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TH.E: lliTV. til'" · . ~ EL CERRITO Date: To: From: August 21, 2012 El Cerrito City Council Sukari Beshears, Employee Services Manager Mary Dodge, Administrative Services Director AGENDA BILL Agenda Item No. 7(A) Subject: Adoption of a Designated Period for Two Years Additional PERS Service Credit for Eligible Employees ACTION REQUESTED Staff requests that the City Council take the following actions: 1. Adopt a resolution designating a window period from August 22, 2012 through November 27, 2012 within which miscellaneous and public safety employees may receive two-years of service credit if they retire during the window period; 2. Authorize the Mayor to certify compliance with Government Code Section 20903;and 3. Direct the City Clerk to certify the Council's action and compliance with Government Code Section 7507. BACKGROUND/ANALYSIS In September of 1992, in response to fiscal concerns, the El Cerrito City Council adopted an amendment to its contract with CalPERS to provide a retirement incentive for eligible employees. This amendment allows for two years additional service credit to those retiring within the time period designated by the City. Over the years, the City opened six window periods within which eligible employees could take advantage of the additional two-year service credit option: These periods were as follows: October 1, 1992 through December 31, 1992, July 1, 1993 through December 27, 1993, July 1, 1994 through December 27, 1994, April1, 1997 through September 27, 1997, December 8, 2003 through June 4, 2004, and finally, July 12, 2009 through October 10, 2009. Each time a period was designated, the City certified that the incentive served the best interests of the agency "because of an impending curtailment of, or change in the manner of performing service" that would result in "impending mandatory transfers, demotions, and layoffs." Further, the City certified to CalPERS that at least one vacancy would remain unfilled resulting in an overall reduction in the work force. Prior to each window period, the City calculated the potential cost assuming that every eligible employee would retire during the period using formulas set by CalPERS. In accordance with CalPERS regulations, this potential cost is made public at a Council meeting at least two weeks prior to adoption of the resolution setting the window period. For this window period overall costs were discussed at the July 17, 2012 City ---PAGE BREAK--- AGENDA BILL Agenda Item No. 7(A) Council meeting. Although specific data on the actual number of retirements during the City of El Cerrito window periods was not readily available, CalPERS has acknowledged that only a fraction of eligible employees take advantage of this retirement incentive when offered. The City also incurs costs associated with payouts of accrued leave balances which are not included in the calculations defined by CalPERS. There is also recruitment and training costs associated with hiring new employees as well as a learning curve for the new employees. Overtime or temporary staffing may be necessary in the short-term to help reduce the impacts to service levels due to retirements but are anticipated to be at a minimum. Hard costs, such as payout of leave balances associated with offering the retirement incentive are offset by the savings due to factors such as: time elapsing between when the vacancy arises and when it is filled, filling vacancies at lower salary steps, hiring entry level positions for vacancies that might arise from more ..tenured retirement and possible elimination or restructuring of positions. An analysis of the demographics of the City's workforce revealed a total of 32 miscellaneous and 11 public safety employees who are eligible to take advantage of the two-year additional service credit option if a new window period is designated. Based on continuing discussions with eligible employees, only 10 to 15 employees are likely to take advantage of the retirement incentive. In compliance with CalPERS requirements, the City has identified the Employee Services Account Clerk as the one position to be permanently eliminated. The required CalPERS Resolution and certifications are attached. FINANCIAL CONSIDERATIONS The primary purpose of this action is to create current year salary savings and provide an opportunity for longer-term savings by identifying opportunities to reduce or reorganize current staffing. New employees will also have lower benefit accruals and thus are entitled to fewer paid days away from work. In total, the payout of accrued leave expenses is an un-funded liability of the City but the cost of retiree payouts will be more than covered in the operating budget by savings related to retirements associated with this program. As described in the Fiscal Year 2012-13 Operating Budget, this action is in response to the dissolution of the City's Redevelopment Agency by the State of California, decreases in City property tax revenue and their related impact on City services. Approximately $150,000 in potential savings was identified in the budget and that amount still seems reasonable. Therefore, it is prudent for the City to offer the two years additional service credit as a retirement incentive to City employees. This action was discussed by the Financial Advisory Board (F AB) during their review of the budget. The F AB believed that the decision to implement this program was under the purview of the City Council but expressed a desire to monitor the outcomes in order to evaluate the actual savings. The overall costs associated with this proposal were presented to the City Council and the public at the Council's July 17, 2012 meeting. An analysis of the savings is included as ---PAGE BREAK--- AGENDA BILL Agenda Item No. 7(A) Attachment 3. Projected net savings are approximately $153,670 in fiscal year 2012-13. In Fiscal Year 2013-14 the net savings were estimated to be $186,937, in Fiscal Year 2014-15 $127,266 and $74,229 in subsequent years. Scott Hanin, City Manager Attachments: 1. 2. 3. Resolution Granting Another Designated Period for Two ·Years Additional Service Credit CalPERS Certifications CalPERS cost/savings analysis ---PAGE BREAK--- RESOLUTION 2012-XX Agenda Item No. 7(A) Attachment 1 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CERRITO GRANTING A DESIGNATED PERIOD FOR TWO YEARS ADDITIONAL SERVICE CREDIT WHEREAS, the City Council of the City of El Cerrito is a contracting Public Agency of the Public Employees' Retirement System; and WHEREAS, the Public Agency desires to provide another designated period for Two Years Additional Service Credit, Section 20903, based on the contract amendment included in said contract which provided for Section 20903, Two Years Additional Service Credit, for eligible members. NOW THEREFORE, BE IT RESOLVED, by the City Council of the City of El Cerrito that it hereby seeks to add a designated period from August 22, 20 1'2 through November 27, 2012 for eligible employees in the miscellaneous and safety classifications. I CERTIFY that at a regular meeting on August 21, 2012, the El Cerrito City Council passed this resolution by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: IN WITNESS of this action, I sign this document and affix the corporate seal of the City ofEl Cerrito on August XX, 2012. Cheryl Morse, City Clerk APPROVED: William C. Jones III, Mayor ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Employer Services Division Contract Maintenance Unit P.O. Box 942709 Sacramento, CA 94229-2709 CERTIFICATION OF COMPLIANCE WITH GOVERNM.ENT CODE SECTION 20903 In accordance with Government Code Section 20903 and the contract between the Public Employees' Retirement System, the City Council of the City of El Cerrito hereby certifies that: 1. 2. 3. 4. Because of an impending curtailment of, or change in the manner of performing service, the best interests of the agency will be served by granting such additional service credit. . . The added cost to the retirement fund for all eligible employees who retire duringf~- the designated window period will be included in the contracting agency's employer contribution rate for the fiscal year that begins two years after the end of the designated period. rt has elected to become subject to Section 20903 because of impending mandatory transfers, demotions, and layoffs that constitute at least 1 percent of the job classification, department or organizational unit, as designated by the governing body, resulting from the curtailment of, or change in the manner of performing, its services. Its Intention at the time Section 20903 becomes operative is. to keep all vacancies created by retirements under this section or at least one vacancy in any position in any department or other organizational unit permanently unfilled thereby resulting in an overall reduction in the work force of such department or organizational unit. THEREFORE, the City Council of the City of El Cerrito hereby elects to provide the benefits of Government Code Section 20903 to all eligible members who retire within · the designated period, August 22, 2012 through November 27, 2012 . Attest: Clerk/Secretary August21,2012 Date CITY COUNCIL OF THE CITY OF EL CERRITO BY Presiding Officer 2yr certification-PA (Rev. 4/04) ---PAGE BREAK--- CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Actuarial and Employer Services Branch Public Agency Contract Services P.O. Box 942709 Sacramento, CA 94229-2709 (888) CaiPERS (225-7377) CERTIFICATION OF GOVERNING BODY'S ACTION ATTACHMENT 2 I hereby certify that the foreg·oing is a true and correct copy of a Resolution ad~pt~d by the City Council ~~the (governing body} City of El Cerrito (public agency) August 21, 2012 on ·(date) Clerk/Secretary City Clerk Title PERS-CON-12 (rev. 1/96) ---PAGE BREAK--- ATTACHMENT 2 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Actuarial and Employer Services Branch Public Agency Contract Services P.O. Box 942709 Sacramento, CA 94229-2709 (888) CaiPERS (225-7377) CERTIFICATION OF COMPLIANCE WITH GOVERNMENT CODE SECTION 7507 1 hereby certify that in accordance with Section 7507 of the Government Code , the future annual costs as determined by the System Actuary for the Increase · in retirement benefit(s) have been made public at a public meeting of the C_i_ty_C_o_u_n_c_il ofthe (governing body) City of El Cerrito on July17,2012 (date) Resolution I Ordinance. Date August 21, 2012 PERS-CON-12A (rev. 1196) (public agency) which is at least two weeks prior to the adoption of the Clerk/Secretary City Clerk Title ---PAGE BREAK--- ATTACHMENT 3 City of El Cerrito Summary of Costs and Savings of Two Year Service Credit. 8/21/2012 City Council Meeting Savings: Salary Savings from three month position openings from Annual Pay Step 5 to Step 2 Savings from Annual Pay (1/2 year of 15% salary savings) Costs: Potential Short term staffing costs Estimated Payouts in FV2012-13 (all Leave Hours·+ $7K Sick Leave} FV2012-13 Net Savings Ongoing Savings: FY2013-14 10% of Annual Pay & Position Elimination FY2014-15 5% of Annual Pay & Position Elimination Potential savings target from restructuring opportunities Ongoing savings from account clerk position elimination FY2015-16 .004689 rate increase Benefit cost savings have not been included in order to be conservative. Ongoing savings from elimination of one position= $67,596 $298,351 89,505 387,857 (20,000} (214,187) (234,187) $153,670 $186,937 $127,266 $50,000 67,596 (63,297) $54,299 ---PAGE BREAK--- ' - . . - . . . . . ' Agenda Item No. 7(A) Attachment 3 Estimate of Cost Impacts for a Two Year PERS Service Credit Calcuations Based on PERS formula guidelines Data Required for Savings/ Cost Analysis To Calculate increased PERS Factor To Calculate costs/savings of service credit PERS Annual Pay 20Year Eligible Cost adjusted for Amortization Sick Potential Pay Annual Factor PERS cost PERS Factor Factor Leave Leave Leave Sick Leave Positions Rate Pay factor X .97 or .93 13.24% Hours Payout Hours (2J Pay New Hires Position 1 $43.60 $126,963 82% $104,110 $96,822 $7,313 499.17 $21,764 $ - $ 110,403 Position 2 $43.60 $126,963 75% $95,222 $88,557 $6,689 446.72 $19,477 $ - $ 110,403 Position 3 $31.22 $90,913 87% $79,094 $73,557 $5,556 293.99 $9,178 $ - $ 78,537 Position 4 $38.46 $111,996 87% $97,436 $90,616 $6,844 240.00 $9,230 $ - $ 96,737 Position 5 $47.67 $99,154 87% $86,264 $80,225 $6,059 513.00 $24,455 $ - $ 82,534 Position 6 $72.24 $140,870 72% $101,426 $98,383 $7,431 259.41 $18,740 102 $ 7,365 $ 122,495 Position 7 $33.72 $65,754 66% $43,398 $42,096 $3,179 215.34 $7,261 37 $ 1,247 $ 59,631 Position 8 $25.32 $49,374 65% $32,093 $31,130 $2,351 594.41 $15,050 250 $ 6,330 $ 43,290 Position 9 $33.72 $65,754 66% $43,398 $42,096. $3,179 263.11 $8,872 182 $ 6,143 $ 57,447 Position 10 $25.07 $48,887 66% $32,265 $31,297 $2,364 980.99 $24,593 250 $ 6,268 $ 42,237 Position 11 $24.06 $46,917 59% $27,681 $26,851 $2,028 156.71 $3,770 $ - $ 46,917 Position 12 $27.17 $52,982 66% $34,968 $33,919 $2,562 773.41 $21,013 250 $ 6,793 $ 45,767 Position 13 $32.72 $63,804 59% $37,644 $36,515 $2,758 133.00 $4,352 250 $ 8,180 $ 55,127 Position 14 $25.69 $50,096 66% $33,063 $32,071 $2,422 7.00 $180 $ - $ 43,271 Position 15 $27.17 $52,982 66% $34,968 $33,919 $2,562 708.50 $19,250 250 $ 6,793 $ 45,767 Total $ 1,193,406 $ 883,030 $ 856,539 $ 207,187 49,117 $ 1,040,561 Actuarialy calculated annual PERS increase beginning FY2015-16 $63,297 Estimated Annual Payroll $13,500,000 Estimated Rate Increase 0.4689% 111 Factors provided by PERS based on age and type of service. Public Safety rate is .93 and miscellaneous .97. 121 Some positions not eligible to cash out any sick leave, others may cash o~:~t at a 1/4 rate with a cap at 250 hours or convert to hours of service with PERS •