LAC Actuarial Study of Liability Trust Fund (Sheriff) Aug 2014 � �<< CountyofLos Angeles .:
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CHIEF EXECUTIVE OFFICE
+n-,', 'Fi' Kenneth Hahn Hall.of Administration
500 West Temple Street,Room 713,Los Angeles,California 90012
•x: (213).974-1101
•
City of FtWeinAtilicaNtrIVP
WILLIAM T FWI KA Board of Supervisors
Chief Executive Officer5 2.014 GLORIA-MOLINA
DECFirst District
MARK RIDLEY-THOMAS
August 14, 2014 .� nrei'' Office Second District
City �
ZEV YAROSLAVSKY
Third District
DON.KNABE
Fourth'District
To: Supervisor Don Knabe, Chairman MICHAEL-D.ANTONOVICH
Fifth District
Supervisor Gloria Molina
Supervisor Mark Ridley-Thomas
Supervisor Zev Yaroslaysky
Supervisor Michael D. Antonovich
From: William T Fujioka (A) b
Chief Executive Officer . ••
ACTUARIAL STUDY OF THE LIABILITY TRUST FUND
On July 29, 2014, the Chief Executive Office (CEO) received correspondence from the
California Contract Cities Association Liability Trust 'Fund. Oversight Committee
(attached). The letter transmitted the June 30, 2013 actuarial study of the Liability.Trust
Fund, which is composed of two funds: 1) Sheriff; and 2) All Other Contracts.
Contributions to the fund are a surcharge on the contracts paid by cities for services
provided by the County of Los Angeles (County) for the purpose of addressing liabilities
related. to these services. On April 20, 2010, the Board approved an ongoing
administrative surcharge review procedure to ensure that the. Liability Trust Fund
maintains funding at or above the 75=:90 percent probability range. If the funding falls
below the 75 percent level for two consecutive year , the surcharge. rate will
automatically increase by 0:5percent; and if funding rises above the 90 percent level for
two consecutive years, the surcharge rate will automatically decrease by 0.5 percent.
Based upon the current actuarial projections, the Liability Trust Fund is projected to fall
below the 75 percent confidence level by the next actuarial report. While not subject to
the automatic rate increase, it is projected that the funding needs for Fiscal Year 2014-
15 will not be met at the current rate of 4 percent, and a shortfall is projected by
June 30, 2015. Furthermore, it is projected that the shortfall will accelerate at a faster
rate than the 0.5 percent rate increase that would become automatic at the second
consecutive year threshold.
"To Enrich Lives Through Effective And Caring Service" •
Please Conserve Paper-This Document and Copies are Two-Sided
Intra-County Correspondence Sent Electronically only
Each Supervisor
August 14, 2014
Page.2
The Liability Trust F=und Oversight Committee reviewed additional Sheriffanalysis from
the actuary and, with. the support from the California Contract Cities Association, has
made the following.recommendation effective January 1, 2015:.
•
• Sheriff Department Services 5 percent (1°/0 increase)
• All Other Contracts 4 percent (no change)
The CEO Risk Management Branch has reviewed the actuarial study and discussed
this matter with a representative from the Liability Trust Fund Oversight Committee.
The representative.has-affirmed the validity of.the.analysis.and, as such, we concur with
the request. Accordingly, we are advising the Board, at the.request of the Liability Trust
Fund Oversight Committee and support of the California Contracts=Cities Association, to
adjust the.surcharge for contract cities for contributions to the Liability Trust Fund:. The
rate for"Sheriff"will increase to 5 percent and..the "All Other Contracts" rate will remain
at 4 percent, effective.January 1, 2015.
For more information, your staff may contact Steven T. Robles, Assistant Chief
Executive Officer/County Risk Manager, at(213) 351-5346. .
WTF:BC
STR:sg
Attachment
c: Captain Richard T. Mouwen, Contract Law, Sheriff's Department
Curtis Morris, Chair, Liability Trust Fund Oversight Committee
Sam Olivito, Executive Director, California Contract Cities Association
Jonathan Shull, Joint Powers Insurance Authority
I:RMB SsaaBoard lettere and memodBM-Actuarial Study of the UabLGty Trust Fund(C100S87)8-12.14.daat
ATTACHMENT
CALIFORNIA CONTRACT CITIES ASSOCIATION
LIABILITY TRUST FUND OVERSIGHT COMMITTEE
California Contract Cities Association Liability Trust Fund Oversight Committee
11027-Downey Avenue 8081 Moody.Street
Downey, CA 90241. '. La Palma,CA 90623
•(562).622-5.533 (562)467-8700
Eivl 7Z",)
July 9,2014 r,,
Mr. William T. Fujioka,.Chief Executive Officer 2
314,11.
County of Los Angeles .
Room 713,Hall of Administration rn
Los Angeles,CA 90012
RE: Liability Trust Fund: Surcharge Adjustment on Sheriff Services iv;
Dear.Mr,Fujioka:
As.you.know,the County of Los Angeles provides services to cities and agencies-throughout the
region through contracts for service. .Cities that contract with the County for services,pay a
surcharge as part of the contract-to address the liability associated with the provision of the
services.by the County. The surcharge is deposited in the Liability Trust Fund(LTF),Which is
maintained by the County. The LTF is comprised of two funds:the Sheriff's Fund and the All
Other Fund.
On April 20, 201Oi.thee Los.Angeles County Board of Supervisors(BOS.)--approved an ongoing
administrative surcharge review procedure to ensure that the LTF maintains funding at or above
the 75-90%o P robability range. The BOS.concurred that funding levels are to be reviewed
annually in conjunction with the actuarial study..,, argd.autos atic_ad4st uents,to_the.surcharge will
be tri �ggeied`us'" the 1011'0 _wing methodology:
�
• If funding falls below the 75%probability level for two consecutive years,the surcharge
rate will automatically increase by 0.5%
• If funding rises above the 90%probability level for two consecutive years,the surcharge
rate will automatically decrease by-0..5%
At its April 9,2.014 meeting,the Oversight Committee(Committee)reviewed the June 30,2013
actuarialstudy, which is attached, and proposed surcharge rates for the LTF. The actuary
projected the LTF's overall actuarial status to fall somewhat below the 75%confidence level by
June 30,2014. This would be the first year that it falls below the threshold for a rate increase,so
the automatic increase would not yet be triggered. However,the projected funding needs for
2014-15 would not be met at the current 4%rate, and the.anticipated shortfall by June 30,2015
Liability Trust Fund:Surcharge Adjustment on Sheriff Services
July 9,2014
Page 2 of 2
would be significant. It is projected that the shortfall would continue to increase in succeeding
years faster than the automatic triggers would increase the rate. The Committee discussed the
Sheriff.surcharge:rate:.at-its meetings in May and June,and reviewed additional analysis from the
actuary regarding the Sh erif's fund.
With support from the California Contract Cities Association,the.Liability Trust Fund Oversight
Committee is electing-to increase the Sheriff's surcharge rate by 1%on January 1,2015, instead
waiting forthe automatic: ncrease trigger allowed by the administrative process: Upon:receipt of
the June 30,2014 actuarial report the Oversight Committee will further review the status of the
surcharge,and determine:any:additional changes to the rate.as-needed.
To.•summarize,the Liability Trust Fund Oversight Committee and the California Contract Cities
Association request that the Liability Trust Fund contribution rates be adjusted effective
January 1,2015 as follows:
Sheriff Department:Services 5% (1%:increase)
All Other Departments 4% (no change)
Please contact Jonathan Shull,California.JPIA,at(562)4674717 if you have-questions or need
more information.
Sincerely,
/44,4-71/701,1444
Curtis Morris
S: 0'vita,Executive Director
Mayor,City of San Dimas California Contract Cities Association
Chair,Liability Trust Fund Oversight Committee
Enclosures
cc: Jonathan Shull, California JPIA