Fort Walton Beach Council agenda — 05-20-08 special agenda - budget policy issues — reading text

subject to F. S. 175/ 185, respectively, and to implement a revision to those plans to change the benefit for new hires ( essentially establish a two -tier plan) would jeopardize the premium tax monies the City receives from the State to partially fund the plans. For FY 2007 -08, state contributions reduced the City contribution by $ 182K toward the Police plan and $ 130K toward the Fire plan. Without these funds, the City's contributions toward these plans would have been 59% and 66% higher, respectively. 4. The City has recently engaged the services of an alternative plan actuary ( Foster & Foster) in an effort to receive a second opinion ( peer review) as to methodologies and assumptions used by Actuarial Concepts for the General Employees' Pension Plan. The City anticipates this peer review in the next month or so and at that point staff will review the report and forward any recommendations to City Council. 24 of 34 FY 2008 -09 Budget Policy Meeting Policy Impact 1. Offering new hires ( general employees only, not police officers and firefighters) participation in a defined contribution plan as described above rather than membership in the City's defined benefit plan would reduce the City's liability to fund a retirement program over time. This is primarily due to an average employer contribution to a defined contribution plan of 7 -9% versus the City's current contribution to the defined benefit plan of 14 %. 2. Offering current non -vested employees the option of transferring to a defined contribution plan would also reduce the City's retirement expense by eliminating the future liability of the plan. 3. The calculations to determine the impact of any plan changes should be performed by the actuary and cannot be computed in- house. Recommendation Authorize staff to contact the City's pension legal counsel and plan actuary to further explore the advantages and potential disadvantages of offering a defined contribution plan ( general employees only, not police officers and firefighters) to new hires and offering a one -time option to convert to current members of the defined benefit plan. 25 of 34 FY 2008 -09 Budget Policy Meeting SEPARATION INCENTIVES Policy Decision Should the City offer incentives to encourage employees to voluntarily separate? Background 1. In light of recent State property tax reform legislation, it has become necessary to consider methods to reduce personnel costs which account for 53% of total expenses and 74% of General Fund expenses. 2. Staff surveyed various Florida municipalities to determine what, if any, programs they were developing or had implemented that would offer incentives for employees to separate employment prior to the new fiscal year beginning October 1, 2008. 3. Based on information gained in the survey, the City may benefit in the long term by implementing the two programs described below. The payroll savings would be derived from a reduction of the salary and associated payroll taxes for a new hire versus the exiting employee, re- classification of the position once vacated, or elimination of the position altogether. Discussion 1. Employees would be eligible for one or the other incentive program, not both. 2. The City reserves the exclusive right to either accept or not accept the application from eligible employees. 3. The City will determine the effective date of the separation of employment which shall not be later than September 30, 2008 unless specifically approved by the City Manager. 4. Employees who elect and are approved for either incentive program are not eligible for re -hire by the City for 5 years from the date of separation. Early Retirement Incentive Program 1. Members of the General Employees' Retirement Plan who are 52 years of age or older as of June 1, 2008 and have at least 10 years of credited service as of this date would be eligible. 2. Members of the Police Officers Pension Plan who 1) are 50 years of age or older as of June 1, 2008 and have at least 10 years of credited service as of this date or 2) who have 25 years of credited service would be eligible. 3. Members of the Firefighters Pension Plan are not eligible. Those members have a separate incentive program under consideration as part of the collective bargaining agreement. 4. Eligible employees would receive the following lump sum based on years of service with the City in addition to regular retirement benefits): a. 10 up to 15 years of credited service 50% of base salary not to exceed $ 15, 000. b. 15 up to 20 years of credited service 50% of base salary not to exceed $ 20, 000. c. 20 up to 30 years of credited service 50% of base salary not to exceed $ 25, 000. d. 30 plus years of credited service 50% of base salary not to exceed $ 30, 000. Voluntary Separation Incentive Program 1. Any full time, regular employee with at least one full year of service would be eligible. 2. Eligible employees would receive one ( 1) week pay for the first year of employment and two ( 2) weeks of pay for each full year of employment thereafter up to a maximum of sixteen ( 16) weeks paid in lump sure. Policy Impact 1. Staff estimates a possible cost of $274K for the early retirement incentive program plus $ 235K for payment of accrued vacation and sick leave. Estimated payroll savings would be $ 392K. 2. The cost of the voluntary separation incentive program is unknown. 3. Fund balance would be used to fund both programs. 26 of 34 FY 2008 -09 Budget Policy Meeting Recommendation 1. Authorize an Early Retirement Incentive Program as identified above and authorize the City Manager to execute agreements with employees approved and disburse incentive payments in accordance with the program offerings. 2. Authorize a Voluntary Separation Incentive Program as identified above and authorize the City Manager to execute agreements with employees approved and disburse incentive payments in accordance with the program offerings. 27 of 34 FY 2008-09 Budge Policy Meeting Zo2154 FY 2008 -09 Budget Policy Meeting UTILITY TAX CAP Policy Decision Should the monthly caps and exemptions for the utility tax be removed? Background 1. Per Chapter 4. 05 of the City's Code of Ordinances, a utility tax is levied at a rate of 10% against electric, gas, and water purchases. The tax is currently limited to $ 20 /month for residential consumers and $ 50 /month for non -residential consumers. Additionally, the tax is not levied on the first 50 kilowatt hours per month of residential use. 2. The Attorney General has issued several opinions stating that caps and limitations on the dollar amount taxed under Florida Statute 166.231 " Public Service Tax" are improper. The City was advised by its attorney in 1996 & 1997 that caps and limitations are improper and should be removed. Further, the City Attorney refused to sign the Ordinance in 2000 increasing the cap from $ 10 /month to $ 20 /month for residential and $ 50 /month for commercial. Discussion 1. A survey of surrounding jurisdictions reveals the following: No Cap 10 Cap Other Crestview Mary Esther FWB —resid. 50kw free & $ 20 cap; commer. $ 50 cap Graceville Valparaiso Chipley - $ 25 cap Gulf Breeze DeFuniak —resid. $ 15 cap; commer. $ 30 cap Niceville Lynn Haven - $ 100 cap Milton - $ 50 cap Panama City - $ 500 cap Pensacola - $ 1, 000 cap Shalimar —resid. 500kw free & $ 10 cap; commer. no cap 2. An analysis conducted in 1998 determined that removal of the cap would generate approximately 435K additional revenue ( in 2008 dollars) compared to the $ 10 cap in existence at the time. This includes electric, gas, and water utilities. Policy Impact 1. Adjusting for higher caps currently in place, staff estimates additional revenue of $ 379K if the public service tax (utility tax) cap were removed based on the analysis conducted in 1998. 2. Staff estimates additional revenue of $ 200K if the cap were increased to $ 500 for residential and commercial based on the analysis conducted in 1998. 3. Staff does not have the data to determine the impact of increasing the exemption. Kilowatt data is proprietary to Gulf Power. Recommendation Authorize staff to prepare an ordinance to remove the residential and commercial utility tax caps and residential usage exemption. 29 of 34 FY 2008 -09 Budget Policy Meeting m 30 of 34 FY 2008 -09 Budget Policy Meeting INTERFUND TRANSFERS Policy Decision Should the current allocation of shared expenses be continued? Background 1. The City' s Cost Allocation Plan was most recently updated in 2003 based on data from FY 2001. The purpose of the Cost Allocation Plan is to provide reasonable and proportionate reimbursement to the General Fund for services such as accounting, human resources, information technology, public works, and purchasing provided to other funds. 2. As a matter of budgetary policy, interfund transfers to the General Fund have been based on the Cost Allocation Plan adjusted for inflation plus other shared expenses not considered in the Cost Allocation Plan ( e.g. property and casualty insurance) and new programs and services not in place at the time of the Cost Allocation Plan update (e.g. employee morale, CRA police officers). Discussion 1. The Law Enforcement Trust Fund reimburses the General Fund for the City Attorney's time spent on forfeitures as well as the Police Department's crime prevention and safe neighborhood activities - $ 18K. 2. The CRA Fund reimburses the General Fund per the Cost Allocation Plan and for a proportionate share of the City Attorney's time, two police officers dedicated to the area, building inspection, and code enforcement - $ 277K. 3. The Utilities Fund reimburses the General Fund per the Cost Allocation Plan and for a proportionate share of the City Attorney's time, employee morale, property and casualty insurance, and postage - $ 1. 896M. 4. The Sanitation Fund reimburses the General Fund per