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HomeMy WebLinkAboutRes2017-007Sponsored by: Hunt CITY OF SEWARD, ALASKA RESOLUTION 2017-007 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, RETROACTIVELY AMENDING THE 2016 BUDGET TO RECORD EXPENDITURES OF $155,298.22 PAID BY THE STATE OF ALASKA ON BEHALF OF THE CITY TOWARD THE CITY'S PUBLIC EMPLOYEES RETIREMENT SYSTEM LIABILITY FOR THE PERIOD JANUARY THROUGH JUNE, 2016, AND APPROPRIATING FUNDS WHEREAS, in accordance with the 2015 Alaska State Legislature's passage of House Bill 2001, the State of Alaska Department of Administration, Division of Retirement & Benefits ("DRB") contributed $155,298.22 on behalf of the City of Seward from January through June, 2016 on the City of Seward's behalf. The Alaska Retirement Management Board set the actuarially required rate at 27.19%. The State's contribution was 5.19%, reflecting the difference between the legislative on -behalf rate of 27.19% and the 22% employer "capped" rate; and WHEREAS, this contribution represents $108,823.59 toward pension costs and $46,474.63 toward healthcare costs, on behalf of the City; and WHEREAS, in accordance with generally accepted accounting principles, the City must record payments made on its behalf, and must therefore amend the 2016 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, the City will further retroactively amend the 2016 Budget to reflect the State payments made on behalf of the City for the period July through December, 2016; and WHEREAS, failure to amend the budget to reflect the State's payments on -behalf of the City, would 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: Section 1. The 2016 Operating Budget shall be retroactively amended to appropriate $155,298.22 as follows: 1) $105,841.94 from State PERS On -Behalf Grant Revenues account 01000-0000-4201 to General Fund/department expense accounts xxxxx-xxxx-6201 allocated on a pro -rata basis, per the attached schedule; 2) State PERS On -Behalf Grant Revenue account 11000-2000-5920 totaling $15,517.80 for Harbor Fund; 3) account 15000-0000-5920 totaling $23,819.56 for Electric Fund; 4) 17000-0000-5920 totaling $5,734.18 for Water Fund; and 18000-0000-5920 totaling $4,384.74 for Wastewater Fund. CITY OF SEWARD, ALASKA RESOLUTION 2017-007 Section 2. This appropriation is retroactive to December 31, 2016, and the resolution shall take effect immediately upon adoption. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 23rd day of January, 2017. THE CITY OF SEWARD, ALASKA an Bardarson, Mayor AYES: Keil, McClure, Squires, Altermatt, Slater, Bardarson NOES: None ABSENT: Casagranda ABSTAIN: None ATTEST: W41 . WE (City Seal) of sFh,•• SEAL ; n W • A e e ti. TF OF •488aa9306` 1 1 1 AGENDA STATEMENT Meeting Date: January 23, 2017 ` Through: James Hunt, City Manage From: Kristin Erchinger, Finance Director Agenda Item: 2016 Retroactive Budget Amendment appropriating State PERS on -behalf contributions of $155,298.22 for Janu2a through June 2016 BACKGROUND & JUSTIFICATION: The 2015 State legislature passed House Bill 2001, appropriating $99,166,576 directly to PERS on behalf of Alaska municipalities and PERS employers, 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, 2016) is $155,298.22. These amounts are 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 required to account for the State's contribution as both revenue and an expense/expenditure on the City's financial statements. 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 attached spreadsheet lists the PERS employer contribution rates as established by the Alaska Retirement Management Board, itemizing the portion of the overall rate covered by the State of Alaska on -behalf of municipal employers, as well as a history of the amount paid by the State on behalf of the City of Seward since 2006. 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. As of this date, for every I% increase in the employer contribution rate cap (i.e. from 22% to 23%), the City's annual PERS contributions will increase by approximately $47,000. INTENT: The intent of this action is to retroactively amend the 2016 budget to account for State contributions on behalf of the City for contributions to the public employee's retirement system for the period January through June, 2016. CITY OF SEWARD RESOLUTION 2017 - FISCAL NOTE: The State's contribution of $155,298.22 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. Since 2006, the State of Alaska has contributed a total of $5,623,534.22 toward the City of Seward's portion of the Public Employees Retirement System unfunded liability, through June 30, 2016. Approved by Finance Department ATTORNEY REVIEW: Yes No RECOMMENDATION: Council approve Resolution 2017- amending the 2016 Operating Budget by appropriating $155,298.22 from State grant revenues, to various fund retirement expense accounts, on a pro - rata basis.