HomeMy WebLinkAboutStaff Report 1.C 10/06/2008I n
CITY OF PETALUMA, CALIFORNIA
I ' V
AGENDA BILL
October 6, 2008
Agenda Title:
Meeting Date:
October 6, 2008
Presentation and Discussion of Financial Impact Report on the City's Future
Costs of Offering the Two Years Additional Service Credit under PERS to
Meeting Time: ® 1:00 PM
Miscellaneous, Police, and Fire Employees; and, Possible Direction to hold a
❑ 7:00 PM
Special Meeting of the City Council to Consider a Resolution Implementing
that Change
Category: ❑ Presentation ❑ Consent Calendar ❑ Public Hearing ❑ Unfinished Business ® New Business
Department:
Director:
Contact Person:
Phone Number:
Human Resources
John Brown
Pa al; ob
778 -4343
Cost of Proposal: $4,270,483
Name of Fund:
Amount Budgeted: N/A
Account Number:
Recommendation: It is recommended that the City Council take the following action:
1) Consider the financial impact report which indicates the "additional employer contributions" which will
be required in the future for providing the two years service credit.
2) Identify the funding source for those future employer contributions.
3) Set a special meeting for Monday, October 27, 2008 to consider a resolution offering two additional years
of service credit under PERS to Miscellaneous, Police, and Fire employees; and, designate the window
period for the eligible employees to retire.
Summary Statement:
The City of Petaluma is facing financial shortfalls and impending layoffs. To mitigate projected gaps between
revenue and expenditures and layoffs, City staff is recommending that the City Council consider the option of
offering two years of additional service credit, which is an added benefit, to all eligible employees.
Attachments to Agenda Packet Item:
1. Financial Impact Report for Two Years Additional Service Credit
Reviewed by-Mmin. Svcs. Dir:
Reviewe (00 Attorney:
Approved .b_ City Manager:
4
Date:
Date: �� O ) OV
Date: .
Rev. #
Date Last Revised:
File:
CITY OF PETALUMA, CALIFORNIA
OCTOBER 6, 2008
AGENDA REPORT
For
Presentation and Discussion of Financial Impact Report on the City's Future Costs of Offering
the Two Years Additional Service Credit under PERS to Miscellaneous, Police, and Fire Employees; and,
Possible Direction to hold a Special Meeting of the City Council
to Consider a Resolution Implementing that Change
RECOMMENDATION:
1) Consider the financial impact report which indicates the "additional employer contributions"
which will be required in the future for providing the two years service credit.
2) Identify the funding source for those future employer contributions.
3) Set a special meeting for Monday, October 27, 2008 to consider a resolution offering two
additional years of service credit under PERS to Miscellaneous, Police, and Fire employees; and,
designate the window period for the eligible employees to retire.
2. DISCUSSION'
As discussed in the attached report, 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 is $4,270,483. The estimated annual
increase in the employer contribution rate is $436,496. If all 91 employees retire and all positions
remain vacant, the estimated annual reduction in salary and benefit costs would be $9,865,797.
In an informal survey of eligible employees, 29 expressed interest in using the added benefit. That
number could increase or decrease. The estimated present value of the additional employer
contributions which will be required in the future for providing the two years service credit if the 29
interested employees choose to retire within the 90 -day window period is $1,608,751. The estimated
annual increase in the employer contribution rate is $212,303. If the 29 interested employees retire
and all positions remain vacant, the estimated annual reduction in salary and benefit costs would be
$3,408,300. Projected from January 26, 2009 the last date employees could elect to take advantage of
the two year service credit, savings for the remaining fiscal. year 2008 -09 is estimated to be
$4,110,748.
The attached Financial Impact Report provides more detailed information about costs.
If the City Council wishes to proceed with implementation of offering the two years additional
service credit to employees, it can either set a special meeting of the Council to consider and adopt a
resolution implementing the program for any date 14 days after October 6, 2008 or it can agendize
the matter for the next regular meeting, November 3, 2008. Implementing the program at the earliest
possible date will result in the maximum savings in salary and benefit costs from any employees who
choose to take advantage of the additional service year credits and retire.
If after review the City Council does not want to go forward, it does not need to set the special
meeting.
FINANCIAL IMPACTS:
See Financial Impact Report.
Attachment 1
City of Petaluma Financial Impact Report for Two Years Additional Service Credit
Two Years Additional Service Credit
There are ninety -one (91) employees eligible to retire and receive the two years additional service credit.
Eligible employees have at least five years of service credit in CalPERS and are age fifty (50) or older.
Attachment A provides a listing of all positions in the City with employees eligible for the service credit.
The added cost to the retirement fund if all eligible employees retire with the service credit is as follows:
Employee Group Safety Employees Miscellaneous Employees Total
# Employees Eligible 14 77 91
Present value of $1,456,457 $2,814,026 $4,270,483
of additional employer
contributions
$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.
The cost of the two years additional service credit will be included in the City's employer contribution rate
in the fiscal year starting two years after the end of the designated retirement period. That means the
cost would be in the City's employer rates in fiscal year 2011/12.
It is estimated that the employer rates would increase an additional amount as follows:
Safety Employees
Employer Rate Increase 1.58%
Estimated Cost
of Increased Rates $193,106
Status of Retirement Program as of June 30, 2006
Safety Employees
Miscellaneous Employees Total
2.42%
243,390 $436,496
- CalPERS Actuarial Report
Miscellaneous Employees Total
Employer Rate 2008/09 28.30% 11.66%
Actuarial Value Assets 76,262,678 51,333,652 $127,596,330
Funded Status 85% 94.30%
Unfunded Liability 19,145,399 6,285,781 $ 25,431,180
Present Value of
Service Credit 1,456,457 2,814,026 $ 4,270,483
Revised Unfunded Liability
With Service Credit $ 20,601,856 $ 9,099,807 $ 29,701,663
■
This estimated present value of additional contribution may differ from the actual present value for two
reasons:
1. 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,
2. 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. Attachment B provides a listing of the number of employees by City
Department who expressed interest the service credit and retirement.
The added cost to the retirement fund if only those who expressed interest retire with the service credit is
as follows:
Employee Group
Safety Employees
Miscellaneous Employees
Total
# Employees Interested
8
21
29
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.
The cost of the two years additional service credit will be included in the City's employer contribution rate
in the fiscal year starting two years after the end of the designated retirement period. That means the
cost would be in the City's employer rates in fiscal year 2011/12. The increase in the employer
contribution rate may continue for as long as 20 years.
It is estimated that the employer rates would increase an additional amount as follows:
Safety Employees Miscellaneous Employees Total
Rate Increase .88% .68%
Estimated Cost
of Increased Rates $ 107,553 $ 104,750 $ 212,303
Status of Retirement Program as of June 30, 2006 — CalPERS Actuarial Report
1
Safety Employees
Miscellaneous Employees
Total
Employer Rate 2008/09
28.30%
11.66%
Actuarial Value Assets
76,262,678
51,333,652
$127,596,330
Funded Status
85%
94.30%
Unfunded Liability
19,145,399
6,285,781
$ 25,431,180
Present Value of
Service Credit
811,881
796,870
1,608,751
Revised Unfunded Liability
With Service Credit
$ 19,957,280
$ 7,082,651
$ 27,039,931
1
If the City offers the two years additional service credit and all 91 employees eligible to retire do retire the
City would save the following estimated amount if positions remain vacant for one year and they are not
staffed. Note: the amount below is an annual amount. It is likely the savings for the current fiscal year
would only be about half or 6 months. The majority of those eligible are not expected to retire during the
90 -day window period.
Employee Group
# of
Annual Salary & Other
Benefit and Other
Total Annual
$ 138,162
Employees
Compensation
Payroll costs
Cost of
29
$ 348,569
Reported to CaIPERS
associated with
Employee
employment
Group
Safety
14
1,729,289
773,256
2,502,545
Miscellaneous
21
1,519,877
479,636
1,999,513
Miscellaneous
77
5,618,946
1,744,305
7,363,251
Total
91
$ 7,348,235
$ 2,517,562
$ 9,865,797
If all of the 29 employees interested in retiring do retire the City would save the following estimated
amount if positions remain vacant for one year and they are not staffed. Note: the amount below is an
annual amount. It is likely the savings for the current fiscal year would only be about half or 6 months. It
is unknown who would actually retire.
Employee Group
# of
Annual Salary & Other
Benefit and Other
Total Annual
$ 138,162
Employees
Compensation
Payroll costs
Cost of
29
$ 348,569
Reported to CalPERS
associated with
Employee
employment
Group
Safety
8
973,558
435,229
1,408,787
Miscellaneous
21
1,519,877
479,636
1,999,513
Total
29
2,493,435
914,865
3,408,300
If all 29 employees retire the City would have to make a cash payout of employee leaves as follows:
Employee Group
# of
Employees
Cost of Leave Payouts
Safety
8
$ 138,162
Miscellaneous
21
$ 210,407
Total
29
$ 348,569
If all 29 employees either opt for retiree health benefit and or receive the 20 -year cash retiree benefit the
City will incur an additional annual cost of $38,112.
All costs and savings are estimates only and based upon current known data. Actual costs and savings
will depended on actual data.
The City's 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
service credit.
The City can pay off the cost of the two years service credit at anytime.
An employee cannot receive unemployment insurance payments during the window period.
An employee may not retire the first day of the window period. If the retired employee subsequently
reenters membership, the additional service credit is forfeited.
To implement the two years additional service credit the City Council must:
1. Have a CalPERS contract amendment in effect that provides for the two years additional service
credit.
2. Designate a window period of not less than 90 or more than 180 days in length within which
employees must retire.
3. Designate position(s) by job classification, department, or other organizational unit eligible for the
service credit.
4. Certify that it is electing to be subject to the provisions of the service credit due to mandatory
transfers, layoffs and /or demotions that constitute at least one percent of the job classifications,
department, or organizational unit. The City has already met this requirement with the layoffs in
the Community Development Department.
5. Certify that the City intends to leave at least one vacancy in any position in any department or
organizational unit unfilled.
6. Certify that the City has complied with the provisions of Government Code Section 7507 and
disclosed the additional employer contributions and the funding of those employer contributions,
at a public meeting.
Attachments
A — Listing of All Employees Eligible
B — Listing of the Number of Employees Interested by Department
1
f
Attachment A - Listing of All Employees Eligible By Position
Department
Number
of
Positions
Title
City Clerk
City Clerk
City Manager
City Manager
Executive Assistant to City Manager
Risk Claims Administrator
Risk Manager
Secretary Confidential
Animal Services
Animal Services Manager
Animal Shelter Assistant
Shelter Supervisor
Human Resources
Human Resources Assistant II —Confidential
Human Resources Manager
Finance
Accountant (Payroll)
Administrative Technician - Confidential
Commercial Services Manager
Senior Accountant
Information Technology
2
Information Technology Specialist II - Confidential
Information Technology Manager
Police
2
Community Services Officer
Police Chief
Police Lieutenant
Police Officer
2
Police Records Assistant II
Police Records Supervisor
2
Public Safety Dispatch
Public Safety Communications Manager
Secretary
Senior Parking Enforcement Officer
Fire
Administrative Assistant - Confidential
2
Fire Battalion Chief
Fire BC — Emergency Medical Services
3
Fire Captain
2
Fire Engineer
Fire Engineer /Paramedic
Fire Marshal
Fire Inspector II
Fire Marshal
Secretary
Community Development
Administrative Assistant
Director Community Development
Housing Administrator
Attachment A - Listing of All Employees Eligible By Position
Senior Building Inspector
Parks & Recreation
Parks Maintenance Foreworker
Parks Maintenance Lead Worker
Parks and Landscape Manager
5
Park Maintenance Worker II
2
Recreation Supervisor
Public Works — Administration
Administrative Assistant
City Engineer
Equipment Maintenance Lead Worker
Facility Maintenance Worker II
Maintenance Worker III Docks & Bridge
Public Facilities Manager
2
Public Works Crew Supervisor
Public Works Supervisor
Secretary
Senior Civil Engineer
2
Street Maintenance Worker II
2
Traffic Signal Light Technician II
Public Works - Engineering
Assistant In Civil Engineering
Budget Grants /Project Manager
Office Assistant II
Public Works — Maintenance
2
Custodian
Supervising Custodian
Water Resources &
Conservation
Administrative Assistant
Secretary
Utility Manager
Water Resources - Field Office
Electrical Maintenance Worker II
Engineering Technician — Senior
Utility Service Lead Worker
2
Utility Service Worker II
Utility Service Worker III
Utility Supervisor
Utility Technician
Water Service Representative
Total
91
Attachment B - Listing of Employees Interested by Position
Department
Number
of
Positions
Title
City Manager
2
Miscellaneous
Finance
2
Miscellaneous
Police
4
Miscellaneous
2
Safety
Fire
1
Miscellaneous
5
Safety
Fire Marshal
1
Miscellaneous
1
Safety
Parks & Recreation
3
Miscellaneous
Public Works - Administration
4
Miscellaneous
Public Works - Engineering
1
Miscellaneous
Water Resources - Field Office
3
Miscellaneous
Total
29