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HomeMy WebLinkAbout03-05-2019 Item 12 - Ordinance Introduction CalPERS Contract Amendment Department Name: Human Resources Cost Center: 2007 For Agenda of: March 5, 2019 Placement: Business Estimated Time: 10 minutes FROM: Monica Irons, Human Resources Director Prepared By: Greg Zocher, Human Resources Manager Brittani Roltgen, Human Resources Administrative Analyst SUBJECT: RESOLUTION OF INTENTION AND AN ORDINANCE AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY OF SAN LUIS OBISPO AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM TO PROVIDE SECTION 20516 (COST SHARING). RECOMMENDATION Adopt a resolution of intention entitled “Resolution of Intention to approve an amendment to contract between the Board Of Administration California Public Employees' Retirement System and the City Council City Of San Luis Obispo” and introduce an Ordinance entitled “An Ordinance of the City Council of the City of San Luis Obispo, California, authorizing an amendment to the contract between the City Council of the City of San Luis Obispo, California and the Board of Administration of the California Public Employees’ Retirement System” approving an amendment to the contract between the Board of Administration of the California Public Employees’ Retirement System (CalPERS) and the City of San Luis Obispo. DISCUSSION Background On April 17, 2018, the City Council adopted a Fiscal Health Response Plan (FHRP) that outlines actions through fiscal year 2020-21 aimed at closing an approximate $8.9 million budget gap due to CalPERS discount rate reductions resulting in increasing retirement costs to agencies. The approach taken in developing the FHRP aimed at solving the budget gap in a balanced manner. Key components to achieve a structurally balanced budget included employee concessions, new revenues, and operating reductions among other things. The FHRP anticipated employee concessions (anticipated growth of employee wages and benefits at a rate less than inflation) equaling $1.9M by fiscal year 2020-21. The City’s focus and primary interests included achieving three-year successor agreements with employee groups that provide certainty around compensation costs during the FHRP term, increased employee contributions to retirement costs, and maintaining competitive wages and benefits to support recruitment and retention objectives. Packet Pg. 71 Item 12 Status of Negotiations The City has made significant progress in achieving the employee concession goal as outlined in the FHRP. Memorandums of Agreement, which include modest cost of living increases offset by employees paying mo re towards retirement costs in 2019 and 2020, were negotiated and approved by Council with the Police Officers Association (POA) and the International Association of Firefighters, Local 3523 (Fire). Resolutions governing unrepresented management, department heads, appointed officials and confidential employees also included modest cost of living increases offset by employees paying more towards retirement costs in 2019 and 2020. All employees currently pay the full employee contribution and the additional contributions agreed to are listed in the chart below: Police (Sworn) Employee Contribution Levels to PERS Retirement (Percent of Salary) Safety PERS Tier Current Jul-19 Jul-20 Tier 1 (3% @ 50) 12% 13.50% 15% Tier 2 (2% @ 50) 12% 13.50% 15% Tier 3 (2.7% @ 57) 12.75% 14.25% 15.75% Police (Non-Sworn) Employee Contribution Levels to PERS Retirement (Percent of Salary) Miscellaneous PERS Tier Current Jul-19 Jul-20 Tier 1 (2.7% @ 55) 11% 12.50% 14% Tier 2 (2% @ 60) 11% 12.50% 14% Tier 3 (2% @ 62) 6.25% 7.75% 9.25% Fire (Sworn) Employee Contribution Levels to PERS Retirement (Percent of Salary) Safety PERS Tier Current Jul-19 Jul-20 Tier 1 (3% @ 50) 9% 10.50% 12% Tier 2 (2% @ 50) 9% 10.50% 12% Tier 3 (2.7% @ 57) 12.75% 14.25% 15.75% Employee Contribution Levels (includes appointed officials, department heads, unrepresented management, unrepresented confidential and non -sworn fire employees) to PERS Retirement (Percent of Salary) Miscellaneous PERS Tier Current Jul-19 Jul-20 Tier 1 (2.7% @ 55) 8% 9.50% 11% Tier 2 (2% @ 60) 7% 8.50% 10% Tier 3 (2% @ 62) 6.25% 7.75% 9.25% Packet Pg. 72 Item 12 The City expects to begin negotiations with both San Luis Obispo City Employees Association (SLOCEA) and San Luis Obispo Police Staff Officers Association (SLOPSOA) in April 2019 as both employee groups have Memorandums of Agreement which expire on June 30, 2019. Cost Sharing of Employer Pension Costs Additional employee contributions toward the employer’s normal costs are allowed by CalPERS under section 20516 (Cost Sharing) of the Public Employees Retirement Law (PERL), which is codified in the California Government Code. If employees agree to cost sharing, Section 20516 allows for additional contributions to be made based on the Memorandum of Agreement or through a contract amendment with CalPERS. Additional contributions made through Memorandum of Agreements without a contract amendment with CalPERS will not be credited to the employees account and CalPERS will not make an adjustment to the employee contribution rate in future actuarial reports. If there is agreement for additional contributions through contract amendment, CalPERS will lower the City contribution percentage and increase the employee contribution percentage by the agreed amount , and this will be reflected in future billings and actuarial reports. The additional employee contributions made under the contract amendment would be applied to the employee’s retirement account. The POA negotiated cost sharing to be based on the Memorandum of Agreement and not through a contract amendment. Fire, Unrepresented Management, and Unrepresented Confidential E mployees agreed to pay the additional contributions through a contract amendment with CalPERS. Amending the Contract with CalPERS There are three main steps t he City must undertake to complete the contract amendment with CalPERS: 1. Approve a Resolution of Intention to amend the contract A Resolution of Intention (Attachment A) will be sent to CalPERS immediately upon adoption to initiate preparation of the Fina l Contract Amendment for signatures and execution. Accompanying the Resolution of Intention are also requisite certifications that confirm the City’s compliance with Government Codes as they relate to the CalPERS contract amendments. These certifications will also be sent to CalPERS upon completion. 2. Hold an Employee Election Sections 20474 and 20469 of PERL require a secret ballot election by the employees affected whenever the contract is amended to change the employees’ rate of contribution. The ele ction must be held after the first reading and before the final adoption of the Ordinance amending the retirement contract. The results of the election are to be certified by the City Clerk. The contract cannot be amended if a majority of the affected me mbers vote to disapprove of the proposed change. If employees disapprove the change, employee agreements and Section 20516 of PERL allows for additional contributions to be made without a contract amendment, in which case the additional employee contribu tions will not be credited to the Packet Pg. 73 Item 12 employees account and CalPERS will not make an adjustment to the employee contribution rate in future actuarial reports. 3. Adopt an Ordinance In addition, an Ordinance must be adopted which amends the contract between C alPERS and the City (Attachment B) addressing the reduction of benefit to employees. The final reading of the Ordinance is scheduled for May 7, 2019. Typically, CalPERS requires an actuarial valuation to be completed prior to amending the retirement contr act; however, no valuation is required for the Cost Sharing amendment since the City’s costs will be reduced. Policy Context City Council adopted the FHRP on April 17, 2018 which assumed additional employee contributions toward retirement costs. Public Engagement The City met with employee groups and agreed to the CalPERS contract amendment. The Council approved the Memorandum of Agreement with the International Association of Firefighters, Local 3523 (Fire) and resolutions governing unrepresented mana gement, department heads, appointed officials and confidential employees. CONCURRENCE The Director of Finance and the City Attorney concur with the recommended action. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15 378. FISCAL IMPACT Budgeted: Yes Budget Year: 2019-20 and ongoing Funding Identified: Yes Fiscal Analysis: Funding Sources Current FY Cost Annualized On-going Cost Total Project Cost General Fund ($526,099) State Federal Fees Other: Total ($526,099) Packet Pg. 74 Item 12 CalPERS will reduce the required employer contribution by 1.5% which will result in an ongoing savings of appro ximately $526,099 for Fire and the Unrepresented Management and Confidential groups by the end of fiscal year 2019-2020. These saving are part of the FHRP’s strategy to close the $8.9M budget gap. ALTERNATIVES Do not approve the resolution and ordinance. This alternative is not recommended since this change was approved by Resolutions and negotiated Memorandums of Agreement with employee groups and failure to amend the contract with CalPERS would place the City in violation of those agreements. Attachments: a- Amendment Resolution of Intention b - Ordinance Packet Pg. 75 Item 12 RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT TO CONTRACT BETWEEN THE BOARD OF ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND THE CITY COUNCIL CITY OF SAN LUIS OBISPO WHEREAS, the Public Employees' Retirement Law permits the participation of public agencies and their employees in the Public Employees' Retirement System by the execution of a contract, and sets forth the procedure by which said public agencies may elect to subject themselves and their employees to amendments to said Law; and WHEREAS, one of the steps in the procedures to amend this contract is the adoption by the governing body of the public agency of a resolution giving notice of its intention to approve an amendment to said contract, which resolution shall contain a summary of the change proposed in said contract; and WHEREAS, the following is a statement of the proposed change: To provide Section 20516 (Employees Sharing Additional Cost) of 1.5% for local miscellaneous members in the International Association of Firefighters Local 3523, Unrepresented Management group and Unrepresented Confidential group; 1.5% for local fire members in the International Association of Firefighters Local 3523; and 1.5 % for local safety members in the Unrepresented Management group. NOW, THEREFORE, BE IT RESOLVED that the governing body of the above agency does hereby give notice of intention to approve an amendment to the contract between said public agency and the Board of Administration of the Public Employees' Retirement System, a copy of said amendment being attached hereto, as an "Exhibit" and by this reference made a part hereof. By:_________________________________ Presiding Officer _________________________________ Title ________________________________ Date adopted and approved (Amendment) CON-302 (Rev. 3/9/2016 rc) Packet Pg. 76 Item 12 Packet Pg. 77Item 12 Packet Pg. 78Item 12 Packet Pg. 79Item 12 Packet Pg. 80Item 12 Packet Pg. 81Item 12 Packet Pg. 82Item 12 Packet Pg. 83Item 12 ORDINANCE NO. (2019 Series) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM WHEREAS, the City of San Luis Obispo has contracted with the California Public Employees’ Retirement System (CalPERS) for retirement benefits for its sworn Police Safety, sworn Fire Safety and Miscellaneous employees since July 1, 1952; and WHEREAS, over the years, the City has amended its retirement benefit structure to reflect changes as negotiated during the meet-and-confer process with each bargaining group; and WHEREAS, the City acted to ensure the retirement pension system is sustainable and amended the retirement contract to provide reduced benefit second tier retirement formulas for all employee groups; and WHEREAS, City employees committed to ensure their retirement pension system is sustainable by paying their full member contributions as established in the Public Employee Retirement Law; and WHEREAS, City Council approved Resolution 10919 ratifying the memorandum of agreement between the City and the San Luis Obispo Firefighters Local 3523 and authorized an increase to the employee contribution to CalPERS as allowed in Government Code section 20516 to contribute an additional one and one-half percent (1.5%) toward their retirement costs; and WHEREAS, City Council approved Resolution 10920 regarding compensation and benefits for appointed officials, department heads, and management employees and authorized an increase to the employee contribution to CalPERS, as allowed in Government Code section 20516, to contribute an additional one and one-half percent (1.5%) toward their retirement costs; and WHEREAS, City Council approved Resolution 10953 regarding compensation and benefits for unrepresented confidential employees and authorized an increase to the employee contribution to CalPERS as allowed in Government Code section 20516 to contribute an additional one and one-half percent (1.5%) toward their retirement costs; and WHEREAS, the increased employee contribution for these employee groups would be effective the first full pay period of July 2019; and WHEREAS, the City is amending its contract with CalPERS to provide that, pursuant to Government Code Section 20471, there must be at least a 20-day period between the adoption of the Resolution of Intention and the adoption of the final Ordinance. Packet Pg. 84 Item 12 Ordinance No. (2019 Series) Page 2 NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. That an amendment to the contract between the City Council of the City of San Luis Obispo and the Board of Administration, California Public Employees’ Retirement System is hereby authorized, a copy of said amendment being attached hereto, marked Exhibit, and by such reference made a part hereof as though herein set out in full. SECTION 2. The Mayor of the City of San Luis Obispo is hereby authorized, empowered, and directed to execute said amendment for and on behalf of said Agency. SECTION 3. This ordinance shall be uncodified. This ordinance shall take effect 30 days after the date of adoption, a summary of this ordinance, together with the names of Council members voting for and against, shall be published at least five (5) days prior to its final passage, in The Tribune, a newspaper published and circulated in this City. INTRODUCED at a regular meeting of the City Council held on this 5th day of March 2019, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the 7th day of May 2019, on the following vote: AYES: NOES: ABSENT: ____________________________________ Mayor Heidi Harmon ATTEST: ________________________________ Teresa Purrington City Clerk APPROVED AS TO FORM: ________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. Packet Pg. 85 Item 12 Ordinance No. (2019 Series) Page 3 ______________________________ Teresa Purrington City Clerk Packet Pg. 86 Item 12 Packet Pg. 87Item 12 Packet Pg. 88Item 12 Packet Pg. 89Item 12 Packet Pg. 90Item 12 Packet Pg. 91Item 12 Packet Pg. 92Item 12 Packet Pg. 93Item 12 Page intentionally left blank. Packet Pg. 94 Item 12 3/5/2019 Item 12, Staff Presentation 1 CalPERS Retirement Contract Amendment – Cost Sharing Monica Irons, Human Resources Director Greg Zocher, Human Resources Manager March 05, 2019 Background Fiscal Health Response Plan Successful Negotiations 1 2 3/5/2019 Item 12, Staff Presentation 2 Cost Sharing – Two Ways Cost Sharing – through Memorandum of Agreement Cost Sharing – through Contract Amendment Contract Amendment Requirements Council adopts a resolution of intention approving the contract amendment (March 5, 2019) Council approves first reading of an Ordinance authorizing contract amendment (March 5, 2019) 3 4 3/5/2019 Item 12, Staff Presentation 3 Contract Amendment Requirements - Continued Secret Ballot Election will be held (between March 5 and May 7, 2019) Final reading and adoption of Ordinance authorizing contract amendment (May 7, 2019) Fiscal Impact Reduction of employer pension rates in future valuation reports Increase of employee pension rates in future valuation reports This Contract Amendment will result in on-going savings of approximately $526,000 annually 5 6 3/5/2019 Item 12, Staff Presentation 4 Questions 7 , 1010 Marsh St., San Luis Obispo, CA 93401 (805) 546-8208 . FAX (805) 546-8641 PROOF OF PUBLICATION (2015.5 C.C.P.) STATE OF CALIFORNIA, County of San Luis Obispo, I am a citizen of the United States and a resident of the county aforesaid; 1 am over the age of eighteen years, and not a party interested in the above entitled matter. I am the principal clerk of the printer of the New Times, a newspaper of general circulation, printed and published weekly in the City of San Luis Obispo, County of San Luis Obispo, and which has been adjudged a newspaper of general circulation by the Superior Court of the County of San Luis Obispo, State of California, under the date of February 5, 1993, Case number CV72789: that notice of which the annexed is a printed copy (set in type not smaller than nonpareil), has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to -wit: in the year 2019. I certify (or declare) render the the penalty of perjury that the foregoing is true and correct. Dated at San Luis Obispo, California, this day 71t of, 2019. r Patricia Dorton, New Times Legals Proof of Publication of SAN EMS OBIS CITY COUNCIL. Thg San LurS NCM �E OF PUBL IC HEARMS uncil Wiles all Lau attend a blit hoofingPclgppons W 010 0m City I ff Connell hdmbartl9H P him St ei43an uis Qbilpo, Cafkoml0, to cnneider the foTlwving ilemsy f a grk 1! 010 4 tiRR"[ b6t Veonhocfloard AdminlgUr�, atglr, of 1110 Cal lmnle Irubtic Emplcyaes' Rolilement system and tho wily council of Old Cily of San Luis Obispo: and 8i Inlloduction and That reading of an Ofinanee outhorairiQ an AFnemfrnorrt t4 the contract I)OW n Iha Cty of Son Luis Obi a1,t1 The Bosrdof Adm,nlstlatiorcor 11m Colitnrnia Pubfic Emplgyeeo it0brOmdnt Sy7ltom to Prando Suction 20510 {con sheringl. Flnal 400n br COMO is onliclpmtmd Moy 2 2019. Th" City CO I'llo i may alae discuss other hei fngs or bualrleas items bekm or atfor iho Hants paled ob" !f you shallcngq [ho POIX00d propel In avert. you may bo ii mad to tais,ny Onty Ihm mu" you or eomdenm also faisod at the public Waring dWnbed in this not". or in varilion co"Ospondonoo dalr„ered to 0w Olty Council al, or prior tct tho pubno hearing. Reports inr tele a meling will bo a%,4ilable furrevijAv fo Iho City Clsrkg 01 ice and onlute et]ryy�g4 on February 27,,201 S. Please Coll UtR CrtV Clelks 10 414 at 1 O 1.7100 for mw inrorrnaIion The City Council mea[ng w!N ba telev sed i ve on Chdrter COMM Channe 20 and pvoetroaming � S�11G8�Lllvaro TOM511 Purrington Gly Clock City of San Luis Obispo February 21, 2019 Adinin&1'ci sun,il/•N'I'MG Adinin'KIW i 0II,e&B1151NESS/Public Noll—A"wr"r Pub SLO CITY CLERK