Recommendation to Amend the General Fund Fiscal Year 2015-16 Budget by Appropriating $3,000,000 from the General Fund Committed Fund Balance to Pay for the City’s Other Post Employment Benefits (OPEB) Obligation as Stated in the Safety Bargaining Groups Memoranda of Understanding. (Finance 2410)
The recommendation to amend the General Fund fiscal year 20 1516 budget by appropriating 3 million from the General Fund committed fund balance to pay for the city's other post-employment benefits obligation as stated in the Safety Bargaining Group's Memorandum of Understanding. All right. So. Could you clarify I pull this out in the title says Recommendation to Amend General Fund Fiscal Year 20 1516 Budget By Appropriating $3 million. Could you clarify what $30 million is and what we're really being asked to do here? Sure. My name is Elaina Dyer and finance director. So what this particular item is is really an administrative item. So what happened back in April of 2015, council approved the safety for safety contracts, bargaining group contracts, and the OPEB section stipulated in those contracts that the city is required to deposit $5 million to the irrevocable trust OPEB trust . We have $2 million already set aside and ready to go. However, we the $3 million that is part of general fund additional contribution is sitting in the general fund and we need to appropriated so that the payment can be made in January. As a clarification item, the Council did approve a commitment of $3 million in September, and that's not the same money that we were talking about prior to the council being superseded here in December of 2014. There was another commitment made for $3 million. Just happen to be the same dollar amount, and that's the dollar amount that was. To be used, actually, or at least assumed to be used back in April for the payment of $5 million. Madam Mayor, it was. It was set aside, but not appropriated. And this is just the authorization to appropriate the money. All right. In the 2 million, has that already been appropriated for this? That's correct. And this is then the 5 million that per the for am I use is to be made contributed by the city to an irrevocable OPEB trust by in January or by January 2016. Correct. All right. Any other. Question? Yes. I swear. When will these dollars be deposited into the interest bearing account? I'm in January, so we are waiting for an appropriation so that we are ready to go. I believe the contract just says January, but January 2016. So that's when they'll start accruing as soon as that deposit happens. That's correct. And the trust. Is this the five? I trust that this money will be deposited into. No, it's not the five. I is actually a different type of trust in which city merely just assists the bargaining groups to set up the trust. But there's no contributions going to that trust from the city. It's strictly employee contributions and those are really to supplement their retirement. And it has nothing really to do with OPEB. The members may choose to use portion of that money that they on their own contribute to use towards premium health premium. But that's not something that city's participating in. OC than the OPEB trust that this money will be going into. Is that all or solely city council contributions, or does that OPEB trust include both City Council contributions and member contributions? It's combined. So the contribution will be going into one account and it's going to be a pooled account and we'll be earning the interest on the total. And that's a current that's pulled account that's currently established. The city will be setting up an account specifically that for the safety and we'll use the word determined that it's actually is actually at the same time a stipulation within the the contracts. But it will not be commingled with moneys that been deposited for existing retirees. These are for the future retirees of the safety groups. But that trust has already been established and it currently has money from both employees as well as city donor contributions. It's the same trust. It will be tracked in a separate account. Within the same trust. So is there a way to have some sort of accounts within this account that's that do not co-mingle the city contributions and the employee contributions? Well, actually, the contributions for the purpose of the trust itself, as well as for tax purposes, are all considered to be city contributions. In essence, it almost makes it, as you would say, a charge to the employees. And it's not separated for that reason. Member. Ody. I like to move approval of the item. Our second. Were there any questions? Yes. QUESTION Members, just to be. Sure. Now, the trust that we're talking about, as indicated in the staff report, this is about the April 2015 trust that we had a discussion which basically the former city manager, Russo's trust fund idea to help pay down the OPEB liability in the future by combining not only the employee's contributions through new payroll, but also helping finance that through the mechanism being discussed right now. That's what this is all about. Yes. And this is, as I mentioned, that's an administrative item for us to move the actual money to the trust. We need to have an appropriation to do so. Now, I raised that because back in April 2015, when this was raised, the concern that I made then and still have is I do think that the trust is undercapitalized. And I do think that the time is now to really think through how to well-capitalised the trust fund. Because the way it looks now, going back to the April 2015 discussion, it runs out of money by roughly the year 2034. But you begin to begin to see a decline in the amount in the trust fund, even as I think 2025 or 2026. Now, I know the counterargument is, well, you know, at some point in time, we will make sure to fix it. We just don't know. You know, you just never know that, you know, there might be some things that happen in the year 2022. I mean, you know, that's many years from now that precludes us, the city council or the Future City Council from from fixing it, the way in which we foresaw possibly right now. So so I still do have my concern about the undercapitalized nature of it. And sure, I could certainly vote for this, but then I think that would kind of water down my concern. My goal is ultimately to fix what I believe is the undercapitalized nature of this. And I do have some suggestions, but I'll I'll remain consistent with my vote of April 2015. I'm sorry. So I also opposed that contract. I think long term it does jeopardize the fiscal health of the city. I also will not be supporting this. So I'm going to call you on it. Just a couple of quick points. I mean, this is a contract that we signed with our bargaining unit is that we have to honor. So it seems like if we vote no on this, then we're we're violating the terms of that contract, which seems to me a violation of our fiduciary duties. And I also don't seem to understand the argument that if it's undercapitalized to begin with, that you improve that problem by not funding it by the amount you promised it, because then you're even undercapitalized even more. So it seems a little, you know, hypocritical in my mind that, you know, to say that I'm not going to vote for this because we're the big project or the big fund is undercapitalized and then miss out on a chance to actually put money in there, which we promise to do. It just seems a little bit odd to me, but it is what it is. So I'm happy to respond to that. I actually think that we need to come up with a serious solution and not something that's a partial solution, and that at this point, we are not there. And and so that's. So I appreciate your comment. At the same time, I cannot support the solution, which was that contract, and I didn't support it then. So I'm member Ashcraft. Thank you, Madam Mayor. So I look forward to future discussions and perhaps agenda items and hearing from our Mayor and Councilmember Desai as to how we can further enhance what we have started to do under the last administration. But I don't think any of us thought we were going to solve the problem of the underfunding of this liability overnight. I think $5 million is a decent start and we want to get that money into this account, which is also known as the lockbox. I think that it's not I mean, it's very strict purposes for which the funds can be used. So, you know, there's a lot that we can discuss, but I don't want that money just sitting out there, not in an interest bearing account. I want us to get started. So I hope we'll have a majority vote to go forward with that appropriation tonight. So just to be clear as to what my concern is, my concern is that you have members of public safety, police and fire who going forward are going to pay out a certain amount from their own paychecks towards basically self-funding or partially self-funding their their retirement. And combining that to start that off or putting in $5 million to capitalize this project over time is going to generate money through interest. But we already know through our discussions of April 20, 2015. We already know, though, that what we're starting off now, the formula that we're starting with now in terms of persons is contributions as well as the capitalization that we're providing is not enough. We already know that is going to run to zero in 2034. We already know that even by 2026 it begins to go slope downwards. So knowing what we know about it running out, to me, that tells me that we need to have a discussion about fully capitalizing it . Right now, I've offered two ideas of, you know, securing the 1079 and 1081 retirement accounts, preserving, you know, what we would have paid to those folks putting it towards this. So that to me is the better course of action is to you to cement some kind of policy, knowing that we know that knowing that we already know that this is going to run out of money is at the end of the day, it's not fair, in my opinion. It's not fair to the public safety person who in 2016 or 2017 and years are paying out as opposed. It runs out of money and they retire. You know they're going to retire in 2031. That's not fair. So I think that's why we we need to take the time to ask this out. And I want to clarify that the vote for the MIS was was this council. It was April 29th, 2015. This council approved different avenues and that vote was 3 to 2. All right. I'm going to call the question all those in favor. I. As opposed. I. I love you. Thank you. The motion carries. Three, two, two. Thank you. The next one I pulled was by. Adoption of resolution of proving administrative correctness to better reflect current medical contribution rates, dental plan modifications to update language changes related to the Public Employee Pension Reform Act and to list specific uniform rates to the memorandum of understanding between the fire chiefs and the city for the period commencing November 1st and ending 2015 and ending December 18 , 2021. I don't believe that's the kind of idea. Regarding the trust. Supplemental retirement trust. Oh, a uniform resolution amending the International Association of Firefighters Supplemental, Retirement and Health Plan and Trust Agreement for IAF employees hired after June seven, 2011, to include the Fire Chiefs Association, the Police Officers Association, the Police Management Association and Employees hired after July.