HomeMy WebLinkAboutStaff Report 1.A 12/27/2012 Agenaa'iteww #1 ., 1
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1858
DATE: December 27, 2012
TO: Honorable Mayor and Membersiof the City Council through City Manager
FROM: Pamala Stephens, Human Resources Manager.
SUBJECT: Adoption of an Urgency Ordinance to Take Immediate Effect, Authorizing
Amendment of the Contract with the Board of Administration of the California
Employees' Retirement System for a Second Tier,of Retirement Benefits
Applicable to Local Miscellaneous Menibers Entering Membership for the First
Time in the Miscellaneous Classification
RECOMMENDATION
1
It is recommended that:the-.City Council adopt the Urgency Ordinance to Take Immediate Effect,
Authorizing Amendment of the Contract Between the City of Petaluma and the Board of
Administration of the California Employees' Retirement System for a second tier of retirement
benefits that provide the 2% at 60 Full formula and Three-Year Final Compensation to City of
Petaluma local miscellaneous members entering membership after the effective date of the
amendment to the Contract.
BACKGROUND
Over the course of the year the City Council approved MOUs with, its safety units; including
Unit 6 (Police), Unit 7 (Fire), and Unit 10 (Safety Mid-Management). All of these ratified
agreements included provisions for a second tier of PERS, and in October the Council approved
a contract amendment with Ca1PERS to create a second tier of'retirement benefits for safety
employees for the 3% at 55 full formula and three year'final average•compensation.
As well, the City Council has ratified agreements with all units representing miscellaneous
employees, including Units 1, 2 and 3 (AFSCME), Units 4, 9 and 11. (Professional and Mid
Managers) and Unit 8 (Directors). All of these ratified MOUs covering miscellaneous
employees also include provisions for a second tier of PERS. On December 6, 2012 the Council
approved Resolution No 2012-177 N.C.S. declaring its intention to amend the contract with
CaIPERS to createrasecond tier of retirement benefits-for miscellaneous employees for the 2% at
60 full formula and three year final average compensation. Ca1PERS requires'that the ordinance
cannot be approvedi until,at;least 20 days after;approval of the of intention. The City
has met the 20-day requirement. •
AgcindaRevi
City Attorne}� �/�^( Finance Director City Manager
DISCUSSION
The City Council's Goals and Priorities,for 2012-2013 include implementation-of second tier
of PERS retirement. The recommended action is adoption of an urgency ordinance authorizing
amendment to the contract with Ca1PERS covering the miscellaneous units that were not subject
to the prior contract amendment that covered. employees. All Units that include
miscellaneous employees now have ratified agreeents, including-a provision for a second tier
of retirement, and on December 6, 2012 the City Council approved the Ca1PERS required
resolution of intent to amend the contract.
The Public Employees' Pension Reform Act of 2013 and related Public Employees' Retirement
Law will result in complex changes to retirement benefits effective.January'l, 2013. As a result,
Ca1PERS requires that member agencies who desire to adopt a dower benefit formula must do so
prior to January 1, 2013. Given this deadline, an urgency ordinance is required so that it can take
effect prior to January 1, 2013. The need for urgency is justified in this case because the City
needs to take action to constrain costs and to implement the ratified MOUs prior to the CalPERS
deadline. If approved at the special meeting, the urgency ordinance will be effective upon
adoption, on December 27, 2012, and the contract amendment will be effective the following
day, December 28, 2012.
Adoption of the urgency ordinance will allow the City to implement the second tier of retirement
benefits. The contract amendment creates a second tier of retirement benefits that provides the
2% at 60 full formula and the three-year final.javerage compensation to employees entering the
miscellaneous classification on or after December 28, 2012, who are not otherwise placed into
the retirement benefit established by the State's pension reform.
FINANCIAL IMPACTS
There will be no immediate savings to the City when the second-tier contract amendment is
implemented. Ultimately, it is expected that=City costs will decrease as the mix of first tier
employees decreases and second tier employees increase. When the mix of all first and second
tier employees reaches a 50-50 ratio, it is estimated by Ca1PERS that the employer contribution
rate will decrease by 1.7%. In current dollars a decrease of 1.7% would reduce the City's annual
employer contribution for miscellaneous employees by $203,330.
ATTACHMENTS
1. Urgency Ordinance Authorizing an Amendment to the Contract Between the City of
Petaluma and the Board of the California Employees' Retirement System.
•
ATTACHMENT I
EFFECTIVE DATE ORDINANCE NO. N.C.S.
OF ORDINANCE
1 Introduced by Seconded by
2
3
4
5
6
7 URGENCY ORDINANCE TO TAKE IMMEDIATE EFFECT, AUTHORIZING AN AMENDMENT TO
8 THE CONTRACT BETWEEN THE CITY OF PETALUMA AND BOARD OF ADMINISTRATION
9 OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM FOR SECTION 20475
10 (DIFFERENT LEVEL OF BENEFITS), SECTION 21353 (2%@ 60 FUIL,FORMULA), AND SECTION
11 20037 (THREE-YEAR FINAL COMPENSATION) APPLICABLE TO LOCAL MISCELLANEOUS
12 MEMBERS ENTERING MEMBERSHIP FOR THE FIRST TIME IN THE MISCELLANEOUS
13 CLASSIFICATION AFTER THE EFFECTIVE DATE OF AMENDMENT TO THE CONTRACT
14
15 WHEREAS, the Public Employees' Retirement Law permits the participation of public
16 agencies and their employees in the Public Employees' Retirement System (PERS) by the
17 execution of a contract, and sets forth the procedure by which said public agencies may elect.
18 to subject themselves and their employees to amendments to said Law; and
19
20 WHEREAS, prior to amending its PERS contract, the city must adopt a resolution giving
21 notice of its intention to approve an amendment to said contract, which resolution shall contain
22 a summary of the change proposed; and
23
24 WHEREAS, on December 6, 2012, the City Council adopted Resolution No. 2012-177
25 N.C.S., a Resolution of Intention to Approve an Amendment to Contract between the Board of
26 Administration of the California Public Employees Retirement System ("PERS") and the City
27 Council of the City of Petaluma; and,
28
29 WHEREAS, pursuant to Government Code Sections 20475, 21353, and 20037 the contract
30 amendment which is the subject of the Resolution of Intention and this Ordinance will allow the
31 City to provide a second tier of retirement benefits at the 2% @ 60 Full formula and three-year
32 final compensation to local miscellaneous members entering membership for the first'time in the
33 miscellaneous classification after the effective date amendment to the contract; and,
34
35 WHEREAS, beginning in FY 2008-2009 the City has identified revenue shortfalls and a
36 severe imbalance with projected expenditures in its General Fund account sufficient to have
37 required the City to deplete nearly its entire General Fund reserves and implement cost-cutting
38 measures in each fiscal year from 2008-2009 to 2012-2013 impacting service levels and
39 significantly reducing the workforce: and,
40
41 WHEREAS, employee salaries and benefits comprise approximately 78% of general fund
42 expenditures; and,
43
44
Ordinance No. N.C.S. Page 1
1 WHEREAS, all Units that include miscellaneous employees have ratified:agreements, and.
2 all include a provision for a second tier-of retirement for the 2% @ 60 formula and the three-year
3 final compensation; and,
4
5 WHEREAS, in accordance with Section 7507 of the Government Code the future annual
6 costs as determined by the System Actuary for the change in retirement benefits were made
7 public at a public meeting of the City Council of the City of Petaluma on December 6, 2012
8 which is at least two weeks prior to the adoption of this Ordinance; and,
9
10 WHEREAS, the System Actuary determined that there will be no immediate employer
11 contribution rate impact from this amendment, but that when the mix of first and second tier
12 retirement employees reaches a 50/50 ratio, the employer cost and contribution rate will.
13 decrease by 1.7%which in current dollars is an annual City savings of$203,330; and,
14
15 WHEREAS, if a second tier of retirement is implemented, the City will achieve annual cost
16 savings that will assist the City in restoration of services; and,
17
18 WHEREAS, the Public Employees' Pension Reform Act of'2013 (PEPRA) and related Public
19 Employees' Retirement Law will result in complex changes to retirement benefits effective
20 January 1, 2013; and,
21
22 WHEREAS, PERS requires that an employer must adopt a lower benefit formula prior to
23 January 1, 2013 and complete the contract amendment process in accordance with all
24 applicable requirements and that the effective date of the final action of the governing body
25 be prior to December 31, 2012; and,
26
27 WHEREAS, pursuant to the Charter of the City of Petaluma, Article XII, Section 76A, an
28 urgency ordinance may be adopted to take immediate effect when necessary for the
29 immediate preservation of the public health, safety and welfare and passed by a unanimous
30 vote of the city council members present at the time of adoption; and,
31
32 WHEREAS, Government Code section 36934 provides that an urgency ordinance may
33 passed immediately upon introduction and either at a regular or a special meeting.
34
35 NOW, THEREFORE, BE IT ORDAINED by the Council of the City of Petaluma as follows:
36
37 Section 1. Findings. The above recitals are hereby'declared to be true and correct and
38 findings of the City Council of the City of Petaluma.
39
40 Section 2. Contract Amendment Authorized. The amendment to the contract between the
41 City of Petaluma and the Board of Administration, .California Public Employees' Retirement
42 System attached hereto, marked Exhibit A, and incorporated herein by reference is hereby
43 authorized.
44
45 Section 3. Mayor Authorized to Execute Amendment. The Mayor is hereby authorized and
46 directed to execute said amendment for and on behalf of the City of Petaluma.
47
48 Section 4. Severability. If any provision of this ordinance or the application thereof to any
49 person or circumstance is held invalid, the remainder of the ordinance, including the application •
50 of such part or provision to other persons or circumstances shall not be affected thereby and
51 shall continue in full force and effect. To this end, provisions of this ordinance are severable. The
52 City Council hereby declares that it would have passed each section, subsection, subdivision,
Ordinance No. N.C.S. Page 2 •
1 paragraph, sentence, clause, or phrase hereof irrespective of the fact that any one or mote,
2 sections, subsections, subdivisions, paragraphs, sentences, clauses, or phrases be held
3 unconstitutional, invalid, or unenforceable.
4
5 Section 5. Effective Date. This ordinance is hereby declared to be "necessary for the
6 immediate preservation of the public peace, health, and safety of the City of Petaluma on the
7 basis of the facts stated herein and shall take effect immediately and be in force from and upon
8 the date of its passage.
9
10 Section 6. Posting/Publishing of Notice. The City Clerk is hereby directed to post/publish this
11 ordinance or a synopsis of this ordinance for the period and in the manner required by the City.
12 Charter.
13
14
15 INTRODUCED, ORDERED POSTED, and ADOPTED this 27th day of December 2012, by the following
16 vote:
17
18
19 AYES:
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20
21 NOES:
22
23 ABSENT:
24
25 ABSTAIN:
26
27
28
29
30
31
32 David Glass, Mayor
33
34
35
36 ATTEST: APPROVED AS TO FORM:
37
38
39
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41
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43 Claire Cooper, CMC, City Clerk Eric W, Danly, City Attorney
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45
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48
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50
51 2014794.1
Ordinance No. N.C.S. Page 3
•
Exhibit A
•
Ca1PERS
California
Public Employees' Retirement System
AMENDMENT�p�p• ..... ..........:yam.._.,._.,y{q�[y
ZVDMEN TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
and the
City Council •
City of Petaluma
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
January 1 , 1950, and witnessed October 18, 1949, and as amended effective August 1,
1959, November 1, 1959, March 1, 1965, June 1, 1965, April 1, 1969, January 1, 1974,
November 1, 1980, November 1, 1981, July 1, 1982, January 1, 1987, December 28,
1987, January 1, 1992, January 4, 1996, June 30, 1996, May 4, 1998, April 5, 1999,
June 30, 2001, January 16, 2003, October 7, 2008 and November 15, 2012 which
provides for participation of Public Agency In said System, Board and Public Agency
hereby agree as follows:
•
A. Paragraphs 1 through 14 are hereby stricken from said contract as executed
effective November 15, 2012, and hereby replaced by the following paragraphs
numbered 1 through 15 Inclusive:
1. 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 entering membership in
the miscellaneous classification on or prior to the effective date of this
amendment to contract and age 60 for local miscellaneous members
entering membership for the first time in the miscellaneous classification
after the effective date of this amendment to contract; age 50 for local
safety members entering membership In the safety classification on or
prior to November 15, 2012 and age 55 for local safety members entering
membership for the first time in the safety classification after November
15, 2012.
2. Public Agency shall participate in the Public Employees' Retirement
System from and after January 1, 1950 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.
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.
1
(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:
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. The percentage of final compensation to be provided for each year of
credited prior and current service as a local miscellaneous member
entering membership in the miscellaneous classification on or prior to the
effective date of this amendment to contract shall be determined in
accordance with Section 21354 of said Retirement Law (2% at age 55
Full).
7. The percentage of final compensation to be provided for each year of
credited current service as a local miscellaneous member entering
membership for the first time in the miscellaneous classification after the
effective date of this amendment to contract shall be determined in
accordance with Section 21353 of said Retirement Law (2% at age 60
Full).
8. The percentage of final compensation to be provided for each year of
credited prior and current service as a local safety member entering
membership In the safety classification on or prior to November 15, 2012
shall be determined in accordance with Section 21362.2 of said
Retirement Law (3% at age 50 Full),
9. The percentage of final compensation to be provided for each year of
credited current service as a local safety member entering membership for
the first time in the safety classification after November 15, 2012 shall be
determined in accordance with Section 21363.1 of said Retirement Law
(3% at age 55 Full).
10. Public Agency elected and elects to be subject to the following .optional
provisions:
a. Section 21222.1 (One-lime, 5% Increase - 1970). Legislation
repealed said Section effective January 1, 1980.
b. Section '20042.(One-Year Final '.Compensatien) for local safety
members;entering membership on or prior to November 15, 2012
and local miscellaneous members entering membership on or prior
to the effective date of this amendment to contract.
c. Section 20965 (Credit forUnused'Sick Leave).
d. Section 21326 (One-Time 1% to 7% Increase For Local
Miscellaneous Members Who'Retired orDie&Prior toy July 1, 1974).
• Legislation repealed said Section effective January1, 2002.
e. Sections 21624, 21626 and 21628 (PostRetirement Survivor
Allowance)for local fire members;only.
f. Section21024 (Military Service Credit as,Publib Service).
g. Section 21574, (Fourth Level of 1959 Survivor Benefits) for local
safety'members only.
h. Section 21573 (Third Level of 1959 Survivor Benefits) for local
miscellaneous members only.
i. Section 20434 ("Local Fire Fighter" shall include any officer or
employee of a fire department employed to perform firefighting, fire
prevention, fire training,. hazardous materials, emergency medical
services, or fire or arson investigation services as described in
Government,Code Section 20434). •
j. Section 20903 (Two Years Additional Service Credit).
k. Section 20475 (Different Level of` Benefits). Section 21363:1 (3%
• @ 55 Full formula) 'and Section 20037 (Three-Year Final
Compensation) are applicable to local safety members entering
membership for the first time in the safety, classification after
November 15, 2012.
Section:21353 (2%a@ 60 Full.forrnula) and Section,20037 (Three-
Year Final Compensation) are applicable to local miscellaneous
members entering membership for the first time in the
miscellaneous classification after the effective date of this
amendmentto'contract.
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11. Public Agency; in accordance with Government 'Code Section 20790,
ceased to be an "employer" for. purposes of Section 20834 effective on
• November 1, 1980. 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.
12. Publi •Agency ahall`contribute to,sald.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.
13, Public Agency shallalso contribute to said Retirement System as follows:
a. Contributions required per covered member on account of the 1959
Survivor Benefits provided under Section•21573:of'said Retirement
Law. •(Subject to annual change.) In addition, all assets and
liabilities of Public Agency and it's employees shall be pooled in a
single,:account;,based on, term insurance rates, for survivors of all
local miscellaneous members.
b. Contributions.required per covered member!on•account of the 1959
Survivor Benefitsprovided under Section 215Z4+.of.said Retirement
Law. (Subject to annual change.) In addition, all 'assets and
liabilities of Public Agency and its,employees shall be pooled in a
single account, based on term insurance'rates, for survivors of all
local safety members.
c. A reasonable amount, as fixed by the ;Board, payable in one
instaliment•within 60 days of date of contract`�to cover the costs of
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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.
d. 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.
14. 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 RetirementLaw.
•
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15. Contributions required‘of Public Agency and its employees shall be paid
by Public Agency to the Retirement 'Ss/Stern 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 day of
BOARD OF ADMINISTRATION ,COUCIL
, PUBLIC EMPLOYEES' RETIREMENT SYSTEM CITY OF PETALUMA
BY BY
KAREN DE FRANK, CHIEF •PRESIDING:OFFICER
CUSTOMER ACCOUNT SERVICES'DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Witness:Date
Attest:
Clerk
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AMENDMENT CaiPERS ID#5476407298
PERS-CON-702A