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6 DATE: March 24, 2025
TO: Mayor and Members of the City Council and President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
VIA: Stefan Chatwin, City/District Manager
FROM: Nate Cruz, Finance Director
Waqas Hassan, Assistant Finance Director
DEPARTMENT: Finance
SUBJECT: COMPENSATED ABSENCES INTERNAL SERVICE FUND
RECOMMENDATION/EXECUTIVE SUMMARY
City/EMID (“City”) staff seeks reaffirmation of the City Council/EMID Board of Directors' (“City Council”) policy 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 2024-25 ending fund balance of the CA ISF will be sufficient to pay for the FY 2025-26 projected benefits’ payments of $493,029 and, therefore, recommends an assessment holiday in FY 2025-26.
BACKGROUND/ANALYSIS
The City provides vacation and sick leave benefits to current employees based upon the two (2) memoranda of understanding (MOUs) 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.
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6 The City Council created the “Compensated Absences Internal Service Fund” on July 1, 2012 through a transfer of available reserves totaling $3.0 million ($2.65 million from the General Fund Reserves, $180,000 from the Water Revenue Fund and $170,000 from the Wastewater Revenue Fund) to the new CA ISF. City staff estimates that the CA ISF reserve balance on June 30,2025 will be $3.70 million. Staff also reviewed both recent and historical trends of year-end accrued liability and has determined the current rate of 2.11% can be slightly increased to 2.33% to maintain a full CA ISF reserve balance through FY 2025-26. This updated rate presents the increase in the City’s liability to pay for the cost of estimated leave hours, as a percentage of the total estimated salary expense.
California Environmental Quality Act
Not Applicable
FISCAL IMPACT
City staff recommends increasing the current rate of 2.11% to 2.33% in FY 2025-26.
The resulting projected CA ISF charges to the General Fund and Special Revenue Funds are estimated to be $487,896 and $5,133 respectively, for a total of $493,029.
However, as the CA ISF has sufficient fund balance to pay for the projected FY 2025- 26 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 Absences Internal Service Charges Comparison