HomeMy WebLinkAboutMinutes - City Council - 2013-06-10 - Special Meeting 248
City Council, Special Meeting
Civic Center Council Chambers
777 Cypress Avenue
Redding, California
June 10, 2013 2:00 p.m.
The meeting was called to order by Mayor Rick Bosetti with the following Council Members
present: Gary Cadd, Patrick Jones, Missy McArthur, and Francie Sullivan.
Also present were City Manager Kurt Starman, Assistant City Attorney Lynette Frediani,
Personnel Director Sheri DeMaagd, Deputy City Manager Greg Clark, City Clerk
Pamela Mize, and Executive Assistant Sharlene Tipton.
2. Workshop to Discuss:
► California Public Employees' Retirement System(Ca1PERS)projected rates
for Fiscal Year 2015-16 and beyond; and
► Governmental Accounting Standards Board Statement (GASB) 45 / Post-
Employment Healthcare Plan Funding Status
[P-100-230/P-100-150]
City Manager Starman summarized the City of Redding Internal Communication
(staffreport)dated June 3,2013,incorporated herein by reference,and recommended
that the City Council receive a presentation from Bartel Associates,LLC,relative to
recent actuarial policy changes approved by the Board of Administration of
Ca1PERS and the potential impact those changes may have to the Ca1PERS employer
contribution for the City of Redding.
On behalf of Bartel Associates, LLC, John Bartel provided a PowerPoint
presentation,incorporated herein by reference,highlighting Ca1PERS projected rates
for Fiscal Year 2015-16 and beyond. He noted that the Ca1PERS Board adopted
changes to the contribution policy for the following reasons: (1) asset corridor
generates volatility when extreme events happen;(2)slow progress towards increased
funded status; (3) current method needs improved transparency; and (4) GASB 68
encourages faster funding by requiring a lower discount rate for slower funding.
Mr. Starman summarized the Public Agency Retirement Services (PARS),
incorporated herein by reference,and provided background information as to how the
rates are calculated,and stated that the projected unfunded liability as of July 1,2013,
is $38 million. He noted that there will be an approximate $1.6 million annual
impact for all City Funds for Fiscal Year 2013-14 and beyond.He stated that the City
discontinued the PARS benefit for new employees in all bargaining units effective
January 1, 2013, due to the California Public Employees' Pension Reform Act
(PEPRA) that states that new employees are no longer eligible for this type of
supplemental benefit.
Council Member Cadd surmised that the$13.5 million in employer contributions by
the City coupled with another$1.6 million in employer contributions from PARS,
is approximately $15 million that the City will need to fund, without taking
healthcare into consideration, and opined that this would be the worst case scenario
of what lies ahead for the City that should be planned for.
•
Peter Scales opined that he opposes government in general,and stated that employee
retirement benefits should not be funded by the government.
In response to Linda G.White,Mr:Bartel opined that there are two things that might
have an impact on the inflationary rate: (1) Ca1PERS' investment return on bonds;
and (2) inflation will be higher than in past years, Ca1PERS assumption is that
inflation is 2.25 percent and Mr. Bartel opined that Ca1PERS will revisit that
assumption and possibly increase it to three percent. Mr. Bartel noted that
interestingly,inflation has a positive impact,it does not increase the liability as much
as it increases the investment return, resulting in a modest reduction in the City's
unfunded liability.
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Council Member Cadd stated that he received an email from David Rutledge who
was not able to attend the Council meeting, and read from his email that Mr.
Rutledge asked State Controller John Chiang what the options are for communities
such as Redding that have large unfunded liabilities, and noted that Mr. Chiang's
response was to "pay up".
In response to Michael Dacquisto's questions, Mr. Bartel noted that the report
assumed: (1)a constant number of employees into the future; and(2)an increase in
the aggregate payroll, at three percent, which is the Ca1PERS aggregate payroll
growth assumption. Mr.Bartel responded to Mr.Dacquisto's second question in two
parts:(1)confirmed that the City could go to CaIPERS and request that its unfunded
liability be paid off sooner; and (2) confirmed that the City could purchase pension
obligation bonds at a lower rate of return than Ca1PERS is expected to earn,however,
the challenge is in the timing.
Mr. Starman added that pension obligation bonds were quite popular in the early to
mid-2000's,however, when the market declined,those communities faced both the
bond payments and large unfunded liability amounts.
Mayor Bosetti stated that in the past,the City has talked about buying its way out of
Ca1PERS altogether,however, that amount was too large to be a viable option.
In response to George Clarke, Mr. Bartel and Mr. Starman noted that Safety
employees are funded 100 percent out of the City's General Fund, with
Miscellaneous employees comprising 40 percent of the City's General Fund.
Governmental Accounting Standards Board Statement (GASB) 45 / Post-
Employment Healthcare Plan Funding Status-re: Accounting Statement for Other
(than pension) Employment B
Mr. Bartel providedPost a PowerPoint presentationenefits (OPER), incorporated herein by reference,
summarizing the status of GASB 45/Post-employment healthcare plan funding for
City of Redding employees.
In response to Council Member McArthur, Mr. Bartel stated that the firm was not
asked to evaluate whether Measure A or B were successful in lowering the City's
unfunded liability. He recalled that Measure A was approved by voters to authorize
the City to negotiate with city workers over the question of whether those city
workers should pay a portion of their Ca1PERS pensions fund contribution. In
addition,Measure B was approved by voters to require city workers to have worked
for a minimum of five years,and be enrolled in medicare(if eligible)before the City
would contribute to retiree health insurance premium costs.
A discussion amongst the City Council ensued.
In response to Council Member Jones,Mr.Bartel confirmed that even with the two-
tiered post-employment healthcare plan funding in place, the costs will escalate in
excess of $100 million within 10 years. He stated that although a two-tier system
is in place, it takes a long time for the full benefit to manifest itself and currently
there are still a large number of City employees who do not have the vesting
requirement within their union contracts yet.
In response to Linda G.White,City Manager Starman and Mr.Bartel explained that
there is no correlation between salary increases and GASB 45/OPEB formulas.
Reverting back to the previous Ca1PERS topic, George Clarke questioned whether
a charter city could change the PEPRA requirements of a 2.7 percent at 55 formula
for Safety employees, citing the City of Bakersfield as an example. Mr. Bartel
opined that for those charter cities that have their own retirement systems, they do
have ability to structure their benefits separate than the mandated amounts required
by law, however, if they participate in Ca1PERS, then those rights are ceded to the
PEPRA law as it applies to Ca1PERS.
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City Manager Starman interjected that the main issue is not related to being a charter
city but whether the entity contracts with Ca1PERS or not. He noted that an entity
can exit Ca1PERS with enough money to"buy out",however, the cost is huge.
The City Council took no action on this informational item and thanked Mr. Bartel
for his informative presentation.
ADJOURNMENT
There being no further business, Mayor Bosetti declared the meeting adjourned at the hour
of 4:21 p.m.
APPROVED:
efe-1.8
Rick Bosetti, Mayor
ATTEST:
01,4G,
Pamela Mize, City Clerk
06/10/2013