HomeMy WebLinkAboutReso 167-2018 (18-877)City of South San Francisco P.O. Box 711 (City Hall,
400 Grand Avenue)
South San Francisco, CA
City Council
Resolution: RES 167 -2018
File Number: 18 -877 Enactment Number: RES 167 -2018
RESOLUTION APPROVING AND AUTHORIZING THE CITY
MANAGER TO SIGN A RESPONSE TO SAN MATEO COUNTY
GRAND JURY REPORT "SOARING CITY PENSION COSTS - TIME
FOR HARD CHOICES."
WHEREAS, the City of South San Francisco has contracted with the California Public Employees'
Retirement System (Ca1PERS) to provide pension benefits to its employees since 1945; and
WHEREAS, over the past twenty years, the economy has endured severe volatility due to the Dot Corn
boom/bust and Great Recession, which placed significant stress on the Ca1PERS pension trust and its
participating members; and
WHEREAS, the Ca1PERS Board of Administration's efforts to address economic volatility and ensure
sustainability have resulted in a number of policy and assumption changes, including amortization, or
how gains and losses are recognized over time, and the discount rate, or the anticipated return on
investment over a long period of time; and
WHEREAS, on July 17, 2018, the San Mateo County Grand Jury issued a report titled "Soaring City
Pension Costs - Time for Hard Choices "; and
WHEREAS, the City of South San Francisco is required to provide a response within 90 days of the
Grand Jury report, which is attached herein as Exhibit A; and
WHEREAS, the City is committed to holding a public meeting for the City Council and the South San
Francisco community to better understand and prepare for escalating pension costs, which complies with
Recommendation RI of the Grand Jury report; and
WHEREAS, consistent with Recommendation R3, the City Council has already implemented a number
of strategies to address rising pension costs, including establishment of a Ca1PERS Stabilization reserve
in FY 2015 -16, which has a current balance of $4.5 million; and
WHEREAS, the City could consider investing accumulated operating surplus with a pension trust fund,
however, assets within a pension trust fund are recorded as a restricted asset on the Comprehensive
Annual Financial Report (CAFR), and not netted directly against the net pension liability; and
WHEREAS, the City could consider contributing additional funds to Ca1PERS to accelerate
amortization of existing pension liabilities.
City of South San Francisco Page 1
File Number: 18 -877
Enactment Number: RES 167 -2018
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of South San Francisco does
hereby authorize the City Manager to sign the City's response to the San Mateo County Grand Jury
Report "Soaring City Pension Costs - Time to Make Difficult Decisions."
At a meeting of the City Council on 9/26/2018, a motion was made by Mark Addiego, seconded by Pradeep
Gupta, that this Resolution be approved. The motion passed.
Yes: 5 Mayor Normandy, Mayor Pro Tern Matsumoto, Councilmember Garbarino,
Councilmember Gtq5f`a, and Councilmember Addiego
Attest by
City of South San Francisco Page 2
DRAFT
CITY COUNCIL 2018 EXHIBIT A
PO BOX 711
400 GRAND AVENUE
SOUTH SAN FRANCISCO, CA 94083
September 27, 2018
Hon. V. Raymond Swope
Judge of the Superior Court
c/o Charlene Kresevich
Hall of Justice
400 County Center; 2nd Floor
Redwood City, CA 94063-1655
Dear Hon V. Raymond Swope
LIZA NORMANDY, MAYOR
KARYL MATSUMOTO, MAYOR PRO TEMPORE
MARK ADDIEGO, COUNCILMEMBER
RICHARD A. GARBARINO, COUNCILMEMBER
PRADEEP GUPTA, PH.D., COUNCILMEMBER
MIKE FUTRELL, CITY MANAGER
On September 22, 2018, the City Council of the City of South San Francisco
(“City”) approved the response contained in this letter to the San Mateo County
Grand Jury Report “Soaring City Pension Costs – Time for Hard Choices” dated
July 17, 2018.
Response to Findings
The City agrees with Findings F1, F2, F3, F4, F5, F6, F8, F9 and F11. The
findings are accurate, and reflect information that is included in publicly available
documents, including the City of South San Francisco’s Comprehensive Annual
Financial Statement (CAFR) and annual actuarial valuations from the California
Public Employees’ Retirement System (CalPERS).
The City disagrees partially with Finding F7. While Finding F7 is mathematically
accurate, comparing annual pension contributions relative to General Fund total
expenditures is not consistent with the City’s method for allocating employee
costs, which include the cost of pension contributions. Employee costs are
allocated based on the scope of each employee’s job duties. For example, the
costs associated with a Laboratory Chemist from the City’s Water Quality Control
Plant are fully allocated to the Sewer Enterprise Fund. As such, of the $92 million
in total appropriations for payroll in the Fiscal Year (FY) 2018-19 Adopted
Budget, $80 million are allocated to the General Fund, $9 million to the Sewer
Enterprise Fund, and the remaining $3 million to other operating funds.
The City disagrees partially with Finding F10. Based on independent actuarial
analysis estimates, by 2024-25, a 6.0 percent investment juxtaposed against a
7.0 percent discount rate with the shorter amortization period, pension
contributions are projected to increase by 57 percent, rather than 100 percent
over the same period. At a cost of $33 million, pension contributions are
projected to reach their apex in FY 2032-33, a 96% increase compared to the
current cost.
DRAFT
The City disagrees partially with Finding F12. The City has utilized a long-term
financial forecast to support its decision-making processes since 2013, and
expanded the forecast to a 10-year time horizon in 2017. However, given the
sensitivity of labor negotiations, the model has been kept confidential. The City is
amenable to establishing a pension funding strategy and policy to achieve
funding targets, and committing to appropriating funds based on availability and
priority. The City is also amenable to implementing processes to monitor the
City’s pension funding efforts, and establishing alternative financial strategies.
While the City agrees with Finding F13, past, present, and future pension
contribution costs are available on publicly available documents. The City’s
Comprehensive Annual Financial Report (CAFR), available at
http://www.ssf.net/departments/finance/financial-reports/comprehensive-annual-
financial-reports-cafr, discloses pertinent pension plan information in Note 7 and
the Required Supplemental Information section, including employer pension
contributions and net pension liabilities. The actuarial valuation for any
participating entity is available on CalPERS’ website at
https://www.calpers.ca.gov/page/employers/actuarial-services/employer-
contributions/public-agency-actuarial-valuation-reports. The actuarial report
provides projected pension contribution rates and sensitivity analysis.
Response to Recommendations
All Grand Jury recommendations will be timely implemented, specifically a public
meeting will be held, engaging and informing residents; all available options will
be evaluated; and a long-term plan to address rising pension costs will be
developed. All staff reports and supporting information will be published in a
highly visible and prominent area on the City’s website.
Sincerely,
Mike Futrell
City Manager
City of South San Francisco