Loading...
HomeMy WebLinkAboutReso - CC - 120-2019RESOLUTION NO. 120-2019 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURLINGAME APPROVING THE RESPONSE TO THE SAN MATEO COUNTY CIVIL GRAND JURY WHEREAS, the 2018-2019 San Mateo County Civil Grand Jury released a report entitled, "Soaring City Pension Costs — Follow-up on Grand Jury Report 2017-2018" on July 29, 2019; and WHEREAS, the report updates financial data on pensions for each city in San Mateo County, and describes the steps taken by each city to reduce, otherwise better manage, and/or plan for their long-term pension costs; and WHEREAS, the report concludes that, in the interest of transparency, specific projected pension information, as well as a General Fund forecast, both for each of the next 10 years, should be published with each city's annual operating budget; and WHEREAS, the City Council has received and reviewed the proposed draft response letter attached hereto as Exhibit A. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BURLINGAME RESOLVES AND ORDERS AS FOLLOWS: That the letter in response to the San Mateo County Grand Jury Report, "Soaring City Pension Costs — Follow-up on Grand Jury Report of 2017-2018" is approved, and the Mayor is authorized to sign and convey said letter on behalf of the City. Donna Colson, Mayor I, Meaghan Hassel -Shearer, City Clerk of the City of Burlingame, certify that the foregoing Resolution was introduced at a regular meeting of the City Council held on the 7`" day of October, 2019 and was adopted thereafter by the following vote: AYES: COUNCILMEMBERS: BEACH, BROWNRIGG, COLSON, KEIGHRAN, ORTIZ NOES: COUNCILMEMBERS: NONE ABSENT: COUNCILMEMBERS: NONE lMeaghan Hassel -Shearer, City erk DONNA COLSON, MAYOR EMILY BEACH, VICE MAYOR ANN KEIGHRAN RICARDO ORTIZ [Toffs]: I \ A 0 Q :Zillri9 041 V [Kew October 7, 2019 Honorable Donald J. Ayoob Judge of the Superior Court c/o Charlene Kresevich Hall of Justice 400 County Center, 21d Floor Redwood City, CA 94063-1655 The City of Burlingame CITY HALL -- 501 PRIMROSE ROAD BURLINGAME, CALIFORNIA 94010-3997 TEL: (650) 558-7200 FAX: (650) 566-9282 www.burlingame.org Subject: City of Burlingame's response to 2018-2019 Civil Grand Jury Report entitled "Soaring City Pension Cost — Follow- up on Grand Jury Report of 2017-18" Dear Judge Ayoob: After reviewing the 2018-2019 Grand Jury report entitled "Soaring City Pension Cost — Follow-up on Grand Jury Report of 2017-18", the following are the City of Burlingame's responses to the Grand Jury's findings: F1. Each City's audited annual financial report for the fiscal year ending June 30, 2018 reported combined covered payroll for the City's pension plans for each of FY 2014.15, FY 2015.16, FY 2016-17 and FY 2017.18 in the amounts set forth beside its name for that year in Appendix A. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame, F2. Each City's audited annual financial report for the fiscal year ending June 30, 2018 reported combined contribution payments to CalPERS on the City's pension plans for each of FY 2014-15, FY 2015-16, FY 2016- 17 and FY 2017-18 in the amounts set forth beside its name for that year in Appendix A. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F3. Each City's audited annual financial report for the fiscal year ending June 30, 2018 reported combined Unfunded Liabilities (as defined in this report) for the City's pension plans for each of FY 2014-15, FY 2015- 16, FY 2016.17 and FY 2017-18 in the amounts set forth beside its name for that year in Appendix A. Each City has been required to make large Amortization Cost (as defined in this report) payments of principal and interest to CalPERS on those Unfunded Liabilities. These payments have diverted money that could otherwise have been used to provide public services or to add to reserves. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. The Honorable Donald J. Ayoob October 7, 2019 Page 2 F4. Each City's audited annual financial report for the fiscal year ending June 30, 2018 reported combined Funded Percentages (as defined in the prior report) for the City's pension plans for each of FY 2014.15, FY 2015.16, FY 2016.17 and FY 2017.18 in the amounts set forth beside its name for that year in Appendix A. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F5. Each City's audited annual financial report for the fiscal years ending June 30, 2015, June 30, 2016, June 30, 2017, and June 30, 2018 reported what the combined Unfunded Liabilities (as defined in the prior report) for the City's pension plans for each of FY 2014.15, FY 2015.16, FY 2016.17 and FY 2017.18 would have been if the applicable Discount Rate applied to calculate them had been one percentage point lower in the amount set forth beside its name for that year in Appendix A. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F6. Each City's CAFR for the fiscal years ending June 30, 2015, June 30, 2016 and June 30, 2017 reported general fund total expenditures for that year in the amount set forth beside its name for that year in Appendix A. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F7. In each of the fiscal years ending June 30, 2015, June 30, 2016, June 30, 2017 and June 30, 2018, each City's combined contribution payments to CalPERS on the City's pension plans represented the percentage of that City's general fund total expenditures for that year set forth beside its name for that year in Appendix A in the column entitled "Contribution Payments as % of General Fund Total Expenditures." Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame, noting that the column referred to in this finding is entitled, "Pension Contribution Cost as % of General Fund Spending". F8. In each of the fiscal years ending June 30, 2015, June 30, 2016, June 30, 2017 and June 30, 2018, each City's combined contribution payments to CalPERS on the City's pension plans represented the percentage of that City's combined covered payroll for the City's pension plans in the amount set forth beside its name for that year in Appendix A in the column entitled "Contribution Rate (i.e., Contribution Payments as % of Covered Payroll)." Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame, noting that the column referred to in this finding is entitled, "Contribution Rate (i.e,, Pension Contribution Cost as % of Payroll"). F11. The only way to find projections showing the annual dollar amount of the following cities' projected pension contribution costs for the next five or more years on their public websites is by manually searching through agenda packages for their city council meetings: Belmont, Burlingame, East Palo Alto, Half Moon Bay, Menlo Park, Millbrae, Pacifica, San Bruno, San Carlos, San Mateo, South San Francisco and Woodside. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F15. Each of Atherton, Belmont, Brisbane, Burlingame, Foster City, Half Moon Bay, San Bruno and San Carlos has a general fund operating budget forecast covering only a five year period. Of those eight, only Belmont, Foster City, Half Moon Bay, San Bruno and San Carlos make the forecasts available to the public in their most recent annual or biannual budgets or annual financial reports published on their public websites. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. Register online with the City of Burlingame to receive regular City updates at www.Burlingame.orq The Honorable Donald J. Ayoob October 7, 2019 Page 3 F16. The only way to find the five-year general fund operating budget forecasts on the public websites of Atherton and Burlingame is by manually searching through agenda packages for their City Council meetings. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F20. Neither Atherton, Brisbane, Burlingame, Daly City, East Palo Alto, Half Moon Bay, Hillsborough, Millbrae, Pacifica, Portola Valley, San Bruno, South San Francisco nor Woodside currently has a specific plan recommended by staff to the City or Town Council (as applicable) to make additional pension contribution payments to CalPERS beyond its Annual Required Contribution. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F21. Each of Brisbane, Burlingame, Colma, Daly City, Foster City, Half Moon Bay, Hillsborough, Menlo Park, Pacifica, Portola Valley, Redwood City, San Carlos, South San Francisco and Woodside has set aside internal reserves, or contributed funds to a Section 115 trust, specifically for the purpose of paying future pension contribution costs. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F23. Each of Atherton, Belmont. Burlingame, Foster City, City, San Mateo and South San Francisco has, or agreements with employees under which employees payment obligations to CalPERS. Hillsborough, Menlo Park, Millbrae, Pacifica, Redwood currently intends to seek, one or more cost -sharing pay for a portion of the City's Normal Cost pension Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. F25. Each of Belmont, Brisbane, Burlingame, Colma, Daly City, East Palo Alto, Foster City, Redwood City and South San Francisco have, since November 2016, sought and obtained voter approval for ballot measures intended to increase revenues. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. However, it should be noted that the transaction tax that resulted from the passage of Measure I, effective April 1, 2018, was not intended to fund the City's pension obligations. These revenues are used specifically for additional safety services and enhanced streets and sidewalk maintenance activities, as well as providing partial support to the construction of a new Community Center, which is long overdue for replacement. Other capital liabilities await funding, and the City continues to identify these needs and recommend their systematic funding within the operating budget (of the appropriate fund) whenever possible. F27. Neither Atherton, Belmont, Brisbane, Burlingame, Colma, Daly City, East Palo Alto, Foster City, Hillsborough, Menlo Park, Millbrae, Portola Valley, San Carlos, San Mateo, South San Francisco, nor Woodside is currently considering seeking approval of its voters for revenue enhancement measures in the near term. Response: The City of Burlingame agrees with this finding with respect to the City of Burlingame. The following are the City of Burlingame's responses to the Grand Jury's recommendations: R1. Each City include in its published annual or bi-annual budgets a general fund operating budget forecast for the next ten fiscal years. Register online with the City of Burlingame to receive regular City updates at www.Burlingame.org The Honorable Donald J. Ayoob October 7, 2019 Page 4 Response: The recommendation will not be implemented by the City of Burlingame. Currently, staff prepares a fairly in-depth five-year forecast for the City's General Fund each fiscal year and presents it along with the year's Mid -Year Report. The Mid -Year Report not only provides an analysis of the status of all of the City's operating budgets half- way through the fiscal year in the context of current economic conditions, but it also examines and updates projections (and the underlying assumptions) incorporated in the General Fund forecast for the next five years. As such, the Mid -Year Report is presented as a Budget Study Session for the subsequent fiscal year, at a Special City Council meeting in March. Having the latest budget projections in the current budget enhances the forecasting process, and allows decision makers to have greater confidence in the information provided within the budget development framework. The concurrent update of the five-year forecast for the General Fund establishes an appraisal of fiscal sustainability beyond the current budget cycle. It is in this longer -term context that the Council can consider setting aside further funds for unmet capital needs and other liabilities, including pension liabilities. However, much of the annual Mid -Year Report is dedicated to discussing the underlying assumptions used in determining each of the City's revenues and expenditures as projected in the General Fund's one -page five-year forecast. Because different assumptions are applied to each account within a revenue or expenditure category, the reader is warned that any growth or decline ratio calculated for a revenue or expense category will not apply to all the revenues and expenses in that category. The outcomes of various business development strategies or long-term revenue -generating opportunities are not assumed. In addition, it is noted that the later years of the forecast are understandably less reliable than in the earlier years. Various risk factors that could render the entire forecast ineffective (Federal monetary policy, escalating inflation, emergency events, global market collapse, etc.) are also noted. The City feels that extending the five-year forecast without the anticipation of any specific longer -term event would not be worthwhile, as the revenue and expenditure growth factors applied to additional future years would serve no public purpose. Currently the City relies on the economic forecasts generated by firms specializing in economic research, forecasting, and data analysis in the public revenue sector. These forecasts rarely project beyond a two -three-year period. To provide a longer term forecast would imply additional knowledge of future events that the City simply does not possess. R2. Each City include a report in its published annual or bi-annual budgets specifically setting forth the dollar amounts of its annual pension costs paid to CaIPERS. The report should include the following: a) The City's total pension contribution costs under all plans, for each of the three preceding fiscal years as well as estimates for such costs in each of the following ten fiscal years (whether developed by City staff internally, or by outside consultants to the City), assuming CaIPERS' actuarial assumptions are met. b) The City's total Unfunded Liabilities under all plans, for each of the three preceding fiscal years as well as estimates for such Unfunded Liabilities in each of the next ten fiscal years, (whether developed by City staff internally, or by outside consultants to the City), assuming CaIPERS' actuarial assumptions are met. c) The City's Funded Percentage across all plans, for each of the three preceding fiscal years as well as estimates for such Funded Percentages in each of the next ten fiscal years, assuming CaIPERS' actuarial assumptions are met. d) The percentage of the City's general fund expenditures, and the percentage of the City's covered payroll, represented by the pension costs described in (a) above (using estimates of general fund expenditures in future fiscal years). Response: The recommendation will not be implemented, as the City does not believe its analysis and discussion of pension costs should follow a specific frequency, format, or content. Register online with the City of Burlingame to receive regular City updates at www.Burlingame.orcl The Honorable Donald J. Ayoob October 7, 2019 Page 5 The City annually reports pension data in compliance with GASB (Governmental Accounting Standards Board) Statement No. 68 in its audited Comprehensive Annual Financial Report (CAFR), in both the "Notes to Basic Financial Statements" and the "Required Supplementary Information" sections. This reporting provides a fairly technical examination of the City's pension plans, with many key financial metrics, including a three-year historical review. For those who wish to review future projections of pension payments and funding, the CalPERS annual actuarial valuation reports provide projections of some of the items listed by the Grand Jury. The CaIPERS reports, from which much of the CAFR presentation on pensions is derived, provide a wealth of additional detailed information and disclosures for the pension plans, and are available online for each plan and member agency. The City's budget documents, published annually and available on the City's website, contain information and discussion on all fiscal topics, concerns, and initiatives of the City, In accordance with the City's Council's continued direction, the budget transmittal letter attempts to place all budget decisions in a long-term context, including a discussion of the long-term General Fund forecast. This forecast, prepared and presented with the City's Mid -Year Report and analysis is an essential part of the subsequent year's budget development process. The transmittal letter has in recent years provided considerable discussion of actions taken to control the increasing costs of employee benefits, as well as the issue of rising pension liabilities. It provides a readable summary of these issues in the context of the City's financial position and outlook as a whole. City Council decisions surrounding this issue have, as with all other issues of fiscal impact, been made during the course of public meetings for which an abundance of data and analysis has been provided, and where public comment was invited. Rising pension costs and underfunding of pension plans have been an issue for many years, prompting the issuance of pension obligation bonds in 2006. Strategies have been implemented that required candid labor negotiations toward shared solutions, such as higher employee contributions to the pension costs. Pension reforms at the state level will also take time to work through the system, but will ultimately curb the currently rising pressure on operating budgets. As reported to the Grand Jury, the City of Burlingame has a plan in place to assist it in meeting its pension obligations through years of high pension costs until the employer required contribution rates return to current levels or below, By funding a §115 Trust established specifically for this purpose, the City intends to smooth out the rate (as a percentage of payroll) for the amounts dedicated to its pension obligations. As each city in the County has taken varying actions to address pensions in light of different fiscal circumstances and levels of pension funding, the budget discussion around pensions will necessarily vary. The budget document is where these various actions culminate and can best be explained to the public. The issue should be fully explained, but an overabundance of detail is not warranted, and can obfuscate the solutions that each City Council deems appropriate. The content and discussion within the budget document should be the prerogative of each City Council. The Burlingame City Council approved this response letter at its public meeting on October 7, 2019. Sincerely, Donna Colson Mayor Register online with the City of Burlingame to receive regular City updates at www.Burlin.game.org -