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HomeMy WebLinkAboutMinutes - September 10, 2013 SSLODI CITY COUNCIL SHIRTSLEEVE SESSION CARNEGIE FORUM, 305 WEST PINE STREET TUESDAY, SEPTEMBER 10, 2013 A. Roll Call by City Clerk An Informal Informational Meeting ("Shirtsleeve" Session) of the Lodi City Council was held Tuesday, September 10, 2013, commencing at 7:00 a.m. Present: Council Member Hansen, Council Member Johnson, Council Member Mounce, Mayor Pro Tempore Katzakian, and Mayor Nakanishi Absent: None Also Present: City Manager Bartlam, City Attorney Schwabauer, and City Clerk Johl-Olson B. Topic(s) B-1 Receive Report on California Public Employee Retirement System (CM) City Manager Rad Bartlam briefly introduced the subject matter of the report regarding the California Public Employees Retirement System (CaIPERS). Deputy City Manager Jordan Ayers provided a PowerPoint presentation regarding CalPERS. Specific topics of discussion included current programs, retirement benefit calculation, various formulas for miscellaneous and public safety employees, CalPERS fund status and history, City history of CaIPERS payments, historical employer rates, approved changes, projected changes, employer rates and costs, and summary. In response to Council Member Hansen, Mr. Ayers stated with multiple agencies blending is based on final compensation through reciprocity assuming the individual is vested in each agency. A brief discussion ensued amongst the City Council regarding the status of pension liabilities in cities that file for bankruptcy and the question that remains to be settled in the courts as to whether or not CalPERS is a creditor. In response to Mayor Pro Tempore Katzakian, Mr. Ayers stated some cities and counties do have reciprocity through agreement with CalPERS even if they have a separate system. In response to Council Member Hansen, Mr. Ayers stated though unlikely it is possible for a miscellaneous employee to go over 100% retirement because it is based on the number of years of service and theoretically an employee could work for an agency for 40 years or more. In response to Council Member Hansen, Mr. Ayers stated CalPERS does not have unilateral authority to change the 8% set forth in the Public Employee Pension Reform Act (PEPRA) last year. In response to Council Member Johnson, Mr. Bartlam confirmed that CalPERS assigned the City the PEPRA number of 8% based on actuarial studies for the City specifically and entities may have different numbers based upon their own actuarial studies. In response to Council Member Hansen, Mr. Ayers stated the City's Tier 2 system was employee negotiated prior to the implementation of PEPRA last year. He stated the primary differentiating factor between the two formulas is whether or not the new employee is already in the CalPERS system and coming from another agency versus they are new to the system in its entirety. In response to Mayor Nakanishi, Mr. Bartlam stated the City of San Bernardino case is important for all cities because San Bernardino, unlike Stockton, stopped making payments to CalPERS thereby treating CalPERS like a creditor and now the courts must decide whether that was a valid determination. A brief discussion ensued amongst the City Council regarding a possible determination by the courts that other cities in the State must make up the difference for the non-paying cities in the CalPERS fund. In response to Mayor Pro Tempore Katzakian, Mr. Ayers confirmed that the City became involved in the CalPERS system in the 1960s. A brief discussion ensued amongst the City Council regarding the history of changes in the CalPERS employee and employer share of rates in the City of Lodi. Mayor Nakanishi requested information regarding revenue amounts in comparison to CalPERS payments for the City over the last few years. In response to Council Member Hansen, Mr. Ayers stated the actuarial rate includes additional factors including demographics and CaIPERS estimates on returns. In response to Council Member Hansen, Mr. Bartlam confirmed that the City has faired well financially over the last few years with respect to CalPERS because there was a significant decrease in employees through early retirements, which was separate from any effort made by CalPERS to reduce its overall liability. A brief discussion ensued amongst the City Council regarding the history of the City's financial decisions when it was super -funded including money that was spent on increased salaries, debt service, and facilities. In response to Council Member Hansen and Mayor Pro Tempore Katzakian, Mr. Ayers and Mr. Bartlam reviewed CalPERS history of rates, return on investment, and the effect of adjustments to the expected rate of return. Mr. Bartlam stated a decreased adjustment in the rate is good because it is more realistic but it is bad because local agencies have to pay more to make up the difference. In response to Council Member Hansen, Mr. Ayers confirmed that disability retirements are considered in actuarial studies. In response to Council Member Hansen, City Attorney Schwabauer stated the PEPRA rate is 11 % less than the original rate and an 11 % reduction of future payments totaling millions of dollars is not helpful. Alex Aliferas spoke in regard to his concerns about spiking and safety retirement formulas affect on the overall budget. Ed Miller spoke in regard to his concern about separating from the CalPERS system and employee contributions being limited by statute. In response to Council Member Hansen, City Attorney Schwabauer stated most forms of spiking as referenced by Mr. Aliferas were eliminated in the PEPRA legislation for both current and new employees. None. Comments by Public on Non -Agenda Items Adjournment No action was taken by the City Council. The meeting was adjourned at 8:25 a.m. ATTEST: Randi Johl-Olson City Clerk AGENDA ITEM FJ �' CITY OF LODI COUNCIL COMMUNICATION TM AGENDA TITLE: Receive Report on California Public Employee Retirement System (CaIPERS) MEETING DATE: September 10, 2013 PREPARED BY: Deputy City Manager RECOMMENDED ACTION: Receive report on California Public Employee Retirement System (CaIPERS). BACKGROUND INFORMATION: The City contracts with CaIPERS for its retirement benefits. Staff will provide a report on the status of the current benefit programs, funding status and current and projected employer rates and costs for this benefit. FISCAL IMPACT: Costs for funding retirement programs are projected to increase. Amounts can be estimated, but are not firm. FUNDING AVAILABLE: Funding will need to be determined each year during the budgetary process. JA/ja Jordan Ayers Deputy City Manager CaIPERS Update Shirtsleeve Session September 10, 2013 Agenda • Current Programs • Funding • Rates and Costs r Current Programs • Retirement Benefit Calculation • Service Credit X Benefit Factor X Final Compensation • Service Credit = number of years in the system • Benefit Factor = % of pay received as a pension payment • Dependent upon age • Final Compensation = average monthly pay over 12 or 36 months (depending upon formula) r Current Programs - Miscellaneous Employees • "Classic" • 2%@55 • Highest 36 months • Employee share of 7% • PEPRA (effective 1/1/13) • 2% @ 62 • Highest 36 months • Employee share of 6.75% r Current Programs - Safety Employees • "Classic" • 3%@50 • Highest 12 months • Employee share of 9% • "Classic" 2nd Tier • 3%@55 • Highest 36 months • Employee share of 9% • PEPRA (effective 1/1/13) • 2.7% @ 57 • Highest 36 months • Employee share of 11.25% Funded Status Plan Accrued liability Available Assets Unfunded liability Funded Ratio Safety $132,266,539 $97.0287,024 $34,,979,515 73.60% Miscellaneous $142,607,697 $120,202,713 $22,404,984 84.30% Based upon 6/30/2011 actuarial report City has always paid its Annual Required Contribution timely. Funding History Year Miscellaneous Fire Police 1999-00 132.9% 110.0% 104.5% 2000-01 122.8% 101.8% 99.0% 2001-02 105.2% 88.3% 89.8 2002-03 93.1% 82.4% 82.4% 2003-04 88.0% 80.6% 80.6% 2004-05 87.2% 82.8% 82.8 2005-06 88.9% 82.8% 82.8 2006-07 90.6% 83.6% 83.6 2007-08 90.0% 82.0% 82.0% 2008-09 86.5% 76.9% 76.9 2009-10 86.1% 76.0% 76.0% 2010-11 84.3% 73.6% 73.6% Funding History 140.0% 120.0°0 100.0°0 80.0% Miscellaneous 60.0% f Fire Pol ice 40.0% 20.0% 0.0% r City Paid Funding • Prior to July 2011, City paid both Employer and Employee share of cost • All employees (except IBEW) will be paying the full employee share by 1/1/14 City Paid Funding Year Amount 1999-00 $1,544,999 2000-01 $2,201,619 2001-02 $2,375,872 2002-03 $2,472,758 2003-04 $3,387,173 2004-05 $5,744,680 2005-06 $6,922,958 2006-07 $6,530,427 2007-08 $7,096,652 2008-09 $7,282,527 2009-10 $6,946,315 2010-11 $6,978,865 2011-12 $6,755,376 2012-13 $6,829,921 2013-14 Est $7,301,780 City Paid Funding $8,000,000 AL $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 0 o}° o l ,, , Historical Employer Rates Year Miscellaneous Fire Police 1999-00 0.000% 0.000% 0.613% 2000-01 0.000% 0.000% 12.186% 2001-02 0.000% 0.000% 12.186% 2002-03 0.000% 0.000% 11.371% 2003-04 0.000% 15.399% 15.386% 2004-05 6.920% 30.152% 24.608% 2005-06 11.550% 30.058% 30.058% 2006-07 12.221% 24.108% 24.108% 2007-08 12.233% 23.509% 23.509% 2008-09 12.058% 24.128% 24.128% 2009-10 11.727% 23.838% 23.838% 2010-11 12.081% 25.016% 25.016% 2011-12 13.680% 30.380% 30.380% 2012-13 14.411% 31.335% 31.335% 2013-14 1 16.203%1 35.657%1 35.657% r Approved Changes • PERS Board approved changes in March 2013 • Asset Smoothing • Reduced from 15 years to 5 years • Amortization Period • Changed from 30 year rolling to 30 year fixed • Effective for us in FY 2015/16 r Projected Changes • PERS Chief Actuary plans to propose changes in March 2014 • Mortality Table changes • Discount Rate changes • Effective for us in FY 2016/17 Employer Rates and Costs Year Miscellaneous Safety Total Employer Cost 2013/14 16.203% 35.657% $7.1M 2014/15 Est 17.800% 37.500% $7.8M Projected -Adopted Changes 2015/16 19.400% 39.940% $8.7M 2019/20 25.040% 51.190% $12.5M Projected -Upcoming Changes 2016/17 24.570% 53.780% $11.7M 2019/20 32.240%1 71.010%1 $16.9M Wrap Up • Employer costs going up • Challenge to fund increasing costs Questions?