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HomeMy WebLinkAboutR-93-0284a--93w332 4/30/03 RESOLUTION NO. 9 3- 284 A RESOLUTION, WITH ATTACHMENT(S), AUTHORIZING AND RATIFYING, IN PRINCIPLE, THE MEMORANDUM OF UNDERSTANDING BETWEEN THE CITY MANAGER AND THE FRATERNAL ORDER OF POLICE, LODGE #20, AND THE INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS, LOCAL #887, MODIFYING THE FUNDING SECTION OF THE GATES SETTLEMENT; REDEFINING CERTAIN FUNDING MECHANISMS RELATED TO COST - OF -LIVING ADJUSTMENTS AND ASSET VALUATION METHODS; RESOLVING AN AMORTIZATION ISSUE RELATING TO FISCAL YEAR 1992-1993 ACTUARIAL VALUATION REPORT OF THE FIRE FIGHTERS' AND POLICE OFFICERS' RETIREMENT TRUST AS SET FORTH IN THE TERMS AND COINDITIONS OF THE ATTACHED MEMORANDUM OF UNDERSTANDING; DIRECTING THE CITY MANAGER TO SECURE APPROVAL OF SAID MEMORANDUM OF UNDERSTANDING BY THE DIVISION OF RETIREMENT, SUBJECT TO ALL CONTINGENCIES CONTAINED THEREIN; FURTHER, DIRECTING THE CITY ATTORNEY TO PURSUE MODIFICATION OF THE GATES JUDGMENT AND TO DRAFT AN ORDINANCE IN ACCORDANCE WITH THE MODIFICATIONS OF SAID GATES SETTLEMENT AGREEMENT. BE IT RESOLVED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA: Seotion 1. The Commission of the City of Miami, Florida, hereby ratifies and aooepts, in prinoiple, the Memorandum of Understanding entered into between the City Manager and the Fraternal Order of Polioe, Lodge #20, and the International Assooiation of Fire Fighters, Looal 4887, modifying the funding IAiiACNMENT (S)I COFFiAi4ED cm COMmSS cw ME MUG OF MAY 13 W3 f 93-- 284 section of the Gates settlement; redefining certain funding meohanisms related to oost-of-living adjustments and asset valuation methods; resolving an amortization issue relating to fiscal year 1992-1993 actuarial valuation report of the Fire Fighters' and Police Offioers' Retirement Trust as set forth in the Memorandum of Understanding dated April 6, 1993, attached hereto and incorporated by reference. Section 2. The City Manager is directed to secure approval of said Memorandum of Understanding by the Division of Retirement subject to all contingencies contained therein. Section 3. The City Attorney is directed to pursue modification of the Gates Judgment and to draft an ordinance in accordance with the modification of said Gates settlement agreement. Section 4. This Resolution shall become effective immediately upon its adoption. PASSED AND ADOPTED this 13th day of _ May , 1993. VIER IOUARIft, MAYOR ATTE MATTY HIRAI CITY CLERK BUDGETARY REVIEW: ftn MANORAR S. SURAN ASSISTANT CITY MAN ER -2- rod: ul PISAAROJI MUM: C �A , DIRRC�fR DEPAR OF FINANCE p29PARED AND APPROVHD SY : IRI AITY' ATTORNEY AS TO FORM AND CORRECTNESS: CITY ATT Y RI:bP:os :H3590 -3- Amortization Resolution For the 1992-93 Fiscal Year, the past service amortization component of the City's contribution will be based on the 5% increasing amortization approach, resulting in a reduction in the City's contribution requirement for such year of approximately $1.3 million. The City, the Unions, and the PIPO Board agree that this resolves all outstanding funding disputes for such year. Agreement Contingencies This agreement is contingent upon: (1) ratification by the City Commission; (2) ratification by the union membership, Pursuant to the legal requirements for collective bargaining; (3) ratification by the Hoard of Trustees of "�iPO; (4) approval by the Division of Retirement as to the legal requirements for funding; and (5) modification of the Final Judgement in Gates v. City of Miami by the Circuit Court to conform to the terms of this -'agreement after notice to the class of retired employees and hearing. - 4 - AGEt1:U to this day of 1993, by and between the respective parties through an authorized repre— sentative or representatives of the Associations and by the City Manager. ATTEST: t ATTEST: ATTEST: / FRATERNAL O DER OF POLICE, LODGE 100- es dent ON THE PART T1IE CITY OF MIAMI, wr FLORJTDA City Manager • ��'�5)PE AS AND CORRECTNESS: • - 5 - 9 3 ,m i MSA0MM" OLD UNDEAS'r'ANDINd It is hereby agreed that the Fraternal order of Police, Lodge #20 ("FOP"), and the International Association of `ire- fighters, Local #587 ("IAFF"), and the City of Miami ("City") shall enter into this Memorandum of Understanding to modify the funding section of the Gates Settlement; to redefine certain funding mechanisms related to cost -of -living adjustments ("COLA") and asset valuation methods; and to resolve an amortization issue related to the Fiscal Year 1992-93 actuarial valuation report of the Firefighters' and Police Officers' Retirement Trust ("FIPO"). Modification in Gates v. City of Miami The FOP and IAFF and the City will cooperate and present to the Circuit Court a joint motion for 66dification of Final Judgment in Gates v. City of Miami. COLA Funding The COLA shall be funded by a percentage of any annual excess investment return. The excess return will be determined as the difference between the actual return, net of investment expenses, and the lesser of: (1) a 7.75% time -weighted rate of return on the actuarial value of assets; or (2) the 'currecit actuarial interest assumption, applied on a time -weighted basis to the actuarial value of assets. The excess earnings going into the COLA fund shall be used to funs] a minimum annual payment of $2.5 million, increasing by 4% compounded per year. To the extent necessary, the City will fund the portion of the minimal annual payment not funded by annual excess earnings no later than January 1st. 93- 28 S , { N �4 T1ie first year's actual return shall be fused on the time weighted gate of (return on the actuarial value of the assets from October 1, 1991, through September 30, 1992. Thereafter, the actual rate of return will be based on the prior fiscal year to be used in the succeeding fiscal year. The percentages of such excess return to be transferred Ito the COLA fund shall be determined as followss Excess Return percentage to be Transferred First 2.5% 75% Next 2.5% M Next 2.'5$ 25% Remainder 0% The -transfers shall be made by the %PO Board as soon as practicable after the beginning of each fiscal year, but not later than January 1st, and shall be transferred only if FIPO remained in a net positive experience position, determined on a cumulative basis -,from October 1, 1982. The determination of the net experi- ence position will be based on the difference between the actual unfunded actuarial liability and the expected unfunded actuarial liability, adjusted for any changes in benefits or assumptions, calculated under the a9gregate entry age normal cost method. The COLA fund will be included with FIYO funds for investment purposes, with separate accounting maintained for administrative purposes. Earnings of the COLA fund will `not be TM'S considered for determining excess investment earnings. tn�q b'Yl For accounting purposes, all assets in the COLA fund at a �. 2 :xufY tea-; 9 .III � 111111II �1 �i� ' CITY OF MIAMI, FLORIDA September 30, 1993, will be used only for COLA benefits. All COLA benefits previously granted will continue to be paid. The actuarial interest and mortality assumptions used for PIPO will be used for COLA. Cola benefits will be determined on a defined benefit basis, based on the minimum City scheduled contribution. The Active member contributions into the COLA fund will terminate on January 1, 1994. Asset Valuation. Method The actuarial methodology for evaluating assets shall be changed to moving market value averaged over three years, from September 30, 1992, prospectively. (As of October 1, 1992, market value shall be used; as of Octobe'P. It 1993, a two-year moving average shall be used; as of October 1, 1994, and thereafter, the three-year moving average shall be used.) Average of ratios of market to book values as of current and two most,. recent September 30's. Average ratio is applied to book value at current September 30. The result cannot be greater than 120% ofmarketvalue or less than 80% of market value. Cost Method The aggregate actuarial cost method will be applied for costs as of October 1, 1993, and each October Ist thereafter, based on demographic and asset data as of the previous September 30, adjusted for interest from that date to reflect payment timing. CITY OF MIAM1, FLORIDA INTER -OFFICE MEMORANDUM TO The Honorable Mayor and Members DATE � April 26, 1993 FILE of the City Commission sueMECT Resettlement and Modifi- cation of Gates v. of Miami. FROM . REFERENCES: Cesar H. Odio — City Manager ENCLOSURES: RECOMMENDATION It is recommended that the City Commission approve the attached resolution ratifying the April 6, 1993 Memorandum of Understanding between the Fraternal Order of Police Lodge #20 and the International Association of Firefighters Local #587 and the City of Miami to modify the funding section of the Gates Settlement; to redefine certain funding mechanisms related to - cost -of -living adjustments and asset valuation methods; and. to resolve an amortization issue related to the Fiscal Year-1992-93 actuarial valuation report of the Firefighters' and Police Officers' Retirement Trust. BACKGROUND On April 6, 1993, the Fraternal Order of Police (FOP), the International Association of Fire Fighters (IAFF), and the City of Miami entered into an agreement to modify certain provisions of the Judgment in Gates v. City of Miami as related to the Firefighters'" and Police Officers' Retirement Trust (FIFO) through a Memorandum of Understanding. The effect of these modifications upon the City's financial condition will be the elimination of a S128 million unfurded lfab;�;ty and the stabilization of annual Pension costs. In general, the provisions of the Judgment which were modified as a result of the collective bargaining process are as follows: redefine the asset valuation method, redefine the actuarial cost method, mechanisms. related to cost -of -living revise certain funding adjustments (COLA), and resolve an interpretation to the Fiscal Year 1992-93 FIPO Trust. x of an amortization issue-,ralated actuarial valuation report-Qf;the The Honorable mayof and Members of the City Commission April 7, 1993 Page 2 The valuation of the FIFO Trust's assets have been changed to initiate a new moving market asset value averaged over three years from actuarial asset value at cost. This redefinition will immediately increase the value of the Trust's assets to the current market value of $492 million from $477 million. The aggregate actuarial cost method will be applied for costs as of October 1, 1993, and each October 1st thereafter, based on demographic and asset data as of the previous September 30th; adjusted for interest from that date to reflect payment timing. Therefore, all liabilities will be amortized over the average future working lifetime of the group which is approximately nine years. The COLA will be funded by a percentage of the Trust's annual investment return in excess of the assumed investment return. Excess investment return shall be utilized to fund a minimum annual payment of $2.5 million; increasing by 4% compounded annually. To the extent necessary, the City shall fund that portion of the minimal annual payment not funded by annual excess investment return. The percentages of excess return to be transferred to the COLA Fund shall be determined as follows: Percentage to be AgggN,s Return Transferred First 2.5% 75% Next 2.5% 50% Next 2.5% 25% Remainder 0% The COLA Fund will now be included with FIPO general trust funds for investment purposes. The two -percent employee COLA contribution will be terminated effective January 11 199t. Pursuant to the Gates Settlement, a COLA Committee meeting will be'convened on April 28, 1993 to initiate definition of the COLA benefit. 93— 284 The Honorable Mayo, and Members of the City Commission April 7, 1993 Page 3 The City initiated formal arbitration proceedings with the FIPO Trust with respect to the past service amortization component of the City's contribution. The Memorandum of Understanding resolves the arbitration and delineates the City's contribution as the 5% increasing amortization approach resulting in a reduction in the City's contribution requirement by $1.3 million for Fiscal Year 1992-93. Modification of the_Funding Section of the_Judgent As a result of the aforementioned modifications, the burdensome schedule of future payments to reduce the unfunded liability which increase at the rate of 5% per year will be eliminated as well as the associated $128 million Gates unfunded liability. The Memorandum of Understanding will be subject to approval by the Hoard of Trustees of the FIPO Trust on May 6, 1993 and ratification by the FOP and IAFF union membership on May 7, and May 10 and 11, 1993 respectively prior to City Commission ratification on May 13, 1993. This agreement is contingent upon% (1) approval by the Florida State Division of Retirement as to legal requirements for funding, and (2) modification of the Judgment in Gate v. City of Miami by the Circuit Court after notice to the class of retired employees.