FD pensions, building leases spark council discussion

MARSHALL – Members of the Marshall City Council approved an increase to the city’s contribution to firefighter retirement benefits in 2014. However, the request for an increase did prompt some discussion, as well as some questions from council member Glenn Bayerkohler, at the council’s regular meeting Tuesday night.

At an October work session, the council had discussed a proposed increase in the city’s contribution to Marshall Fire Relief Association pension. The original request was a $500 increase in city contributions for 2014. However, at Tuesday’s council meeting, Fire Relief Association Officer John Full said, “We are changing our request,” to a $250 increase in 2014 and another $250 in 2015. The smaller increases would be less of a financial hardship to the city, Full said.

Minnesota state funding schedules would allow the Fire Relief Association to raise its maximum benefit level from $5,000 to $7,300. Full said the Relief Association realized that would likely not be affordable for the city and is asking for smaller, more gradual increases instead.

Marshall City Administrator Ben Martig estimated that the $250 contribution would have a total cost of about $106,645 for the city. The cost if contributions stayed at current levels would be $74,507. Martig cautioned council members that those estimates were based on current formulas and state benefit schedules, and there wasn’t a more definite way to project the pension costs.

Bayerkohler questioned the financial impact of even the smaller increase. The city’s contribution would increase by 72 percent in two years, he said.

Marshall Mayor Bob Byrnes said it was hard to say that for certain, without knowing what the state schedules would be in 2014.

“There are multiple factors that impact that,” he said.

Bayerkohler suggested that a better way to avoid fluctuations in city benefit contributions from year to year would be to go to a defined contribution plan.

Full said there are only about 80 fire departments in the state that use a defined contribution plan. Of that number, most are departments with full-time firefighters, he said.

“I think we need to work with the state,” if the benefit scheduled were ever to be changed, said council member Mike Boedigheimer.

“The fire department has no control, and basically we have no control,” he said.

Council member John DeCramer moved that the city approve the $250 increase for 2014. Council members voted 5-2 in favor of the motion, with Bayerkohler and Jennie Hulsizer casting the votes against.

Later at Tuesday’s meeting, council members also discussed three items of business related to lease agreements on the former Red Baron hangar building near the Marshall airport. The building is currently vacant. Marshall EDA Director Cal Brink said he and Marshall City Attorney Dennis Simpson had been working with Schwan’s Aerial Marketing, LLC on an agreement to terminate the commercial lease agreement Schwan’s Aerial Marketing currently has on the hangar building. If approved, Brink said the termination agreement would be effective Dec. 31. Under the termination agreement, the tenant of the building would be responsible for rental, maintenance, utility and insurance payments through the end of the year, as well as the property’s real estate taxes for 2014.

At the same time, Brink said, terminating the lease with Schwan’s Aerial Marketing would also allow the city to enter into two new one-year lease agreements with Running’s and Southwest Aviation for the building. Brink said Running’s was interested in renting office space at the front of the building, while Southwest Aviation was interested in the hangar space. The new lease agreements would take effect starting Dec. 1.

If the previous tenant’s lease didn’t terminate until Dec. 31, Boedigheimer asked, “How can we start renting it out December 1 to someone else?”

Simpson said the situation was unusual, but it was part of the terms that Schwan’s Aerial Marketing had agreed to.

Bayerkohler also said it seemed like the city was letting the hangar building’s previous tenant get out of a financial obligation to the city by terminating the lease. Ending the long-term lease in favor of two one-year leases could cost the city, he said.

Brink said Schwan’s had invested $2 million in renovating the building in the past, and the company has been a good partner to the Marshall community. There was also a possibility that the new lease agreements would lead to having some long-term tenants in the building, as opposed to having it sit vacant.

Council members voted 6-1 in favor of approving the lease termination, and 6-1 in favor of approving each of the two new leases. On all three items, Bayerkohler cast the vote against.