Created on 05/08/2012

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