HomeMy WebLinkAboutStaff Report 3.B 04/20/2009CITY OF PETALUMA, CALIFORNIA
AGENDA BILL
Aeenda Title:
Presentation and Discussion of Financial Impact Report on the City's Future
Costs of Offering Two Years Additional Service Credit under PERS to
Miscellaneous, Police, and Fire Employees; and, Possible Direction to
Grant Another Designated Period for Two Years Additional Service Credit
3.B
April 20, 2009
Meetine Date:
April 20, 2009
Meeting Time: 7:00 PM
Catezorv: ❑ Presentation ❑ Appointments ❑ Consent ❑ Public Hearing ❑ Unfinished Business ❑X New Business
Department: Director:
Human Resources 7ohri Brown
Total Cost of Proposal or Proiect:
$3,776,801
Amount Budgeted:
N'/A
Contact Person: Phone Number:
Pamala Robbins 778-4343
Name of Fund:
Account Number:
Current Fund Balance:
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. Place on the Agenda for Monday, May 4, 2009, 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.
1. ❑ First reading of Ordinance approved unanimously, or with unanimous vote to allow posting prior to second reading
2. ❑ First reading of Ordinance approved without unanimous vote: Ordinance has been published/posted prior to second
reading; see Attachment
3. ❑ Other action requiring special notice: Notice has been given, see Attachment
Summary Statement:
The City of Petaluma continues to face financial shortfalls and impending layoffs. To mitigate projected gaps
between revenue and expenditures and layoffs, City staff is recommending for a second time 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 Finance Director:
Date:'��1-?
Rev. # 3 Date Last Revised
Reviewed by City Attorney:
Date: 0
04/14/09 File:
Approveld by City Manager:
Date:'
CITY OF PETALUMA, CALIFORNIA
APRIL 20, 2009
AGENDA REPORT
FOR
Presentation and Discussion of Financial Impact Report on the City's Future Costs of Offering
Two Years Additional Service Credit under PERS to Miscellaneous, Police, and Fire Employees; and, Possible
Direction to Grant Another Designated Period for Two Years Additional Service Credit
RECOMMENDATION:
A. 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.
B. Identify the funding source for those future employer contributions.
C. 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
employces to retire.
2, DISCUSSION:
The City Council adopted Resolution 2008-202 on October 27, 2008 which opened a window period
between October 28, 2008 to January 25, 2009 and provided two years additional service credit in
PERS for eligible members. The City Council took this action to mitigate projected gaps between
revenue, expenditures, and layoffs. As of October 27, 2008, 91 employees were eligible to retire (14
Safety Employees and 77 Miscellaneous Employees). Eligible employees must have at least 5 years
of service credit in PERS and be age fifty or older. At the time of the offering the City had an
inforinal list of 29 eligible employees interested in the benefit (8 Safety Employees and 21
miscellaneous employees). .
Twenty (20) employees actually opted for the benefit and retired in the window period noted above.
Seven (7) employees who retired were positioned for layoff and 13 additional employees opted to
retire as well. Of the twenty that did retire, 6 were Safety Employees and 14 were Miscellaneous
Employees. The program did reduce the need for mandatory layoffs, transfers, and demotions.
The City of Petaluma continues to face financial shortfalls and impending layoffs. To mitigate
projected gaps between revenue and expenditures and layoffs, City staff is recommending, for a
second time, that the City Council consider the option of offering two years of additional service
credit. City staff recommends the City Council consider a window period from May 25, 2009 to
August 22, 2009.
If the City Council wishes to offer the two years additional service credit to all eligible employees,
the costs to provide this benefit needs to be made public for at least two weeks prior to the adoption
of the resolution to grant another designated period for two years additional service credit.
The attached Financial Impact Report outlines the estimated costs and provides information on the
estimated present value of the additional employer contributions that will be required in the future for
providing the two years service credit. If all 82 employees choose to retire within the 90 -day window
period the estimated present value of the additional employer contributions that will be required is
$3,776,801. The estimated annual increase in the employer contribution rate is $285,257.
a
If all 82 employees retire and all positions remain vacant, the estimated annual reduction in salary and
benefit costs would be $8,927,970.
In an informal survey of eligible employees, 15 expressed interest in using the added benefit. That
number could increase or decrease. If the 15 interested employees choose to retire within the window
period, $773,620 is the estimated present value of the additional employer contributions that will be
required in the future for providing the two year service credit. The estimated annual increase in the
employer contribution rate is 558,431. If the 15 interested employees retire and all positions remain
vacant, the estimated annual reduction in salary and benefit costs would be $1,729,577. The cost of
leave payouts (assumes employees convert sick leave balances to PERS service time rather than cash
payout) is $181,156. The estimated cost savings minus leave payouts if the 15 employees retire is
$1,548,421. Estimated savings of this amomit to the General Fund is $785,569.
The attached Financial hnpact 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 adopt a resolution implementing the program for any date 14 days
after April 20, 2009. The City Council can agendize the matter for the next regular meeting, May 4,
2009. 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 take any action.
3. FINANCIAL IMPACTS:
See Financial Impact Report.
ATTACHMENT TO AGENDA BILL
City of Petaluma Financial Impact Report for Two Years Additional Service Credit
April 20, 2009
There are eighty-two (82) employees eligible to retire and receive the two years additional service credit.
Eligible employees have at least five years of service credit in CaIPERS 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 Safetv Emolovees Miscellaneous Emolovees Total
# Employees Eligible 13 69 82
Present value of $1,209,870 $2,566,931 $3,776,801
Of additional employer
contributions
$3,776,801 is the estimated present value of the additional employer contributions that will be
required in the future for providing the two years service credit if all 82 employees choose to retire
within the 90 -day window period (May 25, 2009 to August 22, 2009).
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 2012113.
It is estimated that the employer rates would increase an additional amount as follows:
Safetv Emr)lovees Miscellaneous Emplovees Total
Employer Rate Increase .78% 1.43%
Estimated Cost
of Increased Rates $91,380 $193,877 $285,257
Status of Retirement Program as of June 30, 2006 — CaIPERS Actuarial Report
Safetv Emolovees Miscellaneous Emolovees Total
Employer Rate 2008109 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 1.209.870 2,566,931 $3.776.801
Revised Unfunded Liability
With Service Credit $20,355,269 $8,852,712 $29,207,981
4
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 eighty-two (82) eligible employees and asked who would be seriously
interested in the taking the service credit and retire.
Fifteen (15) eligible employees said they would be seriously interested in taking the service credit
and retiring. Attachment B provides a listing of the number of employees by department who
expressed interest in 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 Safetv Emplovees Miscellaneous Emplovees Total
# Employees Interested 3 12 15
Present Value $279,611 $494,009 $773,620
$773,620 is the estimated present value of the additional employer contributions that will be
required in the future for employees interested in 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 2012113. 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:
Safetv Emplovees Miscellaneous Employees Total
Rate Increase .18% .28%
Estimated Cost
of Increased Rates $21,119 $37,312 $58,431
Status of Retirement Program as of June 30, 2006 — CalPERS Actuarial Report
S
Safetv Emplovees
Miscellaneous Emplovees
Total
Employer Rate 2008109
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
279.611
494.009
$773.620
Revised Unfunded Liability
With Service Credit
$19,425,010
$6,779,790
$26,204,800
S
Estimated Cost of the Twenty (20) Employees who opted for the service credit during the previous
window period established from October 28, 2008 to January 25, 2009.
Twenty (20) eligible employees opted to take the service credit and retire in the window period
October 28, 2008 to January 25, 2009. Attachment C provides a listing of the employees by
department who opted for service credit and retired.
The added estimated cost to the retirement fund for the twenty (20) employees that did retire with the
service credit is as follows:
Employee Group Safetv Emolovees Miscellaneous Emolovees Total
# Employees Retired 6 14 20
Present Value $689,637 $513,133 $1,202,770
$1,202,770 is the estimated present value of the additional employer contributions for employees
that opted for the service credit and retired.
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 2011112. 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:
Safetv Emolovees Miscellaneous Empl. oyees Total
Rate Increase .43% .25%
Estimated Cost
of Increased Rates $52,087 $38,756 $90,843
Status of Retirement Program as of June 30, 2006 — CaIPERS Actuarial Report
Safetv Emolo_yees Miscellaneous Emplovees Total
Employer Rate 2008109 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 689.637 513,133 $1,202.770
Revised Unfunded Liability
With Service Credit $19,835,036 $6,798,914 $26,633,950
B
Estimated Cost of the Twenty (20) Employees who opted for the service credit during the previous
window period established from October 28, 2008 to January 25, 2009 and the Fifteen (15)
Employees who have expressed interest in the proposed new window period of May 25, 2009 to
August 22, 2009.
The added estimated cost to the retirement fund of the 20 employees that did retire with the service credit
and the 15 employees that have indicated interest in the proposed new window period:
Employee Group
Safetv Emolovees
Miscellaneous Emplovees
Total
## Employees Retired
6
14
20
## Employees Interested
3
12
15
Total
9
26
35
Present Value Retired EEs $689,637 $513,133 $1,202,770
Present Value Interested EEs $279.611 $494,009 $773.620
Total $969,248 $1,007,142 $1,976,390
$1,976,390 is the estimated present value of the additional employer contributions for 20
employees that opted for the service credit and retired and for the 15 employees who have
expressed interest in retirement.
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 2011112 and 2012113. 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:
Safetv Emplovees Miscellaneous Emplovees Total
Rate Increase — Retired EEs .43% .25%
Rate Increase — Interested EEs .18% .28%
Total .61% .53%
Estimated Cost
of Increased Rates — Retired EEs $52,087 $38,756 $90,843
Estimated Cost
Of Increased Rates — Interested EEs 521,119 $37,312 $58,431
Total $73,206 $76,068 $149,274
Status of Retirement Program as of June 30, 2006 — CalPERS Actuarial Report
Safetv Emplovees Miscellaneous Emplovees Total
Employer Rate 2008109 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— Retired EEs 689,637 513,133 $1,202,770
Present Value of
Service Credit — Interested EEs 279,611 494,009 $773,620
Revised Unfunded Liability $20,114,647 $7,292,923 $27,407,570
With Service Credit
M
If the City offers the two years additional service credit and all 82 employees eligible 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. The majority of those eligible are not expected to
retire during the 90 -day window period.
Employee # of Annual Salary & Other Benefit and Other Total Annual Cost
Group Employees Compensation Payroll costs of Employee
Reported to CaIPERS associated with Group
employment
Safety 13 $1,299,989 $628,078 $1,928,067
Miscellaneous 69 $5,288,725 $1,711,178 $6,999,903
Total 82 $6,588,714 $2,339,256 $8,927,970
If all of the 15 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 unknown who would actually retire.
Employee # of Annual Salary & Other
Group Employees Compensation
Reported to CAPERS
Safety 3 $321,392
Miscellaneous 12 $960,493
Total 15 $1,281,885
Benefit and Other
Payroll costs
associated with
employment
$160,511
$287,181
$447,692
Total Annual Cost
of Employee
Group
$481,903
$1,247,674
$1,729,577
If all 15 employees retire the City would have to make a cash payout of employee leaves as follows:
Employee # of Cost of Leave
Group Employees Payouts* l
Safety 3 $45,316
Miscellaneous 12 $135,840
Total 15 $181,156
*assumes employees convert sick leave balances to PERS service time rather than cash payout,
The estimated cost savings minus leave payouts if the 15 employees retire is $1,548,421. Estimated
savings of this amount to the General Fund is $785,569.
If all 15 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 $22,116.00.
All costs and savings are estimates only and based upon current known data. Actual costs and savings
will depend 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 re-
enters CalPERS 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 in which
employees must retire.
3. Designate position(s) by job classification, department, or other organizational unit eligible for the
service credit.
4_ Certify that the City 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 by Position
B - Listing of Employees Interested by Department
C - Listing of All Employees Who Opted to Retire in Window Period October 28, 2008 to January 25, 2009.
Attachment A -- Listing of All Employees Eligible By Position
0
Department
Number
Title
of
Positions
City Clerk
City Cleric
City Manager
City Manager
Executive Assistant to City Manager
Risk Claims Administrator
Secretary Confidential
Animal Services
Animal Services Manager
Animal Shelter Assistant
Shelter Supervisor
f Human Resources
Human Resources Assistant II —Confidential
Human Resources Manager
Finance
Administrative Technician - Confidential
Commercial Services Manager
Finance & Accounting Manager
Information Technology
2
Information Technology Specialist II - Confidential
Information Technology Manager
Police
2
Community Services Officer
2
Police Records Assistant II
Police Records Supervisor
2
Public Safety Dispatch
Secretary
Senior Parking Enforcement Officer
Fire
Administrative Assistant - Confidential
Fire Battalion Chief
Fire BC— Emergency Medical Services
2
Fire Captain
Fire Chief
4
Fire Engineer
Fire Engineer/Paramedic
Firefighter
Firefighter/Paramedic
Fire Marshal
Fire Inspector lI
Community Development
Administrative Assistant
Assistant Community Development Director
Director Community Development
Housing Administrator
Senior Building Inspector
0
Attachment A - Listing of All Employees Eligible By Position
Parks & Recreation
Public Works --Administration
Public Works --Airport
PublicWorks— Maintenance
Water Resources &
Conservation
Water Resources - Field Office
Total
Parks Maintenance Foreworker
Parks Maintenance Lead Worker
Parks and Landscape Manager
6 Park Maintenance Worker II
2 Recreation Supervisor
Administrative Assistant
Budget Grants/Project Manager
Equipment Maintenance Lead Worker
Facility Maintenance Worker 11
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 11
Airport Manager
Office Assistant If
Engineering Technician 11
Secretary
Utility Manager
Electrical Maintenance Worker II
Engineering Technician — Senior
Utility Service Lead Worker
Utility Service Worker 11
Utility Service Worker III
2 Utility Technician
Water Service Representative
82
Attachment B - Listing of Employees Interested by Department
Department Number Title
of
Positions
City Manager 2 Miscellaneous
community Development 2 Miscellaneous
Finance 1 Miscellaneous
Fire 3 Safety
Parks & Recreation 1 Miscellaneous
+I Water Resources -Field Office 6 Miscellaneous
I
Total 15
f2
Attachment C - Listing of All Employees Who Opted to Retire in
Window Period October 28, 2008 to January 25, 2009
Department
!Number Title
of
Positions
City Manager
Risk Manager
Finance
Accountant
Police
Police Chief
Police Lieutenant
Police Officer
Community Services Officer
Fire
Fire Battalion Chief
Fire Marshal
Fire Captain
Secretary
Fire Chief
Public Works
City Engineer
Street Maintenance Worker -- Docks & Bridges
Assistant in Civil Engineering
Supervising Custodian
2 Custodian
Water
Utility Supervisor
f
Utility Service Worker It
Administrative Assistant
Total
20