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CITY OF SEWARD, ALASKA
RESOLUTION 2012 -011
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, RETROACTIVELY AMENDING THE 2011 BUDGET TO
RECORD EXPENDITURES OF $540,733.73 PAID BY THE STATE OF
ALASKA ON BEHALF OF THE CITY TOWARD THE CITY'S PUBLIC
EMPLOYEES RETIREMENT SYSTEM LIABILITY
WHEREAS, in accordance with the 2010 Alaska State Legislature's passage of House
Bill 300, the State of Alaska Department of Administration, Division of Retirement & Benefits
( "DRB ") contributed $246,273.59 on behalf of the City of Seward from January through June,
2011, reflecting the 5.96% difference between the actuarially required contribution rate of
27.96% as adopted by the Alaska Retirement Management Board' and the 22% employer
"capped" rate established by SB53; and
WHEREAS, in accordance with the 2011 Alaska State Legislature's passage of House
Bill 108, the State of Alaska DRB contributed $294,460.14 on behalf of the City of Seward from
July through December, 2011, reflecting the 11.49% difference between the actuarially required
contribution rate of 33.49% as adopted by the Alaska Retirement Management Board and the
22% employer "capped" rate; and
WHEREAS, in accordance with generally accepted accounting principles, the City must
record payments made on its behalf, and must therefore amend the 2011 Budget to account for
both the expenditures paid on behalf of the City, and the corresponding revenues paid by the
State of Alaska Department of Administration; and
WHEREAS, failure to amend the budget to reflect the State's payments on- behalf of the
City, will result in an imbalance between the actual and budgeted revenues and expenditures,
giving the appearance of revenues and expenditures exceeding the annual budget as approved by
the Seward City Council.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF SEWARD, ALASKA, that:
1 The ARC reflects normal cost rate of 9.33% plus past service cost rate of 18.63 %, and is further
expressed as pension costs of 9.98% and healthcare costs of 17.98 %.
2 The ARC reflects normal cost rate of 8.28% plus past service cost rate of 22.48 %, and is further
expressed as pension costs of 14.65% and healthcare costs of 16.11%.
CITY OF SEWARD, ALASKA
,
RESOLUTION 2012 -011
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Section 1. The 2011 Operating Budget shall be retroactively amended to appropriate
$540,733.73 from the State grant revenues accounts x01 - 0000 - 4350 -0150 to various department
retirement expense accounts allocated on a pro -rata basis, to accounts x01 -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 13
day of February, 2012.
THE CITY OF SEWARD, ALASKA
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David Seaward ayor
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AYES: Valdatta, Keil, Shafer, Casagranda, Terry, Seaward
NOES: None
ABSENT: Bardarson
ABSTAIN: None
ATTEST:
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Jo nna Kinney
C t Clerk
(City Seal) ♦♦ ♦S c ?P`1;
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COUNCIL AGENDA STATEMENT
Meeting Date: February 13, 2012 i o SE
Through: James Hunt, City Manager '�'
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From: Kristin Erchinger, Finance Director
Agenda Item: 2011 Budget Amendment appropriating the State PERS on- behalf
contributions in the amount of $540,733.73
BACKGROUND & JUSTIFICATION:
The 2010 State legislature passed House Bill 300, appropriating $165,841,171 directly to PERS
on behalf of Alaska municipalities, to help offset retirement liability costs to local taxpayers. The
City of Seward's portion of this appropriation (for the period January 1 through June 30, 2011) is
$246,273.59. 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 as both a revenue and an
expense /expenditure on the City's financial statements.
The 2011 State legislature passed House Bill 108, appropriating $242,609,397 directly to PERS
on behalf of Alaska municipalities, to help offset retirement liabilities in the PERS defined benefit
plan. The City of Seward's portion of this appropriation (for the period July 1, 2011 through
December 31, 2011) is $294,460.14. In 2008, Senate Bill 125 was passed, capping the annual
PERS contribution rates for employers at 22 %, and creating a cost - sharing plan in which all
employers pay the same employer contribution rate. This was a departure from the previous plan,
in which every employer was assigned a different employer cost rate, depending on their
individual experience.
The Alaska Retirement Management Board has established the following PERS employer
contribution rates:
2009 2010 2011 2012
Normal Cost 13.72% 9.46% 9.33% 8.28%
Past Service Cost 21.50% 18.19% 18.63% 22.48%
Total Rate 35.22% 27.65% 27.96% 30.76%
Pension Cost 10.91% 10.25% 9.98% 14.65%
16.1 .98%
Healthcare Cost 24.31% 17.40% 17.98%
Total Rate 35.22% 27.65% 27.96% 30.76%
State On- Behalf 13.22% 5.65% 5.96% 11.49%
Rate
State On- Behalf $420,411.62 $265,843.03 $540,733.73 TBD
Amount (CY)
The State is on a fiscal year ending June 30, so the City applies the above 2011 rate to employee
wages for the period January 1 through June 30, 2011, and the above 2012 rate to wages for the
period July 1 through December 31, 2011. For the first half of the City's calendar year 2011, the
State's contributions to PERS on the City's behalf totaled $246,273.59, and for the second half
the contribution was $294,460.14 for a total calendar year contribution of $540,733.73.
33
CITY OF SEWARD
RESOLUTION 2012 -
PAGE TWO
Municipal governments in Alaska have benefited significantly by the State's coverage of PERS
costs in excess of 22 %. However, it is important to note that the legislature may, at any time,
modify the amount of subsidy provided by the State toward PERS contributions. Any future
reduction in the State's current practice of covering contribution rates exceeding 22 %, will equate
to equivalent additional required contributions by the City.
CONSISTENCY CHECKLIST: Yes No N/A
1. Comprehensive Plan (document source here): X
2. Strategic Plan (document source here): X
3. Other (list): X
FISCAL NOTE:
The State's contribution of $540,733.73 is considered a State grant award and is recognized as
such on the City's financial statements, with an equivalent amount recorded as retirement
expense /expenditure, allocated on a pro -rata basis, to each department's operating budget.
Approved by Finance Department 4,4/4 d
ATTORNEY REVIEW: Yes N o_
RECOMMENDATION:
Council approve Resolution 2012 - " retroactively amending the 2011 Operating Budget by
appropriating $540,733.73 from State grant revenues, to various fund retirement expense
accounts, on a pro -rata basis, to accounts X01 -XXXX -5060.