Recommendation to Receive an Update to the July 23, 2013 Report on the City’s Other Post-Employment Benefits (OPEB) Liabilities (City Manager 2110)
Second. Any discussion? A call the vote. All those in favor. I oppose none. One recusal member de saag. And that completes the consent calendar. So now we're on the regular agenda items. I have a recommendation for our sixth recommendation. Receive an update to the July 23rd, 2013 report on the city's other post-employment benefit liability. Irma. Yes. It's. Thank you very much, Madame Mayor. Council members. Tonight's report is in anticipation. Of some upcoming. Votes that the council may be taking with respect to addressing the city's long term liability crunch in the area of post-employment benefits. What we wanted to do tonight as staff is to give context and to help the public understand what exactly is meant when we talk about OPEB or other post-employment benefits. It is an issue that is somewhat complicated but can be pretty easily understood once it's explained. It is also a huge headache for cities throughout the country, especially in California. You can thank assistant city manager and soon to be acting city manager. Warmer than for the photo of George Washington on the dollar bill to represent the struggle that cities face. I'm glad she did that. I'm a big fan of Presidents Day merely because I love commercials where Abraham Lincoln and George Washington are selling cars or wrapping or engaged in, you know, beer pong. So this is probably the most important issue that the city faces over which it has control. Our goal tonight is to demystify OPEB for the public. Next slide, please. So what is the difference between Purrs and OPEB? In a nutshell, hers is your pension. OPEB is what's called a retiree medical. Now with PERS. When an employee retires, they get the number of years of service. Let's say, just for argument's sake, 25 years of service times. Some factor. Some percentage. It used to be that the percentage for most employees was 2%. About 14 or 15 years ago, the legislature decided after the dot com boom that the PERS fund had done so well that. It would make a lot of sense to bump pensions up and bump the factor up from 2% to 3%. That was a huge. Huge. Impact from an actuarial perspective on what cities would have to pay eventually and where we sit today with premiums. I want to note that public safety employees throughout the state receive 3% at 50. That means for every year of service, they get 3%. If they work 25 years, they'll get 75% of their what's called pensionable number, which is usually the top year of salary. And they're able to retire at 50 years of age. At the same time that those formula were changed from 2%, 2.5% to 3%. The retirement date changed from 55 to 50. So look at it this way. You went from 2% to 3%. That's a 50% increase in value in the pension. Plus you get to retire five years earlier. So five additional years of liability. This has had a terrible impact on cities throughout California and for Alameda. Now. One point you should make because there's a lot of confusion about this, is that employees who receive a person's retirement are not allowed to draw Social Security. So it is in lieu of. But it is a much more expensive program for the city itself. So that's the pension side. That's PERS I'm not going to address PERS tonight. Some of us who are involved in state level politics at the time when this happened, including me, I was president of the League of California Cities at the time, spoke at the time and said and spoke out publicly and said this change in the formula was non-sustainable. We did not prevail. You can draw your own conclusions about why, but we are where we are now. So what's the difference between person OPEB? Well, OPEB is not a pension. Hers is run by a state agency. Alameda, like most cities, contracts with powers to operate the pension program. Some cities exist in risk pools. Others just exist in the main prize pool. In 2013, a bill was passed called Peprah. Pepper says that for new employees, there is now what's called classic purrs and new purrs. And for those who are employees, classic purrs is like classic coke. And new purrs is like new coke. New purrs says that public safety employees, police, fire, sheriffs, etc. all get instead of 3% a year, they get 2.7% a year. That sounds small. It's not. It's a 10% reduction. But more importantly, instead of being able to retire at 50, these new employees have to retire at 57. So there's seven more years of contribution and seven fewer years of payout. As for miscellaneous employees nonpublic safety, they no longer can retire at 55. They are now retiring at 62. The main point about this and why I wanted to talk about Perce is that because of the losses in the stock market, both in the wake of the dot com boom and in the wake of the housing boom. PERS did not hit its investment return targets in the next six years. And you will see this when the city does its presentation on our budget for the next five years. Our premium rate, the amount we have to pay to PERS to fund these pension benefits is going to rise pretty dramatically. It has already risen pretty dramatically. The city cannot control the purse rate. What the city can however, exercise some modicum of control over is the retiree medical benefit, the so-called OPEB. And that's what I want to speak about tonight. Now, before we do that, let's take a look real quickly at the increase in prices rates, because this is the challenge that most cities and Alameda will face in the coming years. Right now, the fiscal year we are in, we are at the tail end of 1415. So if you're looking at this chart, it's the third bar from the left. Our premium. What we pay to two in Sacramento is for every dollar in public safety salary, we pay $0.53 on a dollar to PERS to fund the pension benefit . Our employees pay 13 of those $0.53, which makes them among the highest in the region. And for those who generally believe that we should confront the unions and, you know, jam down the number that they're supposed to get and make them pay more. I want to let you know that one of the consequences of PEP brought the Pension Reform Act is that state law says you cannot impose more than $0.12 on the dollar. We get more than that because we bargained for it. Right now, the city pays $0.40 on the dollar. Employees pay 13 for a total of 53. Look ahead. This is what's called purrs, smoothing the purrs smoothing process to try to catch up for the so-called lost decade of investment returns that I mentioned earlier. We'll raise our premium up to $0.65 on the dollar. Given our contracts with our police and firefighters. They will be paying $0.15 per dollar. We will be paying 50 per dollar. I want to note there is a, as I said, no way to impose more than 12 under state law and B, the $0.15 that our employees will be paying. No one is paying more in the Bay Area. Some people from time to time ask, why can't you just do what San Jose does? Well, here's why. San Jose has its own pension fund. It's not part of PERS. It's completely different situation. So we're facing an increase from $0.40 on the dollar five years out to $0.50 on the dollar. That is going to put a real strain on our ability to provide services. And so it's critical because these costs are not controlled by the city. It is critical that we bring our OPEB costs, the retiree medical costs under control in the next few years. Now I want to talk about what is open. Our miscellaneous employees, meaning the nonpublic safety employees. When they retire, they get $122 a month. That's the end of their benefit. Public safety employees, though, depending on their hire date. If they're hired before June 2011, they get full medical and dental health care through retirement. For them and for their spouse, that's if you're before June 2011. By contract and by agreement between the management of Alameda and our bargaining units. Those employees who were hired after June 2011 do not receive the benefit for spouses. It's a single party coverage, not a family coverage. But is it still full coverage? It's full coverage, but it's it's one party. And it does make it over time as we phase in these new employees. That provides us quite a bit of relief. Now. How are course determined. What do we pay for OPEB? What is our total bill? How do we get ahead of this and what do we face in the future as more people retire? Well. This chart shows you that. I want you to look at the fourth word. The fourth column down is pay as you go. Pay as you go is the amount that the city has to pay every year to pay the medical premiums for the existing retirees. Now. I read blogs. I look at opinion pieces. There's a lot of people who believe that the city can just unilaterally change the benefit to retirees. In fact, they can't. The city did try to do this about six years ago. And the retired police officers brought in arbitration against the city and one and one in every regard and ended up the city ended up paying for their lawyers as well. You can't touch the existing retirees. What you can do, however, is negotiate with the existing employees who will be retiring at different rates in the coming years. Right now, in fiscal year 1415, the year we're in now, the city is paying $2.7 million a year for the medical premiums of the retired police and firefighters as more and more retire and as people live longer. That number is going to go up. As you can see, if we do nothing. The number will go up such that by fiscal 1920, which is only five years away, that 2.7 million is going to go up to 4.2 million. At the same time, remember I showed you earlier how the PERS numbers are going up. We cannot absorb both of them at the same time. It's not possible. We have to come up with a program that will provide us relief in this field because we can't do anything about the PERS field. Now, I want to give you some definitions because you see some terms up there. You see the term normal cost, you see the usual amortization. Here's what normal cost is. This is the cost of all benefits earned by current and active employees. In other words, this is what we should be putting away today and putting into investments into safe, safe return vehicles in order to pay this bill in the future. We're not doing it. Nearly no cities do it. Some do, but very few. In fact, Alameda at least has paid it's pay as you go as it came. Do some cities, including the one I live in that I used to work in, borrowed over the past 15 years just to make their ongoing payments. So they have compounded their problem such that it's now a problem that's in the billions of dollars rather than millions. The next definition I want to show you is unfunded, actuarial accrued. Oops. Oh, thank you. No, go back. There it is. Okay. This is the cost to fund the benefits that should that have already been earned. And should have been funded in the past. The most important point, if you have one take away about all of these benefits, retirement and retiree medical, is that this is a problem that didn't start just 15 years ago when the formulas changed. This is a problem that started in the immediate postwar when governments at all levels began giving out pensions and post-employment benefits without putting any money aside to fund them whatsoever. It's been going on for more than 60 years. We are now in such a fix that it will take, I believe, 15 to 20 years to fix the problem. That's the bad news. The good news is, if we're diligent and strategic, it can be fixed. Alameda, at least unlike some of its neighbors, is in a position to fix this problem. So again, you shall. Is how much we should have been putting away. And normal cost is how much we should be putting away today. When you put them together. It's something called the annual required contribution. This is the combination of normal cost. Again, normal cost is what we should be putting away now for the people who are working for us now. And the fuel, which is what we should have been doing in the past. When you put it together. The the actuaries call it the annual required contribution. This is the amount we should be putting aside annually to be whole. Now. Let's go back to the numbers now that we've talked about it. This means that what? The city. Is paying in PAYGO comes off of the so-called arc. We are underfunded in 1415. If we were going to be 100% funded, that we didn't have a big problem in the future. We should be paying $6.3 million. You can see by the late where the laser pointer is, we should be doing that. Instead, all we're doing is $2.7 million. And you can see the problem gets larger. It gets away from us every year. Next slide. Now, how do we come up with these numbers? We assume that every year medical premiums are going to go up 8%. Now, last year, the medical premium went up less than 3%. The indication is that this year the medical premium will go up less than 3%. So why are we picking such a high number? Doesn't that make our problem look bigger than it actually is? The reason we're picking the bigger number is because for the last 20 years, we have repeatedly had years in which medical premiums and you know this, if you pay your own health care, medical premiums have gone up eight, nine, sometimes as much as 12 and 14% a year. We had one good year. We think we have another one coming. We don't know that that's a real lasting trend or whether it's just a blip. So consequently, we're using a pretty conservative number by using the 8%. All of the financial analysts believe that even if you could, you should not fund 100% of your liability because you're using assumptions like this 8% and that the most prudent thing to do is to fund at about 75 or 80%. Of course, we're not remotely close to that. Let us show you where we are. Work. Oh, there it is. Okay, so what would it look like if we only had to fund 75% of the benefit for next year? 1516? Well, at 100%, we would be underfunded by 6.7. At 75%, we'd still be underfunded by $4.3 million. So, you know, you can play with the numbers, but the numbers are still very bad. But we felt it was important to show you what the most common standard is, which is 75 to 80%. Okay. Next one. So to look at it as a pie chart. With 100% funding. The pay go is 31% of the pie. That's what, in other words, PAYGO is what we're actually paying today. What we predict we're going to pay in the next fiscal year. The blue area is what we should be paying so that we don't have a bill in the future that we can't meet. The pie chart on the right shows you. If you go 75%, we're still more than 50% underfunded for what we ought to be doing. Next. The obligation as it stands today is about $91 million. That we need to. Now, we don't need to pay $91 million today, but it's $91 million over the next 30 years. And this is just OPEB. This is just OPEB. This is not right now. All we're talking about now. That's right, Madam Mayor. Thank you. This is just OPEB. This is not the pensions. This is why we have to get this under control. Police represent a little more than $44 million of our obligation. Fire represents about 39 million. And everybody else who's not in public safety represents seven but seven and a half million dollars. The city's total unfunded liability is just a little over $91 million. Next slide. What has been done so far. What's been done so far was at long last, in January of 2014, the city decided we better at least get started. With the pension trust. So we created an OPEB trust that currently has about $2 million in it to try to prefund some of this. I mentioned earlier there's no spousal coverage as of June 2011. On the 14th of this month, we are going to publish for the public's review and for vote by the Council on April 29 A Proposal. It is a new five year contract with all of our police and fire unions. That will include solutions for the OPEB trust. It will fashion a trust that will actually be able to provide us with years of breathing room and will save the city tens of millions of dollars. I want to be clear as I was in my discussions with our Treasurer and auditor yesterday about this. This is not a solution that solves the problem forever. It doesn't solve it for 30 years. It solves it in the near term to allow us the time without borrowing, without making the situation worse. It is a net seriously positive impact. It allows us the time to cope with the OPEB. A Pardon me? The purse, the pension rates going up. Anything else? So with that council, Madame Mayor, I'd be happy to answer any questions about the context of OPEB. There will be much more discussion in this month. Again, the 29th is the meeting and the 14th under the Sunshine Law. 15 days prior to the vote on any labor contract, the public must have access to the contract and all related materials, and we will publish all of those no later than Tuesday, the 14th. And with that, I thank you, council members for your attention and would be happy to answer any questions you may have, if I can. And we do have two speakers from the Public Council. Did you want to ask questions first? If. Member Ashcraft. Thank you. Thank you for that report, Mr. City Manager, on page one of the staff report now page three talking about the unfunded actuarial accrued liability. And in Almeida's case, the fuel is 91.2 million as of the last actuarial valuation done in January January one, 2013. Do we do these evaluations annually? Every two years. Every two years. Okay. So we're not up for what we are. So we are. We're in the process of doing one right now. Okay. And will we have those numbers by the time we can. Actually have Doug Pryor here from and Associates, our actuary? Could you come to the microphone? The question is this years actuary, when do we expect it? Yeah, we're we're still in the process of collecting the data. So we're. Typically 4 to 6 weeks off from having. Kind of preliminary results to. Present to staff. So just to follow up, then, by the time we come back on the 29th to vote on the contract provisions, we won't have that information. You don't think 4 to 6 weeks from now or are you in the midst of that. Process where we we're still collecting the data from the city, so we don't have everything yet to proceed with our. Analysis, but. In the order of magnitude of changes are not going to be that. I mean. Right. We're talking billion. Okay. 30 years to 43 million order of magnitude won't change. All right. Okay. Um. And. Uh. Okay. The others can wait till. After member day. So just to clarify in question for a staff, city manager or assistant city manager. Now, when we're talking about the unfunded liability of $91.2 million for the OPEB side, now that unfunded liability, broadly speaking, can be distributed in two ways. One for. People who are part of it is attributable to people who are right now retired. They're no longer working. And part of it is attributable to people who are working right now in city hall. But we need to make plans for them in the future. So. That's correct. It's the whole number. Thank you. Vice Mayor and just for the public. Mr. City Manager. If you can verify the assumptions on. The solution, as well as the liabilities, is projecting an 8% increase in health costs a year? That's correct. And also, it assumes that it's the number of employees that we have now as active no more. Correct? That is correct. So what it assumes we've had persistent vacancies, particularly in the police department. This assumes that we are continuing to budget for full staffing. But not increasing or decreasing. Now, if you increase or decrease, you change the numbers. And the same with the health or the percentage of increase in health care, correct? Well, the percentage, yeah. I mean, it'll be 8%. Whether you have 100 employees or 120, it's going to be 8% per year. But those are two variables. What I'm. Saying. Oh, yes, right. Absolutely. But but it is important to know that the assumption is that there will not be an increase in the size of these forces and there's no decrease in the. So it's the assumption is we are where we are and we will be there for the next, you know, 5 to 10 years minimum number. So a thank you. And I want to underscore that point so that people understand that while the what's in front of us right now is about looking out at and years out, 5 to 10 years out, and that's just a proposal stage. Let me emphasize, to the extent that it's a good program and the possibility of it going beyond ten years is strong, in which case it is important to us to emphasize and reemphasize that the mechanics of the preliminary idea are such that we have certain assumptions with regard to the number of workers. And so to the extent that you change those assumptions, you could potentially then change, you know, all the modeling that we're doing in terms of how much money that we think we need to set aside in the future or now. So that's an important point. And I want to further put the context as to why that's an important point, is because, you know, there are certain metrics with regard to staffing levels, how many fire people you need, how many police people you need, how many parks people you need, and where we are with regard to those benchmarks , again, a guess which one says, you know, okay, this is a satisfactory number of police per 10,000 residents or this is a satisfactory number of parks and park workers per 10,000 residents. Now where we are with regard to those benchmarks. When we move forward with with the proposal that we have in hand, we're going to be sticking to our law employee numbers because they help drive our understanding of how we're going to deal with the OPEB issue in the long term. May I? May I? Yes. Yeah. From a management perspective, one of the problems that has happened over the years with local government, with all levels of government, is too often when it's budget time. A body looks at saying, adding, let's say, you know, the argument is to add and they're going to add another policeman or police, police officer and they say, okay, well, the police officer is going to cost. An extra $100,000 in salary and benefits, but no one looks set. It's also going to increase the premium for the pension in the future, and it's also going to increase the health care in the future. And so it becomes important for this government to follow on what Councilmember De Saag was saying. It becomes important that if you're going to handle something like this over the years, to really manage it, to protect the service level of the city which is valuable and should be protected. You have to look at the full cost of what is happening in every decision. And I fear that in most levels, particularly of local government, that doesn't happen. Thank you. I have questions. You know, so this is about OPEB. Do we have the dollar amount for the unfunded PERS? Will we see that? We don't. We don't. We have presented it before, but we don't have it here tonight. When you say unfunded. It's yeah, it's it's so it's challenging because it's not unfunded. It's we know what, what our. What the bill is. Yeah, we know the bill and we know we have indications from PERS. Based on what you saw, that goes up to 65% I think misinformed em actually has the dollar numbers for PERS. With her. So when this comes back, that's one of the numbers I'll be looking for, not just the percentages, but dollars for the pub. And it's not just for an oral presentation. I really like this included in writing so that the public can has the opportunity to review it in advance and I want it to go over. So there are some slides that came up here today that weren't in the packet. So it could all those be added so that, you know, the public can have all of the slides. So everything we've prepared for tonight. Will be presented in the package that is presented to the public on the 14th as well. All right. Will be the 15 days. But if these can be added so that the people can look at these right away. That'd be great. So we get a head start on trying to figure this out. That'd be great. Yeah, we have no problem putting them on the website, but they will be packaged. Everything will be packaged again for the 14th. So someone picking up the package will have all of the data, some of which you've seen in closed session as we were going through, but that we couldn't disclose until tonight. Right. But I really want the public to be brought along. So I want to go over the dates, because if I have this correct, we're talking about a date, April 29th, which is not our regular. Is that April 29th? It's it's a budget hearing because this impacts the budget. All right. So I want to make sure the audience is aware when this comes back. It will not be on a regular Tuesday council night meeting. It'll be on a special meeting as part of the budget that was added. And then in regards to so I appreciate the comments in regards to the number of employees. How does overtime pay impact pensions and our contribution? Is it based on? It's actually based on what the employees earn, including overtime pay. Correct. So certain. Yeah. I mean, so again, we're talking about OPEB, which is not does not affect overtime. OPEB overtime does not affect other post-employment benefits. So I just want to make sure that we're clear this presentation's about health care into retirement. The question that you're asking, Madame Mayor, is about overtime and how that affects retirement. The pension, there's a very small portion of our overtime that is actually factored into the retirement. But generally speaking, overtime is not what we call personal. It's not counted toward there per service. There is a small portion of overtime in the fire department that is planned that because of their work schedule, they know that they're going to have overtime. Every work schedule that is pensionable, but the majority of overtime is not counted toward a pension. But if I may, can I just follow on a little bit? Thank you. This is an important this is an important point, because everybody who vests once they vest in their post employment, medical care, benefit, everybody gets the same thing. Pension. Everybody gets something different depending on their years of service and when they were hired. The retiree medical benefit is flat. It's the same for everybody. So it wouldn't be impacted by what rank you retired at or what your salary was. Question for Mr. Russo through the chair, can you just explain when you said when everyone vests with what are you what are you talking about there? If you're a police officer or a firefighter, you can't come here, work for a year and get this benefit. You have to work a certain number of years, which eludes me at this moment. How many years it is, Miss Warm Adams, you know. It changes. It changes on when you were hired. You were hired, right? There's like four different versions, right? The current vesting is ten years. So if you're hired today, you need ten years in order to get these benefits. Okay. And then I want to discuss at some point the scheduling of when this is going to be approved. I don't think it's appropriate to approve a contract at the special meeting. I think it's important that it be on a regularly scheduled meeting, which is when our public is used to being here. I'm very concerned about people thinking that we're pushing it through. So I would prefer that that be set either really be the next regularly scheduled meeting. Well, Madam Mayor, we can't do that because the Sunshine Law requires us to give 15 days notice in the next regularly scheduled meeting is 14 days from today. Or then the next regularly scheduled meeting after that, as opposed to putting it on a special meeting. Like the one to the council to discuss. So I think I would like us to discuss the impact because this has been a concern that I think we've all heard. So I would like counsel feedback. I didn't realize that we were talking about doing it on a special meeting, and I think the council would like council feedback on that. I appreciate that. Question for the city attorney. So anything in our charter and that prohibits us from having an action item like this on a special meeting? No, there does not. You you could vote on the contract on the 29th if the next the next regular scheduled meeting would be on May five. And and I take it there are ways that we can publicize the fact that this item will be coming before this meeting. STAFF Yes. I mean, that's part of what the 15 day and advance notice will be about. It will be on it will be in the newspaper, it will be on the website, there will be notices about it. And if I recall correctly, all of those handouts that we were given in closed session this evening that were now appear to be released to the public, that'll be part of the packet that is released on the 14th of this month. That's correct. Any other council comments? So do we need a motion to have this item come back on that date? Is it? I mean, who sets that calendar? Well, I understood that council gave direction, approving it, and took a vote to that effect in executive session tonight, which is why I'm able to discuss that it's happening. For that specific date? Yes, ma'am. Yeah, I think we could. We can kind of control the narrative if if we sit up here and we say this is being pushed through, even though there's 22 days notice and it's the one of the top two biggest issues facing the city council. You know, then people are going to think that a bit of we do the responsible thing and don't push that narrative, then I don't think there's going to be a lot of people saying that we're trying to push this. So I'm going to say I think it is the responsible thing to have it on a regularly scheduled meeting. Contrary to you suggesting that. But my point. What are we've already decided. So that's is that a motion you're making at a mere. Point of order? I thought we we've already decided that in closed session. Oh, that's so. So, so it wasn't so. We did. I got out on it. Right. So did. Yes, you could vote to reconsider, but since you didn't vote yes, then I don't know why. We're I think it's very important that it be made clear to the public that we're talking about having a special meeting. I don't think that that was shared as part of the vote that we were discussing. A special meeting. I take I have I have to say, Madam Mayor, we did say it was happening at the special meeting of the 29th, which was a budget meeting. And the reason it was being placed with the budget meeting is because of the impacts of the of the proposal have to be considered as part of the budget. We had that conversation in executive session just a couple of hours ago. So I don't have the verbatim of the vote, but I'm fine with that. I appreciate that we do have two speakers, so I'm going to call the speakers at this point. We have Kurt Peterson and then Jeff del Bono. Make one other point, please, because it's come up in this discussion if the council will permit. So. I want to be clear. The term pushed through is problematic. There was. A task force to look at OPEB that was seated in 2012 that included members of Labor, the city's treasurer, the city's auditor, investment bankers, community members, actuaries to look at how might we solve this problem. In 2013, I made a report to the Council about OPEB and about the problems with OPEB. This has been discussed for nearly four years now. And so I just want to be clear that while there are legitimate differences of opinion about putting this before special meeting or putting this in a regular meeting, I don't share that concern, but because I think it's part of the budget. But and I do recall when I first got here in 2011 that some critics of going forward with a contract for police and fire said, how can you do this as not part of the budget? So we're doing it as part of the budget this time. I just want to be clear. This has been nearly four years in the making. And so to the extent there's any suggestion that this is being frog marched through the process, I. It really isn't. I think it's irresponsible to say that it is. I'm not prepared to use that term. If I were mayor, vice mayor. And I think just to stick to the point, terrorists. The public is going to see on the 14th. The numbers and a proposal that goes with those numbers and that goes with this this general overview plan the council in between and this is another thing we discussed is going to individually avail themselves if they so choose. And I think we all better do this and meet with the assistant city manager and go step by step through the contract. It's going to be presented so that we understand what stays the same, what's being changed, and then how it applies to this this proposal that we all heard tonight, and I think we have a meeting in between now and the 29th where we could call the question back and say, we're not satisfied. We need to move the target back up, but we better have a reason for that. And I think we're all going to study it. So I'd like just to keep this focused on we've got a program that's not going to solve it but is going to reduce our liability. We've got potential for a contract that implements that. We haven't seen that yet. I think I'd like to see it. I'd like the public to see it, and I urge everybody to look at it all. Your council member email your council member, email the city manager with your feedback so that by the 29th or when we decide to do it, that we make an informed decision. But please look at the numbers and then please look at the contract to make sure that it gets us toward that. Remember. Ashcroft Thank you. And again, we're talking about doing something that it has been said we should have done long ago in this council is digging in and actually doing it. And when I heard the city manager in the presentation thinks that it will take 15 to 20 years to fix the OPEB problem. What I wrote in the margin on my notes is that we as the City Council need to provide the blueprint for how to do that. We want to show the path forward for not just our council but councils that will come after us. It is the responsible thing to do and I also give our public credit for coming out to the issues that are important to them, whether at a regular meeting or at a special meeting. So I, I don't think we want to delay this any further. And again, some very interesting materials that you've seen in the slides will be coming out for the public a week from today. Thank you. Thank you. Kurt Peterson. Thank you once again. IP. I find it very disturbing that these numbers that are so troubling to our city are presented to you by our city manager rather than our treasurer or auditor. You have to keep in mind he is also the city negotiator on these contracts. You're giving an awful lot of impact and power to one individual here. And he's also telling you that this took years, we've had problems. But by the way, we have to do it in 14 days now. We have to get it taken care of in 14 days. This is the rush. Technique that has been placed in front of our city council for a number of years. I commend you as far as Madam Mayor, to want to do this at a meeting. Maybe it's not convenient, but you knew that this was coming up. You could have planned ahead of it. And I think it is the mayor's responsibility to do agendas as set up agendas, but conveniently were in this again in a special meeting. People aren't going to know. It's going to be presented as far as on the 14th. And you got to realize we've got to papers come out once a week minimum time for them to come up with due information and article again, forcing the hand of the people without their understanding. And it's just unbelievable that you can sit here and let it continue to happen. Take time. Do it correctly. It makes sense. Maybe we won't have a problem in the future if you do it that way. But to have the person that gives you the numbers. I would have felt much better if Mr. Kennedy or Mr. Kearney could have given you these numbers, explained his concern about it, rather than the person that's going to take the time and do the negotiation. And he's going to be leaving office in the very near future as well. Thank you very much. Thank you, Jeff Del Bono. And I don't have any other slips on this item. If you want to speak, please turn in a slip. Not a mayor. Council members, city staff chief told Bono if Local 689 president and negotiator for the last three or four contracts and. This is just to add some context from our perspective because everybody has their own perspective. I think we've been working on this for 15 years since I've been here. I know that it's been a cultural change in our department. I know that I've sat up here and I've had discussions with Mr. Kennedy, Carnegie, John Russo, other people in the community that I have a core belief that people deserve health care, they deserve a good pension when they retire. Mine's good. I'm thankful for that. I have a good health care, good pension. I know that that's an important thing. I know it's important. It's important for the people that are sitting out in the audience tonight that are looking for a good wage. So I'm a true believer in that. But. Under my. Leadership and the. IFC leadership that's been here the last 15 years, we have increased the time. For investment from 5 to. 10 years. This is for OPEB. We have dropped Cadillac plans off. That was something John didn't mention. We've captured a Blue Shield or Kaiser and got rid of the other plans that we that past retirees could pick from. We've dropped the spouse for new hires and set up a412 age plan that they can contribute to for their spouse that they invest in and capped out at Blue Shield or Kaiser. We've taken our pension for our purse and we've gone from pay 9% to 15%. And what does that mean? Whether you believe that overtime should be paid to firefighters or police officers in the city. I do. If I work, I want to be paid for my time. My hourly rate is four $41 an hour and I take $8 of that and I pay it towards my pension and my health care. And I have no problem with that. And at this point, you know, we're looking at a dual to where we form a trust. And the employees who have never played one dime towards their retiree health care are now looking and willing in facing paying a percentage towards a health care trust. So I'll end this by by saying that this health care trust once set up and where the city's invested, the employees are vested. I have another 15 years ago, and I know that you have my word after doing all we have done over the last several years, that we understand that this isn't going to be fully funded . But we are partners. We are willing to sit at the table. We are willing to look at this fund that we're both going to be invested in and make it succeed. That's where we're coming from. I'm speaking for the firefighters. I feel safe enough to speak for the police officers because we've been working together to fund this benefit. And what I would ask of you is give us the same respect back. Realize that sitting down and talking and being respectful to each other works a lot better. Sitting in the coffee shop and yelling things out and badmouthing public safety and badmouthing. Our benefits as leaders doesn't work. So give us the respect back. We want to be respectful to. We're willing we've proven that over and over again. Thank you for your time. Um, I would, I would ask that we have the city treasurer Kevin Kennedy, and parties are putting you on the spot. Mr. KENNEDY. But I happen to know that you have seen this presentation and discussed it with the city manager. Would you mind coming? I wouldn't mind. I was hoping that this would be one of the few meetings that I'm not doing the presentation, Mr. Peterson. I actually have enjoyed someone other than me doing this. This is great. I've spent a lot of time. I was thinking I've probably spent almost as much time with Bartels over the last ten years I have with my son. These numbers are things that I've spent an inordinate amount of time on. I've said all along, I've said it to our city manager. I've said it to the various council members over the last ten or 15 years, and I've said it to Mr. Del Bono and to the police also. My interest is in resolving this in a way that doesn't bankrupt the city, but that also does not deny these employees some of the promises, quite frankly, that the city's made to them over the years. This is not one side versus the other. This is a collaborative effort to try to figure out how we're going to dig our way out of this hole. And I think we've had that type of dialog. I think it's good. But it is a very deep hole, as you can see from those numbers. I got to be honest with you, I've seen those. We did our first actual report in 2007 as a result of changes in the accounting, the Gadsby rules. My stomach turned just as much looking at that tonight as it did the first time I saw those things. That's a big, big number. But at the behest of a Vice Mayor Maharishi, back when he was on council, along with Doug Duhon, I participated in a group that actually quantified these numbers, talked about what was involved. I tried to lay those out. It was not a policymaking group. We did not get into the solutions portion, but we did lay these problems out. That was feels like it was just last year, but it was seven years ago. Now, as a city measure, Russo mentioned, I was part of a task force that sat down with all the interested parties and took a look at what potential solutions were out there. I think that was a productive chance for us all to sit down at the same table and talk about these things. I will tell you, I do have a concern, though. I've been part of the discussion. I haven't been part of the negotiation, and that's probably not my role. But I got these this information yesterday. I was briefed by by our city manager and our assistant city manager yesterday. I've spent a lot of time with these numbers. I opened up the new actuarial reports, which go into a lot more detail than the summary tonight. And quite frankly, it makes my head spin. I've got two weeks to try to figure out. I can't tell you tonight whether I think it's a good deal, a bad deal or indifferent. And I doubt I'm going to tell you tomorrow or at the end of the week. This is a huge, huge pile of information, and I've spent a lot of time with it. So my concern is not whether or not this is a good deal, because, quite honestly, I'm not in a position to weigh in on that at this point. My concern is that if I'm going to have to really bear down over the next couple of weeks to figure out what this is, I don't know how many of you followed that OPEB presentation and understood all of that, but this is OPEB 101. When you look at this and this is a five year deal, so I just think there's an awful lot of work done that needs to be done, I'm sorry, over the next two or three weeks so that the public understands what's going on and the public can express their opinions. And most importantly, the five of, you know, because you're voting on a five year contract and that's a very big thing. Again, I can't tell you if it's good or not, but I can tell you it's a very big decision. And I think it really is going to take a lot of heavy thinking over the next couple of weeks. I'm happy to participate however I can. I need to get my brain around it. I know staff is eager to educate us about it, but. If I have a concern at this point, it's that we've got a couple of weeks to vet what I think is a very critical decision for the city, and I hope we're all up to it. The question's actually may I ask real briefly just because we've talked about this for so many years, you know, both formally and informally, I'm not asking you to give an opinion. I agree with you. You've had 24 hours with the proposal, the solution proposal that's going to be disclosed on the 14th. But the numbers that were in the presentation, they don't look. Unduly rosy to you compared to the number of, say, your task force that put together seven years ago? Because the the allegation here, what's what's sitting here and I know this town well enough at this point to know the narrative that some are attempting to construct. That the numbers are cooked. Do you think those numbers look cooked now? No, I don't think the numbers are cooked. I think you've got an that liability of 91 million. I think in 2007 it was 71 million, something like that. So we're up 21 million since then or 20 million since then. I don't think those numbers are flawed. I think Bartel is a very good actuary firm. They a lot of this is based on assumptions that they're very familiar with and that they use in a lot of places. So I'm not worried about that 91 million being the right bogey. I think the question goes back to how do we fix it and how much can we fix it? Is it feasible to assume that we can continually dig our way out of this hole? Is this proposal that's on the table now? Going to get to move the ball down the field. And again, I'm not saying it won't. I'm not saying it will. But I think we need to figure out in the next 14 to 21 days whether or not this is the way to do it. I think it's very clear on both sides, both from the city standpoint and from employee standpoint, that this isn't a solution. The city manager is very clear. Neither the utter I are under any illusion that this is going to solve the problem. But does it make a difference that's meaningful? Net net with all the different moving parts that are part of this agreement. That's the question. And again. I think the important thing and we talked about this when the last public safety contracts were approved. One of my gripes, if you want to call it that, was that the public did not have a lot of time to vet that. And given that. These things tend to appear on the agenda when they're up for your approval. Not when our position is being considered our negotiating position. You know, we're probably in a similar spot now where the public's opinion, quite honestly, has been rendered moot because this deal has basically been put together. So really what it's falling down to at this point is, are the five of you comfortable with where this goes and your understanding of it? You know, I'm I'm getting used to the process of government, but I. I think this. I don't know if I'm if I'm wrong on this, please correct me, but I'm not sure this is a negotiation at this point. This is deciding whether what we've gotten to is a feasible and viable option. So I think everybody, though, needs to, including the public, if they're able to to to vet these numbers, should spend some time with it, because it again, it's a very, very important thing. Thank you. Any other member questions? I have a question. The current contracts, when do they expire? At 2017. Is it June or January? No, it's it's the end of 2017. Or the end of 2017 is when the current contracts expire. All right. So we're asked why are we doing this now as opposed to closer to the end of 2017? I can kind of answer that. The vice mayor and I heard about this on the campaign trail made it a priority. And this was something that people told us they wanted fixed. I mean, we spent an hour sweating at the Oakland Tribune going through all these numbers. I mean, this is something that is is an issue that is important. And we need to tackle this. And if I recall correctly, we unanimously gave direction to staff a few weeks ago to pursue a path based on what was what they came up with on Friday. So, you know, we gave direction. Staff come up with it. They negotiated in good faith and. I guess I'm confused. Why why there's why there's backlash after we gave gave this direction to the staff to do it this way. If I'm trying to educate the public as to what's going on here, and that hasn't been sure as far as I know. Well, all right. Let me let me suggest that tonight we were trying to place context on OPEB so that the discussion about the eventual contract could be meaningful and placed in an important context. What I will say is this as I've argued with labor for the last two years. This problem of these benefits and the unfunded liability, the longer we don't address them, the harder it becomes to fix them. And I see my friend, the Treasurer, nodding his head. Yes, because we've been having this conversation for years now. The sooner you get at this, the better. So now that there's the opportunity based on council direction to go forward and negotiate what will be an essential first step, a necessary if not sufficient first step in a solution. That's why we're bringing it forward now. Thank you. And then when this comes back, we'll include the entire contract. This will include all the contracts. Will be disclosed on the 14th. It is required by the Sunshine Law. And then we'll highlight the highlight the changes, whatever changes. So that's clear. It'll be strikethrough. Strikethrough. Thank you. And remember Ashcraft. And just for the clarification on the staff report that we will get before the 29th when we consider that the public safety contracts, will we will the staff report include commentary by Mr. Kennedy or his analysis? He said he's he's going over the numbers now. I know. I'm next week. Keeping oh. Wait. Times. I assume that that both Mr. Kennedy and Mr. Carney, who's Mr. Carney with April 15th looming is particularly under the gun, although so is Mr. Kennedy. From what I understand, I assume that both of them will be able to attend and will attend the meeting on the 29th and address answer questions and give their opinion about what they think about it. And I'm pretty confident I'll hear about it before the 29th from them personally. And we could to. Any other member disagree. Or about comments. Uh. Right, we're going to comment. Right. I think we're done with all the speakers. Correct? Right. Thank you. Thank you very much. Earlier this evening, we as a council met in executive session to go over some of the deal points that were going to help inform the discussion that that will happen about the contracts for public safety, particularly. This evening I had voted. I had to stand on the vote. And I just want to make clear as to the reason why I abstained on the vote is because it's similar to what City Treasurer Kevin Kennedy said. I just I need to know not just the mechanics, but in the end I need to know that the numbers are going to help us towards solving the the unfunded liabilities. There are elements to the agreement that are in place. You know what? Share how much people are going to contribute over time. But those percentages and rates in my the way that I deal with these matters in to be applied to some real numbers so that I can say all I see so that adds up to that and that relative to the $91 million is so and so so that I can then eventually say, okay, I think that's a solution that I can live with or not. And because this evening was for the most part about kind of the fleshing out the framework of the discussion, I abstained. It doesn't mean that I'm against the framework. It doesn't mean that I'm against the particulars that were raised in the course of the discussion. It just meant that, you know, for my. Comfort level. I just wanted to actually apply those numbers. Some absinthe that I can also. I'll do that on my own as well. So. So when we eventually have the discussion on the about the contract of the labor contract in our council members and either make a decision that night to make to move forward with a contract or they can make a decision to move forward with the contract at a later time. You know, there are plenty of options. So I don't think we should second guess a person's motives or not. I think in the end, we're going to make a good decision on behalf of the public when it comes to the contract A and B, and this is what I really want to get at. I think we're going to make a good decision on behalf of the public when it comes to dealing with the outstanding unfunded liability for the on the open. And I think we're got we're moving in the right direction because without going into the details. The mechanics of the trust fund idea that City Manager Russo has promoted not just recently, but over the course of 18 months. Roughly, we can Kanaks of the trust fund. The idea is that it could help address the unfunded liabilities that is attributable to workers who are right now working in City Hall. Remember that question that I asked earlier that when you look at the unfunded liabilities, that broadly speaking, you can just you can divide it into two categories of the $91 million, the portion that is attributable to those who are retired right now, they're out of city hall or leading the good life, hopefully. And then there's also the portion of the $91 million as attributable to workers who are right now still in city hall. But we have to make sure to plan for their health needs in the future. So the $91 million breaks off in 2 to 2 numbers. And from what I'm seeing, the mechanics of the trust fund idea that city manager Russo has has put forward over the many months, I think really do begin to deal with the to address the unfunded liability for the current workers. And it's a long term solution. So but I do think that we still are going to have to we're still we still need a strategy for the unfunded OPEB liabilities for those who are already retired. Because, you know, we made a promise to them that the money was going to be there. Now, let me make sure to say right now, as the city manager had indicated, we're paying $3 million every year towards individuals as retired persons as health. I remember that $3 million is, as we had dubbed, it's a pay go, meaning that it's paying for medical services or is paying for whatever agreements that we did for that retirees. But it's not the $3 million is not going towards buying down the outstanding $91 million unfunded liabilities. So on the issue of the OPEB trust, in my mind we almost have to think about having two trusts, one trust or the workers right now with whom we have certain deal points, the mechanics of which are clear. But the the, you know, the extent to which it addresses the unfunded liabilities attributable to current workers, it's it's still out there. But I think it's it's moving us in the right direction. But I also think we need another trust fund of sorts to deal with the unfunded liabilities for those retired workers. So in a nutshell, let me just put it to just just to give you an order of magnitude, my understanding is that of the $91 million in unfunded liabilities for OPEB, of the $91 million, $38 million is attributable attributable to workers right now. We know that the workers right now how long they're going to live when they retire. And we've made the calculation through Bertelsmann Associates, I think it's roughly $38 million needs to be set aside for them. So that means that the balance $53 million is what needs to be strategy. That's what I'm talking about, that there needs to be a strategy for that as well. And also, I think it's important, like I mentioned earlier, that we make this decision on a wide, wide open basis, meaning that there will be some agreements that we're going to have to make with regard to staffing levels over the long term . And the final point is, I do think this is an issue that I raised several weeks ago. I do think that we still need a finance commission, one of whose specific tasks is to kind of, you know, monitor the progress that we would make relative to any agreements we make on the unfunded liabilities for current workers, OPEB liabilities for current workers, or unfunded liabilities for those who are already retired. So thank you. Member Ashcraft. Well, I'm sorry, I. I think Mr.. Brody. I think you met. I just try to be brief. I think if you look at the staff report, you know, there's a sentence in any solution must be developed in partnership with our labor groups. And I think that's the big constraint that I think sometimes is lost in this argument, is that as the council, we cannot sit up here and impose a solution unless we involve our partners in the labor organizations, specifically public safety, because they're the biggest chunk of of of the cost. So. We've had we have this in three parts. You know, we've known about the liability. You it was 71 million back in oh seven. It's 90 some million now. Keeps growing. And we had an idea. There was a task force. The trust fund. That was the idea. So we had to solve how we're going to fund that trust fund. And that's the task that, you know, I think lost in today's discussion is unanimously this council a few weeks ago gave direction to staff using a framework to negotiate a solution, not a complete solution, a partial solution that will not kick the can down the road, but at least maybe will carry the bucket for a few years and then try to have to fill it up again later. So. That's what we the job we gave the staff and they came up with a funding solution. It's painful. It's painful for us as a city. It's painful for our employees who will be doing something that no other bargaining unit in the area will be doing. But I think it's a good step in the right direction. And and I hope that we remain focused on, you know, this is this is the one thing that keeps me awake at night is how are we going to take care of these unfunded liabilities? This and what we do in the next couple of months at Alameda Point are probably the two biggest, biggest issues that are going to face this council. So this is something that's very important to us. I mean, we take this seriously. I hope to hear from a lot of people when the details of of the proposed contract come out, you know. I hope that that, you know. Some of the comments are respectful, you know, and that are responsible. And it's instead of, you know, using some of that code word that the city manager talked about earlier about ramming things through, and I hope the discussion is framed in a way that. If you don't like the way that the city has decided to fund this trust fund, then please come up with different ideas. So, I mean, showing leadership is not sitting in a coffee shop bashing our public safety employees and bashing their benefits. Showing leadership is saying. This is how we're going to find a solution. And if one of us doesn't like that solution, then I think to show leadership, it's our job to find a different solution. So I'm really looking forward to spending the next few weeks diving into the details of this and and especially on the impacts. So when we see the numbers, you know, it's not going to solve the entire 91 million. Of course, Member de Song alluded to that. But let's pay attention to what what we are going to solve and the big chunk that we're going to take out of this liability. And then our next task is to approach, you know, the other 38 million and come up with solutions that we can make this long term sustainable. But I think this is a good first step, and I'm really interested in delving into the details. Amber Ashcraft. Thank you. Mayor Spencer And so I was just going to ask a couple of maybe pragmatic housekeeping questions to the folks who think we shouldn't be moving forward at the end of this month considering these revised contract provisions. Is it because you feel we don't have enough information? And if so, what is that information? What more information would you want to have? I've heard the concern that it's a special meeting versus a regular meeting, so people aren't as attuned to that regular, first and third Tuesday. But we all know that we can have a regular council meeting with a very sparse attendance because it's more the agenda items that bring people out rather than it just being a regular meeting. And people participate in all different ways. They're watching us on television, on their computers, live streaming. And then I also want us to consider the question, do we think it's preferable to continue these current contracts that are in place? Because then we wouldn't be adding these provisions that start getting the employees to help pay down their own pay towards their own benefits and help us start paying toward our OPEB liability. It's not quite the same, but I'm just going to analogize to the Iranian nuclear agreement that was was agreed to on a national and international stage last week. And and yet there is a party in Congress that would like to just tear it apart. And the question there is, is it better to continue with no agreement in that case or an agreement that maybe not perfect but took a long time in the making? I do know that the city manager, I think, has a weekly breakfast meeting with the two Kevins, as we like to call them, Mr. Kennedy and Mr. Kearney . I do realize it's tax tax season and you guys are really busy and we do appreciate all the good work you do for the city. But when this staff report comes back, I do want to see the devil's advocate portion. I guess the devil's in the details and I want to see the devil's advocate position because we don't just want a happy talk and we want to know, you know what? Why is this a good idea? Why maybe is this not I want to hear. I mean, it will help all of us make a more informed decision. I'm not entirely clear on what Member De SA still wants to see, but perhaps he will. We'll let staff know because when this comes back to us, I do want us to have as complete information. I, I know because the city managers kept us informed in the last month or so that these talks have been ongoing. And that's the nature of talks. You don't you don't get everybody agreeing to all the points that need to be agreed to the first time out. It's been an ongoing process. So give us all the details. The good, the bad, the ugly. Don't sugarcoat it. We we want to have all the information possible to make a good, informed decision and to any of the council staff public who would like to see more information, shoot an email to to the staff. They'll they'll consider it. Thank you, Mayor. I swear. The only thing I'd like to say is that I'm looking at this as if we do nothing. What happens if we do this? What's the upside? And is it worth the downside? Is the money we're going to save worth the five extra years, for example? That's a good thing to measure. I urge people to do that. Second thing is, if this is a matter of having a special meeting versus a regular meeting, I'm perfectly willing to say we can meet on the fifth at the regular fifth six days to me, doesn't matter in the scope of things here. I, I do like the fact that it's paired with a budget hearing because this is the number one issue of, of our budget. And I think if everybody is heightened to it. But I think we're going to do a better job at educating people on what the impact of what these decisions are. So in regards to our budget calendar, I believe we also still have budget meetings coming up. We're not finished with the budget in April. So we have not seen our multi-year budgets. I think we have a meeting May 12th that addresses the budget. No, actually the multi-year budget will be presented on April 16. So there's a meeting next week. That's on next Thursday, April 16, and that's where the five year budget projections will be presented. Then there's a regular council meeting on April 21. And then there's another budget meeting on April 29. Then there's another budget meeting second week of May, and then there's a regular council meeting on May five. And my understanding is that. This item. Is going to be presented. And part of that budget. Projection on the 16th. Correct. This item will be included include numbers will be included. And on the 14th the entire package will be presented to the public, sharing a lot of the data that the Council and mayor have already received. And if during those numbers, during that presentation of the numbers, if council members want to start exploring some of the ramifications of the potential deal, it's not an orderly process that way, but it's your process. So so we do have more budget meetings coming up after the date in April. Yes. So so that's one of my concerns. I also like to bring the public along as much as we've had now to close session meetings of approximately half an hour each to discuss this. The public has not been privy to that. And I think it's very important that the numbers be shared with the public. And I am looking forward to seeing the continuing meetings on the budget and the multi-year budgets as well as the entire contract that we will be being asked to extend the entire contract, not just this and I have not been privy to the looking at the entire contract. I think that that's very important that that be shared. Any other comments on this one? Thank you. So now we can move on to six be. Recommendation to accept report on offer to transfer a portion of the Oakland Inner Harbor Tidal Canal from the Army Corps of Engineers to the city of Alameda at no cost and subsequent disposition of property. Madam Mayor and Council, this particular item is coming to you primarily from my office, Andre Pennock as an assistant city attorney in my office, and Jillian Blanchard of Rutter Law Group, who is an Alameda attorney, have been working very hard with the Army Corps of Engineers and other potential regional partners.