CITY OF SIGNAL HILL Cherry Avenue Signal Hill, CA 90755

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1 CITY OF SIGNAL HILL 2175 Cherry Avenue Signal Hill, CA November 20, 2012 AGENDA ITEM TO: FROM: SUBJECT: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL CHARLIE HONEYCUTT DEPUTY CITY MANAGER INTRODUCTION OF AN ORDINANCE AND A RESOLUTION OF INTENT TO APPROVE AND AUTHORIZE AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF SIGNAL HILL AND THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM PERTAINING TO THE EXCLUSION OF FUTURE COUNCIL MEMBERS FROM THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM Summary: The City Council will consider a proposed amendment to the contract with the California Public Employees Retirement System that will exclude participation by future City Council Members. The proposed amendment is a continuation of the City s efforts to manage its pension and retiree health obligation costs. Recommendations: 1. Waive further reading and adopt the following resolution, entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA, DECLARING ITS INTENTION TO APPROVE AN AMENDMENT TO THE CONTRACT BETWEEN THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM AND THE CITY COUNCIL OF THE CITY OF SIGNAL HILL

2 CalPERS Contract Amendment-Exclusion of Future Council Members from CalPERS Membership November 20, 2012 Page 2 2. Waive further reading and introduce the following ordinance, entitled: Fiscal Impact: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA, AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF SIGNAL HILL AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM Based on current costs, future savings created by the amendment are estimated to be as much as $11,600 per new Council Member per year while actively serving on the Council. The cost savings include the elimination of liability for pension and medical benefit costs. In addition, up to $10,620 in retiree medical cost savings per Council Member per year will be realized when members retire from the Council. Background and Analysis: In April 2010, the City began taking steps to address rising pension and retiree health obligations. In light of the increasing costs to fund the various retirement plans offered to qualified employees through CalPERS, the City Council has required all employees, including themselves, to make contributions to CalPERS to fund their retirement. All employees and Council members currently contribute at least four percent (4%) of their annual salary to CalPERS to fund their 2%@55 retirement formula for miscellaneous and management employees and 3%@50 retirement formula for Police employees. The City Council has also implemented new retirement formulas for new employees that raise the retirement age to qualify for full retirement benefits. The formulas now are 2%@60 for miscellaneous and management and 3%@55 for Police. Currently, the City contributes a total of % of each miscellaneous employee and City Council annual salary to PERS to fund the 2%@55 retirement formula. This includes the employer rate of % plus 3.0% of the employee rate. All employees currently contribute a minimum of 4% of their salary toward their pension costs. The annual cost to provide this benefit is approximately $3,170 for four Council members (one Council member is a CalPERS retiree with another agency and therefore is not eligible). Additionally, employees who are members of CalPERS are eligible for health benefits and if they meet certain requirements, are eligible for retiree health benefits upon retirement. In 2004, the Governmental Accounting Standards Board (GASB) issued Statement 45 Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions. Otherwise known as GASB 45, this statement requires public agencies to report their estimated Other Post Employment Benefit (OPEB) costs

3 CalPERS Contract Amendment-Exclusion of Future Council Members from CalPERS Membership November 20, 2012 Page 3 and obligations for current and future retirees. The City has complied with GASB 45 and has established an OPEB Trust Fund to begin funding the projected cost of future retiree medical obligations. All miscellaneous and management employees are currently contributing 1% of their annual salary to help fund their retiree health benefit. Police members are contributing $625 per year to fund their retiree health benefit. In addition to the changes made to employee pension plans, the City Council directed staff to research whether future Council members, as Optional CalPERS Members, could be excluded from CalPERS membership and the corresponding health benefits. (An Optional Member is an employee whose eligibility is determined by CalPERS.) The only Optional Members currently employed by the City are City Council Members (the City s previous Optional Members were Crossing Guards). The enrollment of all other City employees in CalPERS is mandated by the Government Code and enforced by CalPERS. Government Code Section (c) was enacted in the mid-1990 s to exclude from CalPERS membership City or County elected or appointed officers first elected or appointed to an office on or after January 1, According to the Code, This exclusion shall not apply to persons elected to a city council or county board of supervisors. This section does apply to the Signal Hill City Treasurer and City Clerk. As our current City Treasurer was first elected in March 2003, he is excluded from CalPERS membership and does not receive health benefits. Our current City Clerk was first elected in March 1994 and she is a CalPERS member. When a new City Clerk is elected or appointed, they will be excluded from CalPERS membership and health benefits. Government Code Section defines who may, by Agency request and CalPERS approval, be excluded from a CalPERS contract and resulting benefits. CalPERS has reviewed the City s request and has determined that City Council members constitute a valid group that meets the criteria of Government Code Section for exclusion. The exclusion is prospective only, applying to new entrants into the position of Council member who will be elected or appointed on or after the effective date of this ordinance. As a result of this exclusion to CalPERS membership, future Council members will not be eligible for a CalPERS pension, health benefits while serving on the City Council or retiree health benefits upon retirement from the City Council. As specified by CalPERS, several actions must be taken prior to the finalizing the amendment to the City s contract. The first steps will be accomplished with the adoption of the Resolution of Intention and the first reading of the Ordinance. On December 18, 2012, staff will present the Ordinance for final adoption. January 18, 2013 will be the effective date of the ordinance and the contract amendment.

4 CalPERS Contract Amendment-Exclusion of Future Council Members from CalPERS Membership November 20, 2012 Page 4 Reviewed: Approved: Maida Alcantara Kenneth C. Farfsing

5 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA, DECLARING ITS INTENTION TO APPROVE AN AMENDMENT TO THE CONTRACT BETWEEN THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM AND THE CITY COUNCIL OF THE CITY OF SIGNAL HILL WHEREAS, the Public Employees Retirement Law permits the participation of public agencies and their employees in the Public Employees Retirement System by the execution of a contract, and sets forth the procedure by which said public agencies may elect to subject themselves and their employees to amendments to said Law; and WHEREAS, one of the steps in the procedures to amend this contract is the adoption by the governing body of the public agency of a resolution giving notice of its intention to approve an amendment to said contract, which resolution shall contain a summary of the change proposed in said contract; and WHEREAS, the following is a statement of the proposed change: To provide for an exclusion of City Council Members elected or appointed for the first time on or after the effective date of this amendment to contract. NOW, THEREFORE, BE IT RESOLVED that the governing body of the City of Signal Hill does hereby give notice of intention to approve an amendment to the contract between said public agency and the Board of Administration of the Public Employees Retirement System, a copy of said amendment being attached hereto, as an Exhibit and by this reference made a part hereof.

6 PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the City of Signal Hill, California this 20 th day of November ATTEST: TINA L. HANSEN MAYOR KATHLEEN L. PACHECO CITY CLERK STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES )ss. CITY OF SIGNAL HILL ) I, KATHLEEN L. PACHECO, City Clerk of the City of Signal Hill, California, hereby certify that Resolution No. was adopted by the City Council of the City of Signal Hill at a regular meeting held on the 20 th day of November 2012, and that the same was adopted by the following vote: AYES: NOES: ABSTAIN: ABSENT: KATHLEEN L. PACHECO CITY CLERK

7 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA, AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM WHEREAS, the City Council of the City of Signal Hill, California, does hereby ordain that an amendment to the contract between the City Council of the City of Signal Hill, California, and the Board of Administration of the California Public Employees Retirement System is hereby authorized, a copy of said amendment being attached hereto, marked Exhibit, and by this reference made a part hereof as though herein set out in full; and WHEREAS, the Mayor of the City Council is hereby authorized, empowered, and directed to execute said amendment for and on behalf of said Agency; and WHEREAS, this ordinance shall take effect thirty (30) days after the date of its adoption, and prior to the expiration of thirty (30) days from the passage thereof shall be published at least twice in the Signal Hill Tribune, a newspaper of general circulation, published and circulated in the City of Signal Hill, California, and thenceforth and thereafter the same shall be in full force and effect.

8 PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of the City of Signal Hill on this 20 th day of November, ATTEST: TINA L. HANSEN MAYOR KATHLEEN L. PACHECO CITY CLERK STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES )ss. CITY OF SIGNAL HILL ) I, KATHLEEN L. PACHECO, City Clerk of the City of Signal Hill, California, do hereby certify that the foregoing Ordinance No. was duly introduced at a regular meeting on the 20 th day of November, 2012 and was adopted by the City Council of the City of Signal Hill at a regular meeting held on the, and that the same was adopted by the following roll call vote: AYES: NOES: ABSENT: ABSTAIN: KATHLEEN L. PACHECO CITY CLERK

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