FERNDALE - The City Council approved the 2013 budget quickly and unanimously Monday, Dec. 3, but one council member remained unsatisfied with funding for the police retiree insurance fund.
The city will need $6 million to cover the cost of medical and long-term care for three retired Ferndale police officers, ages 60, 64 and 73, said city Finance Director Mark Peterson.
The city is now well short of that, with about $250,000 in its Law Enforcement Officers' and Fire Fighters' Plan 1 fund, or LEOFF 1. The retirees are relatively healthy, and expenses by the end of this year are projected to be $55,340.
Years from now, that expense is sure to increase. LEOFF 1 covers the full cost of a retiree's medical care, home care, and assisted-living and nursing homes, Peterson said.
The fund is supported by the city's solid-waste tax, a $1.3 million annual source of revenue from Ferndale's two transfer stations. Of that amount, $60,000 will go to LEOFF 1 in 2013.
Now that the economy is recovering, council member Jon Mutchler wants more money going into the retirees' fund.
"We have the fortune of a budget surplus this year," Mutchler said in an interview. "I'm going to bring back to council in February to add some of that to this fund."
Ferndale isn't the only city that sooner or later will hit a wall with rapidly growing retiree benefit costs, Peterson said.
"It's a huge liability for cities, huge," he said. "And it's unfunded (by the state)."
The total future cost of medical and long-term care benefits to local governments statewide was estimated at $1.75 billion in 2006, according to a state Department of Retirement Systems report.
The state has its own estimate for Ferndale, about $750,000, which Peterson said is "way off." He's planning for an eventual $6 million expense.
"We'd have to come up with the money, including laying off employees, to meet this obligation," Peterson said.
Reach RALPH SCHWARTZ at firstname.lastname@example.org or call 715-2298.