CITY COUNCIL 2017/06/19 Minutes (2)The City of Lake Forest
CITY COUNCIL WORKSHOP
Proceedings of the Monday, June 19, 2017
City Council Workshop Meeting – City Hall, 220 E. Deerpath 4:00 p.m.
CALL TO ORDER AND ROLL CALL: Honorable Mayor Lansing called the meeting to order at
4:01pm, and Assistant to the City Manager called the roll of Council members.
Present: Honorable Mayor Lansing, Alderman Beidler, Alderman Morris, Alderman Newman,
Alderman Rummel, Alderman Tack, Alderman Reisenberg, Alderman Moreno and Alderman
Buschmann.
Also present were: Robert Kiely, City Manager; Mike Strong, Assistant to the City Manager;
Catherine Czerniak, Director of Community Development; Elizabeth Holleb, Finance Director;
Susan Banks, Communications Manager; Sally Swarthout, Director of Parks & Recreation;
Michael Thomas, Director of Public Works; Karl Walldorf, Chief of Police; Rob Copeland, Deputy
Chief of Police; Kevin Cronin, Deputy Chief of Fire; Mike Gallo, Battalion Chief of Fire.
There were approximately 20 people in the audience.
CALL TO ORDER AND ROLL CALL 4:01 p.m.
1. Pension Primer
Mayor Lansing, welcomed the Council, Members of the Community, and City Staff to the
Workshop meeting. He stated that there will be no decisions made by the Council at this
meeting. Instead the meeting is meant to present information and to re-open dialogue among
the City Council on pensions. He introduced Elizabeth Holleb, Finance Director, to lead the
presentation.
Alderman Buschmann arrived at 4:03 p.m.
Alderman Tack arrived at 4:05 p.m.
Elizabeth Holleb, Finance Director, gave an overview of the presentations, studies and actuarial
reports that were provided to City Council in their agenda packets and stated that she would
run through the presentations and will allow for questions to be asked during the
presentations. She began the presentation by reviewing the three pension plans (i.e. Police,
Fire, IMRF) that the City provides including information on plan types, benefit types,
contribution levels, and benefit levels. She reviewed the portability and termination standards
for each and stated that the investment authority for each, which was added to the
presentation, is important considering the City is limited in how police and fire pensions can be
invested. Those plans are regulated largely by State Statute, which can impact the prospects of
Proceedings of the Monday, June 19, 2017
City Council Workshop Meeting
their returns. As a result, the funded ratios for both of these pensions have been similar. She
added that with the adoption of a Tier 2 system, the City is seeing growth in Tier 2 which will
have long-term benefits for reducing the pension obligations for the City; however, we are
many years away from seeing a dramatic impact on the City’s contributions to these programs.
She stated that the City adopted a policy to achieve 100% funded ratios for both systems by
2040, which is what drives the annual contribution levels and property tax levy requirements.
Alderman Moreno arrived at 4:40 p.m.
COUNCIL ACTION: Informational Item for Discussion. No Council action was taken.
2. Summary of Police/Fire Preliminary Actuarial Results
Elizabeth Holleb, Director of Finance, provided a brief presentation on the preliminary results of
the Police and Fire actuarial valuations. She stated that the results are based on current
pension funding policy. She reviewed the Police/Fire funds and stated that since April 2016,
both funds saw increases in net assets, accrued liabilities and funded ratios. In addition, she
stated that the investment return for the Police Fund was 9.67% over the past year, and has
averaged a 6.87% return over the past five years. The Fire Fund saw a 9.69% return over the
previous year, and has averaged 6.47% over the previous five years.
COUNCIL ACTION: Informational Item for Discussion. No Council action was taken.
3. Alternative Scenarios for Public Safety Pension Plans
Elizabeth Holleb, Finance Director, introduced Jason Franken, of Foster & Foster, and stated he
would be discussing the actuarial assumptions and amortization payments for the funds. She
stated that City staff was going to be looking for feedback from the City Council regarding
potential modifications to the assumptions.
Jason Franken, Foster & Foster, provided some background on the agenda item and stated that
the actuarial assumptions help determine liabilities and contribution amounts for the pension
plans; and should be reviewed and amended, as desired, to ensure they remain realistic so that
they can provide a more reliable sense of security for funding the plans. He briefly reviewed
the set of assumptions that are used to determine contribution levels for each plan. These
included investment return, salary increase, payroll growth, mortality, retirement, turnover,
disability, and others. He stated that there were three assumptions that the City may want to
review or further discuss, including:
• Mortality Assumption – This determines the rate at which members and beneficiaries
pass away. He stated that the Society of Actuaries releases new mortality tables every
10 years to reflect the longer life expectancies. The City currently utilizes the 2000
table; however, a new table was released in 2014, and a specific public sector table is
expected to be released next year. He stated that the new table is a bit aggressive, so
Proceedings of the Monday, June 19, 2017
City Council Workshop Meeting
his recommendation was to make standard adjustments to the 2000 table in line with
the Scale BB. This would result in an increase in the liability for Fire plan by $2.1 million
and contribution by $135,000; and Police Plan’s liability by $2.4 million and contribution
by $155,000.
• Salary Increase Assumption – He stated that this assumption is probably the second
most important assumption used by an actuary, and it determines how an individual’s
salary will increase over his or her career. He stated that flat salary increases do not
typically reflect experience due to different step programs, bonuses, and other types of
compensation plans. He stated that his recommendation would be for the City to
switch to the Department of Insurance (“DOI”) service-based table that starts at 11% or
12% and grades down to 4%. He stated that this would decrease the Fire Plan by
$676,000 in liability and reduce its contribution requirement by $75,000; and decrease
the Police Plan by $1.2 million in liability and reduce its contribution requirement by
$120,000.
• Payroll Growth Assumption – He stated that the payroll growth assumption is the
extent to which salary increases determine how a department’s payroll grows. He
stated that as higher paid members retire, they are replaced with salaried positions
that are at a lower level than the salary increase assumption (newer employee salaries
grow at a lower rate than veteran or retiree levels). He stated that this assumption is
what drives the amortization payments. He stated that if the payroll growth rate were
set higher, the future liability would be increased but the current amortization payment
could be lowered which provides greater generational equity with the contribution
payment. He stated that the City may want to discuss how this assumption could be
set, including a level dollar amount or percentage of payroll (i.e. 0, 2.5, or 5.5%).
Elizabeth Holleb, Finance Director, reviewed the three assumption discussion points and
presented an exercise for understanding their impacts on the liability and contributions for
each plan.
COUNCIL ACTION: The City Council was favorable to implementing the recommendations for
the mortality table and salary increase assumptions. However, requested additional
information on the payroll growth assumption.
Mayor Lansing requested that the actuary develop a projection of the impact on the liability
amortization for the pension funds assuming the City contributes an additional amount from
fund balance reserves.
4. Adjournment
There being no further discussion. Alderman Reisenberg made a motion to adjourn, seconded
by Alderman Newman. Motion carried unanimously by voice vote at 6:00 p.m.
Respectfully Submitted,
Proceedings of the Monday, June 19, 2017
City Council Workshop Meeting
Mike Strong
Assistant to the City Manager
A complete Binder including all slides and handouts is available at City Hall.