Submitted By
Steve Drazner, Chief Financial Officer
Agenda Item Title
Title
Discussion of the Police and Fire Pension Actuarial Reports in Preparation for the Fiscal Year 2021 Budget & Levy
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Overview
Overview
This is the first meeting in a series of meetings the Village schedules annually to prepare for next fiscal year’s budget. Each year the Village reviews the actuarial valuations for the Police and Fire pension funds. The Police and Fire Pension Boards are also invited to participate in this conversation.
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Anticipated Future Actions/Commitments
Recommendation
As noted above, this is part of a series of meeting to prepare for the next fiscal year budget.
Chapter 2 of the Municipal Code establishes the foundation for the Municipal Budget and provides:
• The Village fiscal year is January 1 - December 31 annually.
• The Board of Trustees must adopt the annual budget prior to the start of the Fiscal Year and passage of the annual budget shall be in lieu of passage of the appropriation ordinance.
• On or before the Village Board of Trustees' first regular meeting in November of each year, the Village Manager shall submit to the Board of Trustees an annual Municipal budget which contains estimates of revenues together with recommended expenditures in conformity with good fiscal management practice.
Body
Report
The Village of Oak Park, pursuant to Sections 9-1-3 and 19-1-3 Municipal Code has established the Firefighters Pension Fund and Police Pension Funds as required by State Statute.
The property tax levy is the sole source of funding for the Fire Pension and the Firefighters Pension Fund. The Village has a contract with Lauterbach & Amen, a certified public accounting firm which has a separate actuarial division, to prepare the police and firefighter’s actuarial valuations for the Village. Although the Fire and Police Pension Boards have the option to also hire their own firm to conduct their actuarial, this year both pension boards decided to all use the same firm.
This meeting is a discussion of Lauterbach & Amen’s police and firefighter’s actuarial valuations.
In the current FY20 (levy year 2019) budget, the public safety pension levies are $11.8 million of the total $33.9 million levy (approximately 35%).
The Police and Firefighters’ pension recommended contributions are 100% funded via property tax levies which are typically approved by the Village Board in December along with the General/Corporate and Debt Service Fund levies.
The recommended tax year 2020 (for the FY21 budget year) as summarized in the Lauterbach & Amen valuations are as follow:
The tax year 2020 actuarial recommendation is based on data from the fiscal year ending December 31, 2019. Therefore, the property tax distributions dedicated for the police and firefighter pensions in FY21 is based on actuarial data from 2019. This timing delay is necessary due to the fact that the actuary must use audited data (12/31/19 is the most recent audit) and Cook County distributions are one year in arrears (calendar year 2021 distributions are determined from the tax year 2020 levy).
Compared to current fiscal year 2020, the FY21 police levy recommendation is increasing by $635,293, from $6,338,241 to $6,973,534 while the fire pension levy is increasing by $699,264, from $5,438,948 to $6,138,212. The combined total recommended levy increase is $1,334,557 compared to the prior year.
The increase in the recommended levy is a result of plan changes for tier II employees as well as some actuarial assumption updates. Lauterbach and Amen will provide further details on these items during the presentation to the Board.
Please note that although neither Board has formally submitted their FY21 levy requests, it is anticipated that each will request the L&A recommended amount. While both pension boards previously received individual presentations from L&A during recent quarterly meetings, they have been invited and encouraged to attend the presentation to the full village board tonight and participate in the discussion.