MINUTES
COUNCIL OF COLUMBUS, GEORGIA
SPECIAL CALLED MEETING
APRIL 17, 2012
A Special Called meeting of the Council of Columbus, Georgia was called to
order at 5:30 P.M., Tuesday, April 17, 2012, on the Plaza Level of the
Government Center, Columbus, Georgia. Honorable Teresa Pike Tomlinson, Mayor,
presiding.
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PRESENT: Present other than Mayor Tomlinson was Councilors R. Gary Allen, Mike
Baker, Glenn Davis, Berry H. Henderson, Bruce Huff, Judy Thomas and Evelyn
Woodson. City Manager Isaiah Hugley, City Attorney Clifton Fay, Clerk of
Council Tiny B. Washington and Deputy Clerk of Council Sandra Davis were also
present. Mayor Pro Tem Evelyn Turner Pugh took her seat at the Council table at
5:55 p.m. Councilor Jerry Barnes took his seat at the Council table at 5:37
p.m.
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ABSENT: Councilor Charles E. McDaniel, Jr., was absent.
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INVOCATION: Led by Mayor Tomlinson.
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PLEDGE OF ALLEGIANCE: Led by Wynnbrook Christian School After-School Program.
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2012 SOUTHERN PROFESSIONAL HOCKEY CHAMPIONSHP:
Mayor Tomlinson said there is going to be a community celebration down at
the
Civic Center on tonight from 6:00 ? 8:00 p.m., which is open to the community
to
help the Cottonmouths to celebrate.
With the members of the Columbus Cottonmouths Hockey team standing at the
Council table, Mayor Tomlinson then read a proclamation, proclaiming April 17,
2012 as Columbus Cottonmouths Day.
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PENSION PLAN DISCUSSION:
Mayor Tomlinson said we have had ongoing discussions about the Pension
plan and said we will open up that discussion on today for the Council to give
their input. She said a lot of discussion has come up about a define benefit
plan. She said Mr. Chuck Carr, who is our actuary is also present here on
tonight. She said in a lot of the update letters, we have talked about the fact
that our pension obligation being 25% of our payroll cost, which is a phenomena
amount. She said the vast majority of that 25% is legacy cost. She said we have
gotten behind in the past, but our plan itself, is not an overly generous plan.
She said if you took away our legacy cost it would be about 8 or 9%.
After making some additional comments regarding the pension plan, Mayor
Tomlinson pointed out that Association County Commissioners of Georgia have a
consultant, Steve Vaughn, who has been working on these kinds of plans with a
lot of other cities in Georgia. She said Councilor Baker had talked with him
and he has provided some information and said she has spoken with Mr. Vaughn on
today and said that he is willing to come down to Columbus, free of charge and
speak with us and provide his perspective about what we are talking and how it
relates to the things he is talking about in other cities.
Mr. Chuck Carr then went into some details in outlining information about
legacy cost.
He also responded to questions of members of the Council with regards to
the total amount of funding that the City will have to include in the budget
for the funding of the plan.
Mr. Carr also made reference to the following information as well that was
provided to the Council in response to Council referrals, in which the
following information as detailed below was highlighted:
Quantify the adverse selection between the 6%/45% Retirement Plan and the
8%/60% Retirement Plan.
The adverse selection is illustrated by the following summary of cost at three
different ages (25, 35, and 50):
60% of pay plan for general employees costs 4.00% of pay at age 25, costs 7.91%
of pay at age 35, and costs 13.66% of pay at age 50
45% of pay plan for general employees costs 3.00% of pay at age 25, costs 5.93%
of pay at age 35, and costs 10.24% of pay at age 50
60% of pay plan for public safety costs 7.97% of pay at age 25, costs 9.96% of
pay at age 35, and costs 13.33% of pay at age 50
45% of pay plan for public safety costs 5.98% of pay at age 25, costs 7.47% of
pay at age 35, and costs 10.00% of pay at age 50
These figures are for new accruals only without any "legacy" cost. So if we
establish a 6% of pay contribution rate for the 45% plan and an 8% of pay
contribution rate for the 60% plan, these rates MAY pay for most of the cost of
each respective plan based on average ages. But if the young employees select
the 45% plan and the older employees select the 60% plan, the overall cost will
be greater than we originally assumed and the City's cost will rise.
Members of the Council made some comments regarding the proposed plan,
after which Mr. Carr responded to questions of members of the Council.
Mayor Tomlinson then went into some details in explaining the chart that
was presented to the Council with regards to the proposed plan and the cost of
the plan.
Councilor Henderson said he believes that any action we take will certain
lessen our obligation expeditiously. He pointed out that the Mayor had alluded
to the fact Councilor Baker had done a little ground work on this matter and
said he would like to commend him on the work done. He said after seeing the
information that he sent out and talking with him about it, even though the
Pension Committee has done a great job, he thinks whichever way it?s goes, and
it will be a very positive
impact on the taxpayers? dollar. He then asked Councilor Baker to make some
comments regarding the information that has been shared with him.
Councilor Baker said he would like to thank Steve Vaughn at ACCG for
helping him to understand this more clearly. He said he had really been
struggling trying to get his arms around this and really needed some help in
understanding this. He said he tried to talk to as many experts that he could
to get as much information as he could to help him understand. He said what he
came to realize after their help and explaining it out to him, we have talked a
lot about actuary calculations, percent of payroll, four, six, eight percent,
60%, 45% as if that was step one. He said maybe we need to step back and take a
look and said maybe that should be Steps 3, 4 and 5 and let?s understand what
are we trying to do and how we need to get there. He said he think where we
start by defining what an appropriate good benefit is for our employees as a
retirement benefit. What do we think it is, as a percentage of the pay they are
earning now? He said is that 60, 70, or 80% or 90%. He said the bench-marks he
seen has been 80 - 90%. He said that is the total retirement benefit.
He said we do provide a social security benefit to the employees as well;
therefore, when you talk about that 80% benefit, if this is what we want to
provide; then we will have to see what percentage of that does social security
covers because we have to pay that as well. He said the benchmarks with respect
to social security, he has seen those benchmarks has being 35-40%; that someone
will rely on or their social security providing them with that part the benefit
when they retire.
Councilor Baker said if we start at 80% and the social security that we
are funding covers forty percent; then that leaves our defined benefit
calculation to provide the other 40% of their retirement. He said if we take
their salary, how we get to the 40% that the defined benefits plan needs to
provide. He said it may calculate to a 40% defined benefit plan, which means
40% of those retirement dollars should come from the plan. Then you take their
salary at 40% and then it would give you a calculation as to how much money we
should provide.
He said we need to decide what we want to provide, before we decide how we
are going to provide. He said if we can get to that, a lot of the other numbers
will fall into place.
Mr. Carr also made some additional comments regarding this matter and
members of the Council also expressing their further views on this subject
matter as well.
After more than an hour of discussion on the proposed pension plan, this
matter was finally concluded.
The following information outlined below was also provided to the Council for
their information, but no formal discussion was held on this particular
information.
What is the additional cost to the city if we offered a 60% retirement benefit
at a 6% employee contribution level for new employees?
Based on the figures cited above using a 35-year old new employee, a 60% plan
for CCG employees? costs about 8% of pay and a 45% plan for CCG employees?
costs about 6% of pay. If the employee is paying 8% or 6%, respectively, then
the net cost to the City is roughly zero. If the employee pays 6% for the 60%
plan, then the City is left with a cost of about 2% of pay for general
employees. The cost to fund this 2% is $2.2 million a year in addition to our
other pension obligations.
3) What is the additional cost to the city if we offered a 60% retirement
benefit at a 4% employee contribution level for new employees?
Using the same numbers as above, a 60% plan for CCG employees with a 4%
employee contribution would leave about a 4% of pay cost for the City to
absorb. For public safety, the City would be absorbing a roughly 6% of pay
cost. 4% of General Government Employees would be $2 million. 6% of Public
Safety Employees would be $3.6 million. This would result in a total of $5.6
million in additional annual pension cost to the City.
Should we offer interest on pension contributions if the funds are withdrawn
prior
to vesting? If so, how much interest should be paid?
Our actuary, Finance Director and Human Resources Director recommend no
interest payment on pension contributions withdrawn prior to vesting. If
Council wants to pay interest then it should be minimal at 1%, or less.
Linking the rate to the earnings of the pension plan will create a significant
administrative burden on making payouts. Also, note that if the city commits
to even a minimal interest return and the fund loses money during that period,
then the city would end up pay a departing employee regardless of the lose.
With negligible savings rates being offered in the market, the city's offer of
a 1% or 2% return could actually encourage an employee to cash out before
vesting.
If the city offers interest on pension contributions withdrawn before vesting,
would the city have to pay interest on the funds even if the retirement fund
lost money or didn?t make a return higher than the funds? investment return?
Yes, unless set up with specific interest exclusions.
Could employees who withdraw funds from the pension plan before they are vested
roll that money over to an IRA or other tax deferred savings vehicle?
Yes, because it is tax deferred, it could be rolled into an IRA.
What is our Deferred Compensation plan? Who administers it? How could we
improve the marketing for this plan so that more people learn of its
risks/benefits?
Our Deferred Compensation plan is a pre-tax savings plan similar to a 401(k)
plan without a matching City contribution. We have 3 active plans (VALIC,
Great West & Nationwide) and 1 inactive plan (Hartford). All plans provide
admin services. To better market the program we think that a single plan
should be selected in a new RFP process that provides comprehensive education
and retirement planning services to employees and offers a more favorable fund
and fee structure for employees. The current fee structure is not very
transparent and may result in lower quality investment options for plan
participants.
Which would have more employee impact a disparity of retirement benefits (45%
v. 60%) or a disparity in income level (6% contribution v. 8% contribution)?
This is really a personal choice. More information may be presented at the
April 10th Council meeting.
If a new employee pays a 6% or an 8% contribution what is the net cost to him
of that contribution when you consider the pre-tax issue and the proposed 4%
raise?
This will vary based on the tax bracket of the employee involved with more tax
savings for those in higher tax brackets. For a typical employee we would be
looking at a combined federal and state tax rate of 18% to 22% with following
outcome:
For 6% (less the 4% adjustment in pay scale) the effective employee
contribution would be approximately 1.6% of pay.
For 8% (again less the 4%) the effective employee contribution would be about
3.2% of pay.
Will an employee continue to be refunded his/her contribution amount if they
leave before vesting?
It has been many years since we had unvested employees that were making
contributions. If we return to a contributory plan there is a legal
requirement to return contributions to employees that leave prior to being
vested.
What is the impact to the city of implementing a 4% raise and 4% contribution
(for existing employees) and a 4% raise and a 6% or 8% contribution (for new
employees) in the first year instead of phasing it in over two years?
There are two significant differences:
There is an estimated additional savings of $322,833 if the 4% contribution and
raise is implementing in the first year instead of being phased in. This would
provide the City a net savings in the first year of $2.2 million.
The immediate implementation is less complex for new employees. If we do 2%
over 2 years then those employees hired in the first year would only have their
contribution offset by a 2% increase in the base pay during that first
implementation year and but would be paying the full contribution. In the
second year of the program, new employees would receive the "catch up" pay
increase but some would complain for their entire career that they made an
extra contribution that those hired the second year did not have to make.
Where is Columbus? Pension Plan in relation to the Georgia Law definition of a
?Large Pension Plan??
As defined by OCGA Section 47-20-84(a) (5) the Columbus Pension Plan is a large
retirement system because our assets total more than $200 million. As such,
Columbus is granted authority to make larger investments in equities and
utilize other investment options that would otherwise not be permitted.
However, depending on how our unfunded liability is calculated, our pension
plan is right at the mark of permitted unfunded liability (30 percent of total
assets), to be eligible to invest in equities at the level it wishes to in
order to maintain adequate growth for the fund.
As a percentage of total annual payroll that are we now contributing to the
plan, and what are the projections under an 8%/60 benefit and 6%/45 benefit.
According to the actuary, our current combined plan cost is 25.81% of payroll.
By adding the 4% employee contribution and applying to the next annual
contribution calculation, we would save almost $5.2 million and reduce
percentage to approximately 20%.
What about the possibility of having a defined benefit plan up to a certain
level of compensation (example $45,000), and any compensation above the
threshold would be optional into a defined contribution plan. Might require a
less contribution than 8% for those who can least afford it but will protect
those that need the defined benefit the most.
We cannot recommend this for current employees as it may run afoul of
applicable laws that protected the vested rights of current employees many of
whom have relied upon a pension formula that is 60% of their salary - not 60%
of the first $45,000 of their salary.
Private sector employers are subject to ERISA and as such this proposal is
illegal under that Federal law. There has been talk for many years about
making governments subject to the same law. If that were to happen it would be
problematic as to how we could convert everyone. We could expect complaints
and possible litigation from current employees who were previously making more
than $45,000.
We are not sure yet about how any proposed savings would compare to the savings
the city would reap from the current proposal being discussed, but we hope to
have that comparison for you on Tuesday. There is a possibility of an exodus
of critical talent from City employment and difficulty filling those positions,
as this type of benefit limitation is not common; in fact, we could find no
other government, which had such a plan limitation by salary.
We could legally change our plan for new employees on a going forward basis,
but the three issues we need to consider are: 1) Does this proposal save us as
much or more than the current proposal; 2) there hidden costs or ramifications;
3) would it effect our ability to recruit and retain employees, or otherwise
negatively affect morale.
17) Eliminate all "phantom" income going into the benefit calculation other
than base pay.
We have taken steps to eliminate large accumulations of vacation time; comp
time and holiday pay so that old tricks of stockpiling these benefits until
near retirement years will have less cost to the city. If Council would like to
eliminate all vacation, comp, and holiday time from retirement benefit
calculation, we can, as we are exempt from ERISA for the time being. There may
be push back from employees, particularly Public Safety.
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NATATORIUM BUSINESS PLAN:
Dr. James Worsley, Director of the Department of Parks & Recreation came
forward and went into much details in outlining the proposed business plan for
the operation of the Natatorium. The following information, detailed below was
provided in Dr. Worsley?s presentation.
Community Input
Friends of the Natatorium
YMCA
AFLAC
Columbus Hurricanes
Columbus Aquatic Club
Muscogee County School District
The last stakeholders? meeting was held on Monday, December 12, 2011. The
listed
stakeholders had an opportunity to provide feedback about the Natatorium
Business Plan.
About the Natatorium
50,000 sq. ft. state of the art facility
10-lane Olympic Pool (50m x 25yrd)
4-lane Therapeutic Pool (20m x 25yrd)
Seating capacity of 900 spectators
Pro Shop
Meeting/Training Room (rental opportunities)
Additional Amenities
Male and Female Locker Rooms equipped with changing areas, showers, restrooms,
lockers.
Family Changing Rooms
Concessions
Natatorium Programs
Swim Lessons (infant ? Adult)
Therapeutic Programs
Senior Aerobics
Water Aerobics
Kayaking
Lifeguard Training
Water Safety Instruction
Hours of Operation
Monday ? Friday 6am to 8pm
Saturday 6am to 8pm
Sunday 1pm to 6pm
Fee and Rental Costs
General Admissions
Resident Non-Resident
11 under $2 $4
12-17 $3 $6
Adult $5 $10
Senior $3 $6
Dr. Worsley then showed the General Admissions Comparisons for the rates
for the youth, as well as the General Admissions Comparisons for adult.
Fee and Rental Costs
Membership Rates Yearly
Resident Non-Resident
Single $200 $250
Senior $180 $225
Family $300 $350
Dr. Worsley then showed a chart outlining the Membership Comparisons Yearly ?
Single, Senior and Family costs
Fee and Rental Costs
Meeting Room Rental Fee
$50 for the first three (3) hours and $15 for each additional hour
A $100 refundable deposit
Consistent with current rental procedures throughout this department
Birthday Party Rental Fee
$150 for two (2) hours
A $100 refundable deposit
Includes the meeting room and admission for up to 25 children 17 and under
Party staff provided
Water Rental Rates
Swim Team Rental Rate:
$500 per month for 5 lanes
3 hours per day ? 5 days per week
Water Rental Rates
One End Rental Rate:
$200 for 3 hours and $20 per warm up lane
Two End Rental Rate:
$350 for 3 hours and $20 per warm up lane
Water Rental Rates
Swim Meets (facility shut down):
$2500 per day
$5 per swimmer
Program Pricing Guide
Swim Lessons
3 week course
Resident $50 and Non-Resident $75
Kayak Lessons
3 week course
Resident $35 and Non-Resident $50
20% discount on all pricing for city employees
Marketing Methods
Radio
Television
Newspaper
Billboard/Signage
Website/Internet
Facebook
Industry Periodicals
Full Time Personnel Needs
Division Manager
Facility Manager
Facility Supervisors (2)
Facility Technician
Head Lifeguards (3)
Part-Time Personnel Needs
Assistant Facility Supervisors (3)
Park Maintenance Work I (4)
Administrative Clerks (2)
Lead Concessionaire
Head Lifeguards (8)
Lifeguards (4)
Concessionaires (4)
Natatorium Budget (April ? June 2013)
Dr. Worsley then went into some details in outlining the proposed budget
for the operation of the Natatorium from April through June of 2013, which was
included in his presentation as well.
Opportunities for Additional Revenue
The department is looking into naming rights for the facility
Advertising opportunities within the facility such as signs and banners
Research is being conducted with other Natatoriums that operate with a deficit
and those that operate without a deficit
After the conclusion of his presentation, Dr. Worsely then responded to
questions of Mayor Tomlinson and members of the Council.
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With there being no other business to come before the Council, Mayor
Tomlinson then entertained a motion for adjournment. Councilor Allen so moved.
Seconded by Councilor Davis and carried unanimously by those nine members of
Council present for this meeting, with Councilor McDaniel being absent from the
meeting and the time of adjournment being 8:15 p.m.
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Tiny B. Washington, CMC
Clerk of Council
Council of Columbus, Georgia
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