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6.4.D. - Page 1 <br /> RE PO RT <br /> To the Honorable Mayor and City Council <br /> From the Cit Mana er <br /> September 10, 2012 <br /> SUBJECT <br /> Loan from the Employee Benefits Fund to the General Fund to finance the Exit <br /> Incentive Program in FY 2011-12 <br /> RECOMMENDATION <br /> Approve, by resolution, an interfund loan agreement between the Employee Benefits <br /> Fund and the General Fund for funds expended on the Exit Incentive Program in FY <br /> 2011-12 in the amount of $1,256,097 and authorize the City Manager to approve the <br /> repayment. <br /> BACKGROUND <br /> The City and the International Association of Fire Fighters (IAFF) agreed to an exit <br /> incentive plan (EIP) in the current IAFF Memorandum of Understanding (MOU) dated <br /> January 1, 2010. The EIP was offered to any IAFF employee who retired with a <br /> service retirement from the City between January 11, 2011 and June 30, 2012. These <br /> employees were eligible to receive a payment equivalent to the cost of purchasing two <br /> years of additional service credit from CaIPERS. Eleven employees participated in the <br /> EIP. <br /> The EIP will produce expenditure savings as the employees replacing the retirees will <br /> earn a lower salary due to being hired at the first step of the salary range and will be <br /> covered by a less expensive retirement program. It is expected that the foregoing <br /> savings will fully offset the cost of the EIP within a five year period. Accordingly, all <br /> repayments from the General Fund to the Employee Benefits Fund (EBF) will be made <br /> from savings the General Fund realizes by hiring new employees who are being hired at <br /> a lower cost. <br /> Funds to cover the EIP were budgeted in the EBF, an internal services fund, through a <br /> budget amendment approved by Council on June 25, 2012. During the FY 2012-13 <br /> budget presentation, staff reminded the Council that funds for the EIP were coming out <br /> of the EBF and recommended that these expenditures be repaid from the General <br /> Fund. Staff recommends that Council memorialize this arrangement as well as the <br /> terms of repayment through an interfund loan agreement between the EBF and the <br /> City's General Fund. <br /> ANALYSIS <br /> The total cost of the EIP was $1,256,097. Staff is requesting that the Council authorize <br /> the City Manager to approve repayments to the EBF annually beginning in the fiscal <br />