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HomeMy WebLinkAboutReso 94-1981RESOLUTION NO. 94-81 A RESOLUTION OF .THE CITY COUNCIL OF THE CITY OF SOUTH SAN FRANCISCO SUPPORTING AN INVESTIGATION AND ANALYSIS OF THE INVESTMENT POLICIES OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM IN AN EFFORT TO INCREASE RATE OF RETURN .... BE IT RESOLVED by the City Council of the City of South San Francisco as follows: 1) The California Public Employees' Retirement System membership, as of June 30, 1980, included 357,157 members who are employed by local public agencies; and 2) Nineteen (19) cities of the County of San Mateo, represented by the Mayor and Deputy City Manager of the City of Daly City and the Management Analyst of the City of Redwood City, made a formal presentation to .the PERS Board of Administration at its April 22, 1981 meeting in Los Angeles, requesting a change in PERS investment policies in order to maximize earni.ngs from invest- ments; and . 3) As of this date, no action has been taken by the PERS Board of Administration to indicate that a change in investment policies is imminent; and 4) Short term investment vehicles continue to pay high interest rates, as they have for the past thirty C30) months, with PERS failing to capitalize on these investment opportunities; 5) The 1980 Annual Financial Report and Report of Operations, issued by the Public Employees Retirement System of the State of California for the fiscal period ended June 30, 1980, has revealed that the '.'Computed Rate of Return" on the entire $12.85 Billion investment portfolio was 7.91%; and 6) The rate of inflation, as determined by the state composite California Consumer Price Index, as computed by the California State In- dustrial Relations Board, for the same twelve-month period was 17.5% for all urban wage earners, and the interest crediting rate which member employers and employees were granted on their accumulated retirement earnings for the year ending 2une 30, 1980, was only 6%; and 7) The "Statement of Investment Objectives and Policy" of the - California Public EmPloyees Retirement System contains a Section entitled, "Investment Objectives," which states the following" "1) to increase asset coverage for actuarial lia- bilities; 2) to maintian real dollar value of the assets (provide inflation cover, age); and 3) to stabilize current employer contribution rates." 8) The interest crediting rate was increased by PERS Board of Administration to 6.75%, effective July 1, 1980; and 9) Federal Treasury Notes, Federal T-Bill~s, Certificates of Deposit and Short Term Commercial Paper has been yielding interest rates rangi,ng frOm 12%' to 20% over the past thirty months, dependi.ng on the amount to be invested; and 10) 49% of the PERS $12.85 Billion investment portfolio as of June. 30, 1980, is placed in bonds, many of which"are long term investments, some yielding as low as 4%; and 11) Only 4.1% of the PERS investment portfolio, as o.,f June 30, 1980, was placed in short term investments at a time when money market fun~s, are earning up to 20% for large investments; and 12) Public agency employers, depending on the Public Employee Retire- ment System (PERS) benefit level they have contracted for, coupled with their experience, expend from 8% to 12% of their annual operating budget on PERS employer Contributions for employee retirement benefits; and -2- 13) Public agency employers, such as PERS member cities and counties, are experiencing continuous employer rate increases following periodic audits of the financial integrity of the PERS system; and 14) Current PERS investment policies appear too rigid and unable to respond in a timely manner with a flexible and .aggressive investment policy which can capitalize on rapidly changing money market investment opportunities; and 15) PERS actuaries have estimated that a 1% increase in the PERS Computed Rate of Return on its investment portfolio would probably offSet a 13% increase in costs to PERS Retirement System employers in California; and 16) Most of the above matters and concerns have been i nc.orPorated in a previous Resolution adopted on, February 26, 1981, by the City Managers Association of San Mateo County; a Resolution adopted on February 27, 1981, by the Council of Mayors of San Mateo County; a similar Resolution adopted on . . February 26, 1981, by the Peninsula Division, League of California Cities, the City Managers Association of Orange County and the Orange County Division of The League of California Cities; and similar Resolutions adopted by the California Cities and Towns of: Colma Coronado Corte Madera Daly City Fairfax Fountain Valley Huntington Beach Los Alamitos Los Gatos Menlo Park Millbrae Mountain V i ew Norwalk Oceanside Redwood City San Mateo Santa Clara Southgate Tustin Villa Park and the Peace Officers Research Association of California; the American Society of Public Administration (Los Angeles Metropolitan Chapter); and Southeast Los Angeles County Municipal Management Group; the Marin County City Managers Association and the Marin County Council of Mayors; and -3- 17) The City of South San Francisco desires to declare its support of the adoption of the proposed Resolution by the League of California Cities at its annual conference in San Francisco to be held in October, .1981. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that it hereby expresses its support and concurs in adoption of the Resolution by the City Managers Association of San Mateo County, and supported by the PERS Committee of San Mateo County, wherein: 1) The California Public Employees Retirement System (PERS) is not currently meeting the 2nd and 3rd objectives of its stated, "Investment Objectives," which it has officially adopted as policy guidelines for the retirement system investment program; and 2) While it is recognized that the PERS Board of Administration has managed its investment portfolio in a prudent and effective manner in the past, that the League of California Cities take appropr~iate action to influence the PERS Board of Administration to change its investment strategy so that a significantly higher percentage of new revenue could be placed in Federal T-Bills, Certificates of-Deposit, Bankers Acceptance and other performance investment vehicles with high yield,when market conditions so justify, .in a concerted effort to maximize earnings from investments; and 3) The League of California Cities take appropriate action to influence the PERS Board of Administration to examine the maturity period when purchasing new, long term bonds to determine whether they should be shortened. This proce- dure would allow increased opportunities to examine investment decisions in view of current market conditions; and~ 4) The League of California Cities sponsor legislation which will expand membership of the PERS Board of Administration and the PERS Investment -4- Committee to ensure representation of public ~agency employers who are. PERS members and that such additional positions be filled by appointment of the President of the League of California Cilties; and 5) Employee organizations, such as the peace Officers Research Association of California (PORAC), California State Firefighters Association (CSFA), American Federation of State,.County and Municipal Employees (AFSCME), Service Employees International Union (SEIU), other organized labor organizations and other interested organizations and committees, be fully informed of the importance of this issue and legislation related thereto, and seek their support; and 6) Support be given by the League of California Cities to the Invest- ment Practices Sub-Committee of the Finance, Insurance and Commerce Committee, Assemblyman Louis J. Papan's Assembly Committee, which is conducting an investiga- tion of the investment policies of the California Public Employees Retirement System,in an effort to ensure that pERS maximizes its rates of return from invest- ments; and 7) Encouragement be given to PERS member cities, member counties, individual members and public agency employee organizations to write letters to the PERS Board of Administration and to personally appear before the Board to- demonstrate wide public agency and employee organization support for a full review of and change, as appropriate, of current investment policies; 8) The effort to maximize interest earnings from the PERS investment portfolio will directly benefit PERS member cities and individual members of the California Public Employees Retirement System and, in so doing, will reduce the need for employer rate increases which would be funded from tax revenues. -5- I hereby certify the foregoing to be a true copy of a Resolution adopted by the City Council of the City of South San Francisco at a regular meeting thereof held on the 19th day of Au§~.s~ , 1981, by the following vote- AYES- NOES- ABSENT- Councilmen Ronald G. Acosta, Mark N Addiego, Emanueie N. Damonte, · Gus Nicolopulos; and Councilwoman Roberta Cerri Teglia None None ATTEST' Clerk -6-