DATE: March 25, 2024
TO: Mayor and Members of the City Council President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
VIA: Stefan Chatwin, City/District Manager
FROM: Edmund Suen, Finance Director
Waqas Hassan, Assistant Finance Director
DEPARTMENT: Finance
SUBJECT: COMPENSATED ABSENCES INTERNAL SERVICE FUND
RECOMMENDATION/EXECUTIVE SUMMARY
It is recommended that the City Council/EMID Board of Directors (“City Council”) review and accept the report and provide policy direction to fully fund the Compensated Absences Internal Service Fund (CA ISF) for General Fund and Special Revenue Funds accrued liability of employee leave balances. City staff estimates that the FY 2023-24 ending fund balance of the CA ISF will be sufficient to pay for the FY 2024-25 projected benefits’ payments of $514,834 and, therefore, recommends an assessment holiday in FY 2024-25.
BACKGROUND/ANALYSIS
The City provides vacation and sick leave benefits to current employees based upon the two (2) memoranda of understanding (MOU) with AFSCME and FCPOA, and the Compensation and Benefits Plan (C&B Plan) for Management Employees. These benefits are collectively referred to as “compensated absences.” When an employee separates from employment with the City, either through termination, resignation, or retirement, the City is required to pay the final compensated absences balances to the employee based on the provisions within the MOUs or C&B Plan applicable to the employee. For some employees, this payout may be less than $2,000, but for long-term or highly compensated employees, these payouts can be over $50,000.
The City Council created the “Compensated Absences Internal Service Fund” as of July 1, 2012 through a transfer of available reserves totaling $2.65 million from the General Fund to the new Compensated Absences Internal Services Fund. City staff estimates that the reserve balance at 6/30/2024 will be $3.66 million. Staff also reviewed both recent and historical trends of year-end accrued liability and has determined the current rate of 2.74% can be decreased to 2.11% to maintain a full reserve balance through FY 2024-25.
California Environmental Quality Act
Not Applicable
FISCAL IMPACT
City staff recommends decreasing the current rate of 2.74% to 2.11% in FY 2024-25.
The resulting projected CA ISF charges to the General Fund and Special Revenue Funds are estimated to be $511,669 and $3,165 respectively, for a total of $514,834.
However, as the CA ISF has sufficient fund balance to pay for the projected FY 2024- 25 liability and the benefits’ payments, staff recommends no charges to be assessed on General Fund and Special Revenue Funds.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Innovation and Sustainability
ATTACHMENTS:
Attachment 1 – Compensated Absences Budget Comparison
Attachment 2 – Compensated Absence Internal Service Fund (ISF) Charges Comparison