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HomeMy WebLinkAbout2011 03 31 Board Of Trustees Special Meeting Minutes CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES SPECIAL MEETING MARCH 31, 2011 CALL TO ORDER The Special Meeting of Thursday, March 31, 2011, of the Board of Trustees was called to Order by Chairperson Maria Fair at 5:36 p.m. in the Commission Chambers of the Municipal Building (City Hall, 1126 East State Road 434, Winter Springs, Florida 32708). Roll Call: Chairperson Maria Fair, present Vice Chairman Ben McMahan, present Board Member Vernon Rozelle, Jr., absent Board Member Max Swaim, present Board Member Barbara Watkins, absent A moment of silence was followed by the Pledge of Allegiance led by Chairperson Fair. Next, Chairperson Fair asked if there were any Agenda changes and there were none noted. PUBLIC INPUT Ms. Nellie Pilcher, Post Office Box 530483, DeBary, Florida: addressed the Board Members on her Survivor Annuity Benefit correction amount. Mr. Shawn Boyle, Director, Finance And Administrative Services Department: stated, "I have been in contact with the Pension Attorney; I have been in contact with our Actuary — and we are trying to work within the IRS (Internal Revenue Service) Code which required this Board to act in the fashion that it did and we are working with those two (2) groups to try to come up with some solutions to the problem. Chair(person Fair) if you allow me a little bit more time to do a little bit more research and come to a conclusion, I think that would probably be the best outcome at this point." Chairperson Fair answered, "We did have a Special Meeting to address the issue and we were all following the guidance of the Pension Attorney and telling us what we were required to do under our Plan documents. Our job is to follow the Law to the best of our ability and — you to give the opportunity for you all to tell us what that is. We want to make sure we follow things the way we need to." CITY OF WINTER SPRINGS, FLORIDA M INUTES BOARD OF TRUSTEES SPECIAL MEETING - MARCH 31, 2011 PAGE 2 OF 9 City Manager Kevin L. Smith added, "The information that was provided at the time from the advice of our Attorney was what you all relied on to make the decision and what we relied on as Staff. Conversations that Shawn (Boyle) and I have had that you all had obviously had not been privy to since that point in time — to search for any potential solution to this issue beyond the advise that you were given." Vice Chairman Ben McMahan asked, "In the meantime, you are not going to withdraw the eighty -four dollars ($84.00) a month are you, while we look for a solution ?" Mr. Boyle replied, "My recommendation at this point right now is that we do the fifty percent (50 %) reduction which is in the Plan, what Mr. Pilcher signed up for. Let's do that and give Kevin (Smith) and I an opportunity to continue to research — we have another outcome for the retro(active) dollars that were overpaid." Next, Board Member Max Swaim asked, "Does a reference made to Errors and Omissions Insurance, is that a fact ?" Mr. Smith replied, "My understanding is that I do not believe that would apply in this case. We certainly can take a look at that." Chairperson Fair asked, "What about Retirement Plan Solutions. If I recall — I think we had discussed that at the meeting that we had — Jim Linn, Staff, the Pension Attorney on the phone to ask about that possibility. Is that something you are looking into as well ?" Manager Smith replied, "Certainly." Discussion briefly followed on whether a Special Meeting should be held. Manager Smith asked, "After we go through this presentation, my thought that it may elicit questions from the audience, so I would ask that the Board may have an opportunity to have a second set of Public Input later in the meeting." Chairperson Fair answered, "Absolutely." Chairperson Fair reviewed with the Board Members Ordinance 2011 -05, Amending the Uniform Requirements for City Boards and Committees that was Approved by the City Commission on February 28, 2011. REGULAR AGENDA REGULAR 600. Finance And Administrative Services Department Presentation And Acceptance Of The 2010 Actuarial Evaluation. Mr. Larry Wilson, A.S.A., Senior Consultant and Actuary, Gabriel, Roeder & Smith Company (GRS), One East Broward Boulevard, Suite 505, Fort Lauderdale, Florida: presented a PowerPoint presentation on the City of Winter Spring's Defined Benefit Plan Actuarial Valuation As Of October 1, 2010 and stated, "We would be expected to be doing this annually and the Report — determines what is the minimum City requirement to be contributed in the 2011/2012 Fiscal Year. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES SPECIAL MEETING - MARCH 31, 2011 PAGE 3 OF 9 In addition to that, it has the information that needs to be going to the Winter Springs CAFR (Comprehensive Annual Financial Report), the financial Report for the City - and thirdly, it has the information required by the State to be disclosed annually for the Report." Mr. Wilson reviewed the Winter Spring's Defined Benefit Plan with the Board Members and explained the Retirement Plan costs. Continuing with the presentation, Mr. Wilson stated, "One of the metrics again, people want to know, `How well is the Plan doing' — if we compare the Market Value of Assets to the Value of all benefits that is taking into account all the retirees, terminated Vested people and the active people, the Vested portion of all the benefits they earned, last year that ratio was 61.2% and this year it has grown to 65.8 %. The trend is positive that we are better funded." Lastly, Mr. Wilson stated, "Our Certification that the report meets the requirements of the Florida Statutes that every benefit that is provided in the Plan is accounted for and the liabilities and contribution determination — once this Plan is Approved by the Board, it would be sent to the State for their review and Approval." Discussion. Mr. Boyle commented, "We are just looking for the Board to accept the GRS (Gabriel Roeder Smith & Company) 2010 Actuarial Valuation and with that acceptance, I will pass that on to the State as required." "MOTION TO ACCEPT LARRY'S (WILSON) REPORT." MOTION BY BOARD MEMBER SWAIM. SECONDED BY VICE CHAIRMAN McMAHAN. DISCUSSION. VOTE: VICE CHAIRMAN McMAHAN: AYE CHAIRPERSON FAIR: AYE BOARD MEMBER SWAIM: AYE MOTION CARRIED. REGULAR 601. Finance And Administrative Services Department Discussion Of The Future Valuation Of The City Of Winter Springs Defined Benefit Plan. Mr. Wilson introduced this Agenda Item and stated, "This is kind of a summary of Phase I and Phase II that we have done. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES SPECIAL MEETING — MARCH 31, 2011 PAGE 4 OF 9 Phase I being benchmarking our Plan to other plans in the State and Phase II - looking at some changes that were requested to be modeled based upon the Phase I study and just to let you all know, we are working on a - Phase III which is a different level of Plan changes that the City is looking at. That report has not yet been completed. But these two (2) Reports have been completed and delivered." Next, Mr. Wilson spoke of other comparable Retirement Plans. Tape I /Side B Continuing, Mr. Wilson explained the benefits, member contribution rates and financial projections; including costs for two and a half percent (21/2 %) benefit accrual rate. Chairperson Fair asked, "In the Plan that we have for the unreduced, you can have the Police and Fire a different requirement than General Service ?" Mr. Wilson stated, "Yes. You certainly have the flexibility going forward. There is no limitation on what that could be." Next, Chairperson Fair asked, "You mentioned there was a Phase III. What does Phase III address that these do not address ?" Mr. Wilson said, "That has not been completed yet." Chairperson Fair then inquired, "This is a summary of Phase I and Phase II combined, correct ?" Mr. Wilson replied, "And it is not a recommendation of any changes." Chairperson Fair confirmed, "You are just giving us the dollar figure of some cost savings and we basically looked at Plan averages of similar plans and what their benefit structures are so that we can see how we compare across the board." Mr. Wilson added, "Correct." Manager Smith stated, "With the information that Larry (Wilson) has provided, that puts us in the position to basically answer the question of why are we here and what are we doing. The reason — why we are here is mainly financial. We look at what is going on with our revenues at the City and we talked a little bit about this before. The challenges that we are facing as a result of the economy, challenges that we are facing as a result of legislative impacts on property taxes, we have less revenues than we had three (3), four (4), and five (5) years ago. Just as an example, our Property Taxes over the last three (3) years are down twenty -five percent (25 %). We are looking at another five to seven percent (5% to 7 %) reduction — in the coming Fiscal Year. So, it becomes more and more difficult to pay the expenses that it takes to run a City. Seventy percent (70 %) of our costs are personnel so as you look at these expenses, fortunately or unfortunately, however you want to look at it, that is one area that you have to pay particularly close attention to. Our Pension Plan is a component of that." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES SPECIAL MEETING - MARCH 31, 2011 PAGE 5 OF 9 Continuing, Manager Smith then added, "Not only looking at our financial situation, I have to look at the human capital component. Because our residents are not just looking for us to maintain our taxes or not increase taxes or even reduce taxes, they are also looking for services." Manager Smith then said, "What I have to do — if I have to make a financial decision, we terminate this Plan and create a DC (Defined Compensation) Plan. But if I make a human capital decision, I need to look at providing the best benefits that I can afford to the folks — the best employees that I have. And that is what I am attempting to do. If that results in a DB (Defined Benefit) Plan - I have to create a Plan that is sustainable." Next, Manager Smith asked, "Should we create a DB (Defined Benefit) Plan for our employees? From a financial standpoint, the answer is `No'. From a human capital standpoint, the answer is `Yes'. So, how do I marry those two (2) together? My goal and the Department Heads that are here and that work for me, know what my goal is. My goal is to reduce headcount to the lowest number of headcount possible that we can still provide the level of services that our citizens expect. If I have 300 employees that I am trying to pay a DB (Defined Benefit) Plan for or health insurance — versus 180, you can see it is much easier to do that for 180 employees and maybe the Plan is sustainable then. Some of the charts that Larry (Wilson) showed is what we had done over the last two (2) years with those headcount reductions and how the costs have actually gone down and that is a result of that reduction in headcount. So, that is one (1) of the approaches that I am recommending or have already implemented in trying to balance our budgets and contain health insurance and pension costs. If we are successful at that, we result in having a — number of employees that we provide the best benefit package we can. So, if we are going to have a DB (Defined Benefit) Plan again it has to be sustainable. I have got to reduce that headcount down and I have got to couple that with providing the benefit levels that again — levels that we can sustain. So, to do that, what we need to do is go through those typical components of a DB (Defined Benefit) Plan and Larry (Wilson) has done some of that, to see if we can afford to provide those benefits — what we are basically asking you all - there was a long process to get us where we are today. The first step in that process was to hire Larry (Wilson) — RFP (Request For Proposal) and get a new Actuary, which we have done; then updates to our reports and then do the study. That has been about a two (2) year process. So, we are now at the point where we can take that and make these decisions. So, what we are asking you all, and not tonight is to say, I recommend that we do this with a Plan. We are asking for any input that you may have. CITY OF WINTER SPRINGS, FLORIDA M INUTES BOARD OF TRUSTEES SPECIAL MEETING - MARCH 31, 2011 PAGE 6 OF 9 We are going to have a Workshop with the Commission — ask them the same question; continue to look at these and this is where the Phase III comes in. All Phase III is - some of the scenarios that Larry (Wilson) looked at in Phase II, is just tweaking them a little bit." Manager Smith stated, "We would be looking at the July timeframe as we finalize our Budget to make final decisions here. So, I would be asking for any input that you all may have tonight on what we should do; what we shouldn't do; whether a DB (Defined Benefit) Plan is reasonable; do you agree with the things I said, do you not agree." Continuing, Manager Smith added, "Any suggestions or comments that you all may have about that, would be what we would be seeking tonight — I have some thoughts and I would be happy to share those with you all if you would like to hear them." Chairperson Fair asked, "I would be in favor of hearing your thoughts. Anybody else ?" Vice Chairperson McMahan stated, "I would like to hear your thoughts." Discussion. Manager Smith stated, "Some thoughts that I would share and again we have been - discussing this for two (2) years and we have discussing this at the Staff level for a couple of months now, going through various options — so, if I look at a DB (Defined Benefit) Plan — and I start to lay out the typical components — when I look at the typical components of a Defined Benefit Pension Plan, and I base this on the Florida Retirement System — there are several things that make that up — a COLA (Cost -of- Living Adjustment), should your Plan have a COLA (Cost -of- Living Adjustment) in the benefit structure - should your Plan have a disability component — should your Plan have a health insurance subsidy; a DROP (Deferred Retirement Option) Program. These are all things that the Florida Retirement System currently has as part of that Defined Benefit Pension Plan. A COLA (Cost -of- Living Adjustment) is arguably the most expensive component of a — Defined Benefit Pension Plan. It is also a reasonable component because as you are working through your career in normal situations you receive raises — and that keeps up with the cost of living." Continuing, Manager Smith referred to disability components and stated, "Can also be very expensive." Manager Smith then stated, "Whether or not we should have these components in the Plan, is debatable. There is a multitude of reasons why they should be in there. But when we talk about sustainability where I have got to be able to afford the Plan that we are going to have, if we are going to maintain this Plan, if we are going to keep the DB (Defined Benefit) Plan in place, I have got to sustain it. CITY OF WINTER SPRINGS, FLORIDA M INUTES BOARD OF TRUSTEES SPECIAL MEETING - MARCH 31, 2011 PAGE 7 OF 9 So, when I look at the basis for earnings that are pensionable, right now, if an employee in the City retires, we pay out their unused sick and vacation leave subject to certain maximums, we pay those out. That is a fact. Those earnings are pensionable. They are calculated in the pension calculation. Manager Smith stated, "One recommendation that I would make and have made to our Staff was that we change the basis of compensation — pensionable earnings to base pay only." Manager Smith then added, "My recommendation would be to go to a five (5) year period. That is based on two (2) things number one (1) the benchmarking that Larry (Wilson) talked about — it is partly based on benchmarking and the other part is to go towards sustainability. It simply saves money — those two (2) components have a pretty significant cost savings to the Plan and help its sustainability." Next, Manager Smith commented, "When we start to talk about what age should be normal retirement; when a normal retirement age is 55, Larry (Wilson) takes that number and uses mortality tables to calculate the projected number of years somebody would live and receive their retirement benefit to death — the longer that period, the more the cost." Manager Smith then noted, "My opinion is we probably need to move that from 55 to 62 (years). That is going to save significant dollars and it still seems to be a reasonable benefit and it makes it more sustainable." Manager Smith stated, "Those things I just articulated to you all, I am fairly confident that that will be part of my final recommendation to the City Commission. There are several other things that Larry (Wilson) discussed. Multipliers — the amount that the employees would contribute. These may still end up in the final recommendation." Chairperson Fair asked, "Have you talked to the employees. Do you have any idea what their feelings are about contributing more ?" Manager Smith said, "I have discussed this at length with our Department Heads and I have given them the responsibility to discuss and disseminate down to their employees." Chairperson Fair then asked, "Have you gotten any results from that yet? Manager Smith said, "I guess I could let them speak to that. From what I received and from what I have heard, I would say we have some agreement with what we talked about." Tape 2 /Side A Discussion. Mr. Wilson said, "You asked about employee contributions and we weren't including that in our calculations because it is almost a straightforward if we increase contributions by two percent (2 %). It pretty much reduces the City, County contribution by two percent (2 %) CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES SPECIAL MEETING - MARCH 31, 2011 PAGE 8 OF 9 Manager Smith stated, "We have created a separate Website on our intranet site to provide the information so employees can look at it and according to my Department Heads, we received a positive support from our Staff, from our employees as to what we are doing." Chief of Police Kevin Brunelle, Winter Springs Police Department: addressed the Board Members on the proposed Pension Plan changes, human capital, benefits, and mortality rates. Chairperson Fair inquired, "I would like to know what the Police and Firefighters feel about the normal retirement eligibility and the unreduced, early as opposed to the way it is now, because of special risk class even on a State level for comparable plans have age 52 or age 55 and ten (10 years)." Manager Smith replied, "We looked at several options — the program to maintain that 55 retirement age for Public Safety and move only the General Employees to the 62." Further discussion ensued. Mr. Steve Molnar, Seminole County Fire Department: spoke about shift hours for the Fire Department. Mr. Cory Green, Seminole County Fire Department: addressed the Board and commented about the hazards of his job, contributions, and cost of living. Mr. Green also remarked about the Winter Springs Pension Plan versus Florida Retirement System, economic issues; and to consider the human factors. Mr. Keith Guglielmello, Seminole County Fire Department: spoke about Fire employee benefits including Cost -of- Living Adjustment in the Plan; and thanked the Board. Ms. Nellie Pilcher, Post Office Box 530483, DeBary, Florida: addressed the Board about her current situation related to Survivor Benefits. Ms. Valarie Mendelson, Winter Springs Police Department: addressed the Board Members on contributions. Discussion. Chairperson Fair stated, "I think that probably the Board would like to give some input, so that when you go to the Commission to make a final decision, that you have at least gotten some of our input being that we are the ones tasked with making a lot of the decisions and recommendations on this Plan." Manager Smith replied, "I am looking for as much input as I can get." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES SPECIAL MEETING — MARCH 31, 2011 PAGE 9 OF 9 With further discussion, Chairperson Fair commented, "I think that would be good to schedule something to look at the final recommendations or your thoughts and see if Larry (Wilson) would maybe come back at that point after you do a Phase III and let us see what you have overall." Manager Smith added, "And to that point, I would like to know — there is a lot of information tonight, but based on some of the things that I talked about, my thoughts, the information that Larry (Wilson) provided, the input of our employees, and some of the recommendations that I am looking at — the more input the better." ADJOURNMENT Chairperson Fair adjourned the Special Meeting at 7:49 p.m. RESPECTFULLY SUBMITTED: / Adl • L. BRO D ' PUTY CITY CLERK NOTE: These Minutes were approved at the May 10, 2011 Board of Trustees Regular Meeting.