HomeMy WebLinkAbout06-23-2009 CC Item 14REPORT TO CITY COUNCIL
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: ROBERT A. BRADY
CITY MANAGER
DATE: JUNE 23, 2009
SUBJECT: AN URGENCY ORDINANCE AUTHORIZING. AN AMENDMENT TO
CALPERS CONTRACT TO GRANT TWO ADDITIONAL SERVICE
CREDIT FOR THOSE THAT ARE QUALIFIED
Background
As reported to the City Council on May 26, Staff is anticipating a Fiscal Year 2009-10
General Fund revenue shortfall of approximately $3.1 million as a result of the economic
recession and its impact on the City's major revenue sources. The City's economic
team is developing a budget balancing strategy that may include:
• Workforce reductions
Further cuts in operating expenditures
Further drawing from the City's supplemental revenue reserve ("rainy day" fund)
As noted above, as part of responding to this fiscal challenge, workforce reductions may
be necessary. To mitigate the number of involuntary layoffs that may be needed, staff
has explored steps that could betaken to achieve a voluntary reduction in force through
an early retirement incentive.
Discussion
The Council adopted a Resolution of Intention (2009-23) on May 26, 2009 to approve
an amendment to the contract between the Board of Administration California Public
Employees' Retirement System (CALPERS) and the City Council of the City of Lake
Elsinore.
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June 23, 2009
City Council Staff Report
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History
As detailed in the May 26th staff report, effective January 1, 2000, Government Code
Section 20903 renewed the option to allow local agencies contracting with the California
Public Employees' Retirement System (CALPERS) to grant two years of additional
service credit to employees under certain circumstances. Several local agencies have
amended their CALPERS contracts to provide the additional service credit to members
who retire during a designated period because of impending layoffs. By amending the
contract with CALIPERS and offering this benefit to employees, the City hopes to create
vacancies in a number of General Fund and non-General Fund positions, thereby
producing costs savings that will help mitigate the number of involuntary layoffs.
To take advantage of the additional service credits, employees must be at least
50 years of age, have a minimum of 5 years of CALPERS service credit and retire
during a 90 day retirement window. At this time, a total of 20 City employees are
eligible.
However, evidence shows that only a fraction of eligible employees are likely to take
advantage of the program. The cost of the additional service credit will be added to the
City's actuarial liability which will result in an increase in the employer contribution rate
beginning with the 2011 / 2012 Fiscal Year. The costs are amortized over twenty years.
Fiscal Impact
The specific cost of implementing CALIPERS Section 20903, Two Years Additional
Service Credit will not be known until employees apply for retirement. A study was
conducted to determine the City's cost if all eligible employees opt to retire. If this took
place the additional increase to the City's CALPERS employer rate would be
$1,072,821. Staff believes however, that only a portion of eligible employees will
choose to retire. Based on 15% of eligible employees retiring we estimate the City's
actual cost will be approximately $ 160,923. This cost will be amortized over 20 years
beginning in the 2011 / 2012 CALPERS rates.
Because of this cost savings it is the City's intention to offer the eligible employees an
opportunity to participate in the early retirement incentive program.
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June 23, 2009
City Council Staff Report
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Recommendation
1) Adopt an Urgency Ordinance declaring authorization to amend the contract
between the Board of Administration of the California Public Employee's
Retirement System (CALPERS) and the City of Lake Elsinore regarding the
change in benefits of the proposed contract.
2) Authorize the Mayor to execute the Amendment to the Contract authorizing two
years additional service credit for all Miscellaneous Employees who retire
between June 26, 2009 and September 25, 2009.
3) Direct the City Clerk, upon adoption of the Urgency Ordinance, approval of
CALPERS Contract Amendment to forward to CALPERS a Certified copy of the
Urgency Ordinance, and an original Amendment.
Prepared by: Diane Block NX
Human Resources Administrator
Approved by: Robert A. Brady
City Manager &
Attachments:
1) Urgency Ordinance with CALPERS Contract Amendment attached
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ORDINANCE NO.
AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
LAKE ELSINORE, CALIFORNIA, APPROVING AN AMENDMENT TO
THE CONTRACT BETWEEN THE BOARD OF ADMINISTRATION OF
THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND THE CITY
COUNCIL OF THE CITY OF LAKE ELSINORE TO PROVIDE
SECTION 20903 (TWO YEARS ADDITIONAL SERVICE CREDIT) FOR
LOCAL MISCELLANEOUS MEMBERS WHO VOLUNTEER FOR EARLY
RETIREMENT TO MITIGATE THE NUMBER OF ADDITIONAL
INVOLUNTARY LAYOFFS THAT MAYBE BE NEEDED IN THE CITY
WHEREAS, the Board of Administration ("Board"), California Public Employees'
Retirement System ("PERS") and the City Council of the City of Lake Elsinore ("City")
have entered into that certain Contract between the Board and the City (the "Contract")
which provides for the participation of the City in PERS and which was effective on
July 1, 1965, and witnessed on April 30, 1965, and thereafter amended in
December 10, 1983, December 19, 1987, July 14, 1995, May 9, 1997,
December 24, 1999, March 22, 2003, and September 12, 2003; and
WHEREAS, the Board and the City desire to amend the Contract to provide
Section 20903 (Two Years Additional Service Credit) for local miscellaneous members
who volunteer for early retirement to mitigate the number of additional involuntary
layoffs that maybe be needed in the City.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE
DOES HEREBY ORDAIN AS FOLLOWS:
SECTION 1. That an amendment to the Contract between the City Council of
the City of Lake Elsinore and the Board of Administration, California Public Employees'
Retirement System is hereby authorized and approved, a copy of said amendment
attached hereto as Exhibit "A" and by such reference made a part hereof as though
herein set out in full.
SECTION 2. The Mayor of the City Council of the City of Lake Elsinore is hereby
authorized, empowered, and directed to execute said amendment for and on behalf of
the City.
SECTION 3. The City Clerk shall certify as to adoption of this Ordinance and
cause this Ordinance to be published and posted in the manner required by law.
SECTION 4. This Ordinance shall take effect immediately upon passage by a
four-fifths vote of the City Council.
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City Council Ordinance No.
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PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council
of the City of Lake Elsinore, California, on this 23rd day of June, 2009.
ROBERT MAGEE
MAYOR
ATTEST:
DEBORA THOMSEN
CITY CLERK
APPROVED AS TO FORM:
BARBARA LEIBOLD
CITY ATTORNEY
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City Council Ordinance No.
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EXHIBIT "A"
Amendment to the Contract between Board of Administration of the Public Employees'
Retirement System (CALPERS) and the City Council City of Lake Elsinore
(See Attached]
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City Council Ordinance No.
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EXHIBIT A
California
Public Employees' Retirement System
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
and the
City Council
City of Lake Elsinore
The Board of Administration, California Public Employees' Retirement System,
hereinafter referred to as Board, and the governing body of the above public agency,
hereinafter referred to as Public Agency, having entered into a contract effective July 1,
1965, and witnessed April 30, 1965, and as amended effective December 10, 1983,
December 19, 1987, July 14, 1995, May 9, 1997, December 24, 1999, March 22, 2003
and September 12, 2003 which provides for participation of Public Agency in said
System, Board and Public Agency hereby agree as follows:
A. Paragraphs 1 through 15 are hereby stricken from said contract as executed
effective September 12, 2003, and hereby replaced by the following paragraphs
numbered 1 through 16 inclusive:
All words and terms used herein which are defined in the Public
Employees' Retirement Law shall have the meaning as defined therein
unless otherwise specifically provided. "Normal retirement age" shall
mean age 55 for local miscellaneous members and age 60 for local safety
members.
Public Agency shall participate in the Public Employees' Retirement
System from and after July 1, 1965 making its employees as hereinafter
provided, members of said System subject to all provisions of the Public
Employees' Retirement Law except such as apply only on election of a
contracting agency and are not provided for herein and to all amendments
to said Law hereafter enacted except those, which by express provisions
thereof, apply only on the election of a contracting agency.
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City Council Ordinance No.
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3. Public Agency agrees to indemnify, defend and hold harmless the
California Public Employees' Retirement System (CaIPERS) and its
trustees, agents and employees, the CaIPERS Board of Administration,
and the California Public Employees' Retirement Fund from any claims,
demands, actions, losses, liabilities, damages, judgments, expenses and
costs, including but not limited to interest, penalties and attorneys fees
that may arise as a result of any of the following:
(a) Public Agency's election to provide retirement benefits, provisions
or formulas under this Contract that are different than the
retirement benefits, provisions or formulas provided under the
Public Agency's prior non-CaIPERS retirement program.
(b) Public Agency's election to amend this Contract to provide
retirement benefits, provisions or formulas that are different than
existing retirement benefits, provisions or formulas.
(c) Public Agency's agreement with a third party other than CaIPERS
to provide retirement benefits, provisions, or formulas that are
different than the retirement benefits, provisions or formulas
provided under this Contract and provided for under the California
Public Employees' Retirement Law.
(d) Public Agency's election to file for bankruptcy under Chapter 9
(commencing with section 901) of Title 11 of the United States
Bankruptcy Code and/or Public Agency's election to reject this
Contract with the CaIPERS Board of Administration pursuant to
Section 365, of Title 11, of the United States Bankruptcy Code or
any similar provision of law.
(e) Public Agency's election to assign this Contract without the prior
written consent of the CaIPERS' Board of Administration.
(f) The termination of this Contract either voluntarily by request of
Public Agency or involuntarily pursuant to the Public Employees'
Retirement Law.
(g) Changes sponsored by Public Agency in existing retirement
benefits, provisions or formulas made as a result of amendments,
additions or deletions to California statute or to the California
Constitution.
4. Employees of Public Agency in the following classes shall become
members of said Retirement System except such in each such class as
are excluded by law or this agreement:
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City Council Ordinance No.
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a. Local Fire Fighters (herein referred to as local safety members);
b. Local Police Officers (herein referred to as local safety members);
C. Employees other than local safety members (herein referred to as
local miscellaneous members).
5. In addition to the classes of employees excluded from membership by
said Retirement Law, the following classes of employees shall not
become members of said Retirement System:
NO ADDITIONAL EXCLUSIONS
6. Removal of the exclusion of "Persons Compensated on an Hourly Basis",
pursuant to Section 20503, is declarative of agency's previous
interpretation and does not mandate any new classes of employees into
membership.
7. The percentage of final compensation to be provided for each year of
credited prior and current service for those local miscellaneous members
in employment prior to December 19, 1987 shall be determined in
accordance with Section 21354 of said Retirement Law subject to the
reduction provided therein for Federal Social Security (2% at age 55
Modified).
8. The percentage of final compensation to be provided for each year of
credited prior and current service for those local miscellaneous members
in employment on or after December 19, 1987 and not on or after March
22, 2003, shall be determined in accordance with Section 21354 of said
Retirement Law (2% at age 55 Full) pursuant to Government Code
Section 20515.
9. The percentage of final compensation to be provided for each year of
credited prior and current service as a local miscellaneous member in
employment on or after March 22, 2003, shall be determined in
accordance with Section 21354.4 of said Retirement Law (2.5% at age 55
Full), pursuant to Government Code Section 20515.
10. The percentage of final compensation to be provided for each year of
credited prior and current service as a local safety member shall be
determined in accordance with Section 21368 (1.25% at age 60),
supplemental to Social Security.
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City Council Ordinance No.
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11. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 20042 (One-Year Final Compensation) for local
miscellaneous members only.
b. Section 20515 (Full Formula Plus Social Security) for past and
future service for local miscellaneous members in employment on
and after December 19, 1987. Legislation repealed said Section
effective January 1, 2002.
C. Sections 21624, 21626 and 21628 (Post-Retirement Survivor
Allowance) for local miscellaneous members only.
d. Section 21024 (Military Service Credit as Public Service) for local
miscellaneous members only.
e. Section 20503 (To Remove the Exclusion of Persons
Compensated on an Hourly Basis, Prospectively from September
12, 2003).
f. Section 20903 (Two Years Additional Service Credit) for local
miscellaneous members only.
12. Public Agency, in accordance with Government Code Section 20790,
ceased to be an "employer" for purposes of Section 20834 effective on
December 10, 1983. Accumulated contributions of Public Agency shall be
fixed and determined as provided in Government Code Section 20834,
and accumulated contributions thereafter shall be held by the Board as
provided in Government Code Section 20834.
13. Public Agency shall contribute to said Retirement System the
contributions determined by actuarial valuations of prior and future service
liability with respect to local miscellaneous members and local safety
members of said Retirement System.
14. Public Agency shall also contribute to said Retirement System as follows:
a. A reasonable amount, as fixed by the Board, payable in one
installment within 60 days of date of contract to cover the costs of
administering said System as it affects the employees of Public
Agency, not including the costs of special valuations or of the
periodic investigation and valuations required by law.
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City Council Ordinance No.
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b. A reasonable amount, as fixed by the Board, payable in one
installment as the occasions arise, to cover the costs of special
valuations on account of employees of Public Agency, and costs of
the periodic investigation and valuations required by law.
15. Contributions required of Public Agency and its employees shall be
subject to adjustment by Board on account of amendments to the Public
Employees' Retirement Law, and on account of the experience under the
Retirement System as determined by the periodic investigation and
valuation required by said Retirement Law.
16. Contributions required of Public Agency and its employees shall be paid
by Public Agency to the Retirement System within fifteen days after the
end of the period to which said contributions refer or as may be prescribed
by Board regulation. If more or less than the correct amount of
contributions is paid for any period, proper adjustment shall be made in
connection with subsequent remittances. Adjustments on account of
errors in contributions required of any employee may be made by direct
payments between the employee and the Board.
B. This amendment shall be effective on the 23`d day of June, 2009.
BOARD OF ADMINISTRATION CITY COUNCIL
PUBLIC EMPLOYEES' RETIREMENT SYSTEM CITY OF LAKE ELSINORE
BY BY
LORI MCGARTLAND, CHIEF PRESIDING OFFICER
EMPLOYER SERVICES DIVISION MAYOR ROBERT MAGEE
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Witness Date
AMENDMENT ER # 0585
PERS-CON-702A (Rev. 10\05)
Attest:
City Clerk
DEBORA THOMSEN, CMC
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City Council Ordinance No.
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STATE OF CALIFORNIA
COUNTY OF RIVERSIDE SS
CITY OF LAKE ELSINORE
I, Debora Thomsen, City Clerk of the City of Lake Elsinore, California, hereby
certify that an Urgency Ordinance No. was introduced and adopted by the City Council
of the City of Lake Elsinore, California, at a regular meeting held on the 23rd day of
June 2009 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
DEBORA THOMSEN, CMC
CITY CLERK
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