Tuesday, February 13, 2018
Open Board of Directors Meeting
3200 Inland Empire Blvd.
First Floor Media Room
Ontario, CA 91764
Present: Deborah Barmack, Carole Beswick, Tom Brickley, Ken Coate, Louis Goodwin, Lowell King, P.T. McEwen, Dan Murphy, Roman Nava, Jon Novack, Brian Reider, Thomas Rice, Michael Rivera, Kristine Scott, Paul Shimoff, Phil Southard, David VanVoorhis and Ray Wolfe.
Guests: Adam Eventov, Nick Grooters, Sunny Huynh, Kevin Pulliam and Wendy Strack.
Announcements: 1) Next week, there will be no meeting on Tuesday, February 20. On Wednesday, February 21, 2018, Inland Action will have a joint meeting with the Monday Morning Group. The meeting will take place at the Mission Inn. They have recently returned from their Sacramento advocacy trip and will share their platform and experiences.
M/S/P: Minutes from February 6, 2018.
Brian Reider introduced Ken Hunt, Fontana City Manager.
Ken Hunt has worked for the City of Fontana since 1990 and has been the City Manager since 1999.
Fontana and other cities are very concerned about increasing costs for public employee retirement benefits, as costs for cities are approaching unsustainable levels. Rising pension costs will require cities over the next seven years to nearly double the percentage of their General Fund dollars paid to CalPERS (California Public Employees’ Retirement System) for safety personnel.
In the 1990 investments were strong, and the “3% at 50” retirement plan was widely approved. The plan allows public safety employees to retire after the age of fifty and receive a percentage of their highest salary as their pension. At that time the system was “super funded” and cities were not required to make pension contributions for several years. Most cities did not establish a PERS reserve, and many cities used the monies to hire more public safety employees, increase salaries, or funded other on-going budget requirements. The dot-com crash in 2000 and the Great Recession 2007-2009 reduced CalPERS funded status from 128% down to 68%.
Several factors created the need for increased contributions. A primary reason was the economic downturn in 2008 when CalPERS suffered a 27% negative return with a gross impact of a 34.75% loss to the fund, as well as the failure to update actuarial data on the longer life span of retirees. Since 2000 and 2001, the State and most municipalities have renegotiated employee contracts to require greater employee contributions into their personal accounts and creating tiered benefit systems within their workforce.
While the State budget has recovered since the Great Recession, with the assistance of substantial voter-approved tax increases, some cities have yet to recover. Local pension costs are outstripping revenue growth and cities face difficult choices. Under current requirements, cities may attempt to increase revenue or reduce services to meet their required employee retirement contributions. The Public Employees’ Pension Reform Act (PEPRA) enacted by the Legislature will not have a substantial effect on city budgets for decades as it only applies to employees hired after January 1, 2013.
Options for Cities to close the gap are:
- Pay down the City’s Unfunded Actuarial Liability (UAL). This option may only work for cities in a better financial condition.
- Raise taxes to pay down pension costs. Some cities have been successful in passing a measure to increase revenues. Others have been unsuccessful. Given that these are voter approved measures, success varies depending on location.
- Cut costs of certain public services. Many cities have already consolidated and cut local services and have not been able to restore those service levels. Revenue growth from the improved economy has been absorbed by pension costs. The next round of service cuts will be even harder.
- Negotiate new contracts to increase employee pension contributions and change benefits.
- Issue a pension obligation bond. Financial experts strongly discourage this approach as it only delays and compounds the inevitable financial impacts.
- Change benefit structure of vested benefits. Traditionally not allowed by law, it is currently being reviewed by the Supreme Court.
Ken Hunt stated that eventually cities may all contract out fire and police services as there is usually a cost savings.
Lawsuits continue to be filed against general law cities citing election systems that violate the State Voter Rights Act, which aims to protect minorities from having their votes diluted in an at-large system. Because most of the cities charged in these lawsuits have lost, Fontana will avoid the courts and change from elections at large to district voting. He believes that separating a city into districts creates a political nightmare and is not effective in protecting minority voting.
Meeting adjourned at 8:23 a.m.