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HomeMy WebLinkAboutMinutes 2011-11-15 zxso MINUTES � SPECIAL MEETING ,, .fir, _ y fa _ o CITY COUNCIL e 9 oR� OF THE CITY OF SOUTH SAN FRANCISCO P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, California 94083 CITY HALL CONFERENCE ROOM 400 GRAND AVENUE SOUTH SAN FRANCISCO TUESDAY, NOVEMBER 15, 2011 1. Call to Order: Time: 6:37 p.m. 2. Roll Call. Present: Councilmembers Addiego, Gonzalez, Matsumoto, Vice Mayor Garbarino, Mayor Mullin Absent: None. 3. Public Comments — comments are limited to items on the Special Meeting Agenda. None. 4. Agenda Review. None. 5. Update on City's liability for Other Post Employee Benefits (OPEB) and Resolution No. 133 -2011 Authorizing Staff to Utilize the County of San Mateo Request for Proposal Process to Recommend an OPEB Trust Provider to Council. Director of Finance Steele presented the staff report recommending that the City Council review the actuarial analysis of Other Post Employment Benefits ( "OPEB "), or retiree health costs, and direct staff via resolution to bring back a formal Trust Agreement to set up an OPEB Trust Fund. Director Steele began by explaining that in January 2010, staff recommended to Council that the City continue to set aside funds to internally save towards paying down the OPEB obligation. At that time, staff also indicated it would come back at a later date and make additional OPEB recommendations to Council. Director Steele next provided a PowerPoint presentation demonstrating that the OPEB liability cost has doubled since January 1, 2006, growing from around 40 million to just over 80 million. The first reason for the rapid increase is that medical costs have grown more rapidly than inflation and wages. Secondly, the City's current pay -as- you -go strategy has the same impact as making minimum payments on a credit card. Councilwoman Matsumoto pointed out the City's liabilities were among the highest in the County. Director Steele advised that, unlike South San Francisco, most of the other cities do not provide employees /retirees with lifetime benefits- this was cited as the primary reason for the City's high ranking. Director Steele next began presenting options for reducing OPEB related costs. The first option included setting aside funds in an OPEB Trust Fund where a higher earnings rate would be realized. At a minimum staff was recommending moving the funds already set aside interlay into a formal OPEB Trust. Mayor Mullin pointed out the current unrest in the financial markets and asked Director Steele how confident he felt in the investment potential. Director Steele, noted that historically and despite uncertainty in the financial markets, investments typically earn over a 20 -30 year time frame. To further improve the investment's security he recommended laddering deposits into the trust. Mayor Mullin next questioned why an OPEB Trust Fund had not been contemplated historically. Director Steele advised that municipalities only started considering this option roughly two (2) years ago. Staff monitored the success of the new investment option in other municipalities. Observed successes and the recent doubling in the City's OPEB liabilities made the Trust accounts more attractive and functional at this time. Mayor Mullin acknowledged that rapidly increasing health care costs were likely the driving force behind the increased awareness of the Trust option. He queried whether Director Steele believed health care cost containment might be on the horizon soon, especially in light of the transition to "Obama Care." Director Steele advised the actuary assumed 12% health care cost increases eventually going down to 9.5% year. He noted, however, that Obama Care would not change the City's obligation to provide retiree health care. Director of Human Resources Mount explained the general consensus is that Obama Care is not designed for employees of large employers with existing plans. Accordingly, staff does not expect that the City would be affected in a positive way by Obama Care for a number of years. Councilman Addiego queried the flexibility of the trust against changed conditions, particularly a circumstance in which the estimated liability amount was higher than actual need. Director Steele advised the trust would have a condition stating that if the obligation fell below assets in the trust, the trust would dissolve and /or refund. SPECIAL CITY COUNCIL MEETING NOVEMBER 15, 2011 MINUTES PAGE 2 Councilman Addiego questioned the expected return if the funds were invested tomorrow. Director Steele noted PERS funds earned 20% in 2010. He restated the importance of laddering the investment. City Attorney Mattas advised a multitude of strategies could be considered from investing once a year to investing every Friday. An actuary could assist Council with these determinations. Director Steele next explained another option was to change the benefit levels for future employees. He reiterated that staff was not looking for a commitment this evening but wanted direction on the prospect of studying solutions and funding strategies. A step in this direction would include passage of the proposed Resolution authorizing the Finance and Human Resources Directors to utilize the County of San Mateo request for proposal process to select an OPEB Trust Provider. Councilman Addiego sated he was convinced the City needed to move in the Trust direction, and possibly look at other complementary options as well. Councilwoman Matsumoto noted the Trust was a good option and she would like to see staff look at other options as well. Mayor Mullin noted the numbers were alarming enough to warrant bold action. However, he cautioned against overreacting and binding the hands of future Councils. Along those lines, he suggested making an annual determination about how and /or whether to continue funding the trust. Councilman Gonzalez commented that like other local officials, the losses associated with the collapse of Lehman Brothers were still fresh in Councilmembers' minds. Accordingly, there was a certain level of discomfort accompanying any risk. He noted however, that something had to be done and he supported the OPEB Trust idea. Vice Mayor Garbarino questioned whether any other local cities had set up a Trust. Director Steele noted four (4) local cities had already set up OPEB Trusts. Motion— Councilman Addiego /Second— Vice Mayor Garbarino: to approve Resolution No. 133- 2011. Unanimously approved by voice vote. Director Steele noted he anticipated being back before Council with initial study results in about 3 -4 months. 6. 2010 -11 Year End Financial Results and Budget Closing Resolution No. 134 -2011. Budget Director Tribby presented the staff report explaining the 2010 -2011 Year- end Financial Results and recommending that the City Council approve the budget amendment resolution authorizing various budget actions and allowing staff to close the books on fiscal year 2010 -11. The General Fund year -end net operating budget impact was a positive $369,000 as revenue came in over budget and expenses under budget across departments. Revenue increases were partially due to TOT and property tax rebounds. Building and fire permits were also on the rise, although SPECIAL CITY COUNCIL MEETING NOVEMBER 15, 2011 MINUTES PAGE 3 expected to taper off over the next few years. TOT increases were expected due to the 2012 America's Cup in San Francisco. After transfers, total General Fund reserves were at 15.5 million. Director Tribby advised that as a result of the better than expected financial results, there were sufficient funds in the Health and Benefits Fund to set aside an additional $2.1 million as of the end of FY 2010 -2011. This was made possible by the following: $300,000 in savings in Workers Compensation Costs and $1.8 million accumulated as the result of the old financial system's imbedded programming structure overcharging departments for benefits. With Council approval of this proposal, as of June 30, 2010 the total reserve for OPEB would be $8.9 million, or roughly 11% of the $82 million liability. Councilwoman Matsumoto queried whether the funds might be earmarked to address Capital Improvement shortfalls. Director Steele noted that on the second page of the attachment to the resolution $5,316,000 was proposed as designated for future economic development and capital projects. The Resolution would further confirm a $1.1 million dollar fund to accomplish the ADA Master Plan Update. Mayor Mullin questioned whether there would be long tcnn benefits to attracting High Tech Companies as opposed to Biotech Companies. Director Steele noted High Tech Companies might offer additional revenues from sales tax. Assistant City Manager and Director of Economic and Community Development Van Duyn observed, however, that the assessed value of Biotech buildings adds substantially to the property tax base. Councilman Addiego questioned whether there was any way to estimate what a sales tax would generate. City Attorney Mottos stated this could be estimated as a percentage of revenues on a per head basis. Any such tax would have to be put to the voters for approval. MotionD Councilwoman Matsumoto /Second Councilman Addiego: to approve Resolution No. 134 -2011. Unanimously approved by voice vote. SPECIAL CITY COUNCIL MEETING NOVEMBER 15, 2011 MINUTES PAGE 4 7. Closed Session: Conference with Labor Negotiators. (Pursuant to Government Code § 54957.6) Agency designated representative: Kathy Mount Employee organizations: AFSCME, Local 829, AFL -CIO Confidential Unit, Teamsters Local 856 International Association of Firefighters, Local 1507 Mid - management Unit International Union of Operating Engineers, Local 39 South San Francisco Police Association Public Safety Managers Executive Management Unit. Closed Session opened: 7:37 p.m. Open Session resumed: 9:30 p.m. Report out of Closed Session: No reportable action. 8. Adjournment. Being no further business, Mayor Mullin adjourned the meeting at 9:30 p.m. Submitt : Ap ved: 7 CMG tuA ti/t/tu, Kr do artine Ric and A. Garbarino City Clerk, City South San Francisco Mayor, City of South San Francisco SPECIAL CITY COUNCIL MEETING NOVEMBER 15, 2011 MINUTES PAGE 5