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_~ty of <br /> <br />iver <br /> <br />MEMORANDUM <br /> <br />Item #4.2. <br /> <br />TO: <br /> <br />FROM: <br /> <br />DATE: <br /> <br />SUBJECT: <br /> <br />Mayor & City Council <br /> <br />Lori Johnson, Asst. City Administrator/ <br />Finance Director <br /> <br />July 27, 1998 <br /> <br />1999 Fire Relief Association Benefit <br />Increase <br /> <br />At the July 6 City Council meeting, Jim Nystrom made a presentation on <br />behalf of the Elk River Fire Relief Association in support of the Relief <br />Association's request to increase the per year of service benefit level to $2,970 <br />for 1999. The City Council requested that staff review the Relief <br />Association's proposal and bring it back for Council action on July 27. As you <br />may remember, action on this item must be taken prior to August 1. <br /> <br />One of the main concerns in estimating future funding requirements is the <br />projected annual investment growth. Originally, the Relief Association had <br />used a nine percent investment return for future projections when <br />estimating fund assets and benefit amounts. Following discussion at a <br />Trustee's meeting, the projected investment return was decreased to seven <br />percent for all years except 1998 which remained at nine percent. The <br />information presented to the Council on July 6 was based on the lower <br />investment return. Although seven percent is a very reasonable return for a <br />retirement fund, because a city contribution may be required, ff there was a <br />sizable loss in the investment portfolio or some catastrophic event, there was <br />still some concern that the investment returns may be too optimistic. <br /> <br />Because the annual investment income of the Relief fund is a major but <br />sometimes volatile and uncertain source of revenue, it is important to review <br />the status of the fund without investment income. The attached spreadsheet <br />attempts to project the amount of investment income required annually to <br />sustain a $2,970 benefit level and remain fully funded. The most important <br />column is the end column, the estimated cumulative surplus or deficit. Also, <br />you will note that no investment income has been included, with the <br />exception of 1998 in order to determine the 1999 benefit level. The <br />surplus/deficit column indicates the amount of investment income the Relief <br />Association must realize in order to maintain full funding with a benefit level <br /> <br />13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425 <br /> <br /> <br />