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HomeMy WebLinkAbout05/05/1998, 5 - AUTHORIZATION TO SUBMIT ENVIRONMENTAL PROJECT PROPOSALS TO THE CENTRAL COAST REGIONAL WATER QUALITY CONTROL BOARD Dw counat -5-0- 97 j agcnaa Report " , S CITY OF SAN LUIS OBISPO FROM: Ken Hampian,ACAO t:ResPrepared By: Neil Hav . Naources Manager SUBJECT: AUTHORIZATION TO SUBMIT ENVIRONMENTAL PROJECT PROPOSALS TO THE CENTRAL COAST REGIONAL WATER QUALITY CONTROL BOARD CAO RECOMMENDATION Adopt a resolution authorizing submittal of nine environmental project proposals totaling $3.6 million to the Central Coast Regional Water Quality Control Board ("Regional Board') consistent with that organization's request for submittals associated with the settlement monies from Unocal's Guadalupe oil spill. DISCUSSION Background As part of the settlement between the State of California and Unocal for the Guadalupe oil spill, the Regional Board anticipates that a large block of funding will be available for a variety of enhancement programs within southern San Luis Obispo and northern Santa Barbara Counties, and has therefore invited goverment agencies and nonprofit organizations to submit proposals for those programs. The proposals must have a nexus to the spill at Guadalupe; and that nexus has been defined by the Regional Board to be (1) geographic or hydrologic proximity; (2) waste type (i.e. petroleum), or (3) beneficial use type. The latter is the nexus which would apply to proposals by the City of San Luis Obispo. This includes freshwater aquatic habitat and protection or enhancement of habitat for aquatic endangered species. Staff has identified nine potential projects which could receive funding support from this program. These include(in order of cost): 1. Acquisition of the Ayers property($1,250,000); 2. "Daylighting"of San Luis Obispo Creek at Court Street($850,000); 3. Improvement of fish passage at Prefiimo Creek between Laguna Lake and Highway 101 ($400,000); 4. Improvement of fish passage at Reservoir Canyon($350,000); 5. Acquisition support for the Filipponi property($250,000); 6. Acquisition of property at 1095 Marsh Street(John's Batteries) ($250,000); 7. Improvement of fish passage on Froom Creek under Highway 101 ($100,000); 8. Improvement of fish passage on the tributary draining the Ayers property under Highway 101 ($100,000); and 9. Placement of boulder clusters at six to ten locations in San Luis Obispo Creek within the City ($50,000). �i� Council Agenda Report—tcequest to Submit Environmental Project Proposals Page 2 Synopsis of Projects Ayers Property. The Ayers property occupies 242 acres on the west side of Highway 101, south of San Luis Obispo, and has been on the market for several years. The property was one of the priority acquisition projects identified in the "Saving Special Places"report prepared by the Land Conservancy. It contains a tributary to San Luis Obispo Creek which is considered good habitat for the southwestern pond turtle, red-legged frog, and possibly the southern steelhead. Acquisition of the property would serve to preserve the existing high-quality riparian habitat. "Daylighting" of Court Street. The Downtown Concept Plan for downtown San Luis Obispo has anticipated the potential for restoration of San Luis Obispo Creek in various locations in the downtown area. One of the most promising of these is Court Street, which is currently a parking lot owned by the City. While it does not appear feasible to fiilly realign San Luis Obispo Creek in this area, a small-scale project in addition to the rebuilding of the Higuera Street Bridge may be possible. The concept would be to provide a low-flow channel for San Luis Obispo Creek in this area that would be open, serving as an amenity to the Court Street area and, at the same time, improving the potential for fish passage through downtown. The creek would be channeled, possibly using native stone, with seating areas at the top and narrow terraces near the bottom where trees would be planted to shade the stream. The feasibility of an opening has not yet been determined, but will be addressed in the next 2-3 months, when the consultants report becomes available. However, since any such a project would not qualify for Federal Bridge Replacement funds, the concept is recommended for submittal to the Regional Board at this time. Improvement of Fish Passage at Prefumo Creek Prefumo Creek between Laguna Lake and San Luis Obispo Creek is a particularly unfriendly environment for fishes, both for rearing and passage. This proposal contemplates improving that situation by providing passage under Highway 101 through the use of Washington baffles and a fish ladder, plus establishment of a definite low-flow channel within the basic channel of Prefumo Creek. This would be done by excavating a narrow channel that would concentrate low flows which would be more favorable to the passage of steelhead and other fishes through this reach of the creek. This proposal would also consider improvements to fish passage under Madonna Road Improvement of Fish Passage at Reservoir Canyon. Since the establishment of the reservoir in Reservoir Canyon in the late 1800's,the upper portion of Reservoir Creek has been isolated from the remainder of the watershed as far as fish movement is concerned Inspection of the area indicates that the current location of the road is where the original creek may have gone. Therefore, the concept in this area would be to restore the creek to its natural location through a grading program. This grading would remove the now defunct reservoir and provide and more gentle, natural gradient for the movement of steelhead up into the excellent breeding habitat provided in the upper portions of Reservoir Creek. Filipponi Property. The Filipponi property is the subject of current fundraising efforts by the City. This program offers another potential funding source, which would be justified on the basis on the provision of freshwater aquatic habitat and providing protection and enhancement for aquatic endangered species. Furthermore, this property is known to have been impacted by the 1926 fire and spill at the Unocal Tank Farm site. s-a Council Agenda Report=Aequest to Submit Environmental Pruject Proposals Page 3 Acquisition of Property at 1095 Marsh Street. This property, known as "John's Batteries", has been the subject of several discussions between the City and the property owner in conjunction with the widening of the Santa Rosa Street Bridge. The Downtown Concept Plan envisions this particular property as being a small streamside park providing some flood capacity by laying back the bank on the Marsh Street side. Improvement of Fish Passage at Froom Creek At this location under Highway 101 culverts have been installed which are hostile to the entry and passage of steelhead and other fishes. A fish ladder and some installation of Washington baffles could be used in this location to make the upper areas of Froom Creek more accessible for their valuable breeding habitat for steelhead. Improvement of Fish Passage at Ayers Property. This is the same situation as at Froom Creek: culverts underneath Highway 101 were installed without provision for fish passage. At this location, we would propose the installation of a fish ladder and Washington baffles within the culvert underneath the road to provide access for steelhead and other fishes into the good quality habitat of the tributary upstream. Placement of Boulder Clusters. The development of pool habitat within San Luis Obispo Creek has been identified by fishery biologists as being one of the primary needs in order to enhance the habitat as a nursery or juvenile rearing habitat for steelhead and other fishes. One of the most effective ways of doing this is by the placement of clusters of large boulders, perhaps two, three or four together, placed in such a way that they will provide scour among the rocks and create a pool in that location. This proposal would envision the placement of up to 10 such boulder clusters at appropriate locations within San Luis Obispo Creek where such placement would not result in the unacceptable direction of flows against streambanks or other areas where it could lead to property damage. Several locations for such installation exist primarily along the creek below Madonna Road and in the Water Reclamation facility area. Next Steps The deadline for submittal of these project proposals is May 18'b. Upon the completion of settlement negotiations with Unocal, the Regional Board will select from among the projects submitted those which warrant further evaluation and possible funding. We would anticipate that more detailed information would be made available to the Regional Board at that time. This timetable is uncertain. Judging, however, from the operation of previous trustee organizations established to administer settlement funds of this type, we would anticipate that the Regional Board will have complete latitude to select projects for further investigation, continue to work with them or drop them at any time during the process. It is for this reason that the proposals will be presented in a conceptual form and if they are found to be of interest or value to the Regional Board, staff would then provide the necessary detail to satisfy the further requirements of the Board. FISCAL EMPACT The proposals, if successful, will have a beneficial fiscal effect by providing outside funding support for various City project and program goals. No matching funds are required. However, the Regional Water Quality Board will base its funding selections, in large part, on the demonstrated ability of funding recipients to maintain and operate the projects once they have S-3 Council Agenda Report—Aequest to Submit Environmental Project Proposals Page 4 been installed. In the City's case, this will be relatively easy to show on the basis of our existing creek programs, ongoing creek management activities of the Public Works and Utilities Departments, the Natural Resources Protection Program, and the City's Ranger Program which provides patrol capabilities to acquired properties. Furthermore, the projects would have very low maintenance needs. Staff time would be involved in developing the projects, obtaining the necessary approvals, etc.; however, the project proposals include design costs. No significant General Fund obligations would be involved with any of these proposals. CONCURRENCE The Park and Recreation, Public Works and Utilities Departments are aware of these proposals (including generating several of them) and support the proposal effort. ALTERNATIVE The Council could decide not to authorize the proposals. This is not recommended as the submittal of the proposals do not constitute a commitment on the City's part. If successful, the grant funds will further a variety of City program goals. ATTACHMENTS Request from the Central Coast Regional Water Quality Control Board Resolution Location Map for Ayers and Filipponi Properties g:havhWcouncil agenda mpon%MWQCB app ' vy February 25. 1998 Pete &acral Coast Gov. 3.4onal Water I—Ruty Control Gail Marshall, Chair, and the iVlichael Ryan,Chair, and the Santa Barbara County San Luis Obispo County Board of Supervisors Board of Supervisors I FHguemSuva Attention: Michael Brown, Administrator Attention: Clark Channing, Administrative Officer uitc 200 . 105 Fast Anapamu Streetaa Luis County Government Center, Room 370 'sP°, Santa Barbara, CA 93 l San Luis Obispo,CA 93408 AX(8 5) 147 S43 Dear Ladies and Gentlemen: AX(805)543-0397 GUADALUPE OIL FIELD-ENVIRONMENTAL MITIGATION PROJECTS REQUEST I am pleased to inform you that we are in settlement negotiations with Unocal regarding past diluent discharges at Unocal's Guadalupe Oil Field. We hope to reach a settlement in the next several months regarding the State's claims for penalties and damages in the civil lawsuit filed by the Attorney General; the Regional Water Quality Control Board; the Department of Fish and Game, Office of Oil Spill Prevention and Response; the Department of Toxic.Substances Control; and, the Coastal Conservancy. Part of the settlement wiLt irc1.4. funds for water grtaltty projects with a nexus to the water quality problems caused by the petroleum discharges at Guadalupe. This letter is to invite you to submit potential water quality projects for consideration by this Board when and if fhp&become available. The Regional Board has developed specific criteria to evaluate potential projects. A copy of the criteria for the Guadalupe site is attached for your use. Please note that the criteria specify the need for a nexus or link between the proposed project and water quality problems associated with the Guadalupe oil Feld discharges. The nexus may be made geographically,or by waste type(petroleum related),or by beneficial use type affected (see examples of each type in the criteria). Potential projects which meet more than one criteria will be tanked higher than those meeting only one of the criteria. Greater weight will be given to geographical criteria. Funding recipients must demonstrate sufficient institntioaal capacity and stability in -Order.to qualify for funding. Of course,the Board wants to ensure that the"grantee"will have the ability to carry out the proposal after finding. Proposals with more detail will be easier to evaluate against the criteria. The Regional Board will be soliciting potential projects from many sources. We invite you to submit projects and to notify other agencies and groups of this opportunity. Please note that the Regional Board will rank the projects based on the criteria,and the Regional Board will make the final projects selection. The public and the County will have opportunity for input into the discussion before the Regional Board makes the selections. We look forward to receiving yourr project pmpoM and to your input during the selection process. Please submit your proposals by May 28,1998. A iy proposals received after May 18th will not be considered. If you have any questions,a�. please contact EXetitive Officer vcg ,a,,ggs 8G5-54%-3140, or Assistant Executive Officer Paul Jagger at 805-549-3502. Sincerely, tu:Jeffries,Chair Attachments a: See Attached Interested Parties List — ptacyJ6rtlmbdeha;dtrlguadmiciv a�d p� Our minion is w p vmrw mrd enhance the pwary ofCawWon es rater and t aeaa a dwIr pope,a/roexion and a iceuu 8 YSC fOI&beneTu W pfizeAl 471d T(IbPC O[R[Mfi/1w. +_� Guadalupe Unocal Oil Spill Regional Water Quality Control Board Criteria for Environmental Projects 1. Nexus (connection or link with problem) A. Geographically or Hydrologically. Santa Maria Watershed Santa Maria Ground-Water Basin Nipomo Dunes : Near Coastal Waters,, or _ B. Waste Type: Petroleum or C. Beneficial Use Type: Drinking Water and Ag Water Supply (presentlpotential water supplies.) _ Aquatic Habitat - fresh and saline Aquatic Endangered Species 2. Recipients - consideration: A. InstitutionalStability and Capacity ,w „aa�a as 2-9-98 r z N O U Sa e m J m x � I i edw ,p I a ^^ � CLC LL♦♦ • W ® ♦ I ZQ t CD CL wv .. J ^' LM OQ cc CL m d a N H m QH E d Q U U ❑ 13 a -A/1 RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO AUTHORIZING THE SUBMITTAL OF ENVIRONMENTAL PROJECT PROPOSALS TO THE CENTRAL COAST REGIONAL WATER QUALITY CONTROL BOARD WHEREAS, several agencies of the State of California are involved in settlement negotiations with Unocal regarding past discharges of contaminants at Unocal's Guadalupe Oil Fields;and W11EREAS,part of the settlement will include fimds for water quality projects with a nexus to the water quality problems caused by the discharges at Guadalupe; and WHEREAS, the Central Coast Regional Water Quality Control Board (Regional Board) has developed specific criteria to evaluate potential projects; and WHEREAS, the Regional Board has solicited proposals from government agencies and nonprofit organizations for consideration in disbursing monies derived from the settlement negotiations. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San Luis Obispo hereby:. 1. Authorizes the submittal of environmental project proposals to the Central Coast Regional Water Quality Control Board for grant support for environmental projects, including land acquisition and aquatic habitat enhancement. 2. Appoints the City Administrative Officer as agent of the City to conduct all negotiations, execute and submit all documents, including, but not limited to, submittals, agreements, amendments, payment requests and so on, which may be necessary for the completion of the aforementioned proposals. Approved and adopted this 5h day of May,.1998. On motion of , seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this day of ,1998. Allen K Settle,Mayor ATTEST: APPROVED AS TO FORM: Bomue L. Gawt City Clerk Attorney, council j acenaa izEpont 6 CITY OF SAN LUIS OBISPO FROM: Michael D.McCluskey,Director of Public Works SUBJECT: Purchase of 610 Monterey CAO RECOMMENDATION 1. Determine that the acquisition of property-located at 610 Monterey Street would be consistent with the General Plan,and approve the purchase price of $380,000. 2. Authorize preparation of a letter of friendly condemnation. 3. Appropriate $390,000 from the Unappropriated Balance of the General Fund for property purchase and miscellaneous expenses. 4. Authorize the CAO to sign purchase documents and the deed DISCUSSION Recently staff became aware of a property listed for sale at the corner of Nipomo and Monterey (610 Monterey Street). As the City Council has an informal policy of acquiring properties that serve its long term interest and do not involve the use of eminent domain, staff was directed to investigate the site and obtain an appraisal prior to any negotiations for purchase. The site has long term City interest as it is one of the few shown on the City's Downtown Concept Plan for eventual City use. The current version of the Concept Plan designates this location for eventual cultural uses that would benefit the City. The ultimate use of the site will be determined by some City Council in the future. After purchase of this property, only two properties will remain identified for future purchase. The house currently occupying the site was constructed around 1930. It is listed in the City's Historic Resources Survey and is listed as a "contributing building". It is not on the National Register but is located in the historical preservation district. Staff proceeded to obtain an appraisal and the appraiser said of the building "a good quality residence with a remaining economic life of 10 to 15 years". This remaining life should work well with City time frames for development of the site as it could easily take that long to obtain remaining properties; decide upon what type of development; fund and construct the facility. The appraiser found the property to be worth $370,000 while the asking price was $399,900. The Council authorized staff to negotiate for purchase after review ofthe appraisal. The General Plan designates this property as "Office". After purchase, a General Plan amendment to "Public" would eventually be necessary in order to accommodate the multiple uses anticipated by the Downtown Concept Plan. The Downtown Concept Plan was adopted"in Council Agenda Report-Property Purchase-610 Monterey Street Page 2 concept"by the City Council as a planning document to guide the public and private sector in the development of the Downtown. While the General Plan provides a basic overall framework, the Downtown Plan provides more specific direction. Thus, while the General Plan shows this property changing from residential to office, the Downtown Plan shows the property changing from residential to cultural facilities(with an adjacent small plaza). In negotiations with the seller, it became apparent that a major issue was the health and eventual relocation of the elderly inhabitants of the house. The seller requested that the inhabitants be allowed 90 days of free rent after the close of escrow to make such arrangements and likewise requested a letter of friendly condemnation to help in estate planning matters. Staff agreed to both of these requests as the City has no immediate plans for use of the site. However, staff is concerned that the tenancy, even for such a short period, could invoke the Uniform Relocation Act provisions of State law. As such prior to close of escrow either a binding agreement which will eliminate relocation act worries will be negotiated. It is recommended that the City Council purchase of this property because it makes sense from a long range planning perspective. The City already owns five of the eight properties shown for, acquisition and this purchase would leave only two remaining to acquire. Eventually, the City will own a nicely sized piece of property that would offer many possibilities for future use. These could include the currently expected combination of office, cultural and parking uses to office/residential to a new compact and efficient residential complex. If there is to be a parking structure at Palm and Nipomo, it has been envisioned that other uses would be placed on the street frontage of Monterey and Nipomo Streets(the site of this property). PLANNING COIVEVIISSION ACTION The Planning Commission reviewed the proposed property acquisition for General Plan conformity on April 22, 1998. The Commission found the proposed acquisition not to be in conformance with the General Plan Several policies in the Land Use and Housing Elements pertain to the proposed acquisition. Although the General Plan designates thepropertv as Office land use, the Commission based their determination on the eventual conversion of the property to "Office" on Housing Element policies that state the City will discourage the conversion or elimination of existing housing in office, commercial, and industrial areas(H 3.2.2, General Plan Digest). The Commission also referenced a Housing Element policy that states that the City will consider adopting a"no net housing loss"policy in residential/offices portions of Downtown. The General Plan is an internally consistent body of policies, and the Planning Commission staff report (attached) identifies several additional General Plan policies that support the acquisition and eventual conversion of the property. While there are policies to discourage conversion of residential uses in "Office" areas, other General Plan policies suggest that under the right conditions conversion would be appropriate. Together, these policies give the Council flexibility to determine that an eventual conversion of the residential use on this property in this case would be the appropriate thing to do. These are set forth in the attachment. Councr7 Agenda Report-Property Purchase-610 Monterey Street Page 3 FISCAL EM PACT No current funding is budgeted for this project. It is recommended that the necessary funding of $390,000 be provided from the Unappropriated General Fund balance. Approximately $10,000 is being requested to cover miscellaneous costs of closing escrow which should occur about June 5, 1998. Adequate general fiord resources are available to support this appropriation and retain the general fund balance at policy level. ALTERNATIVES Do not purchase the property. Attachments Vicinity map Planning Commission staff report Purchase agreement(copy available in the Council reading file) I:addiv/property acq/610 monterey/610 Monterey 5-5-98 cc agnda report -3 Site Map from GLS Land Use Map r J , � • r i kr J , r ♦ 4 • ♦ t t . • t ♦ r • r • 1 - • /r t r t r� • 1• i t � , ♦ t J � r tJ J � r - J r , J • r J r r r •1 r r r - t CITY OF SAN LUIS OBISPO PLANNING COMMISSION STAFF REPORT rrEm a 4 BY: Glen Matteson, ssociate Planner MEETING DATE: April 22, 1998 FROM: John Mandeville,Long Range Planning Manager) FILE NUMBER: GPC 56-98 PROJECT ADDRESS: 610 Monterey Street SUBJECT: General Plan conformity determination for property acquisition at 610 Monterey Street,for potential future development of a public facility or a cultural facility. RECOMMENDATION Determine,and report to the City Council, that the proposed property acquisition conforms with the General Plan. DISCUSSION Data Summary Property Owner. Russ L.Adrienne,trustee,and others Owner's Representative: Fitzpatrick &Barbbieri General Plan Land Use Map: Office Zoning: O(Office) Surrounding Uses: dwellings,children's museum,parking lots,mortuary Environmental Status: Categorically exempt as an existing facility (CEQA Guidelines Section 15301 or a conversion of a small structure (Section 15303);. firture development of a public or cultural facility will be subject to environmental review. Site Description The proposed acquisition is a single,nearly level,9,100-square-footlot that is occupied by a house. The house was built in 1930,and it's historical designation is a"contributing"property.While not an architecturally significant building, the house and landscaped yards do contribute to the relatively low-intensity,traditional San Luis Obispo neighborhood character. Why is the City thinking of buying this property? The Downtown Concept Plan shows cultural or historical uses along the Monterey Street frontage of this block, and a public parking structure for the western corner of the block. The City has no immediate plans to build in this area However, the City recently bought the two parcels located on Nipomo Street between the subject parcel and Palm Street so the land would be in City ownership when a project is proposed. The City has tried to obtain sites intended for public facilities from willing sellers as opportunities arise, rather than by condemnation. The subject site is one of those opportunities. — Planning Commission Staff Report-610 Monterey Acquisition Page 2 What will the City do with the property? For the immediate firture,the existing house probably would be rented as a residence. In the mid term,it may be converted to an office. Also, it could be a temporary home for at least part of the Historical Museum materials while seismic, accessibility, and other work is done on the. Historical Museum building. Converting the. house to an office would be subject to administrative use-permit approval, and architectural review for any exterior changes. Use of the site for a library, museum, or theater would require a change of zone, as well as Planning Commission approval of a use permit. Architectural review would be required for removal of the existing building or any new construction. The Downtown Concept Plan implies that this site would accommodate part of a new building for a cultural use,access to a new parking structure,and possibly offices along the Nipomo Street frontage. What is the Planning Commission's role? California law requires that before the City acquires real property,it must first refer the item to the Planning Commission for a determination of conformity with the General Plan(Government Code Section 65402).The Commission scion must then hold a public hearing and report its findings to the City Council. A finding that a proposed acquisition conforms with the General Plan does not necessarily mean the Commission endorses a particular project for the site.. There are no specific sanctions in State law if an acquisition is found not to conform with the General Plan. A finding of nonconformance could make a project vulnerable to legal challenge through Government Code provisions requiring General Plan conformity for new development. What does the General Plan say? The Land Use Map shows the site as Office. (Typically, the Land Use Map designates property as Public only if it is owned by a government agency, to avoid potential "takings" issues.) Land Use Element Figure 4 shows the site as being within the downtown planning area, and just outside the core. Land Use Element policy 4.2.1 says "Downtown residential uses contribute to the character of the area, allow a 24-hour presence which enhances security, and help the balance between jobs and housing in the community. Existing residential uses within and around the commercial core should be protected, and new ones should be developed." This policy will be addressed in more detail when a proposal to change the residential use is presented. One response would be to include residential use in any public development for the area. Land Use Element policy 43 says "Cultural facilities, such as museums, galleries, and public theaters should be downtown." Land Use Element policy 4.10 says "There should be a diversity of parking opportunities. Any major increments in parking supply should take the.form of structures, located at the edges of the commercial core, so people will walk rather than drive between points within the core."The acquisition is consistent with these policies. Planning Commission Staff Report-610 Monterey Acquisition Page 3 Land Use Element policy 5.2.2 says "An appropriate area for cultural facilities is the vicinity of Mission Plaza." Figure 5 shows a "Cultural Facilities Area" extending approximately from Monterey Street to San Luis Obispo Creek and from Nipomo Street to the Mission. The subject site is at the edge of the mapped area and is consistent with the text policy. Land Use Element program 5.6 says "The City will attempt to acquire land for cultural facilities or Mission Plaza extension as sites become available." The acquisition is consistent with this program. ALTERNATIVES The Commission may determine that the acquisition does not conform with the General Plan. The Commission may continue the item. There is no legally mandated deadline for Commission action. . Attached: Vicinity Map 6- 7 council ' °�s sig j acEnaa nEpout CITY OF SAN LUIS OBISP. 0�,,� ! FROM: Bill Statler,Director of Finance VY� SUBJECT: PERS RATES FOR 1998-99 CAO RECOMMENDATION Receive a report on proposed retirement contribution rates for 1998-99, and discuss potential impacts on the 1998-99 Budget. DISCUSSION We received our 1998-99 retirement contribution rates from the California Public Employees' Retirement System (PERS) on April 24, 1998. These were late by about one year. The reason we were given by PERS for this delay was their conversion to a new computer system, which would: improve customer service; result in more timely, accurate reports; stabilize rates; and generally improve PERS' reliability and credibility. As shown below,these new rates show a huge increase(by about 600%, or a seven-fold increase) in our employer contribution rate for safety employees (sworn police and fire employees), and a reduction in our employer contribution rate for all other employees (miscellaneous): Current and Pronosed Emlilover Contribution Rates Current: 1997-98 Proposed: 1998-99 Miscellaneous Employees 2.305% 0.000% Safe Employees 3.374% 23.586% Note: These rates are in addition to the employee contribution rate of 7% for miscellaneous and 9% for safety employees,which the City pays for most employees. What does this mean? These changes result in a net increase in PERS costs for 1998-99 of about$900,000. This includes the reduction in costs for miscellaneous employees. This increase is even greater for the General Fund, since a large portion of the reduced costs for miscellaneous employees is in the enterprise funds, whereas all of the safety costs are in the General Fund. For the General Fund,the net increase is about$975,000 annually. Why are safety rates increasing by so much? While we have received actuarial,reports-from PERS, they do not include an adequate explanation for this huge increase. We are vigorously pursuing more information from them. Further, we should recognize that these are based on complex actuarial models. As such, while we can hope for a clear and concise answer from PERS,we may need professional assistance if we want to delve deeply into their methodologies. However, at least part of the answer lies in how outstanding liabilities (or assets) are being amortized as summarized by the following: y / Council Agenda Report—PERS Rates for 1998-99 Page 2 Normal Costs and Amortized Bases ■ Normal costs. This is the amount that should be set aside from this point forward to ensure that contributions will fully cover future benefits. ■ Amortized bases. This is the amount of existing unfunded liabilities (or excess assets) that must be paid (or credited) over time to ensure that future benefits will be correctly funded. The amortization period is referred to as the "funding horizon," which in our case is the year 2000 under our existing PERS contract. The following summarizes our current and proposed rates for miscellaneous and safety employees by both of these cost components: Miscellaneous Em toFees - Current: t997-98 Proposed: 1998-99 Rate for"Normal Costs" 5.590% 5.764% Rate for Payment on Amortization Bases 3.285% 14.110% Total 2.305% 1 0.000% Saft.Em to ees Current: 1997-98 Proposed:-1998-99-1 Rate for"Normal Costs" 13.732% 14.037% Rate for Payment on Amortization Bases 10.358% 9.549% Total 3.374% 1 23.586% Note that for both employee classes, "normal costs" have not changed much. The large changes (positive in the case of miscellaneous employees, extremely adverse in the case of safety employees) are in the area of amortized costs: ■ Miscellaneous employees. The over funding of assets versus liabilities has actually increased, resulting in a credit rate of 14.1% versus 3.3%. In the past, we would have received a full refund for this credit; however,recent legislation no longer allows this. ■ Safety employees. We have gone from an over-funded, credit rate of 10.4%, to an. unfunded liability rate of 9.4%. In short, the credit rate has been replaced by a debit rate, of about equal magnitude. This results in a rate that is about 20 percentage points higher than our current one; and annual cost increase of about$1.2 million for safety employees. Why this huge change in amortized costs? As noted above, we do not yet have this information,but we are pursuing it. What Are Our Options? Since about 50% of the increase in safety rates is for unfunded liabilities, we can spread this out over time. As noted above, our current "funding horizon" is the year 2000. The following summarizes"funding horizon"options as presented by PERS: 7 � Council Agenda Report—PERS Rates for 1998-99 Page 3 Safe Em to ees Fundina Horizon On-tons 11 2011 2028 Normal Cost Rate 14.0370Y( 14.0370o 14.0370 Unfunded Liability Rate 77- 9.549% 1 1.789% 1.022% Total Rate: 1998-99 23.586% 1 15.826% 15.059% Estimated P ent:-1998-99 $1,411,900 $947,400 $901,500 As reflected above, changing our "funding horizon" from 2000 to 2011 would reduce annual costs by about $450,000. Where to from Here? We have a number of issues before us and decisions we need to make in a relatively short time. The following are some of the immediate steps we are taking: ■ Receiving a full accounting from PERS. The outrageousness of this rate increase is compounded by the fact that it comes late, and follows a period where PERS credibility was already at a low point. We are entitled to a concise and straightforward explanation of how our actuarial position can change so radically in one year. There may be a good explanation. We would like to hear it. _ ■ Working with other cities. We know we are not alone in experiencing a huge change in our PERS contribution rates. However, there has not been any organized activity by other agencies. This needs to change, and we plan to work closely with the League of California Cities and others in mitigating these proposed changes. ■ Working with our State legislators. Depending on the results of our efforts in working with PERS and other cities, we may want to seek some form of legislative relief. ■ Contracting for professional assistance. Once we have a better understanding of the issues,we may decide that we need professional advice in reviewing PERS' methodology and developing options. ■ Considering an amendment to our PERS contract. We have a lot of research ahead of us before we can make a good decision about whether we should extend our funding horizon. More fundamentally, we need to assure ourselves that our pension liabilities have been correctly calculated before we invest energy in determining the best way to fund them. FISCAL EMPACT The following summarizes projected PERS retirement costs for 1998-98 based on current and proposed rates. These amounts include the employer contribution as well as employee contributions paid by the City. As reflected in this summary, General Fund costs will increase by about $975,000 annually. This increase will be less (by about $450,000) if we change our funding horizon from 2000 to 2011. Council Agenda Report—PERS Rates for 1998-99 Page 4 Year 2000 Fund*n HWill orizon General Fund PERS Costs: 1998-99 ear 2000 Fundiwr Horizon Current Rates ' Miscellaneous Employees 695,400 510,200 .185,200 Safe Employees 597,900 1,756,200 1,158,300 Total $ 1,293,300 $ 2,266,400 $ 973,100 Total Ci PERS Costs: 1998-99 ,Year 2000 Funding Horizon Current Rates Proposed Rates Variance Miscellaneous Employees 952,600 703,700 248,900 Safe Employees 597,900 1,756,200 1,158,300 Total $ 1,550,500 $ 2,459,900 $ 909,400 Year 2011 Fund!'M Horizon General Fund PERS Costs:1998-99 War 2011 Fundin Horizon Current Rates Proposed Rates Variance Miscellaneous Employees - 695,400 - 510,200 185,200 Safe Employees 597,900 1,311,500 713,600 Total $ 1,293,300 $ 1,821,700 $ 528,400 Total Ci PERS Costs:1998-99 ear 2011 Fundin Horizon Current Rates Proposed Rates Variance Miscellaneous Employees 9522600 703,700 248,900 Safe Employees 597,900 1,311,500 713,600 Total $ 1,550,500 $ 2,015,200 $ 464,700 SUMMARY If implemented, the proposed rates would have profound impacts on us, resulting in General Fund cost increases of$525,000 to $975,000 annually,depending on the funding horizon. We are treating this very seriously. Given our time constraints, our funding recommendations will probably be provided to the Council as part of the 1998-99 Budget,which we plan to present to the Council on June 16, 1998. However, as new developments arise, we will immediately inform the Council about them. ON FILE WITH THE DEPARTMENT OF FINANCE ■ PERS Actuarial Report—Safety Employees ■ PERS Actuarial Report—Miscellaneous Employees G:FinanceBudget 98/PERS Rates Agenda Report 7�k