HomeMy WebLinkAboutItem 8.2 City's retirement benefit liabilities and Pre-Fund Fire OPEB Liabilityor
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DATE:
TO:
FROM:
SUBJECT
STAFF REPORT
CITY COUNCIL
June 21, 2016
Honorable Mayor and City Councilmembers
CITY CLERK
File #600 -40
Christopher L. Foss, City Manager "
Agreement to Pre -Fund Fire OPEB Liability and Direction on City Unfunded
Liabilities Related to Retirement
Prepared by Colleen Tribby, Director of Administrative Services
EXECUTIVE SUMMARY:
The City Council will receive a report on the City's retirement benefit liabilities, and consider
approval of an agreement with Alameda County Fire Department (ACFD) to provide a
mechanism for the City to pre -fund its share of ACFD's Other Post - Employment Benefits
(OPEB, or retiree health) liability. The City Council will also provide direction to Staff regarding
the ongoing funding of City pension and City OPEB liabilities, as well as lump sum contributions
in Fiscal Year 2015 -16.
FINANCIAL IMPACT:
Approval of the agreement with ACFD has no financial impact. Approval of the budget change
will allow the City to make payments from its reserves for OPEB liabilities.
RECOMMENDATION:
Staff recommends that the City Council receive the report; and 1) Adopt the Resolution
Approving the Agreement Regarding Pre - Funding of OPEB Liability Between Alameda County
Fire Department and City of Dublin; and 2) Provide direction to Staff on retirement benefit
funding policy and lump sum contributions in Fiscal Year 2015 -16.
`Reviewed By
Assistant City Manager
DESCRIPTION:
The City of Dublin provides two retirement benefit plans, which are long -term liabilities for the
City. The City's pension plan and Other Post - Employment Benefits (OPEB, or retiree health)
plan are both provided through the California Public Employees Retirement System (CalPERS),
and are pre- funded through planned annual payments by the City. Both plans have unfunded
Page 1 of 7 ITEM NO. 8.2
liabilities which, although lower than many neighboring agencies, have been growing over time
as actuarial and economic assumptions change. This Staff Report discusses the funding status
of these plans, and presents a recommendation that the City Council set a minimum funding
policy and also consider making a contribution from General Fund Reserves against these
liabilities.
The City of Dublin contracts to have the Alameda County to provide fire services. As part of the
contract, the City pays for its share of ACFD's retiree health plan, but has not pre- funded this
liability as there has been no mechanism to do so. However, in 2012 ACFD began working with
CalPERS to create side funds within its OPEB trust to allow for member agencies pre -fund their
share of the obligation. In preparation for this, in June 2012 the City Council authorized a
contribution of $6.487 million towards the liability (Attachment 2 is the Staff Report), which was
then moved to a General Fund Reserve. Since then, the City has continued to add funds to that
reserve as the Fire OPEB liability has grown. ACFD has now successfully implemented the
OPEB trust side funds, and on May 31, 2016 the Alameda County Board of Supervisors
approved an agreement (Attachment 1, Exhibit A) with the City providing the framework for pre -
funding its side fund. Upon approval of the agreement, the City Council will consider making a
one -time contribution to bring the funding status to a level closer to that of the City's pension
and retiree health plans.
RETIREMENT PLAN FUNDING
Retirement plans can be unfunded or funded. An unfunded plan has no assets set aside, so
annual benefits are paid by the employer as they come due for payment. These payments are
made from current revenue sources (e.g., taxes), which is the "Pay -As- You -Go" method. Many
agencies that have large OPEB liabilities and no assets in trust pay for retiree health benefits
this way. Those agencies are paying for current retiree benefits (e.g., health premiums) but are
not setting anything aside for current employees. This is how the City of Dublin has been paying
for its Fire Services OPEB liability, since there was no trust fund mechanism to separate the
City's liability from other agencies that contract with Alameda County Fire Department. That has
since changed, as discussed later in this report.
A funded plan takes contributions from the employer (and sometimes the employee), which are
invested in a trust that can only be used for providing the benefits, with investment earnings
accounting for roughly two - thirds of the funding. Funds contributed to such a trust can only be
used for the purposes of providing the benefits, and cannot be reallocated by an agency.
Furthermore, any asset losses due to investment performance are then ultimately made up by
the agency through rate increases.
The calculation of an agency's liability and funding mechanism are somewhat complex, and
require an actuarial study that makes certain economic assumptions (current interest rates,
expected salary increases, inflation, investment markets, etc.) and demographic assumptions
(life expectancy, the expected length of employment, etc.). Changes in these assumptions can
have a dramatic effect on the annual rate an employer pays into a retirement system.
An unfunded liability exists when there is a gap between the estimated amount of a plan's
obligations, and the current value of its assets. There is nothing inherently wrong with having an
unfunded liability, as long an agency is able to pay it off over time through an Annual Required
Contribution (ARC), as calculated by an actuary. Theoretically, if an agency consistently
makes its ARC, it will be able to meet its retirement obligations as they come due. The City of
Dublin has always fully paid its ARC for its pension and OPEB plans.
Page 2 of 7
CITY OF DUBLIN'S RETIREMENT PLANS — FUNDED STATUS
The tables below illustrates the funding components and status of each of the City's plans,
(including the City's share of ACFD's OPEB plan) and the annual funding of the plans, followed
by a discussion of each plan and funding recommendations.
Funded Status of Retirement Plans
Funded Status
City Pension
City OPEB
Firs OPEB
Note
Valuation Date
6/30/2013
6/30/2015
6/30/2015
Report Date sets rates for future years
Present Value of Projected
$60,300,727
$24,397,000
n/a
Total expected future payments for each participant,
Benefits (PVPB)
($726,529)
$0
n/a
discounted to today
Accrued Liability
$47,146,195
$17,657,000
$10,356,000
Portion ofthe PVPBthat is attributed to past service
Value of Assets*
$38,342,882
$13,154,000
$96,000
Value of assets held in trust
Unfunded Actuarial Liability
$8, 803,313
$4,503,000
$10,260,000
Accrued Liabiilty Less Assets
(UAL)
Funded Status
81.3%
74.5%
0.93%
Contribution Needed for 80%
$0
$971,600
1 $8,188,800
General Fund Reserve
$9,866,853 for both (as of 14-15)
$9,1 96,000
1. Fully Fund ARC;
Recommended Policy
(as of 14-15)
2. Start at 80%
Annual Fundina of Retirement Plans
Annual Costs
City Pension
City OPEB
Firs OPEB
Note
16 -17 Normal Cost
$1,207,492
$884,000
$423,000
The cost of the current year of accrued (earned) benefits
(before cost sharing)
Cost Sharing with Employees
($726,529)
$0
n/a
Employees share 7.0% of the City's Pension Normal Cost
16 -17 Net Normal Cost
$480,962
$884,000
$423,000
This would be the annual ongoing cost if the UAL was paid off
(adjusted each year with assumption changes)
16- 17Amortized Payment
$553,901
$462,000
$1,001,000
of UAL
16-17 Total ARC
$1,034,863
$1,346,000
$1,424,000
Funding Policy
Fully Fund ARC
Fully Fund ARC
Pay -As- You -Go
1. Fully Fund ARC;
1. Fully Fund ARC;
1. Fully Fund ARC;
Recommended Policy
2. Start at 80%
2. Start at 80%
2. Start at 80%
funded Status
funded Status
funded Status
City Pension Plan
The City's unfunded pension liability as of June 30, 2014, is $8.8 million on a market value
basis, and the plan is 81.3% funded, according to the November 2015 CalPERS Actuarial
Report. As the table below illustrates, this is the fourth- highest funded status of all cities in
Alameda County, according to the most recently available actuarial reports as found through
Staff research.
Page 3 of 7
Alameda County Pension Funding, by City (Miscellaneous Only)
Agency
Liability
Value of Assets
Unfunded Liability
Funded Ratio
Emeryville
48,081,973
43,399,292
4,682,681
90.26%
Piedmont
28,577,579
24,516,013
4,061,566
85.79%
Alameda
246,141,609
200,603,777
45,537,832
81.50%
aublin
47,146,15
38,42,82
8,803,31
81.33%
Union City*
105,858,300
85,612,661
20,245,639
80.90%
Albany
15,359,999
12,054,986
3,305,013
78.48%
Berkeley*
848,201,995
653,947,246
194,254,749
77.10%
Livermore
231,329,155
178,013,864
53,315,291
77.00%
San Leandro*
256,461,173
196,388,428
60,072,745
76.60%
Fremont
422,833,958
319,390,248
103,443,710
75.50%
Oakland*
2,341,202,493
1,701,426,635
639,775,858
72.70%
Hayward
386,827,971
280,136,166
106,691,805
72.40%
Newark
96,995,769
68,876,473
28,119,296
71.01%
Pleasanton
227,245,448
157,229,040
70,016,408
69.20%
* Issued Pension Obligation Bonds
The City has historically fully funded its pension ARC, even through rate increases resulting
from lower- than - expected CalPERS investment returns, changes in demographics, and changes
in CalPERS smoothing and amortization tables. The Pension Reform Act (California Public
Employees' Pension Reform Act, or PEPRA), which was approved in 2012 and took effect
January 1, 2013, took steps towards enabling public agencies to better cover their long -term
retirement liabilities. The City, through the approval of the recent five -year employee agreement,
has reduced the City's liabilities with employees agreeing to take on a greater portion of their
retirement costs. As shown in the table below, the City traditionally paid 7% of the 8% employee
contribution, until employees agreed to pay their entire employee contribution in Fiscal Year
2011 -12 which saved roughly $500,000 annually. In addition, the City began a cost - sharing
arrangement in Fiscal Year 2012 -13 in which employees contributed up to 4.072% (depending
on CPI changes) of the City's rate. In Fiscal Year 2015 -16, employees share 7.0% of the City's
rate, resulting in additional savings of roughly $700,000 annually.
Page 4 of 7
City Pension Normal Cost Rates and Contributions, 10 Years
FY
Payroll
City
Rate
City -Paid
Employee
Rate
Normal Cost:
Total City
Contribution
Less
Employee-
Paid City
Rate
Less
Employee-
Paid $$
Net
City Rate
Normal Cost:
Net City
Contribution
07 -08
7,331,336
10.85%
7.00%
1,308,350
17.85%
1,308,350
08 -09
7,742,728
10.84%
7.00%
1,381,612
17.84%
1,381,612
09 -10
7,008,099
10.63%
7.00%
1,235,668
17.63%
1,235,668
10 -11
6,989,777
10.36%
7.00%
1,213,216
17.36%
1,213,216
11 -12
8,016,226
10.54%
844,590
10.54%
844,590
12 -13
8,337,382
10.63%
886,597
-1.75%
(145,904)
8.88%
740,693
13 -14
9,097,454
10.84%
986,437
-2.95%
(268,375)
7.89%
718,062
14 -15
9,170,543
10.61%
973,178
-3.95%
(362,236)
6.66%
610,942
15 -16
10,515,788
10.96%
1,152,320
-7.00%
(736,105)
3.96%
416,215
16-17
10,378,990
11.63%
1,207,492
-7.00%
(726,529)
4.63%
480,962
It should be noted that the above table shows the Normal Cost only, and excludes payments
made by the City against its unfunded liability. If the City had no unfunded liability, this would
generally be the trend line of the annual ongoing contribution, a as a percentage of payroll, to
fully fund the plan.
The unfunded pension liability of $8.8 million is amortized into annual payments that smooth
investment gains and losses, and assumption gains and losses, over differing amortization
periods. The resulting schedule shows that the City would be 100% funded (for one moment in
time), by 2039. However, each year the actuarial study applies new gains and losses to a new
amortization schedule, and takes into account expected investment returns versus actual
returns, and can create an unfunded liability from one year to the next.
Because the City has a high funded status and is able to make its ARC, at this point Staff
recommends looking at alternate amortization schedules rather than making a large one -time
contribution from reserves. CalPERS provided the following information with the most recent
actuarial report that estimates alternate payments (that increase by % each year) that the City
can make in order to realize savings:
Level Rate
Period 2016 -17 Total Total Savings
Payment Payments Interest
20 $690,365 $18,550,353 $9,407,109 $746
15 $838,157 $15,588,808 $6,445,564 $2,962,292
The Adopted Fiscal Year 2016 -17 Budget and the 10 -Year Forecast includes a budget for
increased payments against unfunded liabilities (minimum $500,000), so the increased payment
has already been projected for the long term. Staff will report back to the City Council on the
progress of these funding increases in a future Staff Report.
City Pension Summary: 1) Plan is well funded, ARC is containable
2) Savings can be realized through larger annual payments
Staff Recommendation: 1) Fully fund the ARC
Page 5 of 7
2) Target 80% as the minimum funded status
3) Evaluate alternate amortization schedules for unfunded
liability
City Other Post - Employment Benefits Plan
The City's unfunded OPEB liability as of June 30, 2015, is $4.5 million, and the plan is 74.5%
funded. As the table below illustrates, this is the highest funded status of all cities in Alameda
County, according to the most recently available actuarial reports, as found through Staff
research.
Alameda County OPEB Funding, by City
Agency
Liability
Value of Assets
Unfunded Liability
Funded Ratio
aubtin
17;657;4100
13;154,4100
4,5413,000
74,5+0/
Union City
17,028,000
6,291,000
10,737,000
36.95%
Piedmont
18,524,000
5,218,561
13,305,439
28.17%
Pleasanton
106,695,000
28,057,000
78,638,000
26.30%
Berkeley
103,319,612
25,149,849
78,169,763
24.34%
Livermore
69,067,000
9,459,000
59,608,000
13.70%
Emeryville
7,224,000
883,000
6,341,000
12.22%
San Leandro
16,081,000
1,505,000
14,576,000
9.36%
Hayward
75,797,884
839,626
74,958,258
1.11%
Alameda
113,164,000
177,000
112,987,000
0.16%
Oakland
463,851,000
0
463,851,000
0.00%
Fremont
70,797,000
0
70,797,000
0.00%
Albany
1,427,464
0
1,427,464
0.00%
Newark
5,845,000
0
5,845,000
0.00%
The City has historically fully funded its OPEB ARC, which has been set at a level percent of
payroll (most recently, 14.6 %, or $1.5 million). In Fiscal Year 2014 -15, the City Council
approved changes to the retiree health benefit that set all retirees and current employees (hired
before January 1, 2016) at the same benefit rate of $1,680 per month, increasing annually over
the next five years. Employees hired after January 1, 2016 receive the minimum PERS benefit
of roughly $125 per month. This change is projected to save the City an estimated $4.4 million
over 15 years. When the unfunded liability is paid off, the City will pay $600,000 per year in
estimated Normal Costs, versus $1.4 million per year, without the change. Increasing the City's
OPEB funding status to 80% minimum would require a one -time payment of approximately
$972,000, and would save the City an estimated average of $120,000 per year.
City OPEB Summary: 1) Plan is well funded, ARC is containable
2) Savings can be realized through larger annual payments
Staff Recommendation: 1) Fully fund the ARC
2) Target 80% as the minimum funded status
3) Contribute $1.0 million in Fiscal Year 2015 -16, to bring
funding to 80 %. Savings: $120,000 per year
Page 6 of 7
City's Share of ACFD OPEB
On November 6, 2012, City Council adopted a Resolution (Attachment 3) authorizing the City
Manager to enter into an agreement with the ACFD regarding funding its fair share of retiree
medical benefit liabilities. The City Council approved an initial contribution of $6.487 million,
which was the Accrued Liability value at the time. The allocation of the ACFD unfunded liability
has been somewhat complex as ACFD has multiple contracting agencies, and at the time,
CalPERS did not have the capability of establishing sub - accounts for each contracting agency
under ACFD's primary account. ACFD management has been working with CalPERS diligently
since then, and has successfully implemented side funds that allow contracting agencies to pre -
fund OPEB obligations independently, and through a managed investment trust.
The side funds represent the amount of unfunded liability for each agency due to past service,
based on ACFD's retiree medical benefit. Each agency decides how much, if any, of its own
side fund to pre -fund. The attached Resolution (Attachment 1) approves an agreement that
provides a framework for the side fund, and allows for the City to elect to pre -fund the obligation
through the trust. Approval of the agreement does not set the funding rate, but outlines the
mechanism for doing so.
According to ACFD's actuarial study, the City's share of the unfunded OPEB liability as of June
30, 2015, is $10.3 million on an actuarial value basis, and the plan is 0.93% funded. The current
balance in the City's General Fund Fire OPEB Reserve is $9.2 million (as of June 30, 2015).
Staff recommends using the reserve to fund the liability to 80% minimum, which would require a
payment of $8.2 million. The savings to the City will be calculated in the next ACFD actuarial
study.
OPEB Summary: 1) Plan is not funded
2) ARC is containable
2) Savings can be realized through pre- funding
Staff Recommendation: 1) Fully fund the ARC
2) Target 80% as the minimum funded status
3) Contribute $8.2 million in Fiscal Year 2015 -16
NOTICING REQUIREMENTS /PUBLIC OUTREACH:
None.
ATTACHMENTS: 1. Resolution Approving the Agreement Regarding Pre - Funding of
OPEB Liability Between Alameda County Fire Department and City
of Dublin, and Exhibit A: Agreement. Regarding Pre - Funding of
OPEB Liability Between Alameda County Fire Department and City
of Dublin
2. Staff Report, November 6, 2012: Authorization to Enter into
Agreement with Alameda County Fire District to Fund Retiree Health
Benefit Liabilities and Providing an Appropriation For the Initial
Contribution
3. Resolution 192 -12 Authorizing the City Manager to Enter Into an
Agreement with Alameda County Fire District Regarding Fair Share
Funding of Retiree Medical Benefits Liabilities and Approving the
Use of Specified General Fund Assets As an Initial Contribution
Page 7 of 7
RESOLUTION NO. -16
A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF DUBLIN
APPROVING THE AGREEMENT
REGARDING PRE - FUNDING OF
OPEB LIABILITY BETWEEN
ALAMEDA COUNTY FIRE
DEPARTMENT AND CITY OF
DUBLIN
WHEREAS, Alameda County Fire Department (ACFD) has provided contractual fire and
emergency response services to City since July 1, 1997; and
WHEREAS, on June 19, 2012 the City Council adopted Resolution No. 119 -12 which approved a
20 -year agreement with Alameda County Fire Department for fire services; and
WHEREAS, the City acknowledges that ACFD has incurred an obligation to fund a retiree
healthcare (Other Post - Employment Benefits, or "OPEB ") plan for certain of its employees assigned to
provide services in the City since ACFD first began providing services to the City; and
WHEREAS, ACFD has entered into a contract with California Public Employees' Retirement
System (CalPERS) to join the California Employers' Retiree Benefit Trust (CERBT), for the purpose of
prefunding its liability, and the City acknowledges receiving a copy of said contract; and
WHEREAS, ACFD has arranged with CalPERS to establish trust sub - accounts for each ACFD
contract agency, providing each contracting agency a mechanism for pre - funding its OPEB obligations
independently; and
WHEREAS, on November 6, 2012, City Council authorized the City Manager to enter into an
agreement with ACFD regarding the calculation and funding of the City's fair share of ACFD's OPEB
liability, and authorized an initial contribution of $6.487 million from the General Fund Reserve for Fire
OPEB Liabilities; and
WHEREAS, ACFD has provided the City of Dublin with an Actuarial Valuation of
ACFD's Retiree Medical Benefit Obligations for Fiscal Year 2015 -16 which reports the
estimated City share of ACFD's Unfunded Actuarial Accrued Liability to be $10.878 million;
and
WHEREAS, the City General Fund Reserve for Fire OPEB Liabilities has a balance of $9.196
million as of June 30, 2015, from which the City Council will direct Staff to contribute an amount to
the City's sub - account of ACFD's CERBT trust; and
WHEREAS, the City Council has been supportive of prudent fiscal management that includes
identification of potential liabilities and careful planning to finance liabilities over time; and
WHEREAS, the CalPERS Trust offer the City the opportunity to have funds designated for Fire
retiree benefits to be professionally managed and invested in a manner consistent with the long term
nature of retiree benefits.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin hereby
approves the agreement (attached hereto as Exhibit A) with Alameda County Fire Department.
BE IT FURTHER RESOLVED that the Mayor is authorized to execute the agreement
substantially in the form Attached to Exhibit A.
BE IT FURTHER RESOLVED that the City Manager is authorized to execute additional
documents and to take such other and further action, as necessary and appropriate to carry out the Intent of
this Resolution.
PASSED, APPROVED AND ADOPTED this 21st day of June 2016, by the following vote:
AGREEMENT AND ELECTION OF
O \lu \V_
C (NAME OF EMPLOYER)
TO PREFUND OTHER POST EMPLOYMENT
BENEFITS THROUGH CALPERS
WHEREAS (1) Government Code Section 22940 establishes in the State Treasury the
Annuitants' Health Care Coverage Fund for the prefunding of health care coverage for
annuitants (Prefunding Plan); and
WHEREAS (2) The California Public Employees' Retirement System (CalPERS)
Board of Administration (Board) has sole and exclusive control and power over the
administration and investment of the Prefunding Plan, the purposes of which include,
but are not limited to (i) receiving contributions from participating employers and
establishing separate Employer Prefunding Accounts in the Prefunding Plan for the
performance of an essential governmental function (ii) investing contributed amounts
and income thereon, if any, in order to receive yield on the funds and (iii) disbursing
contributed amounts and income thereon, if any, to pay for costs of administration of
the Prefunding Plan and to pay for health care costs or other post employment
benefits in accordance with the terms of participating employers' plans; and
WHEREAS (3) C'-- 1 ..... .:_------ a:•• tr4 "
kiNATM PLOYER)
(Employer) is a contracting agency under the Public Employees' Medical and Hospital
Care Act (PEMHCA) administered by the Board, and desires to participate in the
Prefunding Plan upon the terms and conditions set by the Board and as set forth
herein; and
WHEREAS (4) Employer may participate in the Prefunding Plan upon (i) approval
by the Board and (ii) filing a duly adopted and executed Agreement and Election to
Prefund Other Post Employment Benefits (Agreement) as provided in the terms and
conditions of the Agreement; and
WHEREAS (5) The Prefunding Plan is a trust fund that is intended to perform an
essential governmental function within the meaning of Section 115 of the Internal
Revenue Code as an agent multiple - employer plan as defined in Governmental
Accounting Standards Board (GASB) Statement No. 43 consisting of an aggregation
of single - employer plans, with pooled administrative and investment functions;
Rev. 2/7/2007
EXHIBIT A -RESOLUTION
NOW, THEREFORE, BE IT RESOLVED THAT EMPLOYER HEREBY
MAKES,THE FOLLOWING REPRESENTATION AND WARRANTY AND THAT
THE BOARD AND EMPLOYER AGREE TO THE FOLLOWING TERMS AND
CONDITIONS:
A. Representation and Warranty
Employer represents and warrants that it is a political subdivision of the State of
California or an entity whose income is excluded from gross income under Section 115
(1) of the Internal Revenue Code.
B. Adoption and Approval of the Agreement_ Effective Date_ Amendment
(1) Employer's governing body shall elect to participate in the Prefunding Plan by
adopting this Agreement and filing with the Ca1PERS Board a true and correct original
or certified copy of this Agreement as follows:
Filing by mail, send to: Ca1PERS Employer Services Division
P.O. Box 942709
Sacramento, CA 94229 -2709
Filing in person, deliver
to: Ca1PERS Mailroom
Attn: Employer Services
Division 400 Q Street
Sacramento, CA 95814
(2) Upon receipt of the executed Agreement, and after approval by the Board, the Board
shall fix an effective date and shall promptly notify Employer of the effective date of the
Agreement.
(3) The terms of the Agreement may be amended only in writing upon the agreement
of both Ca1PERS and Employer, except as otherwise provided herein. Any such
amendment or modification to the Agreement shall be adopted and executed in the
same manner as required for the Agreement. Upon receipt of the executed amendment or
modification, the Board shall fix the effective date of the amendment or modification.
(4) The Board shall institute such procedures and processes as it deems necessary to
administer the Prefunding Plan, to carry out the purposes of the Agreement, and to
maintain the tax exempt status of the Prefunding Plan. Employer agrees to follow such
procedures and processes.
Rev. 2/7/2007 2
EXHIBIT A -RESOLUTION
MO*
C. Actuarial Valuation and Employer Contributions
(1) Employer shall provide to the Board an actuarial valuation report on the basis of the
actuarial assumptions and methods prescribed by the Board. Such report shall be for the
Board's use in financial reporting and shall be:
(a) prepared and signed by a fellow or associate of the Society of Actuaries
who is also a member of the American Academy of Actuaries or a person
with equivalent qualifications acceptable to the Board;
(b) prepared in accordance with generally accepted actuarial practice and
GASB Statement Nos. 43 and 45; and,
(c) provided to the Board prior to the Board's acceptance of contributions for
the valuation period or as otherwise required by the Board.
(2) The Board may reject any actuarial valuation report submitted to it, but shall not
unreasonably do so. In the event that the Board determines, in its sole discretion, that the
actuarial valuation report is not suitable for use in the Board's financial statements or if
Employer fails to provide a required actuarial valuation, the Board may obtain, at
Employer's expense, an actuarial valuation that meets the Board's financial reporting
needs. The Board may recover from Employer the cost of obtaining such actuarial
valuation by billing and collecting from Employer or by deducting the amount from
Employer's account in the Prefunding Plan.
(3) Employer shall notify the Board of the amount and time of contributions
which contributions shall be made in the manner established by the Board.
(4) Employer contributions to the Prefunding Plan may be limited to the amount
necessary to fully fund Employer's actuarial present value of total projected benefits, as
that term is defined in GASB Statement No. 45, as supported by the actuarial valuation
acceptable to the Board. If Employer's contribution causes its assets in the Prefunding
Plan to exceed the amount required to fully fund projected benefits, the Board may
refuse to accept the contribution.
(5) The minimum Employer contribution shall be the lesser of $5000 or be equal to
Employer's Annual Required Contribution as that term is defined in GASB Statement
No. 45. Contributions can be made at any time following the seventh day after the
effective date of the Agreement provided that Employer has first complied with the
requirements of Paragraph C.
Rev. 2/7/2007 3
EXHIBIT A - RESOLUTION
/;I
D. Administration of Accounts, Investments, Allocation of Income
(1) The Board has established the Prefunding Plan as an agent plan consisting of an
aggregation of single - employer plans, with pooled administrative and investment
functions, under the terms of which separate accounts will be maintained for each
employer so that Employer's assets will provide benefits only under Employer's plan.
(2) All Employer contributions and assets attributable to Employer contributions shall be
separately accounted for in the Prefunding Plan (Employer's Prefunding Account).
(3) Employer's Prefunding Account assets may be aggregated with prefunding account
assets of other employers and may be co- invested by the Board in any asset classes
appropriate for a Section 115 Trust.
(4) The Board may deduct the costs of administration of the Prefunding Plan from the
investment income or Employer's Prefunding Account in a manner determined by the
Board.
(5) Investment income shall be allocated among employers and posted to Employer's
Prefunding Account as determined by the Board but no less frequently than annually.
(6) If Employer's assets in the Prefunding Plan exceed the amount required to fully fund
projected benefits, the Board may return such excess to Employer.
E. Reports and Statements
(1) Employer shall submit with each contribution a contribution report in the form
and containing the information prescribed by the Board.
(2) The Board shall prepare and provide a statement of Employer's Prefunding Account
at least annually reflecting the balance in Employer's Prefunding Account, contributions
made during the period and income allocated during the period, and such other
information as the Board determines.
F. Disbursements
(1) During any of the first three years following the effective date of this Agreement, no
disbursement shall be made in a fiscal year from the Prefunding Plan to Employer
unless Employer first contributes the full amount of its actuarially determined Annual
Required Contribution during that fiscal year. If during any of the first three years
following the effective date of the Agreement, Employer has contributed the full amount
of its actuarially determined Annual Required Contribution during a fiscal year,
Employer may receive disbursements not to exceed the annual premium cost for
post employment healthcare benefits and other post employment benefits paid during the same
fiscal year.
Rev. 2/7/2007
EXHIBIT A -RESOLUTION
(2) Employer shall notify CaIPERS in writing in the manner specified by CaIPERS of
the persons authorized to request disbursements from the Prefunding Plan on behalf of
Employer.
(3) Employer's request for disbursement shall be in writing signed by Employer's
authorized representatives, in accordance with procedures established by the Board.
The Board may require that Employer certify or otherwise establish that the monies will
be used for the purposes of the Prefunding Plan.
(4) Requests for disbursements received on or after the first of a month will be
processed by the 15th of the following month. (For example, a disbursement request
received on or between March 1st and March 31st will be processed by April 15th; and
a disbursement request received on or between April 1st and April 30th will be
processed by May 15th.)
(5) Ca1PERS shall not be liable for amounts disbursed in error if it has acted upon the
instruction of an individual authorized by Employer to request disbursements. In the
event of any other erroneous disbursement, the extent of Ca1PERS' liability shall be the
actual dollar amount of the disbursement, plus interest at the actual earnings rate but not
less than zero.
(6) No disbursement shall be made from the Prefunding Plan which exceeds the
balance in Employer's Prefunding Account.
G. Costs of Administration
Employer shall pay its share of the costs of administration of the Prefunding Plan, as
determined by the Board.
H. Termination of Employer Participation in Prefunding Plan
(1) The Board may terminate Employer's participation in the Prefunding Plan if:
(a) Employer gives written notice to the Board of its election to terminate;
(b) Employer ceases to be a PEMHCA participant;
(c) The Board finds that Employer fails to satisfy the terms and conditions of
the Agreement or of the Board's rules or regulations.
(2) If Employer's participation in the Prefunding Plan terminates for any of the foregoing
reasons, all assets in Employer's Prefunding Account shall remain in the Prefunding
Plan, except as otherwise provided below, and shall continue to be invested and accrue
income as provided in Paragraph D.
Rev. 2/7/2007
5
IDlfJ f`
EXHIBIT A -RESOLUTION
I lob 16-
(3) After Employer's participation in the Prefunding Plan terminates, Employer may not
make contributions to the Prefunding Plan.
(4) After Employer's participation in the Prefunding Plan terminates, disbursements
from Employer's Prefunding Account may continue upon Employer's instruction or
otherwise in accordance with the terms of the Agreement.
(5) After thirty -six (36) months have elapsed from the effective date of the Agreement:
(a) Employer may request a trustee to trustee transfer of the assets in
Employer's Prefunding Account. Upon satisfactory showing to the Board
that the transfer will satisfy applicable requirements of the Internal
Revenue Code and the Board's fiduciary duties, then the Board shall
effect the transfer within one hundred twenty (120) days. The amount to
be transferred shall be the amount in the Employer's Prefunding Account
as of the disbursement date and shall include investment earnings up to
the investment earnings allocation date immediately preceding the
disbursement date. In no event shall the investment earnings allocation
date precede the transfer by more than 120 days.
(b) Employer may request a disbursement of the assets in Employer's
Prefunding Account. Upon satisfactory showing to the Board that all of
Employer's obligations for payment of post employment health care
benefits and other post employment benefits and reasonable
administrative costs of the Board have been satisfied, then the Board shall
effect the disbursement within one hundred twenty (120) days. The
amount to be disbursed shall be the amount in the Employer's Prefunding
Account as of the disbursement date and shall include investment earnings
up to the investment earnings allocation date immediately preceding the
disbursement date. In no event shall the investment
earnings allocation date precede the disbursement by more than 120 days.
(6) After Employer's participation in the Prefunding Plan terminates and at such time
that no assets remain in Employer's Prefunding Account, this Agreement shall
terminate.
(7) If, for any reason, the Board terminates the Prefunding Plan, the assets in Employer's
Prefunding Account shall be paid to Employer after retention of (i) amounts
sufficient to pay post employment health care benefits and other post employment benefits
to annuitants for current and future annuitants, and (ii) amounts sufficient to pay
reasonable administrative costs of the Board.
Rev. 2/7/2007 6
EXHIBIT A -RESOLUTION
(8) If Employer ceases to exist but Employer's Prefunding Plan continues to exist and if
no provision has been made by Employer for ongoing payments to pay post employment
health care benefits and other post employment benefits to annuitants for current and
future annuitants, the Board is authorized to and shall appoint a third party administrator
to carry out Employer's Prefunding Plan. Any and all costs associated with such
appointment shall be paid from the assets attributable to contributions by Employer.
(9) If Employer should breach the representation and warranty set forth in Paragraph A.,
the Board shall take whatever action it deems necessary to preserve the tax - exempt status
of the Prefunding Plan.
L General Provisions
(1) Books and Records.
Employer shall keep accurate books and records connected with the performance of
this Agreement. Employer shall ensure that books and records of subcontractors,
suppliers, and other providers shall also be accurately maintained. Such books and
records shall be kept in a secure location at the Employer's office(s) and shall be available
for inspection and copying by CalPERS and its representatives at any time.
(2) Audit.
(a) During and for three years after the term of this Agreement, Employer
shall permit the Bureau of State Audits, CalPERS, and its authorized
representatives, and such consultants and specialists as needed, at all
reasonable times during normal business hours to inspect and copy, at the
expense of CalPERS, books and records of Employer relating to its
performance of this Agreement.
(b) Employer shall be subject to examination and audit by the Bureau of State
Audits, CalPERS, and its authorized representatives, and such
consultants and specialists as needed, during the term of the Agreement and
for three years after final payment under the Agreement. Any examination
or audit shall be confined to those matters connected with the performance
of the Agreement, including, but not limited to, the costs of administering
the Agreement. Employer shall cooperate fully with the Bureau of State
Audits, CalPERS, and its authorized representatives, and such consultants
and specialists as needed, in connection with any examination or audit. All
adjustments, payments, and /or reimbursements determined to be necessary
by any examination or audit shall be made promptly by the appropriate
party.
Rev. 2/7/2007
7
EXHIBIT A - RESOLUTION
FIJI
wow
(3) Notice.
(a) Any notice, approval, or other communication required or permitted under
this Agreement will be given in the English language and will be deemed
received as follows:
1. Personal delivery. When personally delivered to the recipient.
Notice is effective on delivery.
2. First Class Mail. When mailed first class to the last address of the
recipient known to the party giving notice. Notice is effective three
delivery days after deposit in a United States Postal Service office
or mailbox.
3. Certified mail. When mailed certified mail, return receipt requested.
Notice is effective on receipt, if delivery is confirmed by a return
receipt.
4. Overnight Delivery. When delivered by an overnight delivery
service, charges prepaid or charged to the sender's account, Notice
is effective on delivery, if delivery is confirmed by the delivery
service.
5. Telex or Facsimile Transmission. When sent by telex or fax to the
last telex or fax number of the recipient known to the party giving
notice. Notice is effective on receipt, provided that (i) a duplicate
copy of the notice is promptly given by first -class or certified mail
or by overnight delivery, or (ii) the receiving party delivers a written
confirmation of receipt. Any notice given by telex or fax shall be
deemed received on the next business day if it is received after 5:00
p.m. (recipient's time) or on a nonbusiness day.
6. E -mail transmission. When sent by e -mail using software that
provides unmodifiable proof (i) that the message was sent, (ii) that
the message was delivered to the recipient's information processing
system, and (iii) of the time and date the message was delivered to
the recipient along with a verifiable electronic record of the exact
content of the message sent.
Addresses for the purpose of giving notice are as shown in Paragraph 8.(1) of the
Agreement.
Rev. 2/7/2007
EXHIBIT A -RESOLUTION
I 00 r5
(b) Any correctly addressed notice that is refused, unclaimed, or undeliverable
because of an act or omission of the party to be notified shall be deemed
effective as of the first date that said notice was refused, unclaimed, or
deemed undeliverable by the postal authorities, messenger or overnight
delivery service.
(c) Any party may change its address, telex, fax number, or e -mail address by
giving the other party notice of the change in any manner permitted by this
Agreement.
(d) All notices, requests, demands, amendments, modifications or other
communications under this Agreement shall be in writing. Notice shall be
sufficient for all such purposes if personally delivered, sent by first class,
registered or certified mail, return receipt requested, delivery by courier
with receipt of delivery, facsimile transmission with written confirmation
of receipt by recipient, or e -mail delivery with verifiable and unmodifiable
proof of content and time and date of sending by sender and delivery to
recipient. Notice is effective on confirmed receipt by recipient or 3
business days after sending, whichever is sooner.
(4) Modification
This Agreement may be supplemented, amended, or modified only by the mutual
agreement of the parties. No supplement, amendment, or modification of the Agreement
shall be binding unless it is in writing and signed by the party to be charged.
(5) Survival
All representations, warranties, and covenants contained in the Agreement, or in any
instrument, certificate, exhibit, or other writing intended by the parties to be a part of
their Agreement shall survive the termination of the Agreement until such time as all
amounts in Employer's Prefunding Account have been disbursed.
(6) Waiver
No waiver of a breach, failure of any condition, or any right or remedy contained in or
granted by the provisions of the Agreement shall be effective unless it is in writing and
signed by the party waiving the breach, failure, right, or remedy. No waiver of any
breach, failure, right, or remedy shall be deemed a waiver of any other breach, failure,
right, or remedy, whether or not similar, nor shall any waiver constitute a continuing
waiver unless the writing so specifies.
Rev. 2/7/2007
EXHIBIT A - RESOLUTION
(7) Necessary Acts, Further Assurances
The parties shall at their own cost and expense execute and deliver such further
documents and instruments and shall take such other actions as may be reasonably
required or appropriate to evidence or carry out the intent and purposes of the Agreement.
A majority vote of Employer's Governing Body at a public meeting held on the
day of the month of 2007, authorized entering into the
Agreement.
Signature of the Presiding Officer:
Printed Name of the Presiding Officer:
Name of Governing Body:
Name of Employer:
Date:
BOARD OF ADMINISTRATION
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
BY - - - - - --
ACTUARIAL AND EMPLOYER SERVICES BRANCH
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
To be completed by CalPERS
The effective date of the Agreement is:
Rev. 2/7/2007 10
EXHIBIT A - RESOLUTION
. 1�:.._
AGREEMENT REGARDING PRE - FUNDING OF OPEB LIABILITY
BETWEEN
ALAMEDA COUNTY FIRE DEPARTMENT
AND
CITY OF DUBLIN
THIS AGREEMENT is made and entered into this � ` � day of 2016, which date
is designated for purposes of reference only, by and between the ALAMEDA COUNTY FIRE
DISTRICT ( "Alameda County Fire Department" or "ACFD "), a dependent fire district formed
under the Fire Protection District Law of 1987 (Health and Safety Code Sections 13800 et seq.)
and governed by the Alameda County Board of Supervisors as its Board of Directors, and the
CITY OF DUBLIN ( "City "), a municipal corporation (collectively "the Parties ").
RECITALS
Definitions.
As used in this Agreement;
1. "Ca1PERS" means California Public Employees' Retirement System,
2. "Side Fund" means the City's proportionate share of the ACFD unfunded actuarial (1>
accrued liability for OPEB as estimated by valuations prepared by ACFD's actuarial 4
consultant (e.g. June 30, 2415 GASB 45 Actuarial Valuation for Fiscal Years 2016117 1
and 2017/18). The parties specifically acknowledge that the actual monetary amount of �q
the City's proportionate share is estimated by the actuarial valuations but has not yet
been definitively determined and that patties will negotiate in good faith to definitively
determine that amount.
3. "Normal Cost" means value of benefits earned or attributed to the current year. C-)
4, "OPEB" means Other Post - Employment Benefits,
5. "CERBT" means California Employers' Retiree Benefit Trust administered by
CalPERS.
WHEREAS, ACFD has provided contractual fire and emergency response services to City since
July 1, 1997; and
WHEREAS, ACFD currently provides services to City pursuant to the Agreement Between the
City of Dublin and the Alameda County Fire District Regarding Fire and Emergency Response
Services, entered into on or about July 19, 2012 (the "2012 Fire Services Agreement "); and
WHEREAS, ACFD provides fire and emergency response services to other jurisdictions ( "Other
Contracting Agencies ") pursuant to separate contracts with those agencies; and
WHEREAS, ACFD provides its employees, including those that provide services in and/or for
City, certain post - retirement medical benefits. Pursuant to the labor agreements in effect at the
time of execution of this Agreement, to be eligible for such benefits, employees must be
employed with ACFD for at least five (5) years and must have at least twenty (20) years of
CalPERS service credit.
WHEREAS, the 2012 Fire Services Agreement provides, at Section 5(b):
Retiree Healthcare Plan Unfunded Liability
The City acknowledges that ACFD has incurred an obligation to fund a retiree
healthcare plan for certain of its employees assigned to provide services in the
City since ACFD first began providing services to the City on July 1, 1997. The
parties hereby agree to negotiate, in good faith, an agreement establishing a fair
and equitable framework whereby the City shall fund its proportionate share of
ACFD's obligation to provide a retiree healthcare plan for its employees, both
retroactively and to the extent that said obligation continues to accrue during the
term of this Agreement.
The City shall be responsible for its proportionate share of retiree health care
plan unfunded liability remaining with the ACFD plan if the contract for fire
services with ACFD is terminated,
WHEREAS, the Parties have not yet definitively negotiated an agreement "establishing a fair
and equitable framework whereby the City shall fund its proportionate share of ACFD's
obligation to provide a retiree healthcare plan for its employees," due to the complexities
involved in negotiating such an agreement. ACFD has provided the City and the Other
Contracting Agencies a methodology for allocating the unfunded liability that will serve as a
framework for those negotiations; and
WHEREAS, the ACFD's fire service agreements currently require the City and the Other
Contracting Agencies to pay a proportionate share of the medical premium costs that it pays to
current retirees, and the Parties anticipate that the agreements will continue to include such a
requirement; and
WHEREAS, ACFD has entered into a contract with Ca1PERS to join the California Employers'
Retiree Benefit Trust (CERBT), for the purpose of prefunding its liability, and City
acknowledges receiving a copy of said contract; and
WHEREAS, ACFD and Ca1PERS have created sub - accounts within ACFD's trust account for
the purpose of allowing each contracting agency a mechanism for pre - funding its OPEB
obligations independent of the pre - funding choices of the other agencies; and
2
WHEREAS, the Parties desire that City have the option to prefund its proportionate share of
ACFD's OPEB obligation using the CERBT sub - account established for City; and
WHEREAS, the Parties expect, but do not represent or warrant, that pref riding will reduce the
long terra OPEB obligation and lead to an OPEB cost that, over time, is more level as a
percentage of payroll, due to the higher investment returns expected (but not guaranteed) from a
Trust; and
WHEREAS, an agency's pre- funding contributions will benefit only that agency and will not
subsidize the retiree medical benefits of any other agency.
AGREEMENT
1. The foregoing recitals are true and correct,
2. City may pre -fund its proportionate share of ACFD's OPEB liability by contributing to the
sub - account designated for City within the ACFD CERBT. Until such time as its share of
ACFD's OPEB liability has been definitively allocated, City may pre -fund its sub - account
up to the amount of its then current Side Fund, Any such pre - funding shall be in accordance
with this Agreement. The yearly calculation used to calculate the City's Side Fund is as
follows:
Beginning of Year Side Fund Balance
+ Allocated Portion of the full Pre - Funding Normal Cost
- Allocated Benefit Payments
• Allocated (Gains )/Losses
• Zrxterest to the End of the Year
End of Year Agency Side Fund Balance
3. No portion of City's CERBT sub - account balance will be used to offset any other agency's
side fund balance. To the extent any Other Contracting Agency pre -funds its side fund using
the CERBT, its contributions will go into its individual CERBT sub - account and will offset
its proportionate share of ACFD's OPEB liability.
4. Access, Administration and Disbursements.
a. ACFD will make reasonable efforts to ensure that CalP1RS provides online access for
City to view its sub- account activity. City shall be responsible for providing the
necessary information and authority to allow CalPERS to provide such access.
b. City will be responsible for the cost of administration and maintenance of its subaccount,
which cost will be deducted from City's sub - account and reflected on City's quarterly
statements.
c. City may elect to have disbursements made from its sub - account to satisfy obligations it
otherwise has to pay ACFD for costs that can be funded with disbursements from the
account,
3
d. Notwithstanding paragraph 4.c., City cannot withhold payment(s) due pursuant to the
2012 Fire Services Agreement in reliance on making withdraw request(s) from Ca1PERS
through ACFD or pending a disbursement from the sub - account.
e. City shall make all deposits and disbursement requests through ACED. City shall submit
its requests for deposits and disbursements in writing signed by City's authorized
representative to ACFD. City will make the check payable to CERBT. ACFD will
submit City's requests to CalPERS within 15 business days. City acknowledges that at
least 2 months of turnaround time may be required for its requested deposits or
disbursements to be finalized and reflected in the sub - account. ACFD will reimburse the
City within 15 business days the receipt of the disbursement from CERBT.
f. No disbursement shall be made from the sub - account if the sub - account has an
insufficient balance for such disbursements.
g. Disbursement carmot exceed the annual premium and other costs of post - employment
healthcare benefits and OPEB as defined in GASB 43.
h. ACFD shall not be liable for amounts disbursed in error if it has acted upon written
instructions of an individual authorized by the City to request disbursement. If ACFD
makes a disbursement in error, it will correct the amount by reconciling the following
quarter's payment.
i. ACFD shall promptly provide information to City regarding any changes to the
retirement status of ACFD employees. City is responsible for identifying disbursement
eligible items. ACFD will provide City with data requested by City to assist City in its
efforts to identify disbursement eligible expenditures.
5. Mutual Indemnification. The following mutual indemnification is entered into between
ACFD and the City. For purposes of this Section, references to ACFD or the City shall
include the public entity, all of its current and past employees and managers, all elected or
appointed officials, all constituent departments, committees, successors, subsidiaries, related
entities, independent contractors, attorneys, agents, and assigns.
Except as otherwise specifically provided in this Agreement or any attachment hereto ACFD
shall defend, indemnify, and hold harmless the City from and against any and all claims,
losses, damages, liabilities, and expenses, including but not limited to attorneys' fees, based
or asserted upon any act or omission of ACFD in connection with or arising out of the
performance by ACFD of this Agreement and with regard to any alleged illegality or
unconstitutionality of a County ordinance.
Except as otherwise specifically provided in this Agreement or any attachment hereto, the
City shall defend, indemnify, and hold harmless ACFD from and against any and all claims,
losses, damages, liabilities, and expenses, including but not limited to attorneys' fees, based
or asserted upon any act or omission of City, in connection with or arising out of the
performance by City of this Agreement and with regard to any alleged illegality or
unconstitutionality of a City ordinance,
4
6. Notices. All notices required or permitted hereunder shall be deemed sufficiently given if
delivered by hand or mailed, by United States mail, postage prepaid, certified or registered
mail, addressed to the Parties at the addresses set forth below or to such other address as
may, from time to time to designated in writing.
Alameda County Fire Department City of Dublin
Alameda County Fire Chief City Manager
6363 Clark Avenue 100 Civic Plaza
Dublin, CA 94568 Dublin, CA 94568
7. Term. The term of this contract is from the date first written above until 11:59 p.m. on June
30, 2032, unless sooner terminated in accordance with the provisions herein.
8. Termination. This Agreement may be terminated effective June 30 of any fiscal year, by
mutual agreement of the parties, by giving written notice of termination to the other party
not later than September 1 of the, same fiscal year.
9. Transfer of Sub - account in Event of Transfer ACFD Employees to City or Another Agency.
The parties acknowledge the possibility that City could itself provide fire service or contract
with another entity for the provision of fire service, in which case it is likely that certain
ACFD employees would transfer to City or to the other entity. In such event, the Parties
agree to negotiate in good faith an allocation of the ACFD unfunded actuarial accrued
liability for OPEB that will be assumed by the City or another entity for the provision of fire
service. In such event, ACFD agrees to transfer to the City's trust account any excess assets
in the City's CERgT sub - account (i.e., those funds that remain after available funds have
been applied to 'the portion of the City's proportionate share of the unfunded actuarial
accrued liability that remains with ACID). ACFD shall cease allocating unfunded liability
to the City following such an event if the City fully funds its proportionate share of ACFD's
OPEB liability and the excess assets held in the City's sub - account have been transferred to
the City.
10. Survival. The obligations of this Agreement, which by their nature would continue beyond
the termination on expiration of the Agreement, shall survive termination or expiration.
11. Severability. If a court of competent jurisdiction holds any provision of this Agreement to
be illegal, unenforceable, or invalid in whole or in part for any reason, the validity and
enforceability of the remaining provisions, or portions of them, will not be affected, unless
an essential purpose of this Agreement would be defeated by the loss of the illegal,
unenforceable, or invalid provision.
12. Modification.. This Agreement may be supplemented, amended or modified only by a
writing signed by both parties.
5
13. Waiver. No waiver of any breach, failure, right, or remedy under this agreement shall be
deemed a waiver of any other breach, failure, right or remedy, nor shall any waiver
constitute a continuing waiver unless so specified in a writing signed by both parties.
14. Further Obligations. The parties recognize that this Agreement cannot represent a complete
expression of all issues, which may arise during the performance of the Agreement,
Accordingly, ACFD and City agree to meet and confer in good faith over any issue not
expressly described herein to the end that the City will retain the option of pre - funding its
share of ACFD's OPEB obligation in accordance with applicable laws, regulations, and
accounting standards.
15. Signatory. By signing this agreement, signatory warrants and represents that he/she
executed this Agreement in his/her authorized capacity and that by his/her signature on this
Agreement, he/she or the entity upon behalf of which he/she acted, executed this Agreement.
[SIGNATURES FOLLOW ON NEXT PAGE]
0
ALAMEDA COUNTY FIRE DISTRICT
By:
Scott Haggerty, President
Board of Directors
Approved as to form Donna R, Ziegler,
County Counsel:
BY :ms's
Heather Littlejohn,
Deputy County Counsel
ATTEST: Clerk, Board of Supervisors Alameda County, California I hereby certify under penalty of
perjury that the President of the Board of Supervisors was duly authorized to execute this document on
behalf of the County of Alameda by a majority vote of the Board on
2016
CITY OF DUBLIN
U-61
Attest:
i
David Haubert, Mayor
Caroline P. Soto, City Clerk
Approved as to form and legality:
John Bakker,
City Attorney
1 14,1001 2515479.6
7
Date: `
i
Date:
19 82
�rraR �
DATE:
TO:
FROM:
STAFF REPORT
CITY COUNCIL
November 6, 2012
Honorable Mayor and City Councilmembers
Joni Pattilio, City. Manager&6k�
CITY CLERK
File #600 -40
SUBJECT: Authorization To Enter Into Agreement With Alameda County Fire District To
Fund Retiree Health Benefit Liabilities And Providing An Appropriation For The
Initial Contribution
Prepared by Paul S. Rankin, Administrative Services Director
EXECUTIVE SUMMARY:
On June 19, 2012 the City Council approved an agreement with Alameda County Fire District
(ACFD) to provide Fire Services to the City. ACFD provides services to multiple jurisdictions in
Alameda County. As part of its operating costs the Department has incurred a liability for
Retiree Medical benefits. The agencies served by ACFD have developed a methodology for
allocating this liability. The City of Dublin has, over the years, put aside funds to begin to reduce
the City share of the obligation. The City Council will be requested to authorize the City
Manager to negotiate and execute an agreement related to the funding of Retiree Medical
Benefits and to make an appropriation to reduce the amount of the City of Dublin's share of the
total obligation.
FINANCIAL IMPACT:
The projected total funding required for the ACFD Retiree Medical side funds is $69.138 million
as of June 30, 2013. The City of Dublin share is estimated to be $7.61 million. Staff is
proposing to mane an initial deposit of $6.487 million which represents the City share as of June
30, 2011. The source of this funding will be from General Fund net assets (reserves). This
action reduces by 10% the estimated City General Fund balance as of June 30, 2012.
Additional future contributions will be made as discussed further in this report.
RECOMMENDATION:
Staff recommends that the City Council: 1) Adopt the Resolution Authorizing the City Manager
to enter into an agreement with Alameda County Fire District regarding fair share funding of
Retiree Medical Benefit liabilities and approving the use of specified General Fund assets as an
initial contribution; and 2) Authorize the Budget Change.
Submitted By
Administrative Services Director
Reviewed By
Assistant City Manager
Page 1 of 5 ITEM NO. &2
DESCRIPTION:
The purpose of this report is to obtain City Council authorization to implement a supplemental
agreement with Alameda County Fire District regarding the funding of retiree medical benefit
liabilities as well as authorize an appropriation that will contribute funds to an irrevocable trust in
order to reduce the City of Dublin's share of this liability. The discussion about paying dawn our
Fire OPEB liability has been an element of our discussions with the City Council during the most
recent budget preparation and deliberations. We were awaiting the actuarial study which was
just completed recently in order to present the fiscal impact.
Background
On June 19, 2412 the City Council adopted Resolution No. 119 -12 which approved a 217 -year
agreement with Alameda County Fire District for Fire Services_ The City has contracted with
ACFD since 1997. The Agreement included the following provision as it related to unfunded
liability for retiree medical benefits:
Section 5 Cost of Services: Subsection b_ Retiree Healthcare Plan Unfunded Liabilit
The City acknowledges that ACFD has incurred an obligation to fund a retiree healthcare
plan for certain of its employees assigned to provide services in the City since ACFD first
began providing services to the City on ,duly 1, 1997. The parties hereby agree to
negotiate, in good faith, an agreement establishing a fair and equitable framework
whereby the City shall fund its proportionate share of ACFD's obligation to provide a
retiree healthcare plan for its employees, both retroactively and to the extent that said
obligation continues to accrue during the term of this Agreement.
The City shall be responsible for its proportionate share of retiree healthcare plan
unfunded liability remaining with the ACFD plan if the contract for fire services with ACFD
is terminated.
The arrangements for assigning the liability are somewhat complex as ACFD has multiple
contracting agencies, which have been receiving services for varying periods of time. Since the
retirees are former employees of ACFD, the District retains the responsibility for financial
disclosure of the full liability in its financial records, Therefore, ACFD Management, working in
consultation with a consulting actuary (Bartel & Associates), had to develop a system to allocate
the fair share of liability to each agency. The final resolution also has to accommodate different
strategies used by the participating agencies to fund their obligation.
Liability Background
In general the liability for retiree benefits are incurred based on service by employees and paid
out over many years. These liabilities are also sometimes referred to in the accounting
pronouncements as "Other Post - Employment Benefits" (OPEB). Actuaries assist in projecting
the amount of the liability based on assumptions such as: the number of employees covered;
the cost of the benefits they will receive in the future; the life span of the retiree and any covered
dependents; and other factors. Current Government Accounting Standards require agencies to
calculate and disclose the liability. In this case the liability for fire department retirees is
recorded on the ACFD financial statements.
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The liability is a projection of the estimated cost to provide the benefit to both current employees
as well as accrued liabilities for those who may have already retired. Although there is not a
requirement to pre -fund the liability, the City of Dublin has a history of proactively working
towards pre - funding retiree liabilities. Likewise, the partners contracting with Alameda County
Fire District and the County have looked at options to pre -fund. Some of the benefits of pre -
funding include:
• Prefunding enables the agencies to calculate actuarially determined periodic
contributions to partially or completely fund future obligations.
• Earnings on assets reduce employer contributions.
• Reduces the net 0 P E B obligation liability on the balance sheet of the agency granting the
benefit (ACFD).
• Enhances financial security for retirees.
The City of Dublin has a long standing practice of proactively pre- funding retiree health
liabilities. Since 1999, the City has worked with actuaries to assess the City liability and begin to
incrementally set aside funds for these future obligations. The City was among the first
participating agencies in June of 2007 to contribute to the CaIPERS Trust Fund established for
this purpose. The City will extend this practice by working with ACFD to finance the City fair
share of ACFD liabilities,
Methadolo
The District and its actuary developed a proposed system intended to meet the needs of the
District and contracting agencies, The methodology used determined the total liability for ACFD
and then calculated a "side fund" for each participating agency. The side fund represents the
amount of unfunded liability for each agency due to past service, based on ACFD retiree
medical benefits. As of the actuary's June 30, 2013 estimate, ACFD has the largest share at
32.24 %; the City of Dublin share is 11.02 %. The purpose of calculating side funds is to allow
each agency the choice on pre- funding Retiree Medical benefits.
Assumptions related to the discount rate will impact the amount of the liability. They relate to
the assumed earnings on the deposited funds. To the extent that funds can be invested before
the benefits are paid, interest that is earned from investments will reduce contributions required
in the future. However an aggressive discount rate may result in continued funding shortfalls if
the investments perform at less than the assumed rate. The actuary has prepared the liability
calculations using a rate of 7.25 %. This rate is a more conservative assumption than the
maximum discount rate allowed by the CaIPERS Benefits Trust.
The methodology assumes that there will be an annual projected calculation of the side fund.
The following breakdown shows the components that go into the projected Fiscal Year
201212013 City of Dublin side fund balance:
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Component
Projected
Dollar Amt.
Beginning of year "side fund" balance
$7,058,000
Normal Cost Annual allocation of cost for current year employee service.
(Dispatch allocated by call volume -- remainder first by FTE then by allocation %)
368,000
Benefit Payments — Premiums paid for retirees in the current year. (Allocated
based on ACFD data.)
(327,000)
Interest assumed to end of year.
5L 1,000
Sub -Total Side Fund End of Year
$7,600,000
Additional pooled allocation for the year.
10,0_00
TOTAL
$7,610,000
The City of Dublin calculated liability will fluctuate each year based on changes in each of the
components outlined above. In addition there can be changes to the side fund amount based
on changes in actuarial assumptions (ex. Life expectancy; future increases in health costs;
discount rates; number of employees allocated; etc_) ACFD is planning to utilize the CaIPERS
"California Employers Retiree Benefits Trust" (CERBT which was established for the purpose of
receiving employer contributions that will prefund health and other post - employment benefit
casts for retirees and their beneficiaries. It is a method of generating significant revenues from
long term investment to apply toward OPEB obligations.
Authorization to Develop and Execute An Agreement
Since ACFD is the employer responsible for reporting the OPEB liability, it will be important to
have an agreement which specifies the City obligations and flow the funds will be managed.
Items which will be considered in developing the agreement include: A) Definition of how the fair
share is calculated; B) Provisions under which the agencies will resolve any dispute of the
calculation; C) A requirement for the funds to be contributed to an irrevocable trust; D) Reporting
requirements; E) Status of funds in the event that the trust were dissolved or there was a
change in the contract relationship between City and ACFD; and F) Other administrative matters
related to the joint funding of the liability.
Due to the complexity of the issues to be addressed, the parties have not developed the final
agreement. Staff is seeking City Council authorization to enter into a final agreement, which will
be reviewed by the City Attorney and will be consistent with the conceptual framework
presented in this Staff Report. Attachment 1 is a proposed resolution which will document this
authorization.
City of Dublin Contribution Fiscal Year 2012-2013
As noted earlier in this report, the City of Dublin Agreement with ACFD provides that the City will
develop a supplemental agreement to address this funding. The City Council has previously
taken action to designate (set aside) certain General Fund assets to proactively address funding
of this liability- As of dune 30, 20'12, the balance set aside in the Fire Services (OPEB) Benefits
reserve was $5,148,019.57. The Actuarial report prepared by ACFD shows that the City of
Dublin Side Fund balance as of June 30, 2011 was $6,487,000.
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Staff believes that it is prudent to initially fund at least this amount. In order to accommodate the
increased funding, Staff recommends reducing the City General Fund reserve for PERS and
OPEB liabilities by $1,338,980.43 to make the full $6.487 million in Fiscal Year 2012 -2013. The
City OPEB and PERS liability designation has a balance as of June 30, 2012 of $7,073,815.44
and would be reduced to $5,734,834.97. A Budget Change (Attachment 2) has been prepared,
which will appropriate $6,487,040 from the General Fund reserves for this purpose.
The current City Council policy on year end reserves provides that each year the amount of
certain internal charges were added annually to the Fire OPEB reserve designation. This is one
way in which the City incrementally built -up the $5.148 million balance. In the past this has
amounted to an annual increase of approximately $300,000 in this reserve. It is proposed that,
as part of the Fiscal Year 2013/2014 Budget, this process be modified. The funds added at the
end of Fiscal Year 20/2/2013 will be appropriated as additional contributions to the ACFD Fire
side fund in Fiscal Year 201312014. This will continue the pro - active effort by the City to reduce
this liability.
NOTICING REQUIREMENTSIPUBLIC OUTREACH:
Copy of Report to Demetrious Shaffer, Acting Fire Chief ACFD.
ATTACHMENTS: 1. Resolution Authorizing the City Manager to Enter into an Agreement
with Alameda County Fire District Regarding Fair Share Funding of
Retiree Medical Benefits Liabilities and Approving The Use Of
Specified General Fund Assets As An initial Contribution.
2. Budget Change
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