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HomeMy WebLinkAboutRes2006-015 I I I Sponsored by: Corbridge CITY OF SEWARD, ALASKA RESOLUTION 2006-15 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AMENDING THE 2005 BUDGET AND APPROPRIATING $192,943 FROM THE STATE OF ALASKA TO THE PUBLIC EMPLOYEES RETIREMENT SYSTEM ON BEHALF OF THE CITY OF SEWARD, PER SENATE BILL 46 WHEREAS, the Alaska State Legislature passed Senate Bill 46 in 2005 resulting in First Special Session Legislative Appropriation 05 Section 59, authorizing funding to cover the annual 5% increased PERS employer costs for political subdivisions of the State of Alaska; and WHEREAS, the annual cost increases for Seward in 2005 amounted to approximately $192,943, and that amount was appropriated directly from the State to the Division of Retirement and Benefits, on behalf of the City; and WHEREAS, in addition to the direct appropriation to PERS on the City's behalf, the City of Seward elected to pay the 5% increase in PERS contribution rates based on an actuarial report from the State of Alaska PERS dated June 30, 2004, reporting the City of Seward's unfunded actuarial accrued liability of $4,397,000. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, that: Section 1. The 2005 Operating Budget shall be amended by appropriating $192,943 from the General Fund state grant revenues account 101-0000-4680-0200 to various department retirement expense accounts allocated on a pro-rata basis, to accounts x01-xxxx-5060. Section 2. This resolution shall be retroactive to December 31, 2005. Section 3. This resolution shall take effect immediately upon adoption. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 13th day of February, 2006. THE CITY OF SEWARD, ALASKA V1~M~ CITY OF SEWARD, ALASKA RESOLUTION 2006-15 I AYES: NOES: ABSENT: ABSTAIN: Dunham, Valdatta, Lorenz, Thomas, Schafer, Bardarson, Shafer None None None ATTEST: ~.iI-k~~acfr'fKl -fJy Jean Lewis J City Clerk, CMC (~\~'SWJY~",~ , ,...,.~ ;.., "'A ~~ '. ,*"-1 \_.~l!- -4.,.,1-"',' "'.. , ..<,. ,......' ~:..t1~..., \. ~ ." no -0. -1_. ., (f ....o?. ~ ~ ..... :A ~ / ......0 .~&.V..,. of l.::$" '0.. ~ :: --t>- ~.- " . SEAL · ... ~ 0 : 1,. . ! . : ,~ ~ : : ~ \ -.- I ~ ... ~. VV, f't, . ~ ~ t;:;....~~ 1 '\~~...:L~ $' " -1',~......1.... e;..."". ',. ~ , k \..~.J .~ ~i~'1' OF t., ..y "'''u~:oe''\. I I COUNCIL AGENDA STATEMENT Meeting Date: February 13, 2006 Through: Clark Corbridge, City Manager From: Kristin Erchinger, Finance Director Agenda Item: 2005 Budget Amendment appropriating State PERS contribution per SB46 BACKGROUND & JUSTIFICATION: In 2005, the State legislature passed Senate Bill 46, 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 $192,943. This amount was 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 elected to continue to pay the 5% annual rate increase in 2005, 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. 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. CONSISTENCY CHECKLIST: Yes No 1. Comprehensive Plan 2. Strategic Plan 3. Other 4. Not applicable X FISCAL NOTE: The State’s contribution of $192,943 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 ___________________________ RESOLUTION 2006- State PERS Contribution per Senate Bill 46 Page Two RECOMMENDATION: Council approve Resolution 2006-15, amending the 2005 Operating Budget by appropriating $192,943 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, effective retroactive to December 31, 2005.