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CITY OF PETALUMA, CALIFORNIA
AGENDA BILL
October 2T 2008
Agenda Title:
Meeting Date:
October 27, 2008
Resolution to Grant Another Designated Period for Two Years Additional
Service Credit to Miscellaneous and Safety Employees and Adoption of the
Meeting Time: ® 6:00 PM
Certification of Compliance with Government Code Section 20903
Category: ❑ Presentation ❑ Consent Calendar ❑ Public Hearing ® Unfinished Business ❑ New Business
Department:
Director:
Contact Person:
Phone Number:
Human Resources
John Brown
Pa al o b'ns.
778 -4343
Cost of Proposal: No immediate fiscal impact. Potential annual fiscal
Name of Fund:
impact could be up to $322,544.
Account Number:
Amount Budgeted: N/A
Recommendation: It is recommended that the City Council take the following action:
Adopt the attached Resolution to Grant Another Designated Period for Two Years Additional Service Credit to
Miscellaneous and Safety Employees and adopt the Certification of Compliance with Government Code Section
20903.
Summary Statement:
The adoption of the Resolution to Grant Another Designated Period for Two Years Additional Service Credit and
adoption of the Certification of Compliance with Government Code Section 20903 are required steps for the City
to offer two years additional service credit in the Public Employees' Retirement System (PERS) to eligible
employees. The Resolution formally designates the period during which the employees may retire which staff
recommends be the ninety -day period from October 28, 2008 through January 25, 2009.
Attachments to ALrenda Packet Item:
1. Resolution to Grant Another Designated Period for Two Years Additional Service Credit.
2. Certification of Compliance with Government Code Section 20903.
Reviewed by Admin. Svcs. Dir:
Reviewed by City Attorney:
Approved by City Manager:
.
ate
Date:
Date ` , a
Rev. #
Date Last Revised:
File:
CITY OF PETALUMA, CALIFORNIA
OCTOBER 27, 2008
AGENDA REPORT
FOR
RESOLUTION TO GRANT ANOTHER DESIGNATED PERIOD FOR TWO YEARS
ADDITIONAL SERVICE CREDIT TO MISCELLANEOUS AND SAFETY EMPLOYEES AND ADOPTION OF
THE CERTIFICATION OF COMPLIANCE WITH GOVERNMENT CODE SECTION 20903
1. RECOMMENDATION:
Adopt the attached Resolution to Grant another Designated Period for Two Years Additional
Service Credit to Miscellaneous and Safety Employees and adoption of the Certification of
Compliance with Government Code Section 20903. ,
2. BACKGROUND:
The City of Petaluma is facing financial shortfalls and impending layoffs. To mitigate projected gaps
between revenue, expenditures, and layoffs, the Council directed staff on October 6, 2008 to offer
two years of additional service credit in PERS to all eligible employees.
At that same meeting on October 6, 2008, the Council adopted an urgency ordinance amending the
contract with the PERS to allow the City to offer two years additional service credit to eligible City of
Petaluma employees.
The costs to provide this benefit were made public at the City Council meeting on October 6, 2008.
This information is required to be made public at least two weeks prior to the adoption of the
Resolution to Grant Another Designated Period for Two Years Additional Service Credit. Note that
the Resolution states "Grant Another Designated Period" even though it is the first time the City has
designated such a period. PERS requires the City to use its specific language on the Resolution.
DISCUSSION:
Eligible employees electing to participate in the offering of additional service credit will receive an
additional two years of service credit, which will increase their retirement annuity. The offering of
this benefit will reduce the need for mandatory layoffs, transfers, or demotions.
4. FINANCIAL IMPACTS:
The cost of the two years additional service credit will be included in the City's PERS employer
contribution rate for the fiscal- year 2011/2012. The increase in the employer contribution rate may
continue for as long as 20 years.
The annual valuation report for the fiscal year that begins two years after the end of the designated
period will show the amount of the increase in the employer contribution rate resulting from the two
years of additional service credit.
If approved, the City will be offering the two years additional service credit to all eligible employees.
Eligible employees must have at least five years of service credit in PERS and be age fifty or older.
There are ninety -one (91) employees eligible to retire and receive the two years additional
service credit.
The added cost to the retirement fund if all eligible employees retire with the service credit is
as follows:
Employee Group
# Employees Eligible
Present value of
of additional employer
contributions
Safety Employees Miscellaneous Employees Total
14 77 91
$1,456,457 $2,814,026 $4,270,483
$4,270,483 is the estimated present value of the additional employer contributions which
will be required in the future for providing the two years service credit if all 91
employees choose to retire within the 90 -day window period.
It is estimated that the employer rates would increase an additional amount as follows:
Safety Employees Miscellaneous Employees Total
Employer Rate Increase .90% 1.38%
Estimated Cost
of Increased Rates $110,004 $212,540 $322,544
This estimated present value of additional contribution may differ from the actual present
value for two reasons:
A. Some of the employees who are eligible to retire and receive the two years service
credit (and who are included in the preceding estimate) may choose not to retire, and;
B. There may be additional cost to the City (called an experience loss) if the total
number of employees retiring in the fiscal year exceeds the number predicted by the
actuarial assumptions. An experience loss occurs very often when the two years
service credit is offered because some employees retire who would have otherwise
waited until later years.
The City informally surveyed all ninety -one (91) eligible employees and asked who would
be seriously interested in the taking the service credit and retire.
Twenty -nine (29) eligible employees that said they would be seriously interested in taking
the service credit and retiring.
The added cost to the retirement fund for only those who expressed interest in retiring with
the additional service credit is as follows:
Employee Group Safety Employees Miscellaneous Employees Total
# Employees 8 21 29
Interested
Present Value $811,881
$796,870
$1,608,751
$ 1,608,751 is the estimated present value of the additional employer contributions for
interested employees only that will be required in the future for providing the two years
service credit.
It is estimated that the employer rates would increase an additional amount as follows:
Employee Group
Rate Increase
Estimated Cost
of Increased Rates
Safety Employees Miscellaneous Employees Total
.50% .39%
$61,320 $60,187
$121,507
ATTACHMENT 1
CITY COUNCIL
OF THE
CITY OF PETALUMA
RESOLUTION
TO
GRANT ANOTHER DESIGNATED PERIOD
FOR
TWO YEARS ADDITIONAL SERVICE CREDIT
WHEREAS, the City Council of the City of Petaluma is a contracting Public Agency of
the Public Employees' Retirement System; and
WHEREAS, said Public Agency desires to provide another designated period for Two
Years Additional Service Credit, Section 20903, based on the contract
amendment included in said contract which provided for Section 20903,
Two Years Additional Service Credit, for eligible members;
NOW, THEREFORE, BE IT RESOLVED, that said City Council does seek to add
another designated period, and does hereby authorize this Resolution,
indicating a desire to add a designated period from
October 28, 2008 through January 25, 2009 for
eligible Miscellaneous & saf etpembers in the
Citv of Petaluma
Adopted and approved this day of
CITY COUNCIL
OF THE
CITY OF PETALUMA
W
Attest:
Clerk/Secretary
(Rev. 1/96)
Presiding Officer
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services ATTACHMENT 2
P.O. Box 942709
Sacramento, CA 94229 -2709
CERTIFICATION OF COMPLIANCE WITH
GOVERNMENT CODE SECTION 20903
In accordance with Government Code Section 20903 and the contract between the
Public Employees' Retirement System, the City Council of the City of Petaluma hereby
certifies that:
Because of an impending curtailment of, or change in the manner of performing
service, the best interests of the agency will be served by granting such additional
service credit.
2. The added cost to the retirement fund for all eligible employees who retire during
the designated window period will be included in the contracting agency's
employer contribution rate for the fiscal year that begins two years after the end of
the designated period.
3. It has elected to become subject to Section 20903 because of impending
mandatory transfers, demotions, and layoffs that constitute at least 1 percent of the
job classification, department or organizational unit, as designated by the
governing body, resulting from the curtailment of, or change in the manner of
performing, its services.
4. Its intention at the time Section 20903 becomes operative is to keep all vacancies
created by retirements under this section or at least one vacancy in any position in
any department or other organizational unit permanently unfilled thereby resulting
.in an overall reduction in the work force of such department or organizational unit.
THEREFORE, the City Council of the City of Petaluma hereby elects to provide the
benefits of Government Code Section 20903 to all eligible members who retire within
the designated period, October 28, 2008 through January 25, 2009
CITY COUNCIL
OF THE
CITY OF PETALUMA
01
Attest:
Clerk/Secretary
Date
Presiding Officer
2yr certification -PA (Rev. 4/04)