COUNCIL WORKSHOP

A Council Workshop was held on November 3, 2008 at 7:30 p.m. with Council President Hogan presiding. Council members present were Mr. Leary, Mrs. Russell, Mr. McGlumphy, Mr. Slavin, Mr. McGiffin, Mrs. Williams, Mr. Salters, and Mr. Ruane.

Council staff members present were Mr. DePrima, Mrs. Mitchell, and Mrs. McDowell.

AGENDA ADDITIONS/DELETIONS

Mr. Slavin moved for approval of the agenda, seconded by Mr. Salters and unanimously carried.

COLA/Pension Plan

During the Civilian Pension Board Meeting of March 26, 2008, members were presented with various options for alternative COLA funding and it was suggested that the options would be presented to Council for a final determination and that the Board should prioritize the options for their consideration. After much discussion, it was suggested that a workshop be scheduled with City Council and that Mr. Hogan (as Chairman of the Civilian Pension Board) would work with the Treasurer/Controller to prepare a presentation.

Council President Hogan relinquished the chair to Councilman Salters since he would be making the City’s Pension Plan Presentation.

Council President Hogan reviewed the Defined Benefit Pension Plan Presentation (Exhibit #1), which included details regarding the Deferred Compensation Plan (Money Purchase Plan - Internal Revenue Code 401a). He noted that a petition has been submitted by several employees requesting that the City re-open the Defined Pension Benefit Plan; however, at this time, it has been provided for informational purposes only.

Mrs. Mitchell, Controller/Treasurer, reviewed the Actuary Analysis information provided in the Presentation (see Exhibit #1).

Council President Hogan stated that although no decision will be made at this time, there are two (2) major issues to be discussed: 1) the closing of the Defined Pension Benefit Plan; and 2) Cost of Living Adjustments for the Pension Plans.

Referring to the Actuary Analysis, Mr. Leary noted that there is a 41.84% funding ratio and questioned if it has decreased. Responding, Mrs. Mitchell stated that on July 1, 2007 the funding ratio was 45%; therefore, there has been a 3% decrease as of July 1, 2008 (funding ratio rounded to 42%). She stated that a more acceptable level, according to Mr. Pike, the City’s Actuarial, would be a minimum of 70%. The plan has been underfunded for several years. Mr. Leary stated that the unfunded liability is a grave issue that members should address prior to taking any further action.

Responding to Mr. Salters, Mrs. Mitchell explained that the column titled “Increasing Amortization” on the graph depicting the annual payments to amortize the $24,418,821 unfunded liability represents the payments necessary if the plan remains opened and the column titled “Level Dollar Amortization” represents the payments necessary if the plan is closed. As indicated, she confirmed that the annual payments would fully fund the plan in 16 years if there are no changes to the assumptions.

At the request of Mrs. Williams, Mrs. Mitchell stated that she would provide the number of employees that are added per year and how it changes the amount of unfunded liability.

Mrs. Francis Hettinger, 63 Sackarakin Avenue, relayed appreciation to the City, as a retiree, for providing retirees COLA’s and lump sum payments. She noted that at one time both the Police and Defined (Civilian) Pension Plans were identical; however, the Police Pension Plan now provides for an automatic COLA annually. Although she understands there is the concern regarding the unfunded liability, she suggested that consideration be given to providing an automatic COLA annually to the members of the Defined Pension Plan similar to the Police Pension Plan. Mrs. Hettinger also relayed her feeling that due to its reliability, the Defined Benefit Plan should not be closed.

Mr. Joe Klenoski (retired Police Chief) indicated that since 1978, the Police Pension Plan has included a 2.5% automatic COLA annually.

Referring to the Police Pension Plan, Mrs. Mitchell explained that the automatic annual COLA was a negotiated item which resulted from union contract negotiations and that she is not aware of the benefit(s) that were traded. She stated that the State of Delaware gives the City the funds necessary for the COLA and that the City does not have any budget impact resulting from the Police COLA.

Mr. Les Blakeman, 209 Falmouth Way, stated that there are 66 retirees making less than $10,000 per year, 11 retirees making less than $12,000, and 44 retirees making less than $20,000, which represents 121 retirees of the 172 retirees that are receiving less than $20,000 per year.

Mr. Robert Tice (retiree) advised members that he served on the Civilian Pension Board in 1994 and in an attempt to change the formula, the 457 Plan was established. It was anticipated that, over time, more employees would elect the 457 Plan and that if more than 50% of the employees elected the 457 Plan, the City would phase out the Defined Benefit Plan.

Council President Hogan stated that this topic will continue to be discussed amongst the Pension Board as well as City Council.

Mr. Leary moved for adjournment, seconded by Mr. Slavin and unanimously carried.

Meeting Adjourned at 8:09 P.M.

                                                                                    TRACI A. McDOWELL

                                                                                    CITY CLERK

All orders, ordinances, and resolutions adopted by City Council during their Workshop Meeting of November 3, 2008, are hereby approved.

                                                                                    CARLETON E. CAREY, SR.

                                                                                    MAYOR

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Exhibits (Attached to original and file copy)

Exhibit #1 - Defined Benefit Pension Plan Presentation