2001-10-24 CC - Laserfiche WebLink

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Suggestions We believe the department's annual budget should incorporate an evaluation of the normal (annual) costs, and a reasonable amortization of the past service costs (accumulated liability) of these benefits. Based on this evaluation, a portion of the current funding could be dedicated towards funding this liability. A separate fund could be established to identify this funding and to account for severance payments. This would initiate a funding structure for the liability, it would separate unpredictable severance payments from the normal general fund operating results, and would instill the recognition that these costs are currently being incurred. This does not necessarily mean an increase in funding, but rather a recognition of the cost within the current funding. Also, a portion of the existing fund balance ($105,585 at December 31,2000) could be restricted/reserved for the initial funding of the existing accumulated liability. If the member cities are concerned with building up a reserve for this liability within the department, an alternative would be to create their portion ofthe reserve within their own finances. This would again, set aside funding for the liability, provided recognition of the costs incurred, but would place the member cities in direct control of those funds. Concern The next most common concern was how would the liability be addressed in the case of the dissolution of the department. Comments Dissolution of the department would create an unlimited number of resulting scenarios based on such things as replacement law enforcement, reorganization of the current organization, sale of assets, and extinguishing of the liabilities. It would not be practical for us to evaluate all the potential outcomes within this letter. Technically, if the department dissolves, the employees would be terminated and should be paid for all vested benefits accrued at that time. If there was a shortfall of available funds to payoff any of the department's liabilities, the member cities would be required to contributed the difference. This does not preclude the member cities from making special arrangements such as transferring the liability for these benefits to a succeeding organization. Suggestions Again, member cities could always set dollars aside in there own finance systems to protect themselves from this potential outcome, as well as reminding those involved that a liability does exist. Also, if expansion or reorganization is considered, it should be made clear as to how this liability is to paid-off or transferred. Concern There is a general concern regarding the design and terms of the benefit plans, and the adherence to the accumulation limits.