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Sponsored by: Corbridge
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CITY OF SEWARD, ALASKA
RESOLUTION 2006-088
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AMENDING THE 2006 BUDGET AND APPROPRIATING
$186,026 FROM THE STATE OF ALASKA TO THE PUBLIC
EMPLOYEES RETIREMENT SYSTEM ON BEHALF OF THE CITY OF
SEWARD, PER SB231
WHEREAS, the Alaska State Legislature passed Senate Bill 23 I in 2006 resulting in the
authorization of funding to cover the annual 5% anticipated increase in PERS employer costs for
political subdivisions ofthe State of Alaska; and
WHEREAS, the annual cost increases for Seward amounts to approximately $ 186,026,
and that amount will be appropriated directly from the State of Alaska General Fund to the
Division of Retirement and Benefits, on behalf of the City; and
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WHEREAS, in addition to the direct appropriation to PERS on the City's behalf, the
City of Seward will pay the 5% increase in PERS contribution rates based on an actuarial report
from the State of Alaska PERS dated June 30, 2005, resulting in the State's contribution being
applied toward the City's unfunded PERS liability.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF SEWARD, ALASKA, that:
Section 1. The 2006 Operating Budget shall be amended to appropriate $ I 86,026 from
the General Fund state grant revenues account 101 -0000-4680-0200 to various department
retirement expense accounts allocated on a pro-rata basis, to accounts xOl-xxxx-5060.
Section 2. This resolution shall take effect immediately upon adoption.
PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this
14th day of August, 2006.
THE CITY OF SEWARD, ALASKA
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Vanta Shafer, Mayor
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CITY OF SEWARD, ALASKA
RESOLUTION 2006-088
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AYES:
NOES:
ABSENT:
ABSTAIN:
Dunham, Valdatta, Lorenz, Schafer, Thomas, Bardarson, Shafer
None
None
None
ATTEST:
(City Seal)
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COUNCIL AGENDA STATEMENT
Meeting Date: August 14, 2006
Through: Clark Corbridge, City Manager
From: Kristin Erchinger, Finance Director
Agenda Item: 2006 Budget Amendment appropriating State PERS contribution per
SB231
BACKGROUND & JUSTIFICATION:
In 2006, the State legislature passed Senate Bill 231, appropriating funds directly to PERS on
behalf of Alaska municipalities, to help offset retirement liability cost increases to local taxpayers.
Essentially the legislature paid the equivalent of the 5% added yearly rate increase to the City’s
contribution rate, equal to $186,026. This amount is being paid directly to the City’s PERS
account with the State of Alaska Division of Retirement & Benefits. While the funds did not
come directly through the City, we are nonetheless required to account for the State’s
contribution on the City’s books, and to book the corresponding expense.
Despite the legislature’s direct appropriation, the City will continue to pay the 5% annual rate
increase in 2006, to offset -- to a small degree – the growing unfunded liability to PERS. As of
June 30, 2003 the City of Seward’s actuarially determined unfunded liability was estimated at
$4,397,000. At that time, the City’s actuarially required contribution to PERS was 3.74% of
covered payroll. One short year later (as of June 30, 2004), the City of Seward’s actuarially
determined unfunded PERS liability grew to $6,288,000 (an increase of $1,891,000), and the
annual contribution rate was calculated at 22.47% of covered payroll. A recent third-party audit
of the 2004 actuarial PERS report, suggests that the unfunded liability is as much as 29% higher
than the original estimates.
The increase in actuarially determined unfunded liabilities has much to do with the actuarial
assumptions in place at the time of the valuation. However, the magnitude of unfunded liabilities
is also fueled by the artificially lower required contribution rates recommended by the retirement
boards. The State’s retirement boards have historically increased required contribution rates no
more than 5% per year in order to minimize adverse budgetary impacts to communities and local
taxpayers. However, for each year the City pays rates less than the actuarially determined rate,
the City unfunded liability grows, due to the lack of invested funds on-hand, from which to earn
investment income and offset necessary contributions. Ultimately, the PERS contribution
approved by the State legislature will be used to offset the City’s unfunded PERS liability.
CONSISTENCY CHECKLIST:
Where applicable, this agenda statement is consistent with the Seward City Code, Charter,
Comprehensive Plans, Land Use Plans, Strategic Plan and City Council Rules of Procedures.
RESOLUTION 2006-88
State PERS Contribution per Senate Bill 46
Page Two
FISCAL NOTE:
The State’s contribution of $186,026 is considered a State grant award and is recognized as such
on the City’s financial statements, and an equivalent amount is recorded as retirement expense,
allocated on a pro-rata basis, to each department’s operating budget.
Approved by Finance Department ___________________________
RECOMMENDATION:
Council approve Resolution 2006-88 amending the 2006 Operating Budget by appropriating
$186,026 from State grant revenues account 101-0000-4680-0200, to various fund retirement
expense accounts, on a pro-rata basis, to accounts X01-XXXX-5060.