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Home My WebLink About2007/11/06 Item 3 CITY COUNCIL AGENDA STATEMENT .::S'Y~ an OF . ~ ~ ~~ CHUlA VISTA NOVEMBER 6,2007, Item ~ SUBMITTED BY: REVIEWED BY: URGENCY ORDINANCE AUTHORIZING AN AMENDMENT TO THE CONTRACT BEiWEEN THE CITY COUNCIL OF THE CITY OF CHULA VISTA AND THE BOARD OF ADMNISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM. Director of Human rces rw--- CITY MANAGER ASSISTANT CITY ITEM TITLE: 4/5THS VOTE: YES ~ NO D BACKGROUND In an effort to avoid or rninimize the potential for layoffs, reduce the number of benefited employees and reduce personnel costs in the General Fund, it is recommended the City amend both Local Miscellaneous and Local Safety contracts between the Board of Administration of the California Public Employees' Retirement System (CalPERS) and the City of Chula Vista to provide Section 20903 - Two Years Additional Service Credit to all City employees that are Local Miscellaneous and Local Safety members. This urgency ordinance will become effective immediately and will expire when the regular ordinance becomes effective, December 6, 2007. RECOMMENDATION That council adopt the subject Resolution of Intention, and place on first reading the Ordinance, which will amend both the Local Miscellaneous and Local Safety contracts between the Board of Administration of the California Public Employee's Retirement System and the City of Chula Vista to provide Section 20903 - Two Years Additional Service Credit to all eligible City employees that are Local Miscellaneous and Local Safety members. The first reading of the Ordinance was on October 16, 2007. The second reading of the Ordinance was on November 6, 2007. The Ordinance will become effective on December 6, 2007. Since this benefit needs to be implemented as soon as possible in order to realize 3-1 NOVEMBER 6, 2007, Item~ Page 2 of 4 the full financial benefits of the program, this urgency ordinance will become effective immediately and will expire when the regular ordinance becomes effective. DISCUSSION Due to impending layoffs, mandatory transfers and demotions in the City of Chula Vista, the City sought alternative solutions to balance its current budget. The current California Public Employee Retirement Law allows an early retirement incentive. Government Code Section 20903 provides two years additional CalPERS service credit to members who retire during a designated period. The City must certifY that it is its intention that if any early retirements are granted after receipt of service credit pursuant to Section 20903, that any vacancies created or at least one vacancy in any position in any department or other organizational unit shall remain permanently unfilled, thereby resulting in an overall reduction in the workforce of the department or organizational unit. An eligible employee may apply for the benefit during the designated window period, which cannot be less than 90 days or no more than 180 days, subsequent to the effective date of contract amendment. The City will open the 90-day window period from November 7, 2007 through February 5, 2008. To be eligible: . Member must have at least 5 years of CalPERS service credit . Member must be employed for at least one day during the designated period . Member must retire during the designated period . Member cannot receive credit under this section if member is receiving any unemployment insurance payments . If retired member subsequently re-enters membership, additional service credit is forfeited The first reading of the Ordinance was on October 16, 2007. The second reading of the Ordinance was on November 6, 2007. The Ordinance will become effective on December 6, 2007. Since this benefit needs to be implemented as soon as possible in order to realize the full financial benefits of the program, this urgency ordinance will become effective immediately and will expire when the regular ordinance becomes effective. DECISION MAKER CONFLICTS: Not applicable Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently the 500 foot rule found in California Code of Regulations section 18704.2(a)(l) is not applicable to this decision. FISCAL IMPACT The added cost to the retirement fund for all eligible employees who retire during the designated window period will be included in the City's employer contribution rate for the fiscal year that begins two years after the end of the designated period. Government 3-2 NOVEMBER 6, 2007, Item l- Page 3 of 4 Code Section 7507 requires that the estimated present value of additional employer contributions of the proposed contract amendments be made public at a public meeting. This amount is based on the member's annual reportable compensation, the cost factor and the fact that the City does contract for Post-Retirement Survivor Allowance. The following estimated cost projection was based on all 318 eligible employees taking the additional two years credit. However, it is estimated that approximately 25% of the 318 employees that are eligible to retire will take advantage of this CalPERS benefit. Miscellaneous Plan Additional Employer Contribution: Rate Increase in Employer Contribution: $13,134,496 (over 20 years) 1.14% Safety Plan (police and Fire) Additional Employer Contribution (Police): Rate Increase in Employer Contribution: $1,757,294 (over 20 years) 0.41% Additional Employer Contribution (Fire): Rate Increase in Employer Contribution: $1,733,530 (over 20 years) 0.84% The actual employer contribution costs and rates may be only 25% of the amounts shown~ We will be able to accurately identify the final costs once all eligible employees separate from the City and retire. A final list of employees that applied for retirement will be presented to CalPERS after the 90-day application window. CalPERS will include the cost of the Two Years Additional Service Credit in the City's employer contribution rate commencing with the fiscal year starting two years after the end of the designated period. The increase in employer contribution will be amortized over 20 years. The estimated cost of the medical incentive program is $652,800 over the two years. However, the City is saving approximately $1.5 million dollars in cafeteria-style flex benefits for this same group, for a potential net savings of$847,200. The estimated salary savings of the vacancies created by the 75 early retirees, based on an average salary of $75,000, without benefit costs, is $5.625 million per year. CONTRACT AMENDMENT PROCESS The process set out by CalPERS for contract amendments is very specific. This item is being presented as an announcement of the City's intention to amend its contract and to present the first reading of the required Ordinance. Pursuant to Section 20471, approval of the contract shall be by Ordinance adopted no less than 20 days between the adoption of the Resolution of Intention and the adoption of the final Ordinance. The second reading and final adoption of the contract amendment will be November 6, 2007. 3-3 T ORDINANCE NO. URGENCY ORDINANCE OF THE CITY OF CHULA VISTA AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF CHULA VISTA AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM WHEREAS, the City has experienced unexpected revenue shortfalls for Fiscal Year 2008 and Fiscal Year 2009 and is seeking cost saving measures to balance the budget; and WHEREAS, the City Manager and Office of Budget and Analysis have determined the City could realize significant cost savings through an early retirement program; and WHEREAS, the current California Public Employee Retirement Law allows an early retirement incentive; and WHEREAS, Government Code Section 20903 provides two years additional CaIPERS service credit to members who retire during a designated period; and WHEREAS, the City must certify that it is its intention that if any early retirements are granted after receipt of service credit pursuant to Section 20903, that any vacancies created or at least one vacancy in any position in any department or other organizational unit shall remain permanently unfilled, thereby resulting in an overall reduction in the workforce of the department or organizational unit; and WHEREAS, this benefit needs to be implemented as soon as possible to avoid possible detrimental financial consequences to the City. The City Council of the City of Chula Vista does ordain as follows: Section 1. That an amendment to the contract between the City Council of the City of Chula Vista and the Board of Administration, California Public Employees' Retirement System to provide Section 20903 (two years) to local miscellaneous and safety members is authorized by this Ordinance. A copy of the amendment is attached and marked as Exhibit A, and by this reference is made a part of the Ordinance. Section 2. The Mayor of the City of Chula Vista is hereby authorized, empowered, and directed to execute the amendment for and on behalf of the City. Section 3. Pursuant to Section 311 of the Chula Vista Charter, the City Council hereby declares that this Ordinance shall be effective immediately as an urgency measure upon its first reading and adoption if it passes by a four-fifth's vote of the City Council. This Ordinance shall expire when Ordinance No. 3084 takes full force and effect. Presented by Approved as to Form by Marcia Raskin Human Resources Director ~C\r.J \f\cu-4ill- Ann Moore City Attorney 3-4