of the employees Special Meeting City Commission April 30, 1996 95-96-15 Page 7 because only a quarter of them are doing it voluntarily and so you need to put forth a good proposition education, if you will, to get them to accept a forced 2% or whatever and say that's good for me, now maybe some arithmetic as Commissioner Ferring has done would help, a little bit, (I don"t know) but we did not review or study this whole plan other than say yes if the City wants to do it, fine, but as to the merits of it and the concerns about employee leaving and so on, that's something else again. You have a former City Manager who is also a former Police Chief for many years, I'm sure he could tell you what his opinion is on why there is a high turnover and I'm sure when employees leave there is a questionnaire or some discussion as to what their motive was for leaving and perhaps he would know or could tell you some of the reasons he's gotten whether they include having an inadequate pension system. Mayor Bush asked Hoffinann ifhe has seen the agenda item, on the second page, first paragraph, (I'm a little confused) it says on April 23, 1996, the City Pension Board voted unamnamiously to recommend the Commission increase the defined contribution of the plan from a 6%......" from what you said, I'd have to assume that isn't true. Hoffinann said we sustained the recommendations of the City Manager and that is all, we did not initiate this change. Mayor Bush said did you vote on this. Hoffmann said we voted on it yes. Mayor Bush said did you vote unamnamiously to make this recommendation. Hoffinann said yes we made the recommendation to increase it from 6 to 10%. Mayor Bush said you also said the alternative for a split employer/employee contribution was rejected and you gave these reasons. Hoffinann said right, but that's all we did, now we didn't initiate this plan. Mayor Bush said but you sound as if you don't agree with it, if you did, why did you vote for it. Hoffinann said no I didn't say I didn't agree with it, I'm just saying I didn't agree with the proposition that we initiated this change, there is a difference. Mayor Bush said when he read this agenda item and saw that the Pension Board voted unamnamiously to recommend this, to me that was pretty powerful. Hoffinann said Commissioner McLeod assumed that we made a study of this, we didn't. Commissioner McLeod said no he didn't assume that it's says in black and white here, the City Pension Board voted unamnamiously, now that would tell me you fellows did your homework, you looked at it, you did a study of some sort and you decided to make a vote on it. Hoffinann said no, it was asked of us, do we consider this to be the wise thing to do and that's all, based on - we didn't see this we were told the same thing as you were that Cities who have these money purchase plans average 7 and 2, we didn't see the number, we were just told that, so we were given the same information you have right now. Mayor Bush said if you thought that way, why would you vote for it then, why didn't you reject it and say there is not enough information. Hoffinann said we're of the position at that time that the amount that's contributed is something that's out of hands. Mayor Bush said all of these decisions are out of your hands, but your recommendation is what we are looking for. Hoffinann said as to where the funds come from, that's another thing, we weren't told how it's arrive at that, that's an important consideration as well. Mayor Bush said that is the Commission's decision on where the funds come from. Hoffmann said we were just given some information concerning where the pension plan is at. Commissioner Ferring asked Hoffinann ifit would be fair to assume on page 1, that the City Manager made the same statement that he is making to us that he was mandated by the Commission to develop recommendations. Hoffinann said that's right. Commissioner Ferring said based on that is that what Special Meeting City Commission April 30, 1996 95-96-15 Page 8 you felt that you had to vote. Hoffinann said this was based on he was given, call it the mandate or direction that he do something to improve the fund, Tom Lang the Attorney was there at that time. Attorney Lang stated that part of the discussion at the Pension Board meeting was there was some concern for what Mary Norton and John Govoruhk got in the way of pension benefits when they left the City and so he thinks with getting back with what Mr. Hoffmann was saying, the wisdom was is they had been given those statistics that the Commission heard and there was a discussion of was it fair what they were getting as they left the employment, what are our alternatives and at that point the discussion then went to whether it would be all City (meaning employer contribution) or whether it would be split. Attorney Lang said he thinks the motion was made to endorse the concept of the 10% employer contribution as soon as it was economically feasible recognizing that there was no way for the Pension Board to know when it would be economically feasible. The Commission is the only ones who during the budget know when you can afford to make that kind of a contribution on behalf of the employee. Hoffinann said that is correct. Mayor Bush said he is sure the Commission will take into consideration because there is so much money to go around, but that is the Commission's job too. Hoffmann said incidently a 2% contribution by City is equal to 1.2 mills ad valorem. Mayor Bush asked at this point would Manager McLemore like to proceed with presenting the information on the agenda. Manager McLemore said it might be helpful to understand what we face in competition with the State Retirement and with the larger Cities; the Counties obviously around us and the Sheriff's Department all have State Retirement. Most of the smaller Cities either have defined benefits plan, which we did not attempt to talk about in the item packet because they are different. We did have survey data on defined contribution plans and we did want to at least talk a little about for example the City of Orlando, because that is where our competition comes from larger systems and if that is the information the Commission wants to hear then we would like to present it to you. Commissioner Langellotti said he would like to get some figures on option B, say that we increase the pension plan this year 1 % employer contribution and 1 % employee contribution and then the following year do the same thing 1 % and 1 % bring it up 4% to the 10% level, I'd like to see some numbers what it's going to cost the City. That should be easy enough and said he thinks that would be a fair and equitable way, he doesn't know how the rest of the Commission feels but it's giving the employees some security that he's part of this. Commissioner McLeod said the 1% is going to be 43,400 for this year, that's on table B; and then when we add 2% it's going to be 86,800, so the figures are here. Mayor Bush said on his own personal experience as he is a State employee, your legislators have decided that in the State of Florida the employees receive a pension benefit of around 10.7% of your gross salary, he makes no contribution at all, as a matter of fact he is not required to be in the State Special Meeting City Commission April 30, 1996 95-96-15 Page 9 retirement system he can opt to a 403B and believes that is the proper term for non profit, so he can opt to have a private pension rather than the State Retirement which he happens to do personally because the returns are much better than the State System does. The reason he speaks a little against the employees contribution is that if the employee wants to save money, he would rather let them save it the way they want to save it not the way the City wants to save it and so he would see this as an option for the employees and even thought Mr. Hoffinann is concerned about many of our employees not having a 403B's is a valid concern for anyone who should be planning for their retirement but unfortunately young people necessarily don't think that way and I have some young people in my family and I have difficulties getting them to do this too so that is why he questioned Mr. Hoffmann about the recommendation of the Pension Board because he happens to like that recommendations and thought that the Pension Board recommended something that he personally thought was a good idea and said he is still a little confused on what the Pension Board voted on but the way it's written is something he thinks is a valid thing for the Commission to consider for the employees. How you do it of course and how much money and how it affects the tax rate all has to be considered and will have to be taken into deliberations now and in the future with budget items. The Manager mentioned a little about Orlando and Mr. Ketteringham has some information on that. John Ketteringham, General Services Director, stated that for comparison data Orlando's general employees pension fund is 14.05%, 11 % is contributed by the City and 3.05% by the members, it is a 5 year vesting, normal retirement age is 65 for 25 years of service and they retire with 62.5% of their best three years. The police is 33%, 21 % contributed by the City and 6% from Chapter 175 and 185 of Florida Statutes so the total City contribution rate is 27% and they contribute 6%; their retirement age is 55 years and 2% a year up to 19 years, once the employee gets to their 20th year it goes to 3% a year and that is retroactive back to the start date so it would be 60% if they retired in 20 years - 60% of their best three year average; if the employee stays another 4 years the accrual rate is 4% a year, potentially if the employee stays 25 years they would retire at 80% of pay. The also have a disability plan, if the employee receives a job related injury they get 80% of pay based on the best three years of their earnings. The Orlando Fire plan is 27% total, 21 % is contributed by the City and 6% member contribution. Mr. Ketteringham said Seminole County Public Safety is under Florida Retirement System, and the total contribution is 27.5% of that, 3.98% goes to the State Sun Funded Liability, .67% goes to health insurance so a total contribution of22.85% for the employee, the vesting is 10 years, and can retire at 55 with 10 years service, they get a 5% reduction for each year short of 55 years old and it's 3% times their best 5 year average. The general employees is 17.6% total, employee contributes nothing; unfunded liability 5.84% so it's really a total of about 11.5% for the employees. Commissioner Conniff said he would like to hear from the City's former City Manger and Police Chief Commissioner McLeod said he would like to hear the surrounding Cities plans. Commissioner Ferring mentioned that Mayor Bush had mentioned that he didn't like telling Special Meeting City Commission April 30, 1996 95-96-15 Page 10 employees how to save their money and said the Mayor stated that he would rather have the employees save it themselves; Commissioner Ferring said that is exactly his point, he is all for increasing the employee's salary increments right down the line, and especially in the areas that are most needed and said he thinks you have to keep a balance to keep the employees that are at the lowest salary level, he said he thinks it takes more than a pension system because the young professional doesn't have the full vision to what is at the end of this career as opposed to struggling to what he has to do on a day to day basis to raise his family, therefore, he thinks if the Commission is going to concentrate in any area for the employees in this City, he thinks it should be at the incremental in the salary level as opposed to this particular widening of the pension benefits that we are projecting at this particular point because as you increase the salaries, again he says it, as you increase the salaries the pension benefits also increase, so therefore that is his thought. Mayor Bush said he can recall when he first started working that he was much more interested in having the money in his pocket than in his pension plan because it was the farthest thing in his mind at 21 years old to retire, and said he thinks that the Commission does and has looked very closely each year in the budget in terms of compensation and said he thinks the Commission has done a good job at that and hopes the employees of the City feel that way too and said he thinks that is a consideration. Mr. Ketteringham reviewed with the Commission the surrounding Cities pension benefits. Altamonte Springs: general employees pension plan is 8.9%, public safety is 17.7%, they have a defined benefit plan it's 10 year vesting. The City of Casselberry: general employees is 9.1 %, public safety is the same 9.1%. Lake Mary: general employees is 5% and 11% for public safety and the employee contributes 5% of the 11% (6% City contribution and 5% employee) and the public safety plan is they have a five year vesting schedule, the fire is 10 year vesting and the general employees have a defined contribution plan they are 100% vested at 5 years. Longwood: general employees is 8% and public safety is 12.18%, general employees are vested 50% at five years and 100% at ten years. Maitland: general employees is 10% (5/5% City/employee), public safety is 22.7% (18% City, 4.7% employee). Oviedo: 12% (6% City and 6% employee), public safety is the same and they are 20% vested after three years and 100% at seven years. Sanford: 7.4% for general employees and police is 10% (7% city contribution) the fire employees is 7% city contribution and they have a ten year vesting schedule. Winter Park: 7% city contribution and 3% employee contribution for general and police is 10.3% city and fire is 7% and they are 100% vested after one year. Commissioner McLeod said from the numbers that have been read off is sounds like all surrounding Cities are our competition and not just the big cities other than Maitland that is 5% where the employee also puts in 5%. Commissioner McLeod said he noticed that part of the report said that it was felt that it would be an employees not a benefit to them to also contribute, but when you hear the other cities it is at least 80% of the other cities had the employees contributing. Commissioner McLeod said he is a firm believer that if somebody wants something they also help put into it and it then makes a very good plan because they have some ownership, they also have some direction of some of the things that they can help participate in or choices that they can make on the options that they have. Commissioner McLeod said that is one of the things he is presently doing in his own Special Meeting City Commission April 30, 1996 95-96-15 Page 11 corporation, that is going back through and creating a 401K with employee contribution. Before ours was 100% contribution by the corporation and it didn't seem to really stir the enthusiasm within the people as much as what we are finding is getting stirred among the employees now because they are going to have control over some areas at what they can invest it in and said he thinks a split contribution here of some nature is in line, exactly what that is he said he doesn't know. Mayor Bush asked Commissioner McLeod how does his employees have control over their pension. Commissioner McLeod stated that on their 401K they have options of certain things they can have it invested in~ we give the employees up to eight different options of where they can invest - mutual funds, and different stocks and so forth. Mayor Bush said the City doesn't do that. Commissioner McLeod said that is one of the things we are doing, the employee can call and shift their money around however they want to make them feel that they are controlling~ Commissioner McLeod said he doesn't know if the City's plan would allow the employees to do that. Former City Manager/Police Chief, John Govoruhk stated that Mr. Hoffinann can answer that because the employees do have the option to change the plan around 50/50 or to different. Attorney Lang said not the employees the trustees have that option. Mr. Govoruhk said the employees can give input to the City Manager and then the Manager can give input to the trustees. Mayor Bush said it is all or none, the employees can't do it individually. Mayor Bush said at different ages the employee would have different investment objectives~ so a 21 year old would probably invest in stock and a 65 year old might be looking at bonds. Mayor Bush said it appears from what Mr. Ketteringham has shared with the Commission, only Lake Mary has a pension plan less than what Winter Springs does. Discussion. Commissioner Langellotti asked about Seminole County's Sheriff's Department. Mr. Ketteringham stated that they are under F.R.S. (Florida Retirement System), the general employee is 17.66% and public safety is 27.5% Manager McLemore stated that there was an option if we go by a split plan, where the employees could elect four different investment options and said he thinks they can do that but it becomes very complicated for the administration of the plan. Attorney Lang said yes it is very complicated, but it is possible once their own money is put in there that we can work something out with SunTrust where they can sell it direct but it complicates the plan and means revising the plan and probably will increase the cost of administration because you are going to have generically more transactions that occur. Commissioner Ferring said that is why they have administrators like SunTrust and that is why we have computers to do this administrative work, and said he doesn't see it as being a major problem in that particular area, it is being done everyday by a lot of other Cities, Counties and States. Commissioner McLeod said what the City is looking at is the same type thing but as far as administrative cost, it is virtually nothing in difference, the employees will have the phone number, Special Meeting City Commission April 30, 1996 95-96-15 Page 12 we have nothing to do with it, the employees can call anytime and make the switches/transactions themselves so as far as internal administration it is nothing. The external, feel they have people there and that's what part of their support is and that is why they are there and that is why the funds are offered that way and they want you to be part of that and I'm sure SunTrust has the same thing. If that is, the administrative cost is one of the things that he finds that you can argue and negotiate that out with people if you are having your funds with them, they will move on the administrative cost. Manager McLemore said for clarification, will the Commission provide the employee the option to elect the four option, is that confined to only the 2% or is it to the total contribution; is it only the employees contribution or total combined employer/employee contribution that they can elect how it is invested. Attorney Lang said he thinks there is a problem if the Commission allows the employees to direct the employers contribution, from the standpoint that in a lot of cases it does invest for a period of time and that may not be their money down the road so you would be in a position where the Commission would direct as you have through your trustees, the employers contribution; they would have a second body of money that they could then direct and take their options which would be whatever the employee contribution is. Manager McLemore said he asked that question to make sure that is understood. Commissioner Conniff said he is in a plan and said he can telephone switch his transactions and if you are in a select fund, usually the fund fees are taken care of by the fund and if you are within that fund they don't charge you commission; if you flip and flop in and out of the various funds, in and out of the four funds (like we have here at the City, like Mr. Hoffmann said) then they would probably charge the City commission off of that; but the only funds that you would be moving are the funds that the employee puts in, in that regards he controls his own destiny. Mayor Bush said he thinks the Commission has to give the Manager some direction or make a decision of some sort, and said he thinks that there has been so many questions raised that he thinks the Manager needs some direction before he can go back to the drawing board. Mayor Bush said personally he would like to see the Pension Board get involved in this and come forward with a recommendation that not only they would write but that they verbally support, because he feels the Commission needs that kind of information to make a decision on this. Mayor Bush said he senses that the Commission feels that the plan definitely needs to be looked at, we are very close to being low on the compensation list and said the City's employees deserve better than that. Commissioner Conniff said he feels the same as the Mayor but said he would like to hear from the former City Manager/Police Chief Mr. Govoruhk, he has been around the City for a long time and said he thinks he (Govoruhk) could shed some light on it and said he spoke to him in the past and Govoruhk knew at that time that the City was in trouble with the pension and would like to have some of his input. Mr. John Govoruhk stated that going back many years and he believes that everybody knows that this has been one of his pet things is the pension since day one. We didn't have anything, when we got Special Meeting City Commission April 30, 1996 95-96-15 Page 13 it, it was excellent, perfect but as a couple of years went along it wasn't anything. But listening to each Commissioner tonight, he thinks all the Commissioners has the City's interest in heart and his recommendation (if the Commission is asking) from knowing the employees for 20+ years to setting the guideline for the last couple of years, that he would recommend the City and employees put in; in the last few years since the pension plan has changed, we've been talking to the Department Heads and employees about allowing the employees to put in as he has brought up several times to let the employees put in and most of the employees agreed to and leave the deferred comp so they can put in to that to. If you talk about loosing employees, every City is loosing employees. Mayor Bush asked Mr. Govoruhk is he is recommending that the City as well as each employee contribute to the plan similar so what Commissioner McLeod had mentioned in his business. Mr. Govoruhk said yes. Mayor Bush said this would be a required contribution not an optional one? Mr. Govoruhk said he would make it a required contribution. Mayor Bush asked Commissioner McLeod if it was required in his business and Commissioner McLeod answered no, that his company is in the process of resetting the pension up. Mr. Govoruhk said the reason he would make it required is if you go back a few years when we had the 2% every year automatically, no matter what the employee did, he got 2%, and said he tried his best without breaking arms, to tell the employee to take that 2% and put it into deferred compo They wanted in their pocket, so if you don't make the younger people do it, they never will do it, but said he thinks most of the employees after they are into it for a few months and don't miss it, and there is different ways the Commission can do it, one is like we did several years ago as he mentioned most of them are getting right now an average of 6% this fiscal year for pay raises or just say average 5%, City gives the employee 3% and the other 2% go into the retirement so it is not affecting their pay, they haven't got it yet so they are putting their 2% in. Mayor Bush said there is one fact here and the City's going to allocate so much money for the employees and whether it goes in salaries or retirement it's still and "X" number of dollars and what is kind of missing from here and he doesn't know how you would do this but he guesses it's the Manager's problem, Mayor Bush said he would like to know what the employees think is the best, have they had any input into this at all, the bottom line is the Commission is going to put "X" number of dollars into employees of this City and how it's distributed, whether it goes into salary or retirement is an issue the Commission is going to try to decide at the best interest of the employees but he would like to hear what the employees have to say about it. Commissioner McLeod asked if the Manager could put a questionnaire together perhaps for the employees on maybe six different issues requiring contributions, some scenarios that are real scenarios that you could basically get a yes or no answer for those and then tally that up and present that back to the Commission so we can get some input from the employees themselves as to what direction they would feel comfortable with and said he's not sure if the Commission really wants the employees telling them what to do other than input as to what they ( employees) would like to see. Commissioner Gennell asked the City Manager if he had discussions with all the Department Heads Special Meeting City Commission April 30, 1996 95-96-15 Page 14 regarding this. Manager McLemore said yes he has. Commissioner Gennell said then there was input from them, this is a result of their input. Manager McLemore said yes and discussions that he has had at his monthly employee meetings, there was some discussions regarding the pension and said he was very careful to point out to the employees that while we are trying to increase the retirement system benefits that we would probably have to give something up on the annual merit increases, there is only "X" amount that he was willing to recommend, the Commission can do whatever they like, but said he thinks the employees understood that, they ( employees) were willing to give up something in order to start building that bigger base for their future and said he thinks that as long as we are honest and straight forward and level with the employees, he thinks the employees are willing to do, quite frankly he thinks the employees are willing to put the issue in the Commissions hands. Manager McLemore said he has no problem with sitting down and doing what the Commission is asking if they think it would be helpful to the Commission. Commissioner Gennell asked the City Manager if he scheduled this meeting tonight because he needed this input prior to the rest of the budget. Manager McLemore said it would be helpful to him in structuring the budget, he doesn't absolutely have to have it, and one of the things he wants to recommend to the Commission that we put off the budget meetings for two or three weeks because we are not at the point yet where he can bring information to the Commission in the completest form that he would like to present to the Commission. We could do that very rapidly, probably be able to get it back to the Commission probably on the 13th. Commissioner Gennell said she would like to hear the Manager elaborate a little on his recommendation as he's presented it to the Commission but basically does she understand that the recommendation wouldn't require any tax increase or anything. Manager McLemore said we will be recommending to the Commission a millage reduction in this budget, it won't be large but there will be a millage reduction recommended to the Commission. We can afford to do these options as we pointed out to the Commission, we can afford to do it all, he would not be comfortable in recommending the full 4% if the Commission wants to go in that direction, he is only comfortable in going 2% and allow him to do other things with the pay. But, if the Commission want to go 4%, we can fund it this year, but then we wouldn't have the opportunity to give any kind of merit increase at that point in time. Manager McLemore said he was looking at kind of the two this year and two next year which would give the City the option to do some of both, if the Commission only want's to go 8 and 2, we can do all of that this year because we can deal with the 2% plus still have some merit increase left. Commissioner Gennell asked the Manager what was his rationale for recommending a straight out going from 6% to 10% with the City putting it all in. Manager McLemore said because he thinks in the long run based on what people, particularly the people that have been here a while and they don't have a lot to show for their period of service here, we are asking them to pay in to help us catch up, that was one issue; the other issue is we really don't loose other people to other Cities, we loose them to the Sheriff's Dept. and larger organizations. The employees may go there for other reasons as well, in looking at the whole totality of it, it seemed to him that if we did that, you have a solid plan you won't need to increase it in future years, maybe 10 or 15 years but that is his feeling and said he thinks it would be extremely well received and said he thinks we could afford it, however, as we discussed when he was talking to the Commission one on one, there is merit to the proposal that Special Meeting City Commission April 30, 1996 95-96-15 Page 15 employees contributing something may buy them in to that where they appreciate it and understand it more, so his feeling was we do the 10% now and maybe 4 or 5 years down the road the Commission can come back and do some kind of a one to one or two to one type of contribution to the deferred compo plan, but they would have a very solid core for their retirement is where he was coming from. If you look at all of this, the quick vesting of some of the other plans, ours doesn't vest that way, at 10% that is only a reasonable it certainly not an elaborate situation, and said he thinks the real issue is what merit there is in the employees putting something in and is that a powerful enough merit for the Commission's judgement to whether we need to do that or not. Commissioner Gennell said the employees already have a deferred compo plan right now. Manager McLemore said they can and do (some of them) about 20 or 25% do in fact put money into deferred compo and that's what he was saying down the road we might say that the City will give a dollar for every two dollars the employee puts into deferred comp at the point and time the Commission felt like they could afford it as an additional type thing but said he thinks the core of the retirement system is very important to our employees and said that he listened to each and every employee on that and that is how he made his decision s to what he would recommend. Manager McLemore said he would not change his recommendation but he certainly support the Commission on the other alternative. Mayor Bush said the Manager's recommendation is that the Commission approve a contribution from 6% to 10%, if the Commission approves the 10%, the Manager recommends the 4% increase be implemented - 2% in 96-97; 2% in 97-98. Manager McLemore said he doesn't think there is a right and wrong here, the Commission's collective judgement on this issue is probably going to be better than his, he just want's to tell the Commission where he is coming from on it. Commissioner Gennell said she is personally opposed to making something mandatory for employees to and dictating to them that they have to put into it and especially in light of the fact that there are changes going about in I.R.A.' s to where the employees might better utilize that money that we are demanding that they put in to our pension fund so on that one issue she is definitely in disagreement. Motion was made by Commissioner Gennell that the Commission approve the City Manager's recommendation as outlined: that the employer contribution in the pension fund be increased from 6% to 10% and that the Commission does it 2% in 96-97 and 2% in 97-98. Seconded by Commissioner ConnitT. Discussion. Commissioner Ferring said he is asking the Commission to consider what the Commission is doing here is a disservice to this Commission for lack of proper research on this whole issue and said he thinks the Commission has heard the majority of the people here expressed the fact that they think an employee/employer partnership would be a better way to go, and said he asks the Commission to consider that very carefully. Commissioner Conniff said we've been batting this around for about an hour and a half, we've had Mr. Ketteringham tell us what we are up against from the various Cities, large Cities and Cities comparable to us and said he doesn't think the Commission needs any more information than what we have, we've heard from the Chairman of the Pension Board and we heard from our former Police Chief and said he thinks the Special Meeting City Commission April 30, 1996 95-96-15 Page 16 Commission has all the information that they are going to get. Commissioner McLeod said he would hope to see the motion withdrawn and the second withdrawn and hope to see as he heard 80% of the Commissioners say that they would like to have some participation in this thing by the employee as well and said he would like to see this thing become from 6 to 10 but his own feelings would be that he would like to see this year that it went from 6 from the City to 7 by the City and one percent by the employee, the following year to go 8% by the City and 2% by the employee and take it over a little bit at a time and also to get the employees to participate at a slower rate and get it to a level, he thinks the 10% at that point would bring the City very comparable to surrounding communities and better than most. Commissioner Gennell said her question is are you talking the employees part being mandatory. Commissioner McLeod said that was correct. Commissioner Gennell said you are actually going to take money out of their pay, you are going to lower their pay by doing something like that. Commissioner McLeod said they are also at the same time getting an increase in their retirement, they are getting something back for that, you are basically matching them, for every penny you are taking away you are putting one more back in to their pension plan for them and in a couple years it will be a major benefit and in 20 years it will make a difference in the way they retire and said he thinks that is what we are talking about here. Commissioner Conniff asked Attorney Lang that he is under the opinion that the maximum under something like this that the employee can contribute is 3% is that correct. Attorney Lang said Commissioner Conniff mentioned that and said he is not sure where that is coming from and said he would look into it but said he thinks it is a function of their income and there is some maximums to what they can deposit into any retirement account out of their income, he doesn't think it's 3% into this one but said he would check it out and make sure. Manager McLemore said if the Commission chooses this alternative then obviously he will be coming back to the Commission recommending that the City at least give enough pay increases to off-set that. Commissioner McLeod said that is another issue. Commissioner Gennell said her feeling is that the City has been in the dark ages here in pensions for a long time, Mr. Govoruhk and Mary Norton are good examples of it and said she thinks the Commission has to make some progress here to move forward, we're going to grow, we are going to grow tremendously and we need to attract long term dedicated people, my motion stands just like it is. VOTE: Commissioner Ferring; nay; Commissioner Langellotti: nay; Commissioner Gennell: aye; Commissioner McLeod: nay; Commissioner Conniff: aye. Motion fails. Motion was made by Commissioner McLeod that the Commission moves the pension plan a 6% to a 10% over a two year period, move it from a 6% to a 7% contribution this year by the City with a 1 % contribution mandatory by the employees; the following year to be brought to an 8% by the City and additional 1 % by the City employees. Seconded by Commissioner Langellotti. Discussion. Manager McLemore asked if it is the Commission's desire to offer the four election alternative with the employee's contribution and if so in this year or in the second year. Commissioner McLeod said he thinks that is something that can be discussed at a later time and said he thinks that needs to be brought back to the Commission by the Pension Board, let them look into that and bring the recommendations back to the Commission. Commissioner Gennell said is it possible to make the employees portion optional. Mayor Bush said not the way the motion was stated. Attorney Lang said yes it is possible and it probably is the more preferable position to take from a legal standpoint but it's not mandatory, the reason he says preferable it's from the drafting of Special Meeting City Commission April 30, 1996 95-96-15 Page 17 the document and the position you put the employees in that at this juncture what you are doing is saying you want an employee contribution that would be mandatory and it gets back to the point that was made earlier is in essence what you really are doing is causing them to make a possible after tax contribution out of money you are going to give them. Commissioner McLeod said that could be put in pre-tax. Attorney Lang said it can be structured but what he is saying it could also turn out that it may be after tax for some of them ifit is a contribution it depends what else they have in place and we just have to check on that and see and it's going to be a function of their own tax situation because you already have a contribution plan here and to the extend they have an I.R.A. make a contribution, they may exceed what they can make in the way they may have already contributed in excess of what they can make in the way ofa pre-tax contribution into a deferred compensation plan. Commissioner McLeod said that is good, then they are doing better than he is. Commissioner Conniff said with the current motion on the floor that means that the City contribution in two years will be 8% which means that we would still be behind Altamonte, Casselberry, Longwood, Maitland and Sanford, at least when we went ahead with the initial recommendation with the City Manager 2% and 2% or at least bring it up to 10% that the City gives we were going to be at the fore ground again, instead we're still in 4th place. VOTE: Commissioner Langellotti: aye; Commissioner Gennell: nay; Commissioner McLeod: aye; Commissioner Conniff: nay; Commissioner Ferring: aye. Motion passes. Commissioner McLeod said he would like to see some further studies done on this by our Pension Plan people from the standpoint that hopefully within the next two year period of time that they can come back to the Commission and start talking some good horse sense, have some illustrations, have information laid out in a real fashion so we can really look at the long term not necessarily a short term fix. Commissioner Gennell asked the Clerk to read the motion back. The City Clerk read the motion. Commissioner Gennell said she wanted to go on record as saying that she is personally opposed to making a mandatory, dictate to an employee of what they do with their money. Manager McLemore gave out to the Mayor and Commission a paper regarding the budget, and asked what time does the Commission want to meet. Manger McLemore reminded the Commission that the 27th of May is a holiday and asked the Commission if they wanted to still meet. The Commission was in consensus that they will not meet on the 27th. Commissioner Conniff mentioned that he would not be in town for the meeting on May 13, 1996. Mayor Bush asked the Commission to study what the Manager gave them regarding the budget and at the next meeting get with the Manager regarding this. Commissioner Conniff asked if the City Clerk could let him know what happened at the next meeting as he would be out of town. Mr. Hoffmann said what the Commission was doing tonight was predicated on the Police Dept. having the biggest turnover, and the Commission will notice that in the number of plans that were Special Meeting City Commission April 30, 1996 95-96-15 Page 18 presented by Mr. Ketteringham, the public safety people had a higher percentage of participation of their pay than the others, you are not doing that in the plan you are talking about, it's equal for all the employees. What he is saying is that the Commission has not covered the issue of competition with other Cities as regarding what the public safety people. Commissioner McLeod said that is correct and said we are at a 19% average but thinks we are a 50 or 60% problem with the Police Dept. and said we have other problems that we need to address besides the pension. Mr. Hoffinann said the other thing he noticed is that it talks about 80% of the cost coming the general and 20% from the enterprise fund - the enterprise fund is already transferred into the general fund, everything goes into the general fund except what is used to pay the debt, so he doesn't see you can take anything from the enterprise fund. Manager McLemore said no that is not correct. The meeting adjourned at 8:45 p.m. Respectfully Submitted, ~.~~-~ / =~. Hopkins, City Clerk ':f~