Council tables firemen pension request
At its Feb. 11 meeting, the Wadena City Council tabled a request to provide a city guarantee for an increase in the annual contribution to the fire department relief association pension fund. The council plans to address the issue again in March.
The relief association, which provides retirement accounts for the 20-member paid on-call department, asked the city to back a 5.7 percent increase, from $2,175 to $2,300 for each year of active service. The retirement fund is made up of money from state aid, local government contributions, investment gains and relief association fundraising.
Firefighters at least 50 years old with at least 10 years experience qualify for 50 percent of their accrued retirement benefits in a lump sum upon retirement. After 20 years of service, members are eligible for 100 percent of the benefits.
At the Feb. 11 meeting, the association didn’t request any money from the city for the increase, but rather for the city to take on the liability for those increases if the market tanked, which could shrink the pension fund below the level it needs to sustain itself.
The fund increased by 18.2 percent last year and is now funded to 122.8 percent. The requested increase would leave a 10 percent cushion to absorb a market decline.
The city has only backed one increase in the previous five years, a 15.4 percent hike last year.
When he explained this year’s request to the council, the relief association’s investment advisor Ron Meyer said “more consistent year-of-service increases” would be the best way to ensure a healthy turnover in the department.
“Let’s get smaller, more periodic raises rather than this boom-to-bust scenario,” he said.
Council members expressed reservations about backing a 5.7 percent increase to the annual contribution after the large increase last year.
Council member Gillette Kempf said the requested increase was larger than the 2 to 3 percent raises most public employees receive.
After thanking the firefighters, the majority of whom were watching the discussion from seats in the council chambers, council member Toby Pierce said he worried about the risk the city would be taking on.
“It’s a volatile thing,” he said. “Pension plans are a huge liability down the road so I don’t feel very comfortable, especially since you got an increase last year.”
Pierce asked what would happen if the stock market declined in the next couple of years.
Meyer said that is always possibility, but because the fund has a mix of stocks and bonds, it only has half the volatility of the stock market.
In 2009, when the market experienced one of the largest declines in history, the city contributed just over $6,000 during a two-year period to cover losses.
Fire Chief Dean Uselman said at the same time the city made that contribution, the relief association purchased necessary equipment, such as pagers and radios.
“That’s the equipment that should be provided by the city and we’re buying it through fundraisers,” Uselman said. “... I believe the taxpayers of the city are getting a pretty good deal.”
In a passionate address to the council, the fire chief said not approving an increase is “like robbing potential retirees of money ... You’re taking what I’ve earned and deserved and saying I’m not going to give you that because it’s not the same 3 percent that everyone else gets. It’s not the same ball game.”
Council members pointed out the relief association could approve an increase on its own. Meyer said 90 percent of the 700 volunteer fire departments in Minnesota receive city backing for their pension fund increases.
Mayor Wayne Wolden, who along with Uselman and city administrator Brad Swenson, is one of three non-voting members on the relief association board, said he was concerned the organization didn’t discuss the pension request at the their regular board meeting, but rather at a special meeting he and Swenson didn’t know about.
“I think there’s a level of professionalism that needs to come across,” Wolden said. “I expect that. I think the council expects that.”
He supported tabling the measure to learn more at another special relief association board meeting and for the council to have more information - including comparisons of per year retirement benefits from similar-sized departments and the average annual fund increase over the past several years for the Wadena fund - when it reconsiders the request at its March meeting.
In a unanimous vote, the council tabled the request. Then the firefighters silently streamed out of the council chambers.
“It’s a bummer it got tabled,” Dale Haman, a 15-year veteran of the department said outside of the meeting.
He said he thinks the department has a good relationship with the city and he hopes the council will approve the request next month after they get a look at some more numbers.
“I don’t think anybody does it for the money,” Haman said. “But (the pension fund) is an easy way for the city to reimburse firemen for their service.”
The relief association board held a special meeting Monday to explain their request in more detail to Swenson and Wolden.
After the 80-minute meeting, Wolden said it was a “healthy discussion.”
Board president Brian Brauch said he thinks the mayor and city administrator have a better understanding of the pension request.
“They’re just looking out for the taxpayers,” he said. “And so are we.”