FEBRUARY 15, 2007 CITY OF RANCHO PALOS VERDES FINANCE ADVISORY COMMITTEE MINUTES FEBRUARY 15, 2007 CITY OF RANCHO PALOS VERDES FINANCE ADVISORY COMMITTEE MINUTES FEBRUARY 15, 2007 CITY OF RANCHO PALOS VERDES FINANCE ADVISORY COMMITTEE MINUTES

MINUTES

CITY OF RANCHO PALOS VERDES

FINANCE ADVISORY COMMITTEE

FEBRUARY 15, 2007

Chair Clark called the meeting to order at 7:04 PM at the City Hall Community Room, 30940 Hawthorne Boulevard, for the purpose of conducting business pursuant to the Agenda.

ROLL CALL

Roll call was answered as follows:

PRESENT: Clark, Grimme, James, McLeod, Moon and Nelson
ABSENT: Emenhiser

Also present were Assistant City Manager Carolynn Petru, Deputy Director of Finance and Information Technology Downs and Senior Administrative Analyst Gyves.

APPROVAL OF AGENDA

Chair Clark requested a motion to approve the agenda. Vice-Chair Nelson motioned for approval of the agenda and Member McLeod seconded. Hearing no objection, Chair Clark ordered approval of the agenda.

APPROVAL OF DRAFT MINUTES FOR THE MEETING CONDUCTED JANUARY 31, 2007

Chair Clark requested a motion to approve the minutes as amended for the meeting conducted January 31, 2007. Member McLeod motioned for approval of the amended minutes and Vice-Chair Nelson seconded. Hearing no objection, Chair Clark ordered approval of the amended minutes.

FAC ASSIGNMENT – DRAFT REPORT TO CITY COUNCIL – ANALYSIS OF EMPLOYEE RETIREMENT BENEFITS AND THE CITY’S SIDE FUND PENSION LIABILITY

Deputy Director Downs distributed late correspondence related to the agenda item. Deputy Director Downs informed the FAC that the Staff report on this agenda topic is essentially the same Staff report that was presented at the January 10, 2007 FAC meeting, except that John Bartel’s recommendations were added. Deputy Director Downs summarized John Bartel’s recommendations to include not requiring an employee contribution to the pension plan without an enhancement of the pension benefit formula, not instituting a decreased pension benefit formula for new employees and establishing a defined contribution post-retirement health care program for full time staff members. Deputy Director Downs also informed the FAC that the Staff report was updated to include the FAC’s recommendation.

PUBLIC COMMENTS

Holly Starr, Recreation Manager, reported that she had asked twenty six staff members which benefit they would rather contribute 2% of their salary towards, a post retirement health care plan or the 2.5% @ 55 increased CalPERS retirement benefit formula. Ms. Starr reported that two employees chose the post retirement health care plan, two were undecided and twenty two chose the 2.5% @ 55 increased CalPERS retirement benefit formula. Ms. Starr also indicated that if employees contributed 2% towards the 2.5% @ 55 CalPERS formula, the cost to the City would be less than the cost of hiring one full time staff member.

Carla Morreale, Deputy City Clerk, stated that she was concerned because a poll was never performed to determine the preferences of staff members and that she thinks a poll should be done before any recommendation is made to the City Council. Ms. Morreale also expressed concern that employees should be able to opt out of the post retirement health care program, if implemented.

Nancie Silver, Recreation Program Supervisor, stated that she has worked for the City for twenty three years and that the 2.5% @ 55 CalPERS formula would benefit her more than the post retirement health care program, as it would for other staff members that have worked for the City for a long time. Ms. Silver also stated that the cost to the City for the 2.5% @ 55 CalPERS formula would be less than the cost of hiring one full time staff member. Ms. Silver asked whether or not employees can purchase health insurance through the City when they retire. Assistant City Manager Carolynn Petru responded that an employee can purchase insurance through the City when they retire.

Kit Fox, Associate Planner, stated that he is supportive of instituting a retiree health care program. Mr. Fox also stated that he would be supportive of paying one percent of salary for the 2.5% @ 55 CalPERS formula and that the formula would be good to recruit employees but would also encourage employees to retire early. Mr. Fox asked about the transferability of a post retirement health care program. Deputy Director Downs explained that the employee would own the account and would be able to take those monies upon leaving the City, but the account could not be rolled over into an individual retirement account or 457 account. Analyst Gyves added that there are vesting details associated with the City’s contribution that need to be worked out if the City Council decides to implement the program.

Nancy Vitez, Staff Assistant II, stated that she has been working for the City for ten years. Ms. Vitez indicated that the majority of the employees at the City prefer the 2.5% @ 55 CalPERS formula over the post retirement health care program. Ms. Vitez also stated that there are not many employees working at the City, but they work hard and wear many hats and an increase in benefits would help morale.

ANALYSIS OF EMPLOYEE RETIREMENT BENEFITS AND THE CITY’S SIDE FUND PENSION LIABILITY – CONTINUED

Member McLeod stated that based on the letters and comments from employees, the FAC’s current recommended option is not what the employees want and that there seems to be a strong consensus that if employees are going to contribute 2% of salary to something, they would rather contribute to the 2.5% @ 55 CalPERS formula.

Chair Clark mentioned that increasing the CalPERS formula would be inconsistent with what other cities are doing in the area and would place the City towards the top of the retirement benefits comparison chart. Member McLeod indicated that it would place the City somewhere in the middle of the retirement benefits comparison chart because the chart also factors in other retirement benefits, such as retiree medical and deferred compensation. Member McLeod also mentioned that increasing the CalPERS formula to 2.5% @ 55 and requiring employees to contribute 2% of salary would cost the City $64,000, which is less expensive than the $96,000 cost the City would incur for the current recommended option to establish a post retirement health care program.

Vice-Chair Nelson agreed with Member McLeod that most employees seem to prefer the 2.5% @ 55 CalPERS formula over the post retirement health care program. Vice-Chair Nelson stated that the FAC cannot make this happen and can only make the recommendation to the City Council. Vice-Chair Nelson thanked the employees for the letters and comments and stated that the employees would have to do it all over again for the City Council.

Member Grimme mentioned that employees could contribute more than 2% towards the 2.5% @ 55 CalPERS formula.

Member James indicated that part of the assignment was actually to look at making employees contribute towards their current retirement benefits and the actual outcome will be based on what the budget can handle.

Member Moon asked if increasing the CalPERS formula is cheaper than the FAC’s current recommended option. Member McLeod explained that if employees were to contribute 1% of salary it would be comparable to the cost of their current recommended option, but if employees contribute 2% of salary it would be cheaper.

Member Moon stated that based on employee comments, staff favored paying 2% of salary to get the increased CalPERS formula. Member Moon also stated that this option would cost less than the current recommended option and make the City more competitive. Member Moon expressed concern that many cities detailed in the benefit comparison chart were discussing the possibility of increasing their benefit formula and that by the time the City initiated the post retirement health care program we would have fallen to the bottom of the chart again.

Chair Clark indicated that most of the cities in the benefit comparison chart have retiree medical insurance and the 2% @ 55 formula. Member McLeod stated that most of the cities detailed in the benefit comparison chart have defined benefit retiree medical insurance, which would be preferred by employees over the enhanced benefit formula.

Chair Clark indicated that they should also be considering what potential employees would want and that the increased benefit formula could influence employees to retire early.

Member James asked Deputy Director Downs if the City Council could increase the City’s contribution to the post retirement health care program after the initial establishment of the program. Deputy Director Downs stated that the City Council could increase the City’s contribution.

Member Moon suggested a survey of staff regarding the different options. Member James stated he thinks he understands what the employees want and what the consultant recommended and suggested that this information should be included in the report.

FAC RECOMMENDATIONS – EMPLOYEE RETIREMENT BENEFITS AND THE CITY’S SIDE FUND PENSION LIABILITY

Based on further discussion, the FAC revised the options to be presented to the City Council with a recommendation to select Option 2:

Option 1 (Total City Cost of $196,000 Annually):
 Increase the current pension benefit formula to 2.5% @ 55, with the following required contributions:
o Employee contribution of 1% of salary, or about $36,000 annually; and
o City contribution of about $100,000 annually.

 Establish Defined Contribution Post Retirement Health Care Accounts for all full-time employees, with the following required contributions:
o Employee contribution of 2% of salary, or about $72,000 annually; and
o City contribution of $75 per pay period for each full-time employee, or about $96,000 annually.

Option 2 (FAC Recommended Option with a Total City Cost of $128,000 Annually):
 Increase the current pension benefit formula to 2.5% @ 55, with the following required contributions:
o Employee contribution of 2% of salary, or about $72,000 annually; and
o City contribution of about $64,000 annually.

 Establish Defined Contribution Post Retirement Health Care Accounts for all full-time employees, with the following required contributions:
o Employee contribution of 1% of salary, or about $36,000 annually; and
o City contribution of $50 per pay period for each full-time employee, or about 64,000 annually.

Option 3 (Total City Cost of $96,000 Annually):
 Make no changes to the pension benefit formula.

 Establish Defined Contribution Post Retirement Health Care Accounts for all full-time employees, with the following required contributions.
o Employee contribution of 2% of salary, or about $72,000 annually; and
o City contribution of $75 per pay period for each full-time employee, or about $96,000 annually.

Option 4 (Total City Cost of $64,000 Annually):
 Make no changes to the pension benefit formula.

 Establish Defined Contribution Post Retirement Health Care Accounts for all full-time employees, with the following required contributions:
o Employee contribution of 1% of salary, or about $36,000 annually; and
o City contribution of $50 per pay period for each full-time employee, or about 64,000 annually.

ASSIGNMENT TO THE FINANCE ADVISORY COMMITTEE – ALTERNATIVE SOURCES OF REVENUE AND FUNDING – ORAL UPDATE

Deputy Director Downs informed the FAC that Staff has been working with the City Attorney’s Office to identify the issues related to the sale or lease of Grandview Park and building Casitas at Trump National. Deputy Director Downs stated that a Staff Report will be provided to the FAC at the March 7, 2007 FAC meeting.

DIRECTOR/MEMBER REPORTS

Deputy Director Downs indicated that Finance Staff will be presenting the Midyear Report and Public Works will be providing an update on the Water Quality and Flood Protection Program at the February 20, 2007 City Council meeting.

Vice-Chair Nelson stated that he had the pleasure of representing the FAC at the Mayor’s Breakfast and that he reported that the FAC was continuing its hard work on the City Council assigned projects.

Member James informed the FAC that the PUMP Committee has completed the review of trails and reserve areas and have commenced the study of uses. Member James also stated that the PUMP Committee will be receiving presentations from all the groups who use the trails.

Chair Clark reported that the City Council will be appointing new chairs to committees and commissions and urges anybody that was interested for the FAC chair to apply.

ADJOURNMENT

Member McLeod moved and Member Grimme seconded a motion to adjourn the meeting at 8:53 PM. Hearing no objection, Chair Clark ordered the meeting adjourned.

_____________________________
Chair, Finance Advisory Committee

ATTEST:

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Gary Gyves, Recording Person