ITEM 8-B

Council Meeting: September 12, 2000

TO: Mayor and City Council

FROM: City Staff

SUBJECT: Recommendation to Adopt Resolution of Intention to Amend Contract Between the California Public Employees' Retirement System and the City of Santa Monica to Provide Section 21363.1 (3% @ 55 Full Formula) for Local Police Members and to Hold a Public Hearing and First Reading of an Ordinance to Amend Said Contract as Indicated

INTRODUCTION

This report requests that Council adopt the attached resolution stating its intent to approve an amendment to the contract between the California Public Employees' Retirement System (CalPERS) and the City of Santa Monica to provide Section 21363.1 (3% @ 55 full formula) for local police members. The attached resolution and agreement comply with the procedure required by CalPERS. This report also requests that on September 12, 2000 there be a public hearing and first reading of an ordinance which would amend said contract as indicated. The ordinance is also attached.

DISCUSSION

The City of Santa Monica contracts with CalPERS to provide retirement plans for permanent employees. As a contracting agency, the City may amend its contract(s) to provide various optional benefits offered by CalPERS. Santa Monica police members are currently covered by a 2% @ 50 full formula. As a part of the most recent Memorandum of Understanding (MOU) negotiated between the City of Santa Monica and the Santa Monica Police Officers Association, the City agreed to amend its contract with CalPERS to provide Section 21363.1 (3% @ 55 full formula) for local police members.

Section 21363.1 (3% @ 55 full formula) is a new CalPERS service retirement formula which provides to local police members at age 55, or older, 3% of pay for each year of service. For members who retire earlier than age 55, the percentage of pay is less than 3% of pay for each year of service. The formula is not modified because of Social Security.

BUDGET/FISCAL IMPACT

This change in Police retirement plan benefits increases the present day value of actuarially determined future retirement payments by $10,144,939. As a result, the current value of benefits to be paid exceeds the current value of retirement plan assets by $1,696,019. CalPERS policy is to amortize such unfunded liabilities over twenty years. The net impact on current CalPERS contribution rates paid by the City is an increase of 3.4% or about $ 515,000 for FY 2000/01. Sufficient funds were included in the Adopted FY 2000/01 budget to finance this ongoing cost. This future cost is sustainable from future revenues.

RECOMMENDATION

It is recommended that the City Council adopt the attached resolution indicating its intent to approve an amendment to the contract between CalPERS and the City of Santa Monica to provide Section 21363.1 (3% @ 55 full formula) for local police members. It is further recommended that on September 12, 2000, there be a first reading of the Ordinance to amend said contract.

Prepared By: Karen Bancroft, Director of Personnel

Attachment A - RESOLUTION

Attachment B - ORDINANCE