REGULAR COUNCIL MEETING
The Regular Council Meeting was held on September 28, 2009 at 7:30 p.m. with Council President Williams presiding. Council members present were Mr. Leary, Mrs. Russell, Mr. McGlumphy, Mr. Slavin, Mr. McGiffin, Mr. Hogan, Mr. Salters, and Mr. Ruane.
Council staff members present were Major Taraila, Ms. Russell, Mrs. Mitchell, Mrs. Townshend, Fire Chief Christiansen, Mr. DePrima, City Solicitor Rodriguez, Mrs. McDowell, and Mayor Carey.
OPEN FORUM
The Open Forum was held at 7:15 p.m., prior to commencement of the Official Council Meeting. Council President Williams declared the Open Forum in session and reminded those present that Council is not in official session and cannot take formal action.
Mr. Steve Arts relayed concerns regarding letters he recently received concerning new assessments on businesses and properties. It was his feeling that the requirements are an accounting burden and advised members that the costs for an accountant to prepare the necessary documents would be approximately $2,500 each year. He also felt that it is a “back end” way into what is, in essence, a City income tax and that it is a bad business decision affecting business owners in the City and it punishes their success.
The invocation was given by Chaplain Dixon, followed by the Pledge of Allegiance.
AGENDA ADDITIONS/DELETIONS
Mr. McGiffin moved for approval of the agenda, seconded by Mr. Salters and unanimously carried.
Mr. McGlumphy moved for approval of the Consent Agenda, seconded by Mr. Salters and carried by a unanimous roll call vote.
ADOPTION OF MINUTES - SPECIAL COUNCIL MEETING OF AUGUST 3, 2009
The Minutes of the Special Council Meeting of August 3, 2009 were unanimously approved by motion of Mr. McGlumphy, seconded by Mr. Salters and bore the written approval of Mayor Carey.
ADOPTION OF MINUTES - SPECIAL COUNCIL MEETING OF SEPTEMBER 1, 2009
The Minutes of the Special Council Meeting of September 1, 2009 were unanimously approved by motion of Mr. McGlumphy, seconded by Mr. Salters and bore the written approval of Mayor Carey.
ADOPTION OF MINUTES - REGULAR COUNCIL MEETING OF SEPTEMBER 14, 2009
The Minutes of the Regular Council Meeting of September 14, 2009 were unanimously approved by motion of Mr. McGlumphy, seconded by Mr. Salters and bore the written approval of Mayor Carey.
PROCLAMATION - FIRE PREVENTION WEEK
The City Clerk read the following Proclamation into the record:
WHEREAS, the City of Dover is committed to ensuring the safety and security of all those living in and visiting our city; and
WHEREAS, the National Fire Protection Association (NFPA) has documented through its research that cooking is the leading cause of home fires accounting for 40% of reported home fires and 36% of related injuries; and
WHEREAS, Dover's first responders are dedicated to reducing the occurrence of home fires and home fire injuries through prevention and protection education; and
WHEREAS, using proper care when cooking will have a positive effect on the home fire problem; and
WHEREAS, each cooking fire that is prevented in Dover is an opportunity to prevent painful injury and costly property damage; and
WHEREAS, the 2009 Fire Prevention Week theme, "Stay Fire Smart: Don't Get Burned," effectively serves to remind us all of the simple actions we can take to stay safe during Fire Prevention Week and year-round.
NOW, THEREFORE, I, CARLETON E. CAREY, SR., MAYOR, OF THE CITY OF DOVER, DELAWARE, do hereby proclaim October 4-10, 2009 as FIRE PREVENTION WEEK and urge all citizens to heed the important safety message of Fire Prevention Week 2009, and to support the efforts of our fire and emergency services.
PARKS, RECREATION, AND COMMUNITY ENHANCEMENT COMMITTEE REPORT - SEPTEMBER 14, 2009
The Parks, Recreation, and Community Enhancement Committee met on September 14, 2009 with Chairwoman Russell presiding.
Benchmarks Established for the Economic Development Office
During the Parks, Recreation, and Community Enhancement Committee meeting of June 8, 2009, Mr. Anthony DePrima, City Manager, stated his desire to compile a report that includes meaningful economic statistics that can be monitored and that reflect factors that the Economic Development Office can influence. He felt it would be appropriate for this information to be submitted twice per year, or quarterly, and stated his intention to have such a report available to the Committee.
Mr. William Neaton, Economic Development Director, reviewed benchmarks which he stated were developed by Mr. DePrima and Mrs. Ann Marie Townshend, Director of Planning and Community Development, to chart the progress of the Economic Development Office and to give Council and the Committee an understanding of what the office does. He also reviewed a list of vacant and inactive properties in the downtown area.
In response to Mrs. Russell, Mrs. Townshend explained that there is an ongoing problem with property owners in downtown Dover who fail to maintain vacant properties and then express frustration because improvements must be made to make them eligible for occupation. She explained that the vacant building ordinance establishes a vacant building registration fee for properties that are not sale or lease ready, but does not require that property be brought up to occupiable standards. She noted that exterior violations can be addressed by inspectors, but interior problems cannot be enforced.
Referring to the economic benchmarks presented by Mr. Neaton, Mr. Ruane suggested that additional information be included when establishing measurement tools. He stated that there are numerous goals for the Economic Development Office that were included in the City of Dover Comprehensive Plan that were not reflected in the benchmarks listed which would be relevant in measuring the economic status of the Dover area, citing efforts to develop tourism as an example. He felt that the information that was provided regarding major employers was important but that additional statistics relating to smaller businesses are also vital and should be included. He stated his belief that statistics relating to various economic sectors, e.g., the financial and hotel industries, the arts, culture, and education would be useful. He suggested that staff look to national and local levels of statistical gathering that are currently being used, citing the statistics presented on the U. S. Department of Labor’s website as an example of the type of information that is useful in developing an economic profile. He believed that efforts related to job retention, recruitment, and marketing should be reflected as well.
Mrs. Townshend stated that staff’s goal was to provide these benchmarks to Council to allow members to provide feedback on the type of information that would be useful. She noted that she had received mixed responses from Council regarding the type of statistics that should be included, as she had previously been told that labor statistics from the State and Federal governments were not helpful. She agreed that additional measures should be included, but wanted to keep goals realistic as the organization was in its start-up year, and she felt it was important to be realistic in terms of the projects that can be managed. She noted that many of the activities of the office are anecdotal in terms of relationship building and are difficult to quantify.
Mr. DePrima suggested that tracking the square footage of space gained and lost in large industrial and office buildings in the City would be a useful measure.
In response to Mrs. Townshend, Mr. Ruane stated the vision for examining the economic well-being of the City should be expanded beyond the boundaries of the City of Dover. He noted that while, ideally, vacant commercial buildings within the City’s boundaries would be occupied by new owners, which would maintain the value of the building and contribute to the City’s tax base, residents of Dover still benefit when businesses are retained in the surrounding area and jobs are not lost.
In response to Mrs. Russell, Mr. Neaton explained that his office is working closely with Wesley College to facilitate their move into the building that the General Services Administration will be vacating. He stated that he and his staff maintain a good relationship with Delaware State College and Delaware Technical and Community College; however, they have not had good outreach to Wilmington College at this point.
Mr. Hogan stated that he felt that the number of events held in Downtown Dover is the most important measure of the Economic Development Office’s success. It was his belief that people are not frequenting the downtown area due to the perception that there is “nothing to do” downtown.
Mr. Neaton invited members to attend the Downtown Dover Partnership One Year Anniversary Celebration scheduled for Thursday, September 17, 2009, at 5:00 p.m. He noted that a slide show will be presented which showcases events held downtown and includes photos that show hundreds of people in attendance. He also reminded members of the First Friday event sponsored monthly by the Downtown Dover Partnership.
Mr. Ruane emphasized that staff should consider quality rather than quantity in recruiting businesses for the downtown area. He felt the goal should be not just to fill empty buildings but to recruit enterprises and activities that will draw the public downtown. He suggested an appropriate measure of economic success would be to recruit businesses in targeted categories.
Mrs. Horsey stated that she felt that the City should enforce building codes more stringently. She felt that quality businesses are reluctant to locate to the downtown area because the storefronts and sidewalks are not maintained. She expressed frustration with property owners who “do not care enough” to apply for loans that have been made available through the efforts of the Design Committee to improve building facades.
Mrs. Townshend noted that these funds are available only for building exteriors and many of the buildings in the downtown area also need extensive interior repairs.
Mrs. Townshend stated that staff would look at national statistics that are available for the local area as a basis for comparison, track vacant building square footage in the City, and prepare a monthly analysis of statistics related to the City of Dover’s economic health.
Mr. Ruane noted that more jobs are created nationally and locally by small businesses than large enterprises and request that this information be included in the analysis.
Mr. Neaton stated he would be working with the Director of the new Kent County Economic Development Office to develop economic health guidelines based on small businesses.
Mr. DePrima noted that the current budget will be going to print in the near future and that the benchmarks included are similar to those that the committee reviewed; however, he noted that the Committee’s suggestions will be incorporated in the future.
Statistics Regarding Jobs and Businesses Gained and Lost in the City of Dover Since July 2008
Mrs. Ann Marie Townshend, Director of Planning and Community Development, reviewed statistics on the number of jobs and businesses lost in Dover since July 2008. She noted that the report was based on figures that were provided by the Kent Economic Partnership and she was unsure of the methodology used to collect data, the cut-off dates used, or the criteria by which major employers were identified, and she was not confident that the numbers were completely accurate. She stated staff’s intention to begin tracking numbers quarterly using a consistent methodology.
In response to Mrs. Russell, Mrs. Townshend noted that staff plans to track employment statistics for City, State, and County governments and school districts in the future. She also stated her intention to include information related to small businesses and various commercial sectors.
Updates
Members were provided the following updates:
Puncheon Run Watershed Action Team Update
Mr. Scott Koenig, Public Services Manager, presented an update on the Puncheon Run Watershed. He stated that the Governors Avenue Bridge project is approximately 95% complete. He noted that there have been two large rain events since the bridge was installed, and the bridge is functioning as it should. He noted that there were two properties that did have extensive flooding during the recent rainstorms; however, it was determined that the new bridge is not an impediment. He stated that Mr. Ruane had provided photos indicating that flooding appears to be related to problems with the Route 13 bridge. Mr. Koenig stated that construction debris on the west side of the Route 13 bridge, elevation differences in that area, and possibly the need to clear the stream between Governors Avenue and Route 13 may all be contributing factors. He noted that he plans to discuss these issues with the Delaware Department of Transportation (DelDOT), as well as Senator Brian Bushweller and Representative Bradford Bennett.
Mr. Koenig stated that he will be contacting the Delaware Department of Transportation (DelDOT) to determine if “as-built” drawings of the new Governors Avenue bridge are available or if they must be purchased. He indicated that it may be more cost effective and timely to obtain these drawings from the surveyor. He explained that the drawings will be reviewed by the Federal Emergency Management Agency (FEMA) to determine if a letter for map revision can be issued so that properties in the area can be removed from the flood plain. Mr. Koenig noted that this will eliminate the need for property owners to obtain expensive flood insurance, which is required for mortgaged properties located in a flood plain. He indicated that funds for consulting fees related to the revision are included in the current budget. He expected that all work required would be completed in late fall, with submission to FEMA around the first of the year.
Mr. Koenig indicated he would like to reconvene the Puncheon Run Action Team in October or November. At that time, he hopes to have further information regarding the Route 13 bridge obstructions and information regarding the letter of map revision to provide to residents.
In response to Mrs. Horsey, Mr. Koenig reported that the construction equipment currently being stored at the intersection of Wyoming and Governors Avenue will be used to perform storm drain work, utility tie-ins, and to run cable for an “intelligent” traffic signal system. He agreed that it is in everyone’s interest to return the intersection to normal as soon as possible to avoid cut-through traffic in nearby neighborhoods; however, he stated the State has made it clear that they do not dictate the schedule of the contractor performing the construction.
Mr. Neaton noted that approval had recently been granted from DelDOT to put up City signs to indicate that the thoroughfare and businesses are open during construction. He also indicated that DelDOT and the contractor schedule monthly meetings at Bayhealth to discuss construction progress.
Planning and Funding for New Library
Ms. Margery Cyr, Library Director, reviewed an update on planning and funding for the new library. Ms. Cyr indicated the project was initially budgeted for $23.5 million, but through hard work, that figure has been reduced to $22 million, without compromising services or the structure of the building. She noted that staff met with the State Council of Libraries on September 9, 2009, and the Council agreed to recommend $5 million be placed for a library bond in the next fiscal year. Ms. Cyr noted that if the bond is approved, State contributions will total $10.6 million, which is slightly less than 50% of the projected cost of the library.
Ms. Cyr stated that Ms. Donna Stone, Manager of the TD Bank, has agreed to serve as the Chair of the library’s Capital Campaign, and Mrs. Carla Markell will serve as Honorary Chair. The Capital Campaign Office at Wesley College is being prepared for occupancy. She stated that a new sign with a conceptual drawing representing the appearance of the new structure has been placed on Loockerman Street.
Ms. Cyr noted that staff is hosting a Green Summit for the public in the evening on September 30, 2009, to discuss plans for alternative energy and sustainable design for the library, and she hopes to schedule a separate event for Council on the same day so that they can be fully informed on the project.
CDBG Program
Mr. William Neaton, Director of Economic Development, reported that he is working with attorney Gerry Street to develop a lease between the Dover Interfaith Ministry and the Downtown Dover Partnership and hoped that this will be finalized within the next two weeks.
Mrs. Townshend, Planning and Community Development Director, noted that the lease will be reviewed by the U. S. Department of Housing and Urban Development (HUD) to determine if $60,000 of CDBG funds can be expended for this purpose. Mrs. Townshend noted that if HUD determines these funds cannot be used to lease property, staff will encourage the Interfaith Ministry to utilize funds for building renovations, which is an approved use. She noted that this may be the best option in view of need to expend funds in a timely manner.
Housing and Recovery Act of 2008 Funds (Neighborhood Stabilization Fund)
Mrs. Townshend, Planning and Community Development Director, noted that staff has worked with two families who are ready to purchase foreclosed properties. Mrs. Tracey Harvey, Community Development Manager, has been working with Mr. Van Temple, Chair of Diamond State Community Land Trust (DSCLT), and Ms. Ami Sebastian-Hauer, Executive Director of the Dover Housing Authority (DHA), and has identified foreclosed properties that these organizations would like to purchase. She indicated that the DHA has a contract on one property and is working on two others, and DSCLT has one contract.
During the meeting of February 9, 2009, the Parks, Recreation, and Community Enhancement Committee considered a proposal to partner with Discover Bank and others to leverage additional funds for the Neighborhood Stabilization Program (NSP) through the New Markets Tax Credit Program. The Committee recommended that Council approve a non-binding letter of intent to proceed with the leveraging program, which was approved at the City Council meeting of March 23, 2009. Mrs. Townshend indicated that the City has still not received a concrete proposal from the leveraging partners; however, the City is proceeding to obligate NSP funds due to the need to move forward expeditiously. She indicated that staff may request approval from the Committee and City Council to withdraw from the leveraging program, as the program appears not to be as lucrative as it initially appeared and the program is proceeding very slowly.
In response to Mrs. Russell, Mrs. Townshend stated that the foreclosed properties in question are in various states of repair. She noted that the City’s role is to assist applicants with down payments and that the purchaser is responsible for locating the property. She explained that the Kent County Association of Realtors is part of the partnership and is facilitating transactions with prospective property owners.
Responding to Mr. Ruane, Mrs. Townshend stated she is not certain how many foreclosed properties have been identified within the City and where they are located. She stated that the City’s program targeted eight (8) properties, six (6) are in progress and are situated in various locations throughout the City.
Mrs. Townshend noted that she spoke with representatives from Fannie Mae and was told that their foreclosed properties are open only to applicants using public funds (which would include buyers under the NSP program) for the first 15 days after being listed.
Youth Advisory Committee
Mrs. Russell stated that the Youth Advisory Committee met on September 10, 2009, with ten (10) members present. She noted that members of the Committee plan to volunteer at a number of upcoming community activities, including the Governor’s Fall Festival, the Community Youth Party to be held at the YMCA, and the City of Dover Home for the Holidays celebration, and have shown interest in serving at the Salvation Army. Members have formed a planning subcommittee and are considering planning an event to “give back” to the community, possibly a food drive or a basketball fundraising benefit.
By consent agenda, Mr. McGlumphy moved for acceptance of the Parks, Recreation, and Community Enhancement Committee Report, seconded by Mr. Salters and carried by a unanimous roll call vote.
LEGISLATIVE, FINANCE, AND ADMINISTRATION COMMITTEE REPORT - SEPTEMBER 14, 2009
The Legislative, Finance, and Administration Committee met on September 14, 2009 with Chairman McGlumphy presiding.
Review and Recommendation - Filling of Critical Positions
During their meeting of February 23, 2009, members recommended approval of the Hiring Freeze for Fiscal Year 2008-2009, but to allow the hiring of critical positions through the review and approval of the Legislative, Finance, and Administration Committee and City Council. It was suggested that there be a “standing” agenda item to consider the filling of critical positions and, if there are no positions to consider, the item could be removed.
Mr. McGlumphy noted that there were no critical positions to be considered; therefore, no further action was required.
Revenue/Cost Saving Ideas Submitted for Consideration (Items #21-#30)
During their meeting of May 19, 2009, Council reviewed the budget for Fiscal Year 2009/2010 which included a budget shortfall in the amount of $986,781 (across all three funds). In light of the shortfall, Mr. Kenneth Clendaniel, along with the IUE, provided a list of suggestions to save money and increase revenue throughout the City of Dover. Mr. McGlumphy had noted that the 30 suggestions would be considered by members 10 at a time. During their meeting of July 13, 2009, members began their review of a list (items #1-#10) of revenue/cost saving ideas developed by employees (items #11-#20 were reviewed during their meeting of August 10, 2009).
Mr. McGlumphy noted that responses to the ideas have been developed by staff and requested that everyone be provided a copy to provide a better understanding.
Items #21 - #30 were discussed, as follows:
#21 - Put ALL unnecessary projects on hold until the City’s financial situation is corrected - Especially the Library Project
Mr. DePrima, City Manager, explained the importance of the Library Project and how this project is not delving into this year’s finances since funding is being provided by grants and past reserves. He also reminded members that most other projects have been shelved during the budget process, noting that the list was prepared prior to the completion of the budget process.
#22 - Discontinue all studies that do not directly involve the current financial problem with the City
Mr. DePrima advised members that he has eliminated the market study for downtown and that there are no current pending studies included in the budget.
#23 - Raise business licenses. Fees for vendors at Dover Downs... now $40.00, elsewhere it is on average $150
If supported by members, Mr. DePrima stated that staff would develop a proposal for Council’s consideration for increasing the business license fees for vendors at Dover Downs.
#24 - Yard waste (branches, leaves, brush, etc...) that is collected should be mulched by the City and used by the City or sell. Should not be hauling to dump and paying large fees to do so
Mr. DePrima stated that there is an assumption that there would be a profit in collecting yard waste, which an analysis would be required to determine. He noted that it would require an increase in costs for manpower. He advised members that DNREC may be making this decision for the City, explaining that they may prohibit yard waste at the Sandtown Landfill.
Mr. Ruane relayed his desire for staff to further investigate this matter and suggested that it be presented to the Utility Committee for further consideration.
#25 - Cease using post card survey reminders at City inspections. Use emails and post in-house memos
Mr. DePrima indicated that there is not a clear understanding of what this idea is referring to and requested that Mr. Clendaniel obtain clarification to allow staff’s consideration.
#26 - Start charging the public for lock jocks being performed by Police Officers and Animal Control Officer (unlock vehicles with keys locked in them). For many years there has never been a charge for this service. For 2009 so far from January 1st to May 14th, there have been 621 lock jocks. In 2008, there were 1,590 calls for service for lock jocks. With this service comes liability issues for damage while providing this service that could cost the City money. Most Locksmith companies charge on average $50 - $75 for this service. The City could issue a bill in the form of a DCO (add this service on the “other” line on the DCO), for the customer to send payment to the City within 72 hours just like parking summons’, if not paid within that time, it doubles just like all the other City ordinances. This would be a substantial form of revenue for the City on an annual basis
Mr. DePrima explained that the Police Department is able to assist those that have locked their keys in their cars for older model vehicles. Although many Police Departments have eliminated providing this service, the City Police Department views this as a community service. Since the Police Department would not want to begin charging a fee for this service, the alternatives would be to either continue to provide this service free of charge or eliminate providing the service.
Should it be decided to eliminate this service, Chief Horvath advised members that whenever there is a child or animal involved, the Police Department would provide assistance.
Responding to Mr. Hogan, Chief Horvath confirmed that this services cannot be utilized on many of the newer modeled vehicles.
#27 - City inspections are currently using two systems to log inspections complaints. The HTE and the CRM. Both are accomplishing the same task duplicating work. It is suggested that utilizing the old complaint forms and doing away with the Customer Resource Management System would save the City a lot of money. Not only because of the man hours spent duplicating entries, but also the cost of keeping the on-line ysstem updated and running on a daily basis
Mr. DePrima noted that HTE and CRM are different programs with different purposes. It was his feeling that there may be the possibility of eliminating some duplication and he would request staff to look into this matter.
#28 - The City uses outside Companies to monitor alarm systems within the City. Rather than contracting other outside agencies, the City should use their own dispatch centers (Electric or PD) to monitor them. This would eliminate costs for Security systems
At the request of Mr. DePrima, Mr. Clendaniel explained that there are five (5) buildings that have fire alarms and sprinkler systems that are monitored by Delaware Electric Signal at a cost of approximately $4,000 per year. Noting that there are three (3) dispatch centers within the City, it was his feeling that the phone routers could be routed to the City’s dispatch centers.
Mr. DePrima requested the opportunity to further investigate this idea.
#29 - There are a large number of extra phone lines within the City that are being paid for but are not in use. Eliminate costs for those lines by removing them altogether, and only adding lines, on an as needed basis
Mr. DePrima advised members that staff is in the process of determining which existing phone lines could be eliminated. He requested that if any employees are aware of a phone number, that they provide that information to him.
#30 - All standard vehicle maintenance work on City vehicles should be done by City mechanics, rather than contracting outside dealerships to do the work. However, all major warranty work should be done by the appropriate dealerships that apply. This is a huge expense for each department and can save a substantial amount of money annually. Even if the City were to hire another mechanic to share the new work load, the cost of this annual pay would be far less than the vehicle maintenance costs each year
Mr. DePrima advised members that most vehicle maintenance is provided by the City’s Fleet Auto Shop mechanics, with the exception of the Police vehicles and specialty work. It has been determined by staff that additional personnel and capacity would be required to handle additional vehicles. He suggested that staff further investigate this matter to determine if it would be cost effective.
Mr. McGlumphy requested that staff meet with Mr. Clendaniel in an effort to clarify questions of staff regarding some of the recommendations.
Defined Benefit Pension Plan Analysis/Closure
During their Annual Meeting of May 11, 2009, Council approved a motion to authorize the Controller/Treasurer to spend $4,000 to conduct an analysis using a sample of five (5) employees to transfer from the 401(a) Plan to the Defined Benefit Pension Plan. There are currently 82 employees in the 401(a) Plan.
Mrs. Mitchell, Controller/Treasurer, advised members that the analysis has been completed by Mr. Al Pike, MAAA of Pike Associates. Mr. Pike assumed the transferring employee would be required to pay into the Defined Benefit Pension Plan, in a lump sum payment, the following amounts:
1.The amount of employee contributions they would have contributed to the Pension Plan (3½%) had they participated in that plan from date of hire,
2.The amount of past City Contributions to the Defined Contribution Plan (6% of Pay),
3.Interest at the interest rate assumed in the Pension Plan’s actuarial valuations (7½%).
Mrs. Mitchell stated that Mr. Pike also included the average employee contribution percentage (11.5%) or an Equivalent Level Percentage based on the sample group. This percentage, when multiplied by current pay and years of past service, approximates the required buy back contribution.
The completed analysis of the sample group was provided to members for discussion which includes the estimated increase in the City’s pension liability and budget using estimated July 1, 2009 payrolls. It was noted that the analysis is as of July 1 using current assumptions and historical retirement trends. Other factors noted by Mr. Pike that could serve to increase the liabilities illustrated include: 1) Employees live longer than anticipated; 2) Invested funds do not earn the assumed 7.5%; and 3) City grants post retirement COLA’s.
Mrs. Mitchell advised members that there are regulations and ordinances that would need to be addressed to permit retroactive buy in of prior service. She explained that Transfers into the Defined Benefit Plan could potentially change the historical retirement levels with a sudden increase in the number of retirements. She stated that such a change would affect the future funding levels of the Pension Plan, as follows:
● Employee’s requesting the retro buy-in will be subject to two different early retirement benefit levels based on their hire date.
○ If the employee’s hire date is prior to 5/1/94 they will be eligible to receive an early retirement benefit with 25 years of service or at age 50 with 20 years and no reduction in benefits.
Sixteen (16) of the eighty-two (82) employees in the 401(a) Plan would fall under this provision. Twelve (12) of the sixteen (16) would be eligible to retire in the next five years.
○ If the employee’s hire date is after 5/1/94 they will be eligible to receive an early retirement benefit at age 55, if their age plus years of service is greater than 80 with no reduction in benefits.
Sixty-six (66) of the eighty-two (82) employees in the 401(a) Plan would come under this provision. Six (6) of the sixty-six (66) would be eligible to retire in the next five years.
● Hire date would not affect any other provision of the General Pension Plan, for example early retirement with reduced benefits or normal retirement.
Upon reviewing Mr. Pike's analysis, Mrs. Mitchell stated that she would not recommend that the City permit retro buy in of prior service. She reminded members that a separate presentation was made to the Legislative, Finance & Administration Committee on July 27, 2009 and that it was recommended to close the General Employee's Pension Plan to new hires. The committee did not make a recommendation to Council in this regard at that time pending the outcome of this analysis.
Concurring with Mr. Salters, Mr. DePrima suggested that an open workshop be held with interested employees to better explain the study and the results.
Mr. Hogan questioned the pay-out for the employees and, referring to the buy-in contributions, he questioned if the City has the ability to provide information regarding the number of years it would take for the employee to recoup their money.
The Committee recommended approval of staff’s recommendation not to permit retro buy-in for prior service and to close the General Employee’s Pension Plan to new hires.
Mr. DePrima advised members that he had questions regarding this matter. Responding, Mr. McGlumphy stated that the committee’s recommendation will be forwarded to Council for their consideration and suggested that any further discussion could be held at that time.
Mr. McGlumphy noted that, since the committee meeting, he was advised that there are individuals who would like the opportunity to speak regarding this issue and suggested that members provide them the opportunity by waiving the rules.
Mr. McGlumphy moved to waive the rules to allow for public testimony regarding this matter, seconded by Mr. Salters and unanimously carried.
Mr. DePrima referred to a memorandum that he had provided to members of Council and, therefore, would not get into specific details; however, he stated that the presentation material provided to the committee did not accurately reflect what was requested by the employees, which was to show the cost to the employees, given the understanding that the employees did not expect the pension plan to take on any liability as a result of their request. He stated that the Actuary made some assumptions on the contributions that, in fact, did show liability. Another concern was that he felt that the amount reported as an increase to the City’s budget was inaccurate. It was his opinion that it was double counting the liability that the employees assumed they would pay. Mr. DePrima felt that these two (2) issues alone contributed immensely to the committee’s action.
Mr. Jason Osika, City employee, indicated that Mr. DePrima’s memorandum to Council addresses most of the concerns of the employees. He advised members that there are a number of employees (82), both union and management, that are enrolled in the deferred retirement plan, which makes retirement just about impossible, which is why they have requested the opportunity to buy back into the defined pension plan or consideration of a few other options. Although there are 82 employees, he noted that they may not all wish to participate in the buy back. Mr. Osika assured members that the employees are not requesting anything from the City except permission to buy back into the plan and they are willing to do so at 100% of the cost. He requested that members reject the committee’s recommendation and either allow employees permission to buy back into the defined pension plan, and if that is not possible, he requested that the matter be referred back to the committee for further review and allow for employee input and/or the opportunity to discuss the possibility of creating a new pension plan for employees.
Mr. David Carden, City employee, concurred with the statements made by Mr. Osika and reiterated that employees simply wish to be given the option for retirement and to be provided some opportunity to allow for this to occur. He urged members to take the action necessary to support their employees.
At the request of Mr. McGlumphy, Mr. Pike explained that the accrued actuarial liability is a funding number and is used in the actuarial valuations to determine the level basis of funding and was never meant to be used for purposes of buy-in or to determine individual liabilities. He relayed concerns for using it for that purpose, since it is a very abstract number, which is very difficult to explain; uses numerous assumptions that are subject to dispute; and the assumption of mortality, which could not be used for purposes of a buy-in. In order to eliminate some of the objections, Mr. Pike stated that an alternative method was selected by using a calculation of the liability by assuming the employee would retire when first eligible and assuming that their pay increased 4½%. These calculations, although easier, were also difficult to explain. Therefore, he suggested a third alternative which was to accumulate all contributions the City made to the defined contribution plan on the employee’s behalf, as well as all of the contributions the employee would have made if he were in the defined benefit plan, together with interest at 7½%.
Mr. Pike stated that all three (3) estimates were presented in his report to the City, which averaged a cost of $160,000 to $210,000 per employee. He explained that there would be no liability to the City based on the assumptions; however, if the assumptions are incorrect, then there may be a liability to the City. He indicated that the costs presented to the committee were based on 23% of payroll, which is last year’s funding percentage. However, he stated that Mr. DePrima is correct, indicating that over the long-term, the cost is really only the normal costs. Mr. Pike explained that there was a blend of methods presented, but if the City pays for the full past service cost, over the long-term, it would be cost neutral to the City.
Responding to Mr. Ruane, Mr. Pike stated that the assumed retirement age for the employees was that 25% would retire when first eligible and then, each year 10% of the remaining employees would retire, up to age 65 when everyone would be retired. He explained that employees will be required to contribute several thousands of dollars to buy-in to the pension plan; therefore, it was assumed that they will be taking advantage of the early retirement provisions of the plan, since it would not be to their benefit to wait until they are 65 years of age (they would be taking a loss).
Mr. Pike further explained that the funding percentage will increase to 25% of payroll for next year and that this percentage has been escalating each year, mainly due to investment losses.
In response to Mr. Leary, Mr. Pike stated that the unfunded liability was 42% last year, and 36% this year, meaning that the fund is only 36% funded.
Mr. Hogan questioned if any of the three (3) assumptions would be revenue neutral. Responding, Mr. Pike stated that the actuary accrued liability is cost neutral if his assumptions are correct. Should the City allow employees to join the defined plan to be effective the date of membership (for future service only), Mr. Pike stated that it would be cost neutral since there is no built up liability. Mr. Pike noted that this is the more common action taken - to bring employees into a plan prospectively since, otherwise, the liabilities are too huge.
Responding to Mr. McGiffin, Mr. Pike stated that the second assumption, whereby the City would fund the benefit and assuming everyone would retire when first eligible, would either be cost neutral or there could be a cost to the City. The third assumption would cost the City more than what he originally assumed (40% unfunded).
Mr. Slavin questioned how many of the 82 employees would be interested and at what buy-in level. He felt that the matter should be referred back to the committee to allow for this information to be obtained and to allow for further discussion.
Council President Williams noted that the City’s attorneys have indicated that the cost buy-in (buy back) would be illegal, since it would affect the plan’s non-profit status. Responding, Mrs. Mitchell stated that she contacted Mr. Tim Snyder of Young, Conaway, Stargatt, and Taylor (law firm) that does the City’s labor negotiations to discuss this matter. Mr. Snyder had indicated that the City could jeopardize the tax-exempt status for the pension plan. He provided language from the IRS Code (401-K Plan), since it was his opinion that the IRS would perceive it as the City changing the plan to a 401-K Plan, which is a private industry plan, and the City would lose its tax exempt status.
Mr. DePrima felt that, if given the opportunity, the employees could have provided the information requested by Mr. Slavin to be considered in the assumptions and that the City could have contacted the IRS or an attorney who is versed in the IRS as to how such a buy-in could be accomplished so that there is not an IRS issue.
Mr. Leary moved to suspend the waiving of the rules and close public testimony regarding this matter, seconded by Mr. Hogan and unanimously carried.
Mr. Slavin moved to refer the matter back to the Legislative, Finance, and Administration Committee, seconded by Mr. McGiffin.
Mr. Ruane stated his feeling that members have been adequately informed and provided necessary information to make a decision regarding this matter. Responding, Mr. McGiffin felt that employees had not been involved in this matter and even if it is determined that the City is legally prohibited from taking the action requested, he felt it was important to continue involving the employees to determine if there is another method by which the City can address their concerns while being fiscally responsible. It was his opinion that the proper place for these matters would be at a committee meeting.
Mr. Slavin explained that the motion should not be reflective of the work that has been done by members or staff; however, based on the questions raised this evening, it was his feeling that this issue was not ready for Council action at this time.
Mr. McGlumphy stated his support of the committee’s recommendation. He explained his concerns, as follows: the legal process involved with this issue; noted that employees who opted out of the defined plan in 1994 made (signed) an irrevocable decision; concerns of the unfunded liability; and the affect it would have on the City and its employees in the future.
Referring to the document prepared and signed by the employees in 1994, Mrs. Russell questioned the possibility of obtaining a copy, explaining her understanding that employees did not ful