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20101104 Late CorrespondenceNovember 4, 2010 Dear City Council Members; I am the President of Rolling Hills Riviera Homeowners Association located across Western Avenue in the city of Rancho Palos Verdes. There are 721 homes in our neighborhood with 522 current members of our voluntary homeowners association. During a recent meeting of the Northwest San Pedro Neighborhood Council (NWSPNC) meeting, I obtained a copy of a Risk Analysis Report the council had paid $10,000 for because Rancho and the previous owners AmeriGas were not forthcoming with any information. I think it is very important for all homeowners and businesses in the Palos Verdes Peninsula be made aware of the risk this ultra hazardous site holds. These tanks are located on Gaffey with no barriers between the streets and the tanks. They hold 25 million gallons of butane and propane. They were built in 1974 a tet all the homes that are currently there today. They are located on the Palos Verdes fault line and in a liquefaction zone. They are also on the flight pattern for the Torrance Municipal Airport and if Long Beach Airport changes their classification, the flights over these tanks will increase. There was $108 million dollars of taxpayer money that was spent to create "energy island" also called Pier 400. Local homeowners were promised these tanks would get relocated there, however, it was leased out to Maersk Shipping. During the last NWSPNC meeting a representative from Rancho was there with a representative from Quest Consultants who were hired by Rancho to perform their own risk analysis report since they didn't like the results of the one from Cornerstone. The truly alarming statement was when the representative from Rancho stated they have a "like/kind" inspection policy. This policy allows them to inspect one tank and if the other tank is similar, then it is assumed to be in the same condition as the one that was actually inspected. So, only one of the two tanks have been recently inspected. I would like the assistance of the City of Rancho Palos Verdes in moving these tanks to Pier 400 or some other location that is safe. Below are a list of contacts besides myself. • Rancho LPG Holdings LLC is: Mr. Ronald Conrow, District Manager, 2110 North Gaffey St., San Pedro, CA 90731. Rancho LPG Holdings is a division of Plains Midstream Canada. • Chuck Hart or Jody James at San Pedro Peninsula Neighborhood Coalition, P.O.Box 1106, San Pedro, CA, 90733. • WWW.HazardsBeGone.com Thank you for your assistance and time, /eanneLacombe, President Rolling Hills Riviera HOA P.O. Box 6124 San Pedro, CA 90734 (310) 833-0444 Attachments: Risk Analysis Report MADE A PART OF TH MOIL MEETING OF OFFICE OF THE CITY CLERK CARLA MORREALE, CITY CLERK ,� Quantitative RiskAnalysi�s fo_r, Americas Butane Storage Facility Prepared in Consideration of: Amerigas Propane L. P. 2110 North Gaffey Street San Pedro, CA 90731 Prepared By: Cornerstone Technologies, Inc. EnvuonmtntalEiioeK ing&Construttlon 1650 Ximeno Avenue, Suite 210 Long Beach, CA 90804 Tet: (562) 494-9465 Fat: (562) 494-5296 September 2010 This report is designed to provide accurate and authoritative information with regard to the �- subject matter covered. However, it is provided with the understanding that the contents reflect the best judgment of Cornerstone Technologies, Inc. in light of the information available at the time of preparation. Cornerstone Technologies, Inc. does not make any warranty, express or implied, or assume any liability with respect to use of, or damage resulting from the use of any data, information, and/or projections contained herein. TABLE OF CONTENTS 1 SECTION 11.0 Introduction 2.0 Objective, Scope, and Methodology of Study 3.0 Facility Location and Site Description 4.0 Quantitative Risk Analysis Methodology 5.0 Hazards Posed by Amerigas Butane Storage Facility 6.0 Results of Quantitative Risk Analysis 7.0 Conclusions of the Study 1 APPENDICES Appendix 1: Release Scenario #1— Vapor Cloud Explosion (Distance <0.1 miles) Appendix 2: Release Scenario #2 — Vapor Cloud Explosion (Distance <0.1 miles) Appendix 3: Release Scenario #3 — Pool Fire (Distance 0.4 miles) Appendix 4: Release Scenario #4 — Pool Fire (Distance 1.7 miles) Appendix 5: Release Scenario #5 — Vapor Cloud Explosion (Distance 3.2 miles) Appendix 6: Release Scenario #6 — Vapor Cloud Explosion (Distance 4.0 miles) Appendix 7: Release Scenario #7 — BLEVE (Distance 5.2 miles) Appendix 8: Release Scenario #8 — BLEVE (Distance 6.8 miles) 1.0 Introduction This report is intended to provide a quantitative risk analysis associated with butane at the Amerigas facility located at 2110 North Gaffey Street, San Pedro, California. The purpose is to provide the surrounding community with an informed evaluation of the potential health and safety risks that are inherent in this type of industrial setting. Amerigas handles a number of industrial, chemicals at this address. This report will focus exclusively on the butane storage and transport activities associated with the facility. -- Butane is usually received and/or distributed through a pipeline, railcar, or transport trucks. Based on the facility's Regulated Substances Registration, two refrigerated storage tanks located on the western border of the facility are designated for butane storage, each with a capacity of 12.6 million gallons. Butane can additionally be stored in two smaller horizontal vessels, each with a capacity of 60,000 gallons. When considering all storage activities involving butane, this location can store approximately 23.32 million gallons of butane. 2.0 Oblective. Scope, and Methodology o_f_Study The aim of the analysis is to assess the risk to safety of people living and working in the adjacent neighborhoods surrounding the Amerigas facility. The specific objectives of ® this analysis include: • Identification of the typical hazardous incidents that relate to the operation of the facility; • Assessing the significance of each incident that could occur in terms of its potential off-site impact; • Assessing and quantifying the off-site levels of risk to people, property and the environment due to the proposed facility operations, using a quantitative risk _ analysis method; and • Providing a clear, concise report of the analysis to determine the health risk associated with the operation of the facility. In order to meet the necessary objectives of this study, the following items are included for consideration: • Identification of the typical hazards present on the site and development of incident scenarios; -� • Assessment of the consequences of the identified potential risk events; • An assessment of the risk in relation to established risk guidelines. The Quantitative Risk Analysis includes a systematic approach to the analysis of what potential hazards can occur within the storage facility. The normal conditions of Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 ® operation of the system are defined and the following questions are provided best - approximation answers: (1) What accidental events can occur within the storage system? (2) What are the consequences of each accidental event? (3) What is the significance of the calculated risk levels? By objectively quantifying the potential risks from each part of the system, a quantitative risk analysis enables identification of more effective measures to reduce such risks. The methodology begins by defining the system through compiling and assimilating the facility information that is readily available to the public domain. Following the characterization of the facility, common hazards are recognized, in which internal and -® external events are identified which may cause the release of hazardous materials. The consequence and frequency of such events is modeled based on available information. A risk assessment is conducted, which calculates the potential facility -wide risk and m- compares the result to other accidental health risk hazards. In this way, the facility is objectively defined, analyzed, and quantified in order to ® provide a more accurate evaluation of its safety risk potential for the facility operators and the general public. ® 3.0 Facility Location and Site Description Location The Amerigas facility located on Gaffey Street encompasses approximately 20 acres of land and was previously owned and operated by Petrolane prior to Amerigas' purchase of the facility in 1993. The facility is connected via pipeline to a berth in the Port of Los Angeles which has been used in the past to load ships with butane for export. The facility provides access for vehicles and rail lines as alternative means of shipping or receiving butane and other LPGs. While the facility is predominantly surrounded by other industrial operations on the north, south, and east sides, to the west across North Gaffey are very dense residential areas and commercial buildings. Based on a survey of the available aerial maps for this region, it is estimated that the nearest commercial receptor is roughly 0.13 miles (-675 feet) from the largest butane storage tanks. The nearest residential receptor is approximately 0.24 miles (1,290 feet) from the largest butane storage tanks. The _ relatively short distance between the largest butane storage tanks and areas where civilians live and work has generated cause for alarm for the residents near the Amerigas facility. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 Geological Description The facility is relatively level, and records indicate the land was used as a dump and fill area in the past. Numerous chunks of asphalt and concrete were present in the foundation, and the subsurface conditions are known to be relatively uniform for at least a depth of 35 feet. The fill materials that had been previously dumped in, he subsurface .. varied between five and ten feet in thickness and had consistencies ranging from loose to medium -soft. After a depth of about 60 feet, it is postulated that the underlying geological materials consist of medium -firm clays and medium -firm to firm silts. Below this depth, it is estimated that the ground materials are dense deposits of sands and silts. H. M. Scott and Associates of Rosemead, California, developed the site and excavated unsightly and problematic dump materials from the subsurface, consequently recompacting the area with earth excavated from a bluff at the back of the site. Grading work commenced in October 1972 and completed in December 1972. The site was originally developed by Petrolane because of the geology of the subject site. It was determined that the large refrigerated tanks could be developed and installed on -- sand deposits by cutting into an existing slope. This would allow for the tanks to be stored on sturdy, natural foundations. Before development of the site, test borings and an earthquake engineering study were performed by Converse, Davis, and Associates of Pasadena, California. The evaluation included analysis of past statistical data and acceleration level -return period relationship, probability distribution of accelerations and earthquake magnitude, nature and activity of faults in the area of the site, and response — spectra of various ground motions. Facility Description The facility is divided into two different parts. One portion is a storage facility on Gaffey Street, which includes two 12.6 million gallon butane tanks, transportation vehicles and pipeline and rail shipping capabilities. The second portion of the facility is a berth in the Port of Los Angeles which is used for the export of butane and other LPG products. A 16" pipeline, buried 10 feet below ground, connects the storage tanks to the export operations. At the time of preparing this report, it is our understanding that while the berth is not currently in use, Amerigas is negotiating with the Port for a new berth and renewed use of the pipeline from the tanks to the Port. While most of the storage, transport, and nail car delivery is located farthest from Gaffey Street, the two largest butane storage tanks are located closest to the western boundary of the facility, which is closest to the nearest residential and commercial areas. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 4.0 Quantitative Risk Analysis Methodology By understanding the configuration of the facility and by describing the storage -- configuration of the liquid butane, a quantitative risk analysis can provide three primary conclusions: -- (1) Determination of potential releases that could result in significant hazardous conditions outside the boundaries of the facility. (2) For each potential release that is identified, the potentially lethal hazard zones -- can be defined. (3) And using a consistent, accepted methodology, a measure of the "risk" posed to the public can be calculated. It is assumed that a release of butane from the Amerigas storage facility could potentially result in one or more of the following health hazards: (1) Exposure to thermal radiation, which is heat radiated by combustion of materials. -- (2) Exposure to a blast wave from explosion of storage tanks from over -pressure or ignition of materials. These possible health hazards can be divided more specifically to include pool, torch, and flash fires, vapor cloud explosions, and physical tank explosions. A more thorough description of these potential outcomes is discussed. Release Risks and Modeling Assumptions The physical consequences of a butane release are dependent on the quantity released, the rate of release, and for fire and explosion events, when ignition occurs. The quantity of the release will depend on the size of the release (equivalent hole diameter) and duration _ of release (how soon can the release be detected and isolated). The release rate from a hole will be assumed to be from a circular orifice and estimation is based on the maximum flow -rate from a given hole area. As butane liquid may be released, it may pool and generate vapors. Ignition of the vapors arising from the butane pool could result in a flash back or a pool fire, both of which may cause intense thermal radiation around the bunting pool. If the evaporating pool does not ignite immediately, then the evaporated vapor may form dispersions within the ambient _ air. These dispersions are affected by the atmospheric conditions, weather, and wind speed during the occurrence. Vapor will remain close to the pool at first, since the vapor is heavier than ambient air, but as time progresses and mixing occurs, the vapor is assumed to more readily disperse. Ignition of such a dispersion could create a flash fire or a vapor cloud explosion. Areas of confinement or congestion are most vulnerable to the impact caused by a vapor cloud explosion. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 Most of the representative release scenarios are summations of many individual events (e.g. a tank rupture can occur at various locations, and have varied release outcomes). The frequency of each possible outcome is normally derived using event tree analysis. Starting with an initial butane release, the event tree follows various possible outcomes such as ignition, exposure of persons within the impact radius, and types of injury. Probability of such occurrences are further defined and quantified by considering the detection and mitigating protocols which may decrease or prevent exposure to such incidents. Other factors, such as ambient air conditions, wind flow rates, puncture location, etc., can alter the release scenarios either beneficially or detrimentally. The prediction modeling thus makes some assumptions to evaluate generalized occurrences and outcomes, since specific modeling data and outcomes are difficult to quantify. The failure modeling assumptions are as follows: (1) All releases are assumed to be oriented horizontally (parallel to the ground) in the direction that the wind is blowing. All other release orientations would result in smaller hazard zones. Thus, this assumption would allow for a conservative prediction of hazards and their associated risks. (2) If a release does not immediately ignite upon release, it is assumed to grow to its full extent before ignition. This conservative estimation of the risk would not consider intermediate, smaller ignitions which would create smaller hazard zones. (3) A very conservative estimate is provided in consideration of tank rupture due to earthquakes, since detailed knowledge of the seismic reinforcements of these tanks is not available. Furthermore, there are limited studies and historical data on how refrigerated butane tanks respond to catastrophic earthquake events. Thus, the analysis provides a very conservative tank _ failure rate in light of the difficulty in predicting a tank's response to such a geological impact. Additional assumptions must be made concerning the emergency systems in place at the facility: ® (l) It is likely that the facility has installed required mitigation technologies, such as fine control systems, including the fire sprinkler and fire deluge systems. However, the modeling scenarios assume that these mitigation technologies will not immediately reduce the potential of a fine -induced explosion due to catastrophic malfunction, human error, or other worst-case scenario influences. (2) All significant release events are assumed to occur for at least five minutes before the emergency mitigation and abatement systems are capable of maintaining the situation to full capacity. This considers the probability that some emergency response systems may fail due to unforeseen circumstances associated with accidental releases. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 Since the risk analysis also must consider the human factor during evaluation, the following assumptions are made regarding the surrounding population and neighborhoods: (1) The area surrounding the storage facility is assumed to be occupied by members of the general public at all times. This means that accidental risk hazards could impact the nearby population 365 days a year, 24 hours a day. This is a conservative approach toward the risk analysis, as population density and prevalence will vary considerably based on the time of day and day of the week. However, given the relatively close residential proximity to the facility, the assumption that individuals will be near the release incident at anytime is justifiable. (2) No external ignition sources (vehicles, spark -ignition equipment, etc.) were assumed to cause any accidental release hazards, given the storage tanks' proximity to nearby receptors and the probability that a release cloud could — travel such a distance before combusting. Influence of the Palos Verdes Fault Zone of Failure Analysis The potential of a catastrophic earthquake occurring, which would cause rupture of the significant storage tanks at the facility, is estimated based on presently available -- information on the Palos Verdes fault zone, which is the nearest fault zone to the facility. The fault zone is estimated to extend over 100 km from Lasuen Knoll in the south, across the San Pedro Shelf, along the northeastern base of the onshore Palos Verdes Hills, and cross Santa Monica Bay. The fault zone has been shown to have a maximum exhibited slip rate of about 3.0 mm per year, but has been known to exhibit slip as low as 0.2 mm per year. The probability of a moderate or major earthquake along the Palos Verdes fault is low when compared to the potential for movements on either the Newport -Inglewood or San Andreas faults. However, this fault is capable of producing strong to intense ground motion and ground surface rupture. The Palos Verdes fault zone has not been designated as an Alquist-Priolo Special Studies Zone by the California Geological Survey; however, the segment of the fault zone that extends through the harbor area has been identified as a Fault Rupture Study Area by the City of Los Angeles General Plan, Safety Element. During a survey conducted in 1996, it was concluded that Los Angeles region of the fault ® zone could anticipate a >7.0 magnitude earthquake resulting from the fault zone every 400 to 900 years. More recent approximations set the maximum possible magnitude around 7.3. Amerips — Quantitative Risk Analysis of Butane Storage September 2010 6 5.0 Hanrds Posed by Ameriess Butane Storage Facility Hazardous Properties of Butane Butane inherently presents a human health risk due to its physical properties. Butane vapor is very flammable, and when ignition of vapors occurs, the combustion will flash back to the liquid surface. Butane vapor is colorless and non-toxic, with a potential for asphyxiation at high concentrations due to depletion of ambient oxygen. Asphyxiation is not as common of a health risk, since the risks associated with combustion of the butane are much more likely to occur under normal circumstances. Heat radiation or direct fire burns occurring from instances of jet fire, pool fire, or flash fire, are also possible during butane leaks. Jet fire occurs when combustion of butane vapor is released from an orifice in the storage tank, which creates a powerful stream of flame as the evacuated butane vapor is rapidly combusted. A pool fire occurs when butane liquid is released and ignited on the surface of the ground or other area. A flash fire occurs when concentrations of released butane vapors mix with ambient air, disperse, and then are later ignited. The ignition can cause the gas cloud to burn back to the source ® of the spill or leak, and can cause a very rapid, unexpected onset of injury or even death. Injuries from butane can result from overpressure of the storage tank due to rapid phase ® transition, resulting in vessel explosion. Overpressure from a vapor cloud explosion or an explosion in a confined space likewise present a risk of severe injuries or death. _ Radius of Overpressure Blast Wave Materials stored at the Amerigas facility may allow overpressure to be generated in two ways. The first type of occurrence is generated as a result of rapid burning (deflagration) of a vapor cloud, which could result in a low overpressure value (--0.1 S psig) that could result in windows and glass materials shattering for open, unconfined spaces. Overpressures reaching over 1 psig are commonly associated with the boundary where building structural damage can begin to occur. Overpressure explosions occurring in confined spaces, or in areas where obstructions exist, can achieve such potentially damaging values. The second type of mechanism by which damaging overpressure can occur results when a blast wave is created by failure of a pressure vessel. When storage tanks fail due to the buildup of vapor pressure from fire or from the absence of the cooling mechanisms, the internal energy of the butane can be converted to a pressure wave. A conservative estimate considers all the internal energy of butane converted to a pressure wave. This is unlikely to ever occur, but provides a worst-case scenario for a blast wave occurrence. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 7 _ Radius ojFire Radiation Generation It is assumed that the largest credible hazard that would extend beyond the facility boundaries of the Amerigas facility is the thermal radiation that could be released as a result of the combustion of vapor originating from pooled butane that may have escaped during accidental or catastrophic failure of the storage tank This calculation considers the worst case scenario whereupon an earthquake could cause catastrophic failure of the largest butane storage tanks simultaneously. Vapor released from such an event would disperse and travel downwind until a combustion source ignited the vapor. It is likely — that the flash fire would travel back to the pool source, igniting the dense concentration of vapor within that region and producing a tall column of flames capable of subjecting the immediate vicinity to hazardous amounts of thermal radiation. Other possible fire events are possible, but would result in a potentially smaller hazard zone with decreased exposure of individuals to harmful fine radiation. 6.0 Results of Quantitative Risk Analysis Eight separate, distinct release scenarios were considered when evaluating the different types of hazards that could occur as a result of a release incident from the butane storage tanks. The scenarios ranged from minor release scenarios where a puncture was made in the walls of the storage tank, to catastrophic release events caused by severe earthquakes, whereupon the entirety of the butane stored in the largest tanks were to release and combust. For purposes of this risk analysis, EPA's RMP*Comp Ver 1.07 was used to calculate the projected release scenarios. A detailed explanation of each release scenario is presented as follows. Alternative Release - Vapor Cloud Exnlo„r cion #1 This scenario considers the release incident that may occur from a small puncture in a _ butane storage tank near the ground level of the tank. Such a puncture could be caused by improper operation of forklifts or other transportation vehicles. In such a situation, the release of butane from the punctured area would be initiated by the pressure of materials above the puncture arca. In this model, the puncture area is assumed to be nine (9) square inches, 75 feet below the maximum fill height of the storage tank. The release rate is assumed to be 7,790 pounds per minute based on puncture conditions. Assuming a vapor cloud explosion to be the most likely ignition of the released materials, the impact distance is calculated to be roughly <0.1 miles in diameter. In such a scenario, the explosion diameter would reach North Gaffey Street and slightly extend past Westmont -. Drive to the south. A summary of the projected conditions and represented aerial impact map are shown in Appendix 1. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 Alternative Release — Vanor Cloud Ex®losion #2 This scenario considers the incident that may occur from any general release from the storage tank that is caused by the formation of a vapor cloud. The release can occur from the pressure release valve during instances where excess venting may be required due to tank overpressure (due to refrigeration failure, for instance). Other causes may result from improper tank construction and maintenance, which could cause leaks due to material fatigue. In this type of instance, the release rate is lower than an accidental puncture incident. The release rate is assumed to be 1,000 pounds per minute or less. Assuming a vapor cloud explosion to be the most likely ignition of the released materials, the impact distance is calculated to be roughly <0.I miles in diameter. Like the first vapor cloud explosion scenario caused by a puncture, the explosion diameter would reach North Gaffey Street and slightly extend passed Westmont Drive to the south. This indicates that the resulting release incident caused by a puncture or small leak result in equivalent damage scenarios. A summary of the projected conditions and represented aerial impact map are shown in Appendix 2. Alternative Release — Pool Fire #1 This scenario considers a pool fire that may occur when liquid butane is released from a storage tank due to a general release. This may result from improper tank construction and maintenance, which could cause leaks due to material fatigue. The release rate is assumed to be 500 pounds per minute or less. This scenario considers the impact a pool fire would have on the surrounding area. The pool fire would occur once ignition of vapor returned to the dispersed butane liquid collecting near the release point. The. consequent ignition of the liquid would result in a large plume of flames fueled by the pooled. liquid. The amount of butane present will cause a larger plume of flame, which _ increases the possibility of exposure to fire radiation. The outer boundary of the projected area of such an event is the furthest area where an individual would suffer second degree burns if exposure to the fire radiation were to exceed thirty seconds. Assuming a release duration of 360 minutes, occurrence of a pool fire under this scenario would cause an impact radius of 0.4 miles in diameter from the source. This release ® would extend to the west past North Gaffey Street, impacting some residential areas to the west and southwest of the facility. A summary of the projected conditions and represented aerial impact map are shown in Appendix 3. Alternative Release — Pool Fire #2 This scenario considers the incident that may occur when liquid butane is released from a storage tank due to a rupture, similar to an incident postulated in the first vapor cloud explosion scenario. The release rate is expected to be larger than the scenario addressed in "Pool Fire #1" for this study. It is assumed to be 7,790 pounds per minute or less. This scenario considers the impact a pool fire would have on the surrounding area Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 Assuming a release duration of 360 minutes, occurrence of a pool fire under this scenario would cause an impact radius of 1.7 miles in diameter from the source. This release. would extend to the west as far as South Western Ave. (Highway 213), to the north as far as Ken Malloy Harbor Regional Park, and to the south as far as Highway 47 (Vincent Thomas Bridge), causing a devastating impact to residential and commercial centers. To the east, the impact area includes several major container terminals in the port of Los Angeles. A summary of the projected conditions and represented aerial impact map are shown in Appendix 4. Worst -Case Scenario — Vapor Cloud Explosion #1 Worst-case scenario assumes that a catastrophic earthquake would cause complete tank -- failure and instant release of the stored butane. In this model, only one butane tank is considered to completely fail under such a circumstance. The model assumes instantaneous and rapid release of butane vapor from the collective 63 million pounds ® that would be present at the time of failure. The scenario considers that the vapor cloud will disperse its maximum distance before ignition by an external, uncontrolled source. The model assumes vapor cloud explosion, whereupon the entirety of the butane is in vapor form and is instantly ignited upon full dispersion. In this scenario, the impact diameter would be 3.2 miles. The impact would cause large scale structural and physical damage due to rapid overpressure caused by the explosion. The explosion is shown to extend east into predominant shipping yards in the Long Beach harbor, to the north towards West Carson, to the south towards the coast of San Pedro, and to the west as far as the boundary of Rancho Palos Verdes. The impact would encompass terminals in Long Beach and includes nearly all the Port of Los Angeles terminals, as well as the visitor serving areas of the new Wilmington Waterfront project, the proposed San Pedro Waterfront project, and the Los Angeles Cruise Terminals. A summary of the projected conditions and represented aerial impact map are shown in Appendix S. Worst -Case Scenario — Vapor Cloud Explosion #2 _ Worst-case scenario assumes that a catastrophic earthquake would cause complete tank failure and instant release of the stored butane. In this model, all of the butane tanks on- site are considered to completely fail under such a circumstance. The scenario assumes instantaneous and rapid release of butane vapor from the collective 126.5 million pounds that would be present at the time of failure. The scenario considers that the vapor cloud will disperse its maximum distance before ignition by an external, uncontrolled source. The model assumes vapor cloud explosion, whereupon the entirety of the butane is in vapor form and is instantly ignited upon full dispersion. _ In this scenario, the impact diameter would be 4.0 miles. The impact would cause large scale structural and physical damage due to rapid overpressure caused by the explosion. The explosion is shown to extend east into predominant shipping yards in the Long Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 10 Beach harbor, to the north towards Carson, to the south towards the coast of San Pedro, and to the west as far as the boundary of Rancho Palos Verdes. A summary of the projected conditions and represented aerial impact map are shown in Appendix 6. Alternative Release — BLEVE #1 This model is another worst-case scenario like the previous two scenarios, though the resulting release type is considered alternative to the more common type of release mode vapor cloud explosions. BLEVE (Boiling Liquid Expanding Vapor Explosion) occurs -- when a sudden drop in pressure inside a container causes violent boiling of the liquid, which rapidly liberates large amounts of vapor. The pressure of this vapor can be extremely high, causing a significant wave of overpressure (explosion) which may ® completely destroy the storage vessel and project fragments over the surrounding area. The harm involved with such an incident can include injury from shrapnel, explosion, and fire radiation. The first model assumes catastrophic failure of only one butane storage tank due to an earthquake. Again, this represents roughly 63 million pounds of butane released. If -- BLEVE were to occur, the projected release diameter is approximately 5.2 miles. This would expand to the east towards downtown Long Beach, to the north near the 405 Freeway, to the west into central Rancho Palos Verdes, and to the south past the coastline -- and over the Pacific Ocean. The projected impact covers nearly half of Palos Verdes Hills. A summary of the projected conditions and represented aerial impact map are shown in Appendix 7. Alternative Release — B The final BLEVE model assumes catastrophic failure of all the butane storage tanks on- site due to an earthquake. Again, this represents roughly 126.5 million pounds of butane released. If BLEVE were to occur, the projected release diameter is approximately 6.8 ® miles. This would expand to the east past downtown Long Beach, to the north towards Gardena, to the west towards Redondo Beach, and to the south past the coastline and over the Pacific Ocean. A summary of the projected conditions and represented aerial impact map are shown in Appendix & Though this is a worst-case scenario projection, it is highly unlikely to occur, and contains some considerations that may not occur in practicality. First, a large magnitude earthquake from the Palos Verdes fault zone (up to 7.3 magnitude), is only expected to occur once every 400-900 years. Likewise, the probability this would be centered near the Amerigas facility is moderate, since the fault zone extends nearly 100 kilometers. Similarly, it is not confirmed that such a large earthquake would rupture the tanks, since historical and test data is limited for such an occurrence. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 Second, it is highly likely that the vapor cloud will distribute and ignite before reaching its maximum radius, so BLEVE may not occur. The numerous electrical sources in the area will likely ignite the vapor cloud before this can occur. When considering an earthquake failure, exposed electrical sources are anticipated to be more abundant and will likely act as instantaneous ignition sources. Finally, weather conditions along the harbor are anticipated to generate consistent yet variable wind speeds that would disperse the butane vapor more rapidly to prohibit dense, overpressure conditions upon ignition. 7.0 Conclusions of the Study In the event of unexpected release of butane from the Amerigas storage facility, a variety of accidental risks can occur, which include types of combustion (pool, flash, and jet fires) and types of overpressure explosions (overpressure in storage tank, BLEVE, etc.). — The worst case scenario of a large-scale release hazard is projected to occur during the night when population density of the nearest receptors is highest. Low wind velocity is considered, as this would cause a dense vapor cloud of evaporated butane to collect — within the facility, producing a powerful blast wave upon ignition. The largest combustion incident is projected to occur, whereupon BLEVE will occur as the result of simultaneous tank failure due to catastrophic earthquake, creating an intense overpressure ® that would result in a large-scale explosion, projectile shrapnel, and fire radiation exposure. _ A summary of the release scenarios and statistics is shown in the following table: Release Wind Speed Air Temperature Release Rate impact Diameter Description W Ib/min. miles Vapor Cloud 3.0 77.0 7,790 <0. I Explosion Vapor Cloud Explosion 3.0 77.0 1,000 <0.1 Pool Fire 3.0 77.0 500 0.4 Pool Fire 3.0 77.0 7,790 1.7 Vapor Cloud Explosion 1.5 77.0 Instantaneous 3.2 Vapor Cloud Explosion 15 77.0 Instantaneous 4.0 BLEVE 3.0 77.0 Instantaneous 5.2 BLEVE 3.0 77.0 Instantaneous 6.8 _ It is important to note that the analysis is conducted based on a number of assumptions. This may result in an over -conservative conclusion in regards to toxic and flammable hazard zones. These assumptions were necessary, however, due to the lack of historical data and lack of access to facility -specific data. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 12 While the probability of larger -scale release scenarios is very low, the smaller incidents that may occur from ruptures or leaks still pose a threat to the local communities surrounding the facility. Thus, while incidents resulting from large magnitude _ earthquakes are not likely, factors such as accidental release or rupture can still pose an inherent risk to surrounding residential and commercial areas. Amerigas — Quantitative Risk Analysis of Butane Storage September 2010 13 Aoaendix 1 Release Scenario #1—Vapor Cloud Explosion (Distance <0.1 miles) Appendix 1 Chemical: Butane CAS #: 106-97-8 Form: Liquefied by Refrigeration Category: Flammable Gas Scenado: Alternative Release Storage Parameters: Tank Under Atmosphedc Pressure Hole or Puncture Area: 9 square inches Height of Liquid Column Above Hole. 75 feet Release Rate to Outside Air: 7790 lbs/min (based on the condition of punctured area) Release Type: Vapor Cloud Fire Release Duration: 360 Minutes Mitigation Measures: None Lower Flammability Limit: 36 mq& Assum ion about this scenario Wind Speed: 3 meters per second (6.7 milesthour) Atmospheric Turbulence: D Class (Neutral) Air Temperature: 77 degrees F (25 degrees C) Estimated Distance to Lower Flammability Limit: < 0.1 miles radius (< 0.16 kilometers) Release Scenario #2 —Vapor Cloud Explosion (Distance <0.1 miles) Appendix 2 Chemical: Butane CAS #: 106-97-8 Form: Liquefied by Refrigeration Category: Flammable Gas Scenario: Alternative Release Storage Parameters: Tank Under Atmospheric Pressure Release Rate to Outside Air. 1000 lbs/min Release Type: Vapor Cloud Fire Release Duration: 360 Minutes Mitigation Measures. None Lower Flammability Limit. 36 mg1L AMUMeL&M abput this scenario Wind Speed: 3 meters per second (6.7 milesthour) Atmospheric Turbulence: D Class (Neutral) Air Temperature: 77 degrees F (25 degrees C) Estimated Distance to Lower Flammability Limit: < 0.1 mlies radius ( < 0.16 kilometers) b- Ayvendix 3 Release Scenario #3 —Pool Fire (Distance 0.4 miles) 4" V. , ,Iml Chemical: CAS #: Form: Category: Scenario: Storage Parameters: Release Rate to Outside Air: Release Type: Release Duration: Mitigation Measures Topography: Assumptions about this scenario Butane 106-97-8 Liquefied by Refrigeration Flammable Gas Alternative Release Tank UnderAtmospherlc Pressure 500 lbstmin Pool Fire 380 Minutes None Urban Surroundings (many obstacles In the Immediate area) Wind Speed: 3 meters per second (6.7 milesihour) Atmospheric Turbulence: D Class (Neutral) Air Temperature: 77 degrees F (25 degrees C) Estimated Distance to Heat Radiation Endpoints (5 kilowattslsquare meter): 0.4 miles radius (0.7 kilometers) GSt ggal�ntat+Or f Il4 .. N, Q Mary Star of the: '• '. Sea High School - Sandwo60 Pt W G , .. Englander St -St D/. W .Stader SI1. _. wb+nom �_ w eatOteld _ --.... - Dr �P)- t 8 . SOY 9 Rd ; P prpve St10 Harbor--' `,� t�►��a0 W Bloomwobd Rd -W Bloomawoe Rd Hix rptyanda Pik �y �•n6iF� w CMA0e t 1. Z' oaiw, St 1 c # t :Y f ,WESt.' N r r by D St."p SS W G a F D a I -St E St ^V4 Hmy eddrs BNd DSt a 'JY ftw a a r Release Scenario #4 —Pool Fire (Distance 1.7 miles) Appendix 4 Chemical: Butane CAS #: 106-97-8 Form: Liquefied by Refrigeration Category: Flammable Gas Scenario: Alternative Release Storage Parameters: Tank Under Atmospheric Pressure Hole or Puncture Area: 9 square Inches Height of Liquid Column Above Hole: 75 feet Release Rate to Outside Air. 7790 lbs/min (based on the condition of punctured area) Release Type: Pool Fire Release Duration: 360 Minutes Mitigation Measures: None Topography: Urban Surroundings (many obstacles in the Immediate area) Assumntlons about this scenario Wind Speed: 3 meters per second (6.7 miles/hour) Atmospheric Turbulence: D Class (Neutral) Air Temperature: 77 degrees F (25 degrees C) Estimated Distance to Heat Radiation Endpoints (5 kilowatts/square meter): 1.7 miles radius (2.7 kilometers) ""Field - q� r� ( l 1N t omtts &Vd '4 Lomita y (D `_IPaoin,,'"t Hwy,Harbor C Hillslda" IV Y: ' RON�r10 MR %. 4� Coa`VyCG Palos. Verde` S Coastal � ' San Pedro Fa n. MecAi w we: owilk co W Ana Q Hills t=- �4 SEE ak,Rdff t i FilerWal�ip�q`'o' �Y ub wMgp 213 S Coastal � ' San Pedro Fa n. MecAi w we: owilk co W Ana AuRendix 5 Release Scenario #5 -- Vapor Cloud Explosion (Distance 3.2 miles) AnDendix 6 Chemical: Butane CAS #: 106-97-8 Form: Liquefied by Refrigeration Category: Flammable Gas Scenario: worst -can Quantity Released. 62,958,773 Pounds Release Type. Vapor Cloud Explosion Mitigation Measures. None Assumptions about this scenario Wind Speed: 1.5 meters per second (3.4 milesthour) Atmospheric Turbulence: F Class (Stable) Air Temperature: 77 degrees F (25 degrees C) Estimated Distance to I psi overpressure: 3.2 miles radius (5.1 kilometers) Redondo wast I Golf course �' Meads I beach j �71 4J L wew?Od 4, 10 southi ....... b Toirinc* Gaieivm M Ch I St. WfIFOOQWG Od amn., 00 ceaftas Esta",,, 17Y 4 � I'l - �U, 1 11 1 r w �0.9 Big wan '4' Mrs. HN , - j L"�, zam WeOSWe FA -_ PabsrVeMas j I *owno Hioi 4 &4PW IVY' P Estaws P bandt 111,i OR yyl1r11i n, paw. nOto Eastside.:.. polos veMea�' ii -I W�r ,ipemnsws I,- chowwa X11 C4Beach e4ght _ ng Rising 47 w 19h ate Z SanPeOroi Anaendiz 6 Release Scenario #6 —Vapor Cloud Explosion (Distance 4.0 miles) AoRendix 6 Chemical: Butane CAS #: 106-97-8 Form: Liquefied by Refrigeration Category: Flammable Gas Scenario: worst-case Quantity Released: 126,517,153 Pounds Release Type: Vapor Cloud Explosion Mitigation Measures: None Assumvtbm about this scenario Wind Speed: 1.5 meters per second (3.4 miles/hour) Atmospheric Turbulence: F Class (Stable) Air Temperature: 77 degrees F (25 degrees C) Estimated Distance to 1 psi overpressure: 4.0 miles radius (6.5 kilometers) ' rr t @dond0� Geo t 1 Coirsa �� MadeRWest pe4ch , .. I,TORaRCe �" i� •®�'., �j.. �. Lakewood A a W Mutual t f c �Tonanc�Blb. Torrance'i�s.. �}tatdeTtaYanco , §...., ��CaaCetb., } / .i W C,r gun � ar 8�i Neghborhood - ' s ... o.. �,� , t at s St � Lakeupot c�an,Cdup^s I ng�'+�d , f Ci8r8on --- r Cal Hel�tst8aby •,:r.. Verdi Knob/LosCemtoa _ ) 4 Estates I T rtaar�ce Long Beat ...' ;r... .,.;. i .x Beech Rtaero Wefleria 8k1 Zatrt a Perhu st ;b Palos Verdes 0 w told j :r weY a Signal Hitl Esters s � 2l ,.,•::: .w,.•r�..EPnitEs HidNde reC .. ta kY r �1 A. des` Ion mos Y".0% Palos Ver: _ 21d ._ i �� ? Long Beach 8elmor Pentttsula LOh Beach R sfnp FkNs 4 Rancho f � PiIbs.Verdes ponuaosse ' , W 81hat am Podro W191a 8F ` ✓^w 2sm Wary Apuendig 7 Release Scenario #7 — BLEVE (Distance 5.2 miles) 0 0 Anoendig 8 Release Scenario #8 — BLEVE (Distance 6.8 miles) Chemical: Butane CAS #: 106-97-8 Form: Liquefied by Refrigeration Category: Flammable Gas Scenario: Alternative Release Quantity Released: 126,517,153 Pounds Release Type: BLEVE (boiling liquid expanding vapor explosion) Mitigation Measures: None Assu ions about this scenario Wind Speed: Atmospheric Turbulence: Air Temperature: 3 meters per second (6.7 milesihour) D Class (Neutral) 77 degrees F (25 degrees C) Estimated Distance at which exposure may cause second-degree bums: 6.8 miles radius (11.0 kilometE Lt Ees 'Mirada Mk Fullw Munk 1 Park.. °, 1.4 Ps1me Sout6 est oS AIaMfts Stanton 2010/2011 CCCA EXECUTIVE BOARD President Laura Olhasso La Cafiada Flintridge Vice President Secretary/Treasurer James R. Bozajian Diane J. Martinez Calabasas Paramount Director -at -Large Kris Valstad Hercules Frank V. Zerunyan Donald Voss Sandra Armenta Mark R. Alexander Curtis Morris DN. Mario A. Guerra Bob Archuleta Lindsey Horvath Margaret E. Finlay Randy Bomgaars Past President Lois Gaston Duarte Director -at -Large Steve Tye Diamond Bar Rolling Hills Estates La Canada Flintridge Rosemead La Canada Flintridge San Dimas Downey Pico Rivera West Hollywood Duarte Bellflower 30th Annual Fall Seminar fV 7 -UCC-. e«/J t-C44�j Executive Director Sam Olivito We would like to acknowledge the following firms and individuals who have made contributions in prizes and materials toward the success of the 30th Annual Fall Seminar Central Basin City of Cerritos CCCA Special Events Committee Dal Rae Restaurant EDGE Development Fess Parkers Doubletree Resort Golden State Water Schaefer Ambulance Schneider Electric Southern California Edison A Stone and Youngberg c, The Gas Company Waste Management • .9 -rel • tlikkira October 29-31, 2010 Allll;:�N FESS PARKEWS DouBLETPLEE KESoRT- SANTA BACIAaA Special Events Committee Randy Bomgaars Chair Emmett Badar Vice Chair �ban G'C^� ';Pf or -s Ray T. Smith cEIVE FROM ichael D. Morgan D MADE A PART OF T,Hr E RECORD AT TH UNCIL MEETING OF/�U 4 a2Lb _ Margaret Finlay OFFICE OF THE CITY CLERK Diane Dubois CARLA MORREALE, CITY CLERK 20th Annual Jack Parks Memorial Golf Classic Glen Annie Golf Resort Goff awards will be presented at Fess Parker's Doubletree Resort Goff Tournament Chair. Emmett Badar Council Member, Son Dimas 11:00 AM .............................................................................. Assemble and Check In 12:00 PM ..................................................................................................... Shotgun Start 2:30 - 5:30 PM ..................................................................... Seminar Registration Fess Parker's Doubletree Resort 6:00 PM ...................................................................................... Welcome Reception Hosted by: McCormick Ambulance Creative Mask Contest Saturday, October 30, 2010 Seminar Chair Randy Borngaars, Council Member - Bellflower 7:30 AM .................................................................................... Seminar Registration 7:30 - 8:00 AM .................................................................... Continental Breakfast 8:00 AM .............................................................................................. Official Welcome Mayor Helene Schneider, City of Santa Barbara The Pledge of Allegiance Larry Chimbole, CCCA Past President The Invocation Lois Gaston, CCCA Immediate Past President 8:10 - 9:30 AM ............................................................................... Real World Ethics Lessons Learned From The Warning "Bell" Moderator. Randy Bomgaars, Council Member- Bellflower Panelists: Dave Mora, West Coast Regional Director - Cal-ICMA Ken Pulskamp, City Manager - Santa Clarita Roxanne Diaz - Richards, Watson & Gershon FrankV. Zerunyan, Council Member - Rolling Hills Estates 9:30 - 10:30 AM ...................................Media Relations/incident Mgmt Moderator. Curtis Morris, Mayor - Son Dimas Panelists: Eric Rose - Englander, Knabe & Allen 06C'10C 04C~ Rwb@4UW@s, Reporter - L.A. Times Stephen R. Whitmore, Sr. Media Advisor - L.A.S.D 10:30 AM ....................................................................................................................... Break 10.45 AM - 12:00 PM ............................................................................ What's New? Updates and Resources to Help Understand A1332, Commercial Recycling and Financing Energy Efficiency Moderator. Margaret E. Finlay, Mayor - Duarte Panelists: Yvonne Hunter - institute For Local Government Richard Niho - Burrtec Waste Industries 12:00 PM ................................................................................................... Lunch Session Moderator. Laura Olhasso, Council Member- La Cahada Flintridge Speakers: Steve Cooley - LA County District Attorney Anthony Portantino, Assemblymembe`r - 44th District 1:30 - 3:00 PM ........................................................ Contract Cities Have Talent Success Stories; Solving Complex Problems In Tough Economic Times Moderator. Emmett Badar, Council Member- San Dimas Panelists: Frederick W. Latham, City Manager - Santa Fe Spring! Ken Farfsing, City Manager - Signal Hil Desi Alvarez, Deputy City Manager - Downey 3:00 - 3:45 PM ..................................................................... "The More You Know' An Interactive Training For City Managers and City Council! Moderator. Lois Gaston, Council Member- Duarte Hosted by: Natalie Salazar, Director of Community Law Enforcement Partnership Programs L.A.S.D 6:00 PM .............................................. Solving The Murder - Mystery Dinnei 8:00 -10:00 AM ................................................. Conference Wrap -Up Brunch The Following CCCA Associate Members Program Participants Have Contributed To The Success Of The 30th Annual Fall Seminar ALADS BP America Burrtec Waste Industries CalMet Services Care Ambulance Service Consolidated Disposal Services De La Rosa & Co. EDGE Development Englander, Knabe & Allen Kinsell, Newcomb & DeDios McCormick Ambulance Nationwide Environmental Services Pacific West Energy Solutions Professional Peace Officers Association Raytheon Richards, Watson & Gershon Schneider Electric Southern California Edison Stone & Youngberg Tennenhouse, Minassian & Adham TNT Fireworks Vernola's Tow Service Water Replenishment District Wiliclan Inc. KFAM I '.0 LL C/) U- C/) M CV) LO 0 1 Z-1 ED ii nu= LL ILE CO CO C\j C*4 co Z -P U. cu cn cu co cc E cu 10 cl) 0 4 RS 0 Urh — CD X 06 Uj 7: uj cc CZ — cu a CU E CDm 0 tR LI aqk-, RANCHO PALOS VERDES TO: HONORABLE MAYOR & CITY COUNCIL MEMBERS FROM: CITY CLERK DATE: NOVEMBER 4, 2010 SUBJECT: ADDITIONS/REVISIONS AND AMENDMENTS TO AGENDA Attached are revisions/additions and/or amendments to the agenda material presented for tonight's meeting: Item No. Description of Material 9 Staff's letter of response with attachment to Mr. Wedemeyer; Emails from: Bob Markl; Bernie Kenner; Bob West 10 Council Report from Mayor Wolowicz; Additional materials from Mayor Wolowicz; Staff Supplemental Memorandum — Pension Revision; Historical Pension Expenditures (24 Years) 11 Letter from Lowell R. Wedemeyer Respectfully submitted, Carla Morreale W:\AGENDA12010 Additions Revisions to agendas\20101104 additions revisions to agenda.doc �a CITVOF RANCHO PALOS VERDES PUBIC WORKS DEPARTMENT November 4, 2010 Lowell Wedemeyer 13 Clipper Road Rancho Palos Verdes, CA 90275 Dear Mr. Wedemeyer, Thank you for your correspondence regarding the Neighborhood Permit Parking Program. I've provided some clarifying point to some of the questions/concerns raised in your November 1, 2010 letter to the City Council. Petition Status For clarification purposes, the Neighborhood Permit Parking agenda item scheduled for the November 4, 2010 meeting is staff's recommendation for establishing the fees for the program. After establishment of fees, staff will return to the Council with appropriate resolutions to sign up new streets/neighborhoods and to allow streets/neighborhoods to opt - out. That process alone will be very involved. Although I appreciate your comments regarding the status of petitions in your November 1, 2010 letter, I believe the details you present will be addressed at a later date subsequent to the fee adoption process. Permit Pricing The fees as proposed by staff will be determined by City Council. Participation The reference that I made to residences will be corrected to reflect the word "residents" or "property owner". The super majority of 60% is consistent with the City's adopted Neighborhood Traffic Calming Program where 60% of an affected street must, by petition, agree to the proposed action. Again, a valid petition must bare the signatures of a property owner (proof by title) of the affected properties and each property is granted one vote unless there is a multi -unit complex that is comprised of apartments which has only one vote from the property owner. I hope this explanation helps. Sincerely, Nicole Jules, Senior En Engineer g 0-F Department of Public Works 30940 HAWTHORNE BOULEVARD / RANCHO PALOS VERDES, CA 90275-5391 / (310) 544-5252 / FAX (310) 544-5292 / WWW.PALOSVERDES.COM/RPV PRINTED ON RECYCLED PAPER "IFY OF RANCHO PALOS VERDES NEIGHBORHOOD V111 PARKING PROGRAMI PROGRAM SUMMARY The purpose of the Neighborhood Permit Parking Program (NPPP) is to provide residents in residential neighborhoods parking relief associated with adjacent businesses, schools or attractions that generate parking. Some of the program benefits may include: • Protect residents from unreasonable burdens in gaining access to the property • Preserve neighborhood living • Maintain convenience and attractiveness • Preserve residential character of the neighborhood • Safeguard peace and tranquility The implementation of the Neighborhood Permit Parking program combined with consistent enforcement will reduce the problem of non-resident parking while offering reasonable access to parking near homes. ELIGIBILITY Whenever the Director of Public Works or his designee determines that the streets of a neighborhood in which residential uses are permitted and other uses such as commercial, recreational or industrial uses are not permitted, that street is eligible for permit parking if: • more than 25% of the number of parking spaces are occupied by neighboring other uses; and • the total of number of spaces actually occupied by any vehicle exceeds 75%. An Engineering survey must determine the parking availability. Neighborhood Permit Parking Program Page 2 of 3 November 4, 2010 If the above conditions are met, the Director of Public Works or his designee shall prohibit parking during the hours when such use has been found on those streets or portions thereof to have been affected. PARTOPATION Permit parking boundaries shall be determined on a block by block basis. The Director of Public Works will initiate a Traffic Engineering Parking survey where increased parking by non-residents exists. If it is determined that a parking problem exists, the affected street and/or neighborhood must agree to the permit parking program by submitting a signed petition that bears the signatures of at least 60% of the affected residents. Similarly for streets that are currently enrolled in a permit parking program, to opt -out, at least 60% of desired residents must indicate their desire to discontinue the permit program by submission of a petition. A recommendation from the Director of Public Works will be made to the City Council for adoption of a resolution to enroll or discontinue a street or neighborhood into or out - of the program and upon adoption, appropriate signs will be erected or removed on the affected streets. PERMITS Upon adoption by City Council, permits will be issued and managed by the Public Works Department. Each household is eligible to obtain parking permits for each registered vehicle (up to 3 vehicles) and one (1) Flexpass which is to be used at the homeowner's discretion for visiting guests or care -givers. Service Vehicles that are clearly marked are exempt from the permit requirements. Special Event Guest Parking may be issued for special circumstances and large gatherings such as graduations, weddings, tea parties, etc. Special event guest parking will be evaluated on a case-by-case basis. -3 0 � I.7 Neighborhood Permit Parking Program Page 3 of 3 A, November 4, 2010 APPLICATIONS Applications will be made available to the public at City Hall and the City's website. After completion of the application, an applicant can either mail in the application and all required documents or submit in person to the Public Works Department. The required documents for a permit include: Current vehicle registration and proof of residency by submitting one of the following documents: utility bill, telephone bill, cable bill or current auto insurance. Permit fees shall be approved by City Council and adopted by resolution. Page 1 of 1 Nicole Jules From: Robert Markl Ob.markl@verizon.net] Sent: Friday, October 29, 2010 2:34 PM To: nicolej@rpv.com Subject: RPV Parking Permits Dear Ms. Jules, Thank you for your letter dated October 26, 2010 regarding RPV Parking Permits. I live at 5228 Silver Arrow Drive. My home is approximately one block from Peninsula High School, and would be severely impacted by students parking on my street. Currently we are part of the RPV parking permit area, and have been for thirteen years. We became part of the parking permit area because of the excess traffic and traffic accident potential that was created by the students parking on our street. Also the neighborhood didn't want to continue having to clean up the trash that was left on our property by the students who came back to their cars to eat their lunches, and/or to simply relax in their cars during their breaks. Your letter does not specify if Silver Arrow Drive would continue as part of the permit parking area. Since we are in the vicinity of the school that would be creating a parking impact, I presume the answer would be yes. I plan on attending Tuesday's meeting, but I would appreciate a clarification prior to the meeting regarding whether our neighborhood would continue to be part of the RPV parking permit program. Bob Markl 11/1/2010 Page 1 of 2 Nicole Jules From: Bernie [bernie.kenner@gmail.com] Sent: Sunday, October 31, 2010 7:42 PM To: Nicole Jules Cc: janice.kenner@yahoo.com Subject: Re: Neighborhood Permit Parking Some comments: Flexpass Limitations The previous plan did not require stickers service vehicles that had commercial license plates or were obviously used by gardeners or contractors. I recommend that the policy continue with any new plan. Gardeners come frequently and the occupant may not be home to provide the flexpass. More than one service vehicle may require access at the same time. Multiple Guest Parking The statement that special event parking are considered on a case-by-case seems too vague. An informal meeting of a few people should not be difficult to arrange. Perhaps temporary permits could be downloaded on an occasional basis for these situations. Trail Access We are blessed with substantial parklands which include a number of trails. One access point in particular that is not available to the public is at the Northeastern end of Barkentine drive. There are very few cars parked on the street and it is not likely that trail use would be that frequent. But the neighbors have eliminated all parking in the area, probably to discourage use of the parkland and adjacent trail. That is one that I am familiar with and I believe there are others. Looking at the November 4 memo, it appears that several other neighborhoods are planning the same type of restriction. I would recommend that unless there is a really serious situation, this type of restricted parking should only limit parking on one side of the street. It seems like there is a desire to approximate gated communities without the gates. Generally the plan does seem much better than the one proposed last year. Regards, Bernie Kenner 310-378-3881 On 10/26/2010 12:38 PM, Nicole Jules wrote: Greetings, On November 4, 2010, the City Council will discuss the current status of the Neighborhood Permit Parking Program and consider establishing fees to administer the program. The meeting will be held at Hesse Park Community Room located at 29301 Hawthorne Boulevard, Rancho Palos Verdes at 7:00 p.m. 11/1/2010 1 of 2 Staff has received many petitions to opt -out and many petitions to sign up. If your neighborhood is interested in opting -out, you will not be affected by the fee proposal. If you would like to change the status of your petition, please let me know ASAP. The Staff report will be available to the public by early next week. If you have questions, please don't hesitate to contact me. Nicole Jades, P.E. Senior Engineer Department of Public Works 30940 Hawthorne Blvd Rancho Palos Verdes, CA 90275 310.644.6276 310.544.5292 fox 2o�2 11/1/2010 Page 2 of 2 Page 1 of 1 Nicole Jules From: Robertrnch@aol.com Sent: Monday, November 01, 2010 12:45 PM To: nicolej@rpv.com Cc: chateau4us@att.net Subject: Neighborhood Permit Parking Program Hello, Nicole, our application for Permit Parking stands as originally submitted. That is, Monday through Friday, 8:00 a.m.- 3:00 p.m., school days. The fully subsidized program for neighborhoods near schools proposal is what the residents want and expect as the parking problem has been brought on by changes taken by Dodson Middle School which resulted in the school staff parking on our street leaving little or no parking left for residents. Some of our residents thought the number of visitor passes should be increased to at least two or more. In addition, some believed it was to cumbersome to have to use such passes for tradesmen such as plumbers, painters, gardeners etc, and that these tradesmen should be exempt from the parking restrictions as the purpose of our application is to remove school staff from parking so we can have parking for these tradesmen as well as ourselves and our visitors. If we only have one visitor pass how could we have more than one tradesman at our home or even a visitor as well as a tradesman. The ordinance should include an exemption for tradesmen's vehicles. I have seen this exemption in other city's permit parking programs that I have researched. It is logical and residential friendly to include this exemption. Or it could be done, unofficially by letting the sheriff know that the city does not want them to enforce the parking restrictions against tradesmen's vehicles. My wife Linda and I plan to attend the city counsel to speak on the proposed program. Some of my neighbors said they may attend also. Our homeowners President, Jeanne LaCombe said she plans to attend. See you then. Thank you for your effort on this issue. It is appreciated. Bob West P.S. Are you still planning to have a drop-off, pick-up on the school side of the street ? 11/1/2010 From: Robertrnch@aol.com Sent: Thursday, November 04, 2010 10:24 AM To: chateau4us@att.net Cc: richard.vladovic@lausd.net; bonbon31 @earthlink.net; nicolej@rpv.com Subject: Parking in Front of Driveway by Dodson Parent Jeanne, As usual my wife and I went out this morning on a walk. As we were walking up the street a woman and a child pulled up in front of one of my neighbor's house blocking her driveway. I nicely said to her that she shouldn't do that as the resident usually leaves about that time for work. The response was that she was only going to be there for a few minutes as her son was late for school and she wanted to explain to his teacher why he was late! She then took her son into the school through the service gate which was open against LAUSD policy that all gates at LAUSD schools except for the main gate are to be locked during school hours. I yelled out to her that I was going to call the sheriff but she just ignored my warning ( I assume she figured that she would be gone before any sheriff could get there). I did not call the sheriff because she was probably right about the response time. So, we continued on our walk. As I have said be fore, this open gate allows parents, students employees and who knows who else to enter the school at any time of the day as we have observed. This situation exacerbates the our parking problem that we have on Avenida Aprenda near the intersection of Eldena Drive. The open gate allows those who want to enter the school through the service gate to use our street as a parking lot even further reducing any parking for our residents, visitors, gardeners, tradesmen etc. This is why we need RESIDENTIAL PERMIT PARKING on our street ASAP. Even if the visitors to the school illegally park on our street, at least they won't most likely park in or in front of our driveways. I do not understand why Dodson is exempt from the closed campus policy but I am sending a copy of this email to our LAUSD representative, Dr. Richard Vladovic, so maybe he can get back to us to explain why the closed campus policy is not being followed. I am only concerned about the open gate because it negatively impacts our already bad parking problem created by the school staff virtually taking up all of the parking in front of the homes. The school parking lot today was less than half full but apparently the staff doesn't want to park there and doesn't care whether the residents have any parking at all. Therefore, I am continuing to pursue Residential Permit Parking for our street including a portion of Eldena Drive by presenting our situation to the RPV City Council at there meeting tonight and requesting that they Re -Confirm the Neighborhood Permit Parking Program that will be proposed by the Director of Public Works. I am assuming you as President, will be there representing the Rolling Hills Riviera Homeowners Association to support this recommendation and our need for some relief from our current parking problem created by some of the (inconsiderate) Dodson Middle school staff. See you tonight. Thanks from me and my neighbors, Bob West 11/4/2010 TO: CITY COUNCIL MEMBERS FROM: STEVE WOLOWICZ DATE: NOVEMBER 4, 2010 SUBJECT: PENSION REVISION RECOMMENDATION (1) Select and retain a retirement plan consulting firm to assist in the design of an alternative defined contribution retirement program similar to a standard 401(k) plan and cost-saving suggestions to modify the current defined benefit plan. (2) Appoint a two -member subcommittee to (a) work with City Staff in the selection of the consulting firm. (b) Work with the consultant in the analysis and recommendation of the new retirement plan, and (c) By January 31, 2011 based on that analysis submit a recommendation for the new pension plan to the City Council (3) Based on the information provided by the consultant and subcommittee The City Council will deliberate and select a new retirement plan for all new employees hired after July 1, 2011. It is important to note that no part of this recommendation is to change any part of the current plan for existina emolovees. Overthe last decade the City's annual costs forthe existing defined benefit retirement plan has dramatically increased. For the fiscal year ended June 30, 2010 the base cost was $814,205 which excludes an additional $1,661,376 paid to the "side -fund liability." The annual cost alone is $679,204 or 504% higher than the expense amount recorded during the fiscal year ended June 30, 2000. (See comparative costs on Exhibit A and Financial Statement Pension footnote on Exhibit B). Our City's problem with the increasing retirement costs is similar to most all governmental entities sponsoring defined benefit retirement plans. These significant increases are 10-1 primarily not due to increases in the number of participating personnel, but rather in the underlying nature of the defined benefit plans. As described in the CalPERS Member booklet "Threefactors are used to calculate yourservice retirement: Service Credit, Benefit Factor, and Final Compensation." The service credit is earned for each year of partial year worked far the sponsoring employer (in our case as a participating CalPERS entity). The Benefit Factor is the percentage of pay to which employees are entitled for each year of service. That percentage is determined by age of the employee at retirement, which was contracted by the City. This formula is commonly quoted in terms of a percent and number. For our City that formula is stated 2.5% (at) 55 years of age. The funding policy is described in the Notes of Financial Statements in the annual CAFR (Exhibit B). As with all defined benefit (DB) plans, the City's contributions decline when investment returns rise and increase when investment returns decline. As explained by the Governor's Special Advisor for Jobs and Economic Growth, David Crane: "When promises for deferred compensation such as pensions and retiree health care are made to employees, sufficient monies are suppose to be set aside at the same time and invested in order to grow large enough to meet the promises. The amount of money to be set aside is a function of how successfully that set-aside money is expected to be invested. The greater the assumed investment retum, the lower the set-aside when the promise is made, and vice -versa. if those assumed investment earnings arise, all's well. But if not, money must be added in the future to meet the promise... At some point such promises come due and that's when their costs are revealed... By assuming unattainable investment returns, the state has been making promises but underfunding them, assuring massive demands on future general funds." The City has been exposed to the same problem resulting in the skyrocketing costs during the last decade. However, the over -assumption of investment returns during periods of slow growth is not the only reason why the City's pension costs are now so high and disproportionate to covered payroll. The rising and disproportionate costs related to DB plans were recognized in the private sector beginning in the late 1980's. The trend away from defined benefit programs began at that time and has continued to today. The rapidly increasing annual costs and the growth of unfunded vested benefits are the primary reasons for changing from DB plans. By the late 1990's, there were virtually no defined benefit plans used by most small and mid-sized businesses. In 1987 even the Federal Government introduced a defined contribution (DC) - type plan which depends in great part on employee contributions. Defined benefit plans remain in place only in very large public companies and governmental entities which have a strong union presence. Ultimately the amounts of those ultra -large unfunded liabilities were cited as a majorfactor in the financial failures of large business entities including various airlines and General Motors. The failures of several significant governmental entities are similarly attributed to the runaway costs combined with off-balance sheet unfunded liabilities. 10-2 A related administrative issue surfaced several years ago when CaIPERS announced their decision to discontinue disclosure of the City's specific amount of the unfunded vested benefits. That along with other unilateral actions by CalPERS, has reminded us of periodic difficulties in dealing with such a large entity as a service provider. During the decade or so after the City adopted the DB plan, the costs were relatively nominal due to the investment rate assumptions included in the plan. However, as costs increased staff responded to council concerns by stating that the rising costs were merely the "balancing" of the favorable investment rates that were assumed during those earlier periods. However, the continual acceleration of costs has long offset any of the assumed benefits in the earlier years. When pension reform was initially proposed in 2004, those Council members opposed to changes cited a number of arguments. These included assertions that any decrease in benefits or decrease in City contributions would expose the City to organization by unions, exposure to increased staff turnover and difficulty in hiring future employees. Further many City Staff joined them in the argument that the superior retirement benefits were need to offset the wage differentials compared with private industry. During the last half-dozen years the condition of our economy, the continuing 12.5% unemployment in California, and uncertainty of long-term stability in the private sector render those prior arguments moot or subject them to revaluation in light of the increased pension costs during the same period. CURRENT REFORM TRENDS "two-tier" system Each week we are learning of new pension reform proposals. Virtually all of the new plans are specifically designed for new employees who are not now covered by the existing defined benefit plan. This is commonly referred as creating a "two-tiered" plan. When first proposed to RPV in 2004, most existing City staff and the majority of the voting council members stated such a two-tiered plan would create an unequal benefit structure. However, as we have seen during the last year, this concept has been accepted by very large employee unions dealing with the State and Orange County. They too recognize that pension reform must be started at some time and this is proving to be an appropriate time and manner to initiate the process. The newly approved two-tier State plans include the California Highway Patrol. Talks or action to reduce pension costs, including the adoption of two-tier systems are also underway in local government agencies. For example, the City of South San Francisco has adopted a two-tier plan. The City of Ventura has approved a two-tier plan, subject to negotiation of the details with employees. At least eight California cities and one County have pension measures on this month's ballot. Proposals in Bakersfield and Menlo Park would create two-tier systems with lower benefit formulas. Action by the State of California 10-3 On October 20th the Governor signed SB 867 and SBX 622 which implements some major pension objectives. There were three major objectives reforms included in this action: (1) Rolls back expansion of pension benefits in 1999 under SB 400 will be rolled back for new employees. (s) Ended pension spiking by requiring employee retirement rates to be based on the highest consecutive three year average salary as opposed to the single highest year. (3) Increases transparency by requiring CalPERS to notify the Governor and others any time it adopts contribution rates. Also the Governor negotiated pension reforms with seven significant state employee unions resulted in retaining the basic structure of the existing defined benefit programs but significantly reducing the percentage benefits and extending various retirement ages. During conversation with the Governor's principal advisor on these pension reforms, David Crane, he recommended that the recently passed plan in Orange County should be considered as an improvement over the state negotiated changes. Action by Orange County Adopted in May 2010 by Orange County, their new plan has been recognized as being innovative in dealing with the powerful Orange County Employee Association (Union). This is a hybrid defined benefit/defined contribution retirement plan (see article on Exhibit C and their Agenda Staff Report Exhibit D), which required special legislation approved by the State Legislature. It is very important to note that the plan adopted by Orange County required state legislation. The format of this plan is not available to cities— however the innovative hybrid plan and underlying assumptions could be modified and considered by cities. I spoke with the two Orange county Supervisors most responsible for these changes, Supervisor Bill Campbell, and supervisor John Moorlach (who is also a CPA) along with the county's Director of Human resources Carl Crown. It was surprising to learn from the two supervisors that while they were pleased with the plan which their County had adopted given our City's circumstances they recommended that we pursue a defined contribution -type program similar to a 401(k) plan. Actions by Cities While there is a great deal of change discussed by cities, the changes thus far adopted by cities has been to modify now existing defined benefit plans through lowering benefit formulas and extending retirement ages for new employees. BRING Again, there is to be no change to the existing defined benefit plan for current employees. Given our City's increased pension costs during the last decade we should retain pension 10-4 consultants to help us design a DC plan similar to a 401(k) pension plan to be adopted only for new employees beginning July 1, 2011. ALTERNATIVES Retain pension consultants to help modify the existing defined benefit program in a manner similar to those modifications adopted by other cities and even consider some of the hybrid features adopted by Orange County. Make no change. RANCHO PALOS VERDES Exhibit A PENSION COSTS Fiscal year Base cost Add . side Paid to side- fund fund liability payment Pension cost Change Amount Change Covered percent Payroll Penson cost % of Paroll 2009-10 $ 814,205 $ 180,000 $1,481,376 1 2,475,581 $967,277 64% $ 4,630,020 53% 2008-09 $ 808,304 $ 700,000 $ 1,508,304 $761,121 1020% $ 4,650,530 32% 2007-08 $ 747,183 $ 747,183 1$115,963 18% $ 4239,406 18% 2006-07 $ 631,220 $ 631.220 $ 40,6291 7% $ 3490,159 18% 2005-06 $ 590,691 $ 590,591 $179,1791 44% $ 3,621,822 16% 2004-05 $ 411,412 $ 411,412 $143,728 54% $ 3,683,957 11% 2003-04 $ 267,684 $ 267,684 $100,261 60% $ 3,242,093 8% 2002-03 $ 167,423 $ 167,423 $ 22,640 16% $ 2,904,427 6% 2001-02 $ 144,783 $ 144,783 $ 11,323 8% $ 2,455,956 6% 2000-01 $ 133.460 $ 133,460 $ 1,541 -1% $ 2,086,935 6°% 1999-00 $ 135,001 $ 135,001 $ 2102,848 1998-99 na $ 2,064,127 _ Totals last 10 -years $4,716,265 $ 880,000 $1,481,376 $ 7,077,641 $ 34,985,305 20°% H.Wy 0omnerORW City Cowwfi4nnslon IssussW ayroll, pension, health Insurance.xla 1111/2010323 PM 10-6 EXHIBIT B ✓ I Y OF KA,NGHU FALUS VCRDES 40TES TO FINANCIAL STATEMENTS JUNE 30, 2009 VOTE #7— PENSION PLAN 'Ian Description rhe City provides a defined benefit pension plan that . includes retirement and usability benefits, annual cost -of -living adjustments, and death benefits to plan nembers and beneficiaries. The City participates in the Miscellaneous 2.5% at 55 Risk Pool of the California Public Employee's Retirement System (CaIPERS), i cost-sharing, multi-employer public employee defined benefit pension plan administered by CaIPERS. CaIPERS provides retirement and disability benefits, annual cost -of -living adjustments, and death benefits to plan members and )eneficiaries. State statutes, within the Public Employees' Retirement Law, astablish benefit provisions and other requirements. The City selects optional )enefit provisions from the benefit menu by contract with CaIPERS and adopts hose benefits through local ordinance. Copies of the CaIPERS annual financial -eport may be obtained from the CaIPERS Executive Office at 400 P Street, Sacramento, California 95814 or downloaded from their website at vww.calpers.gov. ' r•' rhe contribution requirements of pian members are established by State statute and the employer contribution rate is established and amended by CaIPERS. Nctive City employees are required to contribute 8% of their annual covered ,alary. The City pays 6.5% of the contribution for all the full-time positions, and I% of the'contribudon for part-time employees. The City is required to contribute he actuarially determined remaining amounts necessary to fund the benefits for is members. The FY08-09 rate was 15.275% of covered payroll. The City's .ontributions to CaIPERS for the years ending June 30, 2009, 2008 and 2007 were $1,508,304, $747,183 and $631,220, respectively, and were equal to the 'equired contribution for each year. ks a result of having less than 100 active members as of June 30, 2003, the City was required to participate in a risk pool. The City's pooled employer contribution 'ate is the same as the stand-alone employer contribution rate. At the time of oining the mandatory pooled plan, CaIPERS established an employer side fund o account for the difference between the funded status of the pooled plan and .he funded status of the City's plan. The amortization of the side fund is included n the determination of the City's annual required contribution. rhe funded status of the pooled plan may be obtained from CaIPERS. See independent auditors' report. 59 10-7 Exhibit C Reprinted with permission from - June 28, 2010&g .Pensions.1nv tments THE 1N7 Pli XIrIGNAL NEW$PAi'J:R :.....w..._...., K: . _ .. ;oF<jKONtY MANAGEMENT: _ Pension Funds Orange County offers a combo plan to new union employees By Robert Steyer Orange County, CaUE, has.adopted a novel retirement plan in -which now union employ- ees can choose between participating only in the $4.7 billion defined benefit pian, or par- ticipating in both the DB and a new defined contribution plan. Those choosing the combination pay a lower contribution to the defined benefit plan, but also get reduced benefits. On the DC side, they get a small employer match. Although some state government plan sponsors and a few municipal ones offer defined contribution.plam% Orange CouWs version — where all new employees partici- pate in the defined benefit plan — is rano. More common approaches Include dosing the DB plan to•new employees and allowing them to participate only in a DC plan, or giv- ing them a choice between a defined benefit or a defined contribution plan. An analysis last year by the Center for Retirement Research at Boston College found that 18 of 126 mostly state plans stud- ied had some form of DC component for new employees, said Jean-Pierre Aubry, a research associate at the center. In Orange County the Orange County Employees Retirefnent System, Santa Ana, administers the plan. bht the new approach was developed by -executives of the union — the Orange County Employees Association — and management Officials from both sides say, the new design will reduce the county's defined ben- efit plan expenses. William Campbell, vice chairman of the Orange County Board of Supervisors in Santa Ana, said an actuary hired by the county calculated the new plan could cut annual costs by about 2% over time, assum- ing half of the new employees choose the combination of a DB and a DC plan. Reith Brainard, research director for the National Association of State Retirement Administrators, Baton Rouge, La., noted that plans with a defined contribution component 'present lower, long- term liabilities for the employer." The problem.. however. is usage. Mr. Brainard said 'he believes most new employees select tradi- tional DB plans over other types. The new plan is unique to California, and required passage William of a state law last year to author- Ize it The county and the union agreed to the plan in June 2009: enrollment began last month. Neither Mr. Campbell nor Lisa Major, assistant general manager for the union, could recall who made the first move tpward proposing the new approach wben union and county negodalors starting discussing a new contract In the spring of 2009. "It seemed like we came to It at about the same time Ms. Major said said. "It was both of us," said Mr. Campbell. *We wanted to reduce the (DB) pian for new employees. The union wanted to give new employees a choice' The defined contribution portion was developed — and will be administered — by TLaA.-CRE$ NewYork. The DC component 'works in tandem with, rather than supplements" the defined benefit plan, said Richard Hiller, vice prosI- dent. for government and religious markets at TIAA-CREE "The overall pension plan Is structured to help employees replace 70% or more. df their income in retirement The DB (formula) doesn't accomplish that on its own, so the DC plan Is layered on to help achieve the necessary income in retirement' The standard employer match is 50% on up to 2% of the employee's contribution. In the plans first year of operation, however; the match Is 100% an up to 2% of the employ- ee contribution. On the defined benefit side those choosing to enroll in the DC plan will make a smaller contribution to the DB plan. In exchange the benefit payment will be less. In addition, they must work until age 65 to get their full benefit payment. Those sticking with the original DB -only approach may retire with full benefits at 55. Benefit to county Mr. Campbell said that change Campbell also benefits the county because 'tire county can retain employees 10 years longer and thereby reduce costs associated with training and recruitment." Costs could be reduced further if existing employees are given the same choices that new employees get, something both the countyaud•theunion support. So far, howev- ez that move- has been blocked by the Internal Revenue Service. 'Mandatory employee contributions to public empktyee retirement plans are con- sidered 'picked up' employer contributions for federal income tax purposes,' said Mr. Campbell, "The employee is not taxed when the contributions are made but Is taxed on the benefits when (they) are received' The MS is questioning if allowing current employees a one-time chance to switch to the new plan "wijl cause tbeir contributions to lose their pre-tax status and whether this •loss•witl apply to all ... current employees... Including those who do not elect the lower formula," ]re said. Mr. Campbell said the county las been discussing this issue with the MS since September 2009. He hopes for a ruling later this year. The new structure reflects employees' evolving attitudes about work and retire- ment, Ms, Major said.'If I'm 25, I don't know if Ill be working• in the same place until I'm 55," she said. "People move around a tot more.A defined benefit plan is the most reli- able (retirement investment), but some peo- ple want more control over their money" through a defined contribution plan. ■ The Nnblisltcr's code of ribs ml rbn does cora mmsduue or bnply an)- cadorsentenl or sponsarslillr of any product, same or w1puization. Quin Conannlli0dOns 782.714.0stla. no ilarEl)rl-Olt ACL'1:R Itlil'Ltll\"1'S. ttlPRODUG14ONS ARE N(Yr P1RRmrrii.m. omw ,0 Entire Gaaents vol yrigin by urian Gnnunanic.tduns Inc. Aa dgitns resemd. I ' EXHIBIT D -Page 1 { Stevd Wolowicz 1 From: Crown, Carl [carl.crown@ocgov.com] Sent: Thursday, August 12, 2010 9:23 AM r To: 5tevew@rpv.com j cc: Johnson, Michael [D33 ' Subject: 1.62% @ 65 formula Attachments: 1.62 ASR.doc Steve Attached is the item that went to the Board to adopt the new retirement formula. It is a good description of the plan and issues surrounding the tax implications for current employees. Let me know if you need anything else and, as discussed, I would be happy to meet with you to discuss further. Carl Crown Human Resources Director County of Orange, Ca. (714)834-2836 <s1.62 ASR.doc>> 1 10-9 ' --F °4 °v MEETING DATE: EXHIBIT D — Page 2 c't Agenda item AGENDA STAFF REPORT LEGAL ENTITY TAICI NG ACTION: BOARD OF SUPERVISORS DISTRICT(S): SUBMITTING AGENCY/DEPARTMENT: DEPARTMENT CONTACT PERSON(S): ASR Control 10-000296 04/20/10 Board of Supervisors All Districts Human Resources Department (Approved) Robert J. Franz (714) 834-4304 Carl H. Crown (714) 834-2836 SUBJECT: Approve Resolution for "I.62% at 65" Retirement Formula CEO CONCUR COUNTY COUNSEL REVIEW CLERK OFTIIE BOARD Concur Approved Agreement(s) and Discussion Resolution(s) 3 Votes Board Majority Budgeted: N/A Current Year Cost: N/A Staffmg Impact: No 0 of Positions: Current Fiscal Year Revenue: N/A Funding Source: N/A Prior Board Action: N/A RECOMMENDED ACTION(S): Annual Cost: N/A Sole Source: N/A 1. Approve and adopt the resolution implementing the "1.62% at 65" retirement formula as detailed in Exhibit A. 2. Approve and adopt Side Letter Agreements between the County and applicable labor groups implementing the retirement formula election as to new employees, as detailed in Exhibits B, C and D. 3. Approve and adopt the Amendment to the Personnel and Salary Resolution, adopting the election of the "1.62% at 65" retirement formula for unrepresented employees, as detailed in Exhibit E. SUMMARY: In an effort to address increasing pension costs, the County initiated steps towards implementing a new lower retirement formula "1.62% at 65" combined with a Defined Contribution Plan. The implementation of the proposed retirement program required legislation to be approved through the State legislative process. On October 11, 2009, Senate Bill 752 was approved, which permits in Orange County, the board of supervisors, or the governing body of a district within the county, by resolution adopted by majority vote, to require certain employees to make a written election between two specified retirement formulas. Page 1 EXHIBIT D - Page 3 The lower formula, combined with the Defined Contribution Plan will result in a significantly lower cost to the County and to the employees than the current 2.7% at 55 retirement formula. Approval and adoption of the Resolution before your honorable Board today will allow the County to implement the new 111.62% at 65" retirement formula. MOUS with the Orange County Employees Association (OCEA), Association of Orange County Workers (AOCW) and the International Union of Operating Engineers (IUOE) currently contemplate offering to both current and new employees the election between the two retirement formulas. Issues have arisen with respect to the possible tax impact of implementing the retirement formula election for current employees. Until these issues are resolved, we believe it is best to proceed with implementing the election for new employees only. We have entered into Side Letter Agreements with each of these collective bargaining associations whereby they acknowledge and agree with implementing only for new employees and postponing the election for current employees. The attached amendment to the Personnel and Salary Resolution extends the election of the new retirement formula to unrepresented new employees, which includes Elected Officials, Executive Management and Executive Aides and Executive Assistants of elected officials, and is included in Exhibit E. Discussions are underway with the Orange County Managers Association (OCMA) and Orange County Attorneys Association (OCAA) regarding the implementation of the election of the "1.62% at 65" retirement formula for new employees, under the terms of the respective contract extension agreements. We anticipate that we will return to your Board in the near future with implementation agreements for OCMA and OCAA upon completion of those discussions. BACKGROUND INFORMATION: In an effort to address increasing pension costs, the County initiated steps towards implementing a new lower retirement formula "1.62% at 65" combined with a Defined Contribution Plan for non -safety employees. The lower formula, combined with the Defined Contribution Plan will result in a significantly lower cost to the County and to the employees than the current 2.7% at 55 retirement formula. The implementation of the proposed retirement program required legislation to be approved through the State legislative process, which was approved on October 11, 2009. The bill requires an employee who elects the lesser of the two specified retirement formulas be eligible to receive a contribution to a defined contribution program from the County based on the employee's contribution to a defined contribution program. Employees who elect the new, lower retirement formula will be eligible to participate in a Defined Contribution Plan in which the County will provide a one -hundred percent (100%) match of the employee's contributions during the first year of the plan up to two percent (2%) of the employee's salary, and in subsequent plan years will provide a fifty percent (50%) match of the employee's contributions up to two percent (2%). An issue has arisen regarding the possible tax impact of offering the retirement formula election to current employees. The Internal Revenue Service (IRS) has indicated that doing so would result in the employee contribution paid by the current employees offered the election to no longer be excludable from gross income. We are pursuing this issue with the IRS. Until this tax issue is resolved, we recommend Page 2 0-11 EXHIBIT D - Page 4 proceeding with the implementation of the election for new employees only. Memoranda of Understanding with OCEA, AOCW and iUOE are currently contemplating offering to both current and new employees the election between the two retirement formulas. Attached are Side Letter Agreements with each of these labor associations whereby they acknowledge and agree with implementing only for new employees and postponing the election for current employees. When the tax issues are resolved, we will return to your Board with a Resolution adopting the election of the new Tier 1111.62% at 65 formula for the current employees. The Human Resources Department, the County Executive Office, the Auditor -Controller, OCERS staff, OCEA and other labor representatives have worked together on implementation efforts, including system modifications, employee communications, pre-employment seminars, website information and updated forms so new employees will be properly informed of the requirement to elect their retirement benefit formula. Additionally, tracking and reporting mechanisms will be available for use by departments to assist in following up with any new employees who have not made an election before the 45 days provided for has expired. Government Code Section 7507 requires that the County engage an actuary to provide a statement of the actuarial impact upon future annual costs, including normal cost and any additional accrued liability, of any changes in retirement benefits or other postemployment benefits prior to the Board of Supervisors authorizing such changes. The required report is attached hereto as Exhibit F. Section 7507 requires that the actuary's report be made public at a public meeting at least two weeks prior to the adoption of any changes in public retirement plan benefits or other postemployment benefits. The report was made public at the meeting of the Board of Supervisors held on December 15, 2009. Finally, Section 7507 requires, with respect to any such changes, that the County Executive Officer (CEO), acknowledge in writing that he or she understands the current and future cost of the benefit as determined by the actuary. That acknowledgement is attached hereto as Exhibit G. FINANCIAL IMPACT: There is no immediate financial impact; potential future savings from implementing of the new pension program. STAFFING IMPACT: No REVIEWING AGENCIES: County Counsel ENMIT(S): Exhibit A — Resolution Adopting Election and "1.62% at 65" Retirement Formula Exhibit B — Side Letter Agreement with OCEA Exhibit C — Side Letter Agreement with AOCW :.. Exhibit D — Side Letter Agreement with IUOE Exhibit E - Amendment to Personnel and Salary Resolution Page 3 0-12 .... . ... ... EXHIBIT D - Page 5 Exhibit F — Bartel Actuarial Statement of Cost Impact of the 1.62% at 65 Retirement Change dated December 1, 2009 Exhibit G - Acknowledgement Pursuant to Government Code Section 7507 Page 4 10-13 CITY COUNCIL MEETING NOVEMBER 4, 2010 — topic #10 ADDENDUM — ADDITIONAL MATERIALS TO: CITY COUNCIL Publication Topic Municipal Risk Menlo Park — proposed changes to pensions The Mercury News Milpitas — pension reform questions to council candidates Metro Santa Cruz Santa Cruz - - two tier system The Claremont Institute Reforming California's Unsustainable Pension System Bakersfield.com Pension Reform Ventura County Star Ventura OKs 24ier system NCTimes.com Riverside County mulls two-tier System From: Municipal Risk News [info@municipalrisknews.com] Sent: Thursday, November 04, 201011:16 AM To: stevew@rpv.com Subject: Taxpayers take control of pensions g»wr' Citizens take control of pensions LEI Stt rf �c tfv mise In a watershed moment for taxpayers, .Menlo ark . CA„gtizens voted to reform municipal pensions via a ballot question'yesterday. 72% voted yes on measure L, the so-called pension reform initiative. According to the Mercury News, the binding ballot question will rase m tiel. al e�m loyee retirement awe fromx55 to 60 and will cap the benefit at 2 percent of the highest annual salsxy (down from 2.7%).WwAgq communities targeted pension rpfQr,m via b&ot moqions, this ast tuesday. Unions have vowed to fight the measure in court if it passed. MR News believes this is how communities can strike back at state legislatures across the country who have unfairly strapped taxpayers with expensive and unnecessary pension plans (lobbied for at the state level by unions). M 7 goes a long way Stockton, CA, will save $360,000 next year simply by getting municipal employees to pay $50 more in deductibles and $17 more for prescriptions as part of the city's health insurance. Had the union, which had originally rejected the new fees, not voted to then accept them, as many as 8 town employees would've been laid off. The union originally voted the increases down, but when the city announced the layoffs union members quickly petitioned for a re -vote and passed the measure easily. Ilien.a4rh n�i4ennrra�l 1 http://www.mercurynews.com/milpitas/ci-16448996?nclick—check=l Z�t A murg News MercuryNews.com CANDIDATES' VIEWS ON CITY EMPLOYEE PENSION REFORM Milpitas Post Staff Posted: 10/27/2010 02:15:16 PM PDT Updated: 10/27/2010 02:15:16 PM PDT Milpitas Post this week concludes its five-week series of questions and answers from candidates for Milpitas City Council. The responses from each candidate have been edited to meet Associated Press style and length requirements. The election is Nov. 2 for two four-year seats on the city council, and the two-year mayoral position. Q:What armour su est ons f r ur�nicipaI employee bene it a d,e ion reforms?bo you favor• a two=tie pension stru ure of�° new hires? MILPITAS MAYORAL CANDIDATES Jose Esteves -Age: 64 -Occupation: Engineer, manager, businessman, former mayor A:The Milpitas budget solution hinges on modifying employee pay and benefits now. Although I favor a two-tier pension structure for new hires, that is a long-term solution. We need near-term solutions, too. For the curre�n 2�� pe�cent�at 55 t 7 ercent 5S armor public safely employees raise the current 3 percent at 50 to 3 percent at 55. Future employees would pay for pension contributions increases. Non-public safety retirees would receive a maximum of 75 percent of their salaries, while public safety retirees would receive a maximum of 80 percent. For the near term, I fully support thp end,toa " e�nsonspi 'ng" requiring employee retirement be based on the highest consecutive three-year average salary, not today's one year. We must work with the unions to reduce costs to the city immediately: employees must pay a higher share of their healthcare benefits; reduce employee pay raises now, just as private companies, Social Security, and the military are doing; seriously examine outsourcing and privatizing city services. Finally, as your mayor, I will ensure the city council is responsible for the long-term impacts of their decisions. Debbie Giordano -Age: 55 -Occupation: Milpitas City Council member, businesswoman A:Reforminubicerqpo eepensions is a must. Current law prohibits changing current employee pensions. We must establish a second tier pension with an older retirement age, lower benefits, and equal contributions by the city and the employees. Fire and police employees are 36 percent of the total municipal employee workforce; yet, total compensation (including benefit costs) for f ire/police is 61.19 percent of the total personnel costs. Reform must begin with public safety. a e "o his n 1�f �".rna ing Main � Hotels' global iS J'' F $ z'`-.�. So.. cio ' have W. yv Learn more at RedBuwnes;scorn Print Powered By 1 11 ...``rt Page 1 of 6 http://www.mercurynews.com/fdcp?1288906667820 J Orc- 3 q 11/4/2010 http://www.mercurynews.com/milpitas/ci-16448996?nclick—check=l Page 2 of 6 PeArturgNews MercuryNews corn The current pension for fire/police includes eligible retirement at age 50, with up to 90 percent of salary, with highest one year calculation. As a member of our city's finance subcommittee, I supported two- tier pension reform. We need to raise the retirement age for public safety employees to at least 55 and for other city employees to no less than 62. Pension benefits should be restricted to no more than 50 percent of the last three years salary to avoid spiking and city and employee contributions should be equal or a 50-50 split. Sick leave buyouts must be limited. We can no longer tolerate employee retirement year compensation to reach more than $400,000 because of accrued sick leave. These reforms are long-term savings, but we must act now. Pete McHugh -Age: 6$ -Occupation: Vice mayor, City of Milpitas A:I am in fa sof a two-tier Dension struoturefor new h res aced we must a so-aaiauesuch as spiking and how final compensation is determined. Basing compensation on the average of the last three years as opposed to the single highest year would be a significant savings. We must address retirement ages, the actual formulas and employee contributions. As I mentioned in my response to the question as to how I would solve our budget challenge in the Oct. 1 issue of the Milpitas Post, we must work to reduce our fringe benefits and longevity pay from the current 60 percent of salary to 45 percent that will generate savings of $2 million. This is contingent upon the continued cooperation of our employees. The only alternative to this reduction would be employee layoffs and drastic service cuts to our residents. I sincerely hope that it doesn't come to that, because our residents will have decreased services and we will lose the investment that we have made in our excellent employees. We have to work together for the common good as we did this year when our employees collaboratively gave up 7 percent of their salaries and costs. Rob Means -Age: 60 -Occupation: Electric vehicle entrepreneur A:lf Milpitas employees use their union's democratic process to favor a two-tier pension structure to deal with our fiscal constraints, I am willing to support their decision. However, I believe there are alternatives which are more equitable. These may include reduced hours so more employees can be retained, reduced pay for the same objective, or some give -backs from those who are retired yet making 90 percent of their last paycheck. (That last one seems unfair to me, and seems to assume an ever -rising stock market.) The employee unions must decide how fellow members will be treated when changes are required. Unions are one of the last places where we practice democracy to choose our futures. The city council must review any plan the union proposes and, if needed, veto it based on sound economic, social, or environmental reasons. But it is the responsibility of the union to choose, through a democratic process, the solution they think is best. Rather than looking at how to live within ever - shrinking budgets, I think unions would eagerly support raising city revenues. With city, union and % OFF Tao Healing Arks Center Los Angeles: $466 for a One -Hour Massage of Your Choice Plus Infrared Sauna at Tao Healing Arts Center in Santa Monica ($95 Value) Get this and other Daily Deals at: Print Powered By �F(3nam�cs http://www.mercurynews.com/fdcp?1288906667820 11/4/2010 http://www.mercurynews.com/milpitas/ci_16448996?nclick check=l AeAercurg Mercurftws corn community support, we can pass pollution fees and other measures to balance the budget. MILPITAS CITY COUNCIL CANDIDATES Althea Polanski -Age: 59 -Occupation: Milpitas City Council member, senior executive assistant A:The current benefit and pension structure is unsustainable and is a major factor in Milpitas' structural budget deficit. Employees need to be part of the solution and contribute more to their benefit and pension packages. If this is not done, Milpitas will become another Vallejo and the only solution will be to file for bankruptcy and everyone will lose. -Final compensation should be based on the average of the last three years of salary and not just the final year. -Employees need to contribute a higher percentage to their pension and benefits. -A two-tier pension structure for new hires must be a part of the solution. -Current employees should seriously consider reviewing their age for retirement. -Compensation in salary or pensions should be tied to COLA (Cost -of -living Allowance). -Double dipping should not the "norm" if an employee retires and then accepts another full-time position, pension payments should be deferred until the employee truly retires or a formula is established as with Social Security. I believe employees should receive fair compensation for services they provide to the city; however, it must be balanced with what the taxpayers can afford now and in the future. Gary Roope -Age: 50 -Occupation: Logistic supervisor A:The pension and benefit package our city employees have, must be reformed. This is not going to be popular with the employees. I am not running for election to be popular with the employees, but I very much respect the jobs they do. They must understand that their jobs are not a privilege. I call for the following changes that many of us in the private sector already have in place. 1. An immediate hiring freeze. Any future hiring will be done with a benefit package similar to the private sector. 2. A freeze on future raises to pensions. 3. Employees must contribute to their pensions. 4. Increase the retirement age, with pension reduction penalties for early retirement 5. All extra pay (longevity, etc.) will be eliminated. 6. Employees will pay for portions of health and dental and will split future cost increases with the city. 7. The city will offer more choices of health plans. Just like in the private sector, employees who do not like their compensation packages are free to seek employment elsewhere at their choosing. Working Print Powered By ` „ i Dynamics http://www.mercmynews.com/fdcp?1288906667820 S of 3 q Page 3 of 6 11/4/2010 http://www.mercurynews.com/milpitas/ei_16448996?nclick check=l Page 4 of 6 Akw Mercurylewsco for the city can no longer be looked at as a given right or a privilege. Robert Windisch -Age: 57 -Occupation: Small business owner AJ would utilize the Santa Clara County Grand Jury 2010 Report titled "Cities Must Rein,ln Unsustainable Employee Cost," to start reforming Milpitas municipal employee benefits and pensions. The report is an excellent analysis of facts, reality and suggested long-term solutions to chronic problems that faces all cities in Santa Clara County and California as a whole. City council and municipal employees must recognize the financial impact of present employee agreements, coupled with the economic downturn, and negotiate contracts that will achieve the following goals: -Municipal employees must make sacrifices, like the private business employees have, to help Milpitas return to fiscal stability. -Milpitas must preserve the services the taxpayers deserve and come to expect. -Milpitas must provide competitive and affordable compensation for municipal employees that is based on current economic conditions and private business packages. While private sector citizens have suffered losses in jobs, pay, health benefits and retirement plans, our municipal employees have received lavish increases in total compensation packages. The municipal employees contribute nothing or little to these overly generous plans that are not available to private citizens. It is time for the municipal employees to "get some skin in the game." Byron Winters -Age: 55 -Occupation: Senior engineering technician A:We need to cut expenses; we need to look at all the options. We will need to work with all the city's labor unions to come up with a plan to help reduce the city's contributions to the employees' benefits, such as an increase in employees' contributions. This needs to be applied across the board and not bared by one group. I would not be in favor of contracting out our major services, but that does not mean we should not look at other options. When you contract out your services, you lose ownership of those services. I am in favor of a two-tier system of employment where new employees would come in under a different benefit package. We are limited to what we can do with current employees, they deserve to get what they have worked for, but we cannot continue to provide the same benefits to future employees. We need to look at changing the retirement package to come more in line with the business world. Bill Ferguson -Age: 48 -Occupation: Information technology manager A:In these difficult economic times, our city can no longer afford city salaries that are much higher than private sector workers. We have to bring the salaries of the police and fire department in line with other Print Powered By WE i r,atDynamics http://www.mercurynews.com/fdcp?1288906667820 �c 6_ '3 Cf 11/4/2010 http://www.mercurynews.com/milpitas/ci-16448996?nctick—check=l MercuryNewsco Bay Area workers. Milpitas has faced a serious budget shortfall every year for the past few years. The vacation and sick leave policies are overly generous and higher than that of private companies. If our current city pensions and high salaries continue, it will squeeze out many of the services offered by the city. Our residents do not want service reductions. 1 support a two-tiered pension structure as a way of lowering the cost to our city. This would increase t he age of retirement and lower the retirement payout. The current retirement age of 50 is too low. An additional way to save money is that sick days should not be paid out upon retirement. "Double dipping" should be prohibited, where retired workers can take another job and get additional retirement benefits from a different government agency. Armando Gomez -Age: 37 -Occupation: Milpitas City Council member A:Our residents deserve fiscal policies that preserve our ability to meet community needs, while attracting well qualified employees to public service. owever, our current retirement and benefit structure is not fiscally sustainable. If unaddressed, the costs associated with these benefits could divert limited resources from our neighborhoods. In addition, current pension benefits exceed what private sector employees receive and what is reasonably needed to attract public employees. One-time money and new revenues are only part of the solution toward dealing with our long-term budget challenges. It is clear that in order to maintain those programs that are important to residents we need fiscal reform. I have advocated for bold action when it comes to fiscal reform. At the Finance Subcommittee, 1 have proposed a two-tier pension structure that extends the retirement age and lowers the percentage given at retirement. Other fiscal reforms I am pursuing include the reduction of city employee costs, reduced pension contributions, health care costs, and those practices that cost taxpayers significant money such as excessive sick leave buy-outs. Nancy Mendizabal -Age: 54 -Occupation: Construction inspector A:I have four suggestions for benefit and pension reforms: -To reduce the medical coverage to coverage for one person plus one with the difference of additional family coverage being paid by the employee, saving $3,600 per employee annually. -Increase the medical coverage waiver to promote employees to use spouse's coverage saving $7,600 per eligible employee annually. -Increase employee payments into their retirement system. Possible savings of $1.5 million. -Offer a "Golden Handshake" to promote retirement, rehiring new employees at starting pay levels saving approximately 20 percent per retiree. I would work with the bargaining units on ideas that they have to offer. Everything is negotiable but the quality of our employees can't be bought. Our employees give more than services to our community; they give a part of themselves. SA W ra % Plus, get goo 3 FREE Gifts Print Powered By 1 c r r t. MICS http://www.mercurynews.com/fdcp?1288906667820 © -3 q Page S of 6 11/4/2010 http://www.mercurynews.com/milpitas/ci_16448996?nclick check=l MercttryNewscom 1 am not especially in favor of tiering benefits or pensions. We already have tiering (some units) in b oth retiree medical coverage and retirement payouts. Tiering causes dissention between new and existing employees. It creates a separation between employees instead of promoting team building and cohesion. This again is a negotiating issue that bargaining units could choose to agree to in lieu of other possible reforms. Carmen Montano -Age: 55 -Occupation: Teacher A:The state budget crisis continues to have an impact on local municipalities. With a state deficit in the billions it includes an unfunded pension debt. Pensions are an issue that requires considerable research and evaluation. It will take much deliberation to resolve. The state legislators are responsible to provide a solution involving the Pension Reform Act that will ultimately affect the decisions made at the local level. This includes employee salaries, benefits and p ensions. The legislators and the bargaining units need to sit at the table and come up with a solution to resolve the pension benefits debt in our state. Employees deserve comparable worth as it relates to the two-tier pension structure for new hires. Our city will not be able to change pension benefits earned and incurred by current employees. However, it has been suggested that the pension benefits debt for new hires can be stopped by using the two-tier system. In addition to this, work furloughs and changing the retirement benefits formula are other solutions. It will be a challenge but we must not give up to resolve pension reform. Print Powered By ©! INS i.aDynamics http://www.mercurynews.com/fdcp?1288906667820 Q (YC— 3 q Page 6 of 6 11/4/2010 Pension reform talks I News & Culture in Santa Cruz, CA metro'sa,wI".. n home music & nightlife © movies * the arts * restaurants u classifleds * columns SANTA CRUZ NEWS CAR CULTURE THE ROCK SHOW ra news & features rr the papers * hlogs I,, coupons • advertise n about us a contact Page 1 of 2 News, music, movies, events at restaurants in Santa Cruzr California from Metro Santa Cruz weekly columns 07.28.10 hom,. I naL+fiosago gn,tz to i currents News Briefs Candidate Forum "Betterlate thim never seems to be•the consensto concerning the Aug. 12 debate among the candidates for the i5d%$.#Wn a Djsixict seat, scheduledjost last week in a flurry of emails and phone calix. San%Crux WeeId anti the.k east iF af'41 omen Voters are co -sponsoring the event, the irkstk:t'o-gatlreli^ all roar candidates iYr apublic fdrum in the run-up to the Aug. 17 election to Ali the receatiyvacated seat ofIA Gnv. Abel b4aldondo. Traci HukilI Chiseled Brass "We wanted to U &e a leadership role and wiOa hoping that others in the departntent will take our lead," rii Says the of the Police anagement Association, SCPIJ Deputy Chief Kevin Vogel. "'l don't know if the idea has resonated but we're certainly. hoping that will happen." Vogel says the manager nuld opt out ofthe agreer>Yent if the Pt)A doesn't fall in line. But even if the rest ofthe i'ollce l7eparttnerrt ees to the terrtporary eontrhut gn hiiies, other employee gxrups like firefzglrfers tud nan pulallo-sttf4a workers wilt likely be spared the immediate t�tlxement concessions, "True pension reform will happen when the employees' contracts are open," says Sullivan. "Ttvo- tier reform is perhaps the most important piece for the future, but it's not enough." By "not enough" Sullivan means that a two-tier pension system will only offer savings when future generations of employees retire and will do little to address the current fiscal crunch. Short-term Tray Ads by G"Ie Ve zon Best Price Online Business High Speed Internet As Low As $24;99/Month & Free Equipment! Verizonxon VSmaliBusm, FindSSanigrr Housing Free assistance finding senior living in your area. www.aplaceformom;com Business Security, Systems Sign Up Today for a Free Security Evaluation from ADTO California! www ADTForSmallBusin U011.11vinak? P, ensions Many government pensions are out of control. Learn more & take action! www TheFreeEnteipnsel http://www.metrosantacruz.com/metro-santa-cruz/07.28.10/briefs-1030.htmlC 11/4/2010 01 4 �—' 3 -1 Pension reform talks I News & Culture in Santa Cruz, CA Vogel says he'd 'Obviously like to seethe 3 at 55 plan" over the 2 at 50 version. "Cops already usuwork until their mid-5tts," besays. A 2 at 5o plan, however, would result in 5.3 percent ove payroll savings according to actuarial reports—nearly double the 2.7 percent savings that a 3 at. plan ?mould offer. Santa Crux Finance Director Jack Dines says hell be pushing for the bigger savings, "We need to continue to stabilize our budget and increase our reserves," says Dilies. "Pension reform is one way to do it and I think it's the right thing to do." Curtis Cartier Send letters to the editor km .XI jxi Cx� I iX.. �Xi Page 2 of 2 @)Copyright 2010 Metro Newspapers. All rights reserved. http://www.metrosantacruz.com/metro-santa-cruz/07.28.10/briefs-1030.htrnl 11/4/2010 t (o o�—' 3 LI The Claremont Institute - Reforming California's Unsustainable Pension System Page 1 of 13 Reforming California's Unsustainable Pension System California is facing serious economic and political problems. How we deal By favid I� riskris with these problems will affect both California and the nation. Posted October 28, 201.0 In this second essay of our Advice to the Governor public policy series, the Claremont Institute's David Frisk en ina 1' g i ' - 1W1" ,fhe growing costs of which threaten to displace even basic health and safety services directed towards the common good. In addition to being unaffordable, generous public -employee pensions are also unjust, especially during an economic recession that is demanding disproportionate sacrifices from the private sector. Fixing the problem requires renewed fiscal competence and prudence in our government, along with a statesmanlike perspective and strong political leadership from California's next governor. Frisk is a Fellow of the Claremont Institute and the author of If Not Us, Who?: William Rusher, National Review, and the Conservative Movement, forthcoming from ISI books. Introduction Respect for the common good is an essential characteristic of decent and limited constitutional government. In such a government, public policy must concern itself with society's long-term well -being. Public resources, and the private resources on which the public sector depends, are finite and can be exhausted. In addition, that which belongs to citizens in their private capacity is justifiably taken by government only for essential and limited public purposes. For all these reasons, responsible policy must be based upon serious consideration of what is and isn't affordable and prudent. That, in turn, depends on a sound philosophy of government. A fiscal crisis like California's requires more than putting our financial house in order. This state and its citizenry must also think anew about the first principles of republican government. Public sentiment in California, as well as policy, must turn away from the prevailing view of government as merely a provider of public services, remembering both its proper constraints and its obligation toward society's long-term interests. A first step in the right direction, then, will be a frank acknowledgement and accounting of a spending and debt crisis in California that threatens to make impossible a restoration of something even more important than fiscal prudence itself: a limited, responsible and truly representative government. California's unsustainable public -employee pension system is a perfect example of the disaster that results when government fails to respect its rightful relationship to society and to ground its policies in reality. Benefit formulas that are too generous, and retirement ages that are too low, have driven the costs of public pensions in our state to unsustainable levels. The pension policies that California legislators and local officials have put into place have become notoriously unfair and grossly irresponsible. They are unfair because they enrich public -sector employees at the expense of the people as a whole, especially California taxpayers; they are irresponsible because the financial commitments they require are such that essential public services are suffering as a result, and because these commitments could at some point become unpayable. http://www.claremont.org/projects/print_page.asp?pageid=2653 I I 0� 39 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System Page 2 of 13 Costs for public -sector retirees, poorly controlled for years, are forcing cutbacks in one of government's fundamental obligations -general services to Californians. Our main pension fund, the California Public Employees' Retirement System (CalPERS), which covers state and many local government workers, is headed toward bankruptcy in a decade and a half,[1] Yet in many cases, state and local governments are paying retirees almost what they earned at peak salary, while pension reforms that could reduce the damage have been too slow and limited. The unconscionable salaries and benefits for higher officials in the small Los Angeles -area city of Bell, which provoked sharp public protest this summer, are an extreme case, but they accurately reflect the mentality that has dominated our state's public sector and politics. The next governor of California must make the vast dimensions of the pension crisis fully known to the public. Voters must understand three key points: • 1) this problem is long-term, and must be dealt with sooner rather than later if we are to prevent it from crippling state budgets indefinitely • 2) public pensions are a special case: when they are excessive or overly generous it is the taxpayer who ends up footing the bill, since the taxpayer is the ultimate source of the revenue that must meet the financial obligations undertaken by previous legislatures and local governments • 3) the level of benefits offered in public -employee pension plans is unjust when seen alongside comparable pensions in the private sector; and when seen in the context of a persistent economic downturn in which business profits, private -sector pay, and 401(k) accounts are all declining while high public -sector pay continues mostly unaffected For these reasons, public pensions should be a major issue in the 2010 gubernatorial race and will certainly rank among the most important, urgent challenges the new governor must tackle. The Current Crisis The size of the public -employee and retiree population in California translates into great demands on pension funds (and would do so even if we had better policies). Because the stock market, where a good share of the funds are invested, now stands at a diminished level compared with its exceptional heights a decade ago, these burdens have become increasingly difficult to bear. Annual statewide payments to Ca1PERS skyrocketed over the last decade. Since fiscal year 1998- 99, spending on pensions plus health care for retirees has quintupled; within the next decade, the amount is expected to triple again. This trend cannot continue. The situation is even worse at the local level. A Sacramento Bee review of California's 80 largest city and county governments concluded early this year that their unfunded pension liabilities (the difference between what employees have earned and what's actually in a fund) total $28 billion, not counting another $8 billion in pension -related bond debt. The unfunded liability and debt amount to roughly $4,000 per household in those jurisdictions. [2] Los Angeles County public employee pension obligations have gotten so high that the late former Assemblyman Keith Richman quipped last year that the new Three Rs in the Los Angeles Unified School District are "reading, writing, and retirement benefits." Richman also pointed out that cities and counties were "currently paying about 15-20% of their operating budgets toward pension costs alone," a proportion "expected to grow to between 20% to 25% of budgets within the next couple of years because of the drop in asset value in the pension plans."[3] When nondiscretionary spending runs that high, local governments are less able to fulfill their responsibilities to the public -they are starved of the resources required to provide for basic, essential public services. http://www.claremont.org/projects/print_page.asp?pageid=2653 t2_ 0� N 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System The pension crisis has spread widely in our communities. The Orange County system's payments to retirees have almost tripled, and the same is true of Contra Costa County. The San Diego County grand jury has warned that pensions could eat half the city of San Diego's budget by 2025 if there aren't substantial reforms. In San Francisco, the combined cost of pensions and retiree health benefits now stands at an estimated $413 million. In 2015 it is expected to reach $1 billion - one -third of the city's current general fund. Two years ago the economically troubled, blue-collar city of Vallejo filed for bankruptcy, staggering under the weight of pay and pension obligations. It had paid many of its employees so well that it had no choice but to let many of them go. Since 2005, the Vallejo police force has shrunk from 158 to 104. High -crime Oakland recently laid off 80 police officers, one-tenth of its force, to cope with its deficit. (The union had refused to agree that its members would make a 9% contribution to their pensions, as city officials believed was necessary.) The average pension for recently retired public -safety employees in Oakland has more than tripled since 2000 and now stands at nearly $84,000 a year; the average pay for police and fire employees has tripled as well. More than 25 of California's 80 largest city and county governments "now have unfunded [pension] liabilities that equal or exceed the size of their annual payroll." One of those, Fresno County, lost 10% of its employees from 2008 to 2009. It "drastically cut its mental health services budget, reducing care for the homeless and indigent, and, like many others... released a slew of jail inmates." As Supervisor Adam Hill told fellow board members in San Luis Obispo County: "The old joke is that General Motors is just a health insurance company that makes cars on the side. My concern is that the county government is becoming a pension provider that provides government services on the side." [4] Origins In 1968, a state law gave collective bargaining rights to local government workers in California. Teachers and other state employees were given these rights by the Dills Act in the late 1970s. Since that era (and in some cases earlier), more than 20 cities including Oakland, San Francisco, Sacramento, Vallejo, Stockton, Modesto and Anaheim have guaranteed binding arbitration to police officers, firefighters, or both. [5] This is significant because these employees account for a large share of a city's budget and because in cities with arbitration rights, the affected unions tend to lack an incentive to compromise. City officials make more generous offers than they often want to, fearing they might otherwise be saddled with even costlier arbitration awards. Collective bargaining and binding arbitration rights set the stage for the great power of public -sector unions - and for today's pension overload, which the unions helped create and can be expected to keep defending. After Proposition 13 slashed property taxes in 1978 and tightly constrained their future growth, teachers' unions reacted to the tougher fiscal situation by taking a major role in school board races, often defeating targeted incumbents. Unionized state and local government employees called illegal strikes (until the California Supreme Court issued the dubious 1985 decision that they have a right to strike). [6] Various other state court rulings, including Betts v. Board of Administration (1978), define pension policies for current public employees as contractual under the state constitution. Their status as contracts gives these pensions special protection: they cannot be reduced unilaterally unless an employee is provided with a comparable new "advantage" in return. (It is unclear whether these rulings also prevent public employers from requiring increased contributions from workers.)[7] When Proposition 98 was enacted in 1988, requiring that 40% of the state budget go to local education, schools received an annual windfall of some $450 million. School boards spent much of it on pay raises for teachers, adding to pension costs. Adding further to eventual pension obligations was the very expensive "one-year" standard enacted in 1990, under which state employees' benefit levels are calculated using a percentage of only the final -year (typically an http://www.claremont.org/projects/print_page.asp?pageid=2653 13 o ?L[ Page 3 of 13 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System Page 4 of 13 employee's peak) salary. This ill-advised policy passed the legislature with only one vote against, Senator Tom McClintock. [8] Then in 1999, the legislature and Governor Gray Davis authorized a large increase in the pension formulas for state employees. Like the final -year policy enacted nine years previously, Senate Bill 400 was a bipartisan blunder. It passed by votes of 39-0 in the Senate and 70-7 in the Assembly. This degree of long-term financial myopia has occurred at the local level as well. Orange County boards of supervisors composed entirely of Republicans approved, unanimously in one case, unwise retroactive pension boosts for public employees. At the state level, bad policy decisions continued. The fiscally irresponsible and notorious 2002 contract for prison guards authorized a 34% pay hike over five years, contributing to Governor Davis's unpopularity and perhaps even to his 2003 recall. With the economy cooling, voters had started to take notice of the employee compensation issue. When passed in 1999, the retroactive state employee benefit increases were predicted to cost $650 million in 2010. Such estimates were based upon very high return -on -assets expectations by CalPERS during a brief period of exceptional stock market growth. These predictions have turned out to be disastrously wrong. We have a worse economy and a worse stock market than in the prosperous but short-lived "bubble" years when our pension obligations began running out of control. The actual price tag for those benefit hikes is not the projected $650 million, but $3.1 billion this fiscal year and $3.5 billion next year. The CalPERS board's actuaries had offered three scenarios, the most pessimistic of which predicted almost exactly what has happened. But the board chose the rosy scenario. CalPERS also invested heavily in housing and land speculation, another decision that proved damaging to its fund. [9] Unfortunately, investment -return assumptions continue to obscure the true magnitude of the looming fiscal disaster. The one now used by Ca1PERS, notes Governor Arnold Schwarzenegger's special economic advisor David Crane, "implicitly forecasts the stock market to grow 40% faster than it grew in the 20'' century, a period of unequaled economic growth." As Crane also points out: "by 2110 CalPERS implicitly forecasts the stock market to be nearly three times higher than implicitly forecast by super -investor Warren Buffett for his [own] pension plans... and Ca1STRS [the teachers' fund] uses an even higher assumption." [10] Badly incongruous market projections have combined with questionable management and ethics at CalPERS to tarnish its once -excellent national reputation. As if this weren't enough, public employers in California haven't always made the contributions that sound actuarial principles require -many have skipped payments, a practice sometimes known flippantly as "pension holidays."[1 l] A growing public sector with high salaries has not helped matters either. Generous pay and benefit packages have long been the norm in the state's public sector, due partly to fear among local government officials that other jurisdictions or the private sector would hire the most qualified applicants if they were offered anything less. In today's economy, of course, jobs are less available and people seeking them have fewer options. So in this respect too, as with expectations about the stock market, our public pension systems have fallen behind the times. Average local -government pay in California rose by 40% from 2000 to 2008, far more than the 25% needed to match inflation.[12] There are also many more public employees than there were a decade ago. Since 1998, the state work force has grown by a remarkable 31 %. Government is paying many more salaries, and therefore pays into (and guarantees) pension plans for many more people. Still another factor in runaway pension costs is a highly questionable employee classification. "Public safety" officers used to consist of police and firefighters. Today, almost one out of three California state workers are classified as "public safety" employees, compared to about 5% in the 1960s.[13] This has increased the financial obligations of the state, because public -safety employees have especially liberal pension formulas and especially low retirement ages. http://www.claremont.org/projects/print_page.asp?pageid=2653 t 4 d� 34 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System Page 5 of 13 Even the people of California have contributed directly to the problem. In 1984 voters approved Proposition 21, which allowed pension funds to make more stock investments rather than the previously predominant bond investments -essentially telling, and expecting, pension authorities to invest prudently without ensuring that they would. Los Angeles city officials, wanting to match benefits offered elsewhere, persuaded voters to increase police and firefighters' pensions in 2001. Supporters stated in their ballot -pamphlet argument that the managerial reforms included in the measure would actually save the city money.[14] While the task of funding public -employee pension benefits has been made more difficult by shortsighted policies enacted by voters and state officials, public -employee unions have also been very effective at blocking efforts to deal with the problem. State legislators and local officials, if elected with their backing, are unwilling to stand against the expressed interests of these groups. They receive union support financially and politically -well -advertised endorsements by the "teachers," "police" and "firefighters" are a very effective electioneering tactic. The unions are not shy about their expectations that full cooperation should follow such support. Recently a Service Employees International Union official, speaking into a microphone but perhaps unaware she was being videotaped, told California legislators: "We helped to get you into office, and we got a good memory. Come November, if you don't back our program, we'll get you out of office."[ 15] Irresponsible policies of secondary importance add to the problem as well. The abusive but legal practice of "pension -spiking" lets employees inflate their final year's pay, and thus their pensions, by getting raises or bonuses and by counting things like unused vacation time, unused sick leave, excessive overtime, shift differentials, and cashed -in auto allowances. In a Bay Area sanitary district, more than two-thirds of the employees who left in the last five years spiked their pensions by 25 to 41 %. In addition to manipulating their pension levels through spiking, retirees from California public employment can legally work up to half-time while still drawing a full pension. The term for this is "double-dipping." A rather small problem from a broad financial perspective, it is nonetheless unfair and contributes to the justified sense of grievance among taxpayers. Although public -pension commitments have been rising dramatically nationwide, the Golden State's have been particularly generous. For example, a 2004 study by the nonpartisan state Legislative Analyst's Office found that a retiree drawing a $46,500 pension here would receive $28,000 to $30,000 in Oregon, Illinois, or Florida. In addition to high salaries, over -generous formulas, and low retirement ages, another large factor is the wide use, cited above, of only an employee's final year of pay in setting his or her pension (the recently enacted budget deal made by Governor Schwarzenegger and Democratic leaders in the legislature includes the elimination, for new state workers, of the one-year policy). Every other state bases its pension levels on an employee's last, or highest-paid, three or five years.[16] Reactions to the Crisis This problem is not politically insurmountable. The growing sense of the public -employee pension crisis offers a great opportunity for responsible leadership. Local government officials are paying attention to the issue and often speaking candidly about it. It has been receiving frequent media coverage this year, also getting significant attention in the governor's race. Organizations and websites are dedicated to the problem. The public has a basic grasp of it. The specific pension payments for retired public employees are increasingly being disclosed thanks to several newspapers, the California Foundation for Fiscal Responsibility or CFFR, the California First Amendment Coalition, and the Howard Jarvis Taxpayers Association. During the past year, court rulings in Orange, Sacramento, Contra Costa and Stanislaus counties have gone in favor of the media's right to reveal these payments by showing what individuals or categories of retirees actually receive. Also encouraging is the fact that several local ballot measures to reform pensions will be voted on this fall. http://www.claremont.org/projects/print_page.asp?pageid=2653 [ 5 0� 34 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System Page 6 of 13 By an overwhelming majority, voters seem ready to support change. According to a Public Policy Institute of California poll from January, 76% of respondents and 78% of likely voters think the money being spent on public pensions is a problem. Sixty-seven percent (70% of likely voters) now favor 401(k) -like defined -contribution plans for new public employees. In fact, strong majorities in both parties say they back the idea.[l7] Such a state of public opinion suggests that major pension reform is possible. The next governor will also be able to draw on the example of other states, several of which have begun to reform their way out of problems similar to California's. These states have 1) moved away from the traditional defined -benefit pension in which the employer is responsible for the total amount a worker will eventually receive (not just for its own contributions, as in a 401(k) system); 2) required more contributions from employees; and/or 3) established more sensible retirement ages. Michigan has required a defined -contribution plan for new state employees since 1997. In Florida, both a defined -contribution and a "hybrid" plan (which combines defined -benefit with defined - contribution features) have been available as alternatives since 2000. Oregon employees hired after 2003 are in a defined -contribution and a defined -benefit plan: their contributions enter the defined -contribution system while the employer's portion goes into the defined -benefit system. In Colorado, an optional defined -contribution plan was started in 2006. Alaska actually closed its traditional plans to new enrollment in 2006, replacing them with defined -contribution. Utah this year introduced a defined -contribution plan as a choice for new state and local employees, whose other choice will be a hybrid. Colorado, New York and other states have upped their employee contributions. New York and Rhode Island set a higher retirement age of 62 last year. New Jersey enacted a variety of reforms in 2008 and 2010. Perhaps most impressively, in Illinois -a state with dire financial problems -the Democratic governor signed a bill this year raising the retirement age for a full pension to 67, and basing new employees' pension levels on the last eight years of salary.[18] In California, the modest statewide reforms adopted in early October, under the pressures of an even later -than -usual budget and an impending election, are a step in the right direction. The too - generous SB 400 pension formulas of 1999, which include excessively liberal retirement ages, have been rolled back for new state employees. In addition, their pension benefits will be figured from the three highest years of pay, not the final year. And current employees will have to contribute 2 to 5% more of their salaries toward pensions. (These reforms largely reflect concessions that Schwarzenegger obtained in negotiations with unions representing more than two-thirds of state workers. But members of one large union must still vote to ratify their agreement, and others may hold out for a better deal from the new governor.) Schwarzenegger had insisted that such reforms be adopted with the budget; the legislature managed to thwart his initial demand for a simple 5% contribution increase from current employees, insisting instead on the compromise of 2-5%. Also enacted with the budget were requirements for clearer justifications and financial forecasts from CalPERS when it wishes to impose higher state contributions.[ 19] But it may be that the failure to pass reforms earlier this year more accurately reflects the attitude of the legislature's majority. SB 919, introduced by Senator Dennis Hollingsworth (R -Murrieta) and endorsed by the governor, would have made new state employees wait until 65 (or 57 for public -safety workers), instead of the current 55 and 50, to retire with a full pension. It would have used the three highest years instead of the final year in determining pension levels for new hires, and reduced the pension formula for new employees. It would also have enacted some changes in the state health -benefits program. That legislation failed in committee with a party -line vote by Democrats. On its own, the legislature did little. It produced a bill, signed at the end of September, to further regulate the agents who help make deals between investment funds and pension systems, a situation vulnerable to abuse. Schwarzenegger also vetoed three bills, to http://www.claremont.org/projects/print_page.asp?pageid=2653 l �0 v�_ S e t 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System reduce pension -spiking and some high-level employees' runaway pensions, on the grounds that they did not go far enough. [20] California localities, in contrast to Sacramento, have been addressing the problem more seriously this year. In San Jose, police and firefighter arbitration rights in place since 1980 were ended by a narrowly successful ballot measure in the June primary. Vallejo voters in that election repealed arbitration rights as well. San Francisco voters passed a measure that increases pension contributions by new employees. In Orange County, a new contract with the sheriffs' union raises the retirement age from 55 to 60 for new hires, also mandating employee contributions to pension costs. The city council in La Habra recently ended a furlough program while requiring in return that police department employees pay into their pensions -7% for current ones, 9% for new hires. City -employed SEIU members in Simi Valley agreed by an overwhelming vote to give about 4% of their salaries (7% for new hires) toward pensions, up from a previous contribution of zero; in return they are being protected from layoffs. In Los Angeles County, Supervisor Mike Antonovich has asked officials to look into the possibility of 401(k)s for new non-public safety employees. San Jose residents will soon vote on a measure letting the city council establish a.two- tier pension plan, with more modest benefits for new employees. Especially notable are further developments in liberal San Francisco. Proposition B on the November ballot would increase current city workers' pension contributions to 9 and 10% of their salaries, up from 0 to 7.5%. Spearheading the proposal is the city Public Defender, Jeff Adachi- who explains that pensions are draining money from services "we care about as progressives."[21] Solutions No single policy shift can solve the pension problem. Even the many adjustments needed to deal with it adequately, and those needed to make California solvent again, will only begin -rather than end -the more important discussion, which is about the purposes and scope of state (and local) government. Fixing the pension problem and other fiscal problems in California's public sector will require a variety of steps. Reformers must strike the best possible balance between pursuing substantial -meaning highly controversial -solutions and maintaining public support for change. Even thoughtfully selected small changes can help politically, in addition to being constructive and right. It is symbolically and politically important, for instance, to address the executive - compensation issue that has upset people at the local level. As an employee -association representative in Orange County said recently, the union wouldn't make more concessions unless higher officials agreed to modify their own retirement plans. That's a reasonable point. [22] At the same time, the next governor must be wary of incrementalism, of seeking only small or gradual changes. f: o get lesser or less -guaranteed pensions or a later retirement age, and for current workers to contribute more. This is, for the most part, what has occurred when states have taken action. Such reforms are helpful and tend to be politically safer than larger ones. But because these new policies, other than increased contributions, 4Qt t u r It e they are too quantitatively modest to be very effective. Major savings -and that is what states like California must seek in pension reform -will not occur until the distant future if these are the only changes. There is much to be said for the recommendation by Girard Miller, a public -finance consultant and a columnist for Governing magazine. As he points out, a five-year pay freeze would also save substantial money on pensions due to the close structural connection between pensions and salaries. By immediately affecting the salaries of senior, higher -paid employees who will retire in the near future, a lasting freeze of this type would help reduce pension costs -not just liabilities - rather soon. [23] Miller has also suggested reforming arbitration rules, urging that states require arbitrators to "give equal weight to retirement benefits levels and compensation in the private http://www.claremont.org/projects/print_page.asp?pageid=2653 Page 7 of 13 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System Page 8 of 13 sector for recruits with equal qualifications." As he explained: "Whether by statutory neglect or by practice, the private sector job market is too often ignored by arbitrators." [24] These reforms would do much to bring public -sector benefit packages in line with their more modest cousins in the private sector -and may have the added benefit of being easier to sell to the public. The next governor must also reject, and counter effectively, any claims that the public pension problem is really part of a revenue problem. The repeated response by many to calls for belt - tightening is to target either Proposition 13 or the incomes of the wealthiest Californians. Raising property taxes, or taxing the highest income brackets more, or both, will not solve our long-term deficit problem. California already levies nearly the highest income tax in the nation on high earners. We have the highest tax on middle incomes. Our sales tax is the highest. Our gas tax is the highest. Our corporate income tax ranks among the highest. [25] Adding higher taxes to this existing heavy burden would drive more middle-class, affluent, and wealthy Californians out of the state. It would mean fewer job creators and providers, and in the long run less state revenue. A requirement that employees work longer before qualifying for their generous pensions would more constructively address the problem. The reforms enacted with the recent budget begin to reverse the previous trend toward eligibility at younger ages, by hiking most new state employees' retirement age to 60 and that of new state law-enforcement personnel to 55, a five-year increase in each case. But if "40 is the new 30," why retirement at 60 and not 65? Even the retire -at -65 model, based on the original Social Security system, derives from outdated life expectancies. People aren't just living longer now; they spend more years in a relatively healthy condition as well. They can expect a better quality of life and more activity in their senior years. Those trends are likely to continue. They mean that pensions are and will be paid for longer periods, to retirees with higher lifestyle and therefore higher financial expectations than their parents had at a similar age. Yet these same trends toward a longer and healthier old age also mean that employees are able -and can decently be asked -to work longer. The federal government, thanks to a bipartisan Social Security commission, recognized higher life expectancy back in the 1980s. Because the Social Security retirement age was raised for young workers, a 48 -year-old today must remain employed until 67 to collect full Social Security benefits. That's only fair. Taxpayers can't be expected to finance almost an entire second life for public retirees. Since pensions do not and should not terminate until death, they must begin at later ages in addition to paying less per year. Current ages for pension eligibility cannot responsibly be continued. Our state and local governments, our taxpayers and economy can't take it. Thep . co i. Such pensions have solid advantages that the next governor can easily make clear to the citizenry. Because the payout is determined by investment performance over the years and by how much the employer and employee contribute, rather than by a formula, no unfunded liability exists in a defined -contribution plan. The employer, in this case the state or local government and thus the public, is responsible only for its own agreed-upon contribution rather than what the retiree eventually gets. Furthermore, defined - contribution plans operate on market principles. Defined -benefit pensions, in contrast, are not just paid and guaranteed by government but also run by government. That invites manipulation of investment decisions by interest groups, pension board members' political views, or most dangerously by insider dealing -all contrary to fiduciary responsibility. In May of this year, state Attorney General Jerry Brown's office filed a lawsuit accusing an investment or "placement" agent and former CalPERS board member, along with a former CalPERS chief executive, of fraudulently making and receiving gifts intended to influence the board's investment decisions. (Both have denied wrongdoing.)[26] In addition to these advantages, a `'. g workers to take the benefit with them when they leave for private -sector jobs. In plans with a defined benefit, only the employee's contribution may be taken. People with long seniority who retire as public employees do extremely well under the current system. But those who stay in the public sector for relatively http://www.claremont.org/projects/print_page.asp?pageid=2653 6f— e3 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System Page 9 of 13 short periods lose most of their pension benefit, not having fulfilled what is normally the ten-year vesting requirement. Capitalizing on Political Momentum Elections are supposed to have consequences in our political system, and the next governor should push stronger pension reform as a high-profile priority. Continuing and amplifying the current dialogue seen in the campaign and elsewhere, without delay, would strongly associate the governor -elect and his or her political momentum with the issue. It would also politicize it in the best sense of the word, by helping to maintain public interest in and support for better policy. The legislature must be pressured to fulfill its responsibility to the people and pass meaningful pension reform legislation. In theory, our elected representatives might do this for two reasons: either because they fear the voters' reaction as the problem continues largely unresolved; or because they acknowledge that spending for actual public services is in serious competition with payouts to retirees. In practice, such motivations have not proven very strong when it comes to fiscal issues in California. The incoming governor should add a third incentive to the equation by applying relentless political pressure. A governor has the advantage of a higher profile than the legislature, plus the broadest public constituency. In our American constitutional tradition, applicable throughout our political system, the executive branch is also intended to exert firm leadership on major issues affecting the true long-term common interests of the citizenry. But getting pension reform legislation passed will not be easy. It will take competent, persistent and fearless communication. The new governor, on the day after being elected in November, should use the momentum of victory to call for some, or all, of the following reforms: E ` act hi er retire e perhaps 65 for most=xsWW.=ployees and 57 for new public -safety employees. (Half -pensions could be available perhaps five years earlier.) • Require new state employees' contributions to match those of their employers. • Define new "public -safety employees" much more strictly for pension purposes. The category should include only actual law enforcement officers, firefighters, emergency medical personnel, and prison guards. * Require pension fo ptlx rlughtl • nzzspiking. Only the base salary, excluding overtime and fringe payments, should be used in calculating pensions. • End double-dipping. No publicly -funded pension should be paid to any retiree working more than ten hours a week. • Beain a defined-contributiion or hybrid t)lan...at the. Ycry;m.I awamom Vin, for all new Conclusion As the state's chief executive officer, the governor is entrusted with and responsible for the public treasury in a way that legislators are not. A governor's deepest ongoing responsibility is to counter the great temptation in a legislature, any legislature, to serve influential interests first and the general population second. It is sometimes necessary to stand against the self-interested motives of legislative majorities, defending and promoting instead the "permanent and aggregate interests of the community," as James Madison called them in The Federalist. After standing against special interests, a responsible executive must persuade the people to back measures aimed toward Iong-term fiscal health and the public good. Successful pension reform in California will likely require a great public contest with the entrenched interests. http://www.claremont.org/projects/print_page.asp?pageid=2653 of 3�{ 11/4/2010 o � The Claremont Institute - Reforming California's Unsustainable Pension System The next governor would do well to emphasize two themes. The first is the need to continue adequate public services without higher taxes, which stifle entrepreneurship and job growth. The second is the injustice of requiring taxpayers to provide public employees with excessively high levels of guaranteed benefits relative to the private sector, especially amid an economic downturn. It will be necessary to make voters in the private sector more keenly aware of the fact that their public servants tend to get a much better pension deal, and a better overall deal, than they do. This should include tireless insistence that in California's persistent recession, the situation is not only fiscally impractical (as it would be in better times too) but also shameful. There is no political issue as strong as one uniting self-interest with moral obligation. From the standpoint of the financially stressed, that is exactly what the conflict over public pensions does. The next governor must turn the public -employee unions' predictably vehement opposition into a badge of honor, not a source of embarrassment. Their spokesmen and loyalists in the legislature should be identified so they are less able to shape the debate. Pensions and salaries for groups of employees and retirees should be more widely publicized, including those for law enforcement officers and others in the politically sensitive public -safety category. Pension -spiking and double- dipping should be exposed in detail. The governor must also respond effectively to sob stories about the supposed impact of reforms. If any are true, they must be frankly acknowledged but blamed on the unions and politicians who have fought pension reform or ignored the issue for years. The alleged hardship cases that are either false or highly exaggerated must be exposed unflinchingly as lies. The next governor must take command of the stark facts of California's fiscal mess and, fairly and firmly, voice them to the people so they will pressure the legislature. The governor must also be prepared to "take a strike," as former state finance director Tom Campbell noted last fall at the Claremont Institute's California Public Policy 2009 conference. If public servants are determined to walk off the job, let them, and vigorously oppose them for doing so. A governor fighting to reform pensions should explain articulately to everyone that public employees are an interest group, with an agenda quite distinct from the public good. And the public unions as they now function, not just their pensions, must be identified as one of California's major problems -like our disastrous business climate, to which these unions indirectly contribute. It would be unfair to portray public employees as incompetent or unworthy of their pay. In addition, it would be too easy for the unions and their allies to make effective anecdotal responses. If voters are thinking of teachers and firefighters as individuals rather than collectively as a budgetary category, reform loses. In addressing the citizenry, the governor's focus must be on objective facts about pensions and on the unions as political forces, not on the employees themselves. Finally, even the concept of public -employee unions is questionable. In private industry, the company pays. In government a third party, the taxpayer, pays. Private -sector unions have ongoing natural adversaries in the management and owners. In contrast, public -sector "employers" are elected officials with temporary, often very short-term stewardship of the public purse -a problem exacerbated by California's short legislative term limits. This leaves little personal incentive to defend the enduring interests of the taxpayer, the state, or the local community. Instead, a strong incentive toward irresponsibility exists. Elected officials often win and maintain their positions with significant, even pivotal, help from the major public -employee unions. These unions have a fundamental incentive to transfer wealth from the taxpayers to their members, along with the political clout to ensure that the legislature and local governments tend to be populated by officials who strongly cooperate toward that end. Radical though it may be, the idea of a union -free public workplace ought to be openly and widely discussed. Public workers should, of course, be able to form voluntary associations. But a special entity institutionalized within the government, when its purpose is to make itself more prosperous, heightens the worst tendencies of public authority in a representative democracy. Limited government and our nation's constitutional design seek, among other things, to mitigate http://www.claremont.org/projects/print_page.asp?pageid=2653 ® d- 13q Page 10 of 13 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System Page 11 of 13 special-interest influence. Public unions are intrinsically an interest of the government itself, inclined toward exploiting its power for their own gain rather than the common good. Therefore, a plausible argument can be made that no organization should be allowed to bargain or officially speak for public employees -that ideally, their pay and benefits should be decided solely by the citizenry's elected representatives and officials directly responsible to them. The pension mess, complicated and frustrating though it is, represents a good opportunity for Californians to begin redirecting their government toward its proper role as a servant rather than exploiter. A generation ago, Proposition 13 saved many people from losing their homes by cutting their bloated and growing property taxes. The spirit of fiscally limited government was not long sustained, even though Proposition 13 has been. But in today's environment dramatic pension reform, directed against the unsustainable spending habits of our public officials, can be an effective first step toward a badly needed restoration of both fiscal responsibility and constitutionally principled government. [ 1 ] Ca1PERS could well run out of money in 2026, according to comparative state pension -fund research by Joshua Rauh of the Kellogg School of Management at Northwestern University. Rauh, "The Day of Reckoning For State Pension Plans," Mar. 22, 2010, bM://kelloggfmance.wordpress.com , accessed Sept. 8, 2010. [2] Phillip Reese and Brad Branan, "Pensions batter California's governments," Fresno Bee, hto://www.fresnobee.com/, Apr. 12, 2010. [3] Response by Keith Richman in "How Should California Pay for Retiree Health Benefits?," http://www.californiahealthline.org/, Oct. 5, 2009, accessed June 25, 2010. [4] Reese and Branan, "Pensions batter California's governments." [5] John Woolfolk, "Vallejo's experience with bankruptcy, arbitration reform may spur action in San Jose," Mercury News, http://www.mercpZnews.conn/, July 4, 2010. [6] Steven Malanga, "The Beholden State: How public -sector unions broke California," City Journal, httT)://www.ciiy-ioumal.orp,/, Spring 2010. [7] Betts v. Board ofAdministration, 21 Cal.3d 859 (Supreme Court of California, Aug. 17, 1978); Amy B. Monahan, "Public Pension Plan Reform: The Legal Framework," University of Minnesota Law School, Legal Studies Research Paper Series, Research Paper No. 10-13, pp. 17-22 and 31- 33, available at http://ssm.com. [8] John Hill and Dorothy Korber, "How law fattens state pensions," Sacramento Bee, Dec. 19, 2004. http://www.claremont.org/projects/print_page.asp?pageid=2653 ,Zt d� 34 11/4/2010 The Claremont Institute - Reforming California's Unsustainable Pension System Page 12 of 13 [9] Ed Mendel, "SB 400 pension boost: uncanny forecast unheeded," Calpensions, http://www.calpensions.com/, July 27, 2010; Dan Walters, "Pension hike revelations show massive failure," Sacramento Bee, http://www.sacbee.com/, July 30, 2010. [ 10] David Crane, "The Role of the Investment Return Assumption," http://www.foxandhoundsdaily.com/, June 17, 2010. [11] Testimony of Girard Miller CFA to the Little Hoover Commission, April 22, 2010, available at http://www.lhc.ca.gov/. The commission is a standing advisory and investigative agency on efficiency in California state government. [ 12] Reese and Branan, "Pensions batter California's governments." [13] Hill and Korber, "Pension jackpot: Many more winning safety -worker label," Sacramento Bee, May 9, 2004. [14] Mendel, "Pension `crisis': Did Prop 21 pave the way?," Calpensions, http://www.calpensions.com/, July 1, 2010; and "LA pension plan to save money is now costly," ibid., Aug. 17, 2010. [15] Malanga, "Beholden State." [16] Adam B. Summers, "How California's Public Pension System Broke (and How to Fix It)," Reason Foundation Policy Study 382, http://v".reason.org/, June 2010, pp. 9, 16. [17] Public Policy Institute of California statewide poll released Jan. 27, 2010, www.ppic.org. [18] Ronald Snell, "State Defined Contribution and Hybrid Pension Plans," National Conference of State Legislatures, http://www.ncsl.org/, June 2010; Andy Kim and Heather Kerrigan, "Pension Preparedness," Governing, http://www.goveming_com/. August 2010; Stephen C. Fehr, "In some states, pension pain yields budget gains," Stateline, http://www.stateline.ora/, May 20,2010; Summers, "How Pension System Broke," pp. 26-27. [19] Mendel, "Arnold gets new -hire pension rollback -for now," Calpensions, http://www.calpensions.com/, Oct. 9, 2010; "Pension reform the one bright spot in a dismal budget," Mercury News editorial, http://www.mercurynews.com/, Oct. 12, 2010; Mendel, "Pension reform holdouts wait for next governor," Calpensions, http://www.calpensions.com/, Oct. 28, 2010. The "for now" caveat in the first Calpensions headline refers to the fact that, as the story points out, "the pension reform is only legislation, which unlike a constitutional amendment can be overturned by legislation." The article also notes: "What the governor is calling `historic' pension reform legislation might dampen a drive for an initiative that would switch new workers to a 401(k) -style individual investment plan..." A California Highway Patrol union official said publicly back in January that "the last thing we want to do is leave it to the initiative process." http://www.claremont.org/projects/print_page.asp?pageid=2653 12:2- ( 11/4/2010 The Claremont institute - Reforming California's Unsustainable Pension System [20] Marc Lifsher, "Schwarzenegger signs pension fund transparency bill," and Patrick McGreevy and Jack Dolan, "Schwarzenegger vetoes bills on pension limits," Los Angeles Times, http://www.latimes.com/, Oct. 1, 2010; Jim Sanders, "Schwarzenegger on key pension bill: Taxpayers deserve better," Fresno Bee, http://www. resnobee.com/, Oct. 1, 2010. See also "Pension spikers need not fear Legislature, Sacramento Bee editorial, httt://www.sacbee.com/, Aug. 19, 2010. [21] Susan Ferriss, "Willie Brown joins Schwarzenegger to argue for public pension changes," Sacramento Bee, http://www.sacbee.com/, July 9, 2010. [22] Norberto Santana Jr., "County Seeking State Law That Allows It to Impose Pension Cuts," Voice of Orange County, http://www.voiceofoc.oreJ, July 7, 2010. [23] Miller, "The Other Pension Fix," Governing, http://www.jzoveming.com/. June 10, 2010. [24] Miller, "The Arbitration Game," ibid., July 8, 2010. [25] Tax Foundation, 2010 Facts & Figures: How Does Your State Compare?, ed. Justin Higginbottom, www.taxfoundation.org. [26] Lifsher, "Ca1PERS may see more lawsuits," Los Angeles Times, http://www.latimes.com/, May 7, 2010. http://www.claremont.org/projects/print_page.asp?pageid=2653 -2-3 c)�- 3q Page 13 of 13 11/4/2010 Bakersfield's pension reform measure charting new territory - Bakersfield.com Page 1 of 3 +� News „.. Jobs Homes v.' Web a..�' Obits [Search news Bakersfield's pension reform measure charting new territory BY GRETCHEN WENNER, Californian staff writer gwenner@a.bakersfield.com I Saturday, Jul 10 2010 02:00 PM Last Updated Saturday, Jul 10 2010 02:00 PM When Bakersfield voters decide in November whether to reduce retirement benefits for newly hired city police and firefighters, lots of people will be watching. The local ballot measure will be among the first attempts nationwide to reduce public pension benefits at the ballot box. The outcome will no doubt serve as a test case for other cities and counties considering similar moves after soaring costs have pinched budgets. And there will likely be legal challenges that could also set precedents. Bakersfield's measure was proposed by City Councilmember Zack Scrivner and sent to the ballot last month by a 5-2 vote of the council, If ;approved by a majority of voters, it will rll;Baek retiretykes and require a vote of the electorate to make any increases going forward. It is unique among several efforts around California headed for the Nov. 2 ballot: * In i fig, the city council in June approved a pair of measures that would establish the city's initial bargaining positions with unions. One dissenting councilmember called the effort "ludicrous" because it "doesn't do anything," according to the Redding Record Searchlight; * In Menlo1?ark, a citizens group qualified an initiative that would reduce retirement benefits for most new workers. Two employee unions are suing to keep the item off the ballot. Aside from the fact Bakersfield's measure was put forward by the city council, there's another key difference: Bgk ItafiWgLis a so-called "charter city," a structure that allows it more leeway in determining employee pay and benefits than a "general law" city like Menlo Park, which is limited by state code; * In San Francisco -- where changes to retirement benefits require a vote of the electorate, and one such reform passed overwhelmingly in June -- an initiative spearheaded by Public Defender Jeff Adachi will likely take center stage. The measure would require current employees who don't pay a share of pension costs to do so. (Police and fire, who can retire earlier than other workers, would pay 10 percent of their salaries; non -safety employees would pay 9 percent.) It's unusual because most proposed reforms, including Bakersfield's, apply only to future hires. While the measure hasn't officially qualified for November, Adachi on Tuesday turned in more than 75,000 signatures. "This will be much more contentious" than the June proposition was, Adachi said. "It's only the second major pension reform we've had." http://www.bakersfield.com/news/locallx2005498636Bakersfields-pension-reform-measure-charting-ne... 11/4/2010 200'3Lf Bakersfield's pension reform measure charting new territory - Bakersfield.com Page 2 of 3 A pension initiative is also being worked on in Oakland but has not yet qualified for the ballot. The spate of pending ballot measures prompted a recent article in the Cincinnati Enquirer to say California "may again be on the leading edge of a wave of simmering voter discontent," much as it was when Proposition 13, the landmark property tax initiative, was passed here in 1978. "This will be precedent -setting for the state of California," said Robert Melton, an engineer with the Bakersfield Fire Department and president of International Association of Fire Fighters Local 246. The union is still in the process of researching legal challenges to Bakersfield's measure, Melton said, but believes the move is unlawful. "They're taking our right to bargain away," he said. Firefighters, who have been working without a contract for more than two years, are still negotiating with the city. But doing so with the ballot measure pending is "a challenge in itself," Melton said. He called the measure a "grandstanding play" by Scrivner, who is running for Kern County supervisor. The last day for the city to pull the measure from the ballot is Aug. 11, a date the police union is keeping an eye on, said Todd Dickson, president of the Bakersfield Police Officers Association. "We'll know on the 12th if the measure is a go or not," said Dickson, a detective with the Bakersfield Police Department. "I£ it is, at that time we'll be prepared to make all relevant legal challenges to it." The police union has been without a contract for thxee years and is currently suing the city over alleged unfair labor practices. The parties are officially at impasse after negotiations failed. Marcia Fritz, a Sacramento -area pension reform advocate with the California Foundation for Fiscal Responsibility, said local initiatives like Bakersfield's will be key, especially since a statewide measure failed to qualify for the ballot. "This issue is bringing people into the political process who have never been involved before," Fritz. said. "It's kind of neat." Voters in San Diego and Orange County approved measures in 2006 and 2008, respectively, that require voter approval for future pension increases, but the initiatives didn't cut benefits as some current efforts propose. Scrivner said the city believes it is on "solid legal footing" with the ballot measure he proposed. He also believes Bakersfield's measure isn't like anything that's been tried before. "As far as ours is concerned," Scrivner said, "we are charting new territory." 4 Comments Showing 4 comments Sort by Oldest first —„ Subscribe by email ,Subscribe by RSS http://www.bakersfield.com/newsllocallx2005498636Bakersfields-pension-reform-measure-charting-ne... 11/4/2010 2c5 dl� 3 y Bakersfield's pension reform measure charting new territory - Bakersfield.com Page 3 of 3 the$adge 3 months ago �V&L, If this passes, it just a matter of time before BPD is unable to recruit or retain quality peace officers. Its not all that great now ..wait until BPD is on the same level as Arvin PD, Shafter PD, etc. 5 people liked this, ( Like f reehnfgee 3 months ago in remto h Badv Oh it will most likely pass after the barrage of class warfare Zak and his lemmings have perpetuated. He has done absolutely nothing but raise campain funds and slander safety employees for as long as I can remember now. Oh, I almost forgot... TANDYTFST11111 7 people liked this. Like W,'W hammerhead 3 months ago The city council knows that bypassing collective bargaining is illegal, if it weren't they would have had it on the last ballot It doesn't surprise me that Zak Scrivner is using this topic as a possible springboard to higher office, but for the life of me I can't figure out how he convinced 4 other council members to cede their authority in this matter for themselves and future councils, not to mention completely failing to fulfill their responsibilty to resolve impasse. Some say laziness others say cowardice but I just don't know. And when its all said and done, it will more than likely be for nothing, as Perez will win in November and the ballot measure will not hold up to the very expensive legal challenges the tax payers will have to fund. Lastly, I hope everyone remembers this one thing, even if you have fallen for all the class warfare, cops and firefighters who haven't had raises in years being painted as the haves by city staff and council who haven't made a single personal sacrifice in the way of pay or benefits, whatever comes of this ballot measure, THE CITY COUNCIL COULD HAVE IMPOSED IT, IT WAS THEIR RESPONSIBILITY TO DO SO, EVERY PENNY SPENT ON THIS BALLOT INITIATIVE TO PUT IT ON THE BALLOT AND DEFEND IT IS MONEY WASTED BECAUSE THEY DID NOTWANT TO DO THEIR JOBll1 reelrafkee and 4 more Eked this f Like i Bakomommy405 3 months ago It seems to me that public safety workers need to improve their campaign to help people understand what is at stake. Dont cede this simply because it is a conservative community. People need to know that we don't want just anybody who will accept subpar pay and benefits as our safety workers. Same is true for teachers btw. People need to be reminded that while it might help the bottom line in the short term, in the long term, they will pay more in terms of reduced safety and educational readiness if they are stingy with the people who provide these services because quality will go where pay is better. 2 people liked this: I Like http://www.bakersfield.comlnews/locallx2005498636IBakersfields-pension-reform-measure-charting-ne... 11/4/2010 2- Uv 0�—' '� 9 Ventura OKs 2 -tier system for pensions : Ventura County Star By Kevin Clerici Originally published 07:31 p.m., March 23, 2010 Updated 08:08 p.m., March 23, 2010 In an effort to corral mounting pension costs for employees, Ventura on Monday beca w s. Existing employees would continue to receive promised pension payments for the rest of their retired lives, but could have to contribute more of their salaries to cover those future payouts. The City Council unanimously approved the changes, the details of which still must be negotiated and accepted by union and nonunion employees and their bargaining units. Councilwoman Christy Weir, who made the motion, said too many taxpayer dollars are going to pay for retirements, at a time the city is cash-strapped to provide for vital city services. Lowering city pension costs, she said, could free future funds for public programs. "We are spending more and more money to pay people who no longer work for the city, which means, to me, the city is not getting the actual, tangible benefits for its dollars," she said. "To me, that is not the right way to run a city." Councilman Neal Andrews, who has championed pension reforms, said the city will face staggering costs to cover future obligations, and it was time to act rather than wait for the state or others to find solutions. Labor leaders who learned of the change Tuesday reacted sharply, saying a new retirement benefit system would not likely provide significant savings for at least 15 years and the council shouldn't balance the budget on the backs of workers who already have forfeited 3 percent of their salaries and taken unpaid furlough. The council's unexpected vote came late Monday after it received a lengthy report by a volunteer task force created by the council last year to study employee compensation and possible pension reforms. The task force, which included city employees and local business officials, concluded that while pension plans for Ventura employees are in line with those offered by other public agencies across the state, Ventura, like others, will be forced to contribute growing and "unsustainable" amounts to cover promised retirement obligations. The task force told the council that CaIPERS, the state retirement system plan covering most public employees, projects by 2016, total annual pension contributions Page 1 of 3 http://www.vcstar.cominews/2010/max/231ventura-council-approves-to-two-tier-pension-to/?print=l 11/4/2010 2_1 0,P_ SLA Ventura OKs 2 -tier system for pensions : Ventura County Star Page 2 of 3 1 int for public safety employees, projections that some Ventura employees disputed. Battered by stock market declines, the California Public Employees Retirement System has an unfunded liability of up to several hundred billion dollars, depending upon future earnings, to finance pension and retiree healthcare benefits, according to the governor's administration. The task force's chairman, Ed McCombs, a former Ventura city manager, however, stopped short of recommending any concrete fixes. McCombs said the task force didn't have the time, expertise or money to hire experts to accurately project savings if the city moved to a two-tiered system. The council voted not to wait, adopting policy directing the city manager to move to a two-tiered system and have employees contribute more to their retirements. The exact details still must be defined and negotiated. City employees don't pay Social Security, because they are enrolled in the state retirement system, and due to past negotiations, the city currently pays both the city's share and the employee's share of pension costs — 7 percent for general employees, 9 percent of safety personnel. Possible changes to save future expenses could involve employees having to resume paying for those costs, similar to what county employees do, officials said. Under the tiered system, new hires also could receive lower pension benefits or longer public service before collecting retirement. About a handful of California public agencies have enacted tiered systems, and Ventura would be wise to act now to reduce long-term pension costs, despite likely stiff union opposition, said Herb Gooch, a political science instructor at California Lutheran University in Thousand Oaks. "This is the direction that most cities and counties will have to go," he said. Ventura currently provides retirement benefits under three formulas: 3 percent at 50 for sworn police personnel; 2 percent at 50 for firefighters (scheduled to go to 3 percent at 55 on July 1); and 2 percent at 55 for all other full-time employees. This allows a police officer to receive 90 percent of his or her highest earnings, not including overtime, after age 50 if they have at least 30 years of service. For example, a 30 -year officer whose highest salary was $100,000 would get a $90,000 -a -year pension at age 50. Firefighters also could receive 90 percent of highest pay, but would have to work until age 55 and have at least 30 years of service. Other staff reaching at least 30 years of service at age 55 could retire with 60 percent of their highest year of earnings. Though he ultimately supported the policy, City Councilman Mike Tracy, a former police chief who participated on the task force, cautioned of "a tipping point" where too steep of reductions to employee's pay and compensation will prompt them to seek http://www.vcstar.com/news/2010/mar/23/ventura-council-approves-to-two- ler-pension-to/?print=l 11/4/2010 Ventura OKs 2 -tier system for pensions : Ventura County Star employment elsewhere and make recruitment more difficult, particularly among the police and fire departments. Many city labor leaders were unaware of the late-night vote. Police Cpl. John Snowling, Ventura Police Officers Association president, said in an interview Tuesday that officers compensation lags other departments and the guaranteed pensions are reasonable and widespread for such dangerous work. Still, the association was "willing to discuss a two-tiered system and other options to try to help balance the budget," he said. The Service Employees International Union 721, which represents nearly 400 employees, said the city's budget problems are not related to any retirement increases or enhancements for their rank -and -file members and creating a lower, second-tier retirement benefit would not save the city any significant funds for at least 15 years. "It would be unconscionable for Ventura to continue balancing its budget on the backs of workers who have already contributed 6 percent of their salary last year," SEW 721 President Bob Schoonover said in a statement. "The once-in-a-lifetime stock market loss and revenue decline is something that all cities, counties and states are trying to address and continuing to reduce wages or lay off workers would harm Ventura's own economic recovery." ® 2010 Scripps Newspaper Group --- Online Page 3 of 3 http: //www. vcstar.cominewsl2010/mar/231ventura-council-approves-to-two-tier-pension-to/?print= l 11/4/2010 21 0�_ 3q REGION: Riverside County mulls two-tier retirement system Page 1 of 2 ...................._.......... ....... ..... ............................. ........ .......... X The North County Times - Californian j GI Yversfde CQu I ll Rolling back pension benefits to pre -200I levels would save $120 million over 10 years By DAVE DOWNEY - ddowney@californian.com I Posted: Saturday, September 11, 2010 8:56 pm Riverside County officials could take the first step Tuesday toward creating a two-tiered retirement benefit system in a bid to curb pension costs that are projected to double by 2020. In a new report going to the Board of Supervisors on Tuesday, Finance Director Ed Corser recommends the board order a pension reform plan that lowers benefits for new hires, while maintaining them for existing employees. Corser suggests that plan with two tiers of benefits be brought back to the board for consideration in three months. And while that plan wouldn't lower benefits for current employees and retirees, it could require existing workers to begin contributing a portion of their paychecks to their retirement plan. They do not now. County taxpayers pick up the tab for public safety employees' 9 percent contribution toward retirement and other employees' 8 percent contribution. Corser suggests a gradual shift, with employees one day contributing the full amount. Supervisor Bob Buster, an advocate for pension reform who represents a portion of Southwest County, said it would appear that the county is headed for a two-tier system. "The report makes it clear we certainly need pension reform," Buster said in a telephone interview Friday. "And even if we start it at the earliest possible point, the increased pension costs are going to reduce our services even in addition to the already harsh cuts that we have had to make (this year) because of the bad economy and the reduced tax revenues." But Buster said the report also makes clear that the county can save a significant amount of money over the next decade. Riverside County offers one of the most generous retirement packages available under California's public pension system. Most employees can retire at age 60. If they work 30 years, they receive 90 percent of their final salaries ---- every year for the rest of their lives. Public safety employees, many of whom are law enforcement officers, can retire at 50 with pensions matching 90 percent of their final salaries. For both categories of employees, the board voted nearly a decade ago to boost benefits 50 percent, when pension accounts were brimming over with cash. But the stock market crash of 2008 that wiped out one-fourth of county pension investments and the recent tax revenue declines have called into question that decision. Some county officials have declared the current system isn't sustainable, although employee unions dispute that. According to Corser's report, Riverside County's annual pension costs are projected to rise from $155 million this year to $306 million by 2020. And that's based on long-term projections of the California Public Employees' Retirement System, or CalPERS, that some economists consider too rosy. If CalPERS investments don't live up to expectations, county costs could increase more. State pension officials estimate that Riverside County will need $6 billion to pay promised retirement benefits over the next three decades but is on track to fall $800 million short of that amount. As a result, county payments already have been adjusted upward to account for the gap. Against that backdrop, momentum is building for change. And while Corser stopped short of recommending a specific course of action, he said returning to the level of benefits Riverside County offered before it increased them in 2001 and'02 and applying those to new hires would save $120 million over a decade. Before those increases, general employees received up to 60 percent of their salaries when they retired, something they could do at age 55; public safety employees could receive that same benefit at 50. http://www.netimes.cominewsllocallswcountylarticle_b9d82b8b-807e-5c34-b6c4-304b4b82fef6.html?pri... 11/4/2010 13 0 o� 3� REGION: Riverside County mulls two-tier retirement system Page 2 of 2 Keeping the eligible retirement age at 60 for general employees, while rolling back the 50 percent increase, would generate additional savings to taxpayers, bringing the 10 -year total to $160 million, the report states. However, if a Riverside Sheriffs Association -sponsored measure on the Nov. 2 ballot passes, the board won't be able to roll back benefits for newly hired public safety employees without appealing to the voters of Riverside County in a special election. Corser's report and recommendations will be accompanied by a detailed 56 -page report compiled by a pension reform advisory committee composed of 17 county officials, union representatives and Riverside County residents. Meeting from May through September, the panel could not agree on whether rising pension costs are a problem, much less on a course of action for curbing costs. But the group did reach a consensus that the county never should repeat the "pension contribution holidays" of 1999 and 2000, when it didn't make pension payments in back-to-back years. The group also agreed the county should remain in CalPERS, rather than form its own retirement system, as some counties have. The board is scheduled to meet at 9 a.m. Tuesday at the County Administrative Center, 4080 Lemon St., Riverside. Call staff writer Dave Downey at 951-676-4315, ext. 2623. http://www.nctimes.com/news/local/swcounty/article�b9d82b8b-807e-534-b6c4-304b4b82fef6.html?pri... 11/4/2010 The pain with pensions The pain with pensions by San Joaquin News Service 12.08.09 - 09:38 pi -n Cit tnat s i is pew' City and county leaders recently released a policy document recommending a w -tier ensio em. T •. all the cities and the county would offer similar benefits. "The consensus is that the pension issue has reached a point where it is at a critical stage," said Tracy City Manager Leon Churchill. "Local governments are examining all costs of doing business, and what's on the horizon is pension costs." But at least one union leader said it's not the pension system that has hurt cities; it's poor fiscal management. "When things were good and people were spending money like crazy, you didn't hear about pension reform. This is a knee jerk reaction to a down economy. Things will turn around," said Lodi Professional Firefighters President Brad Doell. Over the years, Lodi City Manager Blair King said cities have increased benefits packages to attract new employees. For example, the city of Lodi's miscellaneous employees receive 2 percent at 55, but Manteca's employees receive 2.7 percent at 55. Lodi has lost several employees to Manteca because of the differences in plans, King said. Lodi doesn't have the money to match Manteca, he said, but at the same time, Manteca feels it cannot sustain its pension program. Throughout the county, cities increased pension plans because up until now it has been possible and affordable to do so, Churchill said. But with the market crashing, the California Public Employees' Retirement System took a serious loss, which raised concerns about the state's pension plans being sustainable. This prompted San Joaquin city managers to meet and discuss possible solutions. In the document, city managers recommended all cities raise the age at which employees can retire, and cut back on how much they'll earn. At the moment, Tracy police officers and firefighters, and many in other local cities as well, can retire at age 50 with up to 90 percent of their highest year's earnings, not counting overtime. Their annual retirement payout is 3 percent of their salaries for each year worked. Officials propose to change that for police officer and firefighters to 2.5 percent of their salaries, and to raise the age of retirement to 55. http://www.tracypress.com/printer_friendly/5027998 '� 2, o� 39 Page 1 of 3 11/4/2010 The pain with pensions Page 2 of 3 For other employees, officials talk about cutting their payout to 2 percent from 2.5 percent of their salaries, and raising the retirement age from 55 to 60. In Tracy, the city pays 100 percent of the retirement costs for each employee, including the employees' share of their own retirement. For police officer and firefighters, Tracy puts .33 cents into their retirement plan for each $1 they're paid in salaries and wages. Overall, Tracy spends $9 million a year on employees' pensions. The main goal among city managers is to start a discussion on how to cap costs and provide some stability in anticipating costs. Manteca City Manager Steve Pinkerton said the city managers are focused on lobbying the legislature to make sure it will be feasible to set up a two-tier system. At the same time, it is important to let all the unions and other labor groups know that this is the direction the cities are headed in when the contracts are up. "It's going to take a long time for any of these changes to have a direct financial impact, but you have to start somewhere," Pinkerton said. Some of the other changes the city managers are recommending include having employees contribute at least 5 percent of their salaries to pensions. But a consequence of having new employees contribute to their pension is that they might try to negotiate for higher salaries, he said. Also, the plan suggests pensions be based off the average salary of the highest three years of pay, which Lodi already does. Other cities will base pensions off the highest year of pay, which can lead to substantially inflated pensions. The head actuary of the state's public employee retirement system, CalPERS, Ron Seeling, bluntly said pension costs have to be cut because payouts are becoming unaffordable. "I don't want to sugarcoat anything," Seeling said at an August seminar. "We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else's — unsustainable pension costs." Firefighters could fight back As a Lodi firefighter, Doell said he is often putting his life on the line to keep the city safe. Increasing the retirement age to 55 will cost the city more because there will be more injuries, he said. "It's a very demanding job doing what we do at the fire department.... Based on what I've seen, the older you get the more injuries you get," he said. Doell also believes that if all the cities in the county lower pension benefits, firefighters will take jobs at other agencies. Generally, throughout the state, he said public safety pensions are 3 percent at 50, so firefighters will be considering that when picking a city to work in. http://www.tracypress.com/printer_friendly/5027998 3 3 v- 3q 11/4/2010 The pain with pensions "There is no shortage of people who want to be firefighters," Doell said. "The question is whether we will retain them." Regarding Seeling's comments about the pension system being unsustainable, he does not believe they were directed at individual cities. "He's telling the PERS board members to look at these things to diversify their investments, so we can sustain retirement. His comment was cautionary," Doell said. Also, by setting up a two-tier system, it could create discontent among employees who are doing the same job for different benefits, he said. He believes cities that have made a commitment to employees should stick with the agreement, especially because employees made pay and benefit concessions during negotiations to receive these pension benefits. "I think that because of the economic times we are in, everybody is looking to place blame.... The city made an obligation to have enough money to fund pensions," Doell said. Not just a local issue One of the reasons it is important to discuss pension reform at the local level is because reform is gaining momentum throughout the state, Churchill said. "If local governments don't do it, local voters are going to," he said. Churchill believes there are about half a dozen counties looking at pension reform, and San Diego County recently passed a two-tier system. Statewide, California Pension Reform, a nonprofit organization, is working to get a initiative on the ballot that will limit all public agency pensions. Organization president Marcia Fritz said a statewide initiative is necessary because it is "incredibly difficult" to do pension reform at the local level. "The people on councils and fire boards are made up of candidates who were put there by the unions," she said. "The only way we can handle this is for citizens to take back control, and the only way to do that is through a vote." Contact a Tracy Press reporter or editor at 835-3030 or tpnews@tracypress.com. © tracypress.com 2009 http://www.tracypress.com/printer_friendly/5027998 3 q UC— 3 q Page 3 of 3 11/4/2010 CITYOF u sr a 9> L RANCHO` LOS VERDES TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: CAROLYN LEHR, CITY MANAGER DATE: NOVEMBER 4, 2010 SUBJECT: STAFF RESPONSE TO MAYOR'S REPORT ON PENSION REVISION RECOMMENDATION If the Council decides to consider a revision to pension benefits at this time for new hires, direct staff to prepare a preliminary report to the City Council which will provide a foundation from which to determine whether to engage in a full study of viable pension proposals to be implemented in the City of Rancho Palos Verdes. The preliminary report should be presented to Council in December and will be prepared in conjunction with independent advice from the City's retirement advisor. DISCUSSION The Mayor's report on Pension Revision for the City of Rancho Palos Verdes was released on Tuesday morning, November 2. In it, Mayor Wolowicz offered his assessment of pension reform trends, along with a table showing the City's pension cost over the last 10 years, and other supporting material. During the two days since that time, staff has endeavored to conduct research on key aspects of pension reform in California that are most pertinent to our circumstances. Examples include: pension reform experience of other contract cities like ours; up to date calculations of current and historic pension costs for RPV City employees, verification of pension alternatives realistically available to our City; impact of direct and indirect costs of altering pension benefits for new employees; potential cost savings net of cost of transitioning to a new plan, demonstration of cost savings realized from defined contribution over defined benefit, and so on. Unfortunately, the body of research regarding other California contract cities undertaking pension reform—creating a second tier benefit for new hires—is thin. From information provided by John Bartel, the City's consultant for retirement planning, as well as Sam Olivito of California Contract Cities Association, it does not appear that any contract cities—with the exception of Cerritos (annual budget $86 million)—have 1 0 JP 2 recently made the move to a two-tiered retirement system. It is interesting to note that the second tier benefits in Cerritos are equivalent to the current 2.5% at 55 benefit formula provided in Rancho Palos Verdes. Many cities in California are currently studying or planning to implement a two-tiered retirement system for new hires. These agencies tend to be larger, full service (with the expanded pension costs of public safety), and facing financial duress. Staff can find no other contract city in the South Bay that has adopted a two-tiered pension formula with CalPERS, thus it is likely that RPV would be charting new ground if a full scale course is undertaken to enact two-tiered pension revision. As such, the Council should consider such a proposed policy change as a serious undertaking and one that would call for an examination of current tasks and priorities for both staff and the Council. For any significant policy question, the City Council has consistently asked its professional staff to investigate all applicable factors and provide the Council with its best research findings and advice on the full scope of the issue, and that it identify any unintended consequences. The complexity of pension reform, cost implications and potential organizational impacts may be best addressed by staff providing a preliminary overview—taking into account the considerable information gathering provided by the Mayor in his report—to offer an overview of the factors and conditions that Council may wish to consider prior to directing a full-scale pursuit of pension reform in our city. f7� Historical Pension Exnenditures Exhibit A 'CalPERS placed the City into the miscellaneous 2% @ 55 plan pool as of June 30, 2003. Upon being placed in the pool, CaIPERS no longer calculated an individual UAAL for the City. As such, the City's UAAL of $1.5 million (as of 6/30/2003) was replaced with an interest accruing debt to the pool referred to as a Side Fund Liability. In FY09-10, this liability was paid in full. As a result of paying off the interest earning debt with idle General Fund cash, the City realized annual pension expense savings o approximately.$146,950 a 14% decrease). 2Total Paid, by City = Total amount paid to CalPERS, including Employer Contribution, Employee Contribution, and Side Fund Liability payments. 3Over the past 24 years, the total pension costs paid to CalPERS has averaged 14% of covered payrol , including the amount paid for Employee Contributions. From FY 86-87 to FY 06-07 the City paid the entire portion of the Employee Contribution of 7% of covered payroll. From FY 06-07 to current, with the change of the City's pension plan to 2.5% @ 55, the City pays 6.5% of the 8% Employee Contribution of covered payroll. Over the past 24 year period, the City's Employer Contribution, including the side fund liability, has averaged less than 8% of covered payroll. Other Information: CalPERS contribution percentages are dependent upon numerous factors, including the type of define benefit plan being offered to employees, the economy and the number of employees in a plan. CalPERS lowered their investment earning assumptions in 2003 and the Great Recession, which negatively impacted financial markets around the world, substantially decreased the value of CalPERS investments. From FY 99-00 to FY 09-10 the number of full-time City employees increased by 49%, from 39 to 58. Over the last 10 years, the City's pension plan has changed twice. In 2001, the defined benefit plan went from 2% @ 60 to 2% @ 55 and in 2007 the plan was changed to 2.5% @ 55. %AI FY09-10 $ 4,630,020 $ 814,205 $ 1,661,376 $ 2,475,581 53.5% FY08-09 4,650,530 808,304 700,000 1,508,304 32.4% FY07-08 4,239,406 747,183 - 747,183 17.6% FY06-07 3,490,159 631,220 - 631,220 18.1% FY05-06 3,621,822 590,591 - 590,591 16.3% FY04-05 3,663,957 411,412 - 411,412 11.2% FY03-04 3,242,093 267,684 - 267,684 8.3% FY02-03 2,904,427 167,423 - 167,423 5.8% FY01-02 2,455,956 144,783 - 144,783 5.9% FY00-01 2,086,935 133,460 - 133,460 6.4% FY99-00 2,102,848 135,001 - 135,001 6.4% FY98-99 2,064,127 126,780 - 126,780 6.1% FY97-98 2,096,620 236,063 - 236,063 11.3% FY96-97 2,140,691 198,956 - 198,956 9.3% FY95-96 1,585,931 145,319 - 145,319 9.2% FY94-95 2,007,244 - - - 0.0% FY93-94 1,608,561 102,000 - 102,000 6.3% FY92-93 1,481,600 90,600 - 90,600 6.1% FY91-92 1,473,100 95,000 - 95,000 6.4% FY90-91 1,489,741 72,476 - 72,476 4.9% FY89-90 1,336,500 66,034 - 66,034 4.9% FY88-89 1,381,150 59,900 - 59,900 4.3% FY87-88 1,229,510 - - - 0.0% . FY86-87 1,120,680 - - - 0.0% 'CalPERS placed the City into the miscellaneous 2% @ 55 plan pool as of June 30, 2003. Upon being placed in the pool, CaIPERS no longer calculated an individual UAAL for the City. As such, the City's UAAL of $1.5 million (as of 6/30/2003) was replaced with an interest accruing debt to the pool referred to as a Side Fund Liability. In FY09-10, this liability was paid in full. As a result of paying off the interest earning debt with idle General Fund cash, the City realized annual pension expense savings o approximately.$146,950 a 14% decrease). 2Total Paid, by City = Total amount paid to CalPERS, including Employer Contribution, Employee Contribution, and Side Fund Liability payments. 3Over the past 24 years, the total pension costs paid to CalPERS has averaged 14% of covered payrol , including the amount paid for Employee Contributions. From FY 86-87 to FY 06-07 the City paid the entire portion of the Employee Contribution of 7% of covered payroll. From FY 06-07 to current, with the change of the City's pension plan to 2.5% @ 55, the City pays 6.5% of the 8% Employee Contribution of covered payroll. Over the past 24 year period, the City's Employer Contribution, including the side fund liability, has averaged less than 8% of covered payroll. Other Information: CalPERS contribution percentages are dependent upon numerous factors, including the type of define benefit plan being offered to employees, the economy and the number of employees in a plan. CalPERS lowered their investment earning assumptions in 2003 and the Great Recession, which negatively impacted financial markets around the world, substantially decreased the value of CalPERS investments. From FY 99-00 to FY 09-10 the number of full-time City employees increased by 49%, from 39 to 58. Over the last 10 years, the City's pension plan has changed twice. In 2001, the defined benefit plan went from 2% @ 60 to 2% @ 55 and in 2007 the plan was changed to 2.5% @ 55. %AI Honorable Members of the City Council City of Rancho Palos Verdes. RE: City Council, November 4, 2010, Agenda Item 11, Adoption of New State Building Codes The proposed adoption of the 2010 California State Building Codes provides an appropriate occasion to consider some issues of good government concerning the City's routine building and safety regulations, the basic foundations of which rarely are reviewed. I comment here on voter anger at the City's Planning, Building and Safety operations, and some reasons for that anger. Then I make some modest proposals for mitigating that anger. This comment is not about any past or current particular project. It definitely is not limited to just my own local neighborhood, nor is it even primarily about my neighborhood. Rather, it is based in my experience with building and construction over many years in various jurisdictions, as well as local experience in Rancho Palos Verdes. I emphasize that nothing in these comments should be considered a criticism of any present or past member of the City Council, Planning Commission, employed Staff or Contract Consultant. HOMEOWNERIVOTER FRUSTRATION AND ANGER WITH PLANNING BUILDING AND SAFETY. The Measure P debate exposed some deeply seated frustration and anger. Although Measure P failed, I suggest that there are lessons to be learned. It became apparent that many voters were inclined to vote in favor of Measure P because of past bad experiences with the City government. Some voters are angry because they believe they personally were subjected to excessive permit fees, excessive delays, and uselessly frustrating demands, so they were primed to believe that Marymount also got a raw deal just as they themselves did on their own homes. NEGATIVE COST -BENEFIT ANALYSIS BY HOMEOWNERS OF PERMIT REQUIREMENTS AND COSTS One issue that seems to come up almost inevitably, even before Measure P, is that the City and its Staff are perceived by many to be intentionally stretching to impose a multitude of permit fees, and to be demanding excessively elaborate professional reports, which do not pass a homeowner's (or a building professional's) practical cost -benefit analysis. These homeowners are successful business people who make risk and cost - benefit decisions all day every day, and they know from experience when to seek professional advice. They do not think they need a City employee to tell them what are appropriate risks and costs on relatively simple repairs and other work on their own homes. In principle, the City's building and safety regulations are justified to voters as necessary to protect the health and safety of the public. But these home owners simply do not City Council Agenda Item 11, Nov. 4, 2010; Adoption of State Building Codes believe that the City's permit review adds any value to their projects, that is, they do not believe that the City's permit process materially improves safety. Therefore, the permit application and inspection fees are perceived as an unnecessary tax which City Staff assiduously collects to fund their own salaries and justify their own retention. The City's finance consultant, perhaps unwittingly, urged this attitude on the City Staff under the rubric that all City services should be self-sustaining by collecting fees, implemented through the City's "fully burdened cost" formula. Some voters read this as: `Staff, charge fees where ever you plausibly can to prove that your salary is fully funded.' Many voters/homeowners simply do not believe that they receive any real value from the permit fees, delays and City inspections as applied to their own homes. It is important to appreciate that this is a rational, economic view point of well-educated, experienced people. The City should entertain the very real possibility that these homeowners do understand and frequently are correct in their negative cost -benefit analysis City permit fees are demanded for routine home repair or maintenance issues. For example, replacing a single fixture, such as a sink, or dishwasher, costs a permit fee of $92 + $35 issuance fee + $4 data processing= $131. These permit costs on small projects, and the service cost for the professional contractor's time to procure the permit, can exceed the labor cost to actually install the fixture -- that is, permits more than double the total cost of installing the fixture. Where is the favorable cost -benefit in these small jobs? What scientifically -vetted evidence is there that the permit requirements on these small jobs actually produce a safer city? MINIMUM DOLLAR AMOUNTS THAT TRIGGER PERMIT REQUIREMENTS ARE FAR TOO LOW. The minimum dollar trigger amount for permit requirements is far too low in the current ordinance. For example, a plumber's short visit to repair a faucet or toilet theoretically could trigger a permit requirement, which can double or triple the cost of an ordinary, routine household repair. This is because the plumber has to make at least one trip to City Hall to file a detailed permit application. [NOTE: Lay homeowners who try to apply for permits themselves are intimidated by City procedures and by requirements for workers compensation and liability insurance]. The plumber then must stand in line and wait at the counter for permit application review, and after the permit is issued must schedule an appointment with a City inspector, who gives only a several -hour window, who may arrive late, and who may be observed by the homeowners to sign off at the curb without even actually inspecting the work. [NOTE: This curb sign -off is not necessarily a dishonest thing because experienced inspectors recognize that qualified professionals do satisfactory work that really does not need inspection. That is, even the City inspectors appear to realize that there is little need for them to make a detailed inspection of some simple, professionally -done jobs and inspection is nothing but going through the unnecessary motion to sign off paperwork mandates.] EXCESSIVELY LOW PERMIT TRIGGERS TURN HOMEOWNERS INTO SCOFFLAWS. City Council Agenda Item 11, Nov. 4, 2010; Adoption of State Building Codes Small wonder then that many if not a large majority of smaller home repairs and improvements are done without permits. The excessively detailed City regulation of home repairs and improvements just turns most homeowners into scofflaws. They feel like chumps if they apply for permits. Some even see it as the City holding their homes hostage to collect fees to pay City Staff who then frustrate and delay homeowners' ability to care for their own homes. Fundamental to this view is a disbelief that the permit requirements actually improve safety. PLANNING PUBLIC HEARINGS ARE TOO EXPENSIVE AND ARE HUMILIATING. IN PRACTICE, NEIGHBORHOOD COMPATIBILITY ANALYSIS IS PERCEIVED BY MANY AS SUBJECTIVE, MOB RULE. In planning -approval situations, many homeowners see themselves and their friends as having been subjected to mob rule from a parade of objectors who raise endless irrelevancies and delays. In this view, the homeowner has to pay an architect to sit through this public spectacle and also has to personally attend numerous, humiliating meetings. The nexus of much of this voter anger appears to be the open-endedness and subjectivity of the "neighborhood compatibility" analysis. Perhaps this issue could be mitigated by more objective definition of "compatibility", and by self-restraint on the part of individual planning commission and city council members -- avoiding the appearance of simply being architectural critics imposing personal preferences. Of course, there is not much that can be done to limit First Amendment -protected speech at mandatory public hearings. Nonetheless, it should be feasible to educate the public about the legitimate and illegitimate uses of compatibility analysis. Perhaps some illegitimate uses could be expressly articulated in written City policy and announced at the public hearings. VIEW ORDINANCE CONTRIBUTES TO THE POOL OF ANGRY HOMEOWNERSNOTERS. The City's view ordinance creates its own group of disgruntled homeowners in addition to those who hate more traditional Planning, Building and Safety. This comment does not speak to the wisdom of the view ordinance, or the lack thereof. However, because the view ordinance runs counter to the most basic assumptions that most California land owners bring with them into the City, view enforcement produces a strong sense of having been wronged -- which is reinforced every time a losing owner looks at his/her ugly, butchered trees. Many voters rationally conclude that there ought to be a more balanced, value-added analysis taken from the view points of both pro -view and pro -tree homeowners. This also is a hot button to those who campaigned for and implemented the view ordinance — but they surely must recognize that the current view ordinance produces a unique group of disgruntled voters who hate the City government and will exact revenge at the polls when given the chance. This is an area that may bear some reconsideration to mitigate homeowner anger. OVERALL CREDIBILITY OF PLANNING, ZONING, BUILDING AND SAFETY IS HARSHLY QUESTIONED BY A SUBSTANTIAL GROUP OF HOMEOWNERS. Government can only alienate so many voters before the government falls at the polls. With these disgruntled voters the City has lost its bedrock credibility on the real City Council Agenda Item 11, Nov. 4, 2010; Adoption of State Building Codes value of the City's home repair and improvement regulations. And these homeowners do remember this when they vote. I do not have a scientific sample to tell how many voters think this way, but I have heard these complaints enough times over enough years that I believe it likely was a significant factor in the Measure P vote and will continue to be on other issues. And, "No", these voters are not all, or even predominantly, conservative, anti-government partisans, nor are they developers. They are sophisticated business and professional people who believe their homes are being held hostage to unnecessarily burdensome and expensive, counter-productive City permit fees and regulatory demands. This is a rational view point, even if one disagrees with it politically. I know that Council Members and the City Staff believe there are good justifications for all these existing regulations and fees, but these alienated voters simply do not believe those justifications. To them, the fees and frustrations just smell bad. Of course, it is easy to dismiss this homeowner/voter anger by stating the truism that there always will be winners and losers in planning, zoning, building and safety. But that facile response invites continuing backlash and heightened civic confrontation. PROPOSALS FOR DISCUSSION. To initiate a public discussion of these issues of city governance, I propose several possible ways to mitigate this voter frustration (which, of course, can never be entirely eliminated): 1. RAISE DOLLAR TRIGGERS ON PERMIT REQUIREMENTS. Raise the minimum dollar amount of job that triggers a permit requirement. Raise it say to $1,500 or $1,850. For projects from $1,500 (or whatever mandatory minimum may be imposed by State law in a particular case) to say $4,500, eliminate the pre -work permit application and plan check. Instead, simply require only that a licensed building contractor, or architect, or professional engineer certify in a post -completion certificate that the work was designed and built according to applicable Code, and require only a nominal fee of say $39 (the $35 issuance + $4 data processing fees), for the homeowner to file the post - completion certificate attached to a standardized face page within 90 days after work completion. This would be self -reporting analogous to income tax returns. Authorize occasional spot inspections to audit some percentage of post -completion certificates as a means to keep some honesty in the system. This reform will eliminate a large, lower -risk volume of permit requirements, issuances and inspections. It also will eliminate a lot of the low-end scofflaw status of homeowners under current regulations. It will focus City Staff and regulatory efforts on the bigger jobs where a cost -benefit analysis is more likely to be favorable. (NOTE: These comments assume that State law authorizes existing permit fees in these small projects, but the argument can be made that State law does not mandate local collection of fees on such smaller projects. If it is determined to the contrary, that City Council Agenda Item 11, Nov. 4, 2010; Adoption of State Building Codes State codes do mandate such low dollar triggers on permit requirements, then relief should be sought through State legislators. Of course, there are safety risks in smaller jobs, but most homeowners don't seek permits on such smaller jobs now anyway. Therefore, these changes likely would not increase net, overall risks, and might even improve safety compliance.) 2. ENACT EXPLICIT COST -BENEFIT ANALYSIS. Establish by ordinance the principle that City permits and inspections must demonstrably add value to a project under a broad cost -benefit analysis from the homeowner's viewpoint, as well as from a public safety point of view. Then mandate that Staff desist from permit and inspection requirements where no positive cost -benefit value is added to the project. A hypothetical example would be where a licensed civil engineer experienced with Palos Verdes soils deliberately designs a replacement wall to higher 2,500 psf standards, and the licensed engineer specifies in his plans that the replacement foundation must be dug into competent, non -fill soils or into manufactured, compacted fill. The licensed, experienced civil engineer believes there is a reasonable cost benefit for extra concrete and steel to build an over -strength wall and eliminate the need for a geotech report. An expensive geotechnical report potentially might show that lesser 2,000 psf standards would comply with code, but would delay permit processing for two months or more. The extra construction cost of the higher margin of safety designed by the licensed civil engineer's reasonably eliminates need for a time-consuming $3,500 geotech professional's report, over $2000 of City fees and two months of delay to achieve geotech investigation, creation of the geotech report and review of the report. A geotech report requirement in this situation fails a cost -benefit test from the point of view of the home owner and does not meaningfully increase the safety of the project. Is expert judgment involved? Surely, but that is why competent, expert, licensed people are hired - - to make judgments. 3. APPOINT AN OMSBUDSMAN. Appoint an omsbudsman to whom homeowners/applicants can quickly and informally turn for non-binding administrative review on Planning and Building and Safety issues. Authorize the omsbudsman to directly, immediately and informally intervene in communications between applicants and City Planning, Zoning and Building and Safety Staff. The current formal appeal procedures obviously should stay in place (because of State statutory mandates), but it is likely that many situations could be ameliorated by the omsbudsman's independent set of eyes without invoking the enormously expensive, time consuming formal appeals to the Planning Commission and the City Council. This could save enormous amounts that the City currently expends to support the seemingly endless staff time, hearings and public testimony in formal Planning Commission and City Council proceedings. The Planning Commission and Council might then have more time and attention for more serious issues. 4. LIMIT OR ELIMINATE DELEGATION OF DISCRETIONARY CITY AUTHORITY TO CONTRACTED PRIVATE CONSULTANTS. Affirmatively eliminate contractual situations where a contracted, private, city "consultant" exercises official City discretion to compel a homeowner to apply for a permit and file an expert investigative report for which the City then exacts a "review fee," a substantial fraction of which fee appears to be passed through by the City to compensate that very same private consultant for "review" of the report that the City Council Agenda Item 11, Nov. 4, 2010; Adoption of State Building Codes consultant ordered. This creates a very real public perception of impropriety. This is seen as a private company using official city authority to order a fee paid to itself -- the homeowner feels like a City -provided cow for the consultant to milk at the consultant's discretion. It makes little difference in this perception whether the report -review fee charged by the City is passed through to the consultant on each individual report, or the consultant's overall compensation is calculated on the City's "full burden" formula. Intelligent people perceive that the consultant is exercising official discretion to order payment of a City fee from which the consultant expects to personally, financially benefit. Whatever the precise legality of such arrangements (as to which this Comment expresses no opinion), they are corrosive to voter/homeowner faith in the fairness and honesty of City Planning, Building and Safety. Homeowners reasonably believe that private consultants should not personally, financially benefit from their exercise of official City discretion. In an insurance context this situation would be characterized as moral hazard. The solution is fairly simple: A different private consultant, independent of the one who exercises discretion to order the permit application and report, should review the report. Or else, the City's consultant should be a salaried City employee who has no pecuniary interest in the "review fee" collected by the City. I know this perception of impropriety is out there in the community, but I have not personally investigated any specific contractual arrangements and payments to any particular consultant. This adverse perception really needs to be addressed and satisfactorily and fully justified to the public. CLOSING COMMENTS. None of the foregoing proposals is a panacea. They all bear public discussion and vetting, and all of them would require City Staff cooperation to implement. However, they or something like them have a real chance of better demonstrating to voter/homeowners that the City's fees and regulations are justified and cost effective. I have not applied detailed legal research to these proposals. They are just ideas to be explored. I am suggesting that too little attention is being paid to homeowners'/voters' perceptions of Planning, Building and Safety and there are many more angry voters out there than is necessary. There is likely to be a very real, on-going price paid at the polls in voter -curtailed ability of the City to govern. This is a basic principle of democracy — angry voters throw the bums out, or adopt an initiative! (Again, I emphasize that no aspersions are intended towards any City official, staff or consultant. This is just real life politics.) These comments are intended to invite a public discussion of generally - applicable, good governance principles. They are not intended to specially apply to any particular project known to me to be pending or likely to become pending before the Planning Commission or City Council. I personally have a permit application by me and my neighbor pending before Building and Safety for a joint replacement of our property line retaining wall, but I expect that permit will be ministerially issued over the counter and I do not expect that it will involve the Planning Commission. Lowell R. Wedemeyer City Council Agenda Item 11, Nov. 4, 2010; Adoption of State Building Codes kAaks-' RANCHO PALOS VERDES TO: HONORABLE MAYOR & CITY COUNCIL MEMBERS FROM: CITY CLERK DATE: NOVEMBER 1, 2010 SUBJECT: ADDITIONS/REVISIONS AND AMENDMENTS TO AGENDA Attached are revisions/additions and/or amendments to the agenda material received through Monday afternoon for the Thursday, November 4, 2010 City Council meeting: Item No. Description of Material 3 Notice of Preparation for the Environmental Impact Report for Ponte Vista 9 Emails from: Joe Lindorfer; Brian Haig; Letter from Lowell R. Wedemeyer Respectfully submitted, " ly#U624 - Carla Morreale W:WGENDA\2010 Additions Revisions to agendas\20101104 additions revisions to agenda through Monday afternoon.doc MEMORANDUM RANCHO PALOS VERDES COMMUNITY DEVELOPMENT DEPARTMENT TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: KIT FOX, AicP, ASSOCIATE PLANNER DATE: NOVEMBER 1, 2010 SUBJECT: LATE CORRESPONDENCE REGARDING THE PONTE VISTA PROJECT AND THE RANCHO LPG BUTANE STORAGE FACILITY (BORDER ISSUES — AGENDA ITEM #3) Ponte Vista Project at Former Navy Housing Site, Los Angeles (San Pedro) Subsequent to the completion of tonight's Border Issues Status Report, Staff received the attached Notice of Preparation (NOP) for the Environmental Impact Report (EIR) for the revised Ponte Vista project on the former Navy housing site at 26900 S. Western Avenue. As mentioned in tonight's report, the project has now been reduced to 1,135 units. A public meeting to receive input on the scope of the project EIR has been scheduled for Wednesday, November 10, 2010, at 6.00 PM at Peck Park Auditorium, 560 N. Western Ave., San Pedro, CA 90732. Written comments on the scope of the revised project EIR are due to the City of Los Angeles by Monday, November 29, 2010. The table below briefly summarizes the differences between the current 1,135 -unit proposal by iStar Financials the previous 1,395 -unit proposal by Credit Suisse from 2008; and the original 2,300 -unit proposal by Bisno Development from 2005. Project 2003 Proposal 2008 Proposal Current Proposal Component Senior housing 575 units 380 units NIA Multi -family condos 1,725 units 1,015 units 600 units and townhomes Single-family homes NIA NIA 143 units Apartments NIA N/A 392 units Total dwelling units 2,300 units 1,395 units 1,135 units Residential density 37.4 DU/acre 22.7 DU/acre 18.5 DU/acre Commercial 10,000 SF 8,000 SF N/A Parks/open space 6 acres (public) & 12 acres (public) 2.8 acres (public) & 6 acres (private) 2.0 acres (private) Access road Access road to be provided connecting Western Avenue to Mary Star -of -the -Sea High School Late Correspondence for Border Issues Status Report November 1, 2010 Page 2 Rancho LPG Butane Storage Facility, Los Angeles (San Pedro) As mentioned in tonight's report, the Planning and Land Use Committee of the Northwest San Pedro Neighborhood Council (NWSPNC) met to discuss the quantitative risk assessment of the Rancho LPG (formerly AmeriGas) butane storage facility that it commissioned in September 2010. The meeting was attended by roughly two (2) dozen residents and interested parties. For some reason, NWSPNC's consultant, Cornerstone Technologies, did not attend the meeting to answer questions about its report. Rancho LPG—the new owner of the facility—did send representatives to refute the findings and conclusions of the Cornerstone report (see attachments). Rancho LPG asserts that the Cornerstone report is inaccurate, not credible and not a "true" risk assessment. Of the eight (8) scenarios analyzed in the Cornerstone report, Rancho LPG claims that four (4) were incorrectly modeled and the other four (4)—the most catastrophic scenarios—are "impossible." Rancho LPG indicated that it is preparing its own risk assessment for the facility, which it plans to release to the public in January 2011. In a related matter, Staff understands that a community protest was held near the site on Saturday, October 30, 2010. Staff will continue to monitor this project in future Border Issues reports. Attachments • NOP for revised Ponte Vista project EIR (received 10/26/10) • Response letters from Rancho LPG Holdings LLC (received 10/28/10) MN3order lssues\Staff Reports\20101101_CC_LateCorrespondence_doc Q 01 0 DEPARTMENT OF CITY PLANNING 200 N. SPRm STC, Roo'-, 525 LosANca% CA 960�2 4601 AND 6262 Wu Nuys BLw., SUITE 351 VAN NtIYS, CA 9740)1 CITY PLANNING COMMISSION WALLIAM ROSCHEN PRESIMW REGINA M. FREER %4CE_ RWs1 EW SCAN O. BURTON DIEGO C ARDOSO MATT EPSTEIN FR. SPENCER T. KELIOS YOLANDA OROZCO BARBARA ROMERO MICHAEL 1C WOO JAMES WILLIAMS COMMaalONEnO nWASSISTANT Q13) 978.13001 CITY OF Los 1``'1NGELE��g�ECUT1VEOFFICES CALIFORNEA IC1i4EL J. LOCRANI�E olRetTOR (213) 978.1271 ANTONIO R. 'VILL ARAIGOSA M"OR October 26, 2010 OCT 26 2010 ALAN BELL, AICP ACrf NC O1PUtY OrR€CTGR (213) 9781272 PLANNING, BUILDING /CENT P. BERTONI, AICP CODE ENFORCEMENT ljEPUiv DIRECTOR 1213) 9781274 EVA YUAN•MC DANIEL OEPuryDIRKT0R 1213) 9781273 FAX_- (213) 978-1275 INFORMATION tiwvw.planning.laciiyorg NOTICE OF PREPARATION OF ENVIRONMENTAL IMPACT REPORT AND PUBLIC SCOPING MEETING 1" N NO.: ENV-2005-4516-EIR PROJECT NAME: Ponte. Vista. PROJECT ADDRESS: 26900 S. Western Avenue COMMUNITY PLAN AREA: Wilmington -Harbor City COUNCIL DISTRICT: 15 COMMENT DUE DATE: November 29, 2010 The City of Los Angeles, Department of City Planning, as the Lead Agency, will require the preparation of an Environmental Impact Report (EIR) for the project identified herein. An EIR was required for the previously proposed project in September 2005; however, The project plans have since been revised and the revised project will once again require an EIR_ The Department of City Planning requests your continents as to the scope and content of the EIR. A comprehensive project description and potential environmental effects are included below. Also included are the date, time and location of the second Public Scoping Meeting, which will be held to solicit input regarding the content of the EIR. The environmental case file is available for review at the Department of City Planning, 200 North Spring Street, Room 750, Los Angeles, CA, 90012. The Project will require the demolition of 245 residential units, a 2,161 square foot community center and a 3,454 square foot retail convenience facility that were constructed in 1962 by the U.S. Navy for the purpose of horsing and accommodating personnel stationed at the Long Beach Naval Shipyard. The site was closed in 1999. The Project site is approximately 61.5 acres. Tlie proposed Project will include approximately 9% landscaped cor mon areas, recreation areas, and parks (excluding roads). The Project will incorporate internal open space and recreational areas, including an approximately 2.8 -acre park, 1.3 -acre community clubhouse and pool/recreation area and an approximately 0.7 -acre open space and trail network. Additional recreational amenities will be distributed throughout the site. The Project's residential units will be comprised of single-family, duplex, townhome, flat, and apartment units, within buildings constructed over and/or adjacent to residential parking garages. Up to 392 of the 1,135 units may be rental units. The Project will also provide an access road from Western Avenue to the Mary Star of the Sea High School. The Project applicant is proposing a Specific Plan (proposed residential density is approximately 18 -units per acre), General Plan Amendment, Zone Change, Vesting Tentative Tract Map and a Development Agreement for the subdivision, construction and operation of a 1,135 -unit residential development featuring a combination of single -fancily, duplex, townhome, flat, and apartment units. ENVIRONMENTAL FACTORS POTENTIALLY AFFECTED, Aesthetics, Air Quality, Biological Resources, Cultural Resources, Geology/Soils, Greenhouse Gas Emissions, Hazards & Hazardous Materials, Hydrology/Water Quality, Land Use Planning, Noise, Papulation & Housing, Public Services, Transportation/Traffic, UtilitieslSen ice Systems, Mandatory Findings of Significance. PUBLIC SCOPING MEETING, The location, date and time of the public scoping meeting for the EIR is as follows: Date: November 10, 2010 Time. 6:00 PM. - 8;00 P.M. Location: Peck Park Auditorium 560 N. Western. Avenue San. Pedro, CA 90732 (see attached map) Public testimony and written comments are encouraged and will be considered in the preparation the Draft EIR. Written comments must be submitted to this office by November 29, 2010. Please direct your comments to. Hadar Plafkin, Project Coordinator, Environmental Review Section Department of City PIanning 200 N. Spring Street, Room 750 Los Angeles, CA 90012 (213) 978-1343 (fax) Hadar.Plafkin@lacity_org (email) Michael I LoGrande Director of City Planning ZVI Hadar Plafkin City Planner, EIR Unit, Envi 4 "'� a 4 Enclosures 9. VIA cr T Cave r �•ry� • VIACT pA PRAI�� - a�odes sv �aS r NOV N LLL i � UW y PENINSULA SRR '�@ p�R,c vlEw - NAYAL AGRJANIAu `ri MEMORIAL TFR 44�G� ��NG V Q- r i ,• LLC,pF�A FE4 taw, '` NA PAL o i. epic 9ygr`��, !iW '' , '� rasa `RESERYATION ,�� ? RESER YATION . � ��1 _. _,BIW..QR Ez OR •.. _._ PROJEUWE am NIUS ff"La Pm 1� t�1KF � 4 VIEW AVENID F _ a SOH -: Project Site -' a �ELICI_,gNO ~ � N t 1 J I/ 04, NA~~• �HN J�QI� r IY/4(/AL p.-_.-. lMrt�. I i ps�aW+1JMOnMNr6AK]01{ /•�rr/,/� �t�9? r', S/'.yY! DR `Q' \yam a ISR' - 7 ' 1 ! I IFIL _ y- o I D ` ST 'O! - r RESER!/ATION i .� -_ A , �_ 1.._ o�, APE, A � AY` - ! �'� - j REFINERS 's�_._.__ _ NRYAL' .� __�_. i : , A S � RESERYATID MID SANDWDQD F __ LAS 1 ;1 FITNESS OR �= - - _II a� yi�A� �( A --� -�- PL \a E JGLA DER 57_ COOPER I` ST HS g } �- P- j' dR - VALETA Dp SSI I4p,TIA_._ �•9 STATLER S� STATLEI SDE �'n,°r 5TM4N�L 1-A &UTVICW Paexr`n`► %A ..-- vc p I Oll DR wFstaraNr STONE'WOOD 6ARH11G4iL _ PUIIA L j I` SANTA iZCNA� DRi n � 7� _ r u S i - r: m y I THISTLEkf30D !JY I M)' '�— ?q`INER - .c 1t TORCANINI �� ': 12 DR )RD Source: Rand McNally. The Thomas Guide Digilal Edition. 200314. Slake of California a IT RAINIER 1 aril Ll i+ T ,c' CAJA Environmenlal Services, LLC ° �1� NorRegional Project Location and Vicinity Map L � Scale (Miles) oil 0 V4 Green Hills Memorial Park �R,� n •. . =S.ov De#e se F I u P n Fuel Supply amt q,2. 04 ,ray' �.'`•p M .,r. t - -.•�;,-"3f"r,, Project Site ,. ♦ . 1 R -yam J 00 •`;`.. �� . �.�. '.--`;;`«'►a ".•fir; ;. ��," A A INV A It "• _ s" ,1 '� L.s, r.r -�'�,�[� i.,.« -7 !� •,,. -,moi ,.,y ��' L. � •',P�- � "v {r�t -+. :yfe-y y� —=; �"•+�Cs� "�M - P 9R. i' . +`^r•i,". *a , � Y' ',�.+� , t�,_ ��k � � 1,�t/� � M w• i rr+ o � 'f 1 1 � :+"'9.a�r.��+i 1. � , � a r' r ! , •� ; "Y .t`6�' +..1C'Mi"! w +r a►r+ p �� ,f� . J. � � rd �, 7f-, � - • 41 e lrJei7.► �` .''+. � s4 �� 1 r � � e.. �. .w"..l��tY. �. �•:� - � 1�1r... � e l J,�'' `� `",� r �:: �•y. `� :.f `�+ •��,,�• fir• f •,' ` '.� ry-��_ �,� frrr �� •fir i( ��rli "+1� •..r .. • M - ,1 1 •L / ,r � •�.' ,gam. �� u 'A 1Yjr . •, s �b' ,• i '4. • i� •' % ��_ � "! ,1` i ,� �. �� + � 1. � r 4 til • '' L r.-� - t w.JCR� Source: t1SGS, Seamless Daia Dishbution, March 2QUs., Ilk CAJA Environmentol Services, LLC V8 114 Aerial Photograph of the Project Site °z Scale (IUiIcs) and the Surrounding Area Source: Quality Mapping Service, 9/14110. t. -N 4Cz'w 0 400 800 Scale (Feet) 46 L--CAJA Environmental Services, 1-1-C Radius Map '7 of .2 V Secondary Loop Rood RecrealiortCenler 0.25 Acres Community Entry Primary Loop Road BSD Swale Community Racrea(ion Center 1.3 Acres Community Spine Street l Public Park 2.8 Acres Open Space OA Acres Entry Drive Ccmmunily Entry Recreation Center �AJA FnvironmentalServices. LEC and Robert HideYArchilecls. Octet- t Proposed Site Plan II Product Type Diagrams r '� S .. `, r lroducf Typal Ta�Nfry 9gl9w,nld td]Unih �b IUNY n9T116 Pd-, gpe2 7; Unih ��'� �. *I� -a-iariocwafYMel•po.na, P-d-17YPe3 1Z8 Unh �J _ s,wr w,Nna ww,nom«aaal•[wen.N.aYn 1 hmludToo 4 1J6 Unds • wwuPa[c,abn ZA 05 lrodgd rypls 10r units a,[gv,ow�Famen �� roW nrn,n• c„ �,[,,.� a[av �e9tlsa prwtl�•gYcg4[ �� 0 �.AWN t!T t. � lrdugcl type 161 Unify s-� rAr I [ T a,rmv aWv+�v fr7 .sn[r.�+ervrov tet. L lredvdType 7 392 Units �y - asi0fr Wt�nq P+a aqv nnv -avadnax w., .w+ea.o�n goregc Total: 1.135 Units \iI Sp0 Scale (Feel) Proposed Site Plan II R NCHO LHoldings LLC October 27, 2010 Mr. John Greenwood Chair, Planning and Land Use Committee 1807 El Rey Road San Pedro, CA 90732 Subject: Cornerstone Technologies, Inc.'s Quantitative Risk Analysis forAmerigos Butane Storage Facility, dated September, 2010. (referred to as the "Report") Dear Mr. Greenwood, It has come to our attention that the Planning and Land Use Committee of the NW San Pedro Neighborhood Council will be discussing the captioned Report in its meeting on Thursday October 28`h, 2010. As the operator of the North Gaffey Street Facility, we understand the NW San Pedro Neighborhood Council's desire for clear and accurate information regarding potential risks relating to our facility. it is for this reason that we formally advise you that the conclusions drawn in the subject Report include some fundamental inaccuracies. These inaccuracies result from: (i) using a relatively simplistic model to analyze scenarios outside of its intended scope (ii) failing to incorporate critical site-specific elements into the analysis, and (iii) making assumptions that are physically impossible and/or not applicable to our facility, Since many of the inputs utilized were inappropriate or quite simply not physically possible, the outputs are predictably inaccurate. We attempted, unsuccessfully, to contact Cornerstone Technologies to discuss these matters. We have commissioned Quest Consultants inc., an engineering and safety consulting firm with considerable experience in preparing such studies for Liquefied Petroleum Gas storage facilities, to review the Report. A summary of Quest's findings are outlined below and a copy of the full evaluation is attached. Primary questions addressed by Quest (along with summarized responses) include: 1. Does the Report adequately calculate the risks associated with the butane storage and transfer operations at the North Gaffey facility and does it meet the minimal requirements of a Quantitative Risk Analysis (QRA)? The Report does not calculate the risks associated with the operations at North Gaffey nor does it meet the minimal requirements of a Quantitative Risk Analysis (QRA), because it fails to incorporate the following critical analytical elements that are standard in performing such an analysis: a. No accident failure rate or accident probabilities were generated or used. b. Only a subset of eight release events was evaluated. A QRA requires that a full range of potential accidents be evaluated. C. No summation of probability/consequence pairs were made in order to develop risk. d. No risk assessment was conducted using risk criteria. 2. Does the Report utilize the proper modeling tools and scenario analysis to appropriately assess the risks inherent in the North Gaffey facility? The RMP*Comp tool utilized by the Report is a commonly utilized, relatively simplistic tool accepted by the EPA for compliance purposes_ The EPA warns however that the RMP*Comp model "makes simple generalized calculations". Given the simplicity of its construction, the RMP*Comp model does not reject unfeasible inputs/outputs; therefore, care must be taken by the user to ensure that the data input is consistent with EPA guidance for the intended use of the RMP*Comp modeling software, or irrational outputs can be generated. In this regard, each scenario set forth in the Report incorporates technical input errors, which make the results of the Report unreliable or inaccurate. These errors include: a. Using physically impossible inputs achieving incorrect results 1. Five of the scenarios outlined in the Report include an assumption that large quantities of refrigerated Butane instantaneously vaporize, mix with sufficient air into a perfect sphere, and then are ignited. Given the physical properties of butane, the pressure regime of the tankage at our facility, and the passive mitigation system, this assumption incorporates a physical impossibility into the models, providing incorrect results. 2. One scenario includes an elevated cold butane vapor release, which the RMP*Comp software cannot model. 3. Two scenarios (which the Report indicates generate the largest offsite consequence areas) assume that an event (known as BLEVE — Boiling Liquid Expanding Vapor Explosion) occurs with the largest of the refrigerated storage tanks. However, a BLEVE is an impossible scenario due to the behavior of refrigerated butane contained in a low pressure refrigerated tank. b. Not considering the plant and equipment at the North Gaffey facility. 1. Our facility includes drainage surrounding each tank such that if a release of butane were to occur, the refrigerated liquid butane would be directed to the large impoundment basin, limiting the size of a potential vapor cloud. The EPA allows consideration of this mitigative measure in risk assessments. However, the Report does not reflect the substantial beneficial effect of the impoundment feature in its conclusions. As a result of these factors and other factors set forth in Quest's evaluation, the outcomes generated in the Report apparently overstate the offsite consequence area by more than 13 times greater than the worst case offsite consequence scenario calculated by Rancho and submitted to the EPA in its Risk Management Plan. We draw this comparison to point out the magnitude of the discrepancy and not to marginalize the seriousness of any potential offsite /Q 6� : � consequence. We remain focused on operating the facility in a prudent manner with the safety of our employees and the community ever present in our minds. 3. Are the results of the analysis presented in the Report accurate enough to be relied upon when evaluating the potential risks associated with the North Gaffey facility? We believe that the above, and attached evaluation, clearly demonstrate that the Report is not an accurate assessment of the risks associated with the North Gaffey Street facility. In May 2009, Rancho addressed the offsite consequence area with neighborhood and community leaders, using assumptions that are physically possible and taking into consideration the physical attributes of the facility. We intend to provide a detailed assessment of the risks associated with our facility in our regularly scheduled meeting to be held in January. We look forward to seeing you at this meeting. Meanwhile, please advise if you have any questions on the above, Best Regards, Ron Conrow District Manager [Rancho LPG Holdings) A division of Plains Midstream Canada Cc: Mr, Mr. Robert Bryant, Vice President — NW San Pedro Neighborhood Council Mr. John R. Talbot, Cornerstone Technologies, Inc. i/ of a� C4 QUEST,, CONSULTANTS INC. October 27, 2010 Mr. Ronald Conrow Rancho LPG Holdings, LLC 2110 North Gaffey Street San Pedro, CA 90731 Re: Review of Cornerstone Report QCI Project 6771 Dear Mr. Conrow: Quest Consultants Inc. has completed a review of Cornerstone Technologies, Inc.'s report titled Quantitative Risk Analysis for Amerigas Butane Storage Facility, dated September, 2010. This report, henceforth referred to as the 'Report". claims to quantify the risks associated with the existing Rancho LPG Holdings, LLC (Rancho) facility located on North Gaffey Street in San Pedro, California Quest's review of the Report addressed general as well as specific questions. Those questions are summarized below and addressed in detail in the remainder of this letter. i. Does the Report calculate the risks associated with the current Liquefied Petroleum Gas (LPG) storage and transfer operations at the North Gaffey facility and does it meet the minimal requirements ofa Quantitative Risk Analysis (QRA)`.' 2. Does the Report utilize the proper modeling tools and scenario analysis to appropriately assess the risks inherent in the North Gaffey facility? 3. Are the results of the analysis presented in the Report accurate enough to be relied upon by decision makers when evaluating the potential risks associated with the North Gaffey facility? This review will Focus on answering these three questions. Information from the Report, published EPA materials. and reference to internationally accepted works will be used to support the conclusions drawn. Oueslion ) - Does the Report calculate the risks associated with the current Liquefied Petroluem Gas %LPG) storage and transfer operations at the North Gaffe), facilirv? The short answer to this question is no. The definition of risk is as follows: Risk= Probability , Consequence In addition, in order to perform a Quantitative Risk Analysis (QRA), the total risk associated with a facility is defined as follows: NIM NG Po BOY 7:.1 itl' VOK41.1i. OK 73070.8ft,, 5Fi1PPJ\c nn8 _4" �%ENLI VA 5LITE W; NOKMAN OX -1004 TFI EPHOhF 54051 3!94415 FAX 1405 1 3 24-7 7;4 E-11131E-111311nuovyques+consulr:on, // -.1 V� -0, �, Mr. Ronald Conrow October 27, 2010 Page 2 Total Risk = Y- (.Probability X Consequence) Information on the use and execution of a QRA can be found many published references including the Center for Chemical Process Safety° text titled Guidelines for Chemical Process Quantitative} Risk Analysis. Section 2 of the Report outlines the steps required to perform a QR.A on the North Gaffey facility as follows: 2. d Objective, Scope, and Methodology of ludy The aim of the analvsis is to assess the risk to safety of people living and working in the adjacent neighborhoods surrottndinS the jmea•igas facility. ,The � ecittc objectives of this analvsis include: • Identification of the typical Ita_;ardous incidents that relate to the opea•ation ofthe acili • Assessing the significance of each incident that could occur in terms of Mpotential ojL- site i act; • Assessing and guanti&dng the otL-sile levels of risk to people, property and the environment due to the proposed facilitv operations, using ra gtcantilative risk analysis method • and • Providing a clear. concise repast of the analvsis to determine the health risk associated with the operation of'the fac&W In order to meet the necessraty ohieelives of this study, the follox,ing items are included for consideration: • Identification of the tpical hazards present on the site and development of incident Scenarios; • Assessment of the consequences of the identified potential risk events: • An assessment ol'the a-isk in relation to established risk ttidelines. The Quantitative Risk Analysis includes a systematic approach to the analvsis of what polential hazards can occur within the storage (acility. The normal conditions of of the system are defined and the followitzg questions are pa-ovided best-approrimaiion answers: 0) What accidental events can occur within the storage systetn? (2) What are the consequences of each accidental event? (3) IThr l i,s_rhe siitnifictance of the caleitlated risk levels? 'A lChE 00001, Guidelines fir Chemieat Process Quantttalive Risk Anal srs Second Edilion- Center for Chem ical Process Safety of the American Institute of Chemical Ensineers QUEST 3 o� Q 7 ak1r. Ronald Conrow October 27. 20 10 Page 3 By obiectively AucrtFuAft the potential risks from each part of the sitstem, a quantitative risk analysis enables identification of more effective measures to reduce such risks. The methodolog beetns_b_ v defining the systen: through compiling and assimilating the facility, information_that is readily available to the public domain. Following the characterization ofthe facility, common hazards are recognized in whicls internal and external events are identified which may cause the release of hazardous materials. The consequence and frequency ofsuch events is modeled based on available information. A risk assessment is conducted. which calculates the Polenlialfar&W wide risk and compares the result to other accidental health risk hazards. In this way. the facility is obiectively defined, analvzed and quantified in order to provide a more accurate evaluation o f its safety risk potential for the facility operators and the general public. The sections highlighted in yellow are not present, nor are they referenced in the Report. A review of the report shows that no frequency or probability data for the selected events were calculated or presented. Thus, "risk" as defined above could not have been quantified. The outline in the report of how to conduct a QR -A has a subset of the proper elements, but as demonstrated in the report, many of the steps necessary to complete a QRA were not performed. In summary, the answer to Question I is no for the following reasons. 1. No accident frequency or probability data was compiled or presented. 2. Only a subset of eight release events was evaluated. A QRA requires that a full range of potential accidents be evaluated. 3. Risk calculations were not made. 4. Without risk calculations, no risk assessment can be made. S. Without risk calculations, no comparison to "established risk guidelines- could be made Thus, the Cornerstone Report cannot be relied upon to provide any risk information for the current operations at the North Gaffey facility, Question ? - Does the Report utilize the proper modeling torus and scenaria analysis to appropriately assess the risks inherent in the North Gaffey fucifirv? The short answer to this question is B2. The Report's Quantitative Risk Analysis methodology is presented in Section 4.0 of the report as follows. 4.0 Quantitative Risk Analysis Methodolozy By understanding the contguration of the facility and by describing the storage con i uration of the liquid butane, a quantitative risk analysis can provide three primary conclusions: (1) Determinotinni otpotenfial releases that could result in siani 'icant hazardous conditions outside the boundaries of the facilitv. (?) For each pote07tial release that is identified. the potentially lethal hazard zones can be de rued QUEST J40, Qf Mr. Ronald Conrow October 27, 20 10 Page 4 (3) Arid usinz a consistent accepted nmethodolo >. a measure of the "risk" Posed to the public cc -in be calculated. 11 is assumed that a release of butane 1rom 1he Anreri as storm acility could notenijEllX result in one or more of the following health hazards: (1) Exposure to thermal radiation, which is heat radiated bi" combustion of materials. (?) F-mnsure to a blast wave from explosion of storage tanks- from over -pressure or ignition of materials. As described earlier in reference to Question 1, there were no risk calculations presented in the Report. Thus, item 3 was not completed. The Report clearly identifies the use of the EPA's RMP*Comp (Vero 1.07) for computing the hazard zones for the eight selected release scenarios. It should be recognized that the RMP*Comp model has serious technical drawbacks and, if run for a release scenario that is property defined, will produce very conservative (i.e., too large) impact distances. The EPA recognizes this reality and explicitly warns/informs the Users of RMP*Camp on its website when addressing frequently asked questions. A couple of the EPA responses germane to the Report modeling are listed below. I tried running the same scenarios in ALOHA and in RMP*Comp, I got different answers. Why? The results you obtain using RMP*Comp may not closely match the results you obtain running the same release scenario in a more sophisticated air dispersion model such as ALOHA or DEGADIS. That's because of a Fundamental difference in purpose between those models and RMP*Comp. RMP*Comp is a planning tool, designed to help you to easily identify high-priority hazards at your Facility, It makes simple, generalized calculations. In contrast, models like ALOHA and DEGADIS are intended to give you as accurate an estimate as possible of the extent and location of the area that might be placed at risk by a particular chemical release. They account for many more of the factors that influence the dispersion of a hazardous chemical. (For this reason, when you need to make decisions during an actual response, use models like ALOHA or DEGAWS, not RMP*Comp.) For alternate release scenarios, RMP*Comp uses set values for meteorological conditions lithe humidity, wind speed, temperature, stability class, and so on. Is there a way to change those values? I want to use meteorology data from my own location. RMP*Comp indeed uses fixed values For certain atmospheric parameters, and does not allose them to be set by the user. This is because the software is intended as a simplified model, adhering to the EPA's Offsite Crnseoyence Analysis Guidanc& W, that is acceptable for compliance with the Risk Management Program (RMP) Rule, Other tools/models may also be used. In order to use local meterological data, you'd have to use one of those other tools. U.S. Environmental Protection .agency. Emergency Management, R1tP*Comp Frequent Questions webpage. Ilrt�?.+1ti'1114'.e(l2.•:c)4':ill4t'erfJCt�C(lnttnL'rrnprTTl cofi]mfdQ.lttn! QUEST Mr. Ronald Conrow October 27, 2010 Page Does RMP*Comp perform some math or modelling in order to arrive at an endpoint distance, or is it simply interpolating from the tables in the EPA's Offsite Consequence Analysis Guidance (POF1? RMP*Comp follows the procedures set out in the OCA Guidance, This means that for some scenarios, the endpoint distance is arrived at via table lookups, for others via calculations. (An example of the latter is the case of pool fires; see Section 12.2 of the Guidance.) However, when table lookups are used, no interpolation is performed (see Section 4.0 of the Guidance). The EPA's responses to these questions tell us two things in regard to the Report modeling results. I. RMP*Cornp is not a sophisticated model and will not provide accurate site-specific answers. 2. RMP*Comp cannot incorporate sitz -specific weather or terrain effects. In addition to the information presented on the referenced EPA website, the assumptions and technical details behind the RMP*Comp modeling are presented in the EPA's Offsite Consequence Analysis Guidance document. A review of the EPA modeling methodology reveals situations in which the results generated by RMP*Comp modeling, are, in fact, physically impossible. A clear example of this is presented in Chapter 5 of the EPA's Offsite Consequence Analysis Guidance. S Estimation Of Distance To Overpressure Endpoint For Flammable Substances Methods to estimate the worst-case consequence distances for releases offlawnlable substances. --5.1 La por cloud explosions otf7ammable substances that are not mired with other substances. and --5.2 Vapor cloud explosions o, flammable substances in mixtures. For the ivorst-case scenario involving a release of llannnrnble gases ant! voluiile ,fimmnjable It adds, you must assume that the total guantiry of theflaminable substance amts n vapor cloud within the upper and lower P7atnmabilita limits and the doled detonates_ .his a conservative worst-case assumption, if you use the method presented here. you must assume that 10 percent of the flammable vapor in the cloud participates in the explpsion. You need to estimate the consequence distance to an overpressure level of 1 pound per square inch (psi) lrorn the explosion of the va or cloud. An overpressure of 1 psi may cause parlial demolition of houses, which can result in serious injuries to people and shattering of glass windows, which may cause skin laceration rom flviim glass. This statement would tell the user that if 20 gallons of gasoline were to be spilled on the ground, all the gasoline (a volatile flammable liquid) would immediately vaporize. mix with air such that all of the gasoline was in a flammable condition, then ignite and explode causing an overpressure wave. While we know this is not true, as most people have seen or spilled small amounts of gasoline on the ground CEPP (1999), Rirk Managemem Program Guidance for Offsite C"onsequencz .4naltisis, Chemical Emergency Preparedness and Prevention Office. April, 1999 QUEST Mr. Ronald Conrow October 27, 2010 Page 6 without experiencing an explosion, it is up to the person using the model to recognize that RMP*Comp will allow you to model an impossible condition. The use of gasoline in the example above is meant to describe a system that an average reader can relate to. The use of RNtP*Comp to model instantaneous releases of butane follows a similar argument — the instantaneous vaporization of liquid butane following a release from the refrigerated storage tanks in the Rancho North Gaffey facility is physically impossible. The misapplication of the RMP*Comp software is demonstrated in each of the eight scenarios evaluated in the Report. A short description of the errors and omissions made in each of the eight scenarios modeled is presented below. Scenario 1 — Alternative Release —Vapor aloud Explosion #1 This scenario is mislabeled. The calculations performed with RMP*Comp are to determine the extent of the lower flammable limit (LFL). The LFL defines the extent of -the flash fire hazard, or vapor cloud fire hazard as it is described in the RMP*Comp manual. The assumed scenario is a nine (9) square inch hole. 75 feet below the maximum liquid till height in one of the refrigerated butane storage tanks. While the probability of such an event is not defined in the Report, it could be argued that the probability of such an event is not zero. Therefore, while the release may not represent a probable event, it is nevertheless possible. Both of the refrigerated butane storage tanks in the North Gaffer facility have channeled drainage surrounding each tank such that if a release of butane were to occur, the liquid butane would be directed to the large impoundment basin. This type of hazard mitigation system, the impoundment basin, is considered a passive system and is always present. This passive mitigation system is not considered in the RMP*Comp program since RMP*Comp assumes that as the butane is released it instantly vaporizes. This is physically impossible, The RMP*Comp model continues to evaluate the dispersion of the butane vapor cloud to a concentration limit equal to the LFL (1.8 mol % for butane). The RMP*Comp model does not calculate any flash fire hazard distances less than 0.1 miles. Thus, if a small release were to occur. the RMP*Comp program would simply list the impact distance as < 0.1 miles. It is instructive to took at another example. Suppose I gallon of butane was spilled at the base of one of the refrigerated storage tanks. R..MP*Comp would present the distance to the LFL endpoint as < 0.1 miles. Using this methodology, the Report would state that such a scenario could produce a flammable cloud on Gaffey Street over 600 feet way from the nearest tank:. This is clearly not true: a single gallon of butane cannot create a flammable cloud 600 feet lona. Conclusion — The results for Scenario 1, as modeled in the Report are incorrect. Chis appears to be due in part to a lack of knowledge regarding the behavior of liquid butane and in part due to the use of RMP*Comp. a model that cannot simulate this type of refrigerated liquid release. Scenario 2 — Alternative Release -- Vapor Cloud Explosion #2 This scenario is also mislabeled. The calculations performed with RMP*Comp are to determine the extent of the lower flammable limit (LFL), QUEST /? ID/- a � Mr, Ronald Conrow October 27, 2010 Page 7 This scenario assumes that 1,000 pounds per minute (60,000 pounds per hour) of butane vapor is released into the atmosphere from one or more of the pressure relief valves on the top of one of the refrigerated butane storage tanks. It should be recognized that regardless of how accurate the 1,000 pounds a minute butane release rate is when compared to the actual system, the RIMP*Comp model has no ability to model the airborne release of a denser -than -air gas cloud. The RrbiP*Comp model will refer to a look. -up table (Reference Table 29 presented below) for the answer. (Note — the correct LFL for butane is 1.8 moi %. The RMP*Comp program lists the LFL for butane as 1.5 mol %. 1.5 enol % r 36 mg/L, Appendix C, Exhibit C-2). Reference Table 29 Dense Gas Distances to Lower Flammability Limit Urban Conditions, D Stability, Wind Speed 3.0 Meters per Second Release Rate lbs/ruin Lower Flammability Limit (m L 27 30 1 35 1 40 ?40 Distance Miles <5,000 4 # 9 5,000 X0.1 <0, I hf # 7,500 0.1 0.1 <0.I 10,000 0.1 0.1 0.1 # < O.l mile (report distance as 0.1 mile) Using Reference Table 29 with a release rate of 1000 lbs/min and a Lower Flammability Limit of 36 mg/L defines the distance to the LFL as 4, or less than 0.1 miles. Note that even if the release rate from the tanks was increased five -fold to 5,000 lbs/min the RMP*Camp answer would be the same, < 0.1 miles, Conclusion — The results for Scenario 2 as modeled in the Report are incorrect. This is due in part to a lack of knowledge involving the behavior of cold butane vapor releases and in part due to the use of RMP*Comp, a model that cannot simulate this type of above grade dense gas release. Scenario 3 — Alternative Release — Pooi Fire This scenario assumes a release of 500 lbs,'min for 6 hours originating rrom one of the refrigerated butane tanks. The scenario also assumes that the liquid butane spreads unconfined and unobstructed over a flat surface. This is equal to saying the liquid is being released on a perfectly flat surface and will spread in a uniform circular manner. This is clearly not the case in the North Gaffey facility as the drainage channels around the refrigerated liquid butane tanks direct any and all liquid to the impoundment basin. This incorrect assumption in the Report has the effect of expanding the base of the potential fire well beyond what is physically possible. The RMP*Comp model does have the ability to "bound" the size of the base of the liquid pool, but the Report does not employ this capability. QUEST !F 6F a� Mr. Ronald Cori -row October 27, 2010 Page 8 To demonstrate how large the RMP*Comp butane pool becomes before the flammable vapors are ignited and a pool Fire results, the following assumption in ii MP*Comp should be considered. The total amount of liquid released is allowed to spread (while not evaporating) until the depth of the liquid pool on the perfectly flat surface decreases to I cm (- 3/8 of an inch). This procedure is outlined in Section 3, equation 3.6. The maximum area of the pool (assuming a depth of one centimeter) is: .4 = QS x DF (3-6) where: A = Maximum area of pool (square feet) tar depth of one centimeter CJS= Quantity released (pounds) DF= Density Factor (listed in Exhibit B-2, Appendix B) Using the values in the Report would result in the following A _ 500 lbs/min X 360 minutes x 0.81 :t = 145,800 square feet This results in a pool diameter of 430 feet This is clearly not physically possible in the North Gaffey facility. It should be noted that the assumption that the liquid does not vaporize upon release is in direct conflict with the assumption used in Scenario 1. Conclusion - The results for Scenario 3 as modeled in the Report are incorrect. This may reflect a lack of knowledge involving the use of the RMP*Comp model as well as a lack of understanding of liquefied gas behavior. Scenario 4 - Alternative Release- PooI Fire This scenario is identical to Scenario 3 except it assumes a release of 7.790 tbs/min for 6 hours (the same release rate as Scenario I ). All the comments made in reference to Scenario 3 apply to this scenario as well. For this larger release, the unrestricted pool diameter is calculated via RMP*Comp as follows using the values in the Report. .4 = 7,790 lbs/min x 360 minutes x 0.81 .4 = 2,271.564 square feet This results in a pool diameter of 1,700 feet. These results are clearly in error as the entire release would be contained by the impoundment basin designed specifically for this purpose. QUEST /? 0� -?�4 Mr. Ronald Conrow October 27, 2010 Page 9 Conclusion — The results for Scenario 4 as modeled in the Report are incorrect. This may reflect a lack of knowledge involving the use of the RtvlP*Comp model as well as a lack of understanding of liquefied gas behavior. Scenarios I through 4 were developed in the Report as being representative of "typical hazardous incidents." The next section of the Report, the evaluation of Scenarios 5 through 8, was developed to identify and quantify the impacts of worst case events. Scenarios 7 and 8 are defined as Alternative Releases in the Scenario title, but are described as Worst Case Releases in the Report text. Scenario 5 — Worst Case — Vapor Cloud Explosion The "Worst Case Scenario of a Flammable Substance" is described as follows in the EPA's Offsite Consequence Analysis Guidance, upon which the RMP*Comp program is based. 2.1 Definition of Worst --Case Scenario A worst-case release is de, fined as: s The release of the lar est q uantity of a regulated substance from a vessel or process line, failure, and s The release that results in _the "realest distance to the endpoint far the regulated toxic or flammable substance. Flammable Substances For all regulated flammable substances. you must assume that the worst-case release results in a vapor cloud containing the total quantityy1 the sulrsrance that could be released Isom a vessel or pipeline_ For the worst-case consequence analvsisyou must assume the vapor cloud delonates. If you use a TNT -equivalent method for vour analvsis, you must assume a 10 ereent yield factor Ef ect of Required Assumptions The assumptions required for the worst-case analysis are intended to provide conservative worst-case consequence distances, rather than accurate predictions of the potential consequences of release: that is, in most cases your results will overestimate the effects of release. In certain cases, acival conditions could be even more severe than these worst-case assumptions (e. g,, very h process temperature, high rocess�nressure, or unusual weather conditions. such as temperature inversions): in ,such cases- your results might underestimate the effects. However, the repaired assum tions enerall are expected to give conservative results. While the EPA's guidance states the assumptions made "generally are expected to give conservative results", it does not say whether the assumed release is even physically possible. The following description of Scenario 5 demonstrates how the RMP*Comp model can be used to simulate impossible conditions. QUEST C:,? 0 4 .2 X Mr. Ronald Conrow October 27, 2010 Page 10 Scenario 5 assumes the following sequence of events (as described in the Report and modeled with the RMP*Comp program). I . Instantaneous failure of one of the refrigerated butane tanks. Tank is at full capacity of 12.6 million gallons (-63 million pounds)_ 2, Instantaneous vaporization of 12.6 million of gallons (-63 million pounds) orbutane. 3, Instantaneous mixing of all 63 million pounds of butane with sufficient air (- I billion pounds of air or a "ball" of air 3,200 feet in diameter) such that the entire butane/air gas cloud is mixed to the optimum burning condition. 4. Instantaneous formation of the perfectly mixed butanetair gas cloud into a perfect sphere. 5. Ignition of the perfectly mixed gas cloud. The RMP"Comp model then uses the TNT -equivalency model to determine the overpressure as a function of distance from the center ofthe sphere, The question becomes, can the sequence of events listed above even occur? Are they physically possible? A review of each finds the following. 1. It may be possible to fail one of the refrigerated butane tames. However, the tank would not simply disappear; a failure mods (e.g.. a tear or split) would result in a release of liquid butane at a high rale out into the drainage channel. The bulk of the liquid butane would be channeled into the impoundment basin. 2. It is physically impossible for 12.6 million gallons (-63 million pounds) of butane to instantaneously vaporize. This exercise should stop at this point. This scenario is impossible. 3_ It is physically impossible for the 63 million pounds of vaporized butane to instantly mix perfectly with one billion pounds of air. This exercise should stop at this point. This scenario is impossible. 4. Since the perfectly mixed butane/air is denser -than -air, there is no physical mechanism by which it could form a sphere. This exercise should stop at this point. This scenario is impossible. 5. If an ignition source were present, the flammable portion of the cloud could ignite. Conclusion - The answer provided by RMP -Comp has no meaning as the scenario is physically impossible. Scenario 6 -Worst Case - Vapor Cloud Explosion Scenario 6 is identical to Scenario 5 except that all the vessels in the ;North Gaffey facility (refrigerated butane tanks and pressurized butane bullets) instantaneously fail at exactly the same time. (ince this physically impossible assumption is made, the sequence of events listed in steps 2 through 5 from Scenario 5 are executed. Conclusion - The results for Scenario 6, as presented in the Report are incorrect. Scenario 6 is not possible for all of the same technical reasons that Scenario 5 is not possible. Scenario 7 - Alternative Release - BLEVE #1 Scenario 7 is described in the Report as follows. QUEST a I a� 7) Mr. Ronald Conrow October 27, 2010 Page I I Alternative Release — BLEVE #! This model is another worst-case scenario like the previous two scenarios, though the resulting release hpe is considered alternative to the more common type of release modevapor clottd explosions. BLEVE (Boiling Liquid Expanding Dopar Explosion) occurs when a sudden drop in pressure inside a container caries violent boiling of the liquid, which rapidly liberates large amounts of vapor. The pressure p f this vapor can be extremely high, causing a significant tveme of overpressure (explosion) which may completely destroy the storage vessel and proms fragmenis over the surrounding area. The harm involved with sttch an incident cora include injure from shraptael, explosion, and ,tire radiation. There are many technical sources for the definition of BLEVE. The one listed below is from the Center for Chemical Process Safety text titled Guidelines fur Chemicul Process Quantitative Risk,4nalysis. BLEVE. A "Boiling Liquid 'Expanding Vapor Explosion," which occurs from the sudden release of a large mass of pressurized liquid to the atmosphere. A primary cause is an external flame impinging on the shell of a vessel above the liquid level. weakening the shell and resulting in sudden rupture. With this definition in mind, the following errors in the Report scenario development are apparent. I. "BLEVE (Boiling Liquid Expanding Vapor Explosion) occurs when a sudden drop in pressure inside a container causes violent boiling of the liquid". The truth is just the opposite. A BLEVE occurs when the pressure in the vessel increases to a point where the vessel fails catastrophically. 2. -'...which rapidly liberates large amounts of vapor." In the context that the Report presents this statement it is not true. The catastrophic failure of one of the refrigerated butane tanks would not result in a large amount of vapor being produced because the temperature of the butane would not support the rapid vaporization of liquid. It should be recognized that a BLEVE occurs when the pressure inside the vessel (in this case a refrigerated tank) exceeds the pressure rating of the vessel- Refrigerated tanks are built to operate in the I to 2 psig range (psig = pounds per square inch gauge pressure, the amount of pressure over atmospheric pressure). If the pressure in the refrigerated tank were to exceed the tank design pressure (probably around 3 to 4 psig), the tank would begin to fail and the liquid butane would be released (similar to Scenario 3)_ If the liquid butane had reached equilibrium before this happened, less than 4% would flash to vapor (assuming a d psig tank failure pressure)_ This is certainly not a large amount of vapor compared to the total mass of butane in the tank. 3. "The pressure of this vapor can be extremely high. causing a significant wave of overpressure (explosion) which may completely destroy the storage vessel and project fragments". As described above, if the vessel were to fail at the design point, the overpressure generated would be in the 3 to 4 psig range, This level of overpressure is incapable of producing any significant oft -site impacts since much of the energy associated with the overpressure is consumed in causing the vessel failure. The RMP*Comp model should never have been used to calculate the impacts associated with a BLEVE ofa refrigerated storage tank. The sequence of events that are assumed b) RMP*Comp are as follows. QUEST as 4 a�( iVlr. Ronald Conrow October 27, 20 10 Page 12 I. Instantaneous failure of one of the refrigerated butane tanks. Tani: is at full capacity of 12.6 million gallons (-63 million pounds). 2. Instantaneous vaporization of ncarly 12.6 million of gallons (-63 million pounds) of butane. 3. Instantaneous mixing of all 63 million pounds of butane with sufficient air (-- I billion pounds of air) such that the entire butane/air gas cloud is mixed to the optimum burning condition. 4. Instantaneous formation of the perfectly mixed butanetair gas cloud into a perfect sphere. 5. Ignition of the perfectly mixed gas cloud which burns instead of exploding. This sequence is nearly identical to that assumed for Scenario 3. In this case instead of the perfectly mixed butanelair vapor cloud exploding, it simply burns until all the fuel is consumed. The results from RNIP*Comp for this scenario are meaningless as the scenario is physically impossible. Conclusion — The results for Scenario 7, as developed and presented in the Report are not only incorrect. they cannot occur. This event should not have been considered as part of the analysis as it is impossible. This appears in large part due to a lack of knowledge involving the behavior of liquid butane. Scenario 8 — Alternative Release — $LEVE #2 The development of Scenario 8 suffers from all the technical difficulties associated with Scenario 7. The difference between Scenarios 7 and 8 is that in 8 all the butane in all the storage tanks in the North Gaffey facility are assumed to fail at exactly the same time (similar to Scenario 4) and all the released mass comingles into one large gas cloud. As described in the review of Scenario 7, this simply cannot happen. Conclusion -- The results for Scenario 8. as developed and presented in the Report are not only incorrect. they cannot occur. This event should not have been considered as part of the analysis as it is impossible and may be due to a lack of knowledge involving the behavior of liquid butane. Question 3- Should the results ol'the analysis presented in the Report be relied upon hti• decision makers when evaluating the potential risky uvsociared with the Morth Gaffey facility' The short answer to this question is no. The Report contains information that does not accurately depict the behavior of liquefied gas in release scenarios for the reasons described throughout this letter. Summary Quest has reviewed the report titled Quanriwive Risk Analysis fur .gmerigas Butane Storage Facility, dated September, 2010- by Cornerstone Technologies, Inc. Our findings can be summarized as follows. The Report does not meet the minimal requirements ofa Quantitative Risk Analysis (QRA). This is because. a. No accident failure rate or accident probabilities were generated or used. b. Only eight release events were considered. A QRA requires that a full range of potential accidents be evaluated. c. No summation of probabilihtconsequence pairs %4cre made in order to develop risk. d. No risk assessment was conducted using risk criteria. Or the eight release events considered in the analysis. Quest found the Collowing technical problems. QUEST Mr. Ronald Conrow October 27, 2010 Page 13 Cornerstone Scenario Summary of Quest Review Scenario 1 -- Alternative Release - Vapor Incorrectly modeled R results inaccurate Cloud Explosion #I Scenario 2 - Alternative Release - Vapor Incorrectly modeled -results inaccurate Cloud Explosion 92 i Scenario 3 - Alternative Release -Pool Fire Physically Impossible as developed - RMP*Comp could be ustd to develop a more realistic result Scenario d - Alternative Release - Pool Fire Physically Impossible as developed - RNIP*Comp could be used to develop a more realistic result Scenario 5 - Worst Case - Vapor Cloud Physically Impossible -results invalid Explosion Scenario 6 - Worst Case - Vapor Cloud Physically impossible - results invalid Explosion Scenario 7 - Alternative Release - BLEVE # 1 Physically Impossible - results invalid Scenario 8 - Alternative Release - BL,EVE 92 Physicatly Impossible - results invalid As a result, none of the consequence modeling results presented in the Cornerstone Report can be relied upon to provide any guidance in assessing the hazards associated with the butane storage and transfer operations at the Rancho facility on North Gaffey Street. As a result of this review. Quest would suggest that no reliance be placed on the Cornerstone Report as it provides no useful data and contains serious misrepresentations of what can occur at the Rancho Facility as well as significant technical errors in the approach and execution of such an evaluation. If you have any questions, please feel free to contact me directly. Sincerely. John B. Cornwell Principal Engineer C) 4 DF a Y QUEST From: lindorfer [lindorfer1@cox.net] Sent: Friday, October 29, 2010 7:03 PM To: Nicole Jules; citymanager@rpv.com Cc: cc@rpv.com; L. Bilski; erika barber; Iowell@transtalk.com Subject: Neighborhood permit parking November 4, 2010 staff report The proposed fees in the staff report are $34 for initial permit and $17 for three year renewals. These numbers are based on a fully burdened permit clerk cost of $34.23 and the 20 minute and 10 minute times required for initial and renewal processing respectively. Since $34.23 is I hope an hourly (60 minute) rate, it looks like you should have divided by 3 to get the 20 and 10 minute costs. Therefore, I propose that that the new fees should be set to $12 for initial and $6 for three year renewals. The report's proposed fee for blocks near city improvements is $0, so I propose that the fees for Palos Verdes Drive South blocks should be set at $0, as they adjoin the new California Coastal Trail and/or the Portuguese Bend Preserve city improvements. Thank You, Joe Lindorfer PVDS (west of Schooner) 11/I/2010 From: eahaig@netzero.net Sent: Monday, November 01, 2010 8A9 AM To: terit@rpv.com Cc: carlam@rpv.com; elehr@rpv.com; ec@rpv.com; eahaig@netzero.eom Subject: RE: RPV City Council Agenda Item-November4, 2010 Meeting -Neighborhood Parking Permits Good morning, I read the staff report regarding the Neighborhood Parking Permit program and it listed Lower Hesse Park as one of the areas that the program may be implemented in. This is because of the proposed development at Lower Hesse Park. Let me get this straight..... The City proposes developing Lower Hesse Park. Has community meetings to get people's input on the conceptual plans that were developed before there were any community meetings to see what the residents want in the park, The people who live near the parks question the need for the facilities and the location of a dog park in a residential neighbor, The City conducts a survey of 866 people of what they would like to see in the park. This was done after the City had already decided what should go in the park, this is a familiar theme with this proposed development. The majority of respondents want facilities that are already in Lower Hesse Park. None of the facilities being proposed by the City even get a majority of yes votes. The City presses on with its plans to develop Lower Hesse Park. Now, because a dog park can only be placed in a residential neighborhood and there is no other location on the Peninsula, there is the possibility that people may have to pay to park on their street. Is this correct? Please tell me it is not. More buildings on our coastline because money is being offered, park development of questionable need or desire, potential parking permits. I get a sense of dread when I get emaiis notifying me of RPV City Council Agendas. I am beginning to question whether the City Council is truly representing those who live in RPV and how development affects neighborhoods. Thank you, Brian Haig ---------- Original Message ---------- From: "Teri Takaoka" <terit@rpv.com> To: <eahaig@netzero.com> Cc: "'Carla Morreale"' <carlamarpv.com>, "'Carolyn Lehr"' <clehr@rpv.com> 11/1/2010 I] Subject: RE: RFV City Council Agenda Item -November 4, 2010 Meeting -Neighborhood Parking Permits Date: Mon, 1 Nov 2010 07:47:43 -0700 IM1100 Please resend your message to be included as late correspondence. This was all we were able to view: From: eahaig@netzero.com [mailto:eahaig@netzero.com] Sent: Friday, October 29, 2010 11:23 AM To: CC@rpv.com; cc@rpv,com Cc: clehr@rpv,com Subject: RPU City Council Agenda Item -November 4, 2010 Meeting -Neighborhood Parking Permits Obama Urges Homeowners to Refinance If you owe under $729k you probably qualify for Obamas Refi Program SeeRefinanceRates.com Thank you Teri Takaoka Deputy City Clerk My Credit Scores- Free Click Dere to See Your 3 FREE Credit Scores from All 3 Credit Bureausl freescore.com 11/1/2010 7, of 2 Lowell R. Wedemeyer 13 Clipper Road, Rancho Palos Verdes, CA 90275 November 1, 2010 City Council City of Rancho Palos Verdes Re: City Council, November 4, 2010, Agenda Item 9 Neighborhood Permit Parking Program Honorable Members of the Council: Initially, we wish to express our appreciation for the efforts of Staff member Nicole Jules, P.E, who kept our neighborhood informed of the on-going evaluations of this issue. The Staff Report omits some factual information that is necessary to clarify the first table on page 9-3 of the Staff Report. The Staff Report omits to list any of the petitions of neighborhoods that have petitioned to retain parking restrictions. For example, there are two petitions from the Seacove neighborhood to retain the existing parking restrictions. That first table on Staff Report page 9-3 creates the incorrect impression that Clipper Road in the Seacove neighborhood has petitioned to opt out of parking restrictions. Two petitions have been signed by super majorities of the affected property owners in portions of the Seacove neighborhood as follows: 1. SEACOVE DRIVE. A super majority of lot owners on the first two blocks of Seacove Drive, between Palos Verdes Drive South and Barkentine have signed a petition to retain existing parking restrictions. This petition is not mentioned in the Staff Report. These two blocks of Seacove Drive suffer from street parking by users of Abalone Cove Shoreline Park seeking to avoid the City's parking lot fee. 2. CLIPPER ROAD. Clipper Road is a one -block street between Palos Verdes Drive South and Seacove Drive. There are two opposing petitions concerning Clipper Road. The majority petition, which seeks retention of existing parking restrictions on Clipper Road, is not mentioned in the Staff Report. Super Majority Petition to Retain Parking Restrictions. The Staff Report does not mention a super majority petition to retain parking restrictions on Clipper Road that has been signed by 84.6% (11 of 13) of owners that have street parking frontage on Clipper Road. These owners represent approximately 95% of the frontage on Clipper Road. The petition asks for permit -only street parking from 9AM to 5PM, 365 days per year, Specifically, the petition to retain street parking restrictions has been signed by owners of lots with street addresses 1, 2, 3, 7, 8, 9,10,11, 13 and 15 Clipper Road, as well as by the owners of 17 Seacove (which is at the northeast corner of Clipper and Seacove and has parking frontage on Clipper Road). The only non -signers are the owners of 5 Clipper and 25 Seacove (which is the northwest corner of Seacove and Clipper). Petitioners' reason for requesting retention of parking restrictions is a history showing that users of Abalone Cove Shoreline Park will park on Clipper. Road, either to avoid the City's parking lot fee or when the City Parking lot is closed. Invalid Minority Petition to Opt -Out of Parking Restrictions. The Staff Report at page 9-3 lists an opt -out petition referencing Clipper Road. That opt -out petition patently is insufficient. Two of the property owners at 9 and 11 Clipper Road who originally signed the opt -out petition subsequently withdrew their signatures in writing. The opt -out petition has numerous invalid names. It includes two people who list addresses on the westerly end of Seacove, distant from Clipper Road. It lists unidentifiable people who do not live at the 3 Clipper Road address listed on the petition next to their signatures. Most of the remaining opt -out signatures appear to be non -owner occupants of the two multi -unit buildings at 1 and 5 Clipper Road. The apartment building at 1 Clipper Road devotes its entire street frontage to paved access to on-site parking spaces, leaving no street parking. The two multi -unit buildings at 1 and 5 Clipper Road (whose occupants have provided most of apparently valid opt -out signatures) comprise less than 15% of the total street parking frontage on Clipper Road. One opt -out signer, who later withdrew his signature, reported that he signed only after he was misinformed by the petition circulator that the parking permits would cost $120 per year per vehicle. Remainder of Seacove Neighborhood. The Seacove Neighborhood includes the streets Clipper, Barkentine, Packet and Seacove, southerly of Palos Verdes Drive South. We are not aware of any petition for or against parking restrictions on Barkentine Road, on Packet Road, or on the two blocks of Seacove Drive westerly of Barkentine Road. PRICING OF PARKING PERMITS. We urge the following for Clipper Road and the easterly two blocks of Seacove Drive: 1. Please retain existing parking restrictions to protect these residential streets from parking by patrons drawn to the area by Abalone Cove Shoreline Park who park on residential streets either to avoid the City's parking lot fee or when the City parking lot is closed. The existing signage prohibiting street parking from 9 AM to 5 PM has been working reasonably well, even with minimal or no ticketing enforcement. Park patrons seem to generally be accustomed to the existing signs and to generally abide by them. Thus, there is no significant public education necessary. 2. We urge that there be no charge to Clipper Road and Seacove Drive residents for retaining restrictions because there is no need for extra work to preserve the existing sign posts and only need to replace a portion of the existing signs to conform them to the correct hours where needed. 2 0-� 5 3. We urge, as a matter of fairness, that parking permit fees be reduced or eliminated because the need for parking restrictions is created by the City's operation of fee parking at the nearby city park. If fees must be imposed, we urge that there be three-year permits. Ambiguity in the PARTICIPATION section of the Neighborhood Parking Program_ attachment to the Staff Report. On page 9-8 of the Staff Report the following statements appear: "Permit parking boundaries shall be determined on a block by block basis." "If it is determined that a parking problem exists, the affected street and/or neighborhood must agree to the permit parking program by submitting a signed petition that bears the signatures of at least 60% of the affected residences." (Note that it states "residences" not "residents.) "Similarly, for streets that currently are enrolled in a parking permit program, to opt - out, at least 60% of desired residences must indicate their desire to discontinue the permit program by submission of a petition." We raise the following issues: 1. What is the rationale for a super majority of 60%? Why not the usual democratic simple majority? 2. With respect to the proposed "block -by -block" rule, what happens when a single block contains both detached single family residences (R-1 zone) and multi -unit projects (>_ R-2 zone)? Will the rules enable the higher -density zone to dominate or veto street parking petitions in the adjacent lower density zone? If so, that would be inconsistent with the purpose of the low-density R-1 zone. For example, Clipper Road comprises one long block. At the top of the hill are four adjoining apartment buildings (R-4 zone?). The remaining structures on Clipper Road are all single family detached residences (R-1 zone) in a separate legal tract 14649. The combined street frontage of the four apartment lots is less than 25% of the total street frontage on Clipper Road. Why should the occupants, or tenants, or owners of these four high-density lots be given dominating control, or veto power, over parking issues in the adjacent R-1 zone? Is there any compelling reason that the R-1 zone could not have its own properly - signed parking restrictions? We urge that the rules allow flexibility on this point. 3 0-P 5 We urge that the Council not blur the distinctions between low-density zones (R-1) and higher -density zones. We urge that the Council not create regulations that enable high- density zones to dominate petition votes that control parking restrictions in adjacent low- density zones. As an alternative, votes can be on a per -lot basis or can be weighted based on street frontage. Per -lot voting is the simplest, easiest method, and it will be fair and just in most cases without overwhelming the lower -density zone. Please note: We are NOT asking for distinctions between tenants and lot owners in the issuance of resident parking permits. Rather, we are urging only that the petitions be signed by lot owners, not by tenants or occupants, for the practical reasons explained below. 3. Who is entitled/required to sign a petition with respect to a "residence" under the Staffs proposed regulations: A. All "occupants" of a "residence", including minors and guests? B. The fee title owners? C. Who as between landlord and tenant will sign a petition? (i) for apartment buildings? (ii) for single family residences and individual condominium units? D. For condominium projects, must individual unit owners sign, or is the issue to be decided on a project -wide basis either by the HOA board or by vote of the members? We urge that the petition signers be authorized title owners with respect to detached single family residences and apartment buildings. With respect to condominium projects, we suggest that the issue can best be resolved project -wide by the Home Owners' Association, either through resolution of the Board of Directors or by membership vote, at the choice of the HOA itself. Our reasons are as follows: I. It would be practically impossible for petition canvassers and Staff to identify and verify all "occupants", so that is an unworkable standard. Even the U.S. Census Bureau has a very difficult time with such a task. Thus, the denominator in the 60% calculation as a practical matter will be unknown as to "occupants" within any acceptably narrow range of error. II. As to apartment buildings, it also would be unreasonably burdensome and practically impossible for petition canvassers and Staff to verify who actually are all of the bona fide tenants of the building. Unlike land title records, there is no public record identifying bona fide tenants. The City does not maintain such a list. In view of privacy laws, how will Staff and petition canvassers learn of or verify even written leases, much less month to month oral tenancies? Landlords certainly won't publish the names of their tenants. Many buildings have security and controlled access so ringing door bells won't work (as election precinct workers quickly learn). Thus, the denominator in the 60% calculation as a practical matter will also be unknown with respect to "tenants" within any acceptably narrow range of error. By contrast, it would be feasible for both petition canvassers and Staff to identify and verify apartment building owners/managers. As between apartment owners/managers and tenants, parking generally is handled by the owners/managers as a common area issue so this would comport with customary practices. III. As to condominium projects, the identities of unit owners will be known to the Home Owner's Association, but the HOA generally will treat its list of owners as confidential. Commercial data bases can provide title information as to condominium projects but that information is quite expensive for people other than real estate professionals to obtain. A condominium project generally also will have entrance security so again ringing door bells of individual units is not feasible. However, the HOA itself routinely must make project -wide decisions either through its board of directors or by a membership vote. Thus, with a condominium HOA it is feasible for petition canvassers and Staff to obtain a project -wide decision from the HOA itself, though not from individual unit owners. IV. As to single family detached residences, neighbors are likely to know who the owners on their block are, and title can be verified in the County Recorder/Assessor records, or by professional title searchers, as necessary. V. As between (i) owners of individual single family residences and individual condominium units, and (ii) the tenants of those individual units, the unit owners have both a greater interest and longer term relationship to the property, so the unit owners have a greater interest in a long-term decision such as street parking restrictions. In summary, using land title records to identify lot owners would be the most practical, feasible method of determining the denominator of the 60% calculation -- or of a 50% + 1 calculation if simple majority rule is followed. We strongly urge that the petition regulations maximize objective, simple, straight- forward, inexpensive petition procedures. The regulations should minimize Staff discretion and maximize the ease of objective verification of petitions by Staff. This will increase compliance by petition circulators and reduce Staff burden and expense. It also will reduce the potential for neighborhood disputes over petition procedures that could potentially escalate to a need for City Council intervention. Again, we appreciate the Staff's efforts on this matter. Lowell R. Wedemeyer Circulator of Petition to Retain Parking Restrictions On Clipper Road. 5 0F 5