HomeMy WebLinkAboutAgenda - Mail Packet - 4/22/2014 - Council Finance & Audit Committee & Ura Finance Committee Agenda - April 21, 2014Council Finance Committee & URA Finance Committee
Agenda Planning Calendar 2014
RVSD 4/16/14 jwv
Apr. 21 TOPIC TIME WHO
CFC
Actuary Annual Pension Valuation Report (GERP) 30 min J. Voss
Policy Review – Reserve/Fund Balances 30 min J. Voss
Budget Policy Review 20 min L. Pollack
URA CAG Discussion on URA 30 min T. Leeson
May 19 TOPIC TIME WHO
CFC
Affordable Housing 30 min Beck-Ferkiss
Fund Balance Review 45 min J. Voss
URA
June 16 TOPIC TIME WHO
CFC
URA
July 21 TOPIC TIME WHO
CFC
Capital Improvement Funds Policy Review 30 min J Voss
Auditor Report 30 min J Voss
Utilities – Fee 30 min L Smith
URA
Future Council Finance Committee Topics:
• IGA—Police Training Facility
• Review Special Improvement Districts
• Budget Briefing (Q3)
• General Policy (Q3)
• Fund Management Policy (Q3)
• Economic Health Policy (Q3)
Future URA Committee Topics:
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
AGENDA
Council Finance & Audit Committee
April 21, 2014
10:00 to 11:30 a.m.
CIC Room – City Hall
Approval of the Minutes from the April 11, 2014 and March 17, 2014 meetings
1. Actuary Annual Pension Valuation Report (GERP) 30 minutes J. Voss
2. Policy Review – Reserve/Fund Balances 30 minutes J. Voss
3. Budget Policy Review 20 minutes L. Pollack
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
Council Audit & Finance Committee
Draft Minutes
4/11/14
9:00 a.m. to 10:00 a.m.
CIC Room
Council Attendees: Bob Overbeck, Ross Cunniff
Staff: Darin Atteberry, Mike Beckstead, Carrie Daggett, John Duval,
Tom Leeson, Jeff Mihelich, Steve Roy, Katie Wiggett
Others: Mike Pruznick, Sarah Pruznick, Betsy Pruznick
First Amendment to Mall Redevelopment Agreement
Mike Beckstead explained the 3 modifications to the current agreement:
1. Modification to Section 3.1(c) concerning leased space required prior to City authorization to issue
Metro District Bonds
2. Clarification to Section 4.3 concerning payment required of the Developer if the residential units are
not completed on time
3. Modification of Section 3.2(c) wording to allow for Supplement Reserve to be used before the
Reserve in the event of insufficient Pledged Revenue.
Mike noted that there are seven conditions precedent to issuance of Bonds; the developer has indicated
that all conditions will be met with the exception of (c): “240k square feet of executed leased space with
120k square feet new tenants to Fort Collins.” The Developer is asking for the following modifications:
• Bonds issued with 155k of executed lease agreements
• 90k of the 155k to be new tenants to Fort Collins
• Leases to have an average sales per square foot of at least $375
• $23M of $53M in bond proceeds released to Developer
• Remaining $30M held in escrow and released in $10M tranches as additional leases signed – final
release at 310k
• Portion of leases new to Fort Collins is laddered to total leases
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The table below provides an overview of the proposed change to the lease requirement and how funds
would be released with additional leased space:
Lease Space Sq Ft Funds Released Percent of…
Tranche
Total
New to
Fort
Collins
Funds
Released
Assigned
to City
Improv
Orig
240k
Mall (less
Macy's)
Current
240k 120k $ 53 $ 8 100% 47%
Request
1 155k 90k $ 23 $ 3 65% 30%
2 205k 120k 33 1 85% 40%
3 255k 130k 43 2 106% 50%
4 310k 150k 53 2 129% 60%
Mike pointed out that the Equity Partner, Walton, has demonstrated a commitment to and a confidence in
this project; Walton’s equity position and recourse commitment are above normal. Also, worked into the
new agreement is an agreement that Alberta will provide monthly status reports on leasing and construction
and quarterly tours of the project for staff and elected officials.
Concerning the Risks and Implications, Bob Overbeck said that he was not comfortable with saying there is
“no financial risk to the City.” Mike explained that, while there is political risk to the City if the deal fails,
there is no financial risk because the bonds come through the Metro District—not through the City—also
the City has not entered into a moral obligation on the bonds. Ross Cunniff suggested changing the wording
to “No direct risk to City’s bond rating.”
Ross asked whether the URA had any financial risk. Mike answered, no and explained that the risk to the
Metro District associated with this modification is primarily related to a low-probability event within the
next 4-6 months.
Darin Atteberry noted that, when giving the risks and implications it is also extremely important to list the
benefits. Staff will add a slide on the benefits of the deal.
Mike said that one benefit to highlight is the good interest rate environment we currently are in for
releasing bonds. Bob Overbeck agreed that the current market climate is excellent for bonding.
Mike explained the interdependency of the different elements of the agreement, noting that all
elements must come together simultaneously. If one element is delayed, the ripple can impact the
completion date which can impact leasing strategy. Bob Overbeck said that the information provided
about the importance of timing is extremely helpful.
Mike then explained the Developer’s second request, a clarification of wording in Section 4.3. The
intent of the original Section 4.3 was to require the Developer to pay 50% of the lost property tax
increment in the event the residential units were delayed, but only until such time as the residential
units are built and the property tax increment is being paid. The current wording isn’t clear that the
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Developer is no longer required to pay the 50% once the units are built. Staff recommends clarifying the
language.
The District Bond Counsel is also asking that the wording in Section 3.2(c) be corrected to allow the
Supplemental Reserve to be used before the Reserve in the event of insufficient Pledged Revenue. The
current wording requires the Reserve to be used before the Supplemental Reserve; however, this
requirement does not work with a bond transaction as it would trigger a default on the bonds.
Correcting this wording will have no financial impact to the City. Staff recommends changing the
Redevelopment agreement to use Supplemental first.
Next Steps
Finance Committee did not support the proposed modifications because there were too many
unanswered questions regarding the financial impacts to the City.
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
Council Audit & Finance Committee
Minutes
3/17/14
10:00 to 12:00
CIC Room
Council Attendees: Mayor Karen Weitkunat, Bob Overbeck, Ross Cunniff
Staff: Darin Atteberry, Mike Beckstead, Tom Demint, Kelly
DiMartino, Andres Gavaldon, Kirstin Howard, Bev McBride,
Angie Rhodes, Amy Sharkey, Greg Tempel, John Voss, Wendy
Williams, Katie Wiggett, Rick Vandervelde
Others: Dale Adamy, Jonathan Carnahan , Gerry Horak, Ann
Hutchison (Chamber of Commerce), Drew Peterson (Hayes),
Janet Ox (Hayes), Lisa Poppaw
Approval of the Minutes
Mayor Karen Weitkunat moved to approve the minutes from the February 10 meeting. Bob Overbeck
seconded the motion. Minutes approved unanimously.
PFA IGA Revenue Allocation Formula
Mike Beckstead introduced the discussion on the Poudre Fire Authority (PFA) Intergovernmental Agreement
(IGA), an agreement which forms PFA, and the associated Revenue Allocation Formula (RAF), a formula
which allocates a share of City revenue toward the provision of fire and rescue services within Fort Collins.
The IGA was originally drafted in 1981 and was last modified in 1987. Over the past six months, City Staff
and PFA Staff have worked together to update the current IGA. Staff is seeking Finance Committee feedback
on the updated RAF in the proposed IGA between the City and the Poudre Valley Fire Protection District
(PVFPD).
Chief Demint noted that the updated RAF helped define a sustainable funding mechanism while allowing
PFA to retain its autonomy. The original RAF was based on an 80%/20% split in the total costs of operating
PFA between the City and PVFPD.
Chief Demint showed that, over the past 20 years, PVFPD has seen an average of 3% annual improvement in
productivity. While total employee numbers have been growing, the number of calls has grown even faster.
Bob Overbeck asked the Chief if he could give an average cost per call and if that data would be useful in
comparison. The Chief replied that they didn’t use the cost-per-call metric because it implies that Staff is
discouraging calls; however, he can provide that information.
Mike explained that because the City’s share of call and assessed value has increased, current funding needs
to shift to align with the relative contribution share. The mayor asked if a five year history can actually help
Staff project the future growth. Mike replied that Staff did not use the five-year history to project; rather,
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they used the history to create a better formula that will need to be reassessed with future changes, such as
large annexations. Darin agreed that, because the past trends have been fairly stable, using the past to help
create a formula is a good way to solve this funding need. Staff should highlight the importance of
reassessing the RAF with such changes as annexations. The IGA has worked for the past 30 years; this
update will allow it to continue to work.
Mike explained that Staff considered three alternatives, and chose the best of the three: to develop a Level
of Service Budget and Modify the Existing RAF. The proposed RAF variables (29% of one cent of sales tax
and 64% of property tax) were determined based on the City’s 2014 revenue forecasts and the targeted
$22.7M for the City contribution. At $22.7M, the City’s contribution equals 82.5% of the PFA Level of
Service Budget and requires an additional $2.6M of funding over the budgeted 2014 funding of $20.1M. The
82.5% reflects a blend of service calls and assessed value between the City and the District. City Staff is
proposing that the $2.6M funding gap be closed over a five year period. The City RAF calculation below
assumes a 3% per year growth assumption and is not a forecast of anticipated revenue, but is provided as an
illustration only to show how the phase in of additional funding will occur:
2014 2015 2016 2017 2018 2019 2020
City RAF Amount $18.6 $19.3 $19.9 $20.6 $21.3 $22.0 $22.8
+ 1 mill Capital 1.8 1.8 1.9 2.0 2.1 2.1 2.2
+ KFCG $2.3 $2.4 $2.5 $2.6 $2.6 $2.7 $2.8
City Calculated Contribution $22.7 $23.5 $24.3 $25.1 $26.0 $26.9 $27.8
Escalation Adjustment
Yrs Total = 5 80% 60% 40% 20% 0%
- Escalation Adj Amount - $2.6 - $2.1 - $1.6 - $1.0 - $0.5 $0.0
City Actual Contribution $20.1 $21.4 $22.7 $24.1 $25.5 $26.9 $27.8
Chief Demint explained that several other updates were made to the IGA including updating the IGA to
reflect previously approved amendments, to reaffirm selection of the 5th member of the Board, to update
the Chief’s authorities, and to outline the impact of annexations and URA’s included with the IGA. The IGA
states that if a large annexation is made, the RAF’s variables will be adjusted to be revenue neutral. URA TIF
will be discussed on a case-to-case basis to determine the implication. All IGA changes have been reviewed
by both the City and District Attorneys.
The Mayor thanked Staff for their work, commending their emphasis of the differences between the City,
PFA and the district—a distinction that is often unclear to residents. Gerry Horak added that this shows a lot
of progress for the PFA Board which has been pushing for many improvements, including fixing PFA’s capital
plan.
Council Finance recommends moving forward with this topic. It will go to the PVFPD Board and the PFA
Board in late March and to Council on April 2.
On-Site Health Clinic
Kelly DiMartino and Amy Sharkey introduced Hays consultants Drew Peterson and Janet Ox to Council
Finance, noting that Hayes experts have helped Larimer County and other municipalities open onsite
Wellness Centers. City Staff is recommending the implementation of an Employee Wellness Center to
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support the health and wellness of City employees and their dependents. Kelly gave an overview of the
City’s current landscape:
• Solid reserves (intentionally drawing down over past 2 years)
• Lower than average claims historically; higher than expected in 2103
• Healthcare Reform increasing costs
• Aging workforce
Bob asked if the fact that the average dollar amount of claims had increased in 2013 was at all due to
the natural disasters. Amy responded, no, the increase in claims reflects several of claims for
catastrophic medical situations. The mayor asked if these numbers affect predictions for 2014. Drew
Peterson answered that this increased number in 2013 cannot predict future numbers.
Amy outlined the affects Healthcare Reform will have on the City’s benefit program, noting that the City
anticipates adding 150 to 190 FT employees as participants in 2015. They also must plan for a
reinsurance fee that will cost the City approximately $200,000 each year for 3 years starting in 2014, as
well as a Patient-Centered Outcomes Research Fee of $5,500. Amy then showed the workforce
demographics for current City employees, pointing out that 20% of the current workforce is retirement
ready.
Creating a Wellness Center would help the City accomplish several of its benefit plan goals. Advantages
to offering a Center include:
• greater ability to manage health risks through coaching and onsite disease management
• anticipated reduction in health care cost trends
• integrated medical records
• established medical home for employees and dependents making health information available
to providers
• enhanced wellness efforts by supporting proactive health care management
The Wellness Center would provide the following services:
• Preventative care
• Treat primary care, acute and urgent care needs
• Annual exams and screenings
• Immunizations
• Prescription Management
Bob Overbeck asked the HR team to add budget estimates for each of these services. Drew said that the
team can provide amounts for what the Plan currently pays for these services.
Mike Beckstead explained that the cost recovery model for the Employee Wellness Center is dependent
on two factors: staff adoption of the services provided by the Wellness Center and preventative care
lowering the overall annual health care cost increases over time. If only 40% of staff utilize the facility
rather than the assumed 80%, the City will incur added costs. To achieve break-even on the cost of the
clinic, a 70% adoption rate is estimated. A Wellness Center providing staff with more preventative care
should favorably impact long term cost trends.
Amy agreed that there is a risk and added that HR would be looking for way to provide members
incentives for using the onsite clinic. The Wellness program, which has a large percentage of employee
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participation, will be one way HR Staff will work to increase employee participation.
The Employee Wellness Center is intended to augment primary care, not replace it. However, some
employees may not have a primary care physician, so the Wellness Center will provide primary care
resources for those employees.
In order to fully evaluate the feasibility of a clinic, it was necessary to select a specific vendor with whom
the City would work. In May 2013, the City of Fort Collins posted a Request for Proposal (RFP) for an
Onsite Employee Wellness Center. Staff worked closely with Hays Companies to construct an RFP that
identified the potential needs of a Center with many different options for services. Nine proposals were
received. Three vendors were interviewed. Marathon Health has been selected as the potential vendor
to provide the City with an Employee Wellness Center.
Bob asked if Staff had looked into partnership with other agencies which already have onsite clinics.
Amy answered that the City has explored partnerships with other entities, including Larimer County,
Loveland and Greeley. Staff determined this was not a viable option; however, staff gained valuable
insight that was utilized during review of the vendor proposals.
The ongoing cost for the Employee Wellness Center will be approximately $750k - $800k, in addition to
set up costs of approximately $350,000 ($150,000 for Center equipment, and $200,000 for
facility/infrastructure costs). The Center is projected to recoup ½ of the cost in year one and break even
by year two.
The Mayor asked why 2014 was included in the “On Site Clinic Costing Analysis – 5 Year ROI Projection.”
Drew answered that the costs could be bumped forward one year without change; 2014 was used
because the analysis was done in 2013. The Mayor asked that the number and years be updated before
presentation to Council. The Mayor also asked for data predicting employee adoption rate of the
Wellness Center, considering the importance buy-in plays in the success of this program.
Ross Cunniff moved that Council Finance recommend that Staff move forward with this request. Bob
Overbeck seconded the motion. Motion carried unanimously.
*In answer to questions during the meeting, Staff prepared a Wellness Center Costing Analysis – 5 Year
ROI Projection and an Additional Information sheet. See Attached.
2013 Financial Highlights
Mike Beckstead presented the Financial Highlights from 2013, noting that the financial condition of the
City continues to be healthy. In 2013, revenues increased as did expenditures.
Mike also went over the City’s expenditures, noting that Staff has put together a Monthly Operating
Report (MOR) that is reviewed monthly by the Executive Lead Team. This report has enhanced
leadership’s knowledge and awareness of overages, savings and opportunities. Mike also noted that
personnel costs have seen a rise in all service areas.
Concerning debt, Mike noted that bonds were issued by the URA, yet total outstanding debt was still
lower at the end of the 2013 than at the beginning. Per capita debt in 2013 is 47% less than in 1986.
Staff will review fund balances for all funds in more detail at the May CFC meeting.
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Attachments
1. Follow Up to On-Site Health Clinic Discussion - Additional Information
2. Wellness Center Costing Analysis – 5 Year ROI Projection
Council Finance Committee
Additional Information Requested from March 17, 2014 Meeting
April 3, 2014
1) Update Marathon Health ROI information starting with 2015
Attached is the updated Wellness Center 5 Year ROI claims projection with the implementation of the
Center in 2015. Following is a summary of the adjustments we made:
• Start-up costs of $147,679 will still occur in 2014.
• Center expenses begin in 2015 with the opening of the Center in January.
• Adjusted projected participation rate in first year from 60% to 50% and from 65% to 60% in
second year. We adjusted the participation rate based on data collected from other local
government clinics.
• As originally projected, the City is anticipating growing to 80% participation rate in year five.
• Not including productivity savings, the analysis demonstrates the City will breaking even early in
year three, consistent with original projections.
• Several Employee Engagement Incentive options will be available to the City in order to increase
the participation rate. See Example Employee Engagement Strategy in #2 below.
2) “EXAMPLE” Employee Engagement Incentive Strategy
(Multi-Year Engagement Strategy – applicable to employees and dependents)
Year One:
• No copay (fee) for using the clinic
• Generic prescription drugs free at time of visit
• Employees do not have to use any sick leave to go to the clinic
Year Two:
• Potential Premium Differential
o Partial premium reimbursement for completing Biometric Screening and Health Risk
Assessment and one-time meeting with Center Clinician to discuss Wellness Plan
Year Three:
• Compliance Program
o Small token – drawings, gift cards, etc.
Annual wellness visit
Face-to-face coaching session with Clinician
Lower a risk factor identified through Health Risk Assessment
City of Ft. Collins
Wellness Center Costing Analysis - 5 Year ROI Projection
If clinic implemented 2015
Marathon Health 2014 2015 2016 2017 2018 2019 Total
EE/Dep Penetration Rate 50% 60% 70% 75% 80%
Total Non-Occ. Visits 6,013 7,216 8,418 9,020 9,621
Expected Occupational Visits 0 0 0 0 0
Total Onsite Visits 6,013 7,216 8,418 9,020 9,621
Avoided Costs/Claims $0 $682,102 $769,846 $898,154 $962,308 $1,026,462 $4,338,871
Center Start-Up Expenses (one-time cost) $147,679
Center Expenses $0 $734,223 $770,934 $809,481 $849,955 $892,453 $4,057,046
Direct Savings/Costs -$52,121 -$1,088 $88,673 $112,353 $134,009 $281,825
Employee Copays $0 $0 $0 $0 $0 $0
Direct Savings/Costs After Copays -$52,121 -$1,088 $88,673 $112,353 $134,009 $281,825
Productivity Savings $216,468 $270,152 $327,785 $365,246 $405,179 $1,584,829
Reduced Trend ROI Analysis*
Projected Total Plan Cost As Is - PPO Plan only (Assumes 5% Trend) $17,244,098 $18,106,302 $19,011,618 $19,962,198 $20,960,308 $95,284,525
Projected Claims Using Reduced Trend For Improved Risk Factors* $17,933,862 $18,561,547 $19,211,201 $19,787,537 $75,494,146
Projected Savings $172,441 $450,071 $750,998 $1,172,772 $2,546,281
Total Savings/Costs -$147,679 $164,347 $441,505 $866,528 $1,228,596 $1,711,960 $4,412,936
*Reduced trend is attainable through improved risk factors achieved by active engagement in the clinic.
1
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: John Voss, Controller / Assistant Financial Officer
Harold Hall, Investment Administrator
SUBJECT: Review of the 2014 Actuarial Valuation of the General Employees’ Retirement
Plan for year ending 2013 and new accounting standards affecting plan reporting.
EXECUTIVE SUMMARY:
The General Employees’ retirement Plan review covers Plan highlights, economic and
demographic assumptions, unfunded actuarial accrued liabilities, and the solvency /sensitivity
model. The Unfunded Actuarial Liability at the end of 2013 was $14.7 million compared to
$15.7 million the prior year. The assumed investment return for the plan was lowered to 6.5%.
BACKGROUND/DISCUSSION:
This pension plan was closed to new employees in 1999. At that time employees were given the
option to migrate to the City’s 401(a) defined contribution plan, and many opted to do so. Of the
approximately 1,300 current regular employees, only 128 active employees continue to earn
benefits under this plan.
The presentation will review the Plan’s Actuarial valuation for year ending 2013 and discuss the
impact to the plan from investment return sensitivity. The Plan investment return assumption
was lowered for year 2014 to 6.5% from 6.8% based on the actuary estimate of the 50
th
percentile for expected returns. This change will increase the unfunded liability in 2014 by $1.6
million.
The General Employees’ Retirement Committee reviewed and approved the 2014 actuary report
in at their March 13
th
meeting.
FINANCIAL/ECOMOMIC IMPACTS:
The 2013 investment return of 18.7% exceeded the Plan return assumption of 6.8%. Positive
investment returns added to supplemental and payroll contributions exceeded retiree payouts
which contributed to a year over year market value increase of $5.2 million. The future impact to
the Plan from the increase in market value is a projected reduction in the end date for
supplemental contributions from year 2033 to year 2025. The market value calculation
recognizes total asset gains and losses in the current year. Supplemental contribution end dates
fluctuate annually based on actual Plan economic and demographic performance.
New accounting standards (GASB 67 and 68) change the reporting requirements for the City
from Net Pension Obligations of $3.2M to an Unfunded Actuarial Liability of $14.7M. This
change will not however impact the Plan’s anticipated cash flows or the City’s credit rating.
STAFF RECOMMENDATION:
Staff recommends the City continue to fund the current $1.12M supplemental contribution.
ATTACHMENTS:
1. City GERP Review presentation
2. General Employees’ Retirement Plan, January 1, 2014 Actuarial Valuation
1
General Employees’ Retirement Plan
Council Finance Committee
April 21, 2014
2
Agenda
• GERP Summary & Plan Administration Review
• Plan Contribution Comparison
• Unfunded Liability Review
• Regulation Changes – GASB 67 & 68
• Summary
3
GERP – Plan Summary
Demographics as of 1/1/2014:
• Total Participants = 439
(128 Active, 169 Retired, 121 Term Vested, 21 Beneficiaries)
• Active Participant Ave. Age = 58.6 and Ave. Years of service = 25.3
• Employees hired after 12/31/1970 but before 1/1/1999.
Current Plan Assumption and Benefit Calculation:
• Investment Return Assumption = 6.5% (reduced from 6.8% in 2013)
• City Contribution = 10.5% of Employee Salary
• 70% of retirees elect the monthly annuity vs. a lump sum payout
• Benefit = Final Ave Monthly Salary x 1.5% x Credited Years of Service
• Benefit Example assuming $75K salary and 30 years of service:
$6,250 x 1.5% x 30 = $2,813 monthly benefit
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Plan Administration - Article XVII, Section 2
Retirement Committee Authority:
The Retirement Committee shall have all powers necessary to effect
management and administration of the Plan with the advice of its
actuary, to adopt, such mortality and other tables as it may deem
necessary or appropriate for the operation of the plan from time to
time.
Investment Return Assumption:
Actuarial Standards of Practice (ASOP No. 27) calls for the actuary to
develop a best estimate range for the valuation investment return
assumption and recommend a specific point within that range. The
actuary recommended and the board approved a change from 6.8% to
6.5% based on the 50 percentile of the target allocation.
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Investment Policy Parameters
Category % vs
Fund Category Allocation Total Portfolio
Lower Limit Target Upper Limit
Domestic Fund Category Total 35% 45% 55%
Each Domestic Fund Category ( 20% Max)
International Fund Category Total 5% 15% 25%
Each International Fund Category ( 7.5% Max)
Fixed Income 30% 40% 50%
Bond Mutual Funds 0% N/A 20%
Sector % vs
Equity Sector Weightings Equity Portfolio
Each Equity Sector ( 25% Max)
Strategic Asset Allocation
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Employee and Employer Contributions Comparison
401/457 Programs GERP & 401 GERP & 457
Contributor: City Staff City Staff City Staff
Pre 2010 6.5 to 7.5% 3%* 7.5%** 3% # 7.5%** Discretionary
Post 2010 6.5 to 7.5% 3%* 10.5%*** 3% # 10.5%*** Discretionary
* Required 401 contribution by staff.
# GERP members who voluntarily elected to also participate in the City 401
program during the 90’s are also required to contribute 3% to the 401.
** 4.5% to GERP and 3% to 401 or match up to 3% for 457 only members.
*** 10.5% to GERP.
The City also contributes $1.12 million in supplemental contributions
annually to the General Employees’ Retirement Plan
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Year Unfunded Liability Return Assumption Investment Return
• 2011 $9.7M 7.5% -3.1%
• 2012 $13.8M 6.8% 11.6%
• 2013 $15.7M 6.8% 18.7%
• 2014 $14.7M 6.5%
• Changes in Investment Return Assumptions from 7.5% to 6.8% in 2012
and 6.8% to 6.5% in 2014 added $3.7M and $1.6M respectively to the
Unfunded Actuarial Liability.
• Positive investment returns in years 2012 and 2013 have offset
increases in the Unfunded Actuarial Liability.
GERP 20 Year actual average investment return = 6.4%
Unfunded Liability Review
Reduced from 6.8% to 6.5%
8
Average Return Unfunded Liability Supplemental Cash
• 5.5% $21.0M* $29.1M
• 6.0% $17.7M* $20.2M
• 6.5% (2014 Baseline) $14.7M $13.4M
• 6.8% (2013 Baseline) $13.0M* $10.3M
• 7.0% $11.9M* $ 8.6M
• 7.5% $ 9.3M* $ 4.5M
( Decreases in AVG Return = increases in supplemental cost to City )
( Increases in AVG Return = decreases in supplemental cost to City )
Positive investment returns have reduced projected supplemental
contribution outlays from $33.6 million in year 2012 to $13.4 million in
year 2014.
*Estimates
The City owns the Investment Return Risk for the Plan
Investment Yield Sensitivity
9
$-
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
$55
Millions
Market value of Assets Contributions Benefit Payments
2014 Projection of Market Value of Assets, Contributions, and Benefit Payments
Future return on Assets: 6.5%
Current Payroll Contribution Rate: 10.5% of compensation from the City
Supplemental Contributions: $1,120,000 to year 2025
Unfunded Liability = $14.7M
Supplemental Cash Outlay = $13.4M
Supplemental Contribution End Date = 2025
10
$-
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
$55
Millions
Market value of Assets Contributions Benefit Payments
“What if” Projection for Market Value of Assets, Contributions, and Benefit Payments
2014 return on Assets: 0%
Current Payroll Contribution Rate: 10.5% of compensation from the City
Supplemental Contributions: $1,120,000 to year 2025
Supplemental Cash Outlay increases from
$13.4M to $20.2M
Supplemental Contribution extended to year 2031
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New Accounting Standards – GASB’s 67 and 68
• Balance Sheet Liability MUST reflect Unfunded Actuarial Liability (UAL) instead of
Net Pension Obligation (NPO)
o UAL was previously only a Note Disclosure, not on Balance Sheet
o NPO of $3.2 M at 12/31/13
o UAL of $14.7 M at 12/31/13
• Required in 2014 and 2015, respectively - plan to implement both in 2014
• This will not change our anticipated cash-flows or Impact City’s credit rating
• If allocated at the end of 2013 it would look like this:
• Enterprise Funds $6.6M or 45%
• Governmental Funds $8.1m OR 55%
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Summary
• The City maintains the investment return risk on the assets. Any
deviation from the assumed 6.5% return assumption will have an
impact on future supplemental contribution requirements.
• Positive investment returns in 2012 and 2013 have greatly reduced
projected supplemental contributions required from the City.
• The current return assumption of 6.5% is consistent with the 20
year actual average investment return history of 6.4%.
• Balance Sheet Liability will reflect Unfunded Actuarial Liability
(UAL) of $14.7M.
13
Back - Up
14
Contribution Breakdown
City City Payroll Total
Year Market value of Assets Supplemental Contribution (10.5%) Contributions Benefit Payments
2014 $ 44,692,556.00 $ 1,120,000.00 $ 856,381.00 $ 1,976,381.00 $ 3,423,585.00
2015 $ 45,991,149.37 $ 1,120,000.00 $ 786,691.00 $ 1,906,691.00 $ 3,748,864.00
2016 $ 46,975,773.60 $ 1,120,000.00 $ 710,897.00 $ 1,830,897.00 $ 4,088,206.00
2017 $ 47,607,076.86 $ 1,120,000.00 $ 626,639.00 $ 1,746,639.00 $ 4,284,831.00
2018 $ 47,997,181.31 $ 1,120,000.00 $ 557,039.00 $ 1,677,039.00 $ 4,427,593.00
2019 $ 48,199,579.87 $ 1,120,000.00 $ 483,577.00 $ 1,603,577.00 $ 4,790,608.00
2020 $ 47,979,419.51 $ 1,120,000.00 $ 409,805.00 $ 1,529,805.00 $ 4,881,294.00
2021 $ 47,581,867.03 $ 1,120,000.00 $ 347,884.00 $ 1,467,884.00 $ 4,947,228.00
2022 $ 47,032,520.45 $ 1,120,000.00 $ 295,480.00 $ 1,415,480.00 $ 4,994,423.00
2023 $ 46,350,229.40 $ 1,120,000.00 $ 247,721.00 $ 1,367,721.00 $ 5,124,357.00
2024 $ 45,449,016.37 $ 1,120,000.00 $ 210,155.00 $ 1,330,155.00 $ 4,996,594.00
2025 $ 44,582,421.60 $ 1,120,000.00 $ 179,247.00 $ 1,299,247.00 $ 5,008,493.00
2026 $ 43,620,022.94 $ - $ 155,093.00 $ 155,093.00 $ 4,877,990.00
2027 $ 41,588,450.56 $ - $ 132,131.00 $ 132,131.00 $ 4,915,067.00
2028 $ 39,372,458.61 $ - $ 114,404.00 $ 114,404.00 $ 4,747,802.00
2029 $ 37,169,591.39 $ - $ 97,309.00 $ 97,309.00 $ 4,671,513.00
2030 $ 34,890,621.46 $ - $ 83,375.00 $ 83,375.00 $ 4,439,149.00
2031 $ 32,689,568.41 $ - $ 69,521.00 $ 69,521.00 $ 4,368,843.00
2032 $ 30,409,791.37 $ - $ 59,023.00 $ 59,023.00 $ 4,219,767.00
2033 $ 28,128,305.20 $ - $ 46,040.00 $ 46,040.00 $ 4,028,875.00
2034 $ 25,884,200.39 $ - $ 38,634.00 $ 38,634.00 $ 3,760,791.00
2035 $ 23,762,252.84 $ - $ 31,144.00 $ 31,144.00 $ 3,568,427.00
2036 $ 21,694,411.44 $ - $ 24,695.00 $ 24,695.00 $ 3,408,312.00
2037 $ 19,652,893.97 $ - $ 20,368.00 $ 20,368.00 $ 3,204,449.00
2038 $ 17,685,026.51 $ - $ 16,029.00 $ 16,029.00 $ 2,982,313.00
2039 $ 15,813,523.71 $ - $ 11,912.00 $ 11,912.00 $ 2,746,174.00
2040 $ 14,058,471.11 $ - $ 8,434.00 $ 8,434.00 $ 2,527,839.00
2041 $ 12,409,904.34 $ - $ 5,607.00 $ 5,607.00 $ 2,355,743.00
2042 $ 10,828,923.00 $ - $ 2,875.00 $ 2,875.00 $ 2,120,507.00
2043 $ 9,382,688.66 $ - $ 1,776.00 $ 1,776.00 $ 1,895,392.00
2044 $ 8,071,006.05 $ - $ 1,280.00 $ 1,280.00 $ 1,698,119.00
Payroll Contributions decline from $856K to $179K while
Benefit Payments increase from $3.4M to $5.0M by year 2025
Milliman Actuarial Valuation
Issued March 17, 2014
City of Fort Collins
General Employees’ Retirement Plan
January 1, 2014 Actuarial Valuation
Prepared by:
Joel E. Stewart, ASA, EA, MAAA
Consulting Actuary
Katie Antoline, ASA, MAAA
Associate Actuary
Milliman, Inc.
1400 Wewatta Street, Suite 300
Denver, CO 80202-5549
Tel +1 303 299 9400
Fax +1 303 299 9018
milliman.com
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
JANUARY 1, 2014 ACTUARIAL VALUATION
TABLE OF CONTENTS
SECTION PAGE
1 SUMMARY OF THE VALUATION RESULTS ...................................................................... 1
2 SCOPE OF THE REPORT ................................................................................................ 7
3 PARTICIPANT DATA ...................................................................................................... 8
Table 1 Reconciliation of Participant Data............................................................ 9
Table 2 Summary of Active Participants............................................................. 10
Table 3 Summary of Deferred Vested and Deferred Disabled Participants ..... 12
Table 4 Summary of Retirees, Disableds, and Beneficiaries ............................ 13
Table 5 Number of Pensioners and Annual Annuity as of the End of the
Each Year ............................................................................................... 14
Table 6 Schedule of Members Eligible for Normal or Delayed Retirement in
the Next Five Years ............................................................................... 15
4 FINANCIAL DATA ....................................................................................................... 18
Table 7 Statement of Market Value of Assets ............................................... 19
Table 8 Change in Market Value of Assets ................................................... 20
Table 9 Development of Actuarial Value of Assets ........................................ 21
5 DEVELOPMENT OF ACTUARIAL LIABILITY ................................................................... 22
Table 10 Actuarial Balance Sheet ........................................................................ 23
Table 11 Unfunded Actuarial Liability ................................................................... 24
6 GASB NO. 25 AND 27 DISCLOSURE INFORMATION .................................................... 25
Table 12 Calculation of Net Pension Obligation and Pension Cost .................... 26
Table 13 Schedule of Funding Progress .............................................................. 27
Table 14 Schedule of Employer Contributions
and Three-Year Trend Information ........................................................ 28
Table 15 Notes to Required Supplementary Information ..................................... 29
7 HISTORY AND PROJECTIONS ...................................................................................... 30
Table 16 Historical Statistics ................................................................................. 31
Table 17 Twenty-Year Projection of Benefit Payments ....................................... 32
APPENDICES
A ACTUARIAL PROCEDURES AND ASSUMPTIONS .................................................... 33
B PLAN SUMMARY ................................................................................................... 36
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 1
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
SECTION 1
SUMMARY OF THE VALUATION RESULTS
This is a report of our actuarial valuation of the Plan as of January 1, 2014. A summary of our
valuation results follows:
1. Overview of Results
The following table summarizes some of the key results of our valuation of the Plan, along
with the comparable figures from the prior year valuation.
January 1, 2014 January 1, 2013
Market Value of Assets (MV) $ 44,692,556 $ 39,489,447
Actuarial Value of Assets (AV) 41,530,376 38,940,438
Ratio of AV to MV 92.9% 98.6%
Discount Rate for Liabilities 6.50% 6.80%
Present Value of Future Benefits $ 58,760,427 $ 57,348,259
Present Value of Future Normal Costs 2,577,619 2,665,267
Actuarial Liability (AL) $ 56,182,808 $ 54,682,992
Funded Ratio (AV / AL) 73.9% 71.2%
Funded Ratio (MV / AL) 79.5% 72.2%
Unfunded Actuarial Liability (AL - AV) $ 14,652,432 $ 15,742,554
Actuarial Liability in Excess of
the Market Value of Assets:
$ 11,490,252
$ 15,193,545
GASB 25 & 27 Information
Net Pension Obligation (End of Prior Year) $ 3,203,138 $ 2,765,738
2. Analyze recent plan experience and select appropriate actuarial assumptions.
To value the Plan, the actuary must predict future events such as investment return,
mortality, and rates of termination and retirement by means of “actuarial assumptions.” The
validity of our valuation depends on how closely future Plan experience follows our
assumptions. Experience different from that assumed gives rise to actuarial gains or losses,
which affect future costs.
The actuarial assumptions we used in this valuation are stated in Appendix A. The following
comments address some of the more important assumptions.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 2
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
a. Rate of investment return
This actuarial valuation was prepared assuming a 6.5% investment return. A study of
actual investment performance on the market value of assets produced the following
results:
Annual Rate of Investment Return
For One-Year Period
For Period Ending
December 31, 2013
Ending
December 31
Annual Rate
Period
Average
Annual Rate
2013 18.7% 1 year 18.7%
2012 11.6 2 years 15.1
2011 (3.1) 3 years 8.7
2010 11.1 4 years 9.3
2009 20.5 5 years 11.4
2008 (26.5) 6 years 4.0
2007 12.2 7 years 5.1
2006 13.6 8 years 6.1
2005 8.5 9 years 6.4
2004 9.5 10 years 6.7
2003 18.8 11 years 7.7
2002 (9.3) 12 years 6.2
2001 (4.0) 13 years 5.4
2000 (3.5) 14 years 4.7
1999 21.1 15 years 5.7
1998 8.8 16 years 5.9
1997 10.5 17 years 6.2
1996 10.1 18 years 6.4
1995 13.8 19 years 6.8
1994 (0.2) 20 years 6.4
* Rates of return for 1999 and earlier as reported by the prior actuary and
used without audit.
One of the most important assumptions in an actuarial valuation is the investment return
assumption, which represents the expected long-term rate of return on plan assets.
Actuarial Standard of Practice (ASOP) No. 27 provides guidance to actuaries on
selecting assumptions for measuring obligations under defined benefit pension plans.
ASOP No. 27 instructs actuaries to consider recent and long-term historical economic
data, and also explicitly advises against giving undue weight to recent experience.
Recognizing that there is not one “right answer”, ASOP No. 27 calls for the actuary to
develop a best estimate range for the valuation investment return assumption, and then
to recommend a specific point within that range. Milliman’s investment practice has
developed a model that provides a best estimate range based on a Plan’s asset
allocation and certain assumptions regarding future economic experience.
Based on this model at December 31, 2013, a 30-year time horizon and the target
investment allocation, we have developed the following estimate range using an
underlying 2.5% inflation assumption:
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 3
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Percentile
Expected
Rate of Return
75th 7.90%
50th 6.44%
25th 4.99%
In other words, there is a 50% probability that the annual return will be higher than
6.44% under the target investment policy, and a 50% probability that the return will be
less than 6.44%. The current assumption of 6.50% represents the 51st percentile of this
range.
b. Withdrawal and retirement rates
On December 31, 2010 the GERP was amended to allow members to cease accruals in
the plan and either elect to receive a lump sum or leave their accrued benefit in the plan
until early or normal retirement. The analysis that follows excludes these participants.
Withdrawal rates
The actual number of participants leaving employment during 2013 prior to retirement is
one, which is consistent with the number expected to terminate in 2013. Withdrawal
experience has been adjusted for terminations that had reached retirement eligibility but
not yet commenced, and is summarized in the following table for the last five years:
2009 2010 2011 2012 2013 Total
Actual 6 5 4 1 1 17
Expected 3 3 2 1 1 10
A/E 170%
We are not recommending any changes at this time for withdrawal, but will continue to
monitor this assumption in the future to determine whether any changes are warranted.
Retirement rates
Eleven active participants were expected to retire during 2013, which is consistent with
the number expected to retire in 2013. Retirement experience from the past five years,
adjusted for terminations that had reached retirement eligibility but not yet commenced,
is summarized in the following table:
2009 2010 2011 2012 2013
Actual 11 9 10 13 11
Expected 21 19 16 10 11
A/E 52% 47% 63% 130% 100%
The retirement assumption was updated with the January 1, 2012 actuarial valuation.
We are not recommending any changes at this time for retirement, but will continue to
monitor this assumption in the future.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 4
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
c. Salary increase assumption
The assumed rate of future salary increases used for the valuation of the plan is a
graded table based on age, as shown in Appendix A, which anticipated average salary
increases during 2013 of 3.9%. Average salary increases for those participants
continuing in covered employment was 2.5%, with the median salary increase from 2013
to 2014 of 2.5%, based on a comparison of actual compensation rates for 2013 and
2014. Although the actual increases for the last few years have been lower than
expected, we do not recommend a change at this time, as current economic conditions
may have influenced the short-term results. We will continue to monitor this experience.
d. Form of payment assumption
It is assumed that 30% of participants retiring from active status or terminating
employment prior to retirement will elect a lump sum. Analysis of lump sum elections
over the last five years produces the following.
2009 20101 2011 2012 2013 Total
Lump sums 5 6 2 2 4 19
Total exits 17 14 14 14 12 71
% taking a lump sum 27%
1. Excludes experience of those opting out as a result of the plan change on 12/31/2010.
The Retirement Committee has adopted the use of the assumptions for the January 1, 2014
actuarial valuation at their February 2014 meeting.
3. Review the financial effect of experience gains and losses and changes in plan
benefits.
Under the entry age normal cost method, an explicit actuarial liability is calculated, and is
compared to the actuarial value of assets in order to determine the unfunded actuarial
liability (UAL). Actuarial gains and losses on the unfunded actuarial liability can then be
measured. The UAL is expected to increase by the normal cost and for interest due to the
passage of time each year and is reduced by the amount of contributions made to the Plan.
The following table summarizes the change in the UAL during 2013.
Actual UAL, January 1, 2013: $ 15,742,554
Expected changes during 2013: (545,822)
Expected UAL, January 1, 2014: $ 15,196,732
Changes:
Asset (gain) or loss $ (1,986,170)
Salary changes different than assumed (273,473)
Pensioner mortality 125,032
Retirement and other Terminations (111,573)
Other demographic (gains)/losses 60,921
Change in investment return assumption 1,640,963
Total $ (544,300)
Actual UAL, January 1, 2014: $ 14,652,432
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 5
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
4. Provide the disclosure information required by Government Accounting Standards
Board Statement (GASB) No. 25 and No. 27.
Section 6 sets forth certain information required for the plan’s disclosures under GASB
No. 25 and No. 27. The effects of GASB Statements No. 67 and No. 68 have not been
included in this valuation report.
Contributions are currently equal to 10.5% of compensation plus a supplemental amount
determined by the City.
Highlights of the 2013 plan year
There were 439 members reported on January 1, 2014, 128 of whom were active members
who continue to accrue benefits under the plan. The remaining 311 were inactive members
retaining benefits under the plan.
The plan assets earned 18.7% during the 2013 plan year on a market value basis. The
average annual return over the last 20 years is 6.4%. The assumed return for the 2013 plan
year was 6.8%.
At the end of 2013, the market value of assets was $44,692,556. The actuarial value of assets
was $41,530,376 at January 1, 2014.
As of January 1, 2014, the ratio of the actuarial value of assets to the actuarial liability was
73.9%. The ratio of the market value of assets to the actuarial liability was 79.5%.
Changes in Accounting Standards
In August 2012, the GASB issued Statements No. 67 and 68 which will replace Statements
No. 25 and 27. These new standards reflect a fundamental break from how retirement systems
report their assets, liabilities, and expenses.
GASB Statement No. 67 is for retirement plans and is effective for plan years starting
after June 15, 2013.
GASB Statement No. 68 is for employers and is effective for plan years starting after
June 15, 2014.
One important change under the new standards is that the entire “Net Pension Liability” (NPL)
will be recognized on the employer balance sheets. The NPL is the difference between the
Actuarial Accrued Liability (AAL) and the assets measured on a market value basis. The NPL
should be very similar to the Unfunded Actuarial Accrued Liability (UAAL). The current balance
sheet amount is called the Net Pension Obligation, which is the cumulative difference between
the pension cost and the employer contributions to the plan.
The new NPL will differ somewhat from the current UAAL for plans without many assets. That
is because the discount rate will be based on yields on long-term, tax-free municipal bonds
instead of investment return assumptions for payments beyond the Plan’s projected solvency
date.
The measured annual plan expense will be much more volatile under the new standards. The
current measure is called the Annual Required Contribution (ARC), which is a less volatile
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 6
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
measure as it allows for longer amortization periods than will be typical under the new
standards.
Finally, another issue is the significantly expanded plan financial disclosures. Milliman will work
with the City in order to assure that those expanded disclosure requirements are being satisfied
with the next valuation report.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 7
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
SECTION 2
SCOPE OF THE REPORT
Section 1 of this report presents a summary of the findings resulting from this valuation.
Section 3 contains a summary of the data we received regarding participants of the Plan.
Section 4 describes the basis we use in assigning values to the assets, and contains summaries
of the assets in Tables 7, 8 and 9.
Section 5 expands upon Section 1 in various areas of our findings, and describes the actuarial
concepts and methods upon which the findings are based.
Section 6 provides the required GASB No. 25 and No. 27 disclosure information.
Section 7 provides historical statistics of the Plan and a 20-year projection of benefit payments.
All of the calculations of the valuation were carried out using certain assumptions as to the
future experience of the plan. Appendix A summarizes these assumptions. Appendix B
outlines the benefit provisions of the Plan as of January 1, 2014.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 8
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
SECTION 3
PARTICIPANT DATA
The actuarial valuation of the plan is based on the participant data provided to us by the City. The
data includes active participants, terminated vested participants who retain benefits under the plan,
and retirees and beneficiaries receiving benefits as of January 1, 2014. A total of 439 participants
were reported to us and included in this valuation. Table 1 includes a reconciliation of the
participant data from January 1, 2013 to January 1, 2014.
The age and service characteristics of the 128 active participants in the plan as of January 1, 2014
are shown in Table 2. As indicated in Table 2, the average age of the active participants on the
valuation date was 58.6, an increase from the average age of 57.9 of the active participants on
January 1, 2013. The average years of service of the active participants on January 1, 2014 was
25.3, up from the 24.7 average years of service of the active participants on January 1, 2013.
In addition to the active members, there were 121 inactive participants not yet in pay status
retaining benefits under the plan. Table 3 contains a summary of the number of inactive
participants not yet in pay status but retaining benefits under the plan, and the amounts of those
benefits.
Tables 4 and 5 summarize the information provided on the 190 members who are currently
receiving monthly benefits. Table 4 contains a summary of the number of participants receiving
benefits and the amounts of those benefits, while Table 5 lists the benefits being paid as of January
1 of each year from 1985 to 2014. Counts and total annual benefit amounts are separated by
status and sex.
Table 6 displays the list of the retirement dates and status of participants eligible for normal or
delayed retirement in the next five years.
Because participation in the plan was frozen as of January 1, 1999, the number of participants in
the plan has declined over the years, as illustrated below:
0
200
400
600
800
1,000
1,200
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Summary of Plan Participants
Active Employees Retirees Vested Inactives
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 9
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 1
RECONCILIATION OF PARTICIPANT DATA
(January 1, 2013 to January 1, 2014)
Actives
Terminated
Vested
Retired
Beneficiary
Total
Included in January 1, 2013
Valuation:
140
129
162
23
454
Change due to:
New entrants N/A N/A N/A N/A N/A
Rehired 0 0 0 N/A 0
Termination
Nonvested 0 N/A N/A N/A 0
Vested (2) 2 N/A N/A 0
Retirement (6) (4) 10 0 0
Disabled 0 (1) 1 0 0
Death no Beneficiary 0 (1) (2) (4) (7)
Death with Beneficiary 0 0 (2) 2 0
Cash out (4) (4) 0 0 (8)
Other 0 0 0 0 0
Net change (12) (8) 7 (2) (15)
Included in January 1, 2014
Valuation:
128
121
169
21
439
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 10
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be appropriate to use for other
purposes. Milliman does not intend to
benefit and assumes no duty or liability to other parties who receive this work.
TABLE 2
SUMMARY OF ACTIVE PARTICIPANTS AS OF JANUARY 1, 2014
Years of Service
1 to 5 5 to 10 10 to 15 15 to 20 20 to 25 25 to 30 30 & Up Total
Age Number of Participants
Under 25 0 0 0 0 0 0 0 0
25 to 29 0 0 0 0 0 0 0 0
30 to 34 0 0 0 0 0 0 0 0
35 to 39 0 0 0 1 0 0 0 1
40 to 44 0 0 0 4 0 0 0 4
45 to 49 0 0 0 4 3 0 0 7
50 to 54 0 1 1 2 6 5 0 15
55 to 59 0 0 0 6 14 6 4 30
60 to 64 0 0 0 7 15 13 19 54
65 & Up 0 0 0 3 5 4 5 17
Total 0 1 1 27 43 28 28 128
Salary
Under 25 0 0 0 0 0 0 0 0
25 to 29 0 0 0 0 0 0 0 0
30 to 34 0 0 0 0 0 0 0 0
35 to 39 0 0 0 62,896 0 0 0 62,896
40 to 44 0 0 0 224,792 0 0 0 224,792
45 to 49 0 0 0 223,124 179,677 0 0 402,801
50 to 54 0 47,378 47,378 105,304 362,560 284,639 0 847,259
55 to 59 0 0 0 349,434 881,159 342,193 256,272 1,829,058
60 to 64 0 0 0 401,965 1,030,958 905,179 1,346,882 3,684,984
65 & Up 0 0 0 146,772 256,972 309,293 438,035 1,151,072
Total 0 47,378 47,378 1,514,287 2,711,326 1,841,304 2,041,189 8,202,862
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 11
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be appropriate to use for other
purposes. Milliman does not intend to
benefit and assumes no duty or liability to other parties who receive this work.
TABLE 2 (CONTINUED)
SUMMARY OF ACTIVE PARTICIPANTS AS OF JANUARY 1, 2014
Years of Service
1 to 5 5 to 10 10 to 15 15 to 20 20 to 25 25 to 30 30 & Up Total
Age Average Compensation
Under 25 0 0 0 0 0 0 0 0
25 to 29 0 0 0 0 0 0 0 0
30 to 34 0 0 0 0 0 0 0 0
35 to 39 0 0 0 62,896 0 0 0 62,896
40 to 44 0 0 0 56,198 0 0 0 56,198
45 to 49 0 0 0 55,781 59,892 0 0 57,543
50 to 54 0 47,378 47,378 52,652 60,427 56,928 0 56,484
55 to 59 0 0 0 58,239 62,940 57,032 64,068 60,969
60 to 64 0 0 0 57,424 68,731 69,629 70,889 68,240
65 & Up 0 0 0 48,924 51,394 77,323 87,607 67,710
Total 0 47,378 47,378 56,085 63,054 65,761 72,900 64,085
HISTORICAL SUMMARY
2007 2008 2009 2010 2011 2012 2013 2014
Not Vested: 0 0 0 0 0 0 0 0
Partially Vested: 2 0 0 0 0 0 0 0
Fully Vested: 272 235 229 212 169 155 140 128
Total: 274 235 229 212 169 155 140 128
Total Compensation: $15,288,465 $13,851,399 $13,958,960 $12,897,653 $10,399,205 $9,582,235 $8,834,557 $8,202,862
Average Rate of Pay: $55,797 $58,942 $60,956 $60,838 $61,534 $61,821 $63,104 $64,085
Average Service: 19.1 20.5 21.5 22.1 23.0 24.2 24.7 25.3
Average Age: 54.3 54.8 55.6 56.1 56.8 57.5 57.9 58.6
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 12
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 3
SUMMARY OF DEFERRED VESTED AND DEFERRED DISABLED PARTICIPANTS
AS OF JANUARY 1, 2014
Age
Number
Total
Annual
Benefit
Average
Monthly
Benefit
30-34 0 $ 0 $ 0
35-39 0 0 0
40-44 3 28,212 784
45-49 1 4,013 334
50-54 22 214,309 812
55-59 43 411,933 798
60-64 43 387,729 751
65 & Up 9 129,466 1,199
Total 121 $ 1,175,662 $ 810
HISTORICAL SUMMARY
2008 2009 2010 2011 2012 2013 2014
Deferred Vested
Number: 128 112 113 134 135 128 120
Total Annual
Benefit:
$929,585 $786,930 $828,324 $1,308,605
$1,402,476 $1,320,218 $1,162,402
Average Monthly
Benefit:
$605 $586 $611 $814
$866 $860 $807
Average Age: 54.3 54.6 55.4 56.2 57.0 57.6 58.0
Deferred Disabled
Number: 3 3 1 1 1 1 1
Total Annual
Benefit:
$60,980 $60,981 $13,260 $13,260
$13,260 $13,260 $13,260
Average Monthly
Benefit:
$1,694 $1,694 $1,105 $1,105
$1,105 $1,105 $1,105
Average Age: 56.3 57.3 53.0 54.0 55.0 56.0 57.0
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 13
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be appropriate to use for other
purposes. Milliman does not intend to benefit and assumes no
duty or liability to other parties who receive this work.
TABLE 4
SUMMARY OF RETIREES, DISABLEDS, AND BENEFICIARIES AS OF JANUARY 1, 2014
Retirees Disabled Retirees Beneficiaries Total
Age
Number
Annual
Benefit
Average
Monthly
Benefit Number
Annual
Benefit
Average
Monthly
Benefit Number
Annual
Benefit
Average
Monthly
Benefit Number
Annual
Benefit
Average
Monthly
Benefit
55-59 3 $31,994 $889 0 $0 $0 1 $2,773 $231 4 $34,767 $724
60-64 10 139,433 1,162 0 0 0 0 0 0 10 139,433 1,162
65-69 48 647,495 1,124 2 33,774 1,407 1 2,594 216 51 683,863 1,117
70-74 38 611,229 1,340 3 46,015 1,278 1 9,474 790 42 666,718 1,323
75-79 38 396,465 869 0 0 0 2 15,062 628 40 411,527 857
80-84 13 100,368 643 1 11,258 938 5 28,812 480 19 140,438 616
Above 85 13 130,123 834 0 0 0 11 93,239 706 24 223,362 776
Total 163 $2,057,107 $1,052 6 $91,047 $1,265 21 $151,954 $603 190 $2,300,108 $1,009
HISTORICAL SUMMARY
2007 2008 2009 2010 2011 2012 2013 2014
Retirees
Number: 119 133 137 141 141 143 157 163
Total Annual Benefit: $1,131,317 $1,391,269 $1,389,056 $1,544,520 $1,551,801 $1,553,258 $1,836,582 $2,057,107
Average Monthly Benefit: $792 $872 $845 $913 $917 $905 $975 $1,052
Average Age: 71.9 71.4 71.5 71.8 72.4 72.5 72.6 72.8
Disabled
Number: 8 8 7 8 6 6 5 6
Total Annual Benefit: $69,538 $69,537 $63,995 $88,050 $76,483 $76,483 $61,091 $91,047
Average Monthly Benefit: $724 $724 $762 $917 $1,062 $1,062 $1,018 $1,265
Average Age: 73.0 74.0 74.3 74.1 72.5 73.5 72.4 72.2
Beneficiaries
Number: 16 18 19 22 23 22 23 21
Total Annual Benefit: $97,520 $107,583 $124,591 $138,291 $147,516 $140,353 $160,626 $151,954
Average Monthly Benefit: $508 $498 $546 $524 $534 $532 $582 $603
Average Age: 79.0 80.1 81.1 81.2 81.3 81.6 82.4 82.1
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 14
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be appropriate to use for other
purposes. Milliman does not intend to benefit and assumes no
duty or liability to other parties who receive this work.
TABLE 5
NUMBER OF PENSIONERS AND AMOUNT OF ANNUAL ANNUITY AS OF THE END OF EACH YEAR
Year
Retirement* Beneficiaries* Disability**
Male Female Male Female Male Female All
No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount
1985 46 $130,578 $ 5 $ 5,643 $ $ $ 51 $136,221
1986 67 250,103 7 14,058 74 264,161
1987 72 267,262 6 12,904 78 280,166
1988 70 264,467 6 9,299 76 273,766
1989 75 355,402 5 15,931 80 371,333
1990 65 370,147 19 38,437 2 3,561 3 12,370 2 2,041 0 0 91 426,556
1991 64 370,359 17 42,832 3 4,736 3 14,349 2 2,041 0 0 89 434,317
1992 65 375,014 18 51,214 3 4,736 4 15,640 2 2,041 1 5,692 93 454,337
1993 67 393,340 22 79,136 3 4,736 7 35,056 3 18,485 1 5,692 103 536,445
1994 60 394,223 17 75,333 1 3,099 8 39,381 3 21,369 2 10,884 91 544,287
1995 55 359,659 17 77,358 1 3,099 11 55,120 4 25,825 2 10,884 90 531,945
1996 66 466,177 18 84,593 1 3,099 10 50,512 4 25,825 2 10,884 101 641,090
1997 68 477,993 21 104,091 1 3,099 10 50,512 5 35,717 2 10,884 107 682,296
1998 70 547,160 23 121,654 1 3,099 11 53,600 6 40,722 2 10,884 113 777,119
1999 74 593,649 23 133,013 1 3,099 12 61,432 5 32,577 2 10,884 117 834,654
2000 74 650,175 22 136,795 1 3,572 13 71,763 5 34,506 2 11,825 117 908,636
2001 74 656,815 23 143,199 1 3,572 13 71,763 6 45,764 2 11,825 119 932,938
2002 73 691,385 29 194,447 1 3,572 12 68,051 6 45,764 2 11,825 123 1,015,044
2003 75 750,807 31 214,130 2 9,855 12 70,742 6 45,764 1 5,543 127 1,096,841
2004 77 807,941 33 215,275 2 9,855 13 80,089 6 45,764 1 5,543 132 1,164,467
2005 78 809,581 33 215,275 2 9,855 14 87,665 6 45,764 1 5,543 134 1,173,683
2006 83 889,557 36 241,760 2 9,855 14 87,665 7 63,995 1 5,543 143 1,298,375
2007 90 1,080,910 43 310,359 2 9,855 16 97,728 7 63,994 1 5,543 159 1,568,389
2008 90 1,050,492 47 338,564 2 9,855 17 114,736 7 63,995 0 0 163 1,577,642
2009 92 1,160,329 49 384,191 2 9,855 20 128,436 8 88,050 0 0 171 1,770,861
2010 90 1,151,934 51 399,867 3 18,484 20 129,032 6 76,483 0 0 170 1,775,800
2011 90 1,141,103 53 412,155 3 18,484 19 121,869 6 76,483 0 0 171 1,770,094
2012 101 1,382,769 56 453,813 3 18,484 20 142,142 5 61,091 0 0 185 2,058,299
2013 103 1,512,466 60 544,641 2 12,201 19 139,753 6 91,047 0 0 190 2,300,108
* Male and female splits are not available prior to 1990.
** Retirement and disability splits are not available prior to 1990.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 15
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 6
SCHEDULE OF MEMBERS ELIGIBLE FOR NORMAL OR
DELAYED RETIREMENT IN THE NEXT FIVE YEARS
Normal Retirement Date Current Status
9/1/2008 Deferred Vested
12/1/2009 Active
6/1/2011 Active
1/1/2012 Active
2/1/2012 Deferred Vested
5/1/2012 Active
5/1/2012 Active
9/1/2012 Active
11/1/2012 Active
1/1/2013 Active
1/1/2013 Active
3/1/2013 Active
5/1/2013 Active
6/1/2013 Active
12/1/2013 Active
2/1/2014 Deferred Vested
2/1/2014 Deferred Vested
3/1/2014 Active
4/1/2014 Active
4/1/2014 Active
5/1/2014 Deferred Vested
5/1/2014 Deferred Vested
5/1/2014 Deferred Vested
6/1/2014 Deferred Vested
6/1/2014 Active
6/1/2014 Deferred Vested
9/1/2014 Deferred Vested
9/1/2014 Deferred Vested
10/1/2014 Active
10/1/2014 Deferred Vested
10/1/2014 Active
11/1/2014 Active
11/1/2014 Deferred Vested
12/1/2014 Active
1/1/2015 Active
1/1/2015 Deferred Vested
1/1/2015 Active
2/1/2015 Deferred Vested
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 16
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Normal Retirement Date Current Status
3/1/2015 Active
4/1/2015 Active
4/1/2015 Active
5/1/2015 Deferred Vested
6/1/2015 Active
7/1/2015 Active
8/1/2015 Active
9/1/2015 Active
11/1/2015 Deferred Vested
12/1/2015 Active
1/1/2016 Deferred Vested
3/1/2016 Active
3/1/2016 Active
4/1/2016 Deferred Vested
4/1/2016 Deferred Vested
4/1/2016 Active
5/1/2016 Deferred Vested
7/1/2016 Active
7/1/2016 Active
7/1/2016 Active
7/1/2016 Active
8/1/2016 Active
9/1/2016 Deferred Vested
9/1/2016 Deferred Vested
10/1/2016 Active
10/1/2016 Active
11/1/2016 Deferred Vested
11/1/2016 Deferred Vested
11/1/2016 Active
12/1/2016 Active
12/1/2016 Active
1/1/2017 Deferred Vested
1/1/2017 Active
1/1/2017 Active
2/1/2017 Deferred Vested
3/1/2017 Deferred Vested
4/1/2017 Active
5/1/2017 Deferred Vested
7/1/2017 Deferred Vested
8/1/2017 Active
8/1/2017 Active
10/1/2017 Active
10/1/2017 Active
11/1/2017 Deferred Vested
11/1/2017 Active
11/1/2017 Active
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 17
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Normal Retirement Date Current Status
12/1/2017 Deferred Vested
12/1/2017 Deferred Vested
12/1/2017 Active
1/1/2018 Deferred Vested
1/1/2018 Deferred Vested
2/1/2018 Deferred Vested
2/1/2018 Active
4/1/2018 Active
5/1/2018 Active
6/1/2018 Deferred Vested
7/1/2018 Deferred Vested
8/1/2018 Deferred Vested
8/1/2018 Active
8/1/2018 Active
9/1/2018 Active
9/1/2018 Active
9/1/2018 Deferred Vested
10/1/2018 Deferred Vested
10/1/2018 Deferred Vested
10/1/2018 Active
11/1/2018 Active
11/1/2018 Deferred Vested
11/1/2018 Deferred Vested
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 18
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
SECTION 4
FINANCIAL DATA
Table 7 displays a Statement of the Market Value of Assets, and Table 8 presents a summary of
the Changes in the Market Value of Assets. During 2013, the market value of the plan assets
increased by $5,203,491. Benefit payments for 2013 were $4,044,328, an increase from
$2,970,386 during the preceding year.
For the purpose of the actuarial valuation, the investment income of the Fund consists of interest
and dividends as well as realized and unrealized gains and losses on investments. During 2013,
investment earnings totaled $7,201,472. The fund earned 18.7% on a market value basis and
earned 12.0% on an actuarial value basis. The fund earned11.6% on a market value basis for
2012.
For funding purposes, gains and losses over our assumed rate of return (7.5% for years 2009-
2011 and 6.8% for 2012-2013) are recognized over a five-year period. The development of the
actuarial value of assets is shown in Table 9.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 19
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 7
STATEMENT OF MARKET VALUE OF ASSETS
FOR THE PLAN YEARS 2013 AND 2012
December 31, 2013 December 31, 2012
INVESTMENTS
Domestic Mutual Funds $ 25,021,661 $ 21,344,038
International Mutual Funds 6,706,097 6,529,157
Cash and Fixed Income Funds 12,910,437 11,553,498
Total $ 44,638,195 $ 39,426,693
RECEIVABLES
Employer Contributions $ 0 $ 0
Accrued Interest and Dividends 54,676 63,010
Total $ 54,676 $ 63,010
LIABILITIES
Expenses and Benefits Payable $ 315 $ 256
Investment Transaction 0 0
Total $ 315 $ 256
TOTAL MARKET VALUE OF ASSETS $ 44,692,556 $ 39,489,447
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 20
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 8
CHANGE IN MARKET VALUE OF ASSETS
FOR THE PLAN YEARS 2013 AND 2012
2013 2012
Market value at end of prior year $ 39,489,447 $ 37,015,380
Adjustment (382) 0
Market value at beginning of year $ 39,489,065 $ 37,015,380
Income:
Contributions $ 2,067,363 $ 1,241,929
Realized and unrealized
appreciation/(depreciation)
7,201,472
4,226,325
Total $ 9,268,835 $ 5,468,254
Disbursements:
Benefit payments:
Periodic Payments $ 2,170,022 $ 1,955,547
Lump Sum Distributions 1,874,306 1,014,839
Expenses 21,016 23,801
Total $ 4,065,344 $ 2,994,187
Net income: $ 5,203,491 $ 2,474,067
Market value at end of year $ 44,692,556 $ 39,489,447
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 21
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 9
DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS
GAIN/(LOSS)
Actuarial value at beginning of year: $ 38,940,438
Contributions: 2,067,363
Benefit Payments: (4,044,328)
Expected Interest: 2,580,733
Expected actuarial value at end of year: $ 39,544,206
Unrecognized asset gain/(loss) as of end of
prior year:
549,009
Expected actuarial value plus prior year's
unrecognized gain/(loss):
$ 40,093,215
Actual market value at end of year: $ 44,692,556
Gain/(loss) for Year: $ 4,599,341
ASSET GAIN/(LOSS) RECOGNIZED
Original
Amount
Recognized
This Year
Recognized in
Prior Years
To Be
Recognized in
the Future
2009 $ 6,829,340 $ 1,365,868 $ 5,463,472 $ 0
2010 1,133,859 226,772 680,315 226,772
2011 (4,174,766) (834,953) (1,669,907) (1,669,906)
2012 1,543,072 308,614 308,616 925,842
2013 4,599,341 919,869 0 3,679,472
Total $ 9,930,846 $ 1,986,170 $ 4,782,496 $ 3,162,180
ACTUARIAL VALUE OF ASSETS
1. Expected actuarial value as of December 31, 2013 $ 39,544,206
2. Gain/(loss) to be recognized this year 1,986,170
3. Initial Actuarial Value of Assets (1. + 2.) $ 41,530,376
4. 80% of Market Value $ 35,754,045
5. 120% of Market Value $ 53,631,067
6. Actuarial Value of Assets
(3., but not less than 4. or greater than 5.)
$ 41,530,376
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 22
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
SECTION 5
DEVELOPMENT OF ACTUARIAL LIABILITY
A fundamental principle in financing a benefit program is that the cost of its benefits should be
related to when those benefits are earned, rather than to when they are paid. Various methods are
used by actuaries to determine costs that satisfy this principle.
The actuarial valuation is prepared using the entry age normal cost method. Under this cost
method, the actuarial present value of the projected benefits of each individual included in the
valuation is allocated on a level basis over the earnings of the individual between entry age and
assumed exit age. The portion of the actuarial present value of the projected benefits allocated
to all service prior to the valuation date is called the Actuarial Liability. The portion of this
actuarial present value of projected benefits allocated to a valuation year is called the Normal
Cost.
Table 10 contains information on the actuarial balance sheet: the plan’s resources and
requirements. The plan requirements consist of the actuarial present value of projected plan
benefits on January 1, 2014. Plan resources consist of plan assets, projected future normal
costs and the plan’s unfunded actuarial liability. The actuarial liability of the Plan is illustrated
below:
Table 11 shows how the unfunded actuarial liability was derived for the Plan.
39%
15%
46%
Actuarial Liability
Actives Retirees Vested Inactive
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 23
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 10
ACTUARIAL BALANCE SHEET
AS OF JANUARY 1, 2014
REQUIREMENTS
Present Value of Projected Benefits
Retired Participants $ 21,608,789
Vested Inactive Participants 8,473,138
Active Participants
Retirement $ 26,566,182
Vested Withdrawal 294,580
Death 284,922
Disability 1,532,816
Total Active 28,678,500
Total Present Value of Projected Benefits $ 58,760,427
RESOURCES
Actuarial Value of Assets $ 41,530,376
Present Value of Future Normal Costs 2,577,619
Unfunded Actuarial Liability 14,652,432
Total $ 58,760,427
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 24
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 11
UNFUNDED ACTUARIAL LIABILITY
Actuarial Liability as of January 1, 2014
Retired Participants and Beneficaries $ 21,608,789
Vested Inactive Participants 8,473,138
Active Participants 26,100,881
Total $ 56,182,808
Actuarial Value of Assets $ 41,530,376
Unfunded Actuarial Liability as of January 1, 2014 $ 14,652,432
Expected Unfunded Actuarial Liability on January 1, 2014
Unfunded Actuarial Liability as of January 1, 2013 $ 15,742,554
Normal Cost 488,144
Employer Contributions (2,067,363)
Interest 1,033,397
Expected, January 1, 2014 $ 15,196,732
Changes
Experience (Gain)/Loss
Asset (Gain)/Loss (1,986,170)
Salary (Gain)/Loss (273,473)
Retirement and Withdrawal (Gain)/Loss (111,573)
Pensioner Mortality (Gain)/Loss 125,032
Other Demographic 60,921
Total Experience (Gain)/Loss (2,185,263)
Assumption Change 1,640,963
Plan Changes 0
Unfunded Actuarial Liability on January 1, 2014 $ 14,652,432
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 25
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
SECTION 6
DISCLOSURE INFORMATION REQUIRED BY
GOVERNMENT ACCOUNTING STANDARDS BOARD
STATEMENT NO. 25 AND NO. 27
Tables 12 and 13 provide the disclosure information required by Government Accounting
Standards Board (GASB) Statement No. 25, Financial Reporting for Defined Benefit Pension
Plans and Note Disclosures for Defined Contribution Plans, and Statement No. 27, Accounting
for Pensions by State and Local Governmental Employers. The assumptions and methods
used for these funding disclosures meet the parameters set forth in GASB No. 25 and No. 27,
and, other than those described below, are outlined in Table 15 and Appendix A of this report.
GASB 25 generally requires two schedules of historical trend information for the plan: a
schedule of funding progress and a schedule of employer contributions as they relate to the
plan’s Annual Required Contribution (ARC). The chart below provides historical information on
the plan’s ARC.
1 Includes change to entry age normal funding method.
2 Includes change in discount rate from 7.5% to 6.8%.
The pension cost is the ARC plus an amortization of the net pension obligation. The net pension
obligation is the cumulative difference between the pension cost and the employer contribution to
the plan. In this context, the net pension obligation will decrease if contributions exceed the
pension cost and will increase if the entire pension cost is not contributed each year. Table 12
shows the calculation of the net pension obligation and annual pension cost.
Table 13 contains the information required for the schedule of funding progress. The required
schedule of employer contributions is included as Table 14. Also included in Table 14 is the
three-year trend information, as required by GASB 27.
In June 2012 the Government Accounting Standards Board issued GASB Statement No. 67 and
No. 68, which amended GASB 25 and GASB 27, respectively. No. 67 is effective for fiscal
years beginning after June 15, 2013, and No. 68 is effective for fiscal years beginning after June
15, 2014. The effects of these accounting changes have not been included in this valuation
report.
4.41%
4.30%
4.46%
4.72%
4.22%
3.98%
4.31%
5.69%
6.35%
8.44%
10.81%
11.28%
9.57%1
13.62% 14.68%
16.41% 24.36%
2
30.36%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 26
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be appropriate to use for other
purposes. Milliman does not intend to
benefit and assumes no duty or liability to other parties who receive this work.
TABLE 12
CALCULATION OF NET PENSION OBLIGATION AND PENSION COST
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Fiscal
Year
Annual
Required
Contribution
(ARC) (a)
Net Pension
Obligation
(NPO) as of
January 1
[Prior year (10)]
Interest Rate
for Fiscal
Year
Interest on
NPO to
End of Year
[(3) * (4)]
Amortization
Factor
ARC
Adjustment
[(3) / (6)]
Annual
Pension
Cost (APC)
[(2)+(5)-(7)]
Actual
Employer
Contribution
Net
Pension
Obligation
at End of Year
[(8)-(9)+(3)]
2007 1,725,108 643,536 7.50% 48,265 6.0460 106,440 1,666,933 866,694 1,443,775
2008 1,325,710 1,443,775 7.50% 108,283 8.3477 172,955 1,261,038 1,807,834 896,979
2009 1,901,281 896,979 7.50% 67,273 8.4814 105,759 1,862,795 1,005,901 1,753,873
2010 1,892,946 1,753,873 7.50% 131,540 8.7353 200,780 1,823,706 2,100,467 1,477,112
2011 1,706,844 1,477,112 7.50% 110,783 8.3154 177,635 1,639,992 1,345,466 1,771,638
2012 2,334,577 1,771,638 6.80% 120,471 8.0890 219,019 2,236,029 1,241,929 2,765,738
2013 2,681,999 2,765,738 6.80% 188,070 7.5710 365,306 2,504,763 2,067,363 3,203,138
(a) The annual pension cost is the annual required contribution plus an amortization of the net pension obligation from the beginning of the prior
year. The annual required contribution was computed under the aggregate cost method for 2007 and prior, the entry age normal cost method
for 2008 and later. The ARC assumes mid-year contributions beginning in 2008.
The effects of GASB Statements No. 67 and No. 68 are not reflected on this schedule.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 27
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be appropriate to use for other
purposes. Milliman does not intend to
benefit and assumes no duty or liability to other parties who receive this work.
TABLE 13
SCHEDULE OF FUNDING PROGRESS
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
Actuarial
Accrued
Liability
(b)
Unfunded
Actuarial
Liability (UAL)
(b)-(a)
Funded
Ratio
(a)/(b)
Covered
Payroll
(c)
UAL as a
Percentage of
Covered Payroll
[(b)-(a)]/(c)
1/1/2008 $42,339,892 $47,789,676 $5,449,784 88.6% $13,851,399 39.3%
1/1/2009 39,568,446 49,707,694 10,139,248 79.6% 13,958,960 72.6%
1/1/2010 39,577,509 50,300,314 10,722,805 78.7% 12,897,653 83.1%
1/1/2011 39,974,052 49,651,276 9,677,224 80.5% 10,399,210 93.1%
1/1/2012 39,973,803 53,813,281 13,839,478 74.3% 9,582,235 144.4%
1/1/2013 38,940,438 54,682,992 15,742,554 71.21% 8,834,557 178.2%
1/1/2014 41,530,376 56,182,808 14,652,432 73.92% 8,202,862 178.6%
The effects of GASB Statements No. 67 and No. 68 are not reflected on this schedule.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 28
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 14
SCHEDULE OF EMPLOYER CONTRIBUTIONS
AND THREE-YEAR TREND INFORMATION
SCHEDULE OF EMPLOYER CONTRIBUTIONS
Fiscal
Year
Annual Required
Contribution
Employer
Contribution
Percent
Contributed
2007 1,725,108 866,694 50.2%
2008 1,325,710 1,807,834 136.4%
2009 1,901,281 1,005,901 52.9%
2010 1,892,946 2,100,467 111.0%
2011 1,706,844 1,345,466 78.8%
2012 2,334,577 1,241,929 53.2%
2013 2,681,999 2,067,363 77.1%
THREE-YEAR TREND INFORMATION
Fiscal
Year
Annual Pension
Cost (APC)
Percent of APC
Contributed
Net Pension
Obligation
2011 1,639,992 82.0% 1,771,638
2012 2,236,029 55.5% 2,765,738
2013 2,504,763 82.5% 3,203,138
The effects of GASB Statements No. 67 and No. 68 are not reflected on this schedule.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 29
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 15
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
The information presented in required supplementary schedules was determined as part of the
actuarial valuations at the dates indicated. Additional information as of the latest actuarial
valuation follows:
Valuation date January 1, 2014
Actuarial cost method Entry Age Normal
Asset valuation method An expected actuarial value is determined equal to the
prior year’s actuarial value of assets plus cash flow
(excluding realized and unrealized gains or losses) for the
year ended on the valuation date and assuming 6.8%
interest (effective January 1, 2013). The unrecognized gain
or loss is then added to the expected value. Any difference
between this amount and the market value of assets is set
up as a gain or loss base and amortized over five years.
The expected actuarial value plus the amortization of prior
gain or losses is constrained to a value of 80% to 120% of
the market value of assets at the valuation date in order to
determine the final actuarial value of assets.
Actuarial assumptions:
Investment rate of return* 6.5%
Projected salary increases*
Age Total
30 4.5%
35 4.5
40 4.5
45 4.3
50 4.2
55 4.0
60 3.7
65+ 3.6
* Includes inflation at 2.5%
Wage Increase for Unfunded Actuarial Liability Amortization: N/A
The effects of GASB Statements No. 67 and No. 68 are not reflected on this schedule.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 30
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
SECTION 7
HISTORY AND PROJECTIONS
Table 16 shows seven years of the more important Plan statistics.
Assets: Comparison of the Market Value of Assets to the Actuarial Value of Assets,
including the rate of return on the Market Value of Assets, net of investment-related
expenses. Investment return often represents the largest source of actuarial gain or loss.
Contribution: Annual Required Contribution as a percent of pay.
Present Value of Projected Benefits: This represents the present value of benefits earned
currently, plus all benefits expected to be earned in the future.
Participant Statistics: Changes, if any, in the active and inactive participants’ characteristics
over time can cause significant changes in costs.
Assumptions: Changes, if any, in the assumptions used to value plan liabilities can have a
dramatic effect. Several key assumptions are shown in Table 16.
Table 17 provides a projection of benefit payments over the next twenty years. This can
be useful for the investment manager in planning future liquidity requirements, although
this exhibit does not attempt to predict future lump sum payments to terminating
employees.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 31
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be appropriate to use for other
purposes. Milliman does not intend to benefit and assumes no
duty or liability to other parties who receive this work.
TABLE 16
HISTORICAL STATISTICS
2014 2013 2012 2011 2010 2009 2008
Assets
Market Value of Assets $ 44,692,556 $ 39,489,447 $ 37,015,380 $ 39,355,910 $ 37,302,262 $ 32,973,705 $ 45,770,541
Actuarial Value of Assets $ 41,530,376 $ 38,940,438 $ 39,973,803 $ 39,974,052 $ 39,577,509 $ 39,568,446 $ 42,339,892
Ratio 92.9% 98.6% 108.0% 101.6% 106.1% 120.0% 92.5%
Market Value Return 18.7% 11.6% (3.1)% 11.1% 20.5% (26.5)% 12.2%
Present Value of Projected Benefits
For retirees and beneficiaries $ 21,608,789 $ 18,850,712 $ 16,058,012 $ 15,459,723 $ 15,544,671 $ 13,871,991 $ 13,906,218
For terminated vested participants 8,473,138 9,217,906 9,568,212 7,704,312 4,286,911 4,311,839 4,913,655
For active participants 28,678,500 29,279,641 31,223,732 28,839,842 33,569,162 34,967,356 32,654,443
Total $ 58,760,427 $ 57,348,259 $ 56,849,956 $ 52,003,877 $ 53,400,744 $ 53,151,186 $ 51,474,316
Actuarial Liability $ 56,182,808 $ 54,682,992 $ 53,813,281 $ 49,651,276 $ 50,300,314 $ 49,707,694 $ 47,789,676
Participant Statistics
Retired Participants
Number 190 185 171 170 171 163 159
Average Monthly Benefits $ 1,009 $ 927 $ 863 $ 870 $ 863 $ 807 $ 822
Vested Inactive Participants
Number 121 129 136 135 114 115 131
Average Monthly Benefits $ 810 $ 861 $ 867 $ 816 $ 615 $ 614 $ 630
Active Participants
Number of Participants 128 140 155 169 212 229 235
Average Compensation $ 64,085 $ 63,104 $ 61,821 $ 61,534 $ 60,838 $ 60,956 $ 58,942
Average Years of Service 25.3 24.7 24.2 23.0 22.1 21.5 20.5
Average Age 58.6 57.9 57.5 56.8 56.1 55.6 54.8
Actuarial Assumptions
Interest 6.50% 6.80% 6.80% 7.50% 7.50% 7.50% 7.50%
Salary Growth Table Table Table Table Table Table Table
Mortality Table Utilized RP-2000;
Proj. 2021
RP-2000;
Proj. 2021
RP-2000;
Proj. 2021
RP-2000;
Proj. 2021
94GAM 94GAM 94GAM
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 32
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
TABLE 17
TWENTY-YEAR PROJECTION OF BENEFIT PAYMENTS
Plan Year
Estimated Annual
Benefit Payments
2014 3,424,000
2015 3,749,000
2016 4,088,000
2017 4,285,000
2018 4,428,000
2019 4,791,000
2020 4,881,000
2021 4,947,000
2022 4,994,000
2023 5,124,000
2024 4,997,000
2025 5,008,000
2026 4,878,000
2027 4,915,000
2028 4,748,000
2029 4,672,000
2030 4,439,000
2031 4,369,000
2032 4,220,000
2033 4,029,000
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 33
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
APPENDIX A
ACTUARIAL PROCEDURES AND ASSUMPTIONS
The actuarial assumptions used in the valuation are intended to estimate future experience
affecting projected benefit flow and investment earnings. Any variations in future experience
from that expected from these assumptions will result in corresponding changes in the
estimated costs of the plan’s benefits.
The tables in this section give rates of decrement, referred to in actuarial notation by the general
symbol “q'.” The underlying theory is described more fully in Jordan, Life Contingencies, Society
of Actuaries (Second Edition, 1967), page 277. Any age referred to in a table is always the age
of the person at his or her nearest birthday.
Actuarial Cost Method
The actuarial cost method we use to calculate the funding requirements of the Plan is called the
entry age normal cost method.
Under this cost method, the actuarial present value of the projected benefits of each individual
included in the valuation is allocated on a level basis over the earnings of the individual between
entry age and assumed exit age. The portion of the actuarial present value of the projected
benefits allocated to all service prior to the valuation date is called the Actuarial Liability. The
portion of this actuarial present value of projected benefits allocated to a valuation year is called
the Normal Cost.
Actuarial Value of Assets
An expected actuarial value is determined equal to the prior year's actuarial value of assets plus
cash flow (excluding realized and unrealized gains or losses) for the year ended on the
valuation date and assuming 7.5% interest for years 2009 through 2011, and 6.8% for 2012 and
2013. The unrecognized gain or loss is then added to the expected value. Any difference
between this amount and the market value of assets is set up as a gain or loss base and
amortized over five years. The expected actuarial value plus the amortization of prior gain or
losses is constrained to a value of 80% to 120% of the market value of assets at the valuation
date in order to determine the final actuarial value of assets.
Investment Earnings
6.50% per annum, compounded annually net of investment-related expenses.
COLA
None.
Wage Increase
3.50%
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 34
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Earnings Progression
Annual salary increases are based on a table graded by age, as displayed below:
Age
Percentage Increase at Age
Inflation Productivity Merit Total
35 2.5% 1.0% 1.0% 4.5%
40 2.5 1.0 1.0 4.5
45 2.5 1.0 0.8 4.3
50 2.5 1.0 0.7 4.2
55 2.5 1.0 0.5 4.0
60 2.5 1.0 0.2 3.7
65+ 2.5 1.0 0.1 3.6
Retirement
The following table sets forth the probability of retirement according to age.
Age
Probability of
Retirement
55 2%
56 2
57 2
58 2
59 2
60 2
61 2
62 10
63 10
64 10
65 40
66 40
67 30
68 30
69 & Over 100
Deferred Vested participants were assumed to retire at age 65.
Disablement
Graduated rates are used. See table below for sample rates.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 35
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Withdrawal Rates
Graduated rates are used. Sample rates are as follows:
Age at
Termination
Withdrawal
Male Female Disability
35 8.58% 9.53% 0.19%
45 3.89 5.24 0.45
55 2.00 3.29 1.19
60 1.50 2.15 1.80
Mortality
Healthy Lives, Pre-retirement – RP-2000 Healthy Non-Annuitant Mortality Table projected to
2021 using Scale AA
Healthy Lives, Post-retirement – RP-2000 Healthy Annuitant Mortality Table projected to 2021
using Scale AA
Disabled Lives – RP-2000 Disabled Retiree Mortality Table projected to 2021 using Scale AA
Expenses
The average of the prior three year's expenses:
Year Expenses
2013 $ 21,016
2012 23,801
2011 24,052
Total $ 68,869
Average $ 22,956
Marriage Rates
85% of all active and terminated participants not currently receiving benefits are assumed to be
married. Male spouses are assumed to be three years older than their female spouses.
Future Credited Service
The Future Credited Service rate is equal to the member’s Full Time Equivalent (FTE) rate as of
December 31 preceding the current valuation year.
Form of Payment
30% of participants terminating or retiring from active service are assumed to elect a lump sum.
Changes in Actuarial Assumptions and Methods as of January 1, 2014
The investment return rate assumption was lowered to 6.5% to better reflect anticipated plan
experience.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 36
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
APPENDIX B
PLAN SUMMARY
All actuarial calculations are based upon our understanding of the provisions of City of Fort
Collins General Employees’ Retirement Plan, as adopted and in effect on January 1, 2014. This
summary does not attempt to cover all of the detailed provisions.
Plan Year
The Plan Year is the 12-month period beginning January 1 and ending December 31.
Effective Date
The original effective date of the plan is January 1, 1971. The plan was most recently restated
effective January 1, 2012 and amended effective February 5, 2013.
Eligible Employee Classification
All persons employed to fill a classified position defined by the city, excluding police officers and
firefighters, shall become a member of the Plan on the later of the Effective Date of the Plan or
Date of Hire.
The Plan was frozen to new entrants as of January 1, 1999.
Accrued Benefit
The Accrued Benefit for each Member is the Member's Normal Retirement Benefit calculated using
Average Monthly Compensation and Credited Service as of the calculation date. In no event will a
Member’s Accrued Benefit be less than the Accrued Benefit earned as of June 30, 2003.
Average Monthly Compensation
A Member’s Average Monthly Compensation, as of a given date, is the average of the highest 60
consecutive months of considered compensation during the last 120 months of Credited Service.
In the event that a participant was employed on a part time basis during any portion of this period,
the compensation will be converted to a full time equivalent for purposes of calculating the Average
Monthly Compensation.
Compensation
Compensation is the gross compensation included as taxable income on Form W-2, excluding
bonuses, compensatory time recorded as additional hours, overtime pay, workers'
compensation accrued vacation pay, taxable fringe benefits, but including any amounts
contributed by the City to a salary reduction agreement including Code Sections 125, 132(f)(4),
402(a)(8), 403(b), 402(a), and 457.
Credited Service
A Year of Service is credited for each plan year a member works 2,080 hours. If the member
works less than 2,080 hours, a partial Year of Service will be credited on a prorate basis based
on the number of hours for which compensation is paid. Service is credited while a member is
on long-term disability as long as no benefits are being paid from the plan.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 37
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Vested Accrued Benefit
A Participant's Vested Accrued Benefit as of a given date is equal to the product of his Accrued
Benefit multiplied by his Vested Percentage as of that same date.
Vesting Schedule
Members become vested in their Accrued Benefit according to the following schedule:
Years of
Credited Service
Percent
Vested
Less than 2 0%
2 40%
3 60%
4 80%
5 and over 100%
Normal Retirement Date
A Participant’s Normal Retirement Age is the first of the month coincident with or next following the
attainment of age 65.
Normal Retirement Benefits
Each Member who becomes eligible for a Normal Retirement Benefit under the plan will be entitled
to receive a monthly retirement pension benefit beginning at the Member's Normal Retirement
Date and payable in the Normal Benefit Form equal to:
1.5% of Average Monthly Compensation, multiplied by Credited Service.
Normal Benefit Form
Life Annuity - Monthly pension benefit payable for the lifetime of the Member.
Early Retirement
(a) Early Retirement Date
A Member's Early Retirement Date is the first day of the month so elected by the Member
which coincides with or next follows the date upon which the Member attains age 55 and
completes 2 Years of Service.
(b) Early Retirement Benefit
A Member's Early Retirement Benefit is a monthly pension benefit equal to his Accrued
Benefit determined as of his Early Retirement Date, reduced by 1/15th for the first 5 years
and 1/30th for each of the next 5 years payments commence prior to age 65.
Optional Benefit Forms
Optional Benefit Forms are available and equal to the Actuarial Equivalent of the Normal Benefit
Form and may be in an amount more than or less than that provided by the Normal Benefit Form
depending on the option selected. Such distribution may be as a Joint & 50% or 100% Survivor
Annuity, a Life Annuity with 120 payments guaranteed, or a Lump Sum.
Milliman Actuarial Valuation
January 1, 2014 Actuarial Valuation 38
City of Fort Collins General Employees’ Retirement Plan
This work product was prepared solely for the City of Fort Collins General Employees Retirement Committee for the purposes described herein and may not be
appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Pre-Retirement Death Benefit
If a Member dies prior to commencing pension payments, the Member’s beneficiary will receive a
single sum benefit in an amount equal to 47% of the actuarial equivalent value of the Member’s
Accrued Benefit. If the beneficiary is the Member's spouse, the spouse may elect a monthly
benefit which is the actuarial equivalent of the single sum benefit. (The 47% factor is stated in the
Plan Document Article XI, Section 11. It was developed assuming that the participant quit the day
prior to death and elected a 50% joint and survivor benefit.)
Termination Benefit
In the event of the termination of a Member's employment for any reason other than death,
disability or retirement after completing 2 Years of Service, the Member will become entitled to
receive a monthly pension benefit commencing on his Normal Retirement Date equal to his Vested
Accrued Benefit.
If the deferred benefit to which the Member is to be paid at his Normal Retirement Date has an
actuarial equivalent value less than $5,000, the entire benefit will be paid to the terminated
participant as a single lump sum.
Disability Benefit
(a) Total Disability
The monthly benefit, payable for life commencing at normal retirement date, is equal to the
normal retirement benefit considering annual rate of compensation at disability and credited
service he would have accumulated if employment had continued uninterrupted to his normal
retirement date.
(b) Permanent Partial Disability
A member may accrue Credited Service under the Plan for any period of time up to a maximum
accrual of two (2) years.
Instead of the disability benefit described above, the disabled participant may elect to take a
lump-sum distribution at any time.
City Contributions
The entire cost of the plan is to be paid by the City.
Plan Changes
Amendment 2 was adopted and executed effective on or before the valuation date. This
amendment had no impact on the valuation of the Plan.
1
Fund Balance Minimum Policy
Council Finance Committee
April 21, 2013
2
Revised Fund Balance Minimum Policy
• Referred to Government Finance Officer Association
best practices
• Updated and defined new terminology:
o Assigned vs Designated vs Reserve
o Working capital vs fund balance; further clarified Available Working
Capital
• Focus on Minimums
o No targets or maximums
o Does not speak to restrictions and other commitments
3
Governmental Funds
• General Fund
o No change, 17% of annual expenditures
o Clarify that it is additive to the emergency reserve required by
State Constitution: 3% of annual revenue
• Special Revenue Funds
o Change from 2% of expenditures to no minimum required
o GFOA recommendation. Intention is to spend on set purposes.
• Debt Service Funds
o No change, no minimum required
• Capital Project Funds
o No change, no minimum required
4
Proprietary Funds
• Internal Service Funds
o Previously 2% of expenses.
• Equipment (fleet) Fund, no minimum balance required
• Self Insurance Fund, 25% of annual expenses
• Data & Communications Fund, no minimum balance required
• Benefits Fund, 30% of annual medical and dental expenses
• Utility Customer Service Fund, no minimum balance required
• Enterprise Funds
o Recommend changes to all, except Golf
o Simplify and combine previously separate minimums
o Applies to Available Working Capital
5
Proprietary Funds continued
• Golf Fund
o No change, 2% of operating expenditures
• Utility Funds
o Change from 8% or 5% to 25% of operating expense, excluding
purchased power
o Eliminate Purchased Power Reserve (only in Light & Power)
o Eliminate Debt Service Reserve, Capital Outlay, Principal and
Interest Reserve
o Eliminate all Restrictions that are mandated by other sources than
this policy, i.e. Art in Public Places, Water Rights Reserve, etc.
6
Recap Changes
• No change to General Fund
• No minimum for Special Revenue Funds
• No change to Golf Fund
• Modify Internal Services uniquely
• Simplify and combine various minimums for the Utility
funds
Proposal: Approve Revisions
7
Closing
• Will be brought forward for City Council consideration
if CFC recommends
Financial Management Policy 5
Fund Balance Minimums Issue Date: April 15,
2008
Version: 2
Issued by: City Council
Financial Policy 5 – Reserve Policy
1
5.1 Governmental Funds and Fund Balances
To set minimum fund balances so as to mitigate risks, maintain good standing with
rating agencies, and ensure cash is available when revenue is unavailable. The policy is
sets minimum fund balances, not targets or maximum balances. Each fund should be
evaluated by staff to determine the appropriateness of maintaining fund balances above
the minimums set in this policy. Contingencies for severe weather, prolonged drought,
and anticipated capital spending should be considered independently from this policy.
The Equity on balance sheet of a governmental fund is called Fund Balance. The current
classifications of Fund Balance in governmental funds are primarily based on the origin
of the constraints. The following categories are in decreasing order of constraints.
Non-Spendable Permanent endowments or assets in a non-liquid form
Restricted Involve a third party: State Legislation or
Contractual Agreements
Committed Set by formal action of the City Council
Assigned By staff, and/or residual balances in a Special Revenue Fund
Objective:
To set minimum fund balances as to mitigate risk, maintain good standing with rating agencies, and ensure
cash is available when revenue is unavailable. The policy sets minimum fund balances, not targets or
maximum balances. Each fund should be evaluated by staff to determine the appropriateness of
maintaining fund balances above the minimums set in this policy. Contingencies for severe weather,
prolonged drought, and anticipated capital spending should be considered independently from this policy.
Applicability:
Funds—This policy applies to all City funds. It does not apply to URA, DDA, PFA and Library.
Authorized by:
City Council Resolution 1994-174 and 2008-038.
Financial Policy 5 – Reserve Policy
2
Unassigned Remaining balances in the General Fund
Minimums outlined in section 5.2 relate only to Assigned and Unassigned balances.
5.2 Proprietary Fund and Working Capital
Internal Service Funds and Enterprise Funds are accounted for nearly identical to the
private sector. The balance sheets include long term assets and long term liabilities.
The resulting Equity section on their balance sheet, called Net Position, is not a good
measure of spendable financial resources. To get to spendable financial resources, a
common calculation is to take Current Assets and subtract Current Liabilities, with the
net result called Working Capital.
To further refine, for purposes of this policy, certain required restrictions are further
subtracted and result in Available Working Capital. Some examples of required
restrictions are unspent monies for Art in Public Places, Water Rights, and existing
appropriations for capital projects. The minimums outlined in section 5.5 relate to
Available Working Capital.
5.3 Minimum Balances
The following Minimum Balances refers to Assigned and Unassigned Fund Balances in
governmental funds and Available Working Capital in the Internal Service Funds and
Enterprise Funds.
A. General Fund
60 Day Liquidity Goal - The Commitment for Contingency should be at least 60 days
(17%) of the subsequent year’s originally adopted budgeted expenditures and transfers
out. The calculation for the minimum level shall exclude expenditures and transfers out
for large and unusual one-time items.
Important note – the 60 Day Liquidity Goal is in addition to the Restricted Balance
required by Article X, Section 20 of the State Constitution. This reserve must equal 3%
of non-exempt revenue and can only be used for declared emergencies. Fiscal
emergencies are specifically excluded by the State Constitution as qualifying use of this
reserve.
B. Special Revenue Funds
Financial Policy 5 – Reserve Policy
3
No minimum balance is required.
C. Debt Service Funds
No minimum balance is required.
D. Capital Project Fudns
No minimum balance is required.
E. Enterprise Funds
Enterprise funds focus on working capital rather than fund balance.
Enterprise Funds shall maintain a minimum Available Working Capital equal to 25% of
Operating Expenses, less Depreciation. In the case of L&P, operating expenses will
include purchased renewable energy for resale but will not include regular purchased
power for resale (i.e. Platte River Power Authority).
Important note – The Water Fund holds a balance for Restricted Water Rights. The
balance equals the amount of cash in-lieu-of water rights payments and raw water
surcharges less any expenses for acquiring water rights and water storage;
The enterprises funds should also be accumulating available working capital above
these minimums for the purposes of funding future capital projects.
F. Internal Service Funds
Each fund is a unique operation and will maintain a minimum Available Working Capital
as follows:
601 Equipment Fund 8.3% Of annual operating expenses, excluding
depreciation
602 Self-Insurance Fund 25.0% Of annual operating expenses
603 Data & Communications
Fund
0.0% N/A
604 Benefits Fund 30.0% Of annual medical and dental expenses
605 Utility Customer Service
Fund
0.0% N/A
Financial Policy 5 – Reserve Policy
4
5.4 Below Minimum
When circumstances result in balances below the minimum, staff should develop a plan
to restore minimums fund balances and present it to Council Finance Committee.
Financial Policy 5 – Reserve Policy
5
Definitions
Non Spendable Fund Balances: Applicable to governmental funds. Permanent endowments or assets in a
non-liquid form such as long term inter-agency loans.
Restricted Fund Balances: Applicable to governmental funds. Involve a third party such as State
Legislative requirements, voter ballot language, or the Contractual Agreements with parties
external to the City.
Committed Fund Balances: Applicable to governmental funds. Involve a of formal action by the City
Council. An example is traffic calming revenues are required to be spent on traffic calming
activities. Any unspent monies at end of year are classified as Committed to Traffic Calming in the
General Fund.
Assigned Fund Balances: Are applicable to governmental funds. Assignments can be made by senior
management. They represent the intent to use the monies for a specific purpose. An example of this
it this the one time Harmony Road monies transferred by the State to the City. Although required to
be used on Harmony Road, staff intends to use the monies only on Harmony Road improvements.
These monies are considered when measuring compliance with minimum fund balances.
Unassigned Fund Balances: Are applicable only to the General Fund. These monies are considered when
measuring compliance with minimum fund balances.
Working Capital: Is a term applicable to Internal Service and Enterprise Funds. It is the difference
between Current Assets and Current Liabilities. Not all Working Capital is available. Available
Working Capital does not include Restrictions for debt, Art in Public Places, approved capital
appropriations, and other restrictions.
Liquidity: Assets range from cash to land. The more easily and quickly an asset can be converted to cash
determines its relative liquidity.
Reserves: A legacy term that previously referred to fund balances, or fund balances set aside for a specific
purpose. It is no longer used on financial statements.
Fund Balance: Is a term applicable to Governmental Funds. Fund balance or Equity is the difference
between Assets and Liabilities. Since governmental funds do not have long term assets and long
term debt on their balance sheet, fund balance is similar and approximates working capital in the
private sector and enterprise funds.
Financial Policy 5 – Reserve Policy
6
Getting Help
Please contact the Controller with any questions at 970.221.6772.
RESERVE POLICIESFUND BALANCE MINIMUMS
5.1. POLICY STATEMENTPURPOSE AND BENEFITS
The accumulation of reserves protects the City from uncontrollable increases in
expenditures or unforeseen reductions in revenues, or a combination of the two. It also
allows for the prudent financing of capital construction and replacement projects.To set
minimum fund balances so as to mitigate risks, maintain good standing with rating
agencies, and ensure cash is available when revenue is unavailable. The policy is sets
minimum fund balances, not targets or maximum balances. Each fund should be
evaluated by staff to determine the appropriateness of maintaining fund balances above
the minimums set in this policy. Contingencies for severe weather, prolonged drought,
and anticipated capital spending should be considered independently from this policy.
5.2 APPLICABLE TO
Funds – This policy applies to all City funds. It does not apply to URA, DDA, PFA and
Library.
5.32. GOVERNMENTAL TYPES OF FUNDS AND FUND BALANCESRESERVES
The Equity on balance sheet of a governmental fund is called Fund Balance. The
current classifications of Fund Balance in governmental funds are primarily based on the
origin of the constraints. The following categories are in decreasing order of constraints.
Non-Spendable Permanent endowments or assets in a non-liquid form
Restricted Involve a third party: State Legislation or Contractual Agreements
Committed Set by formal action of the City Council
Assigned By staff, and/or residual balances in a Special Revenue Fund
Unassigned Remaining balances in the General Fund
Minimums outlined in section 5.5 relate only to Assigned and Unassigned balances.
5.4 PROPRIETARY FUND AND WORKING CAPITAL
Internal Service Funds and Enterprise Funds are accounted for nearly identical to the
private sector. The balance sheets include long term assets and long term liabilities.
The resulting Equity section on their balance sheet, called Net Position, is not a good
measure of spendable financial resources. To get to spendable financial resources, a
common calculation is to take Current Assets and subtract Current Liabilities, with the
net result called Working Capital.
To further refine, for purposes of this policy, certain required restrictions are further
subtracted and result in Available Working Capital. Some examples of required
restrictions are unspent monies for Art in Public Places, Water Rights, and existing
appropriations for capital projects. The minimums outlined in section 5.5 relate to
Available Working Capital. The City of Fort Collins maintains reserves that are required
by law or contract and that serve a specific purpose. These types of reserves are
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considered restricted and are not available for other uses. Within specific funds,
additional reserves may be maintained according to adopted policies. All expenditures
of reserves must be approved by Council. This may occur during the budget process or
throughout the budget year.
5.5 MINIMUM BALANCES
The following Minimum Balances refers to Assigned and Unassigned Fund Balances in
governmental funds and Available Working Capital in the Internal Service Funds and
Enterprise Funds.
a. GENERAL FUND
Restricted for Emergencies - This reserve is required under Article X, Section 20 of the
State Constitution. This reserve can only be used for declared emergencies. Three
percent or more of the City's fiscal year spending, less bonded debt service must be
reserved
Designated for Affordable Housing - This reserve is restricted for affordable housing
use. City Council may appropriate funds for affordable housing purposes. Funds
appropriated for the promotion of affordable housing and not expended during the year
shall lapse to the Affordable Housing Reserve. Any appropriation from this reserve shall
be restricted for the purpose of affordable housing.
Designated for Contingencies - This reserve is what is left after all the other reserves
and designations are calculated. It is available for the financing of any needs deemed
appropriate by the City Council. Monies held in this reserve may be appropriated during
the current budget year and may also be used for the ensuing budget years as a
financing source if projected expenditures needed to maintain appropriate levels of
service exceed projected revenues. Of all General Fund reserves, this is the most
flexible.
60 Day Liquidity Goal - The Designation Commitment for Contingency should be at
least 60 days (17%) of the subsequent year’s originally adopted budgeted expenditures
and transfers out. The calculation for the minimum level shall exclude expenditures and
transfers out for large and unusual one-time items.
Important note – the 60 Day Liquidity Goal is in addition to the Restricted Balance
required by Article X, Section 20 of the State Constitution. This reserve must equal 3%
of non-exempt revenue and can only be used for declared emergencies. Fiscal
emergencies are specifically excluded by the State Constitution as qualifying use of this
reserve.
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b. SPECIAL REVENUE FUNDS
Examples of special revenue funds are: Transportation Services Fund, Natural Areas Fund,
Cemetery Fund, Cultural Services & Facilities Fund, Perpetual Care Fund, Recreation Fund,
Street Oversizing Fund, and the Transit Services Fund. The fund equity of special revenue
funds is classified as reserved or unreserved. Unreserved portions may be classified as either
designated or undesignated. Designated fund balances represent amounts identified by
management for future use. Reserved fund balances indicate that portion of fund equity,
segregated for future use, which are legally required to be segregated in accordance with legal
and contractual provisions.
Fund managers are allowed to identify fund equity designations (unreserved) provided
resources are available in excess of the fund equity used to fulfill reserved balances and those
designations determined by policy.
Designated for Operations – This reserve designation is established to provide for
unforeseen revenue losses. If something happens to the economy, there is flexibility without
worrying that current expenditures will exceed the total revenue available. The revenue
reserve is calculated, as a minimum, at an amount equal to 2% of projected operating
expenditures by fund. The Operations Reserve is not appropriated as part of the annual
budget, but may be utilized at the end of the fiscal year, if necessary.
No minimum balance is required.
c. DEBT SERVICE FUNDS
No minimum fund balance is required. Debt service funds are generally not expected or
managed to carry any fund balance reserves. Their function is to make debt payments, and
receive transfers from other funds to cover the payments, or collect special revenues
dedicated for debt service.
d. CAPITAL PROJECT FUNDS
No minimum fund balance is required.
d. ENTERPRISE FUNDS
Enterprise funds use full accrual based accounting. Their Equity or Fund Balance on a
balance sheet is referred to as Net Assets. In general, Net Assets are subdivided into three
areas, somewhat based on increasing levels of liquidity. The first division is Nets Assets
Invested in Capital Assets, less Related Debt. This class of Net Assets is not liquid at all, and
hence not subject to appropriation. The second division is Nets Assets Restricted to Debt
Service. This class of Nets Assets, if it exists at all, is imposed by debt covenants. Although
each covenant is unique, it commonly equals the next year’s debt service payments. The last
division is Unrestricted Net Assets, which ultimately is the remaining after the other two
divisions are satisfied. It is this class of net assets that the following policies
address.Enterprise funds focus on working capital rather than fund balance.
Enterprise Funds shall maintain a minimum Available Working Capital equal to 25% of
Operating Expenses, less Depreciation. In the case of L&P, operating expenses will include
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purchased renewable energy for resale but will not include regular purchased power for resale
(i.e. Platte River Power Authority).
Electric Utility
The following policies pertain to the electric utility-Light and Power Fund. Since the utility is
debt-free, these policies pertain primarily to maintenance of reserves. The utility shall be
operated:
1. To provide an operating reserve equal to 8% of budgeted operating expenditures, excluding
the cost of purchased power;
2. To provide a future capital improvements reserve in an amount equal to the average
annual cost (excluding debt financing) of the approved five-year capital improvement plan,
considering any changes which, from time to time, may be made in such plan;
3. To provide a purchase power reserve up to approximately 25% of the annual revenue
from the sale of electrical energy. This reserve shall be used to partially off-set, defer, or
mitigate the impact of purchase power cost increases due to factors such as federal power
issues. Significant changes to the 25% level shall be reported to the Council during the budget
process;
4. Capital Outlay Reserve – at an amount needed to maintain capital assets and equipment
reserve at an amount equal to the capital asset replacement schedule;
5. Priority for the accumulation of reserves shall be as follows: reserves shall first be
accumulated in the operating reserve, second in future capital improvements reserve, third in
the purchase power reserve. In addition, 1% of specified capital project appropriations shall
be reserved and restricted for the City's Art in Public Places program. After reserves are
funded, any remaining working capital shall be added to the purchase power reserve.
Water Utility
The following policies pertain to the water utility-Water Fund.
Flow of Funds
The City has committed to maintain rates and charges sufficient to generate sufficient “net
revenues” of the water system to pay principal and interest on its water revenue bonds and
general obligation water bonds. Net revenues include all revenues referred to above, less
operation and maintenance (O&M) expenses. O&M expenses are those expenses necessary
to operate, maintain, and repair the water system, but do not include any allowance for
depreciation or capital replacements and improvements. After all O&M expenses are paid, the
remaining net revenue is pledged to pay the revenue bonds principal, interest, and related
costs. After all O&M and debt services expenses are paid, the City is required to maintain the
following revenue bond accounts:
1. Principal and Interest Reserve - at an amount equal to the accrued principal and interest
on the water revenue bonds; or
2. Debt Service Reserve - at an amount specified in the bond ordinances.
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Any remaining net revenues of the Water Fund may be used for any lawful purpose. These
are used, in part, to fund major and minor capital improvements and the following reserves:
1. Operating Reserve - at an amount equal to 5% of the projected operating revenue for the
ensuing year;
Important note – The Water Fund holds a balance for 2. Restricted Water Rights. The
balance Reserve - at an amount equals to the amount of cash in-lieu-of water rights payments
and raw water surcharges less any expendituresexpenses for acquiring water rights and
water storage;
The enterprises funds should also be accumulating available working capital above these
minimums for the purposes of funding future capital projects. 3. Art in Public Places
Reserve - at an amount equal to 1% of eligible capital projects whose appropriations exceed
$250,000;
4. Capital Outlay Reserve – at an amount needed to maintain capital assets and equipment
reserve at an amount equal to the capital asset replacement schedule;
5. Capital Projects Reserve - at an amount equal to remaining working capital after all other
reserves are satisfied.
Wastewater Utility
The following policies pertain to the wastewater utility-Wastewater Fund.
1. Flow of Funds
The first charge against Wastewater Fund revenue is operation and maintenance (O&M)
expenses--those expenses necessary to operate, maintain, and repair the sewer system.
After all O&M expenses have been paid, the remaining net revenue is pledged to pay the
sewer revenue bonds principal, interest, and related costs. After all O&M and debt services
expenses are paid, the City is required to maintain the following reserve accounts (listed in
pledge order):
1. Principal and Interest Reserve - at an amount equal to the accrued principal and interest
on the sewer revenue bonds; or
2. Debt Service Reserve - at an amount specified in the bond ordinances.
3. Wastewater Bond Capital Reserve - at an amount equal to 25% of the O&M expenses
budgeted for the fiscal year.
Any remaining net pledged revenues of the Wastewater Fund may be used for any lawful
purpose. These are used, in part, to fund major and minor capital improvements and the
following reserves:
1. Operating Reserve - at an amount equal to 5% of the projected operating revenue for the
ensuing year;
2. Art in Public Places Reserve--at an amount equal to 1% of eligible capital projects whose
appropriations exceed $250,000;
3. Capital Outlay Reserve – at an amount needed to maintain capital assets and equipment
reserve at an amount equal to the capital asset replacement schedule;
4. Capital Projects Reserve - at an amount equal to remaining working capital after all other
reserves are satisfied.
Stormwater Utility
The following policies pertain to the stormwater utility - Storm Drainage Fund.
1. Flow of Funds
The first charge against Storm Drainage Fund revenue is operation and maintenance (O&M)
expenses-those expenses necessary to operate, maintain, and repair the storm drainage
system. After all O&M expenses have been paid, the remaining net revenue is pledged to pay
the storm drainage revenue bonds principal, interest, and related costs. After all O&M and
debt service expenses are paid, the City is required to maintain the following reserve accounts
(listed in pledge order):
1. Principal and interest reserve-at an amount equal to the accrued principal and interest on
the storm drainage revenue bonds;
2. Debt service reserve-at an amount specified in the bond ordinances.
Any remaining net pledged revenues of the Storm Drainage Fund may be used for any lawful
purpose. These are used, in part, to fund major and minor capital improvements and the
following reserves:
1. Operating Reserve--at an amount equal to 5% of the projected operating revenue for the
ensuing year;
2. Art in Public Places Reserve - at an amount equal to 1% of eligible capital projects
whose appropriations exceed $250,000; and
3. Capital Outlay Reserve – at an amount needed to maintain capital assets and equipment
reserve at an amount equal to the capital asset replacement schedule;
4. Capital Projects Reserve - at an amount equal to remaining working capital after all other
reserves are satisfied.
Golf Fund
Designated for Operations – This reserve designation is established to provide for
unforeseen revenue losses. If something happens to the economy, there is flexibility without
worrying that current expenditures will exceed the total revenue available. The revenue
reserve is calculated, as a minimum, at an amount equal to 2% of projected operating
expenditures by fund. The Operations Reserve is not appropriated as part of the annual
budget, but may be utilized at the end of the fiscal year, if necessary.
e. INTERNAL SERVICE FUNDS
Internal Service funds account for certain support services provided to other funds. By
imposing charges to the users of the services, they recover their costs. The City’s Internal
Service Funds are used to account for the City’s fleet maintenance (Equipment Fund),
management information services and communication services (Data and Communications
Services Fund), self-insurance of employee health care and other employee benefits (Benefits
Fund), and a risk management insurance program (Self Insurance Fund).
Accounting guidelines strongly encourage internal service fund to charge only enough to the
recovery of the cost of the service, including depreciation, rather than making a profit.
However, in certain situations it is appropriate to establish fund balance reserves policies. For
example, customer-approved master plans and independent third-party actuarial reviews
(Benefits Fund and Self Insurance Fund) guide the level of reserves.
Designated for Operations – This reserve designation is established to provide for
unforeseen revenue losses. If something happens to the economy, there is flexibility without
worrying that current expenditures will exceed the total revenue available. The revenue
reserve is calculated, as a minimum, at an amount equal to 2% of projected operating
expenditures by fund. The Operations Reserve is not appropriated as part of the annual
budget, but may be utilized at the end of the fiscal year, if necessary.Each fund is a unique
operation and will maintain a minimum Available Working Capital as follows:
601 Equipment Fund 8.3% Of annual operating expenses, excluding depreciation
602 Self-Insurance Fund 25.0% Of annual operating expenses
603 Data & Communications Fund 0.0% N/A
604 Benefits Fund 30.0% Of annual medical and dental expenses
605 Utility Customer Service Fund 0.0% N/A
5.6 BELOW MINIMUM
When circumstances result in balances below the minimum, staff should develop a plan
to restore minimums fund balances and present it to Council Finance Committee.
Definitions
Non-Spendable Fund Balances – Applicable to governmental funds. Permanent endowments
or assets in a non-liquid form such as long term inter-agency loans.
Restricted Fund Balances – Applicable to governmental funds. Involve a third party such as
State Legislative requirements, voter ballot language, or the Contractual Agreements
with parties external to the City.
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Committed Fund Balances – Applicable to governmental funds. Involve a of formal action by
the City Council. An example is traffic calming revenues are required to be spent on
traffic calming activities. Any unspent monies at end of year are classified as Committed
to Traffic Calming in the General Fund.
Assigned Fund Balances – Are applicable to governmental funds. Assignments can be made by
senior management. They represent the intent to use the monies for a specific purpose.
An example of this it this the one time Harmony Road monies transferred by the State to
the City. Although required to be used on Harmony Road, staff intends to use the
monies only on Harmony Road improvements. These monies are considered when
measuring compliance with minimum fund balances.
Unassigned Fund Balances – Are applicable only to the General Fund. These monies are
considered when measuring compliance with minimum fund balances.
Working Capital – Is a term applicable to Internal Service and Enterprise Funds. It is the
difference between Current Assets and Current Liabilities. Not all Working Capital is
available. Available Working Capital does not include Restrictions for debt, Art in Public
Places, approved capital appropriations, and other restrictions.
Liquidity – Assets range from cash to land. The more easily and quickly an asset can be
converted to cash determines its relative liquidity.
Reserves – A legacy term that previously referred to fund balances, or fund balances set aside
for a specific purpose. It is no longer used on financial statements.
Fund Balance – Is a term applicable to Governmental Funds. Fund balance or Equity is the
difference between Assets and Liabilities. Since governmental funds do not have long
term assets and long term debt on their balance sheet, fund balance is similar and
approximates working capital in the private sector and enterprise funds.
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April 21, 2014
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Mike Beckstead, Chief Financial Officer
Lawrence Pollack, Budget and Performance Management Manager
SUBJECT FOR DISCUSSION
Budget Policy Review
EXECUTIVE SUMMARY
The proposed revisions to the City's Budget policies are subject to review periodically. These
policies reflect the existing budget methodology and alignment with City Charter and Code. It is
recommended that this policy change from requiring Council review to administrative review
since the policy is primarily administrative.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Are there any questions about the revised policy?
2. Are there any changes requested?
3. Do you support switching this policy to administrative review and approval?
BACKGROUND/DISCUSSION
The previous budget policy evolved as part of the Budget document. In that context it focused
on explaining budget concepts rather than setting policy. The new policy was created from
scratch based upon policy guidelines from the Government Finance Officers Association
(GFOA) presented as best practices. As such, a red line version of the previous policy was not
deemed valuable or useful. Staff has come up with a new format for financial policies to keep
them consistent across all departments within Financial Services.
In staff review of this document is was determined that it is really administrative in nature with
many references to City Code and City Charter. Staff proposes this policy no longer require
periodic City Council review and approval. Rather, future reviews would be handled
administratively.
ATTACHMENTS
1. PowerPoint Presentation
2. Previous Budget Policy
3. Draft 2014 Budget Policy
1
Budget Policy
Council Finance Committee
April 21, 2013
2
Revised Budget Policy
• Researched other municipal budget policies
• Added specific linkages to City Charter; examples
include:
− City Charter Article II, Section 5 (c): City Council has the power to
adopt a budget
− City Charter Article V, Part 1, Section 2: City Manager shall submit
a proposed budget to City Council on or before the first Monday in
September
− City Charter Article V, Part 1, Section 5: Fixing of the levy
− City Charter Article V, Part I, Section 11: Lapsed appropriations
3
Revised Budget Policy
• Selected structure based on the Government Finance
Officers Association (GFOA)
− 1.1 Overview
− 1.2 Principals for Budget Planning
Summary of current process (BFO)
− 1.3 Scope
Comprehensiveness; content of the Recommended Budget
Budget Form; high-level steps to build the budget
Basis of Budgeting; alignment with generally accepted
accounting principles
Budget Calendar; fiscal year = calendar yearSummary of
current process (BFO)
4
Revised Budget Policy
• Selected structure based on the Government Finance
Officers Association (GFOA)
− 1.4 Roles and Responsibilities
− 1.5 Budgeting Control System
Budget Transfers; ordinance required across funds or capital
projects
Applicable Amendments to the Budget; require appropriation
ordinance approved by City Council
− 1.6 Balanced Budget Definition
Expenses must not be greater than revenues for each fund
Revenues can include unallocated reserves
5
Proposed Change to Review and Approval
• Review of the revised policy highlighted most content
was administrative in nature
• Specifics on Budgeting for Outcomes (BFO) is minimal
since BFO is a process rather than a policy
• Substantive changes would be derived from changes
to City Charter
• Staff proposes to shift the Budget Policy from a
periodic City Council review and approval to
Administrative review and approval
Proposal: Change to Administrative Review and Approval
6
Closing
• New budget policy based on Government Finance
Office Association (GFOA) recommended guidelines
• Budget Policy proposed to shift to administrative
review and approval
• Will be brought forward for City Council consideration
if CFC recommends
FINANCIAL MANAGEMENT POLICIES
TABLE OF CONTENTS
The Financial Management Policies are a compendium of all City policies that shape
the Budget. They are intended to assist the Council and the City Manager in preparing
the Budget and help communicate to residents and customers how the community
goals are being addressed.
BUDGET POLICY
1.1 Overview ......................................................................................................
1.2 Charter Process Requirements ....................................................................
1.3 Changes to Adopted Budget ........................................................................
1.4 Lapsed Appropriations .................................................................................
1.5 Budget Philosophy and Preparation ............................................................
1.6 Principles for Budget Planning .....................................................................
BUDGET POLICY
1.1. OVERVIEW
The budget is a long-range plan by which the City Council sets financial policy. Through
the budget, services are implemented. The budget along with the annual appropriation
ordinance provides the basis for the control of expenditures. For the City of Fort Collins,
direction for the budget emanates from many distinct sources. The State Constitution
and the City Charter provide the basic legal requirements and time lines for the process.
Council goals, ordinances and resolutions provide additional direction and respond to
the needs of the community. (INCLUDED)
1.2. CHARTER PROCESS REQUIREMENTS
a. Budget Term
The fiscal year of the City is the calendar year. The City may adopt budgets for a
budget term of one fiscal year or more. After the Charter amendment in 1997
allowing the budget term to be more than one fiscal year, the Council has adopted
two-year budgets that correspond with the election cycle. (INCLUDED)
b. Budget Recommendation
On or before the first Monday in September preceding each budget term, the City
Manager shall file with the City Clerk a proposed budget for the ensuing budget
term along with an explanatory message. The proposed budget shall provide a
complete financial plan for each fund of the City and shall include appropriate
financial statements for each type of fund showing comparative figures for the last
completed fiscal year, comparative figures for the current year, and the City
Manager=s recommendations for the ensuing budget term. (INCLUDED)
c. Public Record, Hearing
The City Manager=s proposed budget shall be a public record and be available to
the public for inspection and copying. The City Council shall, within ten (10) days
after the filing of the proposed budget, set a time for a public hearing. At the
hearing, the public may comment upon the proposed budget. (INCLUDED)
d. Adoption of Budget and Appropriation of Funds
After the public hearing and before the last day of November preceding the budget
term, the Council shall adopt the budget, by ordinance, for the ensuing term.
Before the last day of November of each fiscal year, the Council shall appropriate
such sums of money as it deems necessary to defray all expenditures of the City
during the ensuing fiscal year. The appropriation of funds shall be accomplished
by passage of the annual appropriation ordinance. The appropriation of funds shall
be based upon the budget as approved by the Council but need not be itemized
further than by fund with the exception of capital projects and federal or state
grants, which shall be summarized by individual project or grant. (INCLUDED)
1.3. CHANGES TO ADOPTED BUDGET
After the commencement of the fiscal year, the amounts appropriated for the proposed
expenditures in the adopted budget are not subject to repeal and are considered
appropriated for the purposes specified. The expenditures of City operating funds
cannot exceed the budgeted appropriations for their respective fund. In certain cases,
however, adopted budgets may be increased, decreased, or amounts transferred
between funds.
a. Budget Increases (INCLUDED)
1. Supplemental Appropriations B The Council, upon recommendation by the
City Manager, may make supplemental appropriations from actual revenues
received, anticipated revenues, and prior year reserves provided that the total
amount of the supplemental appropriation plus previous appropriations for the
fiscal year does not exceed the actual or anticipated revenue total or the
available reserve balance. No appropriation can be made which exceeds the
revenues, reserves, or other funds anticipated or available except for
emergencies due to accident or unforeseen event arising after the adoption of
the annual appropriation.
2. Unanticipated Revenue B If a fund receives revenue during the fiscal year
from a source that was not anticipated at the time of budget adoption such as
grants, bond issue or implementation of a new fee, Council may appropriate
such revenue for expenditure.
3. Encumbrance Carryover B If a fund has open and valid purchase orders at
the end of a fiscal year, those related appropriations are encumbered and
carried over to the ensuing fiscal year and added to the budgeted
appropriations to cover the actual expense when it occurs.
b. Budget Decreases (INCLUDED)
The budget may also be decreased below adopted appropriations during the fiscal
year. Changes in service demand, economic conditions, projected growth limits,
and Council goals and direction may cause such budget reductions. Each service
area is responsible for developing a plan to reduce appropriations. Each plan must
be in place and ready for implementation should the need arise. If the City
Manager directs budget reductions, Council will be informed immediately and the
appropriations will be set aside through administrative action. While this
administrative action does not lower the appropriations within a fund, expenditures
from the fund shall not exceed the amount recommended by the City Manager. If
the circumstances leading to the implementation of reductions change, the
appropriations may be made available for expenditure.
c. Level of Control and Budget Transfers (INCLUDED)
1. Control of expenditures is exercised at the fund level. Fund managers are
responsible for all expenditures made against appropriations within their fund
and can allocate available resources within the fund.
2. During the fiscal year, the Council may by ordinance and upon the
recommendation of the City Manager, transfer any unexpended and
unencumbered appropriated amount from one fund or capital project account
to another fund or capital project account, provided that:
(a) the purpose for which the transferred funds are to be spent remains
unchanged;
(b) the purpose for which the funds were initially appropriated no longer
exists; or
(c) the transfer is from a fund or capital project account in which the
amount appropriated exceeds the amount needed to accomplish the
purpose specified by the appropriation.
1.4. LAPSED APPROPRIATIONS (INCLUDED)
All appropriations not spent or unencumbered at the end of the fiscal year lapse into the
fund balance applicable to the specific fund, except for:
a. Capital Projects - appropriations for capital projects which do not lapse until the
project is completed and closed out; and
b. Grant Funds - appropriations for federal or state grants which do not lapse until
the expiration of the grant.
Council can terminate a capital project or a federal or state grant at any time prior to
completion of the project or expiration of the grant.
1.5. BUDGET PHILOSOPHY
a. Philosophy (NOT INCLUDED)
The City of Fort Collins is committed to presenting a sound financial plan for
operations and capital improvements within growth limit guidelines. To achieve
this end, the City utilizes conservative growth and revenue forecasts and:
$ Prepares multi-year financial plans for operations and capital improvements;
$ Allows staff to manage the operating and capital budgets, with City Council
deciding allocations in both;
$ Adopts financial management policies which establish guidelines for multi-
year financial plans;
$ Establishes budgets for all funds based on adopted policies;
$ Appropriates the budget in accordance with the City Charter and State
Constitution;
$ Adjusts the budget to reflect changes in the local economy, changes in
priorities, and receipt of unbudgeted revenues;
$ Organizes the budget so that revenues are related to expenditures as much
as possible;
$ Provides department managers with immediate access to revenue and
expenditure information for controlling their annual expenditures against
appropriations;
$ Utilizes a performance measurement system for all activities in the City;
$ Evaluates recommendations that have a budget impact in light of annual
appropriations and multi-year financial plans.
b. Budget Preparation (INCLUDED)
While the Charter establishes time limits and the essential content of the City
Manager=s proposed budget and the adoption of the budget, the language is silent
on the budget preparation process.
The City=s Financial and Management Policies guide budget preparation and long-
range planning. The City Manager, Deputy City Manager, Budget Director, and
designated Service Area Directors develops the guidelines, consistent with the
Policies, to be used for budget preparation. The aforementioned individuals are
collectively referred to as the Budget Leadership Team. During the development of
the budget, various department and division representatives may be called on to
provide their expertise . In addition, the City Council and the Executive Lead Team
provide guidance during preparation.
The City=s 2006-2007 biennial budget was prepared using a process called
Budgeting for Outcomes (ABFO@). The purpose of utilizing the BFO approach is
to:
$ Identify what=s important to a community and develop a sound financial and
service plan to achieve those outcomes;
$ Allocate dollars based on current priorities and results, not simply increase
last year=s spending;
$ Effectively deal with revenue limitations; and
$ Emphasize accountability, efficiency, innovation and partnerships.
In March, programs develop multi-year revenue projections and submit them to the
Budget Office. These revenue projections effectively Aset the price of
government@; the amount available for purchasing outcomes/results. City Council
adopts the outcomes/results that form the foundation of the budget. The revenues
are then allocated, by the Leadership Team, across the outcomes. Results
Teams, organized by outcome/result, prepare ARequests for Results@ (ARFR=s@)
that include strategy maps, two to three high level indicators to measure results,
and purchasing strategies. Sellers (departments/divisions) prepare Aoffers@ in
response to the RFR=s. The Seller=s offers are reviewed by the Results Teams,
ranked, and recommended for inclusion or omission from the City Manager=s
recommended budget, based upon the offer=s merits and the resources available,
given the outcome/result.
The City Manager=s budget recommendation is submitted to City Council before
the first Monday in September. The recommended budget is made available for
public inspection at this time. In September, a recommended budget-in-brief is
published in the local newspaper for public information. In addition, two public
hearings and Council work sessions are held in September and October. The
budget for the ensuing budget term is adopted no later than November 30.
1.6 PRINCIPLES FOR BUDGET PLANNING
The City provides a wide variety of services to the residents of the community. It is the
responsibility of City Council to adopt a budget and manage the available resources to
best meet the service needs for the overall good of the community. (INCLUDED)
To aid in planning for the allocation of resources to meet the good of the whole
community, Council adopted Resolution 2001-161, that set forth the Principles for
Budget Planning. Those Principles as adopted by Council are as follows: (NOT
INCLUDED FROM HERE DOWN)
a. The City should strive to attain the lowest possible interest rates on debt in order to
minimize the cost to taxpayers and users of City services.
b. The City should maintain adequate reserve levels to ensure minimal loss of service
to the community should there be unforeseen reductions in revenues or a
catastrophic occurrence.
c. Employees of the City are a valuable resource in providing services to the
community, and a compensation policy should be maintained for City employees
that reflects the value of attracting and retaining quality employees.
d. Primary services are those services that are necessary for the good of the entire
community. They are basic to the safety, health, and welfare of the community,
and the allocation of all resources necessary for the provision of primary services is
the first priority in budget preparation. Primary services are:
Police
Fire
Development Review
Affordable Housing
Neighborhood and
Building Services
Water
Transportation
Electric
Engineering
Pedestrian Access
Wastewater
Stormwater
Natural Resources
Facilities Maintenance
(all public facilities
including parks)
e. Secondary services are those services that enhance the quality of life of the
residents and to many, increase the value of living and working in the community.
While the value of secondary services is recognized, the allocation of resources to
those services shall be considered only after the necessary allocation has been
made to fund primary services. Secondary services are:
Recreation
Human Rights
Golf
Parks
Library
Human Services Contract
Natural Areas
Performing Arts
Cemeteries
Airport
Museum
f. Support services provide the management, guidelines, and operational assistance
to carry out the provision of primary and secondary services. Resources should be
allocated to support services to support the level and quality of primary and
secondary services expected and desired by the community. Support services are:
General Administration
Budget
Clerical Support
Information Technology
Real Estate Services
Finance
Human Resources
Fleet Management
Geographic Information
Systems
Legal
City Clerk
Municipal Court
g. No new services, other than those identified as primary services, shall be
undertaken by the City until all existing primary, secondary, and support services
have received a sufficient level of funding to meet the needs of the community.
h. Any adjustment to the existing budget shall take into account the effect that such
adjustment would have on future budget resources.
Financial Management Policy
Budget Policy Issue Date:
Version:
Issued by:
Financial Policy – Budget Policy
1
1.1 Overview
The Fort Collins City Charter establishes time limits and the essential content of the City
Manager’s proposed budget, however the budget preparation process is not prescribed, but
is developed by the City Manager with input from the City Council.
The fiscal year of the City is the calendar year. The City may adopt budgets for a budget
term of one fiscal year or more. After the Charter amendment in 1997 allowing the budget
term to be more than one fiscal year, the Council has adopted two-year budgets that
correspond with the election cycle.
The budget is a 2-year plan by which the City Council sets the financial and operational
priorities for the City - through the budget, services are implemented. The budget along
with the annual appropriation ordinance provides the basis for the control of expenditures.
The State Constitution and the City Charter provide the basic legal requirements and time
lines for the process. Council goals, ordinances and resolutions provide additional direction
and respond to the needs of the community.
1.2 Principals for Budget Planning
The City provides a wide variety of services to the residents of the community. It is in the
power of the City Council to adopt a budget and manage the available resources to best
meet the service needs for the overall good of the community (City Charter Article II,
Section 5 (c)).
In 2005 the City Council, on recommendation from the City manager, endorsed the
Objective:
Governments allocate scarce resources to programs and services through the budget process. As a
result, it is one of the most important activities undertaken by governments. The purpose of this
policy is to establish parameters and provide guidance governing the budget for the City of Fort
Collins (City).
Applicability:
This budget policy applies to all funds and Service Areas of the City.
Authorized by:
City Council
Financial Policy – Budget Policy
2
Budgeting for Outcomes budget process. At a high level, the budgeting for outcomes
methodology can be summarized as:
1. Determine how much money is available. The budget should be built on expected
revenues. This would include base revenues, any new revenue sources, and the
potential use of fund balance.
2. Prioritize results. The results or outcomes that matter most to citizens should be
defined. Elected leaders should determine what programs are most important to their
constituents.
3. Allocate resources among high priority results. The allocations should be made in a
fair and objective manner.
4. Conduct analysis to determine what strategies, programs, and activities will best
achieve desired results.
5. Budget available dollars to the most significant programs and activities. The
objective is to maximize the benefit of the available resources.
6. Set measures of annual progress, monitor, and close the feedback loop. These
measures should spell out the expected results and outcomes and how they will be
measured.
7. Check what actually happened. This involves using performance measures to
compare actual versus budgeted results.
8. Communicate performance results. Internal and external stakeholders should be
informed of the results in an understandable format.
At that time, the City Council also identified the key outcomes it believed should be used in
the new budget process. In addition, the 2005-2007 Policy Agenda sets forth the
implementation and continued improvement of the collaborative budget process, aligning
spending with desired outcomes.
In 2012, the City Council passed resolution 2012-076 promoting improved results through
performance measures and data-driven decision making. In reference to the budget, an
outcome-based performance measurement system will help ensure that available resources
are used to achieve excellent results at low cost to the taxpayers and will enhance the
citizen’s understanding of the City and the services it provides.
1.3 Scope
A. Comprehensiveness
The proposed budget shall provide a complete financial plan for each fund of the city and
shall include appropriate financial statements for each type of fund showing comparative
figures for the last completed fiscal year, comparative figures for the current year, and the
City Manager's recommendations for the ensuing budget term (City Charter Article V, Part
1, Section 2). In addition, the City of Fort Collins Budget Document may include items such
as:
Financial Policy – Budget Policy
3
1) Statement of organization-wide strategic goals.
2) A description of the budget process, including a timeline.
3) A Glossary of Budget Terms.
4) A City of Fort Collins organizational chart.
5) Letter from the City Manager.
6) Budget Overview which may include:
a) The economic outlook;
b) Revenue assumptions;
c) Summary of use of reserves;
d) Budget priorities and highlights.
7) Copy of signed appropriation ordinance and a schedule of 2nd year proposed
appropriations.
8) Revenue, expense and changes in fund balance summaries.
9) Summary of employee full-time equivalent staffing by service area and department.
10) A section for each of the key strategic Outcomes, which may include:
a) Information indicating how the Offers in the Outcome are funded, by fund;
b) Major key purchases;
c) Major enhancements purchased;
d) Detailed listing of all offers funded and unfunded;
e) Strategic objectives of the Outcome.
11) Fund Statements.
12) Overview of debt position.
13) Current Capital Improvement Plan.
14) Summary of changes to user fees.
15) Summary of property tax mill levy and assessments.
The annual appropriation ordinance shall also include the levy in mills, as fixed by the
Council, upon each dollar of the assessed valuation of all taxable property within the
city, such levy representing the amount of taxes for city purposes necessary to provide,
during the ensuing fiscal year, for all properly authorized expenditures to be incurred
by the city, including interest and principal of general obligation bonds. If the Council
fails in any year to make said tax levy as above provided, then the rate last fixed shall
be the levy fixed for the ensuing fiscal year and the Financial Officer shall so certify
(City Charter Article V, Part 1, section 5).
B. Budget Form
The City of Fort Collins uses the Budgeting For Outcomes model to create the City budget. A
new budget is designed from the ground up based on the results desired in each of the
Outcomes defined by the City. The BFO budget-building process includes four steps:
1) Determine how much revenue will be available (the price people pay);
2) Determine the priorities of the City and its citizens and the results to be achieved;
Financial Policy – Budget Policy
4
3) Allocate the revenue needed to achieve the desired results;
4) Determine which budget items will best produce the desired results at the price
allocated.
C. Basis of Budgeting
All budgetary procedures conform to state regulations and to generally accepted accounting
principles. The basis or principle used for budgeting is the same as that used for
accounting, with a few exceptions, and varies according to the fund type.
Governmental Funds use the modified-accrual basis of accounting. This means that revenues
are recognized when they are earned, measurable and available. Expenditures are
recognized in the period that liabilities are due and payable. The budgetary basis is the
same and is used in the General Fund, Special Revenue and Debt Service Funds, and Capital
Project Funds.
Proprietary and Fiduciary Funds use the full accrual basis of accounting. Revenues are
recognized when they are earned and expenses are recognized when liabilities are incurred.
However, the budgetary basis in these funds is primarily based on the modified-accrual
approach. Instead of authorizing budget for depreciation of capital assets, the budget
measures and appropriates cash outflows for capital acquisition and construction, which is
a modified-accrual approach. In full accrual based accounting debt proceeds are recorded as
liabilities rather than a revenue (funding source). For these reasons a reconciliation and
adjustment is made on these fund statements to show the difference between the budgetary
basis and the accounting basis.
D. Budget Calendar
The fiscal and accounting year shall be the same as the calendar year. "Budget term" shall
mean the fiscal year(s) for which any budget is adopted and in which it is to be
administered. Council shall set by ordinance the term for which it shall adopt budgets in
accordance with this Article (City Charter Article V, Part 1, section 1).
On or before the first Monday in September, commencing in 2010 and every other year
thereafter, the City Manager shall file with the City Clerk a proposed budget for the City for
the ensuing two-year term (City Charter Article V, Part 1, section 2). The Council shall,
within ten (10) days after the filing of said proposed budget with the City Clerk, set a time
certain for public hearing and cause notice of such public hearing to be given by publication.
At the hearing, all persons may appear and comment on any or all items and estimates in
the proposed budget. Upon completion of the public hearing the Council may revise the
budget estimates (City Charter Article V, Part 1, section 3).
After said public hearing and before the last day of November preceding the budget term,
Financial Policy – Budget Policy
5
the Council shall adopt the budget for the ensuing term. The adoption of the budget shall be
by ordinance. Before the last day of November of each fiscal year, the Council shall
appropriate such sums of money as it deems necessary to defray all expenditures of the city
during the ensuing fiscal year. The appropriation of funds shall be accomplished by passage
of the annual appropriation ordinance. Such appropriation of funds shall be based upon the
budget as approved by the Council but need not be itemized further than by fund with the
exception of capital projects and federal or state grants which shall be summarized by
individual project or grant (City Charter Article V, Part 1, section 4).
Appropriations for each year of the two-year budget will be approved by the City Council
annually. Appropriations for the 2nd year of the biannual budget are adopted during the
budget revision process. That process allows for adjustments to the originally adopted
biennial budget that address new Council priorities or support changing needs based on
economic conditions. The City Manager may present any budget adjustment
recommendations to the City Council in Work Sessions and then Council may amend the
budget and, as required by the State and City Charter, appropriate or authorize
expenditures for the coming fiscal year.
1.4 Roles and Responsibilities
All powers of the city and the determination of all matters of policy shall be vested in the
Council except as otherwise provided by the Charter. Without limitation of the foregoing,
the Council shall have power to adopt the budget of the city.
The City Manager shall be responsible to the Council for the proper administration of all
affairs of the City and to that end shall have power and be required to prepare the budget
and submit it to the Council and be responsible for its administration after adoption.
The City Manager and Chief Financial Officer, along with the other executive directors,
known as the Budget Lead Team (BLT), develop the guidelines, consistent with the policies,
to be used for budget preparation. During the development of the budget, various
department and division representatives may be called upon to provide their expertise.
From April through June, City staff from all departments and divisions prepares the Offers
(budget requests) for inclusion in the budget.
1.5 Budgeting Control System
No appropriation shall be made by the Council which exceeds the revenues, reserves or
other funds anticipated or available at the time of the appropriation, except for emergency
expenses incurred by reason of a casualty, accident or unforeseen contingency arising after
the passage of the annual appropriation ordinance (City Charter Article V, Part I, Section 8
(a)).
Financial Policy – Budget Policy
6
Control of expenditures is exercised at the fund level. Fund managers are responsible for all
expenditures made against appropriations within their fund and can allocate available
resources within the fund.
All appropriations unexpended or unencumbered at the end of the fiscal year shall lapse to
the applicable general or special fund, except for:
• appropriations for capital projects which shall not lapse until the completion of the
capital project; and
• federal or state grants which shall not lapse until the expiration of the federal or state
grant (City Charter Article V, Part I, Section 11).
A. Budget Transfers
Between Funds or Capital Projects
During the fiscal year, the Council may, by ordinance, upon the recommendation of the City
Manager, transfer any unexpended and unencumbered appropriated amount or portion
thereof from one fund or capital project account to another fund or capital project account
provided that:
1) the purpose for which the transferred funds are to be expended remains unchanged;
2) the purpose for which the funds were initially appropriated no longer exists; or
3) the proposed transfer is from a fund or capital project account in which the amount
appropriated exceeds the amount needed to accomplish the purpose specified in the
appropriation ordinance (City Charter Article V, Part I, Section 10 (b)).
Within a Fund
Budget control is maintained at the departmental level. The Chief Financial Officer Manager
has the authority to approve departmental expenses greater than budget so long as
expenses are less than budget within a fund. In no case may the total expenditures of a
particular fund exceed that which is appropriated by the City Council (City Charter Article V,
Part I, Section 10 (a)).
B. Applicable Amendments to the Budget
Budget Increases
There generally are four opportunities during the fiscal year for supplemental additions to
the current year annual appropriation approved by Council:
1) The first is through the encumbrance carry-forward process whereby approved
purchase orders that cannot be executed prior to the end of the fiscal year will have
available budget carried forward into the new year.
Financial Policy – Budget Policy
7
2) The second is usually adopted in March/April to re-appropriate funds from the previous
year’s ending balance for projects or obligations that were approved but not completed
during that year.
3) The third opportunity in the 2nd half of the year is used to fine-tune (clean-up) the
current fiscal year for previously unforeseen events. In addition, if revenue is received
during the fiscal year from a source that was not anticipated at the time of budget
adoption or appropriation for the fiscal year, such as grants or implementation of a new
fee, Council may appropriate that unanticipated revenue for expenditure when received
anytime during the year.
4) Lastly, the Council, upon recommendation of the City Manager, may make supplemental
appropriations by ordinance at any time during the fiscal year; provided, however, that
the total amount of such supplemental appropriations, in combination with all previous
appropriations for that fiscal year, shall not exceed the then current estimate of actual
and anticipated revenues to be received by the city during the fiscal year. This provision
shall not prevent the Council from appropriating by ordinance at any time during the
fiscal year such funds for expenditure as may be available from reserves accumulated in
prior years, notwithstanding that such reserves were not previously appropriated (City
Charter Article V, Part I, Section 9).
Budget Decreases/Frozen Appropriations
The budget may be decreased below adopted appropriations during the fiscal year due to
changes in service demand, changes in economic conditions, and/or changes in Council
goals. Each service area is responsible for developing a plan to reduce appropriations,
which will be ready for implementation should the need arise. If the City Manager directs
budget reductions, Council will be informed and the appropriations will be “set aside”
through administrative action. While the appropriation amount is not changed,
expenditures shall not exceed the reduced amount recommended by the City Manager.
1.6 Balanced Budget Definition
All funds are required to balance. As such, total anticipated revenues must equal the sum of
budgeted expenditures for each fund. Revenues are derived from two sources: current
revenue charges and unallocated reserves carried forward from prior years.
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
AGENDA
Urban Renewal Authority Board Finance Committee
April 21, 2014
11:30 a.m. to 12:00 noon
CIC Room – City Hall
Approval of the Minutes from the February 10, 2014 Meeting
1. CAG Discussion on URA 30 minutes T. Leeson
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
URA Finance Committee Meeting
Draft Minutes
2/10/14
11:30 to Noon
CIC Room
Council Attendees: Mayor Karen Weitkunat, Bob Overbeck, Ross Cunniff
Staff: Mike Beckstead, Ed Bonnette, Mike DeKock, Bruce Hendee,
Randy Hensley, Tom Leeson, Sandra O’Brian, Gerry S. Paul,
John Voss, Wendy Williams, Katie Wiggett
Others: Dale Adamy, Kevin Jones (Chamber of Commerce), Eric
Sutherland
Approval of the Minutes of December 16, 2013
Mayor Karen Weitkunat moved to approve the minutes for the December 16, 2013 meeting. Bob
Overbeck seconded the motion. Minutes approved unanimously.
Union Place
Tom Leeson introduced a request from Revive Properties, a new residential development in the North
College URA area. Revive is asking the Urban Renewal Authority for financial assistance for street
improvements, sustainability features and stormwater detention improvements associated with their
construction project. Tom said that this project is an excellent example of how public-private
partnerships can be used to help the community achieve its long-term objectives related to creating
great places and reaching the community’s sustainability goals. Revive will be a unique, model
development for Larimer County because it will use geothermal energy for heating and cooling homes,
as well as solar power, in an effort to achieve a Net Zero Capable community. Revive will also be a
catalyst for redevelopment in the North College Urban Renewal Area by providing much-needed,
moderately-priced housing.
Tom explained that, in evaluating URA projects, significant consideration is given to the project’s public
benefit. Public benefit is measured by the extent to which the project aligns and achieves City policies
and remediates blight. The public benefits of the Revive properties include the following:
City Plan
•EH 4.1 – Prioritize Targeted Redevelopment and Infill
•LIV 5.1 – Encourage Targeted Redevelopment and Infill
•LIV 22.1 - Vary Housing Models and Types
•LIV 22.3 – Offer Multi-Family Variation
•LIV 22.4 – Orient Buildings to Public Streets
•ENV 6.5 – Offer Energy Efficiency Incentives
•ENV 20.4 – Develop Public/Private Partnerships (Stormwater Management)
2
North College Infrastructure Funding Plan
•Missing segment Mason St – Med. priority
•West Side Drainage System
Blight remediation
•Deteriorated site or other public infrastructure
•Inadequate public improvements or utilities
•Substantial physical underutilization or vacancy of sites
Tom gave details on the project description and site plan and a breakdown of Revive’s financial request.
Financial Request
Total Project Cost (Vertical Excluded) $5,401,061
Projected Actual Value (Vertical Included) $18,697,200
Projected Annual Tax Increment $135,572
Total Property Tax Increment Expected $1,762,436
Total TIF Requested $1,600,000
% of Tax Increment Requested 91%
Total TIF Recommended $1,270,414
% of Tax Increment Recommended 72%
% of TIF Relative to Project Cost (Vertical Excluded) 23%
% of TIF Relative to Project Cost (Vertical Included) 7%
Staff used the County’s projected estimate of value to calculate the TIF. Revive requested 91% of the
TIF, but Staff recommends a 72% share, staying under the 75% proposed policy guidelines.
Tom said that URA financial parameters also limit the percent TIF contribution relative to total project
cost to 15%. Revive’s total project cost is $5.4 million, excluding the vertical construction costs. This
puts the percent of TIF relative to project cost at 23%, which is higher than the URA financial
parameters. However, if the estimated vertical construction costs are included ($18,697,200), then the
percent TIF relative to total project cost is 7%. URA staff recommends evaluating the project with the
vertical construction costs included as that is what generates the property value, which generates the
tax increment.
Bob Overbeck asked for clarification on the terms vertical and horizontal in this context. Tom explained
that horizontal means the project without future construction, vertical includes the future construction.
Mike Beckstead clarified that the developer is not going to build the improvements; instead, they’ll sell
off lots and someone else will build. So, none of the vertical improvements are included in Revive’s
project costs. URA staff is recommending that the TIF include the vertical costs.
Tom went on to explain a deviation from policy within the request. Revive is asking for retroactive
reimbursement for three projects: a total of $36K for public road improvements and $370K and $84K for
sustainable features. URA Policy does not allow for retroactive reimbursement unless it is for a public
3
improvement cost. The Sustainable features are not “public improvements required of the project” and,
therefore, do not meet the requirements of the URA Policy.
However, Tom pointed out, the Urban Renewal Authority Policies and Procedures also state: “The Board
may, in its discretion, amend or waive sections of this document when determined necessary or
appropriate.” URA Staff recommends that the Board waive this section of policy document for the
following reasons:
• The sustainable features incorporated into the Revive project are consistent with other
community objectives related to sustainability.
• According to the EPA, geothermal heat pumps are the most energy efficient, environmentally
clean and cost effective system for temperature control.
• The intent of the Revive developer is to construct Net Zero Capable residential units, and the
geothermal system is a major factor in reaching that goal.
• In 2008 City Council adopted new carbon reduction goals for the Fort Collins community, which
is to reduce communitywide emissions 20% below 2005 levels by 2020.
• The geothermal system and permeable pavers are a major contributor to the extraordinary
costs associated with the need for URA assistance.
• One of the state objectives of the URA is to: “Promote energy and water efficiencies within
buildings and developments.”
To sum up the financial analysis, Tom noted that:
• The developer’s request is atypical because it does not include vertical costs/returns
• The recommended TIF amount is consistent with URA Financial Parameters
• Even with the requested TIF funds, the estimated returns are below what a developer or
investor would expect for a real estate development project of this size and level of risk
The Mayor asked if the City should be concerned by the fact that this project’s return is so low. Tom
replied that the low return is a risk the developer is choosing to take in order to save their investment.
The Mayor asked if Staff feels comfortable with the developer’s capability and Tom replied, yes, they are
an experienced, capable business.
Tom presented the following Preliminary Redevelopment Agreement terms, terms set to protect the
URA’s investment in this project:
• The maximum URA reimbursement is $1,270,414.
• The reimbursement is contingent upon completion 25% of the units (22 units)
• The URA shall pay 72% of the increment annually generated by the project on the property and
paid during the preceding calendar year.
• The URA shall pay the developer a reimbursement until either: 1) the full payment of the
reimbursement obligation has been satisfied; or, February 1, 2029
• Revive Properties to complete construction of the Public Improvements by November 30, 2014.
• 25% of the units within the project by September 30, 2016.
• All units will utilize a geothermal heating and cooling system.
• All units will utilize solar photovoltaic systems and will incorporate Net Zero Capable design
Mike noted that the mechanics of the agreement are still in discussion and the nature of the project
may require annual adjustments. Bob asked if this would mean significantly more staff time. Mike said,
not necessarily, once staff had found a streamlined way to monitor the project.
4
URA Staff is supportive of the financial request for the following reasons:
• The costs that the Developer is seeking assistance with are eligible public improvements
according to Colorado Urban Renewal Law.
• The URA’s financial assistance fills a financial “gap” in the project.
• The Developer’s financial return is lower than what a developer or investor would expect for a
real estate development project of this size and level of risk, even with the URA assistance.
• The Developer is seeking a proportion of total tax increment generated from the project that is
consistent with the URA financial parameters and will allow the URA to use the remaining
increment for additional North College projects.
Ross asked if Staff could gather data on the projected environmental benefit of the project. He also
stated that he was hesitant to support going against policy in paying for previously completed projects
as it may set a bad precedent. He also noted that, if the projects are not reimbursed, the percentage of
TIF needed may be closer to 50%, a percentage he would like to become the normal share.
Next Steps
Staff will finalize the Redevelopment Agreement with the applicant and bring the Agreement forward to
the URA Board.
April 21, 2014
URBAN RENEWAL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Tom Leeson
Date: April 21, 2014
SUBJECT FOR DISCUSSION
Joint Meeting with the North College Citizen’s Advisory Group
EXECUTIVE SUMMARY
A joint meeting between the North College Citizen’s Advisory Group (CAG) and the Urban
Renewal Finance Committee to discuss:
• The URA Financial Parameters
• The North College TIF District timeline
• Unfunded North College projects
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Discussion with members of the North College Citizen’s Advisory Group regarding
redevelopment issues in the North College Urban Renewal Plan Area.
BACKGROUND/DISCUSSION
The joint meeting between the North College Citizen’s Advisory Group (CAG) and the Urban
Renewal Finance Committee has been requested by members of the CAG to discuss Urban
Renewal Authority Policies and the North College TIF District.
The CAG, which is a sub-group of the North Fort Collins Business Association, is a self-
appointed, ad-hoc City committee made up of business owners and property owners in the North
College area (See Attachment 1). The CAG was formed in 2004 when the North College Urban
Renewal Area was created, and includes many of the original members that requested and
initiated the North College Urban Renewal Plan. Their purpose is to provide the URA Board
with feedback regarding proposed URA funded projects and URA policies. The CAG meets
monthly and Commissioner Overbeck is the URA liaison.
In previous years, the CAG met with the Urban Renewal Board on a regular basis to discuss
redevelopment issues in North College and has requested to resume those regular meetings.
Specifically, the CAG would like to discuss:
• The URA Financial Parameters (Attachment 2)
• The North College TIF District timeline
• Unfunded North College projects.
ATTACHMENTS
Attachment 1 – CAG Member list
Attachment 2 – Financial Parameters
North College Citizen’s Advisory Group Memberlist
Name Company Position Phone Phone #2 Email
Neil McCaffrey Book Center of the Rockies, Inc. Land and Business Owner O: 970-493-4840 H: 970-207-1223 neil@bkctr.com
Bob Brown Brown Ruminant Consulting Inc., Greenbriar Village HOA President, Owner and Area Resident H: 970-224-2941 C: 307-630-0641 rumcon2000@aol.com
Dean Hoag RMB Recycling Land and Business Owner 970-690-3550 970-484-5384 dhoag2000@aol.com
Grant Sherwood Retired VP of Student Affairs Area Resident 970-484-9658 970.217.4997 Grant.Sherwood@colostate.edu
Jim Eddy Overland Partners Property Owner 970-581-7282 opllc@msn.com
Ron Lautzenheiser Big O Tires & Grease Monkey Land and Business Owner 970-493-3356 970.214.1275 rklautz@msn.com
Mike Bello CPI Group Property Owner 970-566-4541 michael.bello@thecpigroup.net
Tim Kenney First National Bank Business Representative 970-302-4611 970-494-6222 tkenney@fnbfc.com
Don Butler Cottonwood Plaza Land and Business Owner 970-484-6715 970.443.3846 jhockr5141@gmail.com
Kristin Kirkpatrick City of Fort Collins Plannning and Zoning Board 970-251-2308 kristin.kirkpatrick@gmail.com
Emily Elmore City of Fort Collins Plannning and Zoning Board emilyelmore@gmail.com
Bob Overbeck City of Fort Collins Councilmember, District 1 boverbeck@fcgov.com
Tom Leeson City of Fort Collins: URA Redevelopment Program Manager 970.416.2231 tleeson@fcgov.com
Megan Bolin City of Fort Collins: URA Redevelopment Specialist 970.221.6342 mbolin@fcgov.com
Heather Greenacre City of Fort Collins Executive Administrative Assistant 970.221.6505 hgreenacre@fcgov.com
City Council Liaisons
Planning and Zoning Board Liaison
City of Fort Collins Staff
URA Financial Management Policy 1.1
1.1 Tax Increment Financing
Issue Date: TBD
Version: 1
Issued by: Director
Economic Health
1.1.1.2 Financial Policy 1.1 – Policy Name
1.1.1.2 1
Objective:
The following parameters are intended to provide a set of operating norms for financing URA
projects. The financing parameters represent a range of preferred methods. The decision to
utilize a particular financing method is contingent upon a project’s need for gap financing, the size
of a particular deal, the type of improvements supported by public financing and/or the public
benefit provided.
Applicability:
This policy applies to Fort Collins Urban Renewal Authority.
Authorized by:
Tax Increment Financing Parameters
1.1.1.1 Financial Policy 1.1 – Policy Name
1.1.1.1 2
1.1 Guiding Principles
A. Retaining a percentage of the total tax increment collected guards against the risk
associated with rising interest rates, a diminution of assessed value, and other market
risks.
B. During volatile and/or rising rate environments, consideration will be given to reducing
the amount of TIF committed by the URA as a hedge against dramatic rate increases that
increase the cost of financing to the URA
1.2 TIF Parameters
URA Assistance Purpose: Create URA Assistance Purpose: Enhance
Element
Lump Sum
Payment
Pay Over Time
Lump Sum
Payment
Pay Over Time
Max % TIF
Commitment
Available to
Support Project
75%* 90%** 75%* 75%
TIF Payment
Calculation
Fixed $
Commitment
(a) % of Actual
Annual Tax
Increment
collected
(b) Fixed Annual
$ Commitment
Fixed $
Commitment
(a) % of Actual
Annual Tax
Increment
collected
(b) Fix Annual
$ Commitment
URA Cost of
Capital
Borrowing Costs:
-City Interagency
Loan Policy
-Bank Loan
Underwriting Req.
-Other: Section 108
standards
N/A
Borrowing Costs:
-City Interagency
Loan Policy
-Bank Loan
Underwriting Req.
-Other: Section 108
standards
N/A
Tax Increment Financing Parameters
1.1.1.1 Financial Policy 1.1 – Policy Name
1.1.1.1 3
1.3 General Procedures:
A. The Larimer County Estimate of Value provided to the developer/property owner shall
be utilized for estimating future tax increment collections associated with a project. There
shall be no annual appreciation applied to the estimate.
B. Growth Estimate in cash flow analysis will be held at 0%
C. Cash flows shall be based on absolute dollars and NPV. The discount rate used shall equal
the URA cost of capital.
D. The term of a City loan to the URA shall be based on the estimated TIF stream. The term
shall be minimized to the greatest extent possible given the estimated cash flow.
E. The minimum time to process the request for payment from the development will be 90
calendar days.
F. In the pay over-time as a Fixed Annual $ Commitment as described in (b) above:
a. In the first year if actual TIF comes in lower than the Estimate of Value, the actual
TIF reimbursed will be prorated based on the actual TIF received.
b. In the first year, if actual TIF comes in higher than the Estimate of Value, the TIF
reimbursed will be based on the original Estimate of Value calculation.
c. The actual TIF paid does not grow with inflation. Once established in (b) above, it
stays constant. Once established by (a), it can grow to equal (b) but not exceed
(b).
1.4 Definitions
A. Create: When existing conditions on a site make private market rate redevelopment
impractical (i.e., environmental contamination or insufficient infrastructure) so providing
TIF assistance removes financial barriers and helps to create a project that would not
otherwise happen.
B. Enhance: When conditions on a site are such that the likely market rate redevelopment
outcome is not consistent with goals for Targeted Redevelopment and Infill Areas. In
these cases, providing TIF assistance changes the scope of a project so that it conforms, or
exceeds identified objectives in City Plan.
Developer Cost
Capital
N/A
-Negotiated
-Limited by the Max
% TIF Commitment
Available
N/A
-Negotiated
-Limited by the Max
% TIF Commitment
Available
% TIF
Contribution
relative to Total
Project Cost
25% 15%
*Includes borrowing costs
**Max % TIF Commitment on Future Prospect South projects limited to 75%
Formatted: Left, Indent: Left: 0.5"
Formatted: Indent: Left: 0"
Formatted: Left, Indent: Left: 0.5"
Formatted: Font: Bold, Underline
Annual Required Contribution
(as a Percent of Total Compensation)
Annual Required Contribution