CC SR 20200317 05 - CalPERS UpdateRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 03/17/2020
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA DESCRIPTION:
Consideration and possible action to receive an update presentation on the City’s
CalPERS pension costs and the benefit changes
RECOMMENDED COUNCIL ACTION:
(1) Receive an update presentation on the City’s CalPERS pension costs and the
benefit changes that resulted in the increase in the City’s unfunded liability; and
(2) Direct Staff to bring a draft pension policy to the City Council for its consideration.
FISCAL IMPACT: N/A
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Angelina Garcia, Interim Director of Finance
REVIEWED BY: Same as above
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A.
B.
Staff report from April 2, 2019 (Page A-1)
Actuarial Valuation Reports as of June 30, 2018 (Page B-1)
EXECUTIVE SUMMARY:
This report continues the City’s work on the City Council’s goal of maximizing the use of
each tax dollar through the development of a policy to address the City’s pension
obligations. An overview of the City’s pension plan, funding progress and future outlook
is contained in this report, as well as options the City can use to address its long-term
pension liability. In April 2019, former Finance Director Deborah Cullen presented to the
City Council a historical summary of the City’s CalPERS pension costs and benefit
changes (Attachment A).
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BACKGROUND AND DISCUSSION:
The Pension Plan
The City provides retirement benefits to its employees by contracting with the California
Public Employees’ Retirement System (CalPERS). CalPERS offers a defined benefit
plan in which retirement benefits are based on a formula. Retirement benefit formulas
(e.g. 2.5% at 55) are calculated based on an employee's years of service credit, age at
retirement, and final compensation, which is determined by an employee’s average
salary, excluding overtime, for a defined period of employment. Retirement formulas for
employee groups vary based on the date of entering CalPERS membership (“Classic” if
entered into CalPERS before January 1, 2013 and “PEPRA” thereafter).
The City currently has three benefit levels offered to eligible employees:
• Tier 1: Employees hired prior to local pension reform action by the City
Council on September 20, 2011 earn 2.5% of salary for each year employed
with the City (based on a three-year average) at the age of 55. The
employee contribution rate for Tier 1 is 8% of their annual salary.
• Tier 2: Employees hired after local pension reform, who previously worked for
another governmental agency with a reciprocating pension plan earn 2% of
salary for each year employed with the City (based on a three -year average)
at the age of 60. The employee contribution rate for Tier 2 is 7% of their
annual salary.
• Tier 3: Employees hired after statewide pension reform, the California Public
Employees' Pension Reform Act (PEPRA) effective January 1, 2013, who
have not previously worked for another governmental agency with a
reciprocating pension plan, or have not worked for such an agency within six
months of being hired by the City, earn 2% salary for each year employed
with the City (based on a three-year average) at the age of 62. The
employee contribution rate for Tier 3 is 6.25% of their annual salary.
Retirement benefits are valued on an annual basis by CalPERS certified actuaries and
the results are reported to member agencies through an Actuarial Valuation Report
(AVR). This report (Attachment B) informs the City of our obligation, both current and
future, represented in the report as the Accrued Liability (AL).
There are three main categories that are used to create the actuarial valuation results:
member information, benefit provisions, and actuarial assumptions and methods. On an
annual basis, the actuary collects the current member information from our agency and
the benefit provisions in the City’s contract with CalPERS are built into the valuation.
Lastly, the actuarial assumptions and methods are applied.
To assist them in handling the unknown, the CalPERS actuaries project the AL using
key assumptions including demographic and economic factors:
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Demographic assumptions include:
o Mortality/longevity
o Retirement rates/service termination rates
o Disability incidence rates
o Typical age, service and gender
o May vary based upon benefit formula and member category (i.e. police,
fire or non-safety)
Economic assumptions include:
o Salary growth rates
o Annual inflation
Current assumption is 2.75%
o Investment return / discount rate
Current assumption is 7%
Actuarial assumptions are used for the long term and are rarely realized in a given year.
Gain or losses occur when actual experience doesn’t match the assumptions. CalPERS
actuarial staff performs an experience study every four years and compares actual
experience with the actuarial assumptions. An experience study measures actual plan
demographic experience over a defined period of time. The results of the study are
used to refine and improve actuarial assumptions used in future actuarial valuations.
Based on that study, changes are recommended to the CalPERS Board of
Administration. The most recent and publicized changes were to the mortality rates to
estimate life expectancy for members and the discount rate used for the investment
return.
The AL is then assessed against the current market value of the assets CalPERS
invests on our behalf, which results in our Unfunded Actuarial Liability (UAL). This
represents the estimated value of unfunded benefits already earned.
According to the latest analysis from the City’s CalPERS Actuary, the City’s UAL for all
employee groups, and across all funds, is $12.3 million as of June 30, 2018 (Table 1).
The UAL consists of the City’s total accrued pension liability of $45.3 million which is
73% funded by fiduciary assets (i.e. investments and cash) of $33 million.
Table 1 – Unfunded Accrued Liability
Each year, every employer contribution requirement is adjusted based upon the funded
status. If an employer reached 100% funded status in a given year, the employer would
still be required to make the normal cost contribution, the benefits earned by employees
As of 6/30/18
Accrued Liability 45,330,477
Market Value of Assets 33,034,043
Unfunded Accrued Liability 12,296,434
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during that fiscal year. Employers that are less than 100%-funded must make the
normal cost contribution and an annual payment toward the UAL.
CalPERS generally phases in significant changes in assumptions to enable employers
to plan for the future increase in benefit costs. The financial status of the pension fund is
updated annually in the AVR, taking into account how well the invested assets in the
fund performed, as well as any changes to the future earnings expectations. Differences
between actual experience and plan assumptions can also increase the City’s UAL.
Retirement benefits are paid by CalPERS through contributions from both employees
and the City (“normal” annual service costs) as well as investment earnings. CalPERS
invests contribution payments with the goal of earning sufficient returns over the long
term to pay defined benefits as promised and cover CalPERS expenses.
Every employer makes contributions to CalPERS in two parts:
Normal Cost – Pays for a year of benefit accrual (i.e. an employee works a ful l
year of service for the City)
Amortization of UAL – Pays for any deficit or surplus accrued over the prior years
of service.
Total Annual Contribution Rate = Normal Cost + UAL
The CalPERS “Pension Buck” below displays how CalPERS currently funds retiree
benefit payments. As is shown here, the majority of the payments are expected to be
paid from regular earnings. However, when investment earnings do not meet
expectations, the funded status of the entire retirement system is at risk with all member
agencies sharing the burden.
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Funding Progress
The UAL continues to increase as the AL has grown at a faster rate than the value of
our assets. As displayed in Table 2 below, the City’s UAL has increased steadily over
the past five years. In its most recent valuation, CalPERS has also indicated that our
required contributions are expected to increase for the next five years, through Fiscal
Year 2024-25. Table 3 illustrates the estimated total payments over the next five years.
Table 2 – Year Over Year UAL Change
Table 3 – Projected Total Annual Payments
Over the years, there have been several factors contributing to the growing pension
liability both at the City and throughout the state. The most prominent of those factors
are outlined below:
Actions taken by CalPERS:
As mentioned above, CalPERS has lowered its expectations for investment
returns and inflation rates to better align with the rates it has experienced over
the past 10 years (from 7.5% to 7% discount rate). Based on the League of
California Cities’ CalPERS report published in 2018, CalPERS’ outside
investment advisors expect returns over the next decade to be about 6.1%,
below anticipated returns set by CalPERS (currently at 7%). Whenever a pension
system’s rate of return projection is lowered, the unfunded liability goes up,
because the amount of money in the fund is no longer expected to earn as much
as it had previously been expected to earn.
CalPERS has also changed how it calculates the annual payment for the UAL
from a percentage of payroll to a flat-rate dollar amount, thereby guaranteeing a
certain level of contributions from member agencies.
($ expressed in millions)
2014 2015 2016 2017 2018
Accrued Liability 33.0$ 35.2$ 37.0$ 40.9$ 45.3$
Market Value of Assets 26.3$ 27.0$ 26.3$ 30.3$ 33.0$
Unfunded Accrued Liability 6.7$ 8.2$ 10.7$ 10.6$ 12.3$
Funded Ratio 79.7% 76.7% 71.2% 74.1% 72.9%
2020-21 2021-22 2022-23 2023-24 2024-25
Tier 1 1,126,479$ 1,249,276$ 1,353,506$ 1,419,962$ 1,490,651$
Tier 2 204,685$ 209,988$ 216,323$ 221,804$ 228,436$
PEPRA 215,987$ 221,737$ 228,477$ 234,375$ 240,435$
1,547,151$ 1,681,000$ 1,798,305$ 1,876,141$ 1,959,523$
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Additionally, CalPERS changed the timeline for amortizing new bases
(gains/losses) from investment returns from 30 years to 20 years and eliminated
the ramp-up and ramp-down of these bases beginning with the valuation reports
as of June 30, 2019. This shorter timeline results in higher annual contribution
payments.
Since 2012, the City of Rancho Palos Verdes has also implemented practices to better
address its long-term pension liabilities. Actions taken by the City include:
In 2012, the City restructured the pension benefits offered to any new employee
who previously worked for another governmental agency with a reciprocating
pension plan. This established our Tier 2 plan with a formula of 2%@60, and
resulted in a lower obligation paid for new employees .
Employees hired after statewide pension reform effective January 1, 2013 , who
have not previously worked for another governmental agency with a reciprocating
pension plan, or have not worked for such an agency within six months of being
hired by the City, earn 2% salary for each year employed with the City (based on
a three-year average) at the age of 62. This membership group is also referred to
as PEPRA members.
Through collective bargaining, the City shifted the employee share of pension
costs (also referred to as “Employee Paid Member Contribution” or EPMC) to the
employee. Both Tier 1 and 2 employees pay 7% of their pensionable salary,
PEPRA members pay 6.25%
Employees in Tier 1 now “pick up” a percentage of the employer share of
pension costs (also known as “cost sharing”) equal to 1% of their pensionable
salary.
Subsequent to the implementation of the additional tiers, the total number of Tier 1
employees, the most expensive tier, has steadily decreased, as shown in Table 4.
Overall, the total number of Tier 1 employees has decreased by 51% from 37 to 18
since 2015. These Tier 1 employees have been replaced by less costly Tier 2 and Tier
3 employees at a rate of three per year on average (see Table 4).
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Table 4 – Members in Each CalPERS Tier
When broken down by tier as shown in Table 5, the majority of the UAL is from Tier 1.
Tier 1 makes up over 98% of the total UAL. As mentioned in the April 2019 staff report
(Attachment A), in 2007, the City enhanced all full-time employees’ retirement benefit
from 2% at 55 to 2.5% at 55. Overnight, this increased each active employee’s pension
payment by 25% (the difference between 2.5% and 2%). At the time the City was
exploring the enhancement option, Staff presented estimates of increase to the City’s
unfunded liability, but it appears these estimates were for future benefits not earned,
with no mention of what it would cost the City to fund for the additional .5% for the years
of service already earned. Because so many employees retired soon after the
enhancement, this led to having a much bigger impact funded status (and ultimately
contributions) than any other factor.
Table 5 - Annual UAL Change by Tier
Tier 2015 2016 2017 2018 2019 2020
Tier 1 37 30 28 25 20 18 -19 -51%
Tier 2 10 13 16 17 16 16 6 60%
Tier 3 / PEPRA 12 13 18 21 24 29 17 142%
Vacant 3 6 5 7 10 7 4 133%
Total 62 62 67 70 70 70 8 13%
Cumulative
Change
($ expressed in millions)
2014 2015 2016 2017 2018
Tier 1
Accrued Liability 32.8$ 34.7$ 36.1$ 39.4$ 42.9$
Market Value of Assets 26.1$ 26.6$ 25.5$ 28.8$ 30.8$
Unfunded Accrued Liability 6.7$ 8.2$ 10.6$ 10.5$ 12.1$
Funded Ratio 79.6% 76.5% 70.7% 73.2% 71.8%
Tier 2
Accrued Liability 0.1$ 0.3$ 0.6$ 0.9$ 1.4$
Market Value of Assets 0.1$ 0.3$ 0.5$ 0.9$ 1.3$
Unfunded Accrued Liability (0.0)$ 0.0$ 0.1$ 0.0$ 0.1$
Funded Ratio 104.4% 96.6% 90.3% 94.8% 92.0%
PEPRA
Accrued Liability 0.0$ 0.2$ 0.3$ 0.6$ 1.0$
Market Value of Assets 0.0$ 0.1$ 0.3$ 0.6$ 0.9$
Unfunded Accrued Liability (0.0)$ 0.0$ 0.0$ 0.0$ 0.1$
Funded Ratio 108.8% 95.7% 89.9% 94.8% 91.8%
Total
Accrued Liability 33.0$ 35.2$ 37.0$ 40.9$ 45.3$
Market Value of Assets 26.3$ 27.0$ 26.3$ 30.3$ 33.0$
Unfunded Accrued Liability 6.7$ 8.2$ 10.7$ 10.6$ 12.3$
Funded Ratio 79.7% 76.7% 71.2% 74.1% 72.9%
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Table 6 – Funded Status by Tier
Pension Reporting Requirements
In 2012, the Government Accounting Standards Board (GASB) issued Statement No.
68, Accounting and Financial Reporting for Pensions. GASB 68 requires that
governmental employers that sponsor defined benefit plans (i.e., CalPERS) must
recognize a net pension liability on their balance sheet. This is the difference between
the City's total pension liability (actuarial accrued liability) and actual plan assets. To
reduce the GASB 68 net pension liability figure, the City's only prior option was to
commit additional funds to CalPERS (in excess of its annual required contributions) to
reduce its unfunded liability. However, additional funds sent to CalPERS are subject to
the same market volatility risk as the CalPERS investment policy target of 7%, and are
never again available to the City for other CalPERS pension expenses.
Potential Pension Policy Funding Options
Through Staff’s extensive research on strategies to more proactively address growing
pension costs, Staff recommends the development and establishment of a pension
policy. The purpose of this policy would be to establish practices and procedures that
will guide the City toward more effectively funding its future pension obligations.
The Finance Advisory Committee (FAC) considered pension funding options at its
March 12, 2020 meeting in order to provide a recommendation to the City Council. At
this time, the FAC intends to complete its review by the close of the fiscal year, June 30,
2020. Staff will then present a draft formal pension policy for consider ation by the City
Council. Feedback on the example policies will be incorporated into the drafting and
presentation of a formal pension funding policy.
In preparing to draft a Pension Policy for the City Council’s consideration, Staff has
spent considerable time and effort to determine the most efficient means of reducing the
UAL with the following goals in mind:
Preserve financial flexibility to meet or maintain City service obligations while
funding pension benefit obligations.
As of June 30,2014 2015 2016 2017 2018
Tier 1 79.6% 76.5% 70.7% 73.2% 71.8%
Tier 2 104.4% 96.6% 90.3% 94.8% 92.0%
PEPRA 108.8% 95.7% 89.9% 94.8% 91.8%
Combined 79.7% 76.7% 71.2% 74.1% 72.9%
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Be consistent with the Government Finance Officers’ Association (GFOA)
recommendations, strive to repay or amortize unfunded pension liabilities over a
period not to exceed 20 years (ideally falling within the 15-20 year range, but
never exceeding 25 years).
Shorter amortization periods, which dramatically reduce taxpayer interest costs
and better match the cost with the work-life of plan participants (i.e. equitable
allocation of cost among generations).
Pay at least the interest owed on the UAL to avoid negative amortization , which
ultimately adds to the interest costs paid by taxpayers.
These funding goals formed the basis of the funding options and recommendations
proposed in this report, as outlined below.
1. Pension Obligation Bonds
Pension obligation bonds (POBs) are taxable bonds that some state and local
governments have issued as part of an overall strategy to fund the unfunded portion of
their pension liabilities by creating debt. The use of POBs rests on the assumption that
the bond proceeds, when invested with pension assets in higher-yielding asset classes,
will be able to achieve a rate of return that is greater than the interest rate owed over
the term of the bonds. However, POBs involve considerable investment risk, making
this goal very speculative. Failing to achieve the targeted rate of return burdens the
issuer with both the debt service requirements of the taxable bonds and the unfunded
pension liabilities that remain unmet because the investment portfolio did not perform as
anticipated.
The Government Finance Officers Association (GFOA) recommends, and Staff concurs,
that state and local governments do not issue POBs for the following reasons:
1. The invested POB proceeds might fail to earn more than the interest rate owed
over the term of the bonds, leading to increased overall liabilities for the City.
2. POBs are complex instruments that carry considerable risk. POB structures may
incorporate the use of guaranteed investment contracts, swaps, or derivatives,
which must be intensively scrutinized as these embedded products can introduce
counterparty risk, credit risk and interest rate risk.
3. Issuing taxable debt to fund the pension liability would increase the City’s bonded
debt burden and potentially uses up debt capacity that could be used for other
purposes.
4. POBs are frequently structured in a manner that defers the principal payments or
extends repayment over a period longer than the actuarial amortization period,
thereby increasing the sponsor’s overall costs. (i.e., 30-year repayment of bonds
vs. 20-year amortization period).
5. Rating agencies may not view the proposed issuance of POBs as credit positive,
particularly if the issuance is not part of a more comprehensive plan to address
pension funding shortfalls.
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2. Pay Down the City’s UAL
This option would require developing and implementing a plan that would result in
making additional cash contributions to our CalPERS plan directly to pay down the
City’s UAL. As an example, let’s say CalPERS is able to quantify the total increase to
our liability for the effects of the 2007 enhancement. Staff could obtain a payoff
schedule from CalPERS to pay it off with excess reserves over a set number of years
(i.e. 5-year, 10-year). This additional contribution would be combined with total plan
assets and (everything else held constant), would decrease our liability. However, with
the volatility in the expected returns at CalPERS, and the resulting increase in our UAL,
the likelihood that our long-term obligations would be reduced is not guaranteed. This
approach would be desirable and recommended if CalPERS returns came in over the
assumed rates. Therefore, it is Staff’s recommendation that this option not be
considered.
3. Section 115 Trust
To help better manage the short-term costs and long-term liabilities associated with
pensions, Staff recommends the City consider exploring setting up a Section 115 Trust
and include funding parameters in the draft pension policy.
This trust provides the City with far more flexible and attractive alternatives than sending
additional funds to CalPERS or obtaining a lower return by keeping them in the City’s
investment portfolio. Additionally, it allows for pre-funding of pension obligations using
accumulated investment returns.
Establishing and funding a local Section 115 (irrevocable) Trust fund can help offset
unanticipated spikes in employer contributions. Funds placed in a 115 Trust are
irrevocably committed for essential government functions, such as pension obligations.
These trusts are held by a third-party trustee, with investment strategies being
determined by the City. Generally, these strategies are a bit more diverse and often
offer more stable returns than CalPERS. Moreover, these would definitely generate a
higher return than the 1.8% return currently received in total from the City’s investment
portfolio.
Monies set aside in a 115 Trust can be used to ease budgetary pressures resulting from
unanticipated spikes in employer contribution rates. For example, we can set aside
some of our year-end surplus to use in future years when the required contribution is
less affordable. By and large, this trust works for agencies that are in a healthy financial
condition and depend on a consistent revenue stream. Local cities with a Section 115
Trust include Manhattan Beach, Beverly Hills, Cypress, El Segundo and Huntington
Beach. Setting up a Section 115 Trust takes about 3-6 months, and each of the steps
below must be followed before contributions can begin:
Complete trust documents
Establish investment policy (diversified investments)
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Select trustee, custodian, investment advisor
Develop financial policies and procedures for annual contribution amounts to the
trust
The trust provides benefits and alternatives to the City to pre-fund its unfunded pension
obligations. These benefits include the following:
Complete Local Control Over Assets: The trust account can be accessed at any
time as long as it is used to pay the employer's pension obligation. Assets in the
trust can be used to offset contribution rate increases or as an additional source
of funds during tough budget times. The City controls the funding decisions
as contributions and disbursements are voluntary.
Investment Flexibility: Unlike investments maintained in the City’s investment
portfolio, the monies placed into the trust are invested based on the risk
tolerance level established by the City. The City maintains oversight of the
investment manager and the portfolio's risk tolerance level, thereby ensuring the
investments can be diversified and invested in a prudent fashion. The funds
accumulated in this trust can be invested in accordance with the rules governing
such special purpose accounts rather than as part of the City’s General Fund.
The ability to diversify investments is likely to result in better returns than the
City’s investment portfolio. Staff has inquired from various trust administrators
offering this service. Investment returns on a “conservative” investment strategy
generate about 5% annual returns.
Actuarially Sound Retirement System: The trust provides integrity and security
for the source of funding for retirement benefits.
CONCLUSION:
This report is meant to provide background information on the City’s pension benefits
and costs, and to seek direction from the City Council regarding the formation of
pension policy based on a Section 115 Trust within which the City could pre-fund its
pension obligation.
ALTERNATIVES:
In addition to the Staff recommendation, the following alternative action is available for
the City Council’s consideration:
1. Do not direct Staff to bring a draft pension policy to the City Council.
2. Take other action, as deemed appropriate.
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RANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 04/02/2019
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA DESCRIPTION:
Consideration and possible action to receive a report that provides a historical summary
of the City’s CalPERS pension costs and the benefit changes that resulted in the
increase in the City’s unfunded liability.
RECOMMENDED COUNCIL ACTION:
(1) Receive and file the information.
(2) Direct Staff to analyze and bring back to the City Council:
(a) An early retirement incentive to Tier 1 employees who are retirement eligible;
(b) The savings from requiring the Tier 1 employees to pay an increased
percentage of their annual salary to offset the increased City costs and
address the inequity with Tier 2 and 3 employees regarding total
compensation; and
(3) Other actions as the council deems appropriate
FISCAL IMPACT: None
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): ###-###-####-####
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
REVIEWED BY: Deborah Cullen, Director of Finance
APPROVED BY: Doug Willmore, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Staff report from April 2017 (page A-1)
B. Minutes City of Rancho Palos Verdes Budget Workshop April 29, 2006
(page B-1)
C. Staff Report from June 6, 2006 (page C-1)
D. Minutes City of Rancho Palos Verdes FAC June 28, 2006 (page D-1)
E. Minutes City of Rancho Palos Verdes FAC January 31, 2007 (page E-1)
F. Minutes City of Rancho Palos Verdes FAC February 15, 2007 (page F-1)
G. Minutes Tactical Planning & Budget Policy Workshop March 24, 2007
(page G-1)
H. Minutes City of Rancho Palos Verdes City Council Meeting June 19, 2007
(page H-1)
BACKGROUND AND DISCUSSION:
A-1
On February 19, 2019, Councilman Dyda requested Staff to prepare a historical timeline
and an analysis of the City’s CalPERS pension benefit and the unfunded pension
liability, in addition to providing possible actions for the City to consider that could
reduce or slow the growth of its unfunded liability.
Staff provided a detailed report in April 2017 that covers the relevant information
regarding the CalPERS Pension and Benefit Program for the City (see Attachment A).
This report is very informative and provides detailed information regarding how the
pension system works and changes that have been made over the years.
The purpose of this report is to delve into the specific changes that occurred to the
City’s PERS contract that impacted the City’s unfunded portion of the pension costs.
The unfunded portion is the amount of retirement benefits that have been earned but
are not fully funded.
HISTORY OF EVENTS
During the Fiscal Year 2006-07 Budget Workshop on April 29, 2006, the City Council
discussed the topic of employee compensation and benefits. At the time, the City paid
the full 7% employee contribution toward the CalPERS pension and all staff benefits
were based on the 2%@55, which had been increased from 2%@ 60 in 2001.
One of the reasons the pension topic was on the City Council agenda was because of
an assemblyman’s proposed bill, (ACA 23) that would require a defined contribution
retirement plan for all new CalPERS members. During this workshop, many ideas
were expressed by members of the City Council and Staff regarding the employee
pension program and post-retirement health benefits, including the option of the
employees paying the 7% employee pension cost that the City was paying on their
behalf and the possibility of post-retirement health benefits. After a lengthy discussion,
a motion was made to direct the Finance Advisory Committee (FAC) to study the issues
related to the employee pension program and post-retirement health benefits as
described by the City Council and for Staff to report back to council. The motion passed
with the understanding that the Council would receive the report in sufficient time to
consider incorporating suggestions and recommendations from the FAC prior to the
adoption of the next year’s budget (Fiscal Year 07-08). (See B-1)
At the June 6, 2006, City Council meeting (See C-1), a staff report presented by the
Finance Director suggested that the Analysis of Employee Retirement Plan and
Employee Benefits Plans include:
1) Various options regarding the retirement plan, including the possibility of requiring
employees to make contributions to the existing pension plan or making no changes to
the current plan;
2) Various options regarding the possibility of providing post -retirement health
insurance;
A-2
3) Comparisons of short-term and long-term costs and savings resulting from the
options presented in 1) and 2) above for both the City and employees;
4) Comparisons of the impact of the different alternatives in combination with other
employee benefits; and
5) Comparisons with other California cities to enable the assessment of the potential
impact on employee morale, retention and recruitment.
Based on the minutes from the June 28, 2006, FAC meeting (Attachment D), Finance
Director McLean informed FAC that the Deputy City Manager, Carolynn Petru, and the
Assistant to the City Manager, Gina Park, were part of a project team working on the
pension and post-retirement health care assignment. He further informed them that
once the City received the CalPERS Actuarial Valu ation Reports, the City’s actuarial
consultant, John Bartel of Bartel Associates, would begin his work. Fieldman, Rolapp &
Associates would also conduct an analysis of the CalPERS side fund, the City’s
payment options, and the impact a formula change would have on the side fund. Lastly ,
Mike Garcia of Tierra West was tasked with completing a survey of benefits and
compensation for miscellaneous employees of comparable cities. The focus of this
survey would be a comparison of pension benefits, health insurance, and health
insurance for retirees, and deferred compensation.
On January 31, 2007, the findings of the analysis were presented to FAC (Attachment
E). The primary focus of the presentation was the results of Bartel and Associates’
findings regarding potential changes to the pension formula presented by John Bartel.
The recommendations were as follows:
Return the CalPERS pension formula to 2%@60, which would result in a savings
up to $28,000 annually.
Replace the City’s defined benefit plan with a defined contribution plan with a
10% contribution rate. 5% would be paid by employees and 5% would be
contributed by the City. This would result in savings of up to $106,000 annually
after 10 years based on turnover of one employee per year)
Bartel also gave an alternative suggestion if the first items were not preferred. He
suggested that new employees could be required to pay a portion of the 7% employee
contribution that was being paid by the City. If this change was made, the City would
realize a savings of up to $11,000 annually for each 1% contributed by employees after
about 10 years of turnover at a rate of one employee per year.
Bartel was asked what pension formula could be used to help the City retain current
staff and remain competitive when recruiting new employees. He stated that 3%@60
was the best designed retirement formula, but was also the most expensive. Bartel
informed the FAC that cities in California were starting to move away from the 2%@55
formula to increased benefit formulas; however, the cities used in surveys and analysis
were still using the 2%@55 formula. Member James suggested that if FAC was going to
propose increasing costs to the City Council, it would be more appropriate to leave the
2%@55 formula as is and concentrate on retiree health.
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Several employees in attendance provided public comments on their willingness to pay
more for an enhanced retirement benefit formula and that there was also a desire
among staff to see a retiree medical plan of some type put in place. It was inferred that
these changes would improve the City’s competitiveness in recruiting and retaining
staff.
Based on the findings of the analysis, FAC created three possible options to present to
the City Council. FAC selected Option 2 as its recommendation.
Option 2
o Make no change to the current CalPERS pension formula
Remain at 2%@55
o Establish a deferred contribution post-retirement healthcare account for
full-time employees
Employees will contribute 2% of their salary
The City will contribute $75 per pay period
On February 15, 2007, Deputy Director Downs returned to FAC to confirm additional
language to be added to FAC’s recommendation to the City Council (See F-1). The
additional language added the recommendation s that:
Employees should not be required to contribute toward their pension without an
enhancement to their pension formula
There should be no decrease in the pension formula for new employees
A defined contribution post-retirement health care plan should be established for
full-time employees.
Several employees provided public comments at the meeting. There was a consensus
in their comments that, as a whole, if required to contribute toward some additional
benefit, Staff would prefer the additional amount go toward an enhanced pension
formula of 2.5%@55 rather than a post-retirement healthcare plan.
FAC Member McCleod stated that based on the comments and letters from Staff, FAC’s
original recommendation appeared to not be what Staff wanted and that it was
recognized that there was strong consensus toward the enhanced 2.5%@55 formula.
Chair Clark mentioned that increasing the formula would be inconsistent with other
cities and place Rancho Palos Verdes toward the top of retirement benefits. Finance
Director McLean indicated that it would actually only place the City near the middle
because factors other than formula are considered in the rankin gs. In addition, he stated
that increasing the formula to 2.5%@55 and requiring a 2% employee contribution
would only cost the City $64,000 annually. FAC Member Moon expressed concern over
the possibility of decreased competitiveness, as many cities were discussing possible
formula changes and that while Rancho Palos Verdes was implementing a retiree
health plan, other cities would increase their formulas, pushing the City to the bottom of
the rankings.
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Apparently, based primarily on Director McLean’s assertions of costs, FAC decided to
revise the original list of options to be presented to the City Council and change its
recommended option. FAC’s choice of Option 2 was amended to contain the following:
Increase CalPERS pension formula to 2.5%@55
o Employees will contribute 2% of their salary
o The City will incur a total annual cost of $64,000
Establish a deferred contribution post-retirement healthcare account for full-time
employees.
o Employees will contribute 1% of their salary, down from 2%
o The City will contribute $50 per pay period (a total cost of $64,000
annually) for each full-time employee, down from $75 per pay period (a
total cost of $96,000 annually)
According to the report, these changes to FAC’s recommendation would result in an
annual increase in cost to the City from $96,000 to $128,000.
At the Fiscal Year 07-08 Tactical and Budget Policy Issues Workshop on March 24,
2007, the City Manager presented the FAC recommendations to include increasing the
pension benefit formula to 2.5%@55 with a 2% salary contribution from employees (See
G-1). The report stated that the City’s cost would only be $64,000 annually and the
employees’ cost would be about $72,000 annually. The report further stated that
according to Tierra West’s Retirement Benefits Survey (see below), moving to the 2.5%
benefit formula would move the City’s ranking from near last (tied with four other cities)
to somewhere mid-range of the 21 cities surveyed. However, as shown below in the
original survey, the differentiating factor was the retiree health insurance option and if
the City had adopted the original FAC recommendation of adding the retiree health
benefit alone, the City would have moved up to the midpoint.
City Rank
PERS
Formula Employee Portion
Pay Rate for Benefit
Calculation Potential Changes to PERS Formula
Participation in
Social
Security/PARS
Deferred
Compensation
Match
Retiree Health
Insurance
Mission Viejo 1 2.7%@55 Employee Pay 1%Highest Year No No No Yes
Beverly Hills 2 2.5%@55 Employee Pay 1%Highest Year Yes (4)No No Yes
San Clemente 3 2%@55 City Paid Highest Year No Yes (SS)No Yes
El Segundo 4 2%@55 Employees Pay a portion Avg. of Highest 3 yrs.No Yes (SS)No Yes
Rolling Hills Estates 5 2%@55 City Paid Avg. of Highest 3 yrs.No Yes (PARS)No Yes
Seal Beach 6 2%@55 City Paid Highest Year No No Yes Yes
Malibu 7 2%@55 City Paid Highest Year No No Yes Yes
Huntington Beach 8 2%@55 City Paid Highest Year Currently discussing 2.7%@55 with labor groups No Yes Yes
Santa Monica 9 2%@55 City Paid Highest Year Yes 2.7%@55 effective 7/1/07 No Yes Yes
West Hollywood 10 2%@55 City Paid Highest Year Currently discussing 2.7%@55 with employees No Yes Yes
Gardena 11 2%@55 City Paid Highest Year No No No Yes
Lawndale 12 2%@55 City Paid Highest Year Currently discussing 2.7%@55 with employees No No Yes
Newport Beach 13 2%@55 City Paid Highest Year No No No Yes
Hermosa Beach 14 2%@55 City Paid Highest Year No No No Yes
Palos Verdes Estates 15 2%@55 City Paid Highest Year No No No Yes
Dana Point 16 2%@55 City Paid Highest Year No No No No
Laguna Beach 16 2%@55 City Paid Highest Year No No No No
Lake Forest 16 2%@55 City Paid Highest Year No No No No
Manhattan Beach 16 2%@55 City Paid Highest Year No No No No
Rancho Palos Verdes 16 2%@55 City Paid Highest Year No No No No
Laguna Hills 21 2%@60 City Paid Highest Year No No No No
Compensation Survey - Retirement Benefits - Original Survey 1/10/2007
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Updated Original Survey with Retiree Health Insurance included.
The Staff recommendation from the March 24, 2007, staff report included the following:
“In accordance with the goal to provide competitive employee benefits that promote
positive morale and retain and recruit high quality employees that the Council previously
established:
I) Direct Staff to expedite the performance of a comprehensive salary survey
II) Direct Staff to develop a defined contribution post-retirement health care plan with an
employee salary contribution of 1% and a matching contribution by the City of $50 per
pay period, with the goal of implementing a plan at the beginning of 2008.
III) Direct Staff to begin the process leading to an amendment of the City’s CalPERS
agreement to increase the pension benefit formula from 2%@55 to 2.5%@55 with
employee contributions of 2% of salary, subject to the majority vote of the City’s
employees.
Additionally, direct Staff to present a cost-effective debt financing scenario of the side
fund liability to the City Council in the near future. The California Statewide
Communities Development Authority offers a Pension Obligation Bond Program (POB)
to assist California local governments.
FISCAL IMPACT
If the City Council adopts the recommendation of the FAC, the fiscal impact would be as
follows:
City Rank
PERS
Formula Employee Portion
Pay Rate for Benefit
Calculation Potential Changes to PERS Formula
Participation in
Social
Security/PARS
Deferred
Compensation
Match
Retiree Health
Insurance
Mission Viejo 1 2.7%@55 Employee Pay 1%Highest Year No No No Yes
Beverly Hills 2 2.5%@55 Employee Pay 1%Highest Year Yes (4)No No Yes
San Clemente 3 2%@55 City Paid Highest Year No Yes (SS)No Yes
El Segundo 4 2%@55 Employees Pay a portion Avg. of Highest 3 yrs.No Yes (SS)No Yes
Rolling Hills Estates 5 2%@55 City Paid Avg. of Highest 3 yrs.No Yes (PARS)No Yes
Seal Beach 6 2%@55 City Paid Highest Year No No Yes Yes
Malibu 7 2%@55 City Paid Highest Year No No Yes Yes
Huntington Beach 8 2%@55 City Paid Highest Year Currently discussing 2.7%@55 with labor groups No Yes Yes
Santa Monica 9 2%@55 City Paid Highest Year Yes 2.7%@55 effective 7/1/07 No Yes Yes
West Hollywood 10 2%@55 City Paid Highest Year Currently discussing 2.7%@55 with employees No Yes Yes
Lawndale 11 2%@55 City Paid Highest Year Currently discussing 2.7%@55 with employees No No Yes
Rancho Palos Verdes 12 2%@55 City Paid Highest Year No No No Yes
Gardena 12 2%@55 City Paid Highest Year No No No Yes
Newport Beach 12 2%@55 City Paid Highest Year No No No Yes
Hermosa Beach 12 2%@55 City Paid Highest Year No No No Yes
Palos Verdes Estates 12 2%@55 City Paid Highest Year No No No Yes
Dana Point 17 2%@55 City Paid Highest Year No No No No
Laguna Beach 17 2%@55 City Paid Highest Year No No No No
Lake Forest 17 2%@55 City Paid Highest Year No No No No
Manhattan Beach 17 2%@55 City Paid Highest Year No No No No
Laguna Hills 21 2%@60 City Paid Highest Year No No No No
* Shows impact to the City of RPV's ranking when implimenting FAC's original recommendation of providing retiree health insurance and no other changes to pension or benefits.
Compensation Survey - Retirement Benefits - Original Survey 1/10/2007*
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1) Paying off the existing $1.9 million side fund liability would save the City about
$358,000 or nearly $20,000 annually (based upon a present value analysis).
2) An increase of the pension benefit formula to 2.5%@55 would:
i) Cost employees about $72,000 annually;
ii) cost the City about $64,000 annually; and
iii) increase the City’s side fund liability by about $930,000. However, the cost of
the employee and employer contributions stated above cove rs the cost of
amortizing the increase of the side fund liability. The use of debt financing the
$930,000 increase of the side fund liability would save the City about $10,000
annually.
3) Establishing defined contribution post-retirement health care accounts for all full-time
employees would:
i) Cost employees about $36,000 annually; and
ii) Cost the City about $64,000 annually”
Based on the notes from the budget meeting, the item was presented as an option
chosen by the employees and the annual costs were verified by the Finance
Department.
At the June 19, 2007 budget adoption hearing, Staff presented the FAC
recommendation on the consent agenda for City Council approval (Attachment H). The
item was pulled for discussion. A brief staff report was presented by Deputy City
Manager, in this presentation it was noted that the City had received “better than
expected” results from an actuarial valuation and informed council that based on this
report the recommendation was that the employees should only contribute 1.5% of their
annual salary instead of 2% that had been recommended by FAC. Based on this
change, and noted in the staff report the annual cost to the City now totaled $70,000
and the cost to the full-time employees would be 65,600. It should also be noted
that the part-time employees had already been paying 7% of their pension costs.
Questions from the City Council were directed to senior staff regarding clarification of
the estimated cost increase and long-term impacts to the City. Staff responded that the
increase in the City’s Side Fund Liability by about $485,890 was for future benefits not
earned and could be amortized over 19 years at a cost of approximately $20,000 per
year. There was no comment regarding the cost impact to the benefits already earned
and that would be calculated as the unfunded liability. Ultimately, the City Manager
clarified the fiscal impact to be only an additional $50,000 annually as the
recommendation was to pay off the side fund.
Council also directed questions to the City Manager regarding the survey of cities that
were moving to the enhanced benefit (2.5%@55) and she confirmed that they believed
most of the cities were in the process of enhancing their benefits. As it turned out, of
course, most of the cities, did not enhance their benefits as shown in the updated
survey below.
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Councilman W olowicz proposed a sub motion, seconded by Councilman Gardiner, to
keep the pension formula at 2%@55. He expressed concerns with continued increases
in defined benefit costs and thought that the city should hold the line. Mayor Pro Tem
Stern stated that he believed the changes would be appropriate and Councilman Clark
agreed that the changes would help increase the competitiveness of the City in
comparison to the neighboring cities. A vote was taken and the sub motion proposed
by Councilman Wolowicz did not pass. A second motion was made to increase the
CalPERS pension formula to 2.5%@55 and was approved by a vote of 3 to 2, with
Wolowicz and Gardiner opposing.
The table below summarized the history of the City’s retirement plan with California
Public Employees’ Retirement System (CalPERS).
Year Description
1974 The City contracted with CalPERS for employees’ retirement plan at 2%@60,
3-year final compensation
1978 Amended the contract with CalPERS to add Survivor Benefit to Level 1
2000 Amended the contract with CalPERS to increase Survivor Be nefit to Level 4
2001 Amended the contract with CalPERS to change the employees’ retirement
plan to 2%@55, 1-year final compensation
2005 The City was required to participate in a risk pool because the CalPERS plan
contained fewer than 100 active members as of June 30, 2003.
2007 Amended the contract with CalPERS to change the employees’ retirement
plan to 2.5%@55, 1-year final compensation
2012 Amended the contract with CalPERS to add Tier 2 and Tier 3 for employees’
retirement plan at 2%@60 and 2%@62, respectively, 3-year final
compensation
City Rank
PERS
Formula Employee Contribution Enhancement Date PERS Formula Employee Contribution PERS Formula Employee Contribution
West Hollywood 1 2.7% at 55 8%
Reduced it down to 2% @55 in
July 2012 2% at 55 2% at 62 half of normal cost
Santa Monica 2 2.7% at 55
6.7% plus cost of the enhanced
benefit 2% at 55 7%2% at 62 half of normal cost
Mission Viejo 3 2.7% at 55 8% plus 1.5%2% at 60 7% plus 1.5%2% at 62 6.25% plus 1.5%
Beverly Hills 4 2.5% at 55 8%6/30/2001 2% at 62 half of normal cost
Laguna Beach 4 2.5% at 55 8%2% at 62 half of normal cost
Rancho Palos Verdes 6 2.5% at 55 8%9/27/2007 2% at 60 7%2% at 62 6.25%
Newport Beach 7 2.5% at 55 12.70%12/22/2007 2% at 60 12.70%2 at 62%12.70%
San Clemente 8 2% at 55 5.90%2% at 62 6.25%
El Segundo 9 2% at 55 7%2% at 60 7%2% at 62 6.25%
Seal Beach 10 2% at 55 7%2% at 62 6.25%
Palos Verdes Estates 10 2% at 55 7%2 at 62%6.25%
Dana Point 10 2% at 55 7%2 at 62%6.25%
Malibu 13 2% at 55 2% at 62 6.50%
Gardena 14 2% at 55 7%2% at 62 6.75%
Lawndale 15 2% at 55 2% at 62
Hermosa Beach 16 2% at 55 7%2% at 60 7%2% at 62%half of normal cost
Lake Forest 16 2% at 55 7%2% at 62 half of normal cost
Manhattan Beach 16 2% at 55 7%2% at 62 half of normal cost
Huntington Beach 19 2% at 55 8%2% at 62 half of normal cost
Rolling Hills Estates 20 2% at 55 10.15%2% at 60 8.35%2% at 62 7.27%
Laguna Hills 21 2% at 60
4.5%, increase to 5.5% on
7/1/19 2% at 62 half of normal cost
Compensation Survey - Retirement Benefits - Updated 2019
Tier 1 Tier 2 Tier 3
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As a result of the required participation in the risk pool in 2005, a side fund was required
to be created to account for the difference between the funded status of the pool and
the funded status of the City’s plan. At the time of creation of the side fund, Fiscal Year
02-03, the City’s actuarial accrued liabilities equaled $8,964,495 and the actuarial value
of its assets were $7,413,891, leaving a difference of -$1,550,604, which was
subsequently placed in the side fund. The side fund is credited with the actuarial
investment return assumption on an annual basis; however, if the return is negative, the
side fund balance will increase. The side fund balance grew to just over $1.9 million by
Fiscal Year 04-05. A payment of $700,000 was made to the side fund in Fiscal Year 08-
09 and the remaining balance of $1.6 million was paid off in FY 09-10.
The table below shows the pension costs, normal cost and unfunded liability for Tier 1,
classic members with 2.5%@55, based on the actuarial reports from CalPERS from the
year that the pension was enhanced to the current fiscal period .
As shown below, as presented to the City Council in Fiscal Year 2007-08, the estimated
$64,000 annual increase, calculated over 11 years, would have totaled approximately
$704,000. However, the City’s unfunded liability has actually grown to over $10.5
million. This unfunded liability is in addition to the $11,563,560 (includes the payoff of
the side fund of approximately $2 million) that the City has paid in annual contributions
for Tier 1 benefits (i.e., the annual normal costs and unfunded payment) in those 11
years. We have no feasible explanation for this discrepancy.
Tier 1
FY 2006-07 FY 2018-19 Variances
Normal Cost 12.906% 17.970% 5.064%
Employee Contribution 6.500% 7.948% 1.448%
Employer Contribution 6.406% 10.022% 3.616%
June 30, 2007 June 30, 2017 Variances
Unfunded liability $2,251,769 $10,534,729 $8,282,960
The City discontinued the 6.5% employer paid member contribution (on behalf of the
employee) in September 2011 and employees received a 5% increase in their salary to
offset the increase. Tier 1 employees currently contribute 8% of their annual salary to
the pension costs.
As a comparison, the City’s costs for Tier 2 and Tier 3 are below.
Tier 2
FY 2015-16 FY 2018-19 Variances
Normal Cost 13.621% 14.546% 0.925%
Employee Contribution 6.912% 6.912% 0.0%
Employer Contribution 6.709% 7.634% 0.925%
June 30, 2013 June 30, 2017 Variances
Unfunded liability $1,700 $49,555 $47,855
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Tier 3
FY 2015-16 FY 2019-20 Variances
Normal Cost 12.487% 13.092% 0.605%
Employee Contribution 6.250% 6.250% 0.0%
Employer Contribution 6.237% 6.842% 0.605%
June 30, 2015 June 30, 2017 Variances
Unfunded liability ($1,302) $32,101 $33,403
The action taken in 2007 to increase PERS benefits has led to a dramatic disparity in
compensation of employees, even for those doing the same jobs with similar education
and years of experience. As shown below, the annual normal cost is a calculation of
the employee annual salary and the unfunded liability is for benefits earned that have
not been fully funded.
POSSIBLE SOLUTIONS
One solution the City could offer is a retirement incentive to Tier 1 employees that are
eligible for retirement. Usually, this could be something as simple as offering employees
x% of their base compensation if they retired or moved on from the City by a certain
date. At the time an employee leaves the City, the City’s retirement obligation stops
accruing. Typically, a situation such as this is analyzed simply in a cost/benefit scenario,
i.e., comparing the cost of the incentive to the short-term and long-term savings of
reducing the Tier 1 costs. Currently, the City has ten (10) Tier 1 employees who are
retirement eligible.
Another solution would be to calculate the impacts of increasing Tier 1 employees’
contribution to PERS up to 12.70% (which is what the City of Newport Beach has
implemented, for example). This could be negotiated and implemented as part of a new
MOU in two years, or the current MOU could be reopened.
RECOMMENDATION
Direct Staff to analyze and bring back to the City Council:
POSITION PERS Tier
PERS Annual City
Normal Cost
Contribution
PERS Annual City
Unfunded Liability
Contribution
Permit Technician 1 8,449.69 24,366.61
Permit Technician 3 4,065.06 60.27
Senior Administrative Analyst 1 12,662.96 36,077.23
Senior Administrative Analyst 2 8,147.25 102.89
Senior Planner 1 12,538.44 35,722.49
Senior Planner 2 8,863.12 111.93
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An early retirement incentive to Tier 1 employees who are retirement eligible;
The savings from requiring the Tier 1 employees to pay an increased
percentage of their annual salary to offset the increased City costs and address
the inequity with Tier 2 and 3 employees regarding total compensation
Other actions as the council deems appropriate
ALTERNATIVES:
In addition to the Staff recommendations, the following alternative action is available for
the City Council’s consideration:
1. Direct Staff to move forward with only one or a combination of both
recommendations above.
2. Direct Staff to take alternate action.
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RANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 04/04/2017
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA DESCRIPTION:
Consideration and possible action to receive information regarding the CalPERS
Actuarial Reports and other information related to the CalPERS Pension and Benefit
Program for the City of Rancho Palos Verdes.
RECOMMENDED COUNCIL ACTION:
(1) Receive and file.
FISCAL IMPACT: None
Amount Budgeted: $0
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Deborah Cullen, Director of Finance
REVIEWED BY: Same as above
APPROVED BY: Doug Willmore, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Actuarial Valuation Report for Tier 1 (page A-1)
B. Actuarial Valuation Report for Tier 2 (page B-1)
C. Actuarial Valuation Report for Tier 3 (page C-1)
BACKGROUND AND DISCUSSION:
The purpose of this report is to provide information and analysis of the CalPERS
Retirement Benefit Program, which covers the City employees. Staff will outline the
current program benefits and costs, and will additionally provide information regarding
recent changes implemented by CalPERS to address current funding levels and the
unfunded liability.
Annually, CalPERS prepares Actuarial Valuation Reports (AVR) for all member
agencies. These reports are created by licensed actuaries whose role is to ensure that
enough funds are accumulated to pay benefits. They are responsible for setting an
annual contribution requirement with goals of fully finding benefits by employee
retirement dates and maintaining inter-generational equity.
CalPERS public agency plans are pre-funded, meaning the funds are accumulated as
the employee earns the retirement benefit. Plan assets come from three different
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sources: employer contributions, employee contributions and investment returns on
CalPERS Investments.
(NOTE: Based on data as of October 2016)
Employee Contributions
Employee contribution rates are set by statute and vary by benefit level. The City
currently has three benefit levels:
• Tier 1 – Employees hired prior to local pension reform action by City Council on
September 20, 2011. These employees earn 2.5% of salary for each year
employed with the City (based on the highest year’s compensation) at the age of
55. The employee contribution rate for Tier 1 is 8.000% of their annual
salary;
• Tier 2 – Employees hired after local pension reform, who previously worked for
another governmental agency with a reciprocating pension plan. These
employees earn 2% of salary for each year employed with the City (based on a
three-year average) at the age of 60. The employee contribution rate for Tier
2 is 7.000% of their annual salary;
• Tier 3 – Employees hired after state-wide pension reform effective January 1,
2013, who have not previously worked for another governmental agency with a
reciprocating pension plan, or have not worked for such an agency within six
months of being hired by the City. These employees earn 2% salary for each
year employed with the City (based on a three-year average) at the age of 62.
The employee contribution rate for Tier 3 is 6.250% of their annual salary;
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Employer Contributions
The employer contribution is established to cover the remaining benefit after employee
contributions and investment earnings are applied. Employer contributions are
determined by annual actuarial valuations, whereas the employee rate is set by statute
and not adjusted periodically. These valuations are based on the benefit formula the
City provides and the employee groups covered.
The annual contribution rate determines the payments that need to be made to
CalPERS to fund the City’s annual benefit costs (including the unfunded accrued
liability) as determined in the Actuarial Valuation Report. The City includes this
assumption in the annual budget process. Salaries are estimated during the budget
process and the contribution rate is applied to the total salaries to determine the annual
payment to be made to CalPERS.
Actuarial Valuation System
An annual valuation is performed by the CalPERS actuary and the City receives the
results of this valuation, which determines the amount of contributions the City needs to
make for the next fiscal year. It is important to remember that the valuation reports lag
and the contribution rates that are used in a fiscal year are based on payroll data and
employee census from the prior year. For example, the current 2015 Annual Valuation
Report determined the pension rates used in the FY16-17 budget.
There are three main categories that are used to create the actuarial valuation results:
member information, benefit provisions, and actuarial assumptions and methods. To
begin the process the actuary collects the current member information from our agency
and the benefit provisions in the City’s contract with CalPERS are built into the
valuation. Lastly, the actuarial assumptions and methods are applied; this results in the
actuarial valuation results.
The key actuarial valuation results are the present value of benefits, normal cost,
accrued liability and funded status, as described briefly in the following table.
Actuarial Valuation
Results Definition Example
Present Value of
Benefits
The present value of benefits
represents the total dollars
needed today to fully fund all
expected benefits for current
members in the plan (both
past and future service).
Amount of money needed
today to fully fund service
credits accrued to date AND
the expected future years of
service.
Normal Cost
Normal cost is the annual cost
associated with one year of
service accrual.
The cost of one year of
service by an employee. This
cost is also dependent on the
City’s plan provisions and
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assumptions including
expected investment return
and age member entered
plan, among other items.
Accrued Liability
Accrued liability is the portion
of the Present Value of
Benefits related to service
earned to date. This also
includes the target level of
assets on the given valuation
date.
The portion of the Present
Value of Benefits related to
the years of service accrued
to date.
Funded Status
The annual certified actuarial report issued by CalPERS determines the Funded Status
for all plans administered by CalPERS. The funded status is calculated as follows:
Market Value of Assets - Accrued Liability = Funded Status %
Funded status is an indicator of how “on track” our plan is, and 100% is the desired
target. Based on information from CalPERS, the “average plan” is about 73% funded
as of the latest annual actuarial reporting. The City is funded at 76.5% for the Tier 1
employees (see page 11 of Attachment A), 96.6% for Tier 2 employees (see page
11 of Attachment B) and 95.7% for the Tier 3 employees (see page 11 of
Attachment C). Overall, the City is 89.6% funded which is significantly above the
average.
Each year, every employer contribution requirement is adjusted based upon the Funded
Status. If an employer reached the 100% Funded Status in a given year, the employer
would still be required to make the Normal Cost contribution, which is the benefits
earned by employees during that fiscal year. Employers that are less than 100%
funded must make the Normal Cost Contribution and an annual payment toward the
Unfunded Accrued Liability.
Every employer makes contributions to CalPERS in two parts:
A. Normal Cost - Pays for a year of benefit accrual (i.e., an employee works a full
year of service for the City)
B. Amortization of Unfunded Accrued Liability (UAL) - Pays for any deficit or
surplus accrued over the prior years of service.
C. Total Annual Contribution Rate = Normal Cost + UAL
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Moving Parts to Consider
Assumptions used by CalPERS to create the annual contribution rate are always a
moving target. Some of the items to consider are:
• The City hires a new employee
• The City must start pre-funding promised pension benefit
• Many unknowns:
o Future salary increases
o Years of service / age of retirement
o Length of time benefits will be paid
o Investment returns over time
The actuary does track employees that leave our agency for another and incorporate
salary changes up to the IRS limit into our annual valuations. This ensures that the
City is recognizing the liability as it is being earned.
Certified actuaries follow guidelines that assist them in handling the unknown. Below is
a list of some of the tools that are used to handle the unknown elements:
• Demographic Assumptions include:
o Mortality/Longevity
o Retirement rates/ Service Termination rates
o Disability incidence rates
o Typical age, service and gender related
o May vary based upon benefit formula and member category (i.e. Police,
Fire or Miscellaneous)
• Economic Assumptions include:
o Salary growth rates
o Annual inflation
Current assumption is 2.75%
o Investment return / Discount Rate
Current assumption is 7.50% (will be reduced to 7.00% over the
next three years)
Actuarial assumptions are used for the long term and are rarely realized in a given year.
Gains or losses occur when actual experience doesn’t match these assumptions.
CalPERS actuarial staff performs an Experience Study every four years and compares
actual experience with the actuarial assumptions. An experience study measures
actual plan demographic experience over a defined period of time. The results of the
study are used to refine and improve actuarial assumptions used in future actuarial
valuations. Based on that study, changes are recommended to the CalPERS Board.
The most recent and publicized changes were to the mortality rates to estimate life
expectancy for members and the discount rate used for the investment return.
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CalPERS generally phases in significant changes in assumptions to enable employers
to plan for the future increase in benefit costs.
CalPERS Risk Pools
Based on information from CalPERS, when performing actuarial valuation, actuaries
use assumptions to predict future employee behavior. The key for actuarial
assumptions to work is to have large numbers. CalPERS administers over 2,000
separate pension plans for local agency employers. Of these 2,000 plans, over 700 are
plans that cover fewer than 10 active employees.
It became evident in the late 1990s that smaller employers could not bear the risk
associated with their pension plans, primarily due to demographic changes. As a
smaller agency, when a member exits the fund by withdrawing their assets or begins to
draw down on their retirement, the impacts are felt much more immediately than that of
a larger agency. For example, a City of ten employees with a standalone fund would be
much more affected by two members exiting than an employer with 200 employees and
corresponding assets. The small size of a city potentially drives the annual contributions
upward to keep a fund funded at an acceptable level.
In 2003, the CalPERS Board approved the implementation of risk pools, for
miscellaneous members and safety (police and fire) members. To protect smaller
agencies that have fewer than 100 active members in either group from being
disproportionately impacted due to their size, they are required to be part of the risk
pool. Being part of the risk pool helps to mitigate liability volatility while still keeping the
assets contributed separated by agency.
Risk pooling is the process of combining assets and liabilities across employers to
produce a larger, risk-sharing pool. Risk-sharing pools dramatically reduces large
fluctuations in an employer’s retirement contribution rate caused by unexpected
demographic events. Similar to mutual funds or investment trusts, pooling allows fund
managers to invest and sell assets when the time is right, not when members join or
leave a fund, or begin drawing down on assets. The employer’s assets are tracked
separately and they are not responsible for other employers’ obligations, and the group
benefits by creating insulation from shocks that occur. In essence, it creates more day-
to-day contribution rate stability for employers when people retire or separate from
CalPERS.
Sections 20840, 20841 and 20842 of the California Government Code allow the
CalPERS Board to create risk pools and mandate public agencies participation in the
pools. Risk pools for public agencies went into effect in 2003. The first-pooled
contribution rates became effective July 1, 2005.
Pools were initially created according to their benefit formula and employee
classification (miscellaneous or safety). Participation in either the miscellaneous or
safety pool is mandatory for public agencies with fewer than 100 active members. The
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City of Rancho Palos Verdes has fewer than 100 active members, so the City is
required to be part of a risk pool based on the benefit provided to the employees.
Initially, five miscellaneous risk pools were created and four safety risk pools were
created aligned with benefits provided, i.e. 2% @ 55.
In September 2012, Governor Brown signed AB 340, the Public Employee Pension
Reform Act (PEPRA), which imposed sweeping reforms for pension provisions. The
new law defined pensionable compensation and imposed specific caps and limits on
compensation used in the defined benefit calculation.
Additionally, PEPRA established equal sharing of pension costs with new employees
and created new benefit formulas for employees joining CalPERS after 2012. The City
also took steps to mitigate pension costs going forward by reducing the benefit for
existing CalPERS members who joined the City after 2012.
Over the past several years, CalPERS staff were monitoring the risk pools to ensure
their effectiveness at protecting the small employers from large fluctuations in employer
contribution. By late 2013, CalPERS staff brought information to the Board identifying
some unintended consequences resulting from the interaction of PEPRA and existing
Board policies on risk pools. They reported to the Board that changes to the risk pools
were necessary to ensure proper funding of the pools and address some equity issues.
Most of the unintended consequences resulted from the fact that existing classic pools
were closed to new PEPRA hires, which result in a decline in covered payroll for the
existing risk pools. Under existing policies, a decline in payroll or even a smaller payroll
growth than assumed would result in a underfunding of the pools. Changes were
necessary to avoid this potential underfunding.
The key changes adopted by the Board June 5, 2014, to address the funding equity and
contribution volatility are as follows:
1. All active and inactive risk pools were combined into two risk pools: one for all
miscellaneous plans and one for all safety plans.
2. Each prior pool’s unfunded accrued liability will be allocated proportionately to
each individual plan based on each plan’s total liability instead of plan payroll.
3. Employer contributions toward the unfunded liability will be collected in dollar
amounts instead of a contribution rate expressed as a percentage of payroll.
It is important to note that the change to dollar amount versus percentage of payroll for
the City’s unfunded liability was done in order to address the equity issues that arose
from employer payroll either increasing faster or slower than assumed in the actuarial
valuation. For example, the actuarial assumption includes a salary growth rate of
2.00% for payroll. If the City’s actual payroll grows at a slower or faster rate, it will affect
the next valuation.
Additionally, an annual reconciliation is performed to the risk pool assumptions and the
variances are shared by the pool members. So there is a shared risk to the pool
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members, but at a very diluted level and only on the deviations from the assumptions;
for example, changes in the actual investment return from the assumption used. That
variance is allocated back to the risk pool members and amortized based on the current
CalPERS smoothing methodology.
Agency Default and Termination
In the case where an agency that is a member of the risk pool defaults on their pension
payments, CalPERS can terminate the pension contract in accordance with
Government Code section 20572. Furthermore, CalPERS will analyze the member’s
funding levels and, based on the funded status, has the authority to reduce benefits for
active employees and reduce retiree pension payments under Government Code
section 20577. The agency that contracted with CalPERS is responsible for the
promised benefit.
City of Rancho Palos Verdes Actuarial Valuation Report (AVR)
Staff has received the City’s Annual Actuarial Valuation Report for 2015. As stated
earlier in this report, the City’s employee pension plan includes 3 tiers of benefits.
Based on the current Actuarial Valuation Report, City’s rates and unfunded liability
payment are as follows:
Budget Workshop--CalPERS Items for Discussion
At the upcoming budget workshop on April 10, 2017, the City will be discussing the
FY17-18 estimated contribution rates (see below), the recently announced changes in
the discount rate assumption used by the actuaries and the changes due to the
implementation of GASB 68.
Discount Rate Change
Tier Formula
Employee
Contribution
2015-2016
Employee
Normal Cost
2015-2016
Employee
Normal Cost
2016-2017
Increase
Tier 1 2.5% @ 55 8.000% 9.617% 10.069% 0.398%
Tier 2 2.0% @ 60 7.000% 6.709% 7.159% 0.450%
Tier 3 2.0% @ 62 6.250% 6.237% 6.555% 0.318%
Tier
Employer Payment of
Unfunded Liability
2015-2016
Employer Payment of
Unfunded Liability
2016-2017
Increase
Tier 1 $356,067 $413,568 $57,501
Tier 2 $0 $0 $0
Tier 3 $0 $90 $90
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CalPERS recently announced a change to the discount rate assumption and the impact
these changes are expected to have on required employer and member contributions.
The June 30, 2016, annual actuarial valuations will provide updated projections of
expected future year pension contributions. These reports will be available this
summer.
On December 21, 2016, the CalPERS Board of Administration approved lowering the
discount rate assumption, the long-term rate of return, from 7.50 percent to 7.00 percent
over the next three years. This will increase our contribution costs beginning in FY18-
19.
The phase-in of the discount rate change approved by the Board for the next three
Fiscal Years is as follows:
Based on the current information and direction that Staff has received from CalPERS,
we have estimated the expected future impact from this change as follows:
Please keep in mind that the above table is a broad estimate based on a current set of
assumptions and should only be used as a general guide. The annual actuarial
valuation report that will be released this summer will provide updated projections for
our specific plan.
GASB 68
The Governmental Accounting Standards Board (GASB) approved a new standard that
took effect in FY14-15. The objective of GASB 68 is to improve accounting and
financial reporting by state and local governments for pensions. State and local
agencies are now required to recognize applicable pension amounts as a liability in their
financial statements (Balance Sheet) and also provide extensive footnote disclosures
and additional supplementary schedules related to their pension plan.
Valuation Date Fiscal Year for Required Contribution Discount Rate
June 30, 2016 2018-19 7.375%
June 30, 2017 2019-20 7.25%
June 30, 2018 2020-21 7.00%
FY 16-17 FY 17-18 FY 17-18 FY 18-19 FY 18-19 FY 19-20 FY 19-20
Rate @ 7.5%Projections
Rate @
7.375%Projections
Rate @
7.25%Projections
Rate @
7%Projections
Tier 1 18.770% 368,804.85 19.211% 370,175.02 19.653% 371,545.19 20.535% 374,285.53
Tier 2 7.159% 138,882.41 8.427% 140,525.30 9.694% 142,168.19 12.230% 145,453.98
Tier 3 6.572% 97,101.40 7.713% 98,141.00 8.854% 99,180.60 11.136% 101,259.81
604,788.65 608,841.32 612,893.98 620,999.32
4,052.67 8,105.34 16,210.67
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As of June 30, 2016, the City reported a liability of $7,637,567 for its proportionate
share of the net pension liability. In comparison to the previous year, the reported
liability increased by $1,923,247 due to the changes of assumptions using a discount
rate of 7.65 percent. In the GASB 68, paragraph 68 states that the long-term expected
rate of return should be determined net of pension plan investment expense, but
without reduction of pension plan administrative expense. The discount rate of
7.50 percent used for the June 30, 2014, measurement date was net of administrative
expenses. The discount rate of 7.65 percent used for the June 30, 2015, measurement
date is without reduction of pension plan administrative expense.
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APRIL 29, 2006 CITY COUNCIL ADJOURNED REGULAR MEETING TACTICAL PLANNING WORKSHOP
MINUTESADJOURNED REGULAR MEETING/BUDGET WORKSHOP
APRIL 29, 2006 CITY COUNCIL ADJOURNED REGULAR MEETING TACTICAL PLANNING WORKSHOP
MINUTESADJOURNED REGULAR MEETING/BUDGET WORKSHOP
M I N U T E S
RANCHO PALOS VERDES CITY COUNCIL
ADJOURNED REGULAR MEETING/BUDGET WORKSHOP
SATURDAY, APRIL 29, 2006
The meeting was called to order at 9:39 A.M. by Mayor Wolowicz at the Pt. Vicente
Interpretive Center, 31501 Palos Verdes Drive West, Rancho Palos Verdes, notice having been
given with affidavit thereto on file.
Roll call was answered as follows:
PRESENT: Clark, Gardiner, Long, Mayor Wolowicz
ABSENT: Stern (excused)
Also present were City Manager Les Evans; Assistant City Manager/City Clerk Carolynn Petru;
Director of Finance and Information Technology Dennis McLean; Director of Planning,
Building and Code Enforcement Joel Rojas; Interim Director of Public Works Ray Holland;
Director of Recreation and Parks Ron Rosenfeld; Assistant to the City Manager Gina Parks;
Deputy Director of Finance and Information Technology Kathryn Downs; Senior
Administrative Analyst Gary Gyves, and Minutes Secretary Carla Morreale.
Councilman Gardiner asked if there was a Public Address System available for the meeting.
City Manager Evans replied that there was not one available at the Pt. Vicente Interpretive
Center similar to the system at Hesse Park, only a smaller system with one microphone typically
used outdoors.
Director McLean stated that the budget for Pt. Vicente Interpretive Center (PVIC) did include an
audio system for the room, but not an elaborate system like that at Hesse Park.
APPROVAL OF AGENDA:
Councilman Clark moved, seconded by Councilman Gardiner, to approve the Agenda. Without
objection, Mayor Wolowicz so ordered.
PUBLIC COMMENTS:
None.
APPROVAL OF CONSENT CALENDAR:
Mayor Pro Tem Long moved, seconded by Councilman Clark, to approve the Consent Calendar.
The motion to approve the Consent Calendar carried on the following roll call vote:
AYES: Clark, Gardiner, Long, Mayor Wolowicz
NOES: None
ABSTAIN: None
ABSENT: Stern
Pontevedra Emergency Storm Drain Repairs (Holland) (604 x 1204)
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Reviewed and reconfirmed by a four/fifths (4/5) vote, the Council’s previous action on
December 6, 2005 to authorize staff to conduct an informal bid process to repair the Pontevedra
storm drain line.
REGULAR NEW BUSINESS:
Budget Policy Issues for FY 06-07 (Petru) (602)
City Manager Evans introduced the budget policies as those items that staff has identified that
they would like the Council to give direction on before the budget is finalized. He stated that
these policies also include issues that the Council has raised throughout the year that they want
to address as a body. He stated that there are 12 budget issues to be discussed this year and
suggested that the members of the public who have submitted speaker slips be allowed to speak
on the individual budget items as they come up instead of as a group at the end. He stated that
Department Heads and selected staff were available to provide detail to the staff reports and
answer questions on the budget issues that Council wishes to discuss in more detail. He added
that Power Point slides on many of the budget issues were available if needed.
Councilman Clark stated that he believed staff has presented a good list of budget issues for
discussion and requested the addition of telecommunications as another item to the list.
Councilman Gardiner stated that he felt it was difficult to discuss budget policy issues before the
budget itself was discussed. He asked if the budget policy issues listed on circle page 4 of item
4, under the titles of City Manager Proposed Operating and City Manager Proposed One-Time
have already been incorporated into the budget recommended by the City Manager, or if they
were in addition to that budget.
City Manager Evans replied that perhaps the best way to explain Item 4 on circle page 4 would
be to go through the items by putting the chart of Budget Policy Issues up on the screen.
Mayor Pro Tem Long stated that he felt it was premature to go to the policy issues and stated
that he would like to talk about the Five-Year Model first. He stated that it is more interesting to
talk about how much money we have, how much is going to be spent, and what the balance is
before deciding how to balance the budget. He added that he agreed with Councilman Clark’s
suggestion to add telecommunications to the list of policy issues and stated that he wished to
add a general discussion of health insurance under employee compensation. He also stated that
he would like to discuss for the benefit of the public the topic of Council restricted funds, what
they are and why they have been set aside by Council.
Councilman Clark echoed Mayor Pro Tem Long’s suggestion to look at the Five-Year Financial
Model first and the dynamics associated with it, so that Council could focus perspective on the
policy issues relative to the budget for the year ahead.
Councilman Gardiner asked to what degree the ongoing budget policy issues have been included
or excluded because that would impact how the Five-Year Model is interpreted. He asked if the
total of the column titled Ongoing Menu and the column titled Project Menu were included in
the City Manager Proposed Total Budget, or if these figures were in addition to what was
proposed.
City Manager Evans replied that all of the items in Column 3 titled City Manager Proposed
Operating were included in the proposed budget. He stated that if everything in the Ongoing
Menu of the budget is included, the remaining revenues available are $20,872. He stated that he
was proposing to spend $1.874 million of General Fund Reserves to do the One-Time Projects
listed in Column 4. He stated that Column 5 titled Not Recommended contained the remaining
budget policy issues including Grant Increases, Equestrian Improvements, City Hall Generator,
Traffic Signals, Code Enforcement Staffing, and Disaster Preparedness Program, which were
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not included in the City Manager’s Proposed Operating Budget or the City Manager’s Proposed
One-Time Budget.
Councilman Gardiner queried if the City Manager’s Proposed Total included everything on the
Ongoing Menu and everything in the Discretionary items except the Not Recommended Menu.
City Manager Evans replied in the affirmative.
Councilman Gardiner stated that if this were the case, the City would be borrowing 1.853 from
the General Fund. He asked what the amount of $1.038 million in the Council Directed column
represented.
Deputy Finance Director Downs stated that it represented the baseline subtotal, which does not
include the Ongoing Project Menu.
City Manager Evans stated that $1,038,623 represents the amount of revenue available in excess
of the 2-year budget that was adopted a year ago.
Councilman Gardiner asked if the City Manager’s recommendation includes everything on the
page except the Not Recommended Menu, adsorbs the $1.038 million and asks for an additional
$1.853 from the General Fund.
Mayor Wolowicz stated that he used the Menu Worksheet being discussed as a scorecard. He
stated that there is a need to understand the big picture of the Five-Year Model first, then come
back to an explanation on the budget policy issues.
Councilman Clark recommended that the members of the Financial Advisory Committee be
heard from after the presentation by staff.
2006 Five-Year Financial Model (McLean) (602)
Director McLean provided an overview of the Five-Year Financial Model. He stated that
Deputy Director of Finance and Information/Technology Downs and Senior Administrative
Analyst Gyves would participate in the presentation as well as the City Manager and the Interim
Director of Public Works Holland. He began with an explanation that the Five-Year Model is
not a forecast, but a model and the assumptions used in the model are consistent with that of the
previous year. He stated that the most striking point of the model is that the Interim Public
Works Director has come to realize that the costs associated with pavement management have
increased by about 40%. He reported that the increase of construction costs has been reflected
through all years of the model and that the impact is fairly significant. He stated that the costs
associated with pavement management such as slurry and reconstruction of residential streets
are about $12.3 million over five years which is an increase of $5.4 million dollars over the
2005 Model. He stated that the increase results partially from the factor of $74 per ton of asphalt
versus $50 per ton for the previous year. He stated that the update to the City’s Pavement
Management Program document prepared by the consultant has not yet been finalized and
delivered to the Interim Director Holland.
Councilman Gardiner asked if the City uses about 226 thousand tons of asphalt a year.
Interim Director Holland replied that the bid opened in April 2006 reflected that the residential
program would require 12,500 tons of asphalt and that the arterial program would be in addition
to that amount. He clarified that the 226 thousand tons would be the amount used over a five-
year period, that the asphalt is only a part of the bid and that a considerable portion of the bid
reflects concrete work.
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Councilman Gardiner stated that the report indicated the increase in the price is due to the
increase in price of asphalt.
Director McLean replied that he did not think it was appropriate to interpret that the rise in
overall cost was due to solely the price of asphalt.
Councilman Clark stated that under Tab 2, circle page 7, paragraph 3 speaks to the different
elements involved in the increase including oil and cement products, and slurry seal materials,
all which have increased dramatically in price.
Mayor Pro Tem Long stated that his point of view is that if the bids prices were up, based upon
the bid experience and the advice received from experts, it really did not matter where the
increases were coming from, unless there were alternatives other then concrete and asphalt to be
considered for the street work.
Councilman Clark asked if there was any preliminary or comprehensive review done with other
municipalities when the Public Works Department received the increased estimates and bids.
Interim Director Holland replied that Public Works did check with other cities and consultants,
and that City Manager Evans checked with the other South Bay city managers and that the same
increases were being experienced by all cities based on the fact that the construction business is
being impacted by activities on an international basis. He stated that those who set the oil prices
are not concerned about what is going on in Rancho Palos Verdes and that there is a tremendous
demand on construction materials and products internationally. He reported that China and India
are consuming cement and oil products at an accelerating rate and that we are not dealing with
an inflationary issue, but a supply and demand issue. He stated that there has been only a slight
rise in the demand curves for the last 15 years, but that in 2003 there was an extreme spike in
that curve which has not gone away.
Councilman Clark asked if it was fair to say that part of the challenges the City is facing is due
to global impacts.
Interim Director Holland replied in the affirmative and explained that the United States as a
whole is going to have to deal with this global issue. He reported that there is some hope that
there will be some stabilization, but no one is expecting the prices of oil, cement, copper, and
steel to decline significantly in the future. He stated that reports indicated that China has bought
up 50 percent of the futures on cement, which will impact the City and the costs associated with
the maintenance of the public streets at the level that they have been previously maintained.
Councilman Clark stated that the City has had a policy for many years to keep the public streets
at an excellent grade level and that the community has come to expect that level of maintenance.
Interim Director Holland reported that the City has an average pavement rating of 89, which is
on the bottom range of excellent on the pavement condition index rating scale. He explained that
the rating scale runs from 100 being freshly paved at the very best quality to 0 being the worst,
with an excellent range of 86 to 100. He explained that if the City wants to stay in the excellent
range, it would have to pay more money noting that it was a “pay me now, or pay me later”
scenario. He added that if the pavement condition was allowed to deteriorate, it would cost the
City more in the long run to repair its streets.
Councilman Clark stated that the City has always had a proactive pavement management
program with a minimalist cost impact with constant repairs versus the necessity to rebuild
roads. He stated that if the City decides to take a dramatic step and not fund the ongoing
pavement and slurry seal programs there would be dramatic costs in the future.
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Interim Director Holland stated that that was exactly what he meant by the statement “pay me
now, or pay me later” and that it may cost $1.00 today to keep the excellent level versus paying
$4.00 for the same level of street excellence in the future.
Councilman Gardiner explained that if the City knows what the cost drivers are, there are a
couple of ways to deal with the associated policy issues, such as looking at substitute
technology. He stated that if prices rise to a high level in one raw material there might be
substitutes to consider, such as recycled tires. He stated that if the trend can be projected out
over 5 years it may serve the City well to accelerate the repaving schedule so that the work can
be done when the prices are lower, instead of putting it off into the out years, when costs will be
higher. He explained that the net present value would determine if the City would be better off
spending more money now at the current rates and reducing the load on the repaving system
later when the costs are going to be higher.
Interim Director Holland indicated that the City’s last update to the Pavement Management
Program was in June 2004. He stated that this document has to be updated every two years and
that the questions posed by Council are the kinds of questions staff can bring up to the
consultant to include in their analysis. He indicated that he hoped to have the updated pavement
management plan by June 2006.
Mayor Wolowicz commented that there was some credence to the use of rubberized asphalt.
City Manager Evans stated that the City has been using rubberized asphalt for many years.
Mayor Wolowicz observed that construction costs have had spikes over the last 25 years due to
fluctuations in the cost of raw materials such as cement and rebar, but noted that an ebb to the
current price increases has not happened. He stated that Councilman Gardiner has brought up
the important issue of timing, which is a good question to pose to the consultants writing the
report. He stated that the City might need to revisit this as a policy issue if costs increases
continue because of their impact on the Five Year Model. He stated that the challenge would be
for the City to react quickly enough to take advantage of the current prices, as opposed to where
they might be later.
Interim Director Holland responded that he did not know if the report would be available prior
to the adoption of the FY06-07 Budget because is not due back to the City until June 2006. He
stated that the consultants have a great deal of data gathering and data analysis to complete and
he was not sure if that process could be sped up without speaking with the consultants.
Director McLean clarified that the 2006 Five Year Model includes $1.6 million for the FY06-07
Pavement Management Program costs while the 2005 Model reflected costs of $1.5 million for
this program, which were predominantly for residential streets. He explained that most of the
impact of the substantial cost increases is seen in the later years of the model.
Mayor Wolowicz asked how the City manages the cost of the projected miles to be paved,
giving an example of 25 miles of city streets to be slurried when given the cost increase factor
that the same dollar amount might only represent 10 miles of city streets to be paved. He stated
that the City would have to decide if it is the dollar amount or the number of miles in the
projected work to be targeted. He stated that Council’s natural preference would be to be
continue to maintain the public streets at the “excellent” level but asked how this standard would
be funded recognizing a 40% cost increase.
Interim Director Holland stated that the consultant’s reports would help the City analyze this
information, with Council setting the City’s pavement condition index (PCI) where it wanted it
to be, analyzing the numbers and making budget decisions accordingly. He continued that the
City could do an inventory and a condition analysis of the City’s existing roadway system, and
then project what resources would be needed to maintain the system at the various PCI levels.
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Mayor Wolowicz stated that it would be another policy issue to consider if the Pavement
Management Program would be dollar driven or distance driven or if the City would change the
mix of that given the likely expectation that costs would increase.
Interim Director Holland explained that the bids that opened on April 11, 2006, are currently
being analyzed and that they are approximately $600,000 above the budgeted amount. He
reported that staff is analyzing whether changes can be made in the bid to pare down the cost
and stay within the budget, but noted that staff is struggling with the higher costs that are being
reflected in the bids.
Councilman Clark stated that in different sectors of the market place consumers of major raw
materials that are in demand are attempting to lock in long term contracts to the extent that they
can to minimize the volatility of the pricing within those contracts to give them some confidence
in the future costs. He stated that he would like the City’s consultant as well as staff to look into
this element as part of the strategy.
Councilman Gardiner queried if the City bids project by project, year by year. He commented
that an alternative way to proceed might be to have a multi-year bid for all the work that would
be large enough to make it worth it to the contractors. He continued that an exception could be
allowed for an increase in material cost, but that the option for higher pricing should not be
allowed simply because it is a busy year. He stated that a larger multi-year contract would be a
better option.
Councilman Clark stated that another benefit of a multiyear contract would be that an advance
order could be placed for raw materials so that there would not be quite the volatility in the out
years when costs are projected to be higher.
Interim Director Holland reported that the Finance Advisory Committee (FAC) asked if the City
could get into the futures market for financing its capital projects. He stated that this has been
deferred to the contractors, but that staff could explore this topic. He reflected that in a city this
size the sophistication of the contractors that bid the City’s projects might not be sufficient for
them to enter into the futures arena.
City Manager Evans stated that even if the City bid 10 years of contracts it would be equal to
one week of contracts for a large organization like Caltrans, and noted that the City is not a big
player in terms of capital projects.
Councilman Clark asked if the concept could be examined on a regional basis as part of the
South Bay Cities Council of Governments (SBCCOG) since all of the cities have pavement
management programs and are faced with the same issues.
City Manager Evans stated that this would be a good topic for the Council’s representative to
SBCCOG to bring up.
Mayor Wolowicz reiterated that there are alternative thoughts to approaching this issue and
stated he would be willing to raise the issue with SBCCOG. He requested a summary report be
prepared that could be delivered to other SBCCOG board members prior to his broaching the
subject.
Mayor Pro Tem Long stated that the City could hope to coordinate with other cities regarding
this issue, and hope that City contractors might buy into the futures market, but that the City had
better be prepared for the possibility that none of these things will happen and realize that
Council will have to make decisions such as devoting additional funds to the Pavement
Management Program or to lower the PCI rate standard. He stated that he did not feel Council
was poised to make that decision until the Pavement Management Program report has been
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received from the consultant, but that Council should think about the difficult decisions that may
have to be made in the meantime.
Mayor Wolowicz asked when Council would expect to see this report.
Interim Director Holland replied that the report was expected in June 2006.
Mayor Wolowicz stated that, given the importance that this issue has in the community and the
enormity that this report has in the City’s budget, staff should be directed to return with a report
once the figures have been received from the consultant with the ideas discussed by Council at
this workshop woven in to the report. He stated that there is also a sense of immediacy to this
topic.
Councilman Clark asked if it was fair to say that in light of all that was discussed that we are not
prepared to make finite decisions at this point.
Mayor Pro Tem Long suggested that Council continue to review the bullet points of the Five-
Year Model and then have public input on the matter.
Director McLean stated that the second major expenditure concern in the 2006 Model was
additional storm drain projects. He stated that the 2006 Model includes the costs associated with
the storm drain user fee rate model and the expenditures associated with that storm drain model
and nothing more. He continued that staff is proposing additional costs of $2.3 million for storm
drain projects for FY06-07 and approximately $4.7 million over the next five years to be
presented later during the budget workshop. He reiterated that it was important that everyone
understand that those costs are not included in the Five Year Financial Model and that the model
includes nothing more than the costs seen in the past associated with the storm drain rate model.
Mayor Wolowicz stated that the table that appears on circle page 4 also appears two other times
in the staff report to emphasize that fact.
Mayor Pro Tem Long stated that he assumed the logic of not including the additional storm
drain projects in the model was not because staff is not recommending them, but simply that
staff was starting with the baseline as a reference point then showing what the impact of the
additional projects would be. He reminder the public that the storm drain rate model is based on
an average fee of $86.00, which was designed to only fund the Priority 1 and Priority 2 projects
that were known at the time the model was prepared. He also stated that staff had originally
recommended a higher figure of at least twice that amount.
Councilman Gardiner asked if the table on circle page 4 was the summary of additional storm
drain needs.
Director McLean confirmed that it was. He stated that he has always preferred that the Five-
Year Financial Model include the Pavement Management Program costs as staff best knows
them at the time and noted that the 2006 Five-Year Model includes those estimated costs. He
explained that any other additional costs are excluded from the model but presented to the City
Council for consideration.
Councilman Gardiner stated that storm drain projects, as understood in the past, were to be
funded with the Storm Drain User Fee. He inquired if the storm drain costs listed on circle page
4 are above and beyond those identified projects. He commented that for FY06-07 the total
being requested was $2.3 million, and $600,000 a year after that.
Director McLean replied in the affirmative.
Councilman Gardiner stated that the budgeted amount for the Sunnyside Ridge Road storm
drain project was $1.2 million and asked why there was an additional $600,000 amount on top
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of that amount. He asked if the price had gone up or if the additional $600,000 reflected
additional work.
City Manager Evans explained that the additional amount was not for additional work, adding
that the cost of the project had been estimated at $1.2 million dollars, but that the bids received
came in at $600,000 above that estimate.
Interim Director Holland stated that the bidding process for the Sunnyside Ridge Road project
occurred before he was working for the City, but he understood that the City had rejected the
first bid of $1.8 million because the budget was only $1.2 million. He explained that Council
had asked staff and the consultants to go back and reanalyze the project.
Councilman Gardiner asked, if all of the City’s estimates have been off on the low side, if staff
had gone back and re-estimated all of the projects.
City Manager Evans replied that would be a policy issue for Council and that staff had not gone
back and re-estimated the costs. He explained that the Sunnyside Ridge Road drainage project
was a bit of an anomaly because the cost of traffic control on Palos Verdes Drive East was much
higher than anticipated. He stated that the City can anticipate that the cost of pipeline materials
are going to follow the pattern already seen in cement and asphalt costs and that the bids
received in the future are going to reflecting these higher costs.
Mayor Pro Tem Long asked if there was a 10% contingency built into the rate model.
Councilman Gardiner stated that he believed it was important at some point for the City to
review the list of projects and analyze how many of them had been funded over how many years
and at what cost. He stated that the former list and the revised list should be analyzed and that
the City may want to consider the merits of stopping the deterioration of the existing systems as
opposed to repairing drainage pipes that had already deteriorated. He stated that he thought it
would be useful to see what the anticipated storm drain fees will actually yield in the way of
projects.
Mayor Pro Tem Long stated that he believes staff has already learned some important lessons
based on the recommendation it has previously made to Council to establish a higher Storm
Drain User Fee, which would have allowed more latitude to deal with storm drain repairs. He
stated that he hoped projects would be prioritized based on the seriousness of the situation and
that the City would not just repair the drains that aren’t that bad in the hope of preserving them
and give up on those that have totally failed.
Councilman Clark asked if the matrix on circle page 4 indicates that the General fund reserves
are currently at approximately $12.8 million and that if the City were to implement just the
storm drain needs as projected between now and the end of FY 10-11, if the General fund
reserve would be reduced to $1.4 million.
City Manager Evans stated that the amount of $1.4 million reflects the cost of the anticipated
pavement management projects as well as the storm drain projects.
Councilman Clark expressed great concern that the General fund reserve would be reduced from
almost $13 million down to less than $1.5 million dollars in less than 5 years.
Mayor Pro Tem Long echoed Councilman Clark’s concern about the Five-Year Model. He
stated that it is estimated that the earliest the Long Point/Terranea resort hotel is anticipated to
receive a certificate of occupancy is in FY 2009-10 with about a year lag time before the City
would realistically see any increase in revenues from this project. He stated that if the
assumption is made that the City will receive another $4.6 million in revenue from Terranea,
and assuming the Storm Drain User Fee is not repealed and assuming the City completes the
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necessary storm drain repairs and continues the street maintenance program, the City will only
have a $6 million General fund reserve, which would only keep the City solvent for 4 months in
a crisis, which is a dramatic situation.
Councilman Gardiner stated that the worst case scenario assumes no revenue from Terranea, but
the best case scenario is that Terranea is built on schedule and generates a great deal of money
for the City. He explained that the model only goes out to FY10-11 and that if Terranea is built
on schedule, the General fund reserve will be increased another $4 million the following fiscal
year. He stated that Council has to be very careful of the transient impacts of forming
assumptions, and that it should always consider the best case, worst case and most likely case
for each scenario.
Councilman Clark stated that this discussion also raises the question in his mind as to whether
the City should continue to fund infrastructure renewal from the General fund and General fund
reserves on an ongoing basis, or if Council should reconsider an approach used by most
municipalities and consider some form of borrowing or debt financing on a strategically value-
oriented basis to help fund infrastructure improvements.
Mayor Pro Tem Long stated that he agreed with Councilman Clark that the City will have to
consider debt financing, but will also have to be able to pay it back. He stated that while the
scenario outlined on circle page 4 may seem to be a worst case scenario, he pointed out that
what was considered to be the worst case scenario five years ago in fact came true, therefore, he
felt the City need to be prepared for the worst case scenario. He stated that even if Terranea
provided $4.6 million a year and started generating this amount of revenue in FY 10-11, he does
not believe it will generate an operating surplus for the City because a lot of projects are not on
the City’s current list and the City is assuming that the 10 or 15% contingency is enough to deal
with the known problems. He reiterated that the City must be prepared for the worst case
scenario that can reasonably be predicted. He stated that the worst-case scenario is when the 10-
15% contingency is not enough, or where the Storm Drain User Fee has been repealed. He
pointed out that when Council started the storm drain repair program it had no idea that the City
would have to purchase property in McCarrell Canyon for $1.2 million in order to build the
project. He stated that it does not take much land in this community to add a $1 million cost to
the budget.
Councilman Gardiner stated that he believed the General fund reserve should not be expected to
subsidize the storm drain repairs at all. He explained that he does not believe there was
reluctance on the part of the public to help repair the City’s storm drains, but reluctance to
support the particular funding approach taken. He stated that Council could wait to see if the
repeal of the Storm Drain User Fee makes it onto the ballot or look at an alternative strategy that
may increase the amount of funding available for a shorter period of time.
Councilman Clark agreed that an alternate strategy should be considered. He noted that as a
member of the Board of Directors for the League of California Cities, he was aware of the fact
that many cities complete infrastructure improvements through very attractive mechanisms of
borrowing money that actually costs less over time than current allocation of funds from current
sources.
Director McLean stated that the 2006 Five-Year Model was based on the assumption that the
Storm Drain User Fee will not be repealed. Regarding law enforcement costs, he reported that
the City has increased the number of traffic deputies; noting that the City has one dedicated
traffic deputy based upon Council action in FY 05-06 and the FY06-07 proposed budget
includes the expectation of an additional traffic deputy as part of the regional contract. He
explained that the City’s share of the cost of the additional regional traffic deputy for FY06-07
would be $235,000. He continued that the Los Angeles County Sheriff’s Deputies have entered
into a new labor contract which is expected to cause an $18.5% increase spread over 2 ½ years
which will cost an additional $60,000 in FY06-07 and noted that this cost increase spread over 5
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years will add up to about $2.5 million. He also pointed out that the addition of the traffic
deputy in the proposed budget for FY06-07 includes the mitigating revenue source as a result of
traffic fines of about $70,000 or $350,000 over 5 years.
Mayor Pro Tem Long stated that the cost of 1.6 full-time traffic deputies would be just over $2.1
million over the next 5 years. He indicated that if the City were to only participate in the 0.6
full-time equivalent traffic deputy through the regional contract, the City would save 1.4 million
over the next 5 years. He stated that he was trying to determine the consequence of the City’s
decision to depart from regional law enforcement contract model that has been in place for
several decades, although he recognizes that the City of Rolling Hills occasionally hires some
additional traffic enforcement on an overtime basis.
Councilman Clark stated that he appreciated Mayor Pro Tem Long’s articulation of the cost
associated with the additional full-time traffic deputy, but indicated that after talking with many
residents throughout the community, he finds that the public has validated the value of having
an additional dedicated traffic safety officer, particularly the deputy who is currently serving the
City.
Councilman Gardiner echoed Councilman Clark’s opinion and noted that Deputy Knox has the
uncanny ability to give a person a ticket without them being annoyed with him; and observed
that people seem to be driving a lot slower.
Mayor Pro Tem Long pointed out that speeding occurs primarily on the arterials in the City and
noted that some residents live in neighborhoods where the arterials they use for access are
located in another city and do not receive the benefit of the dedicated deputy’s services. He
stated that perhaps one revenue device to consider to help close the $1.4 million gap would be to
create a benefit assessment district for additional traffic enforcement services.
Councilman Gardiner observed that most of the tickets are issued on the arterials, not on
residential streets.
Recess and Reconvene:
Mayor Wolowicz recessed the meeting at 10:55 a.m. and reconvened the meeting at 11:05 a.m.
Mayor Wolowicz stated that the most efficient way to proceed with the Budget Workshop is to
complete the Five-Year Model, then invite the public to speak on the particular item they are
interested in so that they would not have to wait any longer.
Director McLean stated that he had two concluding points to bring up as part of his oral staff
report. He stated that there are two trend lines; the first one being the 2005 Five-Year Model
with some slight revisions where the estimated General fund reserves hovered a little over $10
million for several years and then fell to about $7 million in the fifth year. He continued that as a
result of and the inclusion of Pavement Management Program costs, the trend line is more
dramatic and in the fifth year General fund reserves will fall to about $6 million which is below
the Council’s reserve policy level, which is 50% of estimated General Fund Revenues, for the
first time in the fourth year of the Modal and then being below the policy reserve level in the
fifth year. He pointed out that the Finance Advisory Committee reviewed the 2006 Five-Year
Financial Model on April 19th, and discussed this issue at length with the participation of
Interim Director Holland and Senior Engineer Dragoo regarding the City’s pavement
management and storm drains projects. He reported that although the Finance Advisory
Committee accepted the 2006 Five-Year Model and forwarded it on to the City Council and
supported the assumptions contained within, the Finance Advisory Committee is concerned that
the General fund reserves are anticipated to fall below the policy reserve level in FY06-07
including the proposed storm drain expenditures. He continued that the Finance Advisory
Committee recommended the following to City Council: 1) to fund the additional $2.3 million
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of storm drain projects recommended for FY06-07; 2) to maintain pavement management at its
current level and fund the recommended residential street overlay budget for FY06-07; and 3) to
mitigate the effects of funding recommended infrastructure projects and consider alternative
sources of revenue and funding and closely examine existing expenditures. He stated that it was
important to note that the first two recommendations focused on the first year and not the
duration of the Five-Year Financial Model.
Mayor Wolowicz invited public speakers on the Five-Year Financial Model.
Becky Clark, speaking on her own behalf and not as Chair of the Finance Advisory Committee,
stated that Council has a very difficult task ahead of it financially for the next five years. She
noted that it is very frightening to look at the diminishing General fund reserve levels predicted
in the Modal. She stated that one suggestion she had was to task staff and the Finance Advisory
Committee to examine possible financing alternatives both in the area of new revenue sources
and cutting expenditures in certain areas. She suggested that one potential new revenue source
would be in the area of debt financing. She stated that initially the FAC was not advocating
using that financing method to fund storm drain infrastructure projects, but now the situation has
changed, it may be more cost advantageous to fund projects that would normally be done five to
ten years out. She explained that the City could borrow the money now at low cost through
CSCDA pooled bond financing, perhaps to fund $5-10 million worth of discreet projects, and by
front loading and constructing these projects now, the cost may actually be less than if the
projects are done five or ten years from now. She stated that an analysis needs to be done to look
at this possibility. She continued that another option would be to get on the list with the State
Water Resources Control Board for the 2% loans that are available for both sewer and storm
drain repairs, which would enable the City to construct some of these projects in a manner that
would be cost advantageous. Ms. Clark noted that participation in both of these programs is not
possible without the Storm Drain User Fee because the City has to have that type of collateral in
order to take advantage of these programs. She stated that another option Council might
consider is reducing the condition level of the pavement management program. She stated that
another option to consider would be the long-term lease or sale of Grandview Park for
development; another option would be to consider allowing Trump National to build hotel villas
at the golf club, maybe not 200 as previously proposed by Trump National but perhaps 50 to 75
villas which would generate Transient Occupancy Tax income. She concluded by saying that the
City must look at all possibilities and her suggestions are just some examples to consider.
Mayor Wolowicz thanked Ms. Clark for her comments and for her willingness to serve on the
Finance Advisory Committee for almost 6 years now, which has included dealing with the
Storm Drain User Fee, debt financing and the funding issues facing the City. He stated that he is
grateful for her dedication.
Councilman Gardiner thanked Ms. Clark for her suggestions and stated that gathering
information is good and that he was particularly interested in looking at the cash flow diagrams
of debt financing to compare that with the current Storm Drain User Fee system and perhaps an
alternative of funding infrastructure projects in five-year increments using some other
mechanism. He stated that the City may indeed be able to save money in the out years by
accelerating the ability to complete projects now, which would more than compensate for cost of
debt financing. He stated that he would be very interested to see a year-by-year cash flow and a
summary statement, which would be in net present value or other comparative figure as
appropriate.
Mayor Pro Tem Long joined the Mayor in thanking Ms. Clark for agreeing to serve an
additional four years on the Finance Advisory Committee, especially given the forecast included
in the 2006 Five-Year Financial Model. He stated that he would like all of the suggestions that
she put forward to be studied, except that he was not particularly open to selling City assets such
as Grandview Park, but if that possibility was considered, he hoped that the option of selling a
portion of the land in exchange for having a real park developed on the rest of it might be
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considered. He stated that there were a lot of problems with the idea of hotel villas at Trump’s
Golf Club, but that he hoped if the Finance Advisory Committee looked at that as an option, that
the City would work with the Planning Commission and the neighbors to try to formulate a way
that this proposition could be staged so that it does not draw the negative reactions it did in the
past. He stated that he is intrigued by the concept of borrowing which was considered and
rejected before, but noted that this was before all of the increases in construction costs occurred
and the assumption was that the City was probably better off stretching the infrastructure
projects out over time. He indicated that he realizes that tiny changes in interest rates, cost
increases, and assumptions can have a dramatic impact on the viability of different approaches.
He stated that when the Storm Drain User Fee was being debated, some people wanted to use a
dependable source of revenue such as the user fee to pay for storm drain repairs, while
Councilman Gardiner suggested using revenues from the Terranea/Long Point hotel project
instead. Mayor Pro Tem Long stated that he was concerned that now that both revenue sources
are going to be needed in order to make the necessary storm drain repairs. He stated that he
believes that neither of the revenues will be quite what the City thought they would be, and that
construction costs will be much greater than expected, and it will take some creative suggestions
like 2% financing from the state and other types of mechanisms to get the necessary repairs
completed. He stated that in light of the increasing costs, the City should try to find a way to
accelerate the repairs to avoid further deterioration of the infrastructure and the City finding
itself without access to the necessary construction supplies ten years from now.
Councilman Clark stated that the one recommendation that resonated with him is the suggestion
to consider alternative sources of revenue. He asked Ms. Clark for additional information on the
idea behind the pooled bond financing approach.
Ms. Clark stated that she is most familiar with the program available through the CSCDA which
is an organization made up of California State Association of Counties (CSAC) and the League
of California Cities. She indicated that this group joins together perhaps three or four times a
year to pool various sewer and storm drain projects under one bond issue and spreading the
costs among all the entities so that the individual city or county is not bearing the entire burden
of the bond costs.
Mayor Wolowicz suggested that he would like to see a list of revenue alternatives and a
recommendation to Council from the Finance Advisory Committee and staff as quickly as
possible.
Councilman Gardiner added that one way to proceed is to rank the projects based on their
internal rate of return/net present value and the other is to consider bundling projects, which
often results in different dynamics, in order to more effectively spend the City’s resources.
Director McLean clarified that one of the assumptions about General fund revenue was that at
the end of FY06-07, he anticipates the variance between actual General fund revenues and those
in the proposed budget will be less then what has been seen in previous years. He stated that the
Finance staff has fine-tuned the estimates of General fund revenue a little more than in past
years. He stated that the 2006 Five-Year Model is based on the assumption that the Storm Drain
User Fee will not be repealed and noted that if it is repealed, $1.3 million of revenue to fund
storm drain projects will be lost each year, which is a very significant revenue source for storm
drain infrastructure projects over the next five years. He stated that the loss of the Storm Drain
User Fee would make it nearly impossible to move forward with these projects unless other
revenue sources are found.
Councilman Clark asked if the golf tax collected from the Trump National Golf Club is 10% of
green fees per the City’s Code.
Director McLean replied that it is actually about 7.5% of bundled revenue generated by the golf
course, which is an adjustment that was negotiated with the previous owner and included in the
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project’s development agreement. He added that the 2005 Model included $250,000 a year of
expected revenue from Trump National Golf Club, and that the difference in the 2006 Model is
an increase up to $300,000 based upon the City’s validation and computations of information
provided by Trump National.
City Manager Evans reminded Council that the City had agreed to an adjustment regarding golf
cart rentals.
Councilman Clark asked if the current rate structure was used in this Model.
Director McLean stated that they took 66% of Trump’s computation of expected payments to
the City for golf tax over the next five years and slashed out a third of their estimates. He
explained that staff then did their own internal computations and validated the City estimate
with Trump’s estimate, which is based upon current rates and good faith effort of number of
rounds of golf that staff thought would be experienced.
Councilman Clark stated that Trump National is currently discussing with the California Coastal
Commission staff the possibility of offering a reduced green fee to peninsula residents, which he
speculated had not been factored into the 2006 Model.
Director McLean agreed that a reduced green fee for residents was not factored into the Model.
Councilman Clark stated that all possible revenue generators should be considered, adding that
Council should consider raising the City’s golf tax.
Councilman Gardiner asked if the City receives a percentage of the money raised when Trump
National Golf Club holds a golf tournament.
Director McLean replied that the City receives 7.5% of bundled (golf and non-golf) revenue
sources of the gross number in the form of golf tax when Trump National holds a tournament.
Mayor Wolowicz called for the discussion on the next item, which was the Budget Policy
Issues. He invited the speakers to speak on the items of interest to them.
City Clerk Petru stated that she has a total number of 10 speakers bundled by topic. She stated
that the first three speakers would be addressing City Grant Requests.
City Grant Requests
George Haddad, President of the Palos Verdes Kiwanis Club, explained that the local Kiwanis
Club is a charitable organization consisting of mostly peninsula residents dedicated to funding
activities for children. He stated that the primary fundraiser for the organization is the Palos
Verdes Marathon, which is the second oldest marathon in the country. He stated that they
primarily raise money through sponsorships and he presented a list of most of the organizations
they support. He reported that every dollar they receive through sponsorships and grants goes
directly to the children, that there are no administrative costs and that all the adults volunteer
their services. He reported that Kiwanis donated approximately $40,000 this year, including
$3000 to the City’s REACH program, awarded 9 scholarships, donated money to the Peninsula
Education Fund, and many other organizations on the list. He stated that they are requesting a
grant of $5,000 from the City to help in supporting the Palos Verdes Marathon since they are
experiencing increased costs associated with the event. He explained that the largest cost is the
traffic control provided by the Sheriff’s Department, which will total $6,000 for the one-day
event.
Councilman Clark stated that he was impressed with all the Kiwanis organization does for the
youth of the peninsula. He inquired why the organization is called the Kiwanis Club of Rolling
Hills Estates and not the Kiwanis Club of the Palos Verdes Peninsula. He also asked if the club
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had received grant funding from the cities of Rolling Estates, Palos Verdes Estates and Rolling
Hills.
Mr. Haddad replied that there was at one time a Kiwanis Club of the Palos Verdes Peninsula
which is now defunct and when the new club was formed fifteen years ago they could not use
the same name. He stated that most of the 23 members of the club are from the cities of Rancho
Palos Verdes and Palos Verdes Estates, one from Rolling Hills Estates, and a few from out of
the City. In response to the question on other city grants, Mr. Haddad stated that the City of
Palos Verdes Estates gives the Kiwanis Club free use of their Police Department staff for the
marathon, which is a significant contribution. He stated that they have requested a grant this
year from the City of Rolling Hills Estates for the first time. He replied that they have not
requested a grant from the City of Rolling Hills because that city does not encourage grant
requests.
Mayor Pro Tem Long suggested that the Kiwanis Club consider approaching the City of Rolling
Hills because he understands that it recently donated to the swimming pool project at Palos
Verdes High School. He continued that since a portion of the money the Kiwanis are requesting
is to cover the cost of the Sheriff’s services, Rolling Hills Estates might be willing to contribute
according to the 60-30-10 ratio used in the regional law enforcement agreement, noting that if
the City of Rancho Palos Verdes gave $5,000, the City of Rolling Hills might be willing to give
$1,000.
Mr. Haddad stated he would direct the funding committee to request funds from all of the
peninsula cities.
Councilman Gardiner asked how the annual Marathon has been funded in the past and if the
City gives money this year, would the Kiwanis return for funding every year.
Mr. Haddad replied that past funding has been mainly through company and individual
sponsorships, such as Trump National, and that although the City would not be obligated to
provide future donations, the Kiwanis Club would request grants in future years.
Councilman Clark suggested that the Kiwanis might also approach Lowe Enterprises, since they
are vested in the community with the pending development of the Terranea resort hotel. He
noted that some of the Kiwanis’ activities reach into San Pedro and asked if the Kiwanis have
approached Councilwoman Hahn for financial grants as well as the Palos Verdes and San Pedro
Chambers of Commerce.
Mr. Haddad replied that the City of Los Angeles provides free police services for the Marathon
and that they do receive monies from Supervisor Knabe and Mayor Mike Gin, and that the Palos
Verdes Chamber of Commerce has given the Kiwanis free use of a booth at its annual street fair
held in Rolling Hills Estates.
Mayor Pro Tem Long suggested that the club might also consider raising the price of the booths
for the Marathon Expo held at Point Fermin Park in San Pedro. He asked if the running stores
such as Village Runner offer support for the event.
Mr. Haddad replied that Village Runner donates $1,000 and offers their facility for packet
pickup the day before the Marathon.
Mayor Wolowicz recused himself from the dais since his wife is associated with providing
services to the next organization through one of the local school districts.
Dan Smith, Program Manager of the South Bay Youth Project, thanked the City for its past
support and stated that their program is a family and school based counseling organization that
provides counseling for students and families in the City of Rancho Palos Verdes. He stated that
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they provide individual and family counseling through referrals from the School District for
problems ranging from depression, substance abuse, to issues regarding divorce. He stated that
through the City’s participation they are able to leverage the local money received to attain
County, Federal and foundation grants. He stated that these outside funding sources like to see a
network of agencies working together. He explained that the City of Redondo Beach has been
the administrator of the program since 1975 and he handed out a packet that contained the
purpose statement of the organization and information regarding the nine other cities that
participate in the program. He pointed out in the information documenting that 155 RPV
residents used their services in 2005, and letters of support from Lee Strauss and Pat Corwin of
the Palos Verdes Unified School District.
Mike Wizansky, Director of Recreation and Community Services for the City of Redondo
Beach, stated that he will explain why they are requesting increased support for the South Bay
Youth Project. He explained that 3 to 5 years ago, the City of Redondo Beach embarked on a
plan to accurately identify all costs related to its divisional programs and sectional activities
including allocating the city’s overhead costs at all levels. He explained that what has been
identified is that the City of Redondo Beach has significantly subsidized the South Bay Youth
Project for the last several years. He continued that in FY05-06 the City of Redondo Beach
would subsidize the program by approximately $200,000. He stated that they are approaching all
the cities participating in the South Bay Youth Project and asking them to pay their fully
burdened cost based on their population and program usage. He concluded by explaining that
the City of Redondo Beach was requesting that the City of Rancho Palos Verdes contribute
$41,000 to the South Bay Youth Project in FY 06-07.
Councilman Clark stated that, looking at the matrix presented, it was clear that the two cities
receiving the majority of the service were Manhattan Beach and Redondo Beach. He asked if
they have approached Manhattan Beach for a substantial contribution.
Mr. Wizansky replied that this is the first presentation they have made, but that they will be
approaching all of the cities that participate in the program.
Mr. Smith pointed out that the numbers seem to be skewed because the Beach Cities Health
District funds a large portion of their budget, approximately $460,000, but that the health district
can only serve residents of Hermosa Beach, Redondo Beach, and Manhattan Beach.
Councilman Clark asked why only half of the 16 cities of the South Bay area cities were
participants in the program.
Mr. Smith stated that back in 1975 the County approached the City of Redondo Beach and
created juvenile diversion projects throughout Los Angeles County. He reported that some of
the projects created at that time have separated off and are represented by different district
project groups.
Councilman Clark suggested that the South Bay Youth Project might also approach the South
Bay Cities Council of Governments for funding.
Councilman Gardiner noted in the letter that was distributed that 155 youths in Rancho Palos
Verdes were served in the system last year, which represents 6% of the total and stated that this
was quite different from the 20% funding rate being requested. He asked of the dollar amount
received, what percentage was directed toward the youth and what percentage went to overhead
and other costs.
Mr. Wizansky stated that they leverage all of the grants to support the administrative function in
small ways and to use direct pass-through costs for counseling and programming. He explained
that of the total budget of $490,000; $263,000 is for personnel who directly serve the
participants; $42,000 is for materials and supplies; $27,000 for maintenance contracts and
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equipment, which he considers program expenditures; and $161,000 for internal service fund
allocation for overhead; and he concluded of the $1 million dollar figure, 20% is directed to
administration costs.
Mayor Pro Tem Long stated that in his calculations, which are based on the participation of the
residents of Rancho Palos Verdes, the City’s “approximate share” would be $12,000 and he
commented that of all the cities on the list, Rancho Palos Verdes has the lowest revenue per
capita, a smaller General Fund budget, and much less flexibility than the other cities. He
commented that he would be interested in finding out what portion of sales tax revenue collected
by the City of Redondo Beach is paid for by sales to Rancho Palos Verdes residents. He stated
that he would be interested in compensating the City of Redondo Beach for their subsidy for this
program out of that subsidy, and he noted that the sales tax revenue subsidy the City of Redondo
Beach receives from RPV residents is probably a lot more than $41,000. He stated that he felt
the statistics in the handout showing the actual enrollment of 6% is representative of the City’s
proportionate share, and that the amount requested is about 3 ½ times higher than that share.
Councilman Gardiner noted that another group that the City supports is HelpLine Youth
Counseling, which he believes is run by volunteers.
Mr. Smith explained that his understanding of HelpLine is that it is what is traditionally called a
telephone “hot line” where children and teenagers that are having problems can call in and speak
with volunteers trained in crisis intervention who can talk with them, calm them down, and then
refer them to agencies such as the South Bay Youth Project for more in-depth and ongoing
counseling.
Councilman Gardiner commented on his interest in the Peninsula Seniors group and stated that
even though representatives of this organization were not present to speak, he was in favor of
supporting them. He reflected that the City has paid more on the design of girls’ softball fields
than on the Peninsula Seniors.
Mayor Wolowicz returned to the dais at 12:12 p.m.
Employee Compensation and Benefits
Associate Planner Kit Fox first spoke in support of the members of the Equestrian Committee
who were present to address one of the policy issues related to the Palos Verdes Drive East
equestrian trail crossing.
Kit Fox, a resident of Long Beach and an employee of the City for 10 years, then spoke on the
personal matter of employee benefits. He stated that by January 2007 he would have sixteen
years vested in CalPERS, the City’s retirement system. He stated that he supported the staff
recommendation to wait to see what happens with state constitutional amendment before taking
any action to change the City’s current pension program. He stated that he is disappointed in the
current State administration and has long been disappointed with the State Legislature in their
repeated attempts to go the local jurisdictions and the employees to try to balance the State
budget and deal with the issues that should be dealt with in other ways. He acknowledged that
the Council has a responsibility to the residents to make sure expenditures are reasonable. He
stated that he would like to see no changes made to the current system, but that he realizes what
happens at the state level may drive changes in the pension programs at the City level.
Mr. Fox stated that he has problems with each of the alternatives discussed in the staff report
because of the impact they will have on his pension when he retires in approximately 20 years.
He explained that he saw two of the scenarios presented, 1) requiring employees to contribute
7% to the cost of their retirement account, and 2) returning to the 2% @ 60 formula, as putting
the City at a competitive disadvantage and making it more difficult to hire and retain qualified
staff. He reported that he sat on interview panels several times in the last few years for vacancies
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in the City’s Planning Department and noted that it has been difficult to obtain qualified
candidates. He reported that most other cities pay the employees’ portion of CalPERS, and offer
a retirement formula of 2% at 55. He stated that he went into public sector planning rather than
private sector planning because he felt more of a commitment to serving a community as a
member of staff and not working as a consultant. He stated that he entered public sector
planning realizing that the salary is not necessarily as high as that of the private sector, but there
was always the understanding that there was a pension system that provided a better benefit at
retirement, thereby providing a balance. He reiterated that he did not agree with the direction the
State is going in, and that he is concerned about changes to the City’s retirement program that
could create a situation where there would eventually be more contract planners and less
continuity, which he believes would be a disservice to this community.
Mayor Pro Tem Long commented that he wanted to ask Mr. Fox a question departs from the
topic of pension benefits, but is still related to employee compensation and benefits. He stated
that one of the most significant costs increases to the City has been the cost of health insurance,
which has tripled over the last nine years. He asked Mr. Fox what his ideas and those of his
fellow employees might be about a change to the City’s health benefits. He queried Mr. Fox for
his reaction to a health spending account format, funded by the City, where the coverage has
high deductibles; the amount of the deductible is placed in a pre-tax health savings account over
which the employee would have control; and, where the employee would pay until the
deductible is exhausted at which point the benefits would begin. He stated this would give the
employee an understanding of what the real costs are and would save costs because the account
could carry over from year to year and benefit the employee.
Mr. Fox replied that he could only speak for himself, but that it sounded like a viable option. He
stated that the city he previously worked had a cafeteria benefit program where the employee
received a set amount of money each month, out of which they selected the type of plan they
wanted to use, and in his case, the excess funds rolled over into his Deferred Compensation
plan. He stated that he did not find the concept objectionable. He also commented that he was a
single, healthy person and is presently covered by Kaiser, which is the least expensive health
insurance program offered by the City.
Gary Gyves, Senior Administrative Analyst in the Finance Department, stated that he agreed
with many of the points raised by Mr. Fox. He explained that the table on circle page 25 of the
staff report illustrated the costs of the City’s pension plan over the last 20 years, which equals
$3.2 million. He noted, however, that if the City had participated in a 401K plan for the
employees during the same time period, the Social Security costs at a rate of 6.2% of payroll
would have equated to $2.1 million. He stated that over twenty years the net cost to the City for
this program is about $640,000 which is $32,000 annually to bring us from Social Security to
the CalPERS program. He explained that the table on circle page 26 lists potential savings to the
City by making various changes to the existing pension program, but noted that there are
tangible and intangible costs not listed on the table. He stated that if City employees were
removed from the CalPERS program, there would be Social Security costs of $200,000, and it is
assumed that the City would give the employees some type of matching 401K contribution plan
which would also have associated costs. He stated that the scenarios of having the employees
contribute 7% toward their retirement plan or changing the retirement age back to 2% @t 60
would create difficulty in recruiting and retaining employees. In response to Mayor Pro Tem
Long’s questions regarding a change in health care plans, he stated that since he is single and
healthy, he would personally choose to have the HMO program.
Mayor Pro Tem Long reminded Mr. Gyves that while he is young and healthy now, time is not
on his side and he should continue to ponder what it the best health care plan for himself.
Karen Peterson, Administrative Analyst II in the Recreation and Parks Department, stated that
she supported the staff recommendation to watch and wait to see what happens with
Assemblyman Richman’s proposal to create a new California Public Employee Retirement Plan.
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She explained that she has been an employee with the City for almost four years, and has been
with the CalPERS system for almost six years. She stated that as a result of a recent interchange
with a personal financial planner she realizes how critical her pension plan is to her retirement
and she is concerned with the proposed changes at both the State and local levels. She explained
that she is at the front end of her career and that younger employees will be affected by the
changes being contemplated more significantly and over a longer period of time. She stated that
City employees are concerned with protecting the current salary and promised retirement
benefits, retaining a loyal, competent staff, and having the ability to attract competent new staff.
She stated that staff is aware of the increased financial pressures affecting the City, including
significant costs related to needed infrastructure repairs and the difficult decisions Council will
be facing in the next few years. She requested that Council hold off on taking action and that
Council keep employees informed, involved and in mind as decisions on salaries, pension, and
benefits are made in the future. In response to Mayor Pro Tem Long’s question regarding a
change in health benefits, Ms. Peterson stated that she too is single and did not feel she could
equally and fairly represent all City employees. She suggested that if there is to be a continued
analysis of employee health and pension benefits, that perhaps the analysis needs to involve City
staff so that staff can be educated and the fully understand the impacts.
Councilman Gardiner thanked the speakers and stated that in general, he does not like to change
the rules of the game for those already in the game. He stated, however, that it is a fair question
to ask what the implications are for changing the rules that apply to new employees. He stated
that nothing is lost by gathering information, and agreed with staff that information should be
made available to them. He stated that both staff and Council would like to see all of the
alternatives analyzed side by side. He stressed the importance of having information on the
alternatives needed to make well-informed decisions. He stated that the alternatives should be
compared with one another in order to determine the true impact on the individual employee as
well as the City.
Kathryn Downs, Deputy Director of Finance and Information Technology, stated that she
supported staff’s recommendation to take a watch and wait stance on the State legislation. She
stated that she too is concerned with keeping the City competitive for hiring purposes and that
she researched and compared benefits with other cities in the Los Angeles Basin. She reported
that she could not find a city in Los Angeles County that required the employees to contribute
their 7% into CalPERS; that 80% of the cities provided some type of retirement health benefit,
where employees of Rancho Palos Verdes receive nothing; that close to half of the cities also
provide some form of contribution into a Deferred Compensation plan in addition to a fully paid
CalPERS plan and Rancho Palos Verdes does not provide that additional benefit; and, that she
was not able to find a city that pays less for health benefits than Rancho Palos Verdes. She
stated that she does have a family and that she is healthy, but that she found other cities provide
more health benefits for employees with families. She stated that her personal observation in the
6 years that she has been employed with the City is that the Public Works Department has not
been fully staffed during that entire time; and in less than 2 years, she has seen four talented
Planning Department staff members leave the City after gaining some experience for better
compensation and benefits elsewhere.
Councilman Clark inquired if the loss of talented staff in the Planning Department has been as a
result of better compensation or better career opportunities. He stated that his observation is that
a career in municipal public service is one in which in order to advance one’s career, one must
move to different cities.
Ms. Downs replied that was possibly a consideration, but that compensation was also one of the
issues.
Mr. Gyves stated that he was personal friends of two of the Planners that left and that one of
them went into the private sector based on compensation and the other moved to another public
sector job as a career-based move.
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Mayor Pro Tem Long stated that many cities have set caps on the City’s monthly contribution
abdicating their responsibility to address health insurance costs but that the City of Rancho
Palos Verdes has not done this. He said what the City pays is unparalleled in the private sector,
but that he understands the difference to be that the benefits are greater in the public sector
because the salaries are smaller. He reported that at present the City pays 100% of the
employee’s coverage, regardless of which plan the employee chooses, and 50% of the cost of
the dependent coverage, including until last year a zero deductible PPO plan. He reported that in
private industry it is typical for the employer to pay 100% of the HMO cost of the employee,
50% of the HMO cost of dependents, and to require the employee to pay the difference is cost
for any plan that is more expensive than the lowest cost HMO. He stated that he is not
suggesting that the City switch to this approach, but that he is interested in controlling the pace
of health insurance cost increases. He indicated that one way to control that pace is to simply
give the employee a flat amount of money to put toward the costs, which is the approach most
other cities have taken. He stated that he prefers the City to fund the deductible, establish a high
deductible and provide a pre-tax health savings account. He inquired which of the two plans Ms.
Downs preferred.
Ms. Downs replied that she would have to analyze the numbers before making a decision, but
commented that she found it interesting that most of the other cities whose benefits she
researched paid 100% of dependent costs.
Mayor Pro Tem Long stated that those cities probably have a monthly cap, which he believes
will cause those employees to pay more than 50% of the dependent cost in the next couple of
years. He stated that he is interested in obtaining not just the best benefit for the employees, but
also the best plan for the collective premium dollars. He asked how the cost of the health
insurance compared to the cost of pensions.
City Manager Evans replied that health, dental, and vision combined currently costs the City
around $500,000 per year and the pension plan is around $650,000 per year.
Councilman Clark commended the City’s employees and stated that Council appreciates the
contributions they make to the community. He stated that he is not predisposed to any particular
course of action, but is looking forward to further discussion on the matter of employee
compensation and retirement plans and benefits, although he reported that the trend is to move
away from defined benefit plans. He reported that in 1984 the Federal government stopped
providing defined benefit plans and stated that just as the Federal government has had to deal
with making the transition from defined benefit to defined contribution, the state and local cities
will probably have to eventually do the same. He reported that Assemblyman Richman’s bill,
ACA 23, targets 2007 as the date to change employees from defined benefit pension plans to
defined contribution plans. He stated that it was important for City staff to realize that Council is
not going to put employees in a leading disadvantage.
Councilman Gardiner pointed out that the City of San Diego currently has a $1.4 billion
unfunded pension fund that it is trying to deal with. He noted that the City of Rancho Palos
Verdes cannot keep up with every city and is destined to be a “farm team” compared to the
major leagues. He realizes some employees will move to larger cities for career opportunities,
that the City cannot retain all employees forever, and that employee compensation will need to
be discussed. He reported that the topic of compensation frequently came up at USC, and it was
readily acknowledged that they could not compete with the most expensive institutions, but
would compare itself instead with peer institutions and peg its salary ranges at the 85th
percentile. He suggested the consideration of a similar compensation comparison for the City
and then using the most creative way to allocate individual funds.
Mayor Pro Tem Long endorsed Councilman Gardiner’s comments in that the City of San Diego
had its own pension plan and stated that a city the size of Rancho Palos Verdes cannot afford
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this type of plan; and, because the City is a part of CalPERS, the major decision will be made at
the state level and then the City will have to consider what to do from there.
Mayor Wolowicz asked how many speakers remained and reminded Council that it was their
intention to hear the speakers first and then have Council discussion afterwards.
Storm Drain Projects
Eugene Rolle, Rancho Palos Verdes, stated that the drainage only outlet to McCarrell Canyon is
on his property and thanked City staff and the Council Members who have visited the site. He
stated that after the floods of February 2005, the storm drain system at 38 Seacove was
identified as needing emergency repairs to stop the damage that was identified in that area. He
stated that the repair was funded and the Coastal Permit issued for the repair, which consisted of
the placement of steel, concrete and rocks in the drainage channel on his property. He stated that
because the design of the project was flawed, he and his adjacent neighbor resisted the project
and it was not done. He stated that he has developed a more appropriate proposal to repair the
outlet that can be done within the City’s existing budget amount.
Mr. Rolle reported that the existing system was built in 1948, that aggressive erosion is
occurring at a progressive rate, and that the system could be made to be functional if a pipeline
were to be installed as part of the final solution. He gave a PowerPoint presentation illustrating
the drainage areas feeding into McCarrell Canyon and the location of the current drainage
system. He indicated that storm water is collected in the open canyon and fed into a pipeline
system consisting of collection basins that feed into an underground 54-inch pipe that stops just
short of the ocean at Seacove Drive. He explained that the drainage outlet consists of an open
15-foot wide trough that is 250 feet long and after exiting the open trough the water then flows
down a ravine to the ocean. He reported that the 1948 system was designed to handle 210 cubic
feet per second runoff during a peak storm flow; he illustrated that three sources of water
including McCarrell Canyon, a tributary of Barkentine Canyon, and then Barkentine Canyon
itself feed into one single pipeline which carries the water to the bluff. He reported that
McCarrell Canyon was designed to drain 130 cubic feet per second (cfs) out of a 48-inch pipe;
that there was a second 18-inch pipe that can accommodate 20 cfs, and a drain for Barkentine
Canyon that handles 60 cfs, all totaling 210 cfs of capacity during a heavy rainstorm. He
reported that the City’s numbers reflect that McCarrell Canyon alone generates 487 cfs, that
local street runoff is estimated at 75 cfs, and that there is no data for the two drainage tributaries
at Barkentine Canyon. He pointed out that even excluding the unknown data; the total amount of
water flowing through the outlet at Seacove Drive is 562 cfs, compared with the system’s 1948
design capacity of 130 cfs.
Mr. Rolle stated that the hydrologists report that the speed of the water is as damaging as the
volume of the water, and that when the velocity of the water reaches 15 feet per second it
reaches a “super critical flow,” which is a term that describes the McCarrell Canyon drainage
system. He computed that the flow of 562 cfs at the outlet equates to over 250,000 gallons per
minute, which is equivalent to over seven swimming pools going over the bluff every minute.
He reported the following: 1) In 1996, Dr. Perry Ehlig recommended that a pipeline or service
pipe be installed to the ocean, but no action was taken; 2) in 1998, a geological report from
Robert, Bein, Frost & Associates, recommended to either shut the system down or to install a
pipeline, but no action taken; and 3) in August 2005, the Kleinfelder geological report
recommended repair of the cement culvert, support of the ravine walls with gunite and steel, and
the addition of rock lining to the entire ravine. He reported that the adjacent neighbors objected
to the Kleinfelder recommendation. He stated that by placing a surface pipe down the face of the
bluff to the ocean, some revegetation should take place on the bluff face which would help
prevent the area from being further eroded with each winter storms. Mr. Rolle concluded that
the issues in this one location are numerous, including erosion, liability, and dangerous storm
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flow velocities, but that the solution to these problems is installing a surface pipe down to the
ocean, which is a very economically and feasible fix, commensurate with or less expensive than
the solution proposed the previous year by the City.
Councilman Clark disclosed that that he physically inspected the situation on March 25, 2006
and that what he saw upon inspection is consistent with Mr. Rolle’s presentation.
Mayor Pro Tem Long stated that he would like all the materials presented by Mr. Rolle to be
reviewed by staff and placed on an agenda as soon as possible.
Interim Director Holland clarified that what Mr. Rolle and his neighbors are proposing is to
have the City included for funding in the FY06-07 budget for the project they are proposing.
Councilman Gardiner asked if there was money budgeted for the gunite work associated with
the McCarrell Canyon project.
Interim Director Holland stated the reason the gunite project was not completed is because a
property owner in the area was objecting to the project.
Mayor Pro Tem Long stated that if he recalled correctly, the project was not budgeted and that
the City does not have $250,000 available to make the proposed repairs and that regardless of
the funding issue, he stated that this new proposal would require staff’s assessment before a
decision is made.
Interim Director Holland stated that the City’s project was considered an emergency project,
funding for which would have come out of the General fund reserves as a budget amendment.
Mr. Rolle stated that he did not mean to misrepresent the situation. He indicated that a Coastal
Permit was taken out for the repairs and the neighbors were requested to attend a meeting with
the City to discuss the easements and right-of-ways needed in order for the work to be done. He
stated that installing a surface pipe could be much more than just a temporary fix because it has
a very definite lifespan of perhaps 15-30 years, which could be a part of the permanent solution
to remedy the drainage problems in McCarrell Canyon.
Mayor Pro Tem Long reiterated that no decision could be made at this time, but that he shared
Councilman Gardiner’s interest in looking at the matter further.
Interim Director Holland commented that he was very impressed with the time and thought that
Mr. Rolle put into his presentation.
City Manager Evans stated that the issue was that Mr. Rolle’s proposed repair is going to cost a
lot of money, but is not part of the ultimate solution for McCarrell Canyon.
Director McLean stated that there were a number of storm drain repair projects that were
proposed to Council, approved and included in the budget of FY05-06.
City Manager Evans continued that this was one of those budgeted projects, but that Mr. Rolle
and his neighbor did not feel the project as proposed was the right solution, so the City
proceeded with other emergency projects that were not being objected to by the affected
property owners.
Equestrian Improvements on PVDE
Gordon Leon, Chair of the Equestrian Committee, spoke in favor of the proposed Palos Verdes
Drive East (PVDE) equestrian and pedestrian trail improvements that staff and the Equestrian
Committee have presented for Council’s consideration. He stated that although conventional
sidewalks are not necessarily required in an equestrian district and along PVDE, good equestrian
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trails are needed instead for quality of life and safety reasons. He suggested that the proposal of
improvements could be made in an incremental fashion, by first clearing the vegetation and
other obstructions impeding equestrian traffic from the access area and then providing the road
crossing as a second phase.
Ray Van Dinther, Equestrian Committee Member, spoke about the pedestrian and equestrian
safety issues on PVDE. She stated that she understands the financial issues the Council is facing
but feels there are priority issues that could be addressed immediately without spending the
entire amount of money proposed. She reported that the immediate needs are for pedestrians,
including children, equestrians and the elderly, to be able to cross PVDE safely and suggested
that instead of a flashing cross walk as stated in the proposal, lines could be painted on the road
and crossing signs installed. She reported that there is no separation between vehicular traffic
and equestrians or pedestrians; that sidewalks are virtually non-existent along this roadway; and
that she is concerned about the possibility of traffic-related deaths in that area. She stated that
incremental safety improvements include a crossing and the removal of overgrown shrubbery
along the area on PVDE known as “Deadman’s Curve.”
Madeline Ryan, Equestrian Committee Member, stated that she lives on the arterial highway of
PVDE, which is unusual because it is within a residential neighborhood. She was disappointed
that the expenditures for the safety improvements were not recommended for inclusion in the
budget and inquired if the maintenance budget of Public Works might be increased to allow for
much needed and long overdue trail maintenance along PVDE.
Sunshine, Rancho Palos Verdes, suggested that storm drain improvement projects and
equestrian improvement projects should be coordinated to be done at the same time.
Richard Bara, Rancho Palos Verdes, stated that he was disappointed that the staff report
indicated that a 6-foot wide trail, not a 10-foot wide trail, is the standard for an equestrian trail.
He stated that it was his understanding that the City owns the public right of way easement
along an arterial road and that in many cases private property owners have encroached on the
City’s land. He commented that the proposed trail was to be composed of either asphalt or half
asphalt/half decomposed granite and stated that he believes it is safer to make the trail
completely out of decomposed granite.
Beautification Grants
Bob Nelson, resident and member of Sea Bluff HOA, urged the City Council to continue with
the Beautification Grant program because it has had such a positive impact in beautifying the
City’s roadways. He suggested that the City should pursue obtaining grant monies to help
towards the operation of the Pt. Vicente Interpretive Center facility from the County of Los
Angeles, who will bring school busloads of children to enjoy the museum; he stated that there
may be grant monies available from LAUSD or PVPUSD to help offset the remaining budget
expenses of $250,000 for the PVIC site. He stated that one solution to fund the pavement
management program might be to limit the statement of work to a specific level, or limit the
amount of money allocated to the program. He also urged the Council to maintain the current
level of public safety and infrastructure improvements and suggested the continued use of
informational signage indicating the location of infrastructure repair projects when they are
under construction.
Tom Redfield, Rancho Palos Verdes, spoke regarding traffic enforcement and requested that
Council consider adding another traffic enforcement officer. He reported that the City could take
advantage of the reduced rate offered by the Los Angeles County Sheriff’s Department for the
addition of another deputy. He stated that there has been great feedback from the public and
civic leaders on the effectiveness of the existing dedicated traffic officer the City recently added
and that he would like to see the performance and effectiveness of the additional officer tracked
over a 4-month period. He also stated that with an additional dedicated traffic officer, ticket
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revenue would increase since the present deputy is currently focusing on the most egregious
speeders. He thanked Council for the existing dedicated officer because the changes in the
community’s driving habits have been positive and saves lives.
Upper Point Vicente Park Master Plan
Sunshine, Rancho Palos Verdes, asked where the City’s maintenance yard would be located
with the proposed addition of the Palos Verdes Art Center at Upper Point Vicente Park. She
clarified that the implementation of the Palos Verdes Loop Trail is not a “horse issue” and asked
staff to consider coordinating projects so that the least impact is made on one project when
another is under construction; and she suggested that the City should make improvements to
trails while other City improvements are being performed in the same general area.
Recess and Reconvene:
Mayor Wolowicz recessed the meeting at 1:23 p.m. and reconvened the meeting at 2:05 p.m.
Mayor Wolowicz queried the Council on the best way to proceed at this point.
Councilman Gardiner suggested reviewing the items listed on the City Manager’s Proposed
Budget.
Mayor Wolowicz asked if all the items listed as budget policy issues were listed on the table on
circle page 1 of Item 2.
City Manager Evans replied that all budget policy issues were listed on the table, except for the
arterial beautification item, which would be funded from the Recycling fund rather than the
General fund.
Mayor Wolowicz suggested that Council use the worksheet on circle page 4 of Item 4 as a
guideline to walk through the items and added that two items proposed earlier should be added
to the list: 1) telecommunications and 2) Council restricted funds. He inquired if the City has an
adequate number of staff at present.
City Manager Evans stated that some of the budget policy issues included discussion of
additional staffing, one in Code Enforcement and one in Emergency Preparedness.
Councilman Gardiner stated that he wished to add Actions 1-5 and 8 under the Equestrian
Improvements along PVDE to the budget policy issues list.
Councilman Clark noted that he did not see the New Civic Center on the list. He stated that if
this project were to proceed, there would need to be a staff member designated as the project
manager.
Non-Profit Organization Grant Increases
After Council discussion of the various grants requests, the following decisions were made:
1. Approved an additional $3000 for Peninsula Seniors
2. Approved $1,000 for Kiwanis Club to support the Palos Verdes Marathon
3. Approved an additional $400 for Healthcare and Elder Law Program (HELP)
4. Approved an additional $400 for Pet Protectors League.
5. Approved all other grant requests as presented by staff
Mayor Wolowicz stated he would abstain from voting on the grant request from South Bay
Youth Project.
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Councilman Clark stated he would abstain from voting on the grant request from SHAWL.
Mayor Pro Tem Long moved the adoption of the grant proposals as discussed, seconded by
Councilman Gardiner. The motion passed on the following roll call vote with Mayor Wolowicz
abstaining from the grant request for the South Bay Youth Project, and Councilman Clark
abstaining from the grant request for SHAWL:
AYES: Clark, Gardiner, Long, Mayor Wolowicz,
NOES: None
ABSENT: Stern
Employee Pension Plan and Employee Compensation
Mayor Wolowicz stated that he recently spoke on this subject at South Bay Cities Council of
Governments (SBCCOG) meeting where he responded to and took exception to the position
taken by the League of California Cities regarding public employee pension reform. He stated
that he also had lengthy discussions with Assemblyman Richman’s office staff regarding the
Assemblyman’s proposed bill that would require a defined contribution retirement plan for all
new CalPERS members.
Councilman Gardiner said that he is satisfied with what City Manager Evans has proposed and
appropriated in the FY 06-07 budget in regards to the employee salary ranges, merit pool and
bonuses, but indicated that he wanted a long lead-time to study how the City should resolve the
defined benefit/contribution issues discussed earlier in this meeting.
Mayor Pro Tem Long agreed with Councilman Gardiner’s comments and added that based on
the size of the City he was not in favor of the City pursuing its own pension plan. He indicated
that the City’s options should be governed by the decisions made at the State level and that
when health insurance renewal comes up the fall he and Councilman Gardiner as a
subcommittee will be tasked with looking at that issue.
Councilman Clark stated that he agreed with his colleagues with the one caveat that he would
like to see the Finance Advisory Committee assigned to work with staff regarding the long-term
pension implications and alternatives and return to Council with its analysis and
recommendations.
Mayor Wolowicz agreed with the proposed merit pool and bonus increases for FY 06-07; that he
held in high regard the articulate staff members who addressed Council on the topic of employee
compensation and benefits; and that he wanted two things understood – he was not looking to
change the rules of the game for those who are now employed with the City, nor did he wish to
take away the employees’ pension plan. He reiterated that he is not a fan of defined benefit plans
whether in the public or private sector and that a great deal has changed in the world since
defined benefit plans were created. He stated that start-up and surviving companies are not
embracing defined benefit plans any longer, yet he would like a study prepared regarding the
City’s compensation package. He stated he that realized that the best and brightest employees
sometimes leave their current employment for a host of reasons. He explained that he does not
want to wait on the Richman Bill (ACA 23) because he did not believe the bill has much of a
chance of passing. He explained that he was disappointed by the actions of the Executive Office
of the State of California on this issue. He proposed the adoption of a policy requiring some
level of contribution from City employees to their own retirement; and that new employees be
covered by a hybrid plan like the one contemplated in Assemblyman Richman’s bill. He stated
that he understands the consensus of the Council to be to move ahead with a study to be
performed by the Finance Advisory Committee and indicated that he will not stand in the way of
that proposal.
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Councilman Clark asked for a qualification of the statement on circle page 24 of the staff report
which states that “over the years, most of the local agencies including Rancho Palos Verdes
have negotiated agreements with their employees in which the employer pays the entire cost of
pension programs.”
City Manager Evans stated that he is not aware of any city in the South Bay that does not pay
the employees’ 7% contribution to CalPERS. He explained that there are cities that have an
enhanced retirement plan that are negotiated through the employee’s unions where the
employees pay the additional cost of an enhanced pension program.
Councilman Clark stated that he has spent 35 years in public service in the Federal government
and that he has personally had to contribute 7% towards his defined benefit pension. He stated
that he thinks it is great that municipal employees did not have to contribute to their own
retirement program, but stated that this is out of line with what is going on today in both the
private and public sector. He stated that there is movement away from defined benefit pension
plans across the country and that employees should be required to contribute to their pension
programs. He was surprised that the City does not have some contribution to the employees’
post-retirement health benefits and would like the FAC to examine this as part of its assignment.
He stated that he is aware of the expense of this type of benefit, but feels that it is appropriate if
an employee has worked in government service for their entire career. He stated that if the City
is going to continue with a defined benefit pension program, the employees should contribute to
it at some point in time.
Mayor Pro Tem Long moved for the adoption of the three items listed as recommended by the
City Manager for employee salary ranges, merit pool and bonuses with direction to the Finance
Advisory Committee to study the issues related to the employee pension program and post-
retirement health benefits as described by Council and that staff report back to Council with that
information and the results of the State actions on the Richman Bill (ACA 23).
Councilman Gardiner seconded the motion, with the understanding that Council will receive the
report in sufficient time to incorporate suggestions and recommendations from the FAC, if
Council so chooses, prior to the adoption of next year’s budget.
Mayor Wolowicz stated that he will support the motion with the understanding that he will be
looking towards making a proposal at that time for a change in the City’s pension plan; either a
cessation of the defined benefit plan or employee participation in the plan.
The motion passed by acclamation.
Mayor Pro Tem Long stated that he thinks the idea of cessation of the City’s defined benefit
plan before the State acts is very premature. He stated that he understands the current structure is
essentially a substitute for Social Security and wants the FAC to examine what the savings
would really be of eliminating the City’s current plan in the absence of State action. He
continued that the employee contribution issue is a different issue than what he wants to see
from the FAC, which is how such a change would affect the City’s posture competitively. He
stated that he wants the FAC’s comparisons to come back with not how much money is being
saved, but how much is being saved net of what other expenses might be and net of other factors
such as a lower employee retention rate, thereby incurring greater recruitment costs. He stated
that he is not convinced the City should act outside of the context of the actions that the State
might take since that may influence what other cities do as well.
Mayor Wolowicz asked Mayor Pro Tem Plan if the State takes no action, but the FAC comes
back with recommended changes, would he be willing to accept the Committee’s
recommendations.
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Mayor Pro Tem Long replied that it depended on what the changes were. He continued that he
would want to weigh the tangible advantages of change with the intangible advantages and/or
disadvantages. He explained that he would be interested to compare the initial savings in the
short run with the additional costs that may be incurred in the long run.
Storm Drain Projects
City Manager Evans stated that he was recommending that Council approve all of the storm
drain projects included on the list in the staff report as one-time projects that would reduce the
General fund reserve, but not affect the City’s operating costs, and noted that $1.8 million of the
proposed $2.3 million is for the McCarrell Canyon property acquisition and the Sheriff’s traffic
control expenses related to the Sunnyside Ridge Road project. He stated that taking the 5-Year
Model on a year-by-year basis, and knowing the necessity of these projects, he strongly
recommended that this was a good and logical expenditure of General fund reserves In FY 06-
07.
Mayor Pro Tem Long asked if the proposed PVDE curb improvements rose to the same priority
level of importance as the other projects listed.
City Manager Evans replied that he believed so because of the importance of improving
drainage on PVDE to direct the street flow into existing drains so it does not enter private
property, thereby preventing further erosion.
Councilman Clark referred to the Los Verdes Golf Course Drainage issue listed in the table on
circle page 4 and asked if the County was going to pay for this project.
City Manager Evans replied that the cost reflected in the table is the City’s portion of the project
as preliminarily estimated.
Councilman Clark asked about the request to purchase a push camera for storm drain
inspections.
Interim Director Holland replied it was a simple video camera that sits on the end of a stick that
staff can push down into some of the storm drains to visualize what the real problems are before
staff spends money digging up the area. He explained that this would allow staff to investigate
the storm drains without bringing in consultant firms. He stated that the cost of the camera could
be recouped after one use.
Councilman Clark recapped the total cost to be $2.4 million out of the current General fund
reserve for these one-time storm drain projects and confirmed that the current reserve was $12.6
million. He pointed out that this would be reducing the reserve by 1/5th and that the City must
generate additional sources of revenue to be able to continue this kind of repair work.
City Manager Evans stated that at some point the City needs to stop funding the infrastructure
repairs out of the General fund reserve, but that he did not believe this was the time, because of
the necessity of the projects and the size of the reserve. He stated that Council has already
directed staff to bring back specific recommendations from the FAC to do that.
Councilman Clark stated that he thinks creative ideas should be on the table, including making
us of two of the City’s parks of 17-18 acres in size that are zoned for active recreation, but are
not fully developed and therefore underutilized. He stated that the parks should be analyzed to
determine if the City could allow long-term leases of these properties, thereby leveraging
additional capital without giving up the land.
Councilman Gardiner echoed the comments of Councilman Clark. He stated that he took a dim
view of the property acquisition for the McCarrell Canyon drainage project and hoped that there
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would be no other property acquisitions required of this sort. He inquired if there were a way to
loan money from the General Fund for storm drain project sand then pay it back if the City finds
a more reasonable way to generate a funding stream for the storm drain projects, instead of
permanently depleting the General fund.
Mayor Wolowicz asked if General funds used for an un-funded storm drain project could be
transferred back to the General fund from excess money in other unrestricted funds.
Director McLean replied in the affirmative.
City Manager Evans stated that he doubted if funds collected from the Storm Drain User Fee
could be used to repay the General fund.
Councilman Gardiner asked if the City could advance money out of the General fund and have
that amount repaid.
Director McLean stated that he would defer to the City Attorney on the matter, but if there was
any contemplation of refunding the $2.3 million spent out of the General fund to the Water
Quality and Flood Protection Enterprise fund, he would encourage the money to go into a
Capital Improvement Program (CIIP) fund so that it is clear that it is being kept separate from
the same fund that is collecting the Storm Drain User Fee.
City Manager Evans stated that money can be advanced from and then repaid to the General
fund, but that the specific question regarding if money can be advanced from the General Fund
to be repaid by the Storm Drain User Fee will have to be run by the City Attorney.
Mayor Pro Tem Long stated that the question is hypothetical, because the Storm Drain User Fee
was under-funded at its inception; and that it was designed with a 10% or 15% contingency
factor, which will be consumed by rising construction costs that are increasing at a faster rate.
He stated that Council is discussing the funding of $2.4 million of storm drain repair expenses,
none of which were identified in the original Storm Drain User Fee Model and observed that the
prospect that circumstances will change so dramatically that the User Fee will generate a surplus
that could be used to pay back $2.4 million was highly unlikely.
Councilman Gardiner suggested that one way to proceed would be to loan the money to
complete the Priority One storm drain projects. He stated that a lot of money is going to be spent
from the General fund, which will not be paid back until the City starts to receive revenue from
the Terranea hotel project.
Mayor Wolowicz requested that the Director of Finance talk with the City Attorney to see
whether or not there could be an advance of General funds, and if that is not possible, then to
move it to the CIP fund.
Councilman Clark stated that Council needed to pursue other alternatives for revenue
generation, including creative debt financing.
Councilman Gardiner stated that it does not appear that the City will be making repairs as
quickly as previously thought and when revenue from the Terranea project begins to come in,
the City will spend that money and not until then.
Mayor Wolowicz observed that the funds being discussed are beyond the FY06-07 Budget and
that the $2.4 million being discussed is going to be spent long before new revenue sources can
be realized. He stated that he supports the expenditure of General funds to construct the
immediate list of storm drain projects. He commented that the City has yet to identify properties
that might need to be purchased for easements and right-of-ways associated with the identified
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projects. He requested that staff begin the identification process of all the properties that may be
needed to complete the storm drain projects.
Mayor Pro Tem Long moved to accept the City Manager’s proposal to use $2.3 million from the
General fund to complete the identified storm drain projects, seconded by Councilman Clark.
The motion passed without objection.
Councilman Gardiner stated that he would find it useful as estimates are revised or additional
expenditures arise that the baseline costs of the projects be listed with running totals so that the
current total of expenditures incurred are shown from day one forward.
Mayor Wolowicz stated that he too would like to see the cumulative tracking of all the storm
drain projects from the original amount budgeted to the actual costs being incurred.
Pavement Management Residential Overlay
Councilman Clark reminded staff that Council had an earlier discussion regarding the possibility
of collaborating with the South Bay Cities Council of Governments (SBCCOG) on street
maintenance projects.
Interim Director Holland replied that this type of thing may take time, but agreed that the
dialogue with the other South Bay cities needs to start.
Councilman Gardiner indicated that he would like to see a presentation of street photographs
visually comparing of the different rating numbers used in the pavement management program
Mayor Pro Tem Long suggested that the appropriate time to have such a presentation would be
when staff returns with the consultant’s report. He commented that he would also like to see an
assessment of costs to illustrate which level of maintenance is cheaper in the long run when the
costs of rebuilding is factored into the equation.
Councilman Gardiner moved approval of staff’s recommendation, seconded by Mayor Pro Tem
Long. The motion passed without objection.
Items from the “Not Recommended” Menu
City Manager Evans reported that all of the items in the list have merit but they were not at the
same level of priority as the infrastructure and public safety issues, based on the Council’s list of
Strategic Goals identified in February 2006.
Mayor Pro Tem Long stated that he would like to see the list re-ordered with Disaster
Preparedness Tier 1 Programs moved higher up the list and that the Park Maintenance Increase
and Tree Trimming Frequency Increase moved lower down in priority. He recommended
changing the Dedicated Traffic Deputy to a Regional Traffic Deputy, which he felt would be a
more efficient use of funds. He stated these changes would generate a savings that would be
more than sufficient to pay for the Disaster Preparedness Programs.
Councilman Gardiner inquired as to the cost of completing Action Items 1-5 and 8 of the
proposed PVDE Equestrian Improvements.
Interim Director Holland replied the cost of these items totaled $6,700.
Mayor Wolowicz stated that he did not view the PVDE improvements as only an equestrian
issue after a conversation with the Chair of the Traffic Safety Commission. He stated that there
four user groups have been identified that would benefit from the improvements, including
equestrians, bicyclists, pedestrians, and local residents moving house to house.
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Interim Director Holland stated that the Traffic Safety Commission has formed a subcommittee
to study circulation issues on PVDE; that staff has been gathering data and information for the
subcommittee to review and analyze, and that the subcommittee will meet at the direction of
Council and bring back a comprehensive report that deals with all the various groups using the
full length of PVDE.
Mayor Pro Tem Long inquired as to the restriping cost of Action Item 9.
Interim Director Holland replied the cost would be $7,000.
Councilman Clark stated that as one of the three Council Members living off of PVDE, he is
concerned with the fact that only a portion of PVDE is being looked at, and not the entire
arterial. He stated that he is sensitive to the Equestrian Committee’s issues, but noted that there
are huge cycling safety issues along certain portions of the road that are not being addressed and
that the Switchbacks have significant safety issues between cyclists and motorists that are not
being discussed. He stated that he is not supportive of significant expenditures for only one
segment of PVDE without having a full appreciation of the context of all the safety issues
affecting this roadway.
Interim Director Holland reported that this package has been presented to the Equestrian
Committee but that it had not had a chance to respond yet. He reviewed some of the conflicts
that are present with all the various stakeholders and users of this unique stretch of roadway due
to its narrow, winding, and steep characteristics. He reported that a comprehensive study will
consider uses of the pedestrians, equestrians, motorcycles, bicycles, vehicles, trucks, and buses
and will analyze what can be done to improve conditions and safety on this roadway.
Councilman Gardiner stated that the City has made changes to PVDE a portion at a time,
including the re-engineering of the intersection at Ganado Drive. He stated that he does not see
many pedestrians on PVDE, but that he does see horseback riders, and if the City wants to
maintain the semi-rural atmosphere of that area, Council must do something to improve the
roads for these users and show that it supports horses.
Councilman Clark stated that he is in favor of minimal improvements and noted that the
intersection of PVDE and PVDS below the Switchback was improved at the cost of the
developer of the Ocean Trails project, which is now Trump National, as part of the overall
improvement to PVDS. He noted that he sees few pedestrians in this area, but many cyclists on a
daily basis and even more on the weekends.
Mayor Pro Tem Long expressed his belief that the Traffic Safety Commission’s comprehensive
report will analyze the conflicts between bicyclist and motorists and propose a systemic program
to address the issues found along the entire length of PVDE. He agreed that Action Items 1, 3, 5,
and 8 would provide big bang for the buck, and thought that Item 9, although a bit expensive at
$7,000, was also a good idea.
Mayor Wolowicz stated that there was Council consensus to fund Equestrian Improvement Item
Nos. 1-5, 8 and 9, totaling $13,700.
City Hall Generator
Councilman Clark stated that he understood after reviewing the staff report there was a
compelling need for a new City Hall generator to prevent outages during electrical blackouts or
surges.
City Manager Evans replied that there is a need and the present generator is not reliable, but
because it did not fall under the categories of public safety, law enforcement or infrastructure, he
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did not recommend the expenditures at this time. He stated that the cost of the entire project is
$280,000.
Councilman Clark asked if there were any restricted funds that could be used to purchase the
generator.
City Manager Evans replied that Building Replacement funds could possibly be used.
Director McLean reminded Council that there is also $70,000 in the budget this year that has
already been allocated to this project, plus $53,000 in Homeland Security grant funding; leaving
an un-funded amount of $147,000.
Councilman Clark inquired as to the balance in the Building Replacement fund.
City Manager Evans replied that there is currently $1.4 million in this fund.
Councilman Clark stated that this is an item that can affect the day-to-day operation of City
Hall, limit the City’s ability to communicate with the community and affect the City’s
emergency preparedness. He proposed that the un-funded portion should be taken out of the
Building Replacement fund.
Interim Director Holland explained that the current generator, when it does work, is not capable
of handling all the electricity needs at City Hall and noted that the existing generator does not
power the Planning Building or Palos Verdes on the Net. He indicated that Alternate B
described in the staff report would allow for a generator that would be capable of handling all of
the existing City Hall buildings and allow for additional growth.
Councilman Gardiner stated that the ham radio operators (Disaster Communication Service),
Channel 33, and the City’s Emergency Operations Center are all resources that are needed for
the peninsula in an emergency situation, and that there ought to be the ability for the City to
obtain a large-scale grant since these are the local support resources in an emergency situation.
City Manager Evans reported that all of the emergency preparedness grant money that was
previously available has dried up.
Councilman Gardiner stated that back-up generators usually go through batteries which go
through alternators to provide the AC current; normally Edison will supply the current to the
batteries, but when Edison goes down, the batteries provide the back-up until the generator goes
on, so that the devices at City Hall sees no disruption in service.
Interim Director Holland answered that each of the computers in City Hall has its own surge
protector UPS system.
Director McLean said that the City’s computer servers, as well as most workstations and the
voice over IP handsets, are on separate UPS devices.
Councilman Clark moved to approve the purchase of the generator with the balance of the
funding required to come from the Building Replacement fund, seconded by Mayor Pro Tem
Long. The motion passed without objection.
New Traffic Signal
Councilman Clark stated that he thought no money should be spent on traffic signals at this
time.
There was consensus among the Council members to follow Councilman Clark’s
recommendation.
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Code Enforcement Staffing
Councilman Clark reported that he had seen newspaper articles in the last year about local cities,
including Lawndale and Hawthorne, that have been transformed in the look and feel of the
community and improved property values by taking a proactive approach to code enforcement,
particularly in the area of landscaping and property maintenance. He reported that for its
population size, the City spends one of the smallest amounts on code enforcement of any city in
the South Bay and Los Angeles County. He stated that home values in Rancho Palos Verdes
have reached $1.2-$1.3 million and he frequently receives complaints from residents that we are
not proactive enough on landscaping and property maintenance issues. He stated that he agrees
with the staff recommendation that the City hire an additional Code Enforcement Officer.
Councilman Gardiner commented that he too has received resident complaints on property
maintenance and landscaping problems in numerous neighborhoods and has passed the
information on to the City Manager. He agreed with that staff recommendation and felt the
amount requested for the budget item was in line with the City’s overall budget.
Mayor Pro Tem Long stated that he did not feel that this was a high priority item right now,
especially because it would be an ongoing expense.
Councilman Clark disagreed with Mayor Pro Tem Long. He indicated that the City of Palos
Verdes Estates, with a population of 14,000 and less than 4 square miles in size, has 2 or 3 Code
Enforcement Officers while Rancho Palos Verdes, with a population of 42,000 and 13 square
miles in size, has only one Code Enforcement Officer. He stated that he felt Council was doing a
disservice to its citizens by understaffing the City’s Code Enforcement program.
Mayor Wolowicz inquired if the duties of the additional Code Enforcement Officer would
include checking the business licenses of vendors and contractors working in the City.
Director Rojas replied that the City’s current code enforcement program does not extend to
business license enforcement but indicated that the Director of Finance was involved in a
change to the ordinance regarding business licenses.
Director McLean stated that Director Rojas was referring to the City’s new peddling ordinance.
Based on his experience implementing the peddling ordinance, he indicated that the type of
business license enforcement described by Mayor Wolowicz would probably require the
dedication of one or more full-time employees to that program.
Mayor Pro Tem Long agreed that more code enforcement would be helpful but stated that the
impact of adding a recurring cost item such as this needs to be carefully considered. He noted
that the annual cost of $80,000 over five years is $400,000, which would be a further reduction
in the projected General fund reserve. He stated that he could not justify such an expense until a
new revenue stream was in place.
Councilman Clark suggested that the City could contract for the service then evaluate the benefit
versus cost after one year. He reiterated that he felt Council owed the community a more
proactive code enforcement program.
Mayor Wolowicz stated that within his morning walking radius, there are three tradesmen who
live and work in the City who have asked him why other tradesmen working in the City do not
have business licenses and are never cited for this violation. He stated that it was because the
City presently has no enforcement of this sort and he believes that there is a need to proactively
inspect craftsmen working in the city to make sure they have obtained valid City business
licenses.
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Councilman Gardiner inquired if the City collects fines for code enforcement violations; noting
that the collection of fines could help defray the cost of the new employee and that the business
license fee could also be increased to add revenue to the City.
Director Rojas stated that Code Enforcement deals with the enforcement of the City’s Building
and Zoning Codes, while business licenses are a function of the Finance Department.
City Manager Evans inquired how Mayor Wolowicz would suggest implementing this type of
code enforcement program.
Mayor Wolowicz stated he did not understand the inspection process entirely, but suggested that
when applications are filed for permits and an inspector arrives at the inspection site, he could
inquire to see the contractor’s City business license. He relayed a recent situation on his street
where Verizon was preparing to do work in the public roadway, but didn’t have a Public Works
permit or a City business license.
Mayor Pro Tem Long stated that regardless of whether the City uses a contract employee or
hires a City employee to fill the position, it still is a new ongoing expense. He reported that the
City of Rancho Palos Verdes compared to Palos Verdes Estates has about one-half of the
adjacent city’s revenues per capita. He noted that as a much larger city in terms of square miles,
Rancho Palos Verdes spends much less on law enforcement than Palos Verdes Estates, so their
law enforcement personnel have a great deal of time to devote to checking business licenses. He
reiterated that until a new stream of revenue is identified or some expenses removed from the
budget, he is opposed to this item.
Councilman Clark stated that the City received 730 code enforcement complaints in 2004-05,
over half of which related to landscaping and property maintenance issues on residential
properties which are continuing to increase in value and in a community that placed a strong
emphasis on maintaining the existing quality of life. He continued that he did not believe that
$80,000 was an extravagant expenditure, particularly focusing it along a contract basis for the
year with the proposition that at the end of the year staff should return with an analysis of
benefit versus cost. Councilman Clark moved to approve the expenditure, seconded by
Councilman Gardiner. The motion passed on the following roll call vote:
AYES: Gardiner, Clark, Wolowicz
NOES: Long
ABSTAIN: None
ABSENT: Stern
Recess and Reconvene:
Mayor Wolowicz recessed the meeting at 4:00 p.m. and reconvened the meeting at 4:07 p.m.
Disaster Preparedness Programs
Councilman Clark inquired if the Emergency Preparedness Committee has come up with an
emergency evacuation plan for the City.
City Manager Evans replied in the negative.
Councilman Gardiner stated that the only time emergency preparedness is important is when
you have an emergency and the response is inadequate. He stated that he found some merit to
establishing caches of emergency supplies around the City as indicated in Item No. 5 on circle
page 80 of the staff report.
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Mayor Pro Tem Long stated that he also felt that Item No. 5 was the most important issue
identified in the staff report, although he felt that some type of sanitation device should be added
to the City’s supply cache, such as bags of lime.
Councilman Clark agreed with the recommendation but asked if the Emergency Preparedness
Committee or staff has devised a plan for the physical placement of the containers around the
community and distribution of the caches. He recommended that Council not fund the project
until the Committee returns with a more detailed plan.
Mayor Wolowicz stated that he was not convinced that the City has a comprehensive emergency
preparedness plan in place that is well known by the Council and community. He requested a list
of the items necessary to get started on disaster preparedness plan from the Committee. He
stated that in a disaster or emergency, residents will have to be self-reliant and the City will not
receive a great deal of support from outside agencies for at least 72 hours to seven days
following the event. He viewed this issue as something that needed to be addressed now and
moved to adopt the Tier 1 Program, although he was not convinced that additional staffing was
needed.
The motion failed for lack of a second.
Councilman Gardiner stated that what action the City takes should be based on the type of
emergencies that are most likely to be confront the City. He stated that basics supplies are
uniform and suggested that staff contact other cities that have programs already in place to help
determine what basic supplies are needed and even consider hiring staff from another city for
one week to get the City started in the process. He stated that potable water, lime, and body bags
are basic important items to start with and that the City should take action quickly to get the
caches established.
Mayor Wolowicz asked what supplies could be purchased for $100,000.
City Manager Evans replied that the Emergency Preparedness Committee had responded to
staff’s request by suggesting that the City establish emergency supply caches as part of an
extensive list of proposed emergency preparedness programs, but had not developed any
specifics at this time.
Councilman Gardiner stated he would like to see time and money spent for supplies now
including water and food, which can last for a long time.
Councilman Clark stated that he is amenable to developing the supply caches, but wanted to
know where they would be stored. He stated that no one seems to be thinking of an emergency
evacuation plan of the peninsula if it ever became necessary.
Councilman Gardiner stated that if a disaster such as a thermonuclear blast were experienced,
there would be blast damage, heat wave, and fall-out pattern. He reported that if a thermonuclear
device were to go off, the electromagnetic pulse would knock out every automobile, computer,
telephone system, radios, televisions and everything with electronic devices or electronic chips,
which would make it impossible to communicate with the outside world.
Councilman Gardiner moved to allocate $100,000 for the emergency supply caches with
direction to the Emergency Preparedness Committee to develop a plant to obtain the supplies
and put them in place.
Mayor Pro Tem seconded the motion, with the addition of direction to the Committee to focus
on potable water, sanitation, and some emergency food supplies to be put in place as soon as
possible.
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Councilman Clark stated that he would support the motion as long as they return to Council with
a specific plan before any expenditures are made.
The motion passed with no objection.
Sunshine, Rancho Palos Verdes, spoke regarding the switchbacks on PVDE and the trimming of
shrubbery that hangs over into the path used by bicyclist, noting that bicyclists have to enter
traffic lanes in order to avoid the overhanging bushes. She suggested that consideration of
roadside clearing be given when the City is conducting other roadwork, such as curb placement
or installing flood control devices. She also inquired as to a method of enforcement of project
conditions of approval after a project is built, such as the maintenance and trimming of the
hedge along the Island View neighborhood.
City Manager Evans stated that there are a two more items that Council had not yet discussed:
Beautification Grants and the Point Vicente Interpretive Center (PVIC) Grand Opening weekend
in July. He stated that the budget includes $10,000 for the PVIC event, but noted that one
Council Member has questioned whether is in an appropriate expenditure.
Director Rosenfeld stated that $10,000 has been included in the Recreation and Parks
Department’s budget since before the original closing of the PVIC in 1999 and has been carried
for 7 years while the City was awaiting the Grand Re-opening of the facility.
Councilman Clark suggested that he is reassured these funds was designated for this specific
purpose prior to the terms of any of the present Council Members, but suggested that the City
reach out to the business community to help underwrite the cost of the Grand Re-opening to
enable the City to save as much as possible and give the business sponsors an opportunity to
showcase their support for the facility.
Director Rosenfeld stated that due to time constraints it would be difficult for staff to mount
such a fundraising effort before the July 15th Grand Re-opening date and noted that staff is
currently working on several other special events. He reported that $8,500 of the budgeted funds
is going to the donor appreciation gala on Friday night, July 14th. He reported the remaining
funds are for the Saturday event, which will be open to the public and will include popcorn,
cotton candy and a ribbon cutting ceremony.
Councilman Clark suggested that since the money has been budgeted for many years, staff
should proceed with its plans but should also send letters out asking for community support to
reimburse the City’s expenditures. He stated that because PVIC is a significant facility in the
community that would not have happened without the support of private donations; thanks
should be extended to those who helped make it happen from a financial standpoint and there
should also be a formal opening for the public.
Mayor Wolowicz stated that he believes four vendors would be willing to underwrite the event
with donations of $2,500 each.
Councilman Clark moved that the Mayor work with staff in pursuing underwriting of the Grand
Opening Event, seconded by Councilman Gardiner.
Mayor Wolowicz stated that he does not want to increase the overall amount budgeted but
would like to see more of the funds go to the public Grand Opening event.
Councilman Gardiner suggested that local chefs might be interested in catering the evening
event as he has seen done at other local functions.
Councilman Clark volunteered to pursue on some of the local chefs to cater the event.
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Mayor Wolowicz suggested that Council authorize the $10,000 expenditure for the Grand Re-
opening events so that staff can proceed with a firm budget, but that Council will solicit support
from the local community for reimbursement of these funds.
There being no objection, the motion passed by acclamation.
City Manager Evans summarized the direction Council had given to staff so far during the
workshop as follows: 1) On the On-Going Budget Menu, $4,800 was added to the City Grants
program and $80,000 was added to the Code Enforcement program; 2) On the One-Time Menu,
$13,700 was added for Equestrian Improvements on Palos Verdes Drive East; $100,000 was
added to the Emergency Preparedness program for emergency supply caches; $147,000 to the
Building Replacement fund for a City Hall generator; 3) On the Discretionary Budget Menu,
$144,451 for fifteen storm drain projects and the amount necessary to augment the Storm Drain
User Fee to pay for those governmental agencies which may not pay their determined fee.
Mayor Pro Tem Long stated that neither the Palos Verdes Peninsula Unified School District nor
Los Angeles County has told the City that they do not intend to pay their portion of the Storm
Drain User Fee. He reported that the County had even voted to support the User Fee on August
16, 2005, thereby increasing the likelihood that it intended to pay the fee. He stated that the City
should budget with the expectation that it will receive the money in order to encouraging the
other governmental entities to pay the fee and to only make budget adjustments if the other
agencies do not pay.
Discretionary Items
Councilman Gardiner moved to approve the continuation of the additional traffic deputy serving
only the City of Rancho Palos Verdes, with the estimated additional ticket revenue of $70,000,
seconded by Mayor Wolowicz. The motion passed on the following roll call vote:
AYES: Clark, Gardiner, Wolowicz
NOES: Long
ABSTAIN: None
ABSENT: Stern
Mayor Pro Tem Long moved to approve the additional regional traffic deputy and
acknowledged the additional Sheriff increase, seconded by Councilman Gardiner. The motion
passed on the following roll call vote:
AYES: Clark, Gardiner, Long, Wolowicz
NOES: None
ABSTAIN: None
ABSENT: Stern
City Council Meeting Minutes Increase
Councilman Clark inquired as to the need for an increase of $17,000 for City Council Meeting
Minutes.
Assistant City Manager Petru stated that the requested amount is based on the fact that the
number and length of meetings have increased over time, that the City’s present minute takers
are unable to handle the workload, and that it is necessary to pursue additional sources of minute
takers and transcription services at a greater cost.
Councilman Gardiner commented that that he understands that the minute takers are no longer
attending the meetings and are transcribing the meetings directly from the DVDs. He suggested
that the City dispense with the lengthy minutes that were originally requested to capture the
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richness of the discussion, rely instead on the meeting videos that are streamed on the City’s
web site and revert back to a simpler minutes format, which is far less expensive.
Mayor Pro Tem Long stated that such a decision would be a major Council policy decision and
he suspected that Councilman Stern would have a view on that matter. He explained that while
the televised versions are helpful, the written minutes can be reviewed more quickly and as the
meetings get longer, the minutes become that more important. He reported that he would not
want action minutes, but would also not want court transcriptions and noted that the City’s
current summary minutes are much like what a paralegal might prepare, which he believes is
perfect.
Councilman Clark stated that he agreed somewhat with Mayor Pro Tem Long and that he did
not believe Councilman Gardiner really meant to return to the minutes as they were done before
because it was difficult to glean anything of value from them other than the topic, a brief
explanation of what issue was about, and the Council’s vote.
Councilman Gardiner stated that is exactly what he meant and noted that the difference between
the Council meetings held in the 1990’s and today is that those meetings were not broadcast on
the City’s web site. He stated that now that video streaming on the Internet is possible, it is no
longer necessary to spend an enormous amount of money preparing minutes. He stated that he
believes a very small percentage of minutes are ever taken out and reviewed, but when it is
necessary, the minutes only provide a condensed version of what actually happened at the
meeting. He stated that it is far better to go back and replay the video of the agenda item to see
firsthand what happened.
Mayor Pro Tem Long suggested that staff could prepare a more detailed version of a particular
agenda item from the video if and when it is actually needed in the future.
Councilman Gardiner concurred with Mayor Pro Tem Long’s suggestion and noted that since
technology has now migrated everything through the computer, anyone that wants to can now
watch the agenda item on his or her computer.
Mayor Pro Tem Long stated when an important item is scheduled to come up related to
something that happened two years ago, he would not want to tell a member of the public that
they had to watch a three hour agenda item in order to gain an understanding of the issue.
Councilman Gardiner stated that the City Clerk could be directed to prepare a detailed synopsis
of the agenda item in that situation.
Councilman Clark stated that the change to lengthy minutes was not only to aid the public but
also Council in understanding some of the issues discussed, however, he indicated that he would
be open to the idea being proposed as long as some level of summarized minutes was prepared.
Councilman Gardiner stated that there is no difference if the minutes of May or June are created
now or two years from now and if anyone has specific questions about an agenda item, the
direction to the City Clerk’s Office would be to go back to the video of that meeting and create
the needed minutes.
Councilman Clark asked staff what the impact of the cost would be.
Assistant City Manager Petru replied that all of the requested $17,000 would be saved plus a
good portion of the $10,000 currently in the proposed FY 06-07 budget if brief synopsis minutes
were prepared instead of the current detailed summary minutes.
Mayor Pro Tem Long requested staff to bring this item back on a future agenda since it is a
budget issue and a policy issue, so that Councilman Stern will have an opportunity to share his
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opinion on this matter. He explained that technological changes may make this workable, and he
commented that the synopsis minutes could be like the follow-up agenda with a one paragraph
explanation with the rationale behind each decision, such as a motion, vote, rationale, and
rationale of dissent opinions if needed; which would allow the minutes to be brought back
quickly enough for Council approval in a timely manner.
Mayor Wolowicz agreed with brining this matter back when the entire Council is present
because it is policy matter.
Councilman Gardiner inquired of the City Clerk the percentage of time she spends reviewing
and working on the minutes.
Assistant City Manager/City Clerk Petru reported that it generally takes her a full day and a half
to review each set of draft minutes.
Mayor Pro Tem Long moved that the decision on this item be delayed and placed on a future
agenda.
There being no objection, Mayor Wolowicz so ordered.
Community Outreach Increase
City Manager Evans explained that this budget item covers the cost of City awards, such as
plaques, proclamations, certificates, tiles, photographs, City pins and employee 5-year service
pins.
Councilman Clark moved approval of this budget item, seconded by Councilman Gardiner.
There being no objection, Mayor Wolowicz so ordered.
Information Technology Maintenance Increase
Director McLean explained that this budget item is to pay for the acquisition of and annual
support cost of a Barracuda Firewall to be used in conjunction with the conversion of the City’s
computer network to the use of Microsoft Outlook.
Mayor Pro Tem Long moved approval of this budget item, seconded by Councilman Gardiner.
There being no objection, Mayor Wolowicz so ordered.
GIS On-Demand Services
Mayor Wolowicz moved approval of this budget item, seconded by Councilman Gardiner.
There being no objection, Mayor Wolowicz so ordered.
Traffic Striping @ Schools Increase
Interim Director Holland explained that additional funds are needed for the annual refreshing of
traffic striping, primarily crosswalks, around all of the schools in the City.
Councilman Gardiner moved approval of this budget item, seconded by Mayor Wolowicz.
There being no objection, Mayor Wolowicz so ordered.
Contract Traffic Engineering Increase
Councilman Gardiner moved approval of this budget item, seconded by Mayor Wolowicz.
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There being no objection, Mayor Wolowicz so ordered.
Building Maintenance Increase
Councilman Gardiner moved approval of this budget item, seconded by Mayor Wolowicz.
There being no objection, Mayor Wolowicz so ordered.
Park Maintenance Increase
Deputy Director Downs stated that staff was proposing a $39,600 increase in General fund
expenditures for maintenance for the Point Vicente Interpretive Center (PVIC). She explained
that since the facility was partially old and partially new, maintenance for the facility could be
partially funded from Measure A monies. She explained however that in order to be eligible for
Measure A maintenance funding, staff must section out the new part of the building from the old
part, which can be a logistical nightmare. She reported that since Measure A maintenance
monies can be used for other purposes, staff felt that it would be a better use of staff’s time to
not have to section out PVIC’s maintenance costs room-by-room. She explained that staff is also
proposing to implement an annual parking lot resurfacing program and rubberized playground
maintenance program.
Councilman Gardiner moved approval of this budget item, seconded by Mayor Pro Tem Long.
There being no objection, Mayor Wolowicz so ordered.
View Restoration Abatement
Councilman Gardiner moved approval of this budget item, seconded by Mayor Wolowicz.
There being no objection, Mayor Wolowicz so ordered.
Building Code Document Updates
Councilman Gardiner moved approval of this budget item, seconded by Mayor Wolowicz.
There being no objection, Mayor Wolowicz so ordered.
Sewer Condition Investigation
Councilman Gardiner moved approval of this budget item, seconded by Mayor Wolowicz.
There being no objection, Mayor Wolowicz so ordered.
Tree Trimming Frequency Increase
Interim Director Holland explained that the Public Works Department currently has a five-year
cycle citywide for trimming of City trees, but explained that the City should really be on a three-
year cycle. He explained that the current program necessitates the use of contractors during the
extra two years to perform spot work at a higher cost.
Mayor Pro Tem Long reported that in his neighborhood where there is a pilot program for
automated trash pickup there were some trees that were interfering with the operation of the
system. He inquired if a more regular maintenance program would prevent that type of issue or
if that issue would have to be evaluated again if the City switches to a Citywide automated trash
pickup program.
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Interim Director Holland indicated he would have to reevaluate that situation, but confirmed that
the five-year cycle of tree trimming was long and created the need for a great deal of spot
maintenance which is much more expensive than having a three year cycle. He indicated that
there would always be some spot maintenance needed due to unexpected events, such as disease
or weather affected certain trees, but reiterated that the longer cycle is a more expensive mode of
tree trimming overall.
Councilman Gardiner inquired if there were optimal trees for planting Citywide.
City Manager Evans explained that the City has an approved City tree list which is used if new
trees are planted, but that the City often finds that some of its existing street trees are cheaper to
pull out and replace rather than continuing to trim them.
Mayor Pro Tem Long moved approval of this budget item seconded by Councilman Clark.
There being no objection, Mayor Wolowicz so ordered.
Miscellaneous Drainage Repairs
City Manager Evans explained that this budget item of $47,500 would be for small projects that
have not been identified but might come up as the City continues to inspect its storm drains.
Councilman Clark moved approval of this budget item, seconded by Mayor Wolowicz.
There being no objection, Mayor Wolowicz so ordered.
ADA Improvement Project Subsidy
Councilman Gardiner moved approval of this budget item, seconded by Mayor Wolowicz.
There being no objection, Mayor Wolowicz so ordered.
Councilman Gardiner inquired about the three remaining issues raised earlier in the day, which
were 1) Telecommunications, 2) Council restricted funds, and 3) the Civic Center Master Plan.
Telecommunications
Councilman Clark explained that with new technology capabilities, telecommunications
providers are able to provide voice, data and video services to communities and municipalities.
He stated that controversy is raging regarding how to regulate the deployment of this new
technology into communities and extends from issues of franchise fees and protocols to rules of
engagement, and the issue is being reviewed at both the State and Federal levels. He reported
that at the League of California Cities board meeting in February, there was a briefing on the
current status of the issues and explained that Verizon has been attempting to select
communities interested in engaging in pilot programs to install the fiber optic systems in their
communities. He stated that there should be some consideration given to the possibility of
bringing on a second video provider in the City to compete with Cox Communications.
Councilman Gardiner recommended that the City let the telecommunications companies know
of its interest as quickly as possible so that the City and its residents can become less dependent
on Cox Communications.
Councilman Clark noted that utility companies might also be entering into this market, which
may allow for utilities to be undergrounded when new systems are installed.
Councilman Gardiner stated that one issue that still needs to be resolved is the fees that
telecommunication companies would be required to pay to cities for use of the public right-of-
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way. He stated that there is an argument going on as to whether the telephone companies should
be required to pay franchise fees or utility taxes when then they construct new fiber networks,
which cable companies are presently required to do and indicated that this issue is being
currently discussed in Washington, D.C.
City Manager Evans stated that staff was already working with Verizon who wants to install
fiber optics in the City and compete with Cox Communications. He explained that Verizon has
recently pulled back in the discussions because of the pending State legislation (AB 2987 –
Nunez), which could impact the payment of local franchise fees. He stated that Council needs to
get active in opposing this legislation right away or the City might lose franchise fee revenues.
Councilman Clark stated that the Cities of Hermosa Beach and Manhattan Beach has entered
into franchise agreements with Verizon to install fiber optic systems.
City Manager Evans stated that Verizon has met with him and Assistant City Manager Petru and
had set up a second appointment to further negotiate a deal, which the telephone company
representative subsequently cancelled.
Mayor Wolowicz stated that staff can pursue this issue and then place put it on a future agenda
so that Council could consider sending a letter opposing the Nunez legislation.
Council Restricted Funds
Mayor Pro Tem Long stated that there needs to be some mechanism to allow Council and the
public to review the Council restricted funds to understand what they are and why they are
restricted.
Director McLean noted that there was a list of Council restricted funds in Exhibit B to the Five-
Year Model on circle page 25 of Item 3.
Councilman Gardiner asked for the rationale behind funding the City Hall generator from the
Building Replacement fund instead of the Equipment Replacement fund.
Director McLean explained that a generator that accompanies a building has a longer life than
normal equipment purchases, such as photocopiers and computer, and therefore falls under the
Building Replacement fund.
Councilman Clark asked if there was any discretion in this decision because the balance in the
Equipment Replacement fund is almost twice the amount in the Building Replacement fund.
Director McLean explained that although the Equipment Replacement fund is accumulating
nicely, this fund is intended to be available to bring City Hall back on line in case of a disaster.
He stated that any significant reduction in this fund could trigger a comment from the City’s
auditors indicating that it is in violation of the purpose of the Equipment Replacement fund.
Mayor Pro Tem Long compared Equipment Replacement fund to a sinking fund and asked if
any of the other restricted funds could be considered discretionary.
Director McLean replied that the Beautification fund was a discretionary fund that Council had
created using money from the City’s Recycling program.
City Manager Evans explained that there is a great deal of flexibility about how the
Beautification fund monies could be spent.
Councilman Gardiner asked if the Beautification fund was the funding source for a $30,000,000
roadway beautification project he heard mentioned when he first was elected to Council.
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City Manager Evans stated that at one time Council was setting aside $100,000 a year of
General fund revenue into a Roadway Beautification fund in addition to Recycling money. He
noted that he was surprised how much this fund had grown in the last few years.
Mayor Pro Tem Long inquired as to the source of the Utility Undergrounding fund.
Director McLean stated that this amount was originally generated from a transfer from the
General Fund and set aside as seed money for residential undergrounding projects.
Councilman Gardiner inquired as to the difference in the Beautification fund and Roadway
Beautification fund.
Deputy Director Downs replied that transfers from the Recycling fund mostly supported the
Beautification fund, while transfers from the Beautification fund and the General fund created
the Roadway Beautification fund. She indicated that the Roadway Beautification fund was
intended for the Hawthorne Median Beautification Project. She stated some of the monies from
Roadway Beautification fund were used for the PVIC facility. She also noted the Beautification
fund is primarily used for the annual Homeowner Association beautification grants, while
Roadway Beautification fund was established specifically for arterial median projects.
Mayor Wolowicz stated that he would like staff to return with the cost of preparing a Civic
Center Master Plan so that Council can decide whether or not to pursue development of this City
property.
Councilman Clark stated that one of the reasons he ran for a second term in office was to
continue: 1) Fixing the City’s infrastructure, 2) Acquiring open space, and 3) Moving
proactively to create a new Civic Center. He stated that he would like staff to engage further
with some of the private entities that have expressed an interest in partnering with the City in
order to bring some of the components of the new Civic Center to fruition.
Mayor Wolowicz indicated that he would like this item to come back to Council for further
discussion.
Mayor Pro Tem Long stated that it would be nice to devote money right now to the master
planning effort, but pointed out that after excluding one-time expenses, the Operating Budget
will only generate a surplus of $49,000 and that as a percentage of the overall Budget it is just ½
of 1%.
Mayor Wolowicz stated that staff should provide Council with a cost estimate to prepare the
Civic Center Master Plan.
Councilman Gardiner inquired if the Zenith Aquatic Program (ZAP) was still interested in
building a swimming pool at the Civic Center. He stated that if several organizations were
interested in partnering with the City, something better might come out of the process than the
City just focusing on one organization.
City Manager Evans stated that the YMCA may no longer be interested, but staff will re-invite
the parties that showed previous interest to visit the site. He also stated that staff would contact
Johnson Fein, the architect the City had contracted with about four years ago to design an
addition to City Hall, to ask if the firm would be willing to come in to discuss preparing a
Master Plan instead.
Councilman Clark suggested that staff send out the appropriate queries through the League’s
listserve requesting information from other cities that have developed new Civic Centers.
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Arterial and Median Beautification Program
Interim Director Holland stated that he has been approached by a number of residents regarding
the possibility of medians improvements along the City’s arterials, including the intersection of
PVDS and PVDE. He explained that the PVDS/PVDE intersection was complicated by the fact
that Trump National is required to install three trees and hydroseed with native plant seeds along
the north side of the PVDS. He stated that Trump National has not installed the trees yet, but did
hydroseeded the area; however, because the temporary irrigation system in place at the time of
original hydroseeding was inadequate, the hydroseed did not take as well as was hoped. He
stated that Trump National has indicated that it will hydroseed one more time to meet the City’s
requirements. Interim Director Holland stated that he asked staff to propose a plan to install
shrubs and other plantings along the north side in a swath approximately 15 feet wide by 1,600
feet in length and indicated that the estimate, including a permanent irrigation system, is
$120,000. He explained that staff was proposing a second project to phase in improvements to
the median along Hawthorne Boulevard Median over several years time, including the removal
of the existing hardscape and replacing it with plants and an irrigation system. He proposed
budget of $150,000 for each phase of the Hawthorne Boulevard project.
Mayor Pro Tem Long queried if the arterial beautification plan would necessitate the end of or a
reduction of the neighborhood beautification grants.
Interim Director Holland replied that this plan would still allow for the neighborhood grant
program to remain in place.
Councilman Clark stated that he liked the idea since Hawthorne Boulevard is the main arterial
road into the City, and inquired as to the possibility of starting an Adopt A Road program, where
private companies could contribute funds to augment the appearance of the main arterials in the
City.
Interim Director Holland replied that the Adopt a Road programs are usually used for roadway
maintenance programs.
Councilman Gardiner stated that he supported the proposal for PVDS, but that he would like to
see a conceptual plan for Hawthorne Boulevard to ensure that the plan would not obstruct the
spectacular ocean view available from this roadway.
Interim Director Holland stated that he is proposing just that - a concept plan with some citizen
involvement to determine the type of planting desired by the community and to develop a
reasonable phasing plan for the project.
Councilman Gardiner suggested that the plans did not need to be elaborate; that it could just
include sketches or computer simulations to illustrate what the different treatments would look
like.
Mayor Pro Tem Long inquired if the stretch of PVDS from Hawthorne to Wayfarer’s Chapel is
included in the proposed plan. He also asked where this stretch of roadway is in the City’s
pavement management cycle.
Interim Director Holland stated that Council could add this section of Palos Verdes Drive South
to the arterial beautification program. He indicated that this section of PVDS is scheduled to be
repaved in the next year or two, and that a beautification project along this roadway could be
considered at the time it is scheduled to be repaved.
Councilman Gardiner inquired about the chain link fencing abutting the nicer fence along PVDS
adjacent to 2 Yacht Harbor Drive and about the possibility of replacing the chain link fencing
with something more attractive at some future time.
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Interim Director Holland asked if the City had a policy regarding advertising in the public right-
of-way, because an Adopt-A-Street program would involve such issues.
Councilman Gardiner stated that he was not in favor of having signs of this type installed at the
main entryways into the City.
Mayor Pro Tem Long moved approval of staff recommendation, seconded by Councilman Clark
with the suggestion that staff explore for future consideration an Adopt-A-Street program.
There being no objection, Mayor Wolowicz so ordered.
ADJOURNMENT
Mayor Wolowicz moved to adjourn the meeting, seconded by Mayor Pro Tem Long. Without
objection, Mayor Wolowicz declared the meeting adjourned at 6:01 p.m.
/s/ Stefan Wolowicz
Mayor
Attest:
/s/ Carolynn Petru
City Clerk
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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: DENNIS McLEAN, DIRECTOR OF FINANCE AND INFORMATION TECHNOLOGY
DATE: JUNE 6, 2006
SUBJECT: ASSIGNMENT TO THE FINANCE ADVISORY COMMITTEE – ANALYSIS OF
EMPLOYEE RETIREMENT PLAN AND EMPLOYEE BENE FIT PLANS
RECOMMENDATION:
1) Provide Staff with direction regarding the assignment to the Finance Advisory
Committee regarding the analysis of the City’s employee retirement plan and
employee post-retirement health insurance; and
2) Authorize an additional budget appropriation during FY05-06 of $25,000 for the
retention of pension and benefit consultants to assist Staff and the FAC during the
preparation of the Analysis described in this report and ADOPT RESOLUTION NO.
2006- , A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO
PALOS VERDES AMENDING RESOLUTION NO. 2005 -53, THE BUDGET
APPROPRIATION FOR FY05-06,
BACKGROUND AND DISCUSSION:
During the Budget Policy Workshop on April 29, 2006, the City Council directed Staff
and the Finance Advisory Committee (the “FAC”) to study possible changes to the
City's employee retirement plan, as well as the possibility of providing post-retirement
health insurance. The City Council asked that the analysis include all of the impacts,
both fiscal and non-fiscal, of different retirement plan alternatives, including the
possibility of requiring employees to make contributions to the existing pension plan
(the “Analysis”). The Analysis and report should be presented to the City Council with
sufficient time to consider prior to the adoption of the FY07-08 Budget. Staff seeks
clarification and direction regarding the Proposed Scope and Budget Adjustment that
follows.
Proposed Scope – Analysis Of Employee Retirement Plan And Employee Benefit
Plans
Staff suggests that the Analysis shall include:
1) Various options regarding the retirement plan, including the possibility of requiring
employees to make contributions to the existing pension plan or making no changes
to the current plan;
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2) Various options regarding the possibility of providing post-retirement health
insurance;
3) Comparisons of short-term and long-term costs and savings resulting from the
options presented in 1) and 2) above for both the City and employees;
4) Comparisons of the impact of the different alternatives in co mbination with other
employee benefits; and
5) Comparisons with other California cities to enable the assessment of the potential
impact on employee morale, retention and recruitment.
Proposed Budget Adjustment For FY05-06 In The Amount Of $25,000 For The
Retention Of Pension And Benefit Consultants To Assist Staff And The FAC
During The Preparation Of The Analysis
Staff proposes a budget adjustment for FY05 -06 in the amount of $25,000 for the
retention of pension and benefit consultants to assist Staff a nd the FAC during the
preparation of the Analysis. Although most all of the services would be performed by
the pension and benefit consultants during FY06 -07, the approval of the proposed
budget adjustment would enable Staff to immediately retain the cons ultants to begin
working with Staff during the preparation of the draft scope of the assignment for
presentation to the FAC at its meeting on July 26, 2006. In the event Staff and the FAC
determines that additional support will be required by pension and benefit consultants
prior to completion of the assignment, Staff will bring back a second request for a
budget adjustment.
It’s expected that the pension and benefit consultants will be retained in late June or
early July 2006. Staff would work with th e consultants to prepare a draft scope of the
assignment for presentation to the FAC at its meeting on July 26, 2006. Staff expects
that the pension and benefit consultant shall present a draft of its analysis to the FAC at
a meeting in November 2006. Staff expects that the FAC will present its
recommendation to the City Council in February 2007. The timeline should allow
sufficient time for further revision of the analysis or the FAC recommendation prior to
conducting the FY07-08 Budget Policy Workshop in April 2007.
FISCAL IMPACT
The proposed budget appropriation for the retention of pension and benefit consultants
would decrease Estimated General Fund reserves by $25,000 during FY05 -06. Staff
has attached the FY 05-06 Statement of Estimated General Fund Reserves.
Respectfully submitted,
Dennis McLean
Director of Finance and Information Technology
Reviewed by,
Les Evans
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City Manager
Attachments:
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES
AMENDING RESOLUTION NO. 2005-53, THE BUDGET APPROPRIATION FOR
FY05-06
FY 05-06 Statement of Estimated General Fund Reserves
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MINUTES
CITY OF RANCHO PALOS VERDES
FINANCE ADVISORY COMMITTEE
JUNE 28, 2006
Chair Clark called the meeting to order at 7:05 PM at the City Hall Community
Room, 30940 Hawthorne Boulevard, for the purpose of conducting business
pursuant to the Agenda.
ROLL CALL
Roll call was answered as follows:
PRESENT: Clark, Emenhiser, Grimme, James, McLeod, Moon and
Nelson
ABSENT: None
Also present were Deputy Director of Finance and Information Technology Kathryn
Downs and Senior Administrative Analyst Gary Gyves.
APPOINTMENT OF NEW FAC MEMBER
Chair Clark introduced Amar Moon as the new FAC member. Chair Clark
welcomed Member Moon and thanked him for volunteering.
APPROVAL OF AGENDA
Chair Clark requested a motion to approve the agenda. Member Emenhiser
motioned for approval of the agenda and Vice-Chair Nelson seconded. Hearing
no objection, Chair Clark ordered approval of the agenda.
APPROVAL OF DRAFT MINUTES FOR THE MEETING CONDUCTED APRIL
19, 2006
Chair Clark requested a motion to approve the minutes for the meeting conducted
April 19, 2006. Vice-Chair Nelson motioned for approval of the minutes and
Member McLeod seconded. Hearing no objection, Chair Clark ordered approval
of the draft minutes.
PUBLIC USE MASTER PLAN (PUMP) COMMITTEE
Chair Clark explained to the FAC that the PUMP Committee will be addressing
issues such as public access, mitigation and other land use issues in the
Portuguese Bend Nature Preserve. Chair Clark informed the FAC that Member
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James has agreed to be a member of the PUMP. Chair Clark explained to the
FAC that Member James will not be representing the FAC, but will be providing
the FAC with periodic updates relating to the financial aspects of the PUMP.
2006 FIVE-YEAR FINANCIAL MODEL
Analyst Gyves informed the FAC that the 2006 Draft Five-Year Model was
presented to the City Council along with the FAC’s recommendations at the
Budget Policy Workshop on April 29, 2006. Analyst Gyves also informed the
FAC that the City Council followed all of the FAC’s recommendations, which
include:
Funding the additional $2.3 million of additional storm drain projects
recommended for FY06-07 using General Fund reserves;
Funding the $1.6 million for the Residential Overlay budget for FY06-07 to
maintain pavement at the current level of condition; and
Assigning the FAC the task of studying alternative sources of
revenue and funding to help fund infrastructure improvements.
Analyst Gyves also mentioned that the City Council also tasked the FAC with
studying possible changes to the City's employee retirement plan and the
potential for retiree health benefits.
Analyst Gyves informed the FAC that the Final 2006 Model being presented
tonight includes changes made at the April 29, 2006 Budget Policy Workshop
and any subsequent budget adjustments approved by the City Council. Analyst
Gyves informed the FAC that the following changes have been incorporated into
the Final 2006 Model since it was last presented to the FAC on April 19, 2006.
An additional code enforcement officer was approved starting in FY06-07
at a cost of approximately $80,000 annually.
A budget appropriation of $25,000 was approved from the City’s General
fund for the retention of pension and benefit consultants to assist Staff and
the FAC with the project assigned by the City Council to study possible
changes to the City's employee retirement plan, as well as the possibility
of providing post-retirement health insurance.
A General fund transfer to the WQFP Program in the amount of $157,792
was approved for the Pontevedra emergency storm drain repairs. The
initial estimated cost of repairs was $100,000. However, as work
progressed the amount of work required to complete the repair exceeded
this estimate. Staff is working with FEMA to secure reimbursement for the
cost of the repairs.
The City’s FY06-07 Budget contained a General fund transfer of $1.2
million to the WQFP Program for the purchase of privately owned property
required for improvements to control drainage from McCarrell Canyon.
The planned purchase of the property has been moved up to FY05-06 for
the recently re-appraised value of $900,000. The purchase is reflected in
FY05-06 as a General fund transfer of $900,000 to the WQFP Program.
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QUESTIONS AND COMMENTS REGARDING THE 2006 FIVE-YEAR
FINANCIAL MODEL
Chair Clark asked if the Western Avenue storm drain project was complete.
Deputy Director Downs informed the FAC that the projects are complete.
Chair Clark asked if the City had received reimbursement from FEMA for the
Western Avenue Storm Drain Projects. Deputy Director Downs informed the FAC
that the drainage improvements cost the City approximately $639,000 and the City
received FEMA reimbursements totaling approximately $586,000 that were
booked in FY04-05.
Member James asked why an appropriation of $80,000 is necessary for consultant
services related to the residential and commercial solid waste collection options
study. Deputy Director Downs informed the FAC that the $80,000 is for the
consultant to attend community meetings, prepare and analyze request for
proposals and to perform customer surveys. Deputy Director Downs also informed
the FAC that the residents of the City pay for trash services and that the City
receives revenues in the form of franchise fees, AB939 fees and recycling fees.
Member McLeod asked if there were restricted funds that could be used to
purchase the property required for the McCarrell Canyon improvements. Deputy
Director Downs informed the FAC that there are no restricted funds available to
fund the land purchase.
FAC ASSIGNMENT – PENSION AND POST RETIREMENT HEALTH CARE
Deputy Director Downs stated that the City Council assigned the FAC the task of
studying possible changes to the City's employee retirement plan and the
potential for retiree health benefits. Deputy Director Downs also stated that
Director McLean presented a staff report to the City Council asking for direction
and asking for $25,000 for a benefit consultant to perform actuarial work. Deputy
Director Downs stated that the City Council approved the $25,000 request and
gave Staff the following direction for the study.
Study the possibility of requiring employees to make contributions to the
existing pension plan;
Study the possibility of providing post-retirement health insurance;
Determine the impact any changes might have on employee retention and
recruitment; and
Compare the City’s retirement plan with other cities in California.
Deputy Director Downs informed the FAC that the City is currently in the process
of negotiating pension consultant services from John Bartel of Bartel Associates.
Deputy Director Downs informed the FAC that Staff has met with John Bartel to
discuss the scope of services for the pension project. Deputy Director Downs
also stated that the draft scope includes the analysis of:
A two-tier retirement system with a different benefit level for future hires;
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Requiring current and future employees to pay a portion of the employee
contribution rate;
The feasibility of providing a healthcare subsidy to retirees; and
The financial issues related to the City’s CalPERS Side Fund.
Deputy Director Downs informed the FAC that John Bartel is expected to present
the study’s findings to the FAC no later than November 2006.
QUESTIONS AND COMMENTS RELATED TO THE PENSION AND POST
RETIREMENT HEALTH CARE FAC ASSIGNMENT
Member Emenhiser asked if the pension consultant was planning on comparing
the City’s benefits with other local cities. Deputy Director Downs informed the
FAC that comparisons of compensation packages with other cities will be a part
of the project’s Scope.
Vice-Chair Nelson asked when the City Council was expecting the FAC’s
recommendation on the pension analysis. Deputy Director Downs informed the
FAC that the City Council is expecting the FAC’s recommendation in time for the
FY07-08 budget process, which starts in February of 2007.
Member McLeod requested that Staff or the pension consultant provide the FAC
with an overview of the benefits that City employees receive.
PUBLIC COMMENTS
Tom Redfield suggested that the FAC members attend City Council meeting to
stay appraised of major topics such as the new trash contract. Mr. Redfield also
mentioned that the City Council meetings can also be viewed on television or
online.
ADJOURNMENT
Member McLeod moved and Member Grimme seconded a motion to adjourn the
meeting at 7:42 PM. Hearing no objection, Chair Clark ordered the meeting
adjourned.
_____________________________
Chair, Financial Advisory Committee
ATTEST:
_____________________________
Gary Gyves, Recording Person
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MINUTES
CITY OF RANCHO PALOS VERDES
FINANCE ADVISORY COMMITTEE
JANUARY 31, 2007
Chair Clark called the meeting to order at 7:06 PM at the City Hall Community
Room, 30940 Hawthorne Boulevard, for the purpose of conducting business
pursuant to the Agenda.
ROLL CALL
Roll call was answered as follows:
PRESENT: Clark, Emenhiser, Grimme, James, McLeod, Moon and
Nelson
ABSENT: None
Also present were Assistant City Manager Carolynn Petru, Director of Finance
and Information Technology McLean, Deputy Director of Finance and Information
Technology Downs, Senior Administrative Analyst Gyves and John Bartel from
Bartel Associates.
APPROVAL OF AGENDA
Chair Clark requested a motion to approve the agenda. Member Emenhiser
motioned for approval of the agenda and Member Nelson seconded. Hearing no
objection, Chair Clark ordered approval of the agenda. Chair Clark stated that
items four and five were combined on the posted agenda and will be considered
as one item.
FAC ASSIGNMENT – PENSION, POST RETIREMENT HEALTH CARE AND
SIDE FUND LIABILITY
Director McLean introduced John Bartel from Bartel Associates and informed the
FAC that he will be providing a summary of the information that was provided to
the FAC at the January 10, 2007 FAC meeting. Director McLean informed the
FAC that John Bartel and Mike Garcia from Tierra West, the City’s compensation
survey consultant, provided City staff with the same presentation that was given
to the FAC on January 10, 2007 that was attended by 43 of the 49 full time
employees. Mr. Bartel provided the FAC with a presentation using handouts that
were included in the agenda.
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QUESTIONS AND DISCUSSION - FAC ASSIGNMENT – PENSION, POST
RETIREMENT HEALTH CARE AND SIDE FUND LIABILITY
Member Emenhiser asked if cities participating in a retiree health care program
make any adjustments when the person turns 65 years of age and becomes
eligible for Medicare. Mr. Bartel stated that approximately 80% to 90% of cities
that provide a retiree health care benefit reduce the benefit when the participant
turns 65. Mr. Bartel followed up to say that cities providing a defined contribution
retiree health care program do not have the need or the ability to make such
restrictions. Member Emenhiser also asked how many cities in California
participated in some type of defined benefit retiree health care program. Mr.
Bartel stated that he would estimate that approximately 80% to 90% of the cities
in California participate in some type of defined benefit retiree health care
program. Mr. Bartel also stated that the trend is moving towards providing
employees with a defined contribution retiree health care program .
Mr. Bartel stated that he recommends to his clients wishing to provide retiree
health care that they provide a defined contribution plan because of its triple tax
benefit: the contributions are pre-tax, the funds grow tax free and the
withdrawals, if used for approved medical costs, are tax free. Analyst Gyves
stated that the institution of a defined contribution retiree health care program
would not be much of a benefit to older employees that are close retirement,
which Mr. Bartel agreed with. Analyst Gyves asked if the City could institute a
catch-up provision for older employees that have worked for the City for a
number of years. Mr. Bartel stated that he believed that some type of catch-up
provision could be instituted, but also stated that an attorney would be better
suited to provide the details of such a provision.
Chair Clark referred to a previous statement that Mr. Bartel made that cities in
California are starting to move away from the 2%@55 formula to an increased
benefit formula, but that most of the cities used in the compensation survey are
still using the 2%@55 formula. Mr. Bartel agreed with the statement and stated
that the cities used in the compensation survey tend to be smaller cities that
provide additional retiree benefits other than the CalPERS 2%@55 formula, such
as retiree medical insurance and/or a 457 contribution. Mr. Bartel stated that the
cities that are increasing their 2%@55 CalPERS benefit formula are mostly
moving to a 2.7%@55 formula.
Member McLeod asked Mr. Bartel what CalPERS benefit formula could the City
institute to prevent the City from being a “farm team” where employees work for a
short period of time to gain experience and then move on . Mr. Bartel stated that
the 3%@60 formula is considered the best because it puts the most dollars into
the hands of employees and is considered the gold standard of benefit formulas,
but is also the most expensive plan available. Mr. Bartel stated that he believes
the only benefit formula above the 2%@55 formula that is designed correctly is
the 3%@60 formula. Member James suggested that if the FAC was going to
recommend increasing costs to the City Council that it might be more appropriate
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to leave the 2%@55 formula alone and concentrate on instituting a retiree health
program. Mr. Bartel agreed with Member James’ suggestion.
Chair Clark asked Staff if there were cost estimates associated with the
increased CalPERS benefit formulas. Deputy Director Downs informed the FAC
that the cost estimates were located on page eight of the staff report. Mr. Bartel
stated that the total cost, which does not necessarily have to be paid for by the
City, to increase the benefit formula from 2%@55 is $136,000, $227,000 and
$300,000 for plan formulas 2.5%@55, 2.7%@55 and 3%@60, respectively.
Mr. Bartel stated that he does not recommend moving to a two tiered system that
incorporates a defined contribution program or 2%@60 plan formula for new
employees because of the difficulty it will present in hiring new employees while
saving the City a minimal amount of money.
Member Emenhiser asked Mr. Bartel about cost projections related to the
potential defined contribution retiree medical program. Mr. Bartel referred to
slide 24 of his presentation and stated that the total cost is $103,000 annually ,
which is based on $50 per pay period and includes full-time and part-time staff.
Member Moon asked what the cost would be for full -time employees only.
Deputy Director Downs stated that the cost for only full-time employees would be
$63,700.
Member Emenhiser asked Mr. Bartel if it is common to ask for employees to pay
a portion of the increased cost associated with moving to an enhanced benefit
CalPERS formula. Mr. Bartel stated that it is common for employers to ask
employees to pay for a portion of the increased cost associated with moving to
an enhanced formula, but also stated that it is typically not a significant portion of
the total cost.
PUBLIC COMMENTS
Ron Dragoo, Senior Engineer, stated that it took two years to recruit and hire a
Senior Engineer and urged the FAC to provide the City Council with a
recommendation that will make the City more competitive with other cities.
Member Grimme asked Mr. Dragoo why it was so difficult to recruit a Senior
Engineer. Mr. Dragoo stated that the reason varied from person to person, but
was mainly associated with salary and pension benefits.
Holly Starr, Recreation Manager, stated that she would gladly pay for an
increased benefit formula. Ms. Starr also stated that residents of the City
deserve talented staff to run the City and that she has worked here for twenty
years and has seen many qualified staff members leave the City for better
compensation packages. Member Emenhiser asked Ms. Starr if staff was
leaving because of salary or benefits. Ms. Starr informed the FAC that it was her
belief that it was associated with retiree benefits. Member McLeod asked Ms.
Starr if she would be willing to pay into a retiree health care program. Ms. Starr
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stated that she would be willing to do so, but feels a s though on a dollar for dollar
basis, the increased CalPERS formula would be more beneficial.
Gina Park, Assistant to the City Manager, stated that she handles recruitment for
the City and has done so for the last ten years. Ms. Park stated that the City has
had to become more aggressive in recruiting because there are not enough
qualified people to fill the positions. Ms. Park also stated that there is a shortage
of professional level candidates, such as engineers and accountants. Ms. Park
stated that when she is negotiating salary with potential employees that they are
knowledgeable when it comes to retiree benefits and realize that other cities are
offering more. Member James asked Ms. Park if the she knows what employees
think is the most important aspect of their compensation package. Ms. Park
stated that it is different for each group of employees based on age, how long
they’ve been in their career and their career goals. Member Grimme asked Ms.
Park what the turnover rate for the City was. Ms. Park stated that the annual
turnover rate for the City was about 10% annually.
Nancie Silver, Recreation Program Supervisor, stated that she has worked for
the City twenty years and that she is extremely interested in seeing the City
institute a retiree health program. Ms. Silver also mentioned that the City had a
high turnover rate associated with part-time staff, which are staff members that
are less likely to come to FAC meetings.
Kit Fox, Associate Planner, stated that he has worked for the City eleven years
and that he is supportive of instituting a retiree health care program but thinks the
pension benefit formula should be left as is. Mr. Fox also stated that he was
against the City instituting a different pension formula for new employees
because it would cause morale problems and make it difficult to recruit.
Teri Takaoka, Accounting Technician, stated that she agreed with the comments
made by both Ms. Starr and Ms. Silver.
FAC RECOMMENDATIONS AND COMMENTS – PENSION, POST
RETIREMENT HEALTH CARE AND SIDE FUND LIABILITY
The FAC discussed the numerous options and their associated costs and effects
on employee recruitment and retention. Based on these discussions, the FAC
developed the following three options to be presented to the City Council with a
recommendation to select Option 2:
Option 1 (Total City Cost of $196,000 Annually):
Increase the current pension benefit formula to 2.5% @ 55 and require
employees to pay the resulting 1% increase to the employee contribution .
The employer and employee contributions would be about $100,000 and
$36,000, respectively.
Establish Defined Contribution Post Retirement Health Care Accounts for
all full-time employees, with the following required contributions:
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o Employee contribution of 2% of salary, or about $72,000 annually;
and
o City contribution of $75 per pay period for each full-time employee,
or about $96,000 annually.
Option 2 (FAC Recommended Option with a Total City Cost of $96,000
Annually):
Make no changes to the pension benefit formula.
Establish Defined Contribution Post Retirement Health Care Accounts for
all full-time employees, with the following required contributions.
o Employee contribution of 2% of salary, or about $72,000 annually;
and
o City contribution of $75 per pay period for each full-time employee,
or about $96,000 annually.
Option 3 (Total City Cost of $64,000 Annually):
Make no changes to the pension benefit formula.
Establish Defined Contribution Post Retirement Health Care Accounts for
all full-time employees, with the following required contributions:
o Employee contribution of 1% of salary, or about $36,000 annually;
and
o City contribution of $50 per pay period for each full-time employee,
or about 64,000 annually.
The FAC also made the following recommendations and comm ents to the City
Council:
The City should perform a current salary survey, since the last survey
performed in 2002 may be outdated;
Consider making an assignment to the FAC to review the options for
providing health insurance benefits to part-time employees in the future;
Do not require an employee contribution to the pension plan without an
enhancement of the pension benefit formula; and
Do not institute a decreased pension benefit formula for new employees,
resulting in a two tier system.
Additionally, the FAC made the following recommendations to the City Council
regarding the Side Fund Liability:
Pay off the Side Fund Liability.
Options to payoff include:
o Use of the City’s unrestricted monies (the FAC understands the
City’s competing needs for unrestricted monies), or
o Re-finance the liability at a lower interest rate.
Instruct Staff to explore the details of re-financing with the City’s financial
advisor and report back to the City Council with a financing plan.
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DIRECTOR/MEMBER REPORTS
Director McLean stated that a staff report regarding the establishment of an
oversight committee for the Water Quality and Flood Protection Program was
presented to the City Council on January 16, 2007. Director McLean also stated
that the FAC will still be responsible for reviewing the fiscal impact of the
potential loss of the Storm Drain User Fee as part of the Five -Year Financial
Model that will be presented to the FAC in April.
ADJOURNMENT
Member James moved and Member Emenhiser seconded a motion to adjourn
the meeting at 11:48 PM. Hearing no objection, Chair Clark ordered the meeting
adjourned.
_____________________________
Chair, Finance Advisory Committee
ATTEST:
_____________________________
Gary Gyves, Recording Person
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MINUTES
CITY OF RANCHO PALOS VERDES
FINANCE ADVISORY COMMITTEE
FEBRUARY 15, 2007
Chair Clark called the meeting to order at 7:04 PM at the City Hall Community
Room, 30940 Hawthorne Boulevard, for the purpose of conducting busines s
pursuant to the Agenda.
ROLL CALL
Roll call was answered as follows:
PRESENT: Clark, Grimme, James, McLeod, Moon and Nelson
ABSENT: Emenhiser
Also present were Assistant City Manager Carolynn Petru, Deputy Director of
Finance and Information Technology Downs and Senior Administrative Analyst
Gyves.
APPROVAL OF AGENDA
Chair Clark requested a motion to approve the agenda. Vice-Chair Nelson
motioned for approval of the agenda and Member McLeod seconded. Hearing
no objection, Chair Clark ordered approval of the agenda.
APPROVAL OF DRAFT MINUTES FOR THE MEETING CONDUCTED
JANUARY 31, 2007
Chair Clark requested a motion to approve the minutes as amended for the
meeting conducted January 31, 2007. Member McLeod motioned for approval of
the amended minutes and Vice-Chair Nelson seconded. Hearing no objection,
Chair Clark ordered approval of the amended minutes.
FAC ASSIGNMENT – DRAFT REPORT TO CITY COUNCIL – ANALYSIS OF
EMPLOYEE RETIREMENT BENEFITS AND THE CITY’S SIDE FUND
PENSION LIABILITY
Deputy Director Downs distributed late correspondence related to the agenda
item. Deputy Director Downs informed the FAC that the Staff report on this
agenda topic is essentially the same Staff report that was presented at the
January 10, 2007 FAC meeting, except that John Bartel’s recommendations
were added. Deputy Director Downs summarized John Bartel’s
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recommendations to include not requiring an employee contribution to the
pension plan without an enhancement of the pension benefit formula, not
instituting a decreased pension benefit formula for new employees and
establishing a defined contribution post-retirement health care program for full
time staff members. Deputy Director Downs also informed the FAC that the Staff
report was updated to include the FAC’s recommendation.
PUBLIC COMMENTS
Holly Starr, Recreation Manager, reported that she had asked twenty six staff
members which benefit they would rather contribute 2% of their salary towards, a
post retirement health care plan or the 2.5% @ 55 increased CalPERS
retirement benefit formula. Ms. Starr reported that two employees chose the post
retirement health care plan, two were undecided and twenty two chose the 2.5%
@ 55 increased CalPERS retirement benefit formula. Ms. Starr also indicated
that if employees contributed 2% towards the 2.5% @ 55 CalPERS formula, the
cost to the City would be less than the cost of hiring one full time staff member.
Carla Morreale, Deputy City Clerk, stated that she was concerned because a poll
was never performed to determine the preferences of staff members and that she
thinks a poll should be done before any recommendation is made to the City
Council. Ms. Morreale also expressed concern that employees should be able to
opt out of the post retirement health care program , if implemented.
Nancie Silver, Recreation Program Supervisor, stated that she has worked for
the City for twenty three years and that the 2.5% @ 55 CalPERS formula would
benefit her more than the post retirement health care program, as it would for
other staff members that have worked for the City for a long time. Ms. Silver also
stated that the cost to the City for the 2.5% @ 55 CalPERS formula would be
less than the cost of hiring one full time staff member. Ms. Silver asked whether
or not employees can purchase health insurance through the City when they
retire. Assistant City Manager Carolynn Petru responded that an employee can
purchase insurance through the City when they retire.
Kit Fox, Associate Planner, stated that he is supportive of instituting a retiree
health care program. Mr. Fox also stated that he would be supportive of paying
one percent of salary for the 2.5% @ 55 CalPERS formula and that the formula
would be good to recruit employees but would also encourage employees to
retire early. Mr. Fox asked about the transferability of a post retirement health
care program. Deputy Director Downs explained that the employee would own
the account and would be able to take those monies upon leaving the City, but
the account could not be rolled over into an individual retirement account or 457
account. Analyst Gyves added that there are vesting details associated with the
City’s contribution that need to be worked out if the City Council decides to
implement the program.
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Nancy Vitez, Staff Assistant II, stated that she has been working for the City for
ten years. Ms. Vitez indicated that the majority of the employees at the City
prefer the 2.5% @ 55 CalPERS formula over the post retirement health care
program. Ms. Vitez also stated that there are not many employees working at
the City, but they work hard and wear many hats and an increase in benefits
would help morale.
ANALYSIS OF EMPLOYEE RETIREMENT BENEFITS AND THE CITY’S SIDE
FUND PENSION LIABILITY – CONTINUED
Member McLeod stated that based on the letters and comments from
employees, the FAC’s current recommended option is not what the employees
want and that there seems to be a strong consensus that if employees are going
to contribute 2% of salary to something, they would rather contribute to the 2.5%
@ 55 CalPERS formula.
Chair Clark mentioned that increasing the CalPERS formula would be
inconsistent with what other cities are doing in the area and would place the City
towards the top of the retirement benefits comparison chart. Member McLeod
indicated that it would place the City somewhere in the middle of the retirement
benefits comparison chart because the chart also factors in other retirement
benefits, such as retiree medical and deferred compensation. Member McLeod
also mentioned that increasing the CalPERS formula to 2.5% @ 55 and requiring
employees to contribute 2% of salary would cost the City $64,000, which is less
expensive than the $96,000 cost the City would incur for the current
recommended option to establish a post retirement health care program.
Vice-Chair Nelson agreed with Member McLeod that most employees seem to
prefer the 2.5% @ 55 CalPERS formula over the post retirement health care
program. Vice-Chair Nelson stated that the FAC cannot make this happen and
can only make the recommendation to the City Council. Vice-Chair Nelson
thanked the employees for the letters and comments and stated that the
employees would have to do it all over again for the City Council.
Member Grimme mentioned that employees could contribute more than 2%
towards the 2.5% @ 55 CalPERS formula.
Member James indicated that part of the assignment was actually to look at
making employees contribute towards their current retirement benefits and the
actual outcome will be based on what the budget can handle.
Member Moon asked if increasing the CalPERS formula is cheaper than the
FAC’s current recommended option. Member McLeod explained that if
employees were to contribute 1% of salary it would be comparable to the cost of
their current recommended option, but if employees contribute 2% of salary it
would be cheaper.
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Member Moon stated that based on employee comments, staff favored paying
2% of salary to get the increased CalPERS formula. Member Moon also stated
that this option would cost less than the current recommended option and make
the City more competitive. Member Moon expressed concern that many cities
detailed in the benefit comparison chart were discussing the possibility of
increasing their benefit formula and that by the time the City initiated the post
retirement health care program we would have fallen to the bottom of the chart
again.
Chair Clark indicated that most of the cities in the benefit comparison chart have
retiree medical insurance and the 2% @ 55 formula. Member McLeod stated
that most of the cities detailed in the benefit comparison chart have defined
benefit retiree medical insurance, which would be preferred by employees over
the enhanced benefit formula.
Chair Clark indicated that they should also be considering what potential
employees would want and that the increased benefit formula could influence
employees to retire early.
Member James asked Deputy Director Downs if the City Council could increase
the City’s contribution to the post retirement health care program after the initial
establishment of the program. Deputy Director Downs stated that the City
Council could increase the City’s contribution.
Member Moon suggested a survey of staff regarding the different options.
Member James stated he thinks he understands what the employees want and
what the consultant recommended and suggested that this information should be
included in the report.
FAC RECOMMENDATIONS – EMPLOYEE RETIREMENT BENEFITS AND
THE CITY’S SIDE FUND PENSION LIABILITY
Based on further discussion, the FAC revised the options to be presented to the
City Council with a recommendation to select Option 2:
Option 1 (Total City Cost of $196,000 Annually):
Increase the current pension benefit formula to 2.5% @ 55, with the
following required contributions:
o Employee contribution of 1% of salary, or about $36,000 annually;
and
o City contribution of about $100,000 annually.
Establish Defined Contribution Post Retirement Health Care Accounts for
all full-time employees, with the f ollowing required contributions:
o Employee contribution of 2% of salary, or about $72,000 annually;
and
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o City contribution of $75 per pay period for each full-time employee,
or about $96,000 annually.
Option 2 (FAC Recommended Option with a Total City Cost of $128,000
Annually):
Increase the current pension benefit formula to 2.5% @ 55, with the
following required contributions:
o Employee contribution of 2% of salary, or about $72,000 annually;
and
o City contribution of about $64,000 annually.
Establish Defined Contribution Post Retirement Health Care Accounts for
all full-time employees, with the following required contributions:
o Employee contribution of 1% of salary, or about $36,000 annually;
and
o City contribution of $50 per pay period for each full-time employee,
or about 64,000 annually.
Option 3 (Total City Cost of $96,000 Annually):
Make no changes to the pension benefit formula.
Establish Defined Contribution Post Retirement Health Care Accounts for
all full-time employees, with the following required contributions.
o Employee contribution of 2% of salary, or about $72,000 annually;
and
o City contribution of $75 per pay period for each full-time employee,
or about $96,000 annually.
Option 4 (Total City Cost of $64,000 Annually):
Make no changes to the pension benefit formula.
Establish Defined Contribution Post Retirement Health Care Accounts for
all full-time employees, with the following required contributions:
o Employee contribution of 1% of salary, or about $36,000 annually;
and
o City contribution of $50 per pay period for each full-time employee,
or about 64,000 annually.
ASSIGNMENT TO THE FINANCE ADVISORY COMMITTEE – ALTERNATIVE
SOURCES OF REVENUE AND FUNDING – ORAL UPDATE
Deputy Director Downs informed the FAC that Staff has been working with the
City Attorney’s Office to identify the issues related to the sale or lease of
Grandview Park and building Casitas at Trump National. Deputy Director Downs
stated that a Staff Report will be provided to the FAC at the March 7, 2007 FAC
meeting.
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DIRECTOR/MEMBER REPORTS
Deputy Director Downs indicated that Finance Staff will be presenting the
Midyear Report and Public Works will be providing an update on the Water
Quality and Flood Protection Program at the February 20, 2007 City Council
meeting.
Vice-Chair Nelson stated that he had the pleasure of representing the FAC at the
Mayor’s Breakfast and that he reported that the FAC was continuing its hard
work on the City Council assigned projects.
Member James informed the FAC that the PUMP Committee has co mpleted the
review of trails and reserve areas and have commenced the study of uses.
Member James also stated that the PUMP Committee will be receiving
presentations from all the groups who use the trails.
Chair Clark reported that the City Council will be appointing new chairs to
committees and commissions and urges anybody that was interested for the FAC
chair to apply.
ADJOURNMENT
Member McLeod moved and Member Grimme seconded a motion to adjourn the
meeting at 8:53 PM. Hearing no objection, Chair Clark ordered the meeting
adjourned.
_____________________________
Chair, Finance Advisory Committee
ATTEST:
_____________________________
Gary Gyves, Recording Person
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MINUTES
RANCHO PALOS VERDES CITY COUNCIL
TACTICAL PLANNING &
BUDGET POLICY ISSUES WORKSHOPS
ADJOURNED REGULAR MEETING
MARCH 24, 2007
The meeting was called to order at 8:30 A.M. by Mayor Long at City of Rancho Palos Verdes
City Hall at 30940 Hawthorne Boulevard, notice having been given with affidavit thereto on file.
City Council roll call was answered as follows:
PRESENT: Clark, Gardiner, Stern, Wolowicz and Mayor Long
ABSENT: None
Also present were Carolyn Lehr, City Manager; Carol Lynch, City Attorney; Carolynn Petru,
Deputy City Manager; Joel Rojas, Director of Planning, Building and Code Enforcement; Dennis
McLean, Director of Finance/Information Technology; Ron Rosenfeld, Director of Recreation
and Parks, and Sandra Ishman, Recording Secretary.
FLAG SALUTE:
The Pledge of Allegiance was led by Director of Finance/Information Technology McLean.
APPROVAL OF AGENDA:
Mayor Pro Tem Stern moved, seconded by Councilman Wolowicz, to approve the
Agenda. Hearing no objection, Mayor Long so ordered.
PUBLIC COMMENTS:
None.
REGULAR BUSINESS:
Tactical Planning Workshop
City Manager Lehr presented the staff report for the Tactical Plan for 2007. She recommended
that City Council should set goals for the next two-year period ending in December 2008 and
develop specific strategies with timelines for achieving those goals.
Mayor Long invited comments regarding the report.
Councilman Gardiner moved, seconded by Councilman Clark, to reaffirm the goals of the
Tactical Plan and proceed to discuss each one, and modify the name of Goal No. 3 from
“Roadway Safety” to “Citywide Traffic and Roadway Safety.”
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Without objection, Mayor Long so ordered.
Water Quality and Flood Protection Program
Councilman Wolowicz inquired about the Milestone No. 4 and indicated that he wanted to see
the work move forward regardless of the outcome of the ballot initiative and did not want to wait
another two years to come up with an alternative plan to fix this ongoing problem.
Mayor Long clarified that Milestone No. 4 should be amended to delete the phrase “assuming the
User Fee is affirmed by the voters” and suggested that a Request for Qualifications be sent out
by a date certain.
Councilman Gardiner moved, seconded by Councilman Wolowicz, to amend Milestone No. 4 as
stated by Mayor Long.
Without objection, Mayor Long so ordered.
Director McLean reminded the Council that the Public Works Department has completed 40
storm drain lining projects to date. He reported that the total funding for the Water Quality and
Flood Protection Program is $7.2 million. He reported that these funds will be used for design,
research, and the completion of projects. He indicated that $6.1 million has been transferred
from the General fund for storm drain projects. He noted that the $3 million General fund
transfer proposed to be in the FY07/08 budget was for the McCarrell Canyon project. He noted
that sending this project out to bid may take some time.
Councilman Wolowicz suggested that the City website be used to show which projects have been
funded and the progress the City has made in infrastructure repair.
Mayor Long added that the projected milestones to be reached should be identified on the
website.
Councilman Gardiner requested that the milestones successfully reached should also be
recognized on the website.
Councilman Wolowicz wanted to acknowledge the total amount of money that had been spent
and noted that the acquisition of property and easements necessary to complete the repairs should
be identified on the website.
Mayor Long suggested that the staff should bring updates on the construction status and use of
funding for the infrastructure programs to Council by July 1, 2008 and noted this information
should be placed on the website.
Councilman Clark stated he was concerned that it would be difficult to put into perspective the
amount of money that has been spent to date and how those expenditures balance with the entire
program.
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Councilman Wolowicz reported that if the Storm Drain User Fee was not repealed the City has a
$1.2 million revenue source. He stated that in actuality the City has transferred $6 million to
date for storm drain repair.
Mayor Pro Tem Stern requested that the Finance Department chart or diagram the expenditures
in a way that is easily communicated to the Council and the public.
Mayor Long noted he would like to see the chart or diagram prior to June 1, 2007.
Councilman Gardiner suggested that staff generate a summary report of infrastructure
expenditures and get feedback from the public as to whether it is understandable to them.
Mayor Long agreed with Mayor Pro Tem Stern and Councilman Gardiner and requested that
staff inform Council as to a projected date for such a report, noting that this would not be an
internal checklist but instead would provide information for the public.
Portuguese Bend Nature Preserve
Councilman Clark inquired how the dates were selected for the proposed milestones related to
the Portuguese Bend Nature Preserve Goal.
Deputy City Manager Petru indicated that the dates were selected as a result of conversations
between Director Rojas and the Resource Agencies.
Councilman Clark inquired why the dates had been moved out as far as 2010.
Deputy City Manager Petru stated that she was not certain why the dates were moved, but noted
that it would take at least two years to finalize the NCCP documents related to Forrestal and
other portions of the nature preserve.
Councilman Wolowicz commented that the Public Use Master Plan (PUMP) had to be in place
by 2010.
City Attorney Lynch noted that the PUMP had to be in place before the Council could give final
approval for the NCCP. She suggested that perhaps the trigger dates had not started yet because
the composition of the PUMP Committee was still incomplete.
Councilman Gardiner stated that he did not understand why the Council could not have a draft of
the PUMP before the full report was completed.
Councilman Wolowicz suggested that staff highlight in green the areas of existing land
purchased by the City and highlight in yellow the property that the City would like to purchase
on the NCCP map.
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Mayor Pro Tem Stern indicated that the Council agreed on a goal, not a particular plan, to
acquire additional land for the NCCP Preserve. He noted that the Council’s original goal was to
create a natural preserve and it should return to that goal and not be just a plan to purchase land.
Councilman Wolowicz indicated that the Council goal was to acquire more land, but the
milestone was to determine usage of the land.
Mayor Long stated the Council goal was to acquire more land in order to obtain a total of 1,200
acres to be used as a nature preserve.
City Attorney Lynch agreed and stated that the Council was still in compliance with that goal.
Mayor Long stated he would like the goal rephrased to state that it is Council’s goal to add
additional acreage to the Preserve from willing sellers and to reform the milestones to achieve
the results as quickly as possible.
The Council members agreed that this Tactical Goal should be revised such that the milestone
dates are accelerated as much as possible.
Roadway Safety Goal
Councilman Clark indicated that the Chair of the Traffic Safety Commission had just joined the
meeting.
Mayor Long moved, seconded by Mayor Pro Tem Stern, to allow the Traffic Chair to join
Council at the dais and to discuss the current status of traffic issues.
Ava Shephard, Chair of the Traffic Safety Commission, reported that existing speed humps were
becoming an issue with some of the residents. She inquired if the removal or change in
appearance of speed humps could be considered a beautification project.
Mayor Long moved, seconded by Mayor Pro Tem Stern, to revamp the City’s traffic
enforcement program to move to a completely regional model, thereby eliminating the City’s
dedicated traffic deputy and folding this position into the regional contract with the two adjacent
cities.
The motion failed on the following roll call vote:
AYES: Mayor Long
NOES: Clark, Gardiner, Stern and Wolowicz
ABSENT: None
ABSTAIN: None
Councilman Clark reported that there was a proposal by the League of California Cities to
address the use of electronic technology at traffic light locations as a method of traffic
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enforcement. He stated that he would like to see the City of Rancho Palos Verdes participate in
the pilot program.
Mayor Long stated that he believed controlling the speed on Palos Verdes Drive East (PVDE)
was more important than placing cameras at signalized intersections.
Councilman Wolowicz indicated that he thought it important to complete projects currently
underway in the City before taking on a new proposal. He expressed concern that government
takes too long to move forward, and stated he believed it was premature to take on the proposal
suggested by Councilman Clark.
Councilman Clark stated that he did not understand why the City of Rancho Palos Verdes could
not be a pilot city for the new traffic calming technology. He reported that the pilot program has
been enormously effective in other cities.
Mayor Long stated that the traffic problems associated with PVDE went way beyond traffic
control measures.
Councilman Wolowicz inquired if there were a specific plan for PVDE. He asked if the Tactical
Goal could be modified in such a way as to allow the Traffic Safety Commission to modify the
way in which these problems were evaluated.
Mayor Long suggested that the Traffic Safety Commission should work on the problems on
PVDE as its first priority within the calendar year, instead of spending $30,000 to propose using
new technology just because other California cities were doing so.
City Attorney Lynch suggested examining the entire issue and noted that it was not possible to
formulate an answer until more data is gathered.
Councilman Clark moved, seconded by Councilman Gardiner, to have staff and the Traffic
Safety Commission provide a proposal for the use of traffic calming technology to the State
Legislature and the League of California Cities with the City of Rancho Palos Verdes to be in the
pilot program.
Mayor Long suggested that Councilman Clark amend his motion to include that the first
milestone be for the Traffic Safety Commission to work on the traffic related issues and
problems on PVDE to be completed prior to considering the use of new technology this calendar
year.
Councilman Clark and Councilman Gardiner accepted the proposed amendment to the motion.
The amended motion passed on the following roll call vote:
AYES: Clark, Gardiner, Stern, Wolowicz, and Mayor Long
NOES: None
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ABSENT: None
ABSTAIN: None
Civic Center Master Plan
Councilman Wolowicz suggested the modification of the words “Girls’ softball fields” in
Milestone No. 2 to “softball fields.”
Deputy City Manager Petru explained that the design of the softball fields was specifically per
girls’ softball standard regulations.
Councilman Gardiner stated that he would like to meet with School District personnel and the
Parks and Recreation staff of the City of Rolling Hills Estates and the City of Palos Verdes
Estates to see what could be done collectively with the parks in the Peninsula area.
Mayor Pro Tem Stern stated that he would like to meet with the Palos Verdes Girls’ South Bay
League to find out if they have the financial ability to construct the fields or not.
Councilman Gardiner stated that the location of the mound on the field is what determines if the
field meets regulations to be a multi-use field.
Councilman Wolowicz indicated that facilitating the development of the girls’ softball fields was
his objective; the Girls’ Softball League apparently could not afford such an undertaking; and the
City needed to address the project. He also stated that he did not want to cloud the Civic Center
Master Plan by addressing the utilities and infrastructure plan referenced in Milestone No. 2.
Mayor Long asked staff to continue to explore the private funding of civic buildings and parks
and he noted that this was the broad meaning of Milestone No. 1. He acknowledged that the
Annenberg Foundation was offering its assistance in the land use planning of the Civic Center
property.
Councilman Wolowicz indicated that consideration should be given to develop a community
softball field at Upper Hesse Park that the City pays for; he did not oppose a privately funded
project but believes that it will probably need to receive assistance from the City; and wanted to
make sure the field was built to the standards for a girls’ softball field. He moved to reorder the
milestones for the Civic Center/Active Recreation Tactical Goal and prioritize the projects so
that Milestone No. 3 becomes the first milestone to be following by Milestone Nos. 4, 1 and 2.
Mayor Pro Tem Stern stated that if the Palos Verdes Girls’ Softball League could not raise
enough private funding, then other funding would need to be used. He indicated that beyond the
City working on infrastructure projects, he would like to see more positive movement on this
Tactical Goal. He noted that 2 years ago the Council agreed to pursue development of a new
Civic Center. He expressed that he would like to see it become a reality opposed to an idea and
noted it should be included in the Vision Plan.
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Mayor Long stated that he wanted to keep the focus on specific goals and milestones, and
wanted to keep the discussions of the softball fields and the Civic Center separate. He asked for
specific questions regarding the milestones.
Councilman Gardiner inquired if the baseline study for the Civic Center project included a utility
study, noting that he understood the sewer did not work well at the site.
Deputy City Manager Petru replied that there have been problems with the sewer lines at the
Civic Center, but they were currently being investigated for repair.
Councilman Clark stated that staff should be directed to review the Master Plan for the Civic
Center site and return to Council with a report on vision of the entire project.
Deputy City Manager Petru reported that the Annenberg Vision Plan included the area
encompassed in the Civic Center Master Plan.
Mayor Long and Councilman Clark discussed whether or not the City should proceed with the
Civic Center Master Plan or wait until the Annenberg Vision Plan was completed.
Deputy City Manager Petru indicated that the Annenberg Foundation was funding the
preparation of a Vision Plan for all of the open space and parks along the City’s coastline,
including conceptual alternatives for development at specific nodes, including the Civic Center,
as well as considering the enhancement of trail connections and linking of City properties.
Councilman Clark commented that he did not want to wait forever for a site plan of the Civic
Center to be completed.
Mayor Long stated that he would like staff to bring back a report regarding the Annenberg
Vision Plan, their timetable, and an alternative site plan for the Civic Center that excludes the
Palos Verdes Art Center proposal.
Councilman Wolowicz moved, seconded by Mayor Long, to accept the milestones for this
Tactical Goal, with modification to the milestone regarding girls’ softball. He noted that
Milestone Nos. 2 and 3 should be used to facilitate the staff’s report back to Council and if it is
determined that the Girls’ Softball League cannot raise the funds necessary for the two fields,
then staff should create a design for Upper Hesse Park that can be used by the general public.
Mayor Long amended the motion to clarify that staff was to update Council on the timetable for
the Annenberg project.
Without objection to the amended motion, Mayor Long so ordered.
City Attorney Lynch noted that the Annenberg Foundation should be notified that the
discussions regarding the Palos Verdes Art Center lease had been suspended and that the site
plan for the Civic Center should be modified to include an alternative with this component of the
project removed.
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Mayor Long stated that the City has not determined that the Palos Verdes Art Center project is
completely out of the realm of possibly moving forward, but that the Palos Verdes Art Center is
considering other site alternatives. He continued that the Annenberg Foundation needs to know
that the City accepts the plan conceptually, but that more information is needed in order to move
forward.
Recess and Reconvene
Mayor Long called a brief recess between 10:17 A.M. and 10:28 A.M.
Emergency Preparedness
Councilman Wolowicz indicated that he perceived the goal has been decreased in importance
based on the new milestones stated within the goal.
Councilman Gardiner inquired if Milestone No. 4 was related to the National Incident
Management System (NIMS) training.
Deputy City Manager Petru responded that was correct and stated further that City staff, fire
personnel, and sheriff personnel have already completed NIMS training during the last year.
Councilman Wolowicz asked if the NIMS training at the management level was similar to the
SIMS training that the Council received previously.
Deputy City Manager Petru answered in the affirmative.
Councilman Gardiner inquired about Milestone Nos. 1, 2, and 4.
City Attorney Lynch stated that the intent of Milestone No. 1 was to better prepare the public for
disasters, No. 2 was to better assist in responses with the radio tower and No. 4 would provide
necessary supplies in order to sustain emergency operations until help or assistance arrived.
Mayor Long indicated that small steps towards emergency preparedness were important so the
Council would know what to do in case of an emergency. He suggested that the City consider
whether it should provide enough water and supplies to sustain the residents until help could
arrive.
Councilman Clark noted that the community should be able to see the City’s emergency plan on
the website, including a master plan for evacuation, instead of just stating that the Council had
gone through NIMS training or erected a radio tower.
Deputy City Manager Petru acknowledged that the City’s website is to be updated, but noted that
fixed evacuation routes should not be posted, as these are incident specific.
Councilman Wolowicz noted that staff should update the City’s emergency plan to comply with
NIMS and provide the City Council with training to be familiar with the plan.
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Mayor Long moved, seconded by Councilman Wolowicz, that the Council should confirm this
Tactical Goal and the milestones as listed with the addition of a fifth milestone to improve
communication with the public regarding the City’s emergency preparedness programs. Without
objection, Mayor Long so ordered.
Eastview School District
Councilman Gardiner moved, seconded by Councilman Clark, that a milestone should be added
to this Tactical Goal to allow Eastview residents to be able to vote in the Palos Verdes Peninsula
School District (PVPUSD) School Board elections.
Councilman Wolowicz stated that there should be a milestone to attempt to set up a meeting with
the President of the PVPUSD Board to discuss this goal.
Councilman Clark moved to reverse the order of milestones regarding the order of holding of the
following meetings hosted by Assembly Member Betty Karnette, such that the first meeting
would be with representatives of Los Angeles Unified School District (LAUSD) and the second
meeting would be with representatives from PVPUSD.
Mayor Long stated that the first meeting was to be held before May 30, 2007, with LAUSD and
the second meeting was to be held before June 30, 2007, with PVPUSD. He suggested that a
third milestone be added regarding meeting dates with the respective school district presidents
and boards.
Councilman Gardiner modified his motion, seconded by Councilman Clark, to add Milestone
No. 3 to direct staff to prepare for Council consideration draft legislation to be presented to
Assembly Member Karnette to enfranchise Eastview residents in the PVPUSD, or to take this
action through the Los Angeles County Board of Supervisors; and, to revise the dates of the
current milestones as suggested by Mayor Long.
Mayor Long stated that even though there was no date certain for pursuing a school district
boundary adjustment through the County process, the Council would like to see a draft of the
proposed boundary change.
A roll call vote on the amended motion reflecting the following:
AYES: Clark, Gardiner, Stern, Wolowicz, and Mayor Long
NOES: None
ABSENT: None
ABSTAIN: None
City Grant Requests Budget Policy Issue
Deputy City Manager Petru presented a staff report regarding the City grant requests for the next
two fiscal years and explained a handout outlining the various requests and the grants awarded in
the last two years. She noted there was one additional request for an unspecified amount from
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the Palos Verdes Peninsula Library District. She explained that staff had attempted to contact
the Kiwanis Club, which had requested a grant for the first time last year, but did not obtain a
response from them this year, and had entered a zero on the chart next to that organization. She
concluded that the City had a total of $41,250 for grant funding, whereas last year the grant
amount was $34,300.
Councilman Wolowicz inquired what the specified criterion was for the award of grants; if the
organization must provide a financial statement or tax return; and, if the dollar amount of
administrative costs towards salaries was identified by the organization.
Deputy City Manager Petru indicated the criterion was that the organization must have non-
profit 501(c)3 status and that they must provide evidence of that to the City prior to funding.
Councilman Gardiner inquired if providing a City Grant to an organization with 501(c)3 status
would be considered a gift of public funds.
City Attorney Lynch indicated that it was not a gift of public funds if the organization receiving
the grant provides a service that is not otherwise provided by the City and City residents and
others can take advantage of the service.
Mayor Long opened the floor for public comments regarding City Grant requests and informed
the speakers that because the Council had previously received their written proposals they would
have three minutes to answer questions rather than restate their request for grants.
Deputy City Manager Petru noted that she had 11 requests to speak on this item and she had
received a request from the Chamber Orchestra of the South Bay to speak first, as their
representative had another meeting to attend.
Gary Brumfield and Mary Kaleta Oksenkrug, Animal Lovers of South Bay, stated that they care
for the feral cat colony at White Point and Eastview parks and attempt to reduce the colony of
cats through sterilization and adoption where possible and keep the area clean. They noted that
they would like to use the funds to educate the public to spay and neuter cats and to help stop the
dumping or abandoning of cats at local parks, which is occurring at an increasing rate.
Councilman Clark inquired if their focus was mostly on cats or if there was any work done with
dogs.
Ms. Kaleta Oksenkrug stated that the dogs were taken care of by the Society for the Prevention
of Cruelty to Animals (SPCA). She noted that Petco awarded the Animal Lovers of South Bay
organization $1,400, but the organization’s veterinary bills alone outweighed the Petco donation.
Councilman Clark noted that the amount requested was $800 and he suggested that Animal
Lovers of South Bay request grants from local veterinarians as well as Petco, to cover the cost of
veterinary bills and pet food.
Councilman Gardiner moved, seconded by Mayor Pro Tem Stern, to approve all of the grants
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requested for the FY 2007/08 budget except for the three who are requesting an increase over the
amount awarded in FY06-07 or that is a new request, which include the Palos Verdes Symphonic
Band, Palos Verdes Library Annex and South Bay Family Healthcare.
Councilman Gardiner moved, seconded by Mayor Pro Tem Stern, to approve the requested
grants to the following organizations for the following amounts:
Animal Lovers of South Bay - $800
Dance Peninsula Ballet - $1,000
Harbor Community Clinic - $3,000
H.E.L.P. - $1,500
Helpline Youth Counseling - $2,000
Mothers Advocating Prevention - $2,000
Palos Verdes Symphonic Band - $1,000
Palos Verdes Symphony Association - $1,000
Peninsula Seniors - $10,000
Pet Protection League - $1,000
Shakespeare by the Sea - $1,200
South Bay Chamber Music Society - $1,000
South Bay Youth Project - $7,000 (with Councilman Wolowicz recused)
S.H.A.W.L. $2,000 (with Councilman Clark recused)
A roll call vote reflected unanimous approval.
Mayor Long requested to hear from the remaining speakers.
Robert Miller, Chamber Orchestra of the South Bay, stated that their organization was a non-
profit organization and the only orchestra in the area that did not have administrative costs. He
noted they operated solely on a volunteer basis and explained that they have applied to the City
of Rolling Hills Estates for a grant, but had yet to hear from them. He requested a grant in the
amount of $750.
Councilman Clark noted that the South Bay was comprised of 16 cities and asked if the orchestra
had members from all of the cities in the South Bay area.
Mr. Miller explained that their orchestra included members from all South Bay cities except
Torrance, which has its own orchestra and funding. He added that they supported the Palos
Verdes Peninsula and surrounding areas.
Mayor Long moved, seconded by Councilman Clark to approve a $750 grant to the Chamber
Orchestra of the South Bay. Without objection, Mayor Long so ordered.
Marilyn Katherman, Dance Peninsula Ballet, thanked the Council for the grant monies received
for FY07-08.
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Rick Paares, Harbor Community Clinic, reported that they currently operated Monday through
Thursday, but hoped to begin offering services on Fridays in the month of July, and so were
requesting additional funding for that reason.
Councilman Clark asked what the present funding sources were for the Harbor Community
Clinic.
Mr. Paares responded that they received funding from Medicare and Medical in addition to some
private funding sources.
Councilman Clark commented that the City of Rancho Palos Verdes was comprised of 41,000
residents, whereas the City of Los Angeles had millions of residents. He suggested that the
Harbor Community Clinic consider requesting funding from the City of Los Angeles.
Responding to Councilman Wolowicz, Mr. Paares stated that about 6% of Rancho Palos Verdes
residents were served by the organization.
Catherine Grove, H.E.L.P., explained that her organization provides education and counseling
for the elderly and their families; provides a “listen and help” program where emails, calls, and
advice is given to residents; and, provides referrals to area services to meet individual
needs. She indicated that as the Administrator of the organization she received a salary, but the
people that answered phones and provided services to the community did not receive salaries.
Larry Weeks, Palos Verdes Symphonic Band, stated that the band has existed for 35 years and is
excited to be attracting new members. He explained his organization was requesting a $1,200
grant to help cover the musician’s stipends and the updating of the music library. He added that
the City of Rolling Hills Estates awarded them a grant of $1,000, but the City of Palos Verdes
Estates had declined to award a grant.
Kathy Gould, Executive Director, Palos Verdes Library District, indicated that their initial
request for the PV Library Annex was $10,000. She explained the PV Library Annex project as
a joint venture between the Palos Verdes Peninsula Library District (PVPLD) and the Freedom
For You organization which provides youth services including games, movie nights, and other
youth activities. She explained that the Library Annex has direct operating costs of $95,000,
which includes $23,000 for security costs, rent and utilities; and with a receipt of $5,000 from
private donations. She indicated the award of a grant would help support equipment purchases
and the maintenance of that equipment.
Councilman Clark stated that he was receptive to the organization’s request, but had concerns
regarding the amount of money requested in light of the fact that the PVPLD has private donors
that support not only the Annex but the library as well.
Councilman Gardiner inquired if a number of the youth that participate in the program are “latch
key kids.”
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Ms. Gould replied that most of the youth are “latch key kids” that need after school programs
and outlets where they can stay out of trouble and have supervision in a controlled
environment. She noted that the Annex as well as the main library provides this service to the
community.
Responding to Councilman Wolowicz, Ms. Gould stated that the space they currently occupy is
sufficient and the City of Rolling Hills Estates has insured them that the owner of The Village
shopping center where the Annex is located will provide the same space allotment as a
component of the Master Plan for the Peninsula Village Overlay project.
Responding to Councilman Clark, Ms. Gould stated that they currently receive funding from an
organization called Friends of the Annex, which consists of private donors.
Responding to Councilman Wolowicz, Ms. Gould indicated that they were confident that their
lease would continue for one to two years at its current location. She reported that the PVPLD’s
annual budget is roughly $6 Million and that it serves 500 to 600 kids weekly during the peak
hours of 3:00 p.m. to 7:00 p.m., and clarified that the grant request before Council was solely
for the Annex operations. She noted that the Annex as a part of a public institution does not
solicit funds from the parents of the children who attend because they want to make the site
available to all who need the service.
Councilman Clark inquired if the organization planned to function in a manner similar to the
Y.M.C.A. or the Boy’s Club.
Ms. Gould indicated that they were formulating some programs similar to those entities and
noted that they did not currently have an affiliation with either the YMCA or the Boys’ & Girls’
Club.
Responding to Councilman Clark, Ms. Gould stated that most of the youth that come to the
Annex seem to be too old for day care and too young to drive.
Ken Dyda, Peninsula Seniors, thanked the City Council for their support.
Jim Paterson, South Bay Chamber Society, thanked the City Council for their support.
Jann Hamilton Lee, South Bay Family Healthcare, reported that they currently have 4 clinics in
operation located in Inglewood, Manhattan Beach, Carson and Gardena, and they provide free
medications, pre-natal care, health education and community support services. She noted they
were requesting $5,000 from the City of Rancho Palos Verdes and the grant would be spent on
direct care of those residents, with no associated administrative costs.
Responding to Councilman Gardiner and Councilman Clark, Ms. Lee explained that the grant
monies would go directly to costs incurred by residents of the City of Rancho Palos Verdes
which is tracked by address and zip code information.
Connie McFall, S.H.A.W.L., thanked the Council for their continuing support.
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Councilman Wolowicz noted that he would recuse himself from the vote on the grant for the
South Bay Youth Project because his wife provides independent contractor services for that
organization.
Councilman Clark recused himself from the vote on the grant for the S.H.A.W.L. organization.
Mayor Long moved, seconded by Councilman Clark, to approve the $5,000 grant for South Bay
Family Healthcare for care of Rancho Palos Verdes residents. Without objection, Mayor Long
so ordered.
Councilman Wolowicz moved, seconded by Mayor Long, for a reconsideration of the grant to
the Animal Lovers organization, increasing it by $200 to $1,000. The motion passed, with
Mayor Pro Tem Stern dissenting.
Councilman Gardiner moved, seconded by Mayor Long, to approve the grant of $10,000 to the
PVPLD Annex.
Council discussion of the PV Library Annex ensued with discussions of support for the project,
suggestions that PVPLD might consider a partnership with the YMCA and/or the Boys & Girls
Club for additional funding, and an inquiry regarding a possible invitation to an Annex board
meeting.
A roll call vote on the PV Library Annex grant reflected unanimous approval.
Recess and Reconvene
Mayor Long called a lunch recess from 12:26 p.m. to 1:06 p.m.
Budget Policy Issues Workshop
Revenue Alternatives
Director of Finance and IT McLean presented the Revenue Alternative staff report and explained
that the Finance Department has prepared a matrix to facilitate the discussion of revenues,
expenditures and income. He addressed revenue alternatives from the matrix and indicated that
staff’s recommendation was for the City to implement a cost-based fee increase in FY07-08 of
10% and at least a 50% increase in the rental rates of the Multi-Purpose Room at Point Vicente
Interpretive Center (PVIC) as well as the review of rental rates of other City facilities.
Mayor Pro Tem Stern stated that the annual Sewer Fees assessed by the County are not sufficient
to set aside monies for a preventative sewer line replacement program. He noted that he was
troubled that the City owns the deteriorating infrastructure and inquired if a sinking fund should
be created to establish a systematic sewer line replacement program.
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Director McLean replied that the City does own the sewer infrastructure, but cautioned that
Director of Public Works Bell was not present at this meeting and noted he was the only staff
member who has had direct conversations with the Los Angeles Sanitation District on this topic.
Councilman Wolowicz asked if residents would receive an increase in the annual Sewer Fee
from the County. He requested a report from the Public Works Department on the status of
sewer maintenance and the related costs of repair.
Director McLean replied that the only way to know would be to inquire of the County directly.
Councilman Gardiner inquired if the City was restricted as to the amount of rental rates it could
charge at PVIC.
City Attorney Lynch indicated that there was not a restriction since a rental fee would not be a
cost-based fee and the service provided was not a mandatory service.
Recreation Services Manager Holly Starr reported that she checked comparable rental rates at
other South Bay beach cities and the City of Rancho Palos Verdes was 40% below the average
rate that is being charged.
Councilman Clark noted that the purpose of PVIC is not primarily as a profit center, but noted
that the rental rates should be raised to be more in line with surrounding communities.
Mayor Pro Tem Stern stated that since the site is being rented out, it will have some wear and
tear and noted that the City should capture revenue for at least refurbishing the facility when it is
needed.
Councilman Gardiner inquired if there could be a 2-tier fee rate schedule, one for residents and
one for non-residents.
City Attorney Lynch indicated that there could be a differential in rental rates, but since the City
of Rancho Palos Verdes received some grant monies for the facility the differential in rental rates
could not be too high.
Councilman Wolowicz stated that based on the potential prospect of losing the Storm Drain User
Fee in November 2007 and a share of the City of Rolling Hills Estates’ sales tax in 2010, he
proposed to direct staff to seek a recommendation from the Finance Advisory Committee and
staff as to how revenue will be made up as shown on Circle page 5, Items 3 and 4 of the staff
report.
Councilman Gardiner moved, seconded by Mayor Pro Tem Stern, to reorder the agenda and
consider the issue of Employee Compensation and Pension before continuing with discussion of
Revenue Alternatives.
Employee Compensation and Pension
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City Manager Lehr presented the staff report and discussed the desire of the Council to pay
employees a competitive rate in order to attract and retain the expected level of staff talent. She
indicated that she had reviewed the personnel costs and considered the costs and savings
proposal for the FY07-08 report. She reported an annual cost savings of as much as $170,000 if
the City were to bring the Building Safety inspection services in-house and noted that Finance
staff was suggesting the refinance of the side fund liability for the pension fund which would
realize an additional annual savings of $20,000. She reported on the FAC recommendations of a
change in the pension plan from 2% at 55 to a 2.5% at 55 formula with a cost of $64,000; the
adoption of a defined contribution post retirement health care account to bring the employee
benefits package to the mid-range level of comparable cities. She noted that the FAC
recommended a current salary survey be performed, since the last survey was performed in 2002.
Councilman Gardiner stated that if verification of the numbers can be done and staff is content
with the plan, he was in favor of it.
Mayor Pro Tem Stern stated that he agreed with Councilman Gardiner and suggested looking at
other opportunities for cost savings across the board on an ongoing basis and as part of the
Management Audit.
Deputy City Manager Petru reported that evaluation of cost savings was being performed on an
ongoing basis and cited the conversion of the View Restoration staff from contract to in-house
employees as an example of cost saving measures that have been implemented.
Councilman Clark stated that he was definitely in favor of the defined contribution post
retirement health care program in light of the rising costs of health care.
Councilman Wolowicz reiterated that he was not in favor of cancelling the defined benefit
employee pension plan for existing employees, but expressed concern with defined benefit plans
in general. He indicated that there are continuing discussions at the State level regarding the
reform of the State employee pension plan and the State legislature is proposed to take a position
on the matter by January 2008. He noted that historically unfunded vested defined pension
benefit plans have been problematic for major corporations in the United States. He stated that
he was in favor of the defined contribution post retirement health care program as presented, but
was not certain he was in favor of both the post retirement health care program and an enhanced
pension plan.
Mayor Long stated that it clouded the focus to bring in the decision to go in-house with the
Building Safety inspection services with the change to the pension plan, because the two were
not related. He indicated it also clouded the focus to discuss the actions the State may take in the
future. He noted that the real question focuses on the rationale of comparing the City of Rancho
Palos Verdes to other cities regarding employee retention.
The Council discussed various aspects of the CalPERS employee retirement plan.
Director McLean indicated that CalPERS has implemented a smoothing formula over 15 years to
minimize volatility in employer contribution rates. He explained that although the employer rate
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would not fluctuate from year to year, the number of employees might which would affect the
yearly cost to the City.
Mayor Long commented that he found the charts included in the staff report to be confusing and
indicated that he believed the formulas should not have been mixed.
Councilman Clark noted that on circle page 21 of the staff report the Finance Advisory
Committee’s (FAC) recommendation for the employee pension and post-retirement health care
plan was discussed.
Director McLean explained the different options that were presented to the FAC and noted that
the 2.5% at 55 formula with a 2% salary contribution by the employee was the option that was
chosen by the employees and is what is being proposed to City Council.
Mayor Long inquired how the 2% salary contribution opposed to a 7% salary contribution was
chosen.
John Bartel, City pension consultant, explained that the employees chose the plan based on the
comparative study that was presented to them.
Kit Fox, Karen Peterson, Matt Waters, Holly Star, Gina Park, and Nancie Silver, City
employees, spoke in favor of the proposed employee pension and post-retirement health care
plan.
There was Council discussion regarding the issues related to employee pensions and a post-
retirement health plan.
Councilman Wolowicz moved, seconded by Mayor Pro Tem Stern, to vote separately on the
pension, post-retirement health care plan, and salary survey.
Councilman Wolowicz moved to amend the employee pension plan to include the highest three
years of employee salary to be considered in the formula. The motion died for a lack of a
second.
Councilman Wolowicz moved to adopt any change made by the State of California pension plan
to the City pension plan. The motion died for a lack of a second.
Mayor Pro Tem Stern moved, seconded by Councilman Clark, to approve the FAC
recommendation of a 2.5% at 55 with a 2% salary contribution by the employee.
A roll call vote reflected the following:
AYES: Clark, Gardiner, Stern, and Mayor Long
NOES: Wolowicz
ABSENT: None
ABSTAIN: None
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Mayor Pro Tem Stern moved, seconded by Councilman Clark, to approve the FAC
recommendation on the post-retirement defined contribution health care plan. Without
objection, Mayor Long so ordered.
Mayor Pro Tem Stern moved, seconded by Councilman Clark, to approve the FAC
recommendation on the Salary Survey. Without objection, Mayor Long so ordered.
Councilman Wolowicz moved, seconded by Mayor Long, to refinance the side fund liability and
use the excess in the Employee Benefit fund balance to pay down the debt before refinancing the
balance of the debt. Without objection, Mayor Long so ordered.
Recess and Reconvene
Mayor Long called a brief recess from 3:09 p.m. to 3:23 p.m.
Director McLean presented information regarding the FAC’s recommendation to consider
providing health benefits for the part-time employees.
Mayor Long suggested that staff contact the City’s insurance broker to see what is feasible and
report back to Council.
Councilman Gardiner stated that he supported the FAC’s consideration of providing health
benefits for the part-time employees.
Councilman Wolowicz suggested that staff be directed to consult with the City’s broker and to
conduct a survey to see if other public entities are providing health benefits to their part-time
employees.
Mayor Long moved, seconded by Mayor Pro Tem Stern, to direct staff to contact the City’s
insurance broker on health benefits for part-time employees and report the findings to Council
for consideration.
A roll call vote reflected the following:
AYES: Clark, Stern, Wolowicz, and Mayor Long
NOES: Gardiner
ABSENT: None
ABSTAIN: None
Employee Compensation Budget Policy Issue
Deputy City Manager Petru presented a brief staff report. She explained that the City adjusts
employees’ compensation within established salary ranges, each of which has a cap. She
explained that out of 49 full time employees, 10% of them have reached that cap and cannot
receive a merit increase, but could receive a bonus for exceptional performance. She reported
that the City uses a salary range pay scale instead of a stepped pay scale like most cities.
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Mayor Long restated his understanding of the staff report as the following: the current Consumer
Price Index (CPI) adjustment is 3.5%; staff was recommending a 7% merit pool and a 1.5%
bonus pool; and that of the 7% merit increase, 3.5% of that amount is for the CPI adjustment.
Responding to Councilman Clark, staff indicated that the City does not provide emplo yees with
an automatic pay increase for the cost of living.
Councilman Wolowicz stated that he was not prepared to make a decision without knowing how
the City of Rancho Palos Verdes compared to other cities of a similar size and characteristics.
Director McLean suggested that Council review the FAC report as the information was
contained within that document.
Councilman Clark indicated that an annual adjustment to the salary ranges was to keep the City’s
salaries competitive, relative to the cost of living. He moved, seconded by Mayor Pro Tem
Stern, to approve the Bonus Pool of 1.5% to a maximum of $60,000.
Without objection, Mayor Long so ordered.
Mayor Long moved, seconded by Councilman Clark, to direct staff to look at whether the CPI
adjustment should be automatic rather than part of the merit pool and compare what other cities
are doing in this regard; and to look at whether the total merit pool should be 7% or some other
amount. A roll call vote reflected the following:
AYES: Clark, Wolowicz, and Mayor Long
NOES: Gardiner, Stern
ABSENT: None
ABSTAIN: None
Mayor Pro Tem Stern moved, seconded by Councilman Gardiner, to review the full benefits
provided to employees to be considered over the next year. A roll call vote reflected the
following:
AYES: Gardiner, Stern, and Wolowicz
NOES: Clark and Mayor Long
ABSENT: None
ABSTAIN: None
Councilman Gardiner moved, seconded by Mayor Long, to approve the recommended salary
range adjustments based on the current CPI. Without objection, Mayor Long so ordered.
Councilman Clark moved, seconded by Mayor Long, to defer the one-time capital projects until
the Budget Review session in May. Without objection, Mayor Long so ordered.
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Councilman Gardiner moved, seconded by Mayor Pro Tem Stern, for a reconsideration of the
motion, so that staff be allowed to describe each capital project so that it can be discussed at the
May 29, 2007 Budget Review Workshop. Without objection, Mayor Long so ordered.
Revenue Alternatives Budget Policy Issue
Council’s discussion returned to the Revenue Alternatives Budget Policy Issue.
Mayor Pro Tem Stern moved, seconded by Councilman Gardiner, to increase the City’s cost-
based fees by 10%, not including any parking fees. Without objection, Mayor Long so ordered.
Councilman Gardiner moved, seconded by Mayor Pro Tem Stern, to direct staff to increase the
rental rates at PVIC by 50% and maintain a 2-tier rate system for residents and non-residents;
and to review rates at all other similar City facilities, excluding any parking fees, and bring back
a recommendation on all rates to Council. Without objection, Mayor Long so ordered.
Mayor Long moved, seconded by Mayor Pro Tem Stern, to postpone the discussion debt
financing until after the November 2007 General Municipal Election. Without objection, Mayor
Long so ordered.
Councilman Gardiner moved, seconded by Mayor Pro Tem Stern, to receive and file the
remainder of the FAC’s report on revenue alternatives.
Councilman Clark moved a substitute motion, seconded by Councilman Wolowicz, to direct staff
to bring back to Council this calendar year a discussion of the revenue options for Grandview
Park. A roll call vote reflected the motion failed:
AYES: Clark, Wolowicz,
NOES: Gardiner, Stern, and Mayor Long
ABSENT: None
ABSTAIN: None
Due to the failure of the substitute motion, Mayor Long declared that the original motion passed
without objection.
Pavement Management Program Budget Policy Issue
Deputy Finance Director Downs presented a brief staff report. She reported that the Public
Works Department staff recommends funding the arterial pavement program primarily with
Proposition C revenue, and funding the paving maintenance of Palos Verdes Drive South
(PVDS) in the Portuguese Bend landslide area primarily with General fund monies. She stated
that the City would like to keep the pavement index at a “very good” rate of 82%.
Councilman Wolowicz moved, seconded by Mayor Pro Tem Stern, to approve the staff request
to primarily fund the arterial pavement management program at the current index using
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Proposition C and other State and Federal funds, and to use General funds to pay for the PVDS
landslide road repairs. Without objection, Mayor Long so ordered.
Responding to Councilman Gardiner, Deputy Finance Director Downs stated that the paving of
Hawthorne Boulevard was included in the $1.2 million Proposition C fund.
Responding to Councilman Clark, staff indicated that the City of Rolling Hills Estates prohibits
the use of large trucks on Crenshaw Boulevard within its jurisdiction.
Mayor Long moved, seconded by Councilman Clark, to bring back other pavement management
issues regarding City streets and the Terranea project until the Director of Public Works would
be available during the budget process.
Management Audit Budget Policy Issue
City Manager Lehr indicated that the City of Rolling Hills Estates recently performed an
organizational audit. She explained that the City of Rolling Hills Estates paid $35,000 for an
incremental study, but staff estimated a fully comprehensive study would be in the range of
$100,000 to $120,000.
Councilman Clark noted that he wanted a Request for Information (RFI) done for a fully
comprehensive study of the entire City, not an incremental or piece-meal study.
Responding to Councilman Wolowicz, City Manager Lehr stated that the study would address
the issue of the appropriate level of City staffing.
Councilman Clark moved, seconded by Councilman Wolowicz, to direct staff to bring back to
Council more specific information regarding the costs associated with an incremental or
comprehensive study. Without objections, Mayor Long so ordered.
Mayor Pro Tem Stern moved, seconded by Mayor Long, to adjourn the meeting at 5:30 p.m.
/s/ Thomas D. Long
Mayor
Attest:
/s/ Carla Morreale
City Clerk
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MINUTES
RANCHO PALOS VERDES CITY COUNCIL
SPECIAL MEETING/REGULAR MEETING
JUNE 19, 2007
The Special Meeting was called to order at 6:36 P.M. by Mayor Long at Fred Hesse Community
Park, 29301 Hawthorne Boulevard, notice having been given with affidavit thereto on file. The
Mayor had previously called a Special Meeting so that items on the Regular Meeting agenda,
other than Public Hearings, could be considered between 6:30-7:00 P.M. due to the large number
of agenda items. The Regular Meeting followed immediately after the Special Meeting with no
Public Hearings held until 7:00 P.M.
City Council roll call was answered as follows:
PRESENT: Clark*, Gardiner, Stern, Wolowicz, and Mayor Long
ABSENT: None
*Councilman Clark arrived at 6:45 P.M. and left the meeting at 12:18 A.M.
Also present were City Manager Carolyn Lehr, City Attorney Carol Lynch, Deputy City
Manager Carolynn Petru, Director of Planning, Building & Code Enforcement Joel Rojas,
Director of Public Works Jim Bell, Director of Finance/Information Technology Dennis
McLean, Deputy Director of Finance/Information Technology Kathryn Downs, Deputy Planning
Director Greg Pfost, Senior Engineer Ron Dragoo, Associate Planner Kit Fox and City Clerk
Carla Morreale.
FLAG SALUTE:
The Flag Salute was led by Mayor Long.
MAYOR’S ANNOUNCEMENTS:
None.
RECYCLE DRAWING:
Mayor Long announced that the recyclers of the month from the June 5, 2007 Council meeting
were Sue Reinhart and Maria Higgins. He indicated that all winners received a check for $250
representing a year of free refuse service and he urged everyone to participate in the City’s
recycling program.
APPROVAL OF AGENDA:
Councilman Wolowicz asked that the part of Item 23 that relates to the budget be included with
the other budget items.
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Mayor Pro Tem Stern moved, seconded by Councilman Wolowicz, to approve the Agenda as
amended with Item 22 presented in conjunction with Item 19, and Item 23 to be taken up
immediately after Item 19. Hearing no objection, Mayor Long so ordered (absent Councilman
Clark).
PUBLIC COMMENTS:
None.
CITY MANAGER’S REPORT:
Deputy Planning Director Pfost provided an update on the Trump National Clubhouse
expansion.
Deputy City Manager Petru reported on efforts to coordinate a meeting between the Council
subcommittee, Assemblywoman Karnette, Los Angeles Unified School District Board Members,
and Palos Verdes Peninsula Unified School District Board Members regarding the School
District boundary issues in the Eastview area.
Councilman Clark arrived at 6:45 P.M.
Councilman Gardiner indicated that he would be out of town on the proposed date for the joint
meeting and the Council agreed that if the date could not be changed that Councilman Wolowicz
could attend in his place.
COUNCIL DISCUSSION OF FUTURE AGENDA ITEMS:
Responding to Councilman Gardiner, City Manager Lehr reported that the Johnson matter at 58
Avenida Corona was to be agendized in the near future.
Responding to Councilman Wolowicz, City Manager Lehr indicated that an update regarding
girls’ softball fields at Upper Hesse Park were scheduled to be discussed at the second meeting in
July.
APPROVAL OF CONSENT CALENDAR:
Mayor Long requested that Item 8 be removed from the Consent Calendar for separate
consideration.
Councilman Wolowicz requested that Items 7 and 15 be discussed in conjunction with the budget
item.
Councilman Gardiner requested that Item 11 be removed from the Consent Calendar for separate
consideration and that Items 8 and 11 be considered immediately after the Consent Calendar.
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Mayor Pro Tem Stern received clarification from Deputy City Manager Petru that five of the tax-
defaulted lots referred to in Item 14 were fragments of private driveways or private roads on
Surrey Lane, in the Portuguese Bend area, and on Via Campesina, which staff indicated there
was no value in attempting to obtain them for public use.
Councilman Gardiner moved, seconded by Councilman Wolowicz, to approve the Consent
Calendar with Items 7, 8, 11 and 15 removed for separate consideration.
A roll call vote reflected the following:
AYES: Clark, Gardiner, Stern*, Wolowicz, and Mayor Long
NOES: None
ABSTAIN: None
ABSENT: None
*Mayor Pro Tem Stern abstained from the approval of the February 20, 2007 minutes due to his
late arrival at that meeting.
EMERGENCY ROAD RECONSTRUCTION PROJECT (1204 X 1404)
Palos Verdes Drive South Landslide (East End) Road Reconstruction
Reviewed and reconfirmed by a four/fifths (4/5) vote, the Council’s previous action on June 5,
2007, authorizing staff to proceed with emergency repairs to the roadway along Palos Verdes
Drive South within the Portuguese Bend Landslide.
OTHER CONSENT CALENDAR ITEMS:
Motion to Waive Full Reading
Adopted a motion to waive reading in full of all ordinances presented at the meeting with
consent of the waiver of reading deemed to be given by all Council Members after the reading of
the title.
Approval of the Minutes (301)
Approved the Minutes of the February 20, 2007 Regular Meeting and March 6, 2007 Regular
Meeting, with Mayor Pro Tem Stern abstaining from the approval of the February 20, 2007
Minutes.
Adopt Resolution for Residential Street Overlay and Slurry Seal Project (Area 9) (1204 X1404)
ADOPTED RESOLUTION NO. 2007-66, A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF RANCHO PALOS VERDES, AMENDING RESOLUTION NO. 2006-41, THE
BUDGET APPROPRIATION FOR FISCAL YEAR 2006-2007, FOR A BUDGET
ADJUSTMENT OF $75,000 TO THE CAPITAL IMPROVEMENT PROJECT (CIP) FUND
AND THE GENERAL FUND.
Revisions to the Fourth Amendment to the Operating Agreement between the City and the Palos
Verdes Peninsula Land Conservancy (1203 X 1411)
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Authorized the Mayor to sign a revised, amended Operating Agreement with the Palos Verdes
Peninsula Land Conservancy (PVPLC) to assign the habitat maintenance responsibility for the
portions of the open space lots in the Oceanfront Estates community that are part of the Natural
Communities Conservation Plan (NCCP) preserve to the PVPLC.
Energy Efficient Lighting Retrofit Contract (1601)
1) Approved the Specifications and Instructions for Energy Efficient Lighting Retrofit Services;
2) Awarded Construction Contract to Sylvania Lighting Services, Inc. in the amount of $42,574
for the Energy Efficient Lighting Retrofit services and authorize an expenditure of up to $8,500
for possible extra work; and, 3) Authorized the Mayor and City Clerk to execute the contract
with Sylvania Lighting Services, Inc.
Traffic Engineering Services Contract (1204 X 1502)
This item was removed from the Consent Calendar for separate consideration.
Case No. ZON2005-00536 (General Plan Amendment, Coastal Specific Plan Amendment, Zone
Change, Vesting Tentative Tract Map No. 67532, Coastal Permit, Variance, Grading Permit
[Lots 1, 2, 3, 4, and 5], Height Variation Application [Lots 3, 4, and 5], and Environmental
Assessment) and ZON2006-00180 through 00182 (Height Variation for Lots 3 through 5);
Property Owner: Dana Ireland; Site Address: West of Nantasket Drive, between Beachview
Drive and Sea Cove Drive [APN:7573-014-013] (701 X 1203)
This item was removed from the Consent Calendar for separate consideration.
Contract for Building and Safety Services (201)
Authorized the Mayor and City Clerk to execute a professional services agreement with Charles
Abbott Associates Inc. to provide building inspection and plan check services to the City.
Extension of View Restoration Mediator and Arborist Professional Services Contracts (1806)
1) Authorized the Mayor and City Clerk to execute a professional services agreement with the
View Restoration Arborist, Mr. David Hayes, for professional arboriculture services in an
amount not to exceed $2,000 annually for two (2) years; and, 2) Authorized the renewal of the
existing contract with the City’s View Restoration Mediator, Ms. Coleen Berg, for an amount not
to exceed $40,000 annually for an additional two (2) years.
Contract Renewal for Geotechnical Consulting Services (1203)
This item was removed from the Consent Calendar for separate consideration.
Extension of Contract Service Agreement for On-Call Biological Consulting Services (1203)
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Authorized the Mayor and City Clerk to execute an extension of the professional services
agreement with David Magney Environmental Consulting to provide on-call biological
consulting services on an as-needed basis to the City for an additional one-year period.
City Maintenance Contract Extensions (1204 X 1405 X 1407 X 701)
Approved a three-year extension on the contract for Sidewalk Grinding to Central Coast Surface
Grinding, Inc. (CCSG). Approved one year extensions on the contracts for FY07-08 for the
following companies: Republic Electric for signal maintenance, Hardy & Harper for roadway
maintenance, TruGreen Landscape for roadside and park and trail maintenance, West Coast
Arborist for tree maintenance, and Nationwide Environmental Services for street sweeping.
Purchase of Tax Defaulted Property (950)
Authorized the Mayor and City Clerk to sign an Agreement to Purchase Tax-Defaulted Property
for a 0.17-acre vacant parcel located at the end of East Crest Road, adjacent to the Federal radar
dome facility at San Pedro Hill.
2.5% @ 55 Employee Retirement Formula Resolution of Intention (1202)
This item was removed from the Consent Calendar for separate consideration.
Register of Demands
ADOPTED RESOLUTION NO. 2007-67, A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF RANCHO PALOS VERDES, ALLOWING CERTAIN CLAIMS AND
DEMANDS AND SPECIFYING FUNDS FROM WHICH THE SAME ARE TO BE PAID.
# # # # # #
Items Removed from the Consent Calendar:
Case No. ZON2005-00536 (General Plan Amendment, Coastal Specific Plan Amendment, Zone
Change, Vesting Tentative Tract Map No. 67532, Coastal Permit, Variance, Grading Permit
[Lots 1, 2, 3, 4, and 5], Height Variation Application [Lots 3, 4, and 5], and Environmental
Assessment) and ZON2006-00180 through 00182 (Height Variation for Lots 3 through 5);
Property Owner: Dana Ireland; Site Address: West of Nantasket Drive, between Beachview
Drive and Sea Cove Drive [APN:7573-014-013] (701 x 1203)
Mayor Long inquired if it was necessary to have a full denial of this project with the applicant
returning to the Planning Commission for consideration. He noted it was his recollection that the
Council did not intend for the applicant to start over again but rather to have the Planning
Commission take another look at the existing application and changes the applicant might be
willing to make.
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Councilman Clark reported that he had previously abstained from the item and recused himself
from Council Chambers.
City Attorney Lynch reported that staff had struggled with inconsistent Council direction but had
concluded that Council granted the applicant the option to pursue the project under the existing
Commercial Recreation designation with the possibility of a Bed and Breakfast component or
similar establishment. She stated that staff’s understanding was that the Council denied the
application of the change of zoning to RS-4 because they felt it was too dense, but decided that
RS-2 or RS-3 zoning was appropriate. She added that the resolution could be amended if staff’s
understanding did not reflect Council’s intent.
Councilman Gardiner indicated that it was not his intent that the applicant should have to start
over and pay the fees again.
Planning Director Rojas clarified that the review process would be essentially the same whether
the project was remanded back to the Planning Commission or denied, except for the payment of
new fees.
City Attorney Lynch suggested Council deny the project without prejudice as RS-4 zoning
would be allowed with a smaller scale project.
Members of the Council indicated that their issue with the project was density and Mayor Pro
Tem Stern asked that staff, in that context, suggest how to fold in a quasi-neighborhood
compatibility analysis.
Planning Director Rojas pointed out that to perform a neighborhood compatibility analysis that
involves properties in different zoning districts would require an amendment to the City’s
neighborhood compatibility guidelines.
City Attorney Lynch clarified that if the applicant made the project less dense it would match the
current policies and guidelines.
Mayor Long moved, seconded by Councilman Gardiner, to deny the project without prejudice
and remand it back to the Planning Commission with the stipulation that the applicant would not
be required to pay additional fees and that he attempt to design a project that would address the
concerns of the Council.
Without objection, Mayor Long so ordered.
Councilman Clark returned to Council Chambers after discussion of this item.
Contract Renewal for Geotechnical Consulting Services (1203)
Councilman Gardiner noted that it had been ten years since the City had sent out a bid for the
contract for geotechnical consulting services. He stated he was not happy with the current
service or the presentation made at the Landslide Moratorium workshop.
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Staff and Council discussed the contract renewal. Director Rojas explained that Zeiser Kling had
presented a short report at the workshop at staff’s direction and explained that the technical
difficulties experienced there were not the fault of Zeiser Kling. He reported that City staff has
worked with Zeiser Kling for many years and they are pleased with the day-to-day work product
of the firm. He indicated that Zeiser Kling staff is very knowledgeable of the City’s
requirements and has, over the years, made procedural changes to facilitate processes for
residents.
Mayor Long stated that he favored renewal of the contract with Zeiser Kling as he indicated
there was value in the knowledge the firm had regarding the issues of the area and value to
continuity. He reported that he was pleased with the independent advice of Zeiser Kling even in
the face of concerns of the community, noting that every geologist at the workshop reaffirmed
the City Geologist’s opinion despite much pressure from community members. He noted that
changing consultants would send a message that the City wanted to hear only what they wanted
to hear, rather than the best professional advice.
Councilman Gardiner stated that he disagreed that changing consultants would send such a
message and indicated that he wanted clear, science-based information from the geologists.
Responding to Mayor Pro Tem Stern, City Attorney Lynch explained that Mr. McLarty and Mr.
Tofani, both experts in the Monks’ case, were not at the Landslide Moratorium workshop since
the City wanted to insure that their independence was not compromised.
Councilman Wolowicz acknowledged that reliability on a day-to-day basis was important. He
indicated he was not satisfied with the presentation at the workshop and pointed out the necessity
of a succinct presentation that was understandable to the community. He agreed that an RFP
should be sent out, so that residents realize the City is not complacent.
Mayor Pro Tem Stern moved, seconded by Mayor Long, to approve the staff recommendation.
Councilman Wolowicz moved to amend the motion to ensure that the contract went out for RFP
by June 30, 2009.
Councilman Clark pointed out that it was not fair to promise something for future Councils.
Councilman Wolowicz withdrew the amendment.
Mayor Pro Tem Stern moved, seconded by Mayor Long, to authorize the Mayor and City Clerk
to execute the proposed agreement with Zeiser Kling Consultants, Inc. to provide geology and
geotechnical engineering consulting services on an as-needed basis to the City for an additional
two years.
The motion passed on the following roll call vote:
AYES: Clark, Stern, Wolowicz, and Mayor Long
NOES: Gardiner
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ABSTAIN: None
ABSENT: None
PUBLIC HEARINGS:
Amendment to Revision "BB" to the Trump National Golf Course (1411)
City Clerk Morreale reported that notice of the public hearing was duly published and no written
protests were received and there were no requests to speak on the item.
Mayor Long opened the public hearing.
Responding to Mayor Pro Tem Stern, Deputy Planning Director Pfost explained that the
developer had planted trees along the western side of the driving range which violated the
conditions of the project. He indicated that the developer must either remove the trees or amend
the conditions of the project.
Councilman Gardiner stated that the trees should be removed immediately as they were blocking
the ocean views of several of the residences in the area.
Deputy Planning Director Pfost reported that the request for a permit for the trees as well as the
flagpole would be considered at the July 17, 2007 City Council meeting.
Councilman Wolowicz requested that the developer be present at that meeting.
Council Members expressed concern regarding the developer’s trend of asking for approval of
projects after-the-fact and Mayor Pro Tem Stern suggested that the developer have the trees
removed by the July 17, 2007 City Council meeting.
Mayor Pro Tem Stern moved, seconded by Councilman Clark, to continue the public hearing to
the July 17, 2007 City Council meeting.
Without objection, Mayor Long so ordered.
Code Amendment (Case No. ZON2006-00082): An Amendment to Title 17 (Zoning) to Preserve
Opportunities for Future Horsekeeping in the City’s Equestrian Overlay (Q) Districts)
[Continued from May 1, 2007] (1801 x 1808)
City Clerk Morreale reported that the public hearing was continued from May 1, 2007, late
correspondence was distributed prior to the meeting, written protests were included with the staff
report, and there were ten requests to speak on the item.
Responding to Councilman Gardiner, City Attorney Lynch advised that Mayor Pro Tem Stern
and Councilman Gardiner should recuse themselves from the discussion of this item and leave
the dais, and they did so.
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Associate Planner Fox provided a summary staff report.
Warren Sweetnam, Rancho Palos Verdes, stated that he believed the current system worked well,
but if changes had to be made he indicated the current Planning Commission proposal was
reasonable, and he did not want to see mandatory restrictions as he felt they would decrease
property values.
Ray VanDinther, Rancho Palos Verdes, expressed support for the staff recommendation noting
that there was an advantage to preserving horsekeeping in Rancho Palos Verdes and maintaining
a semi-rural lifestyle in an area totally overtaken by concrete and bricks. She stated she was
disturbed by the use of the word “mandatory” by a small group of people to make residents think
they had to keep a horse.
Mark Jacobowitz, Palos Verdes Peninsula Horsemen’s Association, representing 500 members
including many Rancho Palos Verdes residents, reported that they supported the amendment as
they believed a mandatory restriction was necessary. He pointed out that the area was being
eroded each time a property was built in a manner that made the property incompatible for
equestrian purposes, and over time horses would not be allowed in the area.
Bonnie Fine, speaking on the behalf of the Smith Family Trust, stated that she did not support
mandatory provisions. She indicated support of voluntary provisions noting that improvements
and better access to trails would add to horsekeeping in the area and stables were more user
friendly than keeping horses on residential property. She explained that residents should be able
to develop property as they wish and reported that the Planning Commission concluded there
was no evidence that horsekeeping had been lost in the area.
Responding to Mayor Long, Ms. Fine indicated that she was not aware of plans to subdivide the
Smith Family Trust property and noted that it would depend on who was building as to whether
the property would be kept for horsekeeping.
Anna Chu, Rancho Palos Verdes, supported the staff recommendation for controlling
overdevelopment of the equestrian overlay district as she saw a need to maintain the small
pocket as an equestrian zone of the City of Rancho Palos Verdes.
Michael VanHillat, Rancho Palos Verdes, noted he did not want to see a mandatory restriction
imposed in the equestrian zone and suggested that the Planning Commission make decisions on
an individual project basis. He questioned the logic of having those Council Members who live
in the area having to recuse themselves.
Doug Maupin, Rancho Palos Verdes, indicated that the Equestrian Committee came up with
good solutions regarding the importance of eliminating the 35 foot setback on equestrian
properties, which allowed more useable space on lots and encouraged horsekeeping. He stated
that there were many opportunities for horsekeeping without making it mandatory.
Gordon Leon, Rancho Palos Verdes, indicated that the proposed modification to the setback
requirements of 35 feet would be a tremendous help for maintaining horsekeeping in the
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equestrian district; and reported that the Equestrian Committee had been actively working on the
trails to provide an effective network of trails to support the equestrians in the area.
Richard Bara, Rancho Palos Verdes, clarified that the original proposed Code Amendment
language would only affect projects of new construction, reconstruction, tear downs, rebuilds,
and major reconstructions; but opposition letters and petitions implied that every property would
be affected. He indicated that many requirements were gradually compromised out and staff was
recommending consideration of only new subdivisions, which equated to approximately 209
properties being affected. He explained that there had been much discussion regarding how
many horses were currently in the area. He stated the issue was not how many horses were now
present, but instead, how many there were 10 years ago and how many there would be in the
future.
Madeline Ryan, Rancho Palos Verdes, inquired whether the Council wanted horses in the City of
Rancho Palos Verdes or not, and noted that the only way to ensure the continuance of the
equestrian “Q” zone was through restrictive measures. She reported that four properties in the
last three years engaged in lot line adjustments, which resulted in the loss of zoning for the
keeping of horses for those properties. She suggested that homeowners who want to use every
inch of their buildable space should be required to apply for a variance to be heard before the
Planning Commission so that the City can measure what it is losing. She pointed out that the
City did not keep records specific to equestrian areas lost, but stated it was important to preserve
the equestrian “Q” zone as the forefathers had intended, by adopting more stringent codes.
Kay Bara, Rancho Palos Verdes, stated that she hoped the Council would work towards the
adoption of more firm restrictions in the future noting that square footage restrictions have been
used effectively by other cities. She commented that much money and effort was being put into
the open space preserve, but soon there would be no horses on the trails.
Michael Cotter, Rancho Palos Verdes, President of the Road Association, noted that most people
were not happy about restrictions being placed on their properties in order to accommodate
horses and expressed concern about the homeowners with small houses who would not be able to
increase the square footage of their homes.
Lynne Amano, Rancho Palos Verdes, expressed hope that the Council would preserve the
horsekeeping areas of the City.
Dave Wall, Rancho Palos Verdes, pointed out that the proposed legislation did not address the
topography of the lots and he saw that as a serious defect. He objected to the proposal and cited
safety issues created by pedestrians, cyclists, and horses on Palos Verdes Drive East.
Mayor Long closed the public hearing.
Councilman Clark moved, seconded by Mayor Long, to approve the staff recommendation.
Councilman Wolowicz commented that slightly misleading phrases had created
misunderstanding in the community. He noted that he did not support changing the rules for
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property owners after-the-fact, but did support the concept of incentives and hoped the new
regulations would give people incentives to follow the rules. He indicated that the legislation
would resolve the issue and noted that the City had made a commitment to open space and had
provided opportunities for horses.
Councilman Clark stated that the proposal before Council made sense and that the time and
effort of the community, the Equestrian Committee, the Planning Commission and staff had paid
off with the proposal of a voluntary and incentive driven approach to address the issue. He
commented that only time would tell as to whether the community wanted an equestrian “Q”
zone or not and suggested amending the motion to add a sunset of five years on the Code change
so Council could review the matter to see what impact it has had on the community at that time.
Mayor Long supported the motion and wanted mandatory language included for lots to be
subdivided. He noted that he believed incentives would not work in the long run nor did he
believe that zoning regulations should be voluntary. He cautioned against letting people build to
the maximum possible on their lots, citing Manhattan Beach as a negative example of such
building, and pointed out that other areas like Palos Verdes Estates had (Floor Area Ratios)
FARs in order to limit development. He noted that some people in the community wanted to
preserve open space, which includes the open space around their homes, and expressed concern
that the line would become blurred over time and that restrictions should not be limited to the
“Q” district.
Councilman Clark stated that a Council subcommittee was established to deal with neighborhood
compatibility to eliminate the unintended consequences of gradual overdevelopment by
analyzing the impact on neighborhoods and residents. He noted that a maximum square footage
provision was removed because it was inequitable to residents. He stated that the proposal was a
reasonable approach to amend the current Code in the equestrian district and to give incentives to
promote the retention of equestrian use and horsekeeping, but it was not mandated, which was an
aspect many residents opposed.
Mayor Long clarified that the previous square footage limitation was not dependent on the size
of the lot which was the aspect that made it inequitable and observed that Palos Verdes Estates
had a FAR limit. He supported the motion though he believed it to be ineffective as it would not
succeed in preserving open space because a FAR had not also been created.
City Attorney Lynch noted that since a mandatory component was being added to the language
that was not in the proposed ordinance, the item should be continued so that particular language
could be added.
Mayor Long moved to amend the motion to add the language under Other Possible Suggested
Language section.
The amendment died for lack of a second.
Councilman Clark moved, seconded by Mayor Long, to amend the motion adding the provision
of a sunset in five years to reflect on the impact of the Code amendment to the community.
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The motion failed on the following roll call vote:
AYES: Clark and Mayor Long
NOES: Wolowicz
Councilman Clark moved, seconded by Mayor Long, to INTRODUCE ORDINANCE NO. 460,
AS AMENDED, AN ORDINANCE OF THE CITY OF RANCHO PALOS VERDES
AMENDING CHAPTER 17.46 OF TITLE 17 OF THE CITY’S MUNICIPAL CODE (CASE
NO. ZON2006-00082) TO ESTABLISH REGULATIONS FOR THE PRESERVATION OF
FUTURE HORSEKEEPING OPPORTUNITIES IN THE CITY’S EQUESTRIAN OVERLAY
(Q) DISTRICTS, thereby adopting Addendum No. 16 to Environmental Assessment/Negative
Declaration (EA/ND) No. 694 and approving the Planning Commission’s recommended ‘Q’
District Code Amendment (Case No. ZON2006-00082).
City Attorney Lynch suggested a minor edit to the ordinance, on Circle Page 6, so that it read “
… the following incentives shall be offered to encourage compliance with …” which was
accepted by the maker of the motion.
A roll call vote reflected the following:
AYES: Clark, Wolowicz, and Mayor Long
NOES: None
Recess and Reconvene
Mayor Long called a brief recess from 8:43 P.M. to 8:57 P.M.
Councilman Gardiner and Mayor Pro Tem Stern returned to Council Chambers.
Councilman Wolowicz clarified that all the budget issues would be discussed simultaneously to
be immediately followed by discussion of the item regarding Channel 33.
Adoption of the City Budget and Employee Salary Ranges for Fiscal Year 2007-2008 (602 X
1202)
City Manager Lehr provided a summary staff report.
Deputy Finance Director Downs provided a presentation on the Five-Year Model.
Responding to Mayor Long, Public Works Director Bell explained that the proposed funding
plan for the paving maintenance of arterial roads was to move from 0 to 9%, which maintains the
average standard range.
Responding to Mayor Pro Tem Stern, Finance Director McLean reported that the growth of
property tax revenue has been reduced from 6% beyond 2007-2008, but that the County of Los
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Angeles had provided information reflecting an expectation of growth of property tax revenue
during the 2007-2008.
Mayor Pro Tem Stern commented that the City of Rancho Palos Verdes was not like the rest of
the Los Angeles County and did not have the same amount of [property] turnover as the County.
Councilman Wolowicz received clarification that numbers in the two-year budget document and
the five-year model were basically the same with a $15,000 difference. He observed that
significant assumptions were included and the ripple effect would be enormous.
Responding to Mayor Long, Public Works Director Bell stated that the Council had been
provided a plan to keep the roads intact and explained that staff had also considered a plan to
bring the roads up to optimal condition in six years which would require additional funding of
$350,000 annually.
Finance Director McLean reported on pending legislative actions that could include
transportation funds, some of which could be allocated to Rancho Palos Verdes, and might
enable a reassessment in the near future by Public Works staff.
Mayor Pro Tem Stern indicated that residents expected good quality roads and he questioned
why staff did not recommend something as part of this budget and in the Five-Year Model that
allocated $2 million towards road maintenance.
Public Works Director Bell explained pavement indexes, noted that the standard could be
changed in the future, and commented that he supported pursuing external funding for paving
and road maintenance.
Councilman Gardiner and Mayor Long discussed methods to determine whether the City would
be in a better position to pay now or pay later.
Staff and the Council discussed whether appeals were cost recoverable and Finance Director
McLean reported that a Cost Fee Study conducted about three years ago showed a rate of
recovery of about 30% of the City costs. He estimated that the City had increased the cost
recovery of appeal costs up to approximately 10-15%.
City Attorney Lynch explained that the City was allowed to recover out of pocket expenditures.
Councilman Gardiner received clarification about hours allocated to the Finance Advisory
Committee; ongoing and one-time expenses; transient expenses; and assurance that there was not
double counting on the General Plan Update which would probably end within the next three
years.
Responding to Mayor Long as to the annual savings of reduced overtime, Deputy Finance
Director Downs explained that quite a bit of overtime was not being claimed and most overtime
was not paid, but was instead being taken in compensation hours. She indicated that the 2007-
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2008 Budget did not include a large decrease in the amount of overtime compared to previous
budgets and noted that much overtime was claimed by exempt employees.
Mayor Pro Tem Stern was troubled by the observation of the underreporting of actual overtime
work.
Councilman Wolowicz expressed concern with the decrease to the budget for street repairs.
Deputy Finance Director Downs explained that the 2006-2007 budget of $5 million for pavement
included carryovers from previous years.
Public Works Director Bell explained that in the past there had been some missed years on
paving and the arterials were not maintained properly, but that the model had been adjusted to
provide for more of a long term present value projection for residential roadways. He
summarized some of the history of the arterial maintenance and suggested that there could be
other methods and funds available to bring the arterial standards up to a higher level.
Councilman Wolowicz commented on the uncertainty of the City receiving funding from the
State. He posed several questions to Deputy Finance Director Downs who explained that Sheriff
figures in the Five Year Model were based on 5% increases and that the 2007-2008 budget
would get them to full costs for the newly added traffic enforcement deputies. She indicated that
expenditures were not separated out in the Five-Year Model, but they had a blending
assumption. She explained that non-employee expenditures were anticipated to increase at a rate
of 3% each year with 3.25% applied to all expenditures to allow for a higher rate of increase for
personnel costs; the City Attorney reduction was due to a decrease in lawsuits; and increases to
employee benefits included the enhanced pension benefits formula, the additional employees,
and the 7% merit pool for 2007-2008.
Mayor Long requested the staff reports be presented for the next two items, the Traffic
Engineering Services Contract and the 2.5% @ 55 Employee Retirement Formula Resolution of
Intention, that are being considered in conjunction with the Adoption of the City Budget &
Employee Salary Ranges for Fiscal Year 2007-2008 and the 2007 Five-Year Financial Model.
Traffic Engineering Services Contract (1204 X1502)
Public Works Director Bell provided a brief summary staff report.
Responding to Councilman Wolowicz, Public Works Director Bell explained that the budget
proposal included only base costs for traffic engineering services.
Mayor Pro Tem Stern received clarification that staff had been reactive in terms of the utilization
of the traffic engineer and that there was not an overall proactive game plan to identify problems
and solve them before they occurred.
Public Works Director Bell reported that due to community pressure, there had been more
concentration on neighborhood quality improvement objectives and projects, which displaced
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proactive work on safety issues and the opportunity to spend time in the pursuit of grants. He
suggested that staff could return with a menu of future objectives to see what components the
Council was interested in.
Mayor Long suggested the possibility of the Traffic Safety Commission reviewing methods to
systemically improve safety on Palos Verdes Drive East. He received clarification that such a
component was not currently included in the budget.
Public Works Director Bell emphasized the importance of examining the safety issues and
objectives related to Palos Verdes Drive East and formulating a plan of action. He pointed out
that working with the community on design efforts clearly required extra funding. He estimated
that a more detailed initial investigation of safety issues would cost about $15,000 and that more
work was needed to present a better overall design package to the City Council, but indicated
that it was reasonable to adopt the budget with staff working on a plan as to the best methods to
move forward.
Deputy Finance Director Downs explained that money had been allocated in the Fiscal Year
2007-2008 Budget to accomplish the objectives but staff had not yet determined whether they
would prefer to hire a full time associate engineer to cover traffic safety issues or use contract
services to achieve that goal.
Councilman Wolowicz received clarification that the money was allocated in the budget for
either a full-time position or a consultant, but not both, and any necessary budget adjustment
could be requested.
2.5% @ 55 Employee Retirement Formula Resolution of Intention (1202)
Deputy City Manager Petru provided a brief staff report.
Responding to Councilman Gardiner, Finance Director McLean indicated that moving from a
2% at 55 retirement formula to a 2.5% at 55 retirement formula would increase the City’s costs
and add a future obligation.
Responding to Councilman Gardiner, Deputy City Manager Petru indicated that the Present
Value of Benefits totaling $962,677 would accrue to the existing employees and the Accrued
Liability of $449,700 applies to the City and the Plan.
Staff and the Council discussed amortization, surpluses in the employee benefits fund, Council
restricted funds, General Fund coverage of the side fund liability requirement shortfall, and
liability vs. cash flow.
Recess and Reconvene
Mayor Long called a brief recess from 10:19 P.M. to 10:27 P.M.
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Mayor Long opened the public hearing for Item 19 regarding the adoption of the City Budget
and Employee Salary Ranges for FY07-08.
There were no public speakers.
Mayor Long closed the public hearing.
Mayor Long explained that the staff reports were complete for Items 19, 22, 7, and 15 and asked
Council’s preference for the manner in which to proceed, noting that Item 7, the Traffic
Engineering Services Contract, and Item 15, the 2.5% at 55 Employee Retirement Formula
Resolution of Intention, were specific and suggested that action be taken on those items first.
Mayor Pro Tem Stern moved, seconded by Councilman Gardiner, to award and authorize the
Mayor to execute the Traffic Engineering Services Contract for the City of Rancho Palos Verdes,
in the amount not to exceed $46,900 with Priority Engineering Inc.
The motion passed on the following roll call vote:
AYES: Clark, Gardiner, Stern, Wolowicz, and Mayor Long
NOES: None
ABSTAIN: None
ABSENT: None
Mayor Pro Tem Stern moved, seconded by Councilman Clark, to approve the staff
recommendation on the 2.5% at 55 Employee Retirement Formula Resolution of Intention.
Councilman Wolowicz proposed a substitute motion, seconded by Councilman Gardiner, for a
2% at 55 Employee Retirement Formula.
Councilman Wolowicz expressed concern with continued increases in defined benefit costs to
the City and stated that he believed the City should hold the line on the increase of pension costs.
Deputy City Manager Petru explained that the City’s current retirement formula was 2% at 55.
Council Wolowicz confirmed that he sought to keep the benefit formula at its present rate.
Mayor Pro Tem Stern stated that he believed the change to the City’s retirement plan to be
appropriate and while he recognized that it would cost the City money, he indicated it would be a
bad move to change course after the Council had preliminarily approved it.
Councilman Clark indicated that according to Tierra West’s Retirement Benefit Survey, adopting
a 2.5% at 55 Employee Retirement Formula would elevate the City’s ranking from near last to
near the midrange compared to 21 other southern California cities surveyed, and he believed
staff deserved the modification to retirement benefits.
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Mayor Long expressed frustration with the State’s policy direction and noted that without the
increase in retirement benefits the City ran the risk of increased staff turnover, which was
expensive and disruptive.
Staff and the Council discussed the proposal to provide employees with post retirement health
care accounts, the City’s ranking compared to other cities in terms of its benefits package, and
the Public Agency Retirement System (PARS).
The substitute motion failed on the following roll call vote:
AYES: Gardiner and Wolowicz
NOES: Clark, Stern, and Mayor Long
A roll call vote on the main motion to ADOPT RESOLUTION NO. 2007-68; A RESOLUTION
OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES, ADOPTING A
RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT TO THE CONTRACT
BETWEEN THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC
EMPLOYEE’S RETIREMENT SYSTEM AND THE CITY OF RANCHO PALOS VERDES
FOR THE 2.5% @ 55 RETIREMENT BENEFIT FORMULA passed on the following roll call
vote:
AYES: Clark, Stern, and Mayor Long
NOES: Gardiner and Wolowicz
Mayor Pro Tem Stern suggested that Item 22, the 2007 Five-Year Financial Model be considered
next.
2007 Five-Year Financial Model (602)
Mayor Pro Tem Stern moved, seconded by Councilman Clark, to approve the staff
recommendation to 1) Receive and file the 2007 Five-Year Financial Model; 2) Based on the
needs of the City and the analysis of revenues derived from the Utility Users Tax required by
Municipal Code Section 3.30.190 annually, determine that the current Utility Users Tax rate of
3% continues to be a necessary General Fund revenue source and the current rate of 3% should
be maintained; and 3) Based on the needs of the City and the analysis of revenues derived from
the Golf Tax required by Municipal Code Section 3.40.140 every four years, determine that the
current Golf Tax rate of 10% continues to be a necessary General Fund revenue source and the
current rate of 10% should be maintained; and, 4) ADOPT RESOLUTION NO. 2007-69, A
RESOLUTION OF THE COUNCIL OF THE CITY OF RANCHO PALOS VERDES,
AMENDING RESOLUTION NO. 2006-41, THE BUDGET APPROPRIATION FOR FY06-07,
TO INCREASE THE GENERAL FUND REVENUE BUDGET OF THE CITY by a total of
$350,000 ($150,000 for Property Tax and $200,000 for Property Tax In-Lieu of VLF Revenues).
Responding to Councilman Gardiner, Finance Director McLean explained that the City had
prepared the Five-Year Model for approximately the last seven years. He indicated that a trend
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analysis had been prepared for revenue budgeting accuracy, but not for expenditures, and that the
trend analysis was present in the Budget document.
Councilman Gardiner clarified that the Five-Year Model deals with parameters, constants, and a
model, but was not an actual budget.
The motion passed on the following roll call vote:
AYES: Clark, Gardiner, Stern, Wolowicz, and Mayor Long
NOES: None
Mayor Pro Tem Stern moved, seconded by Councilman Clark, to adopt the FY07-08 City Budget
as presented. (This motion was not voted on, but was restated later in the meeting.)
Councilman Wolowicz expressed concern about employee positions being added. He stated that
he understood the three positions of Deputy Director of Public Works, Associate Engineer in
Public Works, and Senior Information Technician in Finance were upgrades, not new
positions. He explained that he understood the new positions to be the following: Senior
Administrative Analyst in the City Manager’s Office, Senior Accountant in Finance/ Information
Technology Department, Senior Administrative Analyst in Public Works, and Open Space &
Trails Manager in the Planning, Building, and Code Enforcement Department. He inquired if
there were alternatives to the new positions, in terms of contract employees now filling the
positions.
Deputy Finance Director Downs explained that the Traffic Engineering position was one of the
upgrades in the budget, and confirmed that the three position upgrades and the new positions, as
reiterated by Councilman Wolowicz, were included in the proposed budget.
Councilman Gardiner questioned whether it was possible to save money by reordering priorities;
disagreed with hiring four people before the management audit was conducted to determine if
additional staff was necessary; pointed out that the City asked residents to pay a Storm Drain
User Fee for the repair of deteriorating storm drains, but could find funds to hire four staff
members; opined that money could be saved by sending Information Technology (IT) out to bid;
and requested that the IT portion of the budget be voted on separately.
Councilman Gardiner proposed an amendment to the motion, seconded by Councilman
Wolowicz, to vote on the IT portion of the budget separately.
Councilman Gardiner pointed out that the price of computers had dropped, but the IT budget had
steadily increased noting that IT had not been out to bid since 1998 or 1999. He added that he
understood that Channel 33 was supposed to be self-sustaining and was opposed to any subsidy
for Channel 33.
Mayor Pro Tem Stern indicated that additional staffing was necessary and without appropriate
staffing, the City Manager would not be able to implement the policies the Council had worked
hard to establish.
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Councilman Clark expressed concern with staff burnout noting that the new City Manager had
evaluated the workload of each department and her assessment was that City Hall was
understaffed.
Mayor Long observed that in the past the Council had expressed concern with contracting out
tasks they believed the City should have the ability to handle. He commented that the Council
required a great deal of staff time and while increased staffing could be deferred, it should be
noted that staffing needs had been put off for a number of years. He pointed out that the City
had been unable to take on an accelerated program to repair storm drains because they did not
have the staff to manage the program and discussed the issue of the user fee and utility tax. He
pointed out that much of the City’s exempt staff was working excessive overtime hours which
could result in burnout and noted that City staffing should be effective and efficient so that
employees are able to provide quality service.
Councilman Wolowicz stated that he supported the Senior Administrative Analyst position for
Public Works, but did not support the other positions at this time due to decisions that might
need to be made in the November General Municipal Election.
Councilman Wolowicz proposed a second amendment to the motion, seconded by Mayor Long,
to defer all new staff positions except for Senior Administrative Analyst for Public Works.
City Attorney Lynch suggested that Council vote on the first amendment to the motion that was
on the floor, and then move on to the second amendment.
Mayor Long inquired if Council needed further discussion on the first amendment to the motion,
which was to vote on the IT portion of the budget separately.
Responding to Councilman Wolowicz, City Manager Lehr reported that $100,000 had been set
aside for the organization-wide management audit, and it was her intention to provide a review
of the City’s IT services as a part of that audit.
Council and staff discussed the IT review and Finance Director McLean indicated that it was his
understanding that the IT review would be the very first step of the management audit.
The first amendment to the motion to vote on the IT portion of the budget separately failed on
the following roll call vote:
AYES: Gardiner and Wolowicz
NOES: Clark, Stern, and Mayor Long
Mayor Long clarified in seconding the motion to the second amendment made by Councilman
Wolowicz, that the motion was to defer three of the proposed staff positions, other than the
Senior Administrative Analyst, until December or until such time as the management audit was
complete.
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City Manager Lehr requested that if the second amendment passed, staff be given direction to
return with a list of tasks to be deferred.
Mayor Long indicated that he believed the positions were needed, but acknowledged that the
management audit could prove him wrong and was willing to look at that. He commented that
Council agreed that Public Works staff should be augmented immediately, but noted that if
voters rejected the User Fee, the City would be faced with cutting staff positions.
Mayor Pro Tem Stern stated that the priorities established by Council were appropriate to
address the needs and desires of the community. He stated he was optimistic that staff could take
advantage of efficiencies, but noted that the audit had not even begun and the results would not
be available for at least 12 months. He indicated that he did not want projects and priorities
placed on hold and given the backlog of the work he opined it was better to move forward and
get the job done.
Councilman Clark stated it was arbitrary and capricious to support one of the positions and not
the others in light of the well-documented, detailed information provided by the City Manager
and staff.
Councilmembers discussed various items in the budget including the use of outside contractors,
staff size vs. City population, planned retirements, budget assumptions, and break-even budgets.
Mayor Long moved, seconded by Councilman Clark, to vote on the addition of each position
separately.
Without objection, Mayor Long so ordered.
The motion passed to approve the addition of the Senior Administrative Analyst position in the
Public Works Department by the following roll call vote:
AYES: Clark, Stern, Wolowicz, and Mayor Long
NOES: Gardiner
The motion failed to approve the addition of the Senior Accountant position in the Finance/IT
Department by the following roll call vote:
AYES: Clark and Stern
NOES: Gardiner, Wolowicz, and Mayor Long
The motion failed to approve the addition of the Senior Administrative Analyst position in the
City Manager’s Office by the following roll call vote:
AYES: Clark and Stern
NOES: Gardiner, Wolowicz, and Mayor Long
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The motion passed to approve the addition of the Open Space and Trails Manager position in
Planning, Building & Code Enforcement Department by the following roll call vote:
AYES: Clark, Stern, and Mayor Long
NOES: Gardiner and Wolowicz
Councilman Clark requested the reconsideration of the vote on the Senior Administrative
Analyst position in the City Manager’s Office.
Mayor Long denied the request for reconsideration.
Councilman Wolowicz moved, seconded by Mayor Long, to 1) Reevaluate the two remaining
requested positions (Senior Administrative Analyst in the City Manager’s Department and
Senior Accountant in the Finance/IT Department) after the completion of the management audit,
but no sooner than December 2007; and 2) Direct the City Manager to create a list of tasks that
the City Manager and Finance/IT Departments would not be able to perform without additional
staff resources.
The motion passed on the following roll call vote:
AYES: Clark, Gardiner, Stern, Wolowicz, and Mayor Long
NOES: None
Mayor Pro Tem Stern moved, seconded by Councilman Wolowicz, to 1) ADOPT
RESOLUTION NO. 2007-70, AS AMENDED, A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF RANCHO PALOS VERDES, APPROVING THE CITY BUDGET FOR
FISCAL YEAR 2007-2008; and 2) ADOPT RESOLUTION NO. 2007-71, A RESOLUTION OF
THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES, ESTABLISHING
SALARY AND HOURLY RANGES FOR COMPETITIVE AND MANAGEMENT
EMPLOYEE JOB CLASSIFICATIONS.
Deputy City Manager Petru reiterated that included in the Budget are the three upgraded
positions previously discussed.
Deputy Finance Director Downs read the revised numbers for the Budget with the deletion of
two of the proposed positions so that the resolutions could be adopted.
The motion passed on the following roll call vote:
AYES: Clark, Stern, Wolowicz, and Mayor Long
NOES: Gardiner
Councilman Clark moved, seconded by Mayor Long, to continue all matters not yet addressed to
the next regular Council meeting.
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City Manager Lehr indicated that paid consultants were in the audience and the Council decided
to continue with the meeting after a brief recess.
Recess and Reconvene
Mayor Long called a brief recess from 11:49 P.M. to 11:53 P.M.
Channel 33 Business Plan, Operating Policies and Proposed Budget FY 2007/08 and 2008/09
(305)
City Clerk Morreale noted that late correspondence was distributed prior to the meeting and there
was one request to speak on the item.
City Manager Lehr suggested that Council defer the policy decisions and consider only the three
contract agreements. City Manager Lehr presented brief summary staff report.
Councilman Clark noted previous discussion that the station was a form of media and
information and suggested that another alternative would be for the General Manager of the
Channel 33 Station to report to the Director of IT.
City Manager Lehr explained that option had been clearly rejected and Council had concurred
with former City Manager Bussey’s report in March where he recommended that the General
Manager report to the City Manager’s office.
Mayor Pro Tem Stern indicated that all departments should report to the City Manager, noted
that he did not support significant involvement of the subcommittee, and questioned what the
best organizational structure would be for handling Channel 33.
City Manager Lehr stated that she concurred with the workshop recommendation which was that
the position of General Manager and operation of Channel 33 would report to the City
Manager’s office, like any other department.
Mayor Long called for the public speaker.
Ken Dyda, Rancho Palos Verdes, stated that it had been appropriate to have a subcommittee
during the startup of the City’s television station, but now that the channel was established he
believed it important to set the policy and have Channel 33 operate as a City function reporting
to the City Manager. He expressed concern that the Joint Powers Authority (JPA) would dilute
control and reported that a rate schedule in the business plan would release the need for a JPA to
provide funding. He indicated it was a mistake to create entitlements, the channel should be
treated like any other department in terms of funding, the General Manager function should be
defined in terms of a job description, time critical programs should be given priority, a regular
schedule should be provided for program series such as City Talk, imported programs should be
avoided, an in-house training program should be developed, disagreements with General
Manager decisions should be resolved by the City Manager like other departments, programming
should be consistent with content policies and may be submitted for airing by others, and he
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believed it was not necessary for station management to commission programs as good programs
would be submitted. He observed that the current workload of the General Manager was
excessive and he indicated that part of the budget should be allocated for staff to assist her.
Gabriella Holt, Channel 33 Station Manager, commented on the tremendous workload that
existed and noted that as more managerial duties were added production time was
decreased. She indicated that the enterprise became more expensive as it became a City
department under City Council control. She stated that due to other commitments she would not
be able to continue to provide General Management duties as of the end of the fiscal year and
sought to provide the Council with information so they could make an informed decision and
understand the consequences of that decision.
Responding to Mayor Long, Ms. Holt clarified that she would not take on the additional
administrative duties that they were looking to ascribe as of July 1, 2007, but that she would
continue as a volunteer for Channel 33.
Mayor Pro Tem Stern expressed appreciation for Ms. Holt’s service and he supported City
Manager Lehr being responsible for the station.
Ms. Holt stated that she agreed that the City Manager should oversee the station, but suggested
that the Council might need to reframe their thinking regarding the station resembling a
department of the City. She indicated that she agreed with the suggestion by Mayor Long to
defer the decision until December after the management audit. She pointed out the many
administrative duties necessary and cited the need for some sort of funding stream as the end of
FY 2006-2007 drew near and as the station continued to become more automated.
Mayor Pro Tem Stern moved, seconded by Councilman Clark, to adopt the governance model
whereby the Channel 33 Studio General Manager would report to the City Manager in the same
manner as department heads.
Responding to Councilman Wolowicz, Ms. Holt stated that the General Manager would be the
overall person who would report to the City Manager and would not be a volunteer although the
position could be part time. She indicated that she was available in a volunteer capacity for
productions and scheduling for Channel 33, but stated it was not reasonable to expect her to do
all of the extra administrative tasks.
Without objection, Mayor Long so ordered.
Councilman Clark departed the meeting at 12:18 A.M.
Responding to Mayor Pro Tem Stern, City Manager Lehr indicated that she was not aware of
problems with the SCROC agreement and that there was not a cost involved with that agreement.
City Attorney Lynch indicated that she had reviewed the agreement.
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Mayor Long clarified that the approval of the TVTN agreement that implemented the automation
of Channel 33, which was conceptually approved at the January Channel 33 workshop, would
save money in the long run.
City Manager Lehr indicated that the automation feature was important since Ms. Holt would no
longer be the General Manager of the Channel 33 station.
Mayor Pro Tem Stern suggested deferring the item to give staff time to consider the impact of
Ms. Holt’s departure as General Manager.
Council and staff discussed which items could be deferred and which required action.
Mayor Long moved, seconded by Mayor Pro Tem Stern, to 1) Approve the renewal of the
Southern California Regional Occupational Center (SCROC) lease agreement for FY 07/08; 2)
Approve the TelVue Corporation (TVTN) agreement; 3) Continue all other aspects of this item
to the City Council Meeting of July 3, 2007, including the following: JPA Governance and
Contributory Funding; Franchise Fees; Adoption of Channel 33 Operating Budget for FY 07-08;
Approval of Channel 33 Production, Programming and Operational Policies and Procedures;
Approval of Channel 33 Business Plan; Role of Channel 33 Cable TV/Cox Contract Renewal
Subcommittee; 4) Direct that Channel 33 be included in the City’s Management Audit; and, 5)
Approve the FY 07-08 Budget for Channel 33 consistent with the budget items conceptually
approved at the January 27, 2007 Workshop, with no additional positions to be added until after
December 2007.
A roll call vote on the motion reflected unanimous approval.
Annual Levy of Storm Drain User Fee (Fiscal Year 2007-08) (604 X 602)
City Clerk Morreale reported that notice of the public hearing was duly published and written
protests were included in the late correspondence distributed prior to the meeting. She indicated
there were three requests to speak.
Finance Director McLean provided a brief staff report.
City Attorney Lynch clarified that the increase of the User Fee from $86.00 to $87.72 reflects the
2% increase currently authorized within the ordinance approved by the property voters in August
2005.
Mayor Long opened the public hearing.
Frank Lyon, Chairman of the Oversight Committee, Rancho Palos Verdes, briefly summarized
the Oversight Committee’s findings and recommendations noting that avail able funds were
inadequate to address storm drain issues and an aggressive approach was necessary. He
indicated that the Oversight Committee deferred to the Council regarding raising the User Fee,
but agreed that retention of the User Fee was essential in the near term until such time as other
sources of significant revenue become available. He reported an Oversight Committee
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recommendation that staff and the Council adjust future budgets to maintain a prudent General
Fund reserve level and that the Council prepare an information summary for the public prior to
the November election.
Responding to Mayor Pro Tem Stern, Mr. Lyon commented that the amount of the increase was
very small but it could create a negative public perception.
Councilman Wolowicz received clarification that Mr. Lyon had received any and all information
the Oversight Committee required to make their recommendations.
Don Reeves, Committee to Repeal the User Fee, Rancho Palos Verdes, asserted that the short-
term projections in the Five-Year Model were grossly erroneous; the purpose of the Oversight
Committee was not to discuss the political implications of the cost increase; there was no cost
estimate for storm drain repairs; there should be a shorter period for the User Fee as originally
proposed; and indicated a willingness to discuss the course the Committee to Repeal the User
Fee believed the City should follow.
Councilman Wolowicz took issue with Mr. Reeves’ statement that there was no cost estimate
and plan for storm drain repair.
Mr. Reeves indicated that there had been no update to the basis for the User Fee.
Mr. Long offered to meet with residents and address any issues regarding the Storm Drain User
Fee, noting that he felt voters were looking for a better quality of life rather than the stern
necessities that Mr. Reeves advocated.
Mayor Long closed the public hearing.
Responding to Councilman Gardiner, Finance Director McLean reported that the Palos Verdes
Peninsula Unified School District, the Los Angeles Unified School District, and the Sanitation
District had not paid their User Fee bills.
City Attorney Lynch reported that state entities other than the school district were obligated to
pay.
Councilman Gardiner indicated that he wanted to make sure residents were aware that the school
districts had not paid.
Mayor Pro Tem Stern asserted that the problem was real, no amount of political philosophy
would eliminate it, and did not believe that the 2% increase would turn residents against the fee.
Mayor Pro Tem Stern moved, seconded by Councilman Wolowicz, to approve staff
recommendation to 1) Conduct a public hearing pursuant to Health and Safety Code Section
5473.2 and Section 3.44.40 of the Rancho Palos Verdes Municipal Code on June 19, 2007 on the
Annual Report prepared by Harris & Associates and information provided by Staff, and
determined to collect the Storm Drain User Fee (the "Fee") for Fiscal Year 2007-08, at the
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maximum rate allowed by law per Equivalent Residential Unit ("ERU") for Fiscal Year 2007-08;
2) At the conclusion of the Public Hearing determine the absence of a majority protest; 3) In the
absence of a majority protest, determine that the rate per ERU for Fiscal Year 2007-08 shall be
the maximum rate of $87.72 as set forth in the Annual Report, ADOPT RESOLUTION NO. 72;
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES,
FINALLY ADOPTING A REPORT, AS FILED, IN CONNECTION WITH THE STORM
DRAIN USER FEE ESTABLISHED PURSUANT TO CHAPTER 3.44 OF THE RANCHO
PALOS VERDES MUNICIPAL CODE; DETERMINING THE AMOUNT OF SUCH FEE
FOR FISCAL YEAR 2007-08; AND ORDERING THAT SUCH FEE BE COLLECTED ON
THE COUNTY OF LOS ANGELES TAX ROLL FOR FISCAL YEAR 2007-08; and
4) Continue to a future agenda the discussion of the Oversight Committee’s recommendation for
the preparation of a Public Information Summary for dissemination to the public prior to the
November 2007 Election.
Councilman Gardiner stated that he preferred to take the $22,000 out of the $80,000 plus the
$10,000 contingency fund requested in Agenda Item 25, Upper Point Vicente Civic Center Site
Analysis, and put that money towards the User Fee.
Mayor Long stated that he disagreed, noting that there were private donors seriously interested in
donating towards the construction of buildings at Upper Point Vicente, but there were very few
private donors interested in funding studies or funding utility hookups and building pads for
buildings.
Councilman Gardiner noted that USC’s policy was that they would not accept money from
outside donors unless money was also donated for annual upkeep.
Mayor Long stated that he believed the User Fee was too low and acknowledged that General
Fund reserves being spent was not enough on its own to cover the necessary storm drain repairs,
but hoped that there would be adequate funds to make the storm drain repairs if combined with
the User Fee. He stated that he was mindful of adding new expenditures but was in favor of the
increase of the User Fee by 2%, noting that the voters would consider the matter in November.
Councilman Wolowicz stated that he was troubled by the outflow of cash and believed that at
some point in time if there were sufficient revenues the fees should be reduced or suspended.
A roll call vote on the motion reflected the following:
AYES: Gardiner, Stern, Wolowicz, and Mayor Long
NOES: None
Mayor Pro Tem Stern inquired about the action to be taken regarding the authorization by
Council for the Oversight Committee to prepare an informative public information summary
regarding the Storm Drain User Fee.
City Attorney Lynch stated that this item should be brought back as a Consent Calendar item on
the July 3, 2007 City Council Agenda since it was not specifically on this agenda.
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Abalone Cove Sewer Maintenance Fee (1900)
City Clerk Morreale reported that notice of the public hearing was duly published and no written
protests were received.
Mayor Long opened the public hearing.
There were no requests to speak.
Mayor Long closed the public hearing.
Councilman Wolowicz moved, seconded by Councilman Stern, to 1) Conduct the public hearing
on the proposed levy and allocation of the annual sewer service charge for the Abalone Cove
Sewer System for Fiscal Year 2007-2008; 2) ADOPT RESOLUTION NO. 2007-73, A
RESOLUTION OF THE COUNCIL OF THE CITY OF RANCHO PALOS VERDES,
APPROVING A REPORT IN CONNECTION WITH THE SEWER SERVICE CHARGE
ESTABLISHED PURSUANT TO CHAPTER 13.06 OF THE RANCHO PALOS VERDES
MUNICIPAL CODE, DETERMINING THE AMOUNT OF SUCH CHARGE FOR FISCAL
YEAR 2007-2008, AND ORDERING THAT SUCH CHARGE BE COLLECTED ON THE
TAX ROLL.
A roll call vote on the motion reflected the following:
AYES: Gardiner, Stern, Wolowicz, and Mayor Long
NOES: None
REGULAR NEW BUSINESS:
Upper Point Vicente Civic Center Site Analysis (1201)
Mayor Pro Tem Stern moved, seconded by Mayor Long, to continue the matter to the July 3,
2007 City Council Meeting.
Without objection, Mayor Long so ordered.
Ordinance Amending the Storm Drain User Fee to Shorten the Duration of the Fee from Thirty
Years to Ten Years and to Establish a Resident Oversight Committee to be Placed on the Ballot
for the November 6, 2007 General Municipal Election (602 X 604)
Mayor Long moved, seconded by Mayor Pro Tem Stern, to continue the matter to the July 3,
2007 City Council Meeting.
Without objection, Mayor Long so ordered.
November 6, 2007 General Municipal Election (501)
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Mayor Pro Tem Stern moved, seconded by Mayor Pro Tem Stern, to continue the matter to the
July 3, 2007 City Council Meeting.
Without objection, Mayor Long so ordered.
Los Angeles County Sheriff’s Contract (1206)
Mayor Pro Tem Stern moved, seconded by Councilman Gardiner, to 1) Authorize the Mayor to
sign the FY 07-08 Services for the Peninsula Region (Rancho Palos Verdes, Rolling Hills and
Rolling Hills Estates); and, 2) Authorize the City Manager to sign the FY 07-08 Rancho Palos
Verdes Deployment Survey with the Los Angeles County Sheriff’s Department.
A roll call vote on the motion reflected the following:
AYES: Gardiner, Stern, Wolowicz, and Mayor Long
NOES: None
CITY COUNCIL ORAL REPORTS:
Mayor Pro Tem Stern moved, seconded by Mayor Long, to continue Oral Reports to July 3,
2007.
Without objection, Mayor Long so ordered.
Councilman Gardiner congratulated the Eastview citizens who collected 8,500 signatures against
the development on Western Avenue.
ADJOURNMENT:
Mayor Pro Tem Stern moved to adjourn the meeting. At 1:27 A.M. Wednesday, June 20, 2007,
the meeting was adjourned.
/s/ Thomas D. Long
Mayor
Attest:
/s/ Carla Morreale
City Clerk
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California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 |Phone: (916) 795-3000 | Fax: (916) 795-2744
888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov
July 2019
Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2018
Dear Employer,
Attached to this letter, you will find the June 30, 2018 actuarial valuation report of your CalPERS pension plan.
Provided in this report is the determination of the minimum required employer contributions for Fiscal
Year 2020-21. In addition, the report contains important information regarding the current financial status of the
plan as well as projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2018.
Section 2 can be found on the CalPERS website (www.calpers.ca.gov). From the home page, go to “Forms &
Publications” and select “View All”. In the search box, enter “Risk Pool” and from the results list download the
Miscellaneous or Safety Risk Pool Actuarial Valuation Report as appropriate.
Your June 30, 2018 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. Your assigned CalPERS staff actuary, whose signature appears in the Actuarial Certification section on page
1, is available to discuss the report with you after August 1, 2019.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts
the contribution rates as needed. This valuation is based on an investment return assumption of 7.0% which was
adopted by the board in December 2016. Other assumptions used in this report are those recommended in the CalPER S
Experience Study and Review of Actuarial Assumptions report from December 2017.
Required Contribution
The exhibit below displays the minimum employer contributions, before any cost sharing, for Fiscal Year 2020-21 along
with estimates of the required contributions for Fiscal Year 2021-22. Member contributions other than cost sharing
(whether paid by the employer or the employee) are in addition to the results shown below. The employer
contributions in this report do not reflect any cost sharing arrangements you may have with your
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
2020-21 12.361% $835,213
Projected Results
2021-22 12.4% $950,000
B-1
Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2018
Page 1
The actual investment return for Fiscal Year 2018-19 was not known at the time this report was prepared. The
projections above assume the investment return for that year would be 7.00 percent. If the actual investment
return for Fiscal Year 2018-19 differs from 7.00 percent, the actual contribution requirements for the
projected years will differ from those shown above. For additional details regarding the assumptions and
methods used for these projections please refer to the “Projected Employer Contributions” in the “Highlights and
Executive Summary” section. This section also contains projected required contributions through fiscal year 2025-26.
Changes from Previous Year’s Valuation
CalPERS continues to strive to provide comprehensive risk assessments regarding plan funding and sustainability
consistent with the Board of Administration’s pension and investment beliefs. Your report this year includes new metrics
on plan maturity in recognition of the fact that most pension plans at CalPERS are maturing as anticipated. As plans
mature, they become more sensitive to risks than plans that are less mature. The “Risk Analysis” section of your report
will help you understand how your plan is affected by investment return volatility and other economic assumptions.
We have included plan sensitivity analysis with respect to longevity and inflation to further that discussion and
encourage you to review our most recent Annual Review of Funding Levels and Risks report on our website that takes
a holistic view of the system.
Upcoming Change for June 30, 2019 Valuations
The CalPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial
valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20
years with the payments computed using a level dollar amount. In addition, the new policy removes the 5-year ramp-
up and ramp-down on Unfunded Accrued Liability (UAL) bases attributable to assumption changes and non-investment
gains/losses. The new policy removes the 5-year ramp-down on investment gains/losses. These changes will apply
only to new UAL bases established on or after June 30, 2019.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and
funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A, “Statement of Actuarial Data, Methods and Assumptions” of the Section 2 report.
We understand that you might have a number of questions about these results. While we are very interested in
discussing these results with your agency, in the interest of allowing us to give every public agency their results, we
ask that you wait until after August 1 2019 to contact us with actuarial questions.
If you have other questions, please call our customer contact center at (888) CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO
Chief Actuary
B-2
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Actuarial Valuation
as of June 30, 2018
for the
Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2020 - June 30, 2021
B-3
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
B-4
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Section 1
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMEN T SYSTEM
Plan Specific Information
for the
Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
(Valuation Rate Plan ID: 1107)
B-5
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Employer Contributions 4
Plan’s Funded Status 5
Projected Employer Contributions 5
Changes Since the Prior Year’s Valuation 6
Subsequent Events 6
Assets and Liabilities
Breakdown of Entry Age Normal Accrued Liability 8
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 8
Development of Plan’s Share of Pool’s Market Value of Assets 8
Schedule of Plan’s Amortization Bases 9
Amortization Schedule and Alternatives 11
Employer Contribution History 13
Funding History 13
Risk Analysis
Future Investment Return Scenarios 15
Discount Rate Sensitivity 16
Mortality Rate Sensitivity 16
Inflation Rate Sensitivity 17
Maturity Measures 17
Hypothetical Termination Liability 19
Participant Data 20
List of Class 1 Benefit Provisions 20
Plan’s Major Benefit Options 21
B-6
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2018
which was provided by your agency and the benefit provisions under your contract with CalPERS. Section 2 of
this report is based on the member and financial data as of June 30, 2018 provided by employers participating
in the Miscellaneous Risk Pool to which the plan belongs and benefit provisions under the CalPERS contracts for
those agencies.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the
risk pool containing your Miscellaneous Plan has been performed in accordance with generally accepted actuarial
principles consistent with standards of practice prescribed by the Actuarial Standards Board, and that the
assumptions and methods are internally consistent and reasonable for the risk pool as of the date of this valuation
and as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public
Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the plan, it is my opinion as the plan actuary that Unfunded Accrued Li ability amortization
bases as of June 30, 2018 and employer contribution as of July 1, 2020, have been properly and accurately
determined in accordance with the principles and standards stated above.
The undersigned is an actuary for CalPERS, a member of both the American Academy of Actuaries and Society
of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial
opinion contained herein.
STUART BENNETT, ASA, MAAA
Senior Pension Actuary, CalPERS
Plan Actuary
B-7
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Changes Since the Prior Year’s Valuation
• Subsequent Events
B-8
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2018 actuarial valuation of the Miscellaneous Plan of the City of
Rancho Palos Verdes of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation
sets the required employer contributions for Fiscal Year 2020-21.
Purpose of Section 1
This Section 1 report for the Miscellaneous Plan of the City of Rancho Palos Verdes of the California Public
Employees’ Retirement System (CalPERS) was prepared by the plan actuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2018;
• Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2020
through June 30, 2021; and
• Provide actuarial information as of June 30, 2018 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to GASB
Statement No. 68 for a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation
report for such purposes is available from CalPERS and details for ordering are available on our website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer
should contact their actuary before disseminating any portion of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and
changes in plan provisions or applicable law.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial
Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception
of including the original base amounts of the various components of the unfunded liability in the Schedule of
Amortization Bases shown on page 10.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in
the Model Disclosure Elements document and consistent with the recommendations of Actuarial Standard of
Practice No. 51:
• A “Scenario Test,” projecting future results under different investment income scenarios.
• A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates
of 6.0 percent and 8.0 percent.
• A “Sensitivity Analysis,” showing the impact on current valuation results using a 1.0 percent plus or
minus change in the inflation rate.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming post-retirement rates
of mortality are 10 percent lower or 10 percent higher than our current mortality assumptions adopted
in 2017. This type of analysis highlights the impact on the plan of improving or worsening mortality
over the long-term.
• Plan maturity measures which indicate how sensitive a plan may be to the risks noted above.
B-9
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 4
Required Employer Contributions
Fiscal Year
Required Employer Contributions 2020-21
Employer Normal Cost Rate 12.361%
Plus, Either
1) Monthly Employer Dollar UAL Payment $ 69,601.12
Or
2) Annual UAL Prepayment Option* $ 807,431
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31). Any prepayment totaling over $5 million requires a 72-hour notice email to
FCSD_public_agency_wires@calpers.ca.gov. Plan Normal Cost contributions will be made as part of the
payroll reporting process. If there is contractual cost sharing or other change, this amount will change.
In accordance with Sections 20537 and 20572 of the Public Employees’ Retirement Law, if a contracting
agency fails to remit the required contributions when due, interest and penalties may apply.
Fiscal Year Fiscal Year
2019-20 2020-21
Development of Normal Cost as a Percentage of Payroll1
Base Total Normal Cost for Formula 18.774% 19.695%
Surcharge for Class 1 Benefits2
a) FAC 1 0.609% 0.619%
Phase out of Normal Cost Difference3 0.000% 0.000%
Plan’s Total Normal Cost 19.383% 20.314%
Formula's Expected Employee Contribution Rate 7.951% 7.953%
Employer Normal Cost Rate 11.432% 12.361%
Projected Payroll for the Contribution Fiscal Year $ 2,994,179 $ 2,356,334
Estimated Employer Contributions Based on Projected Payroll
Plan’s Estimated Employer Normal Cost $ 342,295 $ 291,266
Plan’s Payment on Amortization Bases4 739,621 835,213
% of Projected Payroll (illustrative only) 24.702% 35.445%
Estimated Total Employer Contribution $ 1,081,916 $ 1,126,479
% of Projected Payroll (illustrative only) 36.134% 47.806%
1 The results shown for Fiscal Year 2019-20 reflect the prior year valuation and may not take into account any lump sum
payment, side fund payoff, or rate adjustment made after April 30, 2018.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit.
3 The normal cost difference is phased out over a five-year period. The phase out of normal cost difference is 100 percent
for the first year of pooling, and is incrementally reduced by 20 percent of the original normal cost difference for each
subsequent year. This is non-zero only for plans that joined a pool within the past 5 years. Most plans joined a pool June
30, 2003, when risk pooling was implemented.
4 See page 10 for a breakdown of the Amortization Bases.
B-10
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 5
Plan’s Funded Status
June 30, 2017 June 30, 2018
1. Present Value of Projected Benefits (PVB) $ 42,705,764 $ 45,601,156
2. Entry Age Normal Accrued Liability (AL) 39,354,331 42,896,179
3. Plan’s Market Value of Assets (MVA) 28,819,602 30,796,160
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 10,534,729 12,100,019
5. Funded Ratio [(3) / (2)] 73.2% 71.8%
This measure of funded status is an assessment of the need for future employer contributions based on the
selected actuarial cost method used to fund the plan. The UAL is the present value of future employer
contributions for service that has already been earned and is in addition to future normal cost contributions for
active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets
to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Ana lysis”
section.
Projected Employer Contributions
The table below shows projected employer contributions (before cost sharing) for the next six fiscal years.
Projected results reflect the adopted changes to the discount rate described in Appendix A, “Statement of
Actuarial Data, Methods and Assumptions” of the Section 2 report. The projections also assume that all actuarial
assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will
occur during the projection period.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2018-19)
Fiscal Year 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26
Normal Cost % 12.361% 12.4% 12.4% 12.4% 12.4% 12.4%
UAL Payment $835,213 $950,000 $1,046,000 $1,104,000 $1,166,000 $1,198,000
Changes in the UAL due to actuarial gains or losses as well as changes in actuarial assumptions or methods are
amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded Actuarial
Accrued Liability” under “Actuarial Methods” in Appendix A of Section 2. This method phases in the impact of
unanticipated changes in UAL over a 5-year period and attempts to minimize employer cost volatility from year
to year. As a result of this methodology, dramatic changes in the required employer contributions in any one
year are less likely. However, required contributions can change gradually and significantly over the next five
years. In years where there is a large increase in UAL the relatively small amortization payments during the
ramp up period could result in a funded ratio that is projected to decrease initially while the contribution impact
of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section.
B-11
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Changes Since the Prior Year’s Valuation
Benefits
None. This valuation generally reflects plan changes by amendments effective before the date of the report.
Please refer to the “Plan’s Major Benefit Options” and Appendix B of Section 2 for a summary of the plan
provisions used in this valuation.
Actuarial Methods and Assumptions
In December of 2016 the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00
percent using a three-year phase-in beginning with the June 30, 2016 actuarial valuation. The minimum
employer contributions for Fiscal Year 2020-21 determined in this valuation were calculated using a discount
rate of 7.00 percent, payroll growth of 2.75 percent and an inflation rate of 2.50 percent. The projected employer
contributions on Page 5 are calculated under the assumption that the discount rate remains at 7.00 percent
going forward and that furthermore the realized rate of return on assets for Fiscal Year 2018-19 is 7.00 percent.
The decision to reduce the discount rate was primarily based on reduced capital market assumptions provided
by external investment consultants and CalPERS investment staff. The specific decision adopted by the Board
reflected recommendations from CalPERS staff and additional input from employer and employee stakeholder
groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced
discount rate assumption provides a more realistic assumption for the long-term investment return of the fund.
CalPERS has implemented a new actuarial valuation software system for the June 30, 2018 valuation. With this
new system we have refined and improved some of our calculation methodology. Any difference in liability
between the old software and new software calculations is captured as a method change line item.
Subsequent Events
The CalPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019
actuarial valuation. The new policy shortens the period over which actuarial gains and losses are amortized from
30 years to 20 years with the payments computed using a level dollar amount. In addition, the new policy
removes the 5-year ramp-up and ramp-down on UAL bases attributable to assumption changes and non-
investment gains/losses. The new policy removes the 5-year ramp-down on investment gains/losses. These
changes will apply only to new UAL bases established on or after June 30, 2019.
For inactive employers the new amortization policy imposes a maximum amortization period of 15 years for all
unfunded accrued liabilities effective June 30, 2018. Furthermore, the plan actuary has the ability to shorten the
amortization period on any valuation date based on the life expectancy of plan members and projected cash
flow needs to the plan. The impact of this has been reflected in the current valuation results.
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2018, and may reflect additional discretionary payments made by the
employer through April 30, 2019. Changes in the value of assets subsequent to that date are not reflected.
Investment returns below the assumed rate of return will increase the required contribution, while investment
returns above the assumed rate of return will decrease the required contribution.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions through
January 2019. Any subsequent changes or actions are not reflected.
B-12
Assets and Liabilities
• Breakdown of Entry Age Normal Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change
• Development of Plan’s Share of Pool’s Market Value of Assets
• Schedule of Plan’s Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
B-13
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Breakdown of Entry Age Normal Accrued Liability
Active Members $ 10,792,843
Transferred Members 7,129,027
Terminated Members 2,464,020
Members and Beneficiaries Receiving Payments 22,510,289
Total $ 42,896,179
Allocation of Plan’s Share of Pool’s
Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience gains/losses
and assumption changes in a manner that treats each employer equitably and maintains benefit security for the
members of the System while minimizing substantial variations in employer contributions. The Pool’s experience
gains/losses and impact of assumption/method changes is allocated to the plan as follows:
1. Plan’s Accrued Liability $ 42,896,179
2. Projected UAL balance at 6/30/18 10,820,600
3. Pool’s Accrued Liability1 17,424,237,070
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/181 3,777,499,883
5. Pool’s 2017/18 Investment & Asset (Gain)/Loss1 (135,628,188)
6. Pool’s 2017/18 Other (Gain)/Loss1 66,272,613
7. Plan’s Share of Pool’s Asset (Gain)/Loss: [(1) - (2)] ÷ [(3) - (4)] × (5) (318,783)
8. Plan’s Share of Pool’s Other (Gain)/Loss: (1) ÷ (3) × (6) 163,154
9. Plan’s New (Gain)/Loss as of 6/30/2018: (7) + (8) (155,629)
10. Increase in Pool’s Accrued Liability due to Change in Assumptions1 453,914,155
11. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (3) × (10) 1,117,477
12. Increase in Pool’s Accrued Liability due to Change in Method1 128,995,852
13. Plan’s Share of Pool’s Change in Method: (1) ÷ (3) × (12) 317,571
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market
Value of Assets
14. Plan’s UAL: (2) + (9) + (11) + (13) $ 12,100,019
15. Plan’s Share of Pool’s MVA: (1) - (14) $ 30,796,160
B-14
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
Schedule of Plan’s Amortization Bases
On the next page is the schedule of the plan’s amortization bases. Note that there is a two-year lag between
the valuation date and the start of the contribution fiscal year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2018.
• The required employer contributions determined by the valuation are for the fiscal year beginning two years
after the valuation date: Fiscal Year 2020-21.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and
financial data, and the need to provide public agencies with their required employer contribution well in advance
of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled
forward two years from the valuation date to the first day of the fiscal year for which the contribution is being
determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal
year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected
Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution
for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second
year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected
Payments column in the fiscal year they were made by the agency.
B-15
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 10
Schedule of Plan’s Amortization Bases
Amounts for Fiscal 2020-21
Reason for Base
Date
Established
Ramp
Up/Down
2020-21
Escalat-
ion
Rate
Amorti-
zation
Period
Balance
6/30/18
Payment
2018-19
Balance
6/30/19
Payment
2019-20
Balance
6/30/20
Scheduled
Payment
for 2020-21
SHARE OF PRE-2013 POOL UAL 06/30/13 No Ramp 2.750% 16 $4,133,591 $331,533 $4,080,002 $340,537 $4,013,348 $345,573
NON-ASSET (GAIN)/LOSS 06/30/13 100% 2.750% 25 $(37,135) $(1,969) $(37,698) $(2,529) $(37,721) $(2,559)
ASSET (GAIN)/LOSS 06/30/13 100% 2.750% 25 $4,026,153 $213,481 $4,087,157 $274,154 $4,089,671 $277,431
NON-ASSET (GAIN)/LOSS 06/30/14 100% 2.750% 26 $3,272 $130 $3,367 $179 $3,418 $226
ASSET (GAIN)/LOSS 06/30/14 100% 2.750% 26 $(2,865,155) $(114,215) $(2,947,571) $(156,463) $(2,992,054) $(197,855)
ASSUMPTION CHANGE 06/30/14 100% 2.750% 16 $1,867,370 $102,732 $1,891,819 $140,703 $1,878,702 $178,644
NON-ASSET (GAIN)/LOSS 06/30/15 80% 2.750% 27 $(149,749) $(4,041) $(156,051) $(6,228) $(160,532) $(8,396)
ASSET (GAIN)/LOSS 06/30/15 80% 2.750% 27 $1,771,488 $47,801 $1,846,046 $73,673 $1,899,061 $99,329
NON-ASSET (GAIN)/LOSS 06/30/16 60% 2.750% 28 $(268,051) $(3,720) $(282,967) $(7,644) $(294,868) $(11,588)
ASSET (GAIN)/LOSS 06/30/16 60% 2.750% 28 $2,082,547 $28,899 $2,198,432 $59,390 $2,290,889 $90,029
ASSUMPTION CHANGE 06/30/16 60% 2.750% 18 $661,702 $12,487 $695,104 $25,657 $717,221 $39,049
NON-ASSET (GAIN)/LOSS 06/30/17 40% 2.750% 29 $(56,505) $0 $(60,460) $(840) $(63,823) $(1,697)
ASSET (GAIN)/LOSS 06/30/17 40% 2.750% 29 $(1,061,210) $0 $(1,135,495) $(15,776) $(1,198,661) $(31,862)
ASSUMPTION CHANGE 06/30/17 40% 2.750% 19 $712,282 $(21,086) $783,953 $14,808 $823,512 $30,030
NON-ASSET (GAIN)/LOSS 06/30/18 20% 2.750% 30 $163,154 $0 $174,575 $0 $186,796 $2,551
ASSET (GAIN)/LOSS 06/30/18 20% 2.750% 30 $(318,783) $0 $(341,098) $0 $(364,975) $(4,985)
METHOD CHANGE 06/30/18 20% 2.750% 20 $317,571 $(1,014) $340,850 $(1,042) $365,787 $6,820
ASSUMPTION CHANGE 06/30/18 20% 2.750% 20 $1,117,477 $(15,329) $1,211,556 $(15,750) $1,312,657 $24,474
TOTAL $12,100,019 $575,689 $12,351,521 $722,829 $12,468,428 $835,213
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s
Experience/Assumption Change” earlier in this section. These (gain)/loss bases will be amortized according to Board policy over 30 years with a 5-year ramp-up.
If the total Unfunded Liability is negative (i.e., plan has a surplus), the scheduled payment is $0, because the minimum required contribution under PEPRA must be at
least equal to the normal cost.
B-16
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 11
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these
unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate
amortization schedules to help analyze the current amortization schedule and illustrate the advantages of
accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on: 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate
“fresh start” amortization schedules using two sample periods that would both result in interest savings relative
to the current amortization schedule. Note that the payments under each alternate scenario increase by 2.75
percent for each year into the future, except for inactive plans.
The Current Amortization Schedule typically contains individual bases that are both positive and negative.
Positive bases result from plan changes, assumption changes or plan experience that result in increases to
unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that result
in decreases to unfunded liability. The combination of positive and negative bases within an amortization
schedule can result in unusual or problematic circumstances in future years such as:
• A positive total unfunded liability with a negative total payment,
• A negative total unfunded liability with a positive total payment, or
• Total payments that completely amortize the unfunded liability over a very short period of time
In any year where one of the above scenarios occurs, the actuary will consider corrective action such as replacing
the existing unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current
amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know
today whether such a scenario will in fact arise since there will be additional bases added to the amortization
schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate
action based on guidelines in the CalPERS amortization policy.
B-17
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Amortization Schedule and Alternatives
Alternate Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2020 12,468,427 835,213 12,468,427 1,124,574 12,468,427 1,537,353
6/30/2021 12,477,266 949,621 12,177,949 1,155,500 11,750,967 1,579,630
6/30/2022 12,368,378 1,045,689 11,835,147 1,187,276 10,939,553 1,623,070
6/30/2023 12,152,495 1,103,839 11,435,480 1,219,926 10,026,405 1,667,704
6/30/2024 11,861,350 1,166,363 10,974,063 1,253,474 9,003,166 1,713,566
6/30/2025 11,485,149 1,198,438 10,445,644 1,287,944 7,860,861 1,760,689
6/30/2026 11,049,435 1,231,395 9,844,579 1,323,363 6,589,850 1,809,108
6/30/2027 10,549,131 1,265,259 9,164,802 1,359,755 5,179,783 1,858,859
6/30/2028 9,978,776 1,300,053 8,399,796 1,397,149 3,619,550 1,909,977
6/30/2029 9,332,505 1,335,805 7,542,560 1,435,570 1,897,222 1,962,502
6/30/2030 8,604,014 1,372,539 6,585,574 1,475,048
6/30/2031 7,786,529 1,410,284 5,520,762 1,515,612
6/30/2032 6,872,777 1,399,590 4,339,454 1,557,292
6/30/2033 5,906,124 1,387,242 3,032,341 1,600,117
6/30/2034 4,884,579 1,354,125 1,589,431 1,644,120
6/30/2035 3,825,781 1,295,584
6/30/2036 2,753,423 651,100
6/30/2037 2,272,660 574,918
6/30/2038 1,837,046 494,054
6/30/2039 1,454,586 430,102
6/30/2040 1,111,506 388,091
6/30/2041 787,867 301,583
6/30/2042 531,058 281,816
6/30/2043 276,720 218,308
6/30/2044 70,271 72,689
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Totals 23,063,700 20,536,720 17,422,459
Interest Paid 10,595,273 8,068,293 4,954,032
Estimated Savings 2,526,981 5,641,241
B-18
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 13
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan, as determined by
the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year.
[
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
2016 - 17 10.069% $413,568
2017 - 18 10.110% $495,784
2018 - 19 10.609% $613,118
2019 - 20 11.432% $739,621
2020 - 21 12.361% $835,213
Funding History
The funding history below shows the plan’s actuarial accrued liability, share of the pool’s market value of assets,
share of the pool’s unfunded liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Plan’s Share of
Pool’s Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/2011 $ 25,552,394 $ 19,543,745 $ 6,008,649 76.5% $ 5,093,868
06/30/2012 28,080,069 20,206,710 7,873,359 72.0% 5,447,523
06/30/2013 30,369,005 23,138,924 7,230,081 76.2% 5,026,814
06/30/2014 32,822,157 26,128,062 6,694,095 79.6% 4,349,951
06/30/2015 34,740,823 26,564,734 8,176,089 76.5% 3,599,187
06/30/2016 36,088,996 25,521,188 10,567,808 70.7% 3,009,689
06/30/2017 39,354,331 28,819,602 10,534,729 73.2% 2,750,098
06/30/2018 42,896,179 30,796,160 12,100,019 71.8% 2,172,158
B-19
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Inflation Rate Sensitivity
• Maturity Measures
• Hypothetical Termination Liability
B-20
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 15
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios
assumed to occur during the next four fiscal years (2018-19, 2019-20, 2020-21 and 2021-22). The projections
also assume that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur.
For fiscal years 2018-19, 2019-20, 2020-21, and 2021-22, each scenario assumes an alternate fixed annual
return. The fixed return assumptions for the five scenarios are 1.0 percent, 4.0 percent, 7.0 percent, 9.0 percent
and 12.0 percent.
These alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four-year period ending June 30, 2022. Using the expected returns and volatility of the asset
classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based
on the most recently completed Asset Liability Management process. We then selected annual returns that
approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the 4 -year
outcomes generated in the stochastic analysis, approximately 25 percent of them had an average annual return
of 4.0 percent or less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment
returns will average less than 1.0 percent or greater than 12.0 percent over this four-year period, the possibility
of a single investment return less than 1.0 percent or greater than 12.0 percent in any given year is much
greater.
Assumed Annual Return From
2018-19 through 2021-22
Projected Employer Contributions
2021-22 2022-23 2023-24 2024-25
1.0%
Normal Cost 12.4% 12.4% 12.4% 12.4%
UAL Contribution $996,000 $1,185,000 $1,382,000 $1,632,000
4.0%
Normal Cost 12.4% 12.4% 12.4% 12.4%
UAL Contribution $973,000 $1,116,000 $1,246,000 $1,406,000
7.0%
Normal Cost 12.4% 12.4% 12.4% 12.4%
UAL Contribution $950,000 $1,046,000 $1,104,000 $1,166,000
9.0%
Normal Cost 12.6% 12.9% 13.1% 13.4%
UAL Contribution $937,000 $1,011,000 $1,035,000 $1,050,000
12.0%
Normal Cost 12.6% 12.9% 13.1% 13.4%
UAL Contribution $914,000 $939,000 $885,000 $790,000
In addition, the projections above reflect the recent changes to the new amortization policy effective with the
June 30, 2019 valuation. The projections above incorporate the impact of the CalPERS risk mitigation policy
which reduces the discount rate when investment returns are above specified trigger points.
B-21
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 16
Discount Rate Sensitivity
Shown below are various valuation results as of June 30, 2018 assuming alternate discount rates. Results are
shown using the current discount rate of 7.0 percent as well as alternate discount rates of 6.0 percent and 8.0
percent. The rates of 6.0 percent and 8.0 percent were selected since they illustrate the impact of a 1 percent
increase or decrease to the 7.0 percent assumption. This analysis shows the potential plan impacts if the PERF
were to realize investment returns of 6.0 percent or 8.0 percent over the long-term.
This type of analysis gives the reader a sense of the long-term risk to required contributions. For a measure of
funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination
liabilities, please see “Hypothetical Termination Liability” at the end of this section.
Sensitivity Analysis
As of June 30, 2018 Plan’s Total
Normal Cost
Accrued
Liability Unfunded
Accrued Liability Funded
Status
7.0% (current discount rate) 20.314% $42,896,179 $12,100,019 71.8%
6.0% 25.393% $48,758,687 $17,962,527 63.2%
8.0% 16.433% $38,087,075 $7,290,915 80.9%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2018 plan costs and funded ratio under two different
longevity scenarios, namely assuming post-retirement rates of mortality are 10 percent lower or 10 percent
higher than our current mortality assumptions adopted in 2017. This type of analysis highlights the impact on
the plan of improving or worsening mortality over the long-term.
As of June 30, 2018 Current Mortality 10% Lower
Mortality Rates 10% Higher
Mortality Rates
a) Accrued Liability $42,896,179 $43,704,774 $42,148,783
b) Market Value of Assets $30,796,160 $30,796,160 $30,796,160
c) Unfunded Liability
(Surplus) [(a)-(b)]
$12,100,019 $12,908,614 $11,352,623
d) Funded Status 71.8% 70.5% 73.1%
A 10 percent increase (decrease) in assumed mortality rates over the long-term would result in approximately
a 1.3 percent increase (decrease) to the funded ratio.
B-22
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 17
Inflation Rate Sensitivity
The following analysis looks at the change in the June 30, 2018 plan costs and funded ratio under two different
inflation rate scenarios, namely assuming the liability inflation rate is 1 percent lower or 1 percent higher than
the current valuation inflation rate assumption of 2.50%, while holding the discount rate fixed at 7.0%. This
type of analysis highlights the impact on the plan of increased or decreased inflation of active salaries and retiree
COLAs over the long-term.
As of June 30, 2018 Current Inflation
Rate -1% Inflation Rate +1% Inflation Rate
a) Accrued Liability $42,896,179 $40,070,670 $45,011,749
b) Market Value of Assets $30,796,160 $30,796,160 $30,796,160
c) Unfunded Liability
(Surplus) [(a)-(b)]
$12,100,019 $9,274,510 $14,215,589
d) Funded Status 71.8% 76.9% 68.4%
A decrease of 1 percent in the liability inflation rate (2.50 percent to 1.50 percent) reduces the Accrued Liability
by 6.6 percent. However, a 1 percent increase in the liability inflation rate (2.50 percent to 3.50 percent)
increases the Accrued Liability by 4.9 percent.
Maturity Measures
As pension plans mature they become much more sensitive to risks than plans that are less mature.
Understanding plan maturity and how it affects the ability of a pension plan to tolerate risk is important in
understanding how the plan is impacted by investment return volatility, other economic variables and changes
in longevity or other demographic assumptions. One way to look at the maturity level of CalPERS and its plans
is to look at the ratio of a plan’s retiree liability to its total liability. A pension plan in its infancy will have a very
low ratio of retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature plan will
often have a ratio above 0.60 to 0.65. For both CalPERS and other retirement systems in the United States,
these ratios have been steadily increasing in recent years.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2017 June 30, 2018
1. Retired Accrued Liability 18,952,012 22,510,289
2. Total Accrued Liability 39,354,331 42,896,179
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.48 0.53
Another way to look at the maturity level of CalPERS and its plans is to look at the ratio of actives to retirees. A
pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures, and
members retire, the ratio starts declining. A mature plan will often have a ratio near or below one. The average
support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2017 June 30, 2018
1. Number of Actives 41 32
2. Number of Retirees 72 81
3. Support Ratio [(1) / (2)] 0.57 0.40
B-23
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 18
Actuarial calculations are based on a number of assumptions about long-term demographic and economic
behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary growth, and
investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-
to-year differences between actual experience and the assumptions are called actuarial gains and losses and
serve to lower or raise required employer contributions from one year to the next. Therefore, employer
contributions will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage
of payroll) due to investment return. For example, a plan with an asset -to-payroll ratio of 8 may experience
twice the contribution volatility due to investment return volatility than a plan with an asset-to-payroll ratio of
4. Shown below is the asset volatility ratio, a measure of the plan’s current contribution volatility. It should be
noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize
as the plan matures.
Liability Volatility Ratio (LVR)
Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a percentage
of payroll) due to investment return and changes in liability. For example, a plan with a liability-to-payroll ratio
of 8 is expected to have twice the contribution volatility of a plan with a liability-to-payroll ratio of 4. The liability
volatility ratio is also shown in the table below. It should be noted that this ratio indicates a longer-term potential
for contribution volatility. The asset volatility ratio, described above, will tend to move closer to the liability
volatility ratio as the plan matures.
Contribution Volatility June 30, 2017 June 30, 2018
1. Market Value of Assets $ 28,819,602 $ 30,796,160
2. Payroll 2,750,098 2,172,158
3. Asset Volatility Ratio (AVR) [(1) / (2)] 10.5 14.2
4. Accrued Liability $ 39,354,331 $ 42,896,179
5. Liability Volatility Ratio (LVR) [(4) / (2)] 14.3 19.7
6. Accrued Liability (7.00% discount rate) 40,471,423 42,896,179
7. Projected Liability Volatility Ratio [(6) / (2)] 14.7 19.7
B-24
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 19
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2018. The plan liability on a termination basis is calculated differently
compared to the plan’s ongoing funding liability. For the hypothetical termination liability calculation, both
compensation and service are frozen as of the valuation date and no future pay increases or service accruals
are assumed. This measure of funded status is not appropriate for assessing the need for future employer
contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS
retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit
security for members is increased while funding risk is limited. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on
the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 2-year period
centered around the valuation date.
[]
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
@ 2.50%
Funded
Status
Unfunded
Termination
Liability
@ 2.50%
Hypothetical
Termination
Liability1,2
@ 3.25%
Funded
Status
Unfunded
Termination
Liability
@ 3.25%
$30,796,160 $77,626,260 39.7% $46,830,099 $70,743,775 43.5% $39,947,615
1 The hypothetical liabilities calculated above include a 5 percent mortality contingency load in accordance with Board policy.
Other actuarial assumptions can be found in Appendix A of the Section 2 report.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S.
Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The
discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point,
which is a good proxy for most plans. The 20-year Treasury yield was 2.91 percent on June 30, 2018, and was 2.83 percent
on January 31, 2019.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with
the plan actuary before beginning this process.
B-25
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 20
Participant Data
The table below shows a summary of your plan’s member data upon which this valuation is based:
June 30, 2017 June 30, 2018
Reported Payroll $ 2,750,098 $ 2,172,158
Projected Payroll for Contribution Purposes $ 2,994,179 $ 2,356,334
Number of Members
Active 41 32
Transferred 49 47
Separated 102 103
Retired 72 81
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• One Year Final Compensation (FAC 1)
B-26
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 21
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Benefit Group
Member Category Misc Misc Misc
Demographics
Actives No Yes No
Transfers/Separated Yes Yes No
Receiving Yes Yes Yes
Benefit Group Key
Benefit Provision
Benefit Formula 2% @ 55 2.5% @ 55 2% @ 60
Social Security Coverage No No No
Full/Modified Full Full Full
Employee Contribution Rate 8.00%
Final Average Compensation Period One Year One Year Three Year
Sick Leave Credit Yes Yes No
Non-Industrial Disability Standard Standard Standard
Industrial Disability No No No
Pre-Retirement Death Benefits
Optional Settlement 2 Yes Yes No
1959 Survivor Benefit Level Level 4 Level 4 Level 4
Special No No No
Alternate (firefighters) No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500
Survivor Allowance (PRSA) No No No
COLA 2% 2% 2%
B-27
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 22
Section 2
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Section 2 may be found on the CalPERS website
(www.calpers.ca.gov) in the Forms and
Publications section
B-28
California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 |Phone: (916) 795-3000 | Fax: (916) 795-2744
888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov
July 2019
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2018
Dear Employer,
Attached to this letter, you will find the June 30, 2018 actuarial valuation report of your CalPERS pension plan.
Provided in this report is the determination of the minimum required employer contributions for Fiscal
Year 2020-21. In addition, the report contains important information regarding the current financial status of the
plan as well as projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2018.
Section 2 can be found on the CalPERS website (www.calpers.ca.gov). From the home page, go to “Forms &
Publications” and select “View All”. In the search box, enter “Risk Pool” and from the results list download the
Miscellaneous or Safety Risk Pool Actuarial Valuation Report as appropriate.
Your June 30, 2018 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. Your assigned CalPERS staff actuary, whose signature appears in the Actuarial Certification section on page
1, is available to discuss the report with you after August 1, 2019.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts
the contribution rates as needed. This valuation is based on an investment return assumption of 7.0% which was
adopted by the board in December 2016. Other assumptions used in this report are those recommended in the CalPER S
Experience Study and Review of Actuarial Assumptions report from December 2017.
Required Contribution
The exhibit below displays the minimum employer contributions, before any cost sharing, for Fiscal Year 2020-21 along
with estimates of the required contributions for Fiscal Year 2021-22. Member contributions other than cost sharing
(whether paid by the employer or the employee) are in addition to the results shown below. The employer
contributions in this report do not reflect any cost sharing arrangements you may have with your
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
2020-21 8.794% $15,889
Projected Results
2021-22 8.8% $16,000
B-29
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2018
Page 1
The actual investment return for Fiscal Year 2018-19 was not known at the time this report was prepared. The
projections above assume the investment return for that year would be 7.00 percent. If the actual investment
return for Fiscal Year 2018-19 differs from 7.00 percent, the actual contribution requirements for the
projected years will differ from those shown above. For additional details regarding the assumptions and
methods used for these projections please refer to the “Projected Employer Contributions” in the “Highlights and
Executive Summary” section. This section also contains projected required contributions through fiscal year 2025-26.
Changes from Previous Year’s Valuation
CalPERS continues to strive to provide comprehensive risk assessments regarding plan funding and sustainability
consistent with the Board of Administration’s pension and investment beliefs. Your report this year includes new metrics
on plan maturity in recognition of the fact that most pension plans at CalPERS are maturing as anticipated. As plans
mature, they become more sensitive to risks than plans that are less mature. The “Risk Analysis” section of your report
will help you understand how your plan is affected by investment return volatility and other economic assumptions.
We have included plan sensitivity analysis with respect to longevity and inflation to further that discussion and
encourage you to review our most recent Annual Review of Funding Levels and Risks report on our website that takes
a holistic view of the system.
Upcoming Change for June 30, 2019 Valuations
The CalPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial
valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20
years with the payments computed using a level dollar amount. In addition, the new policy removes the 5-year ramp-
up and ramp-down on Unfunded Accrued Liability (UAL) bases attributable to assumption changes and non-investment
gains/losses. The new policy removes the 5-year ramp-down on investment gains/losses. These changes will apply
only to new UAL bases established on or after June 30, 2019.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and
funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A, “Statement of Actuarial Data, Methods and Assumptions” of the Section 2 report.
We understand that you might have a number of questions about these results. While we are very interested in
discussing these results with your agency, in the interest of allowing us to give every public agency their results, we
ask that you wait until after August 1 2019 to contact us with actuarial questions.
If you have other questions, please call our customer contact center at (888) CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO
Chief Actuary
B-30
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Actuarial Valuation
as of June 30, 2018
for the
Miscellaneous Second Tier Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2020 - June 30, 2021
B-31
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
B-32
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Section 1
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMEN T SYSTEM
Plan Specific Information
for the
Miscellaneous Second Tier Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
(Valuation Rate Plan ID: 23274)
B-33
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Employer Contributions 4
Plan’s Funded Status 5
Projected Employer Contributions 5
Changes Since the Prior Year’s Valuation 6
Subsequent Events 6
Assets and Liabilities
Breakdown of Entry Age Normal Accrued Liability 8
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 8
Development of Plan’s Share of Pool’s Market Value of Assets 8
Schedule of Plan’s Amortization Bases 9
Amortization Schedule and Alternatives 11
Employer Contribution History 13
Funding History 13
Risk Analysis
Future Investment Return Scenarios 15
Discount Rate Sensitivity 16
Mortality Rate Sensitivity 16
Inflation Rate Sensitivity 17
Maturity Measures 17
Hypothetical Termination Liability 19
Participant Data 20
List of Class 1 Benefit Provisions 20
Plan’s Major Benefit Options 21
B-34
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2018
which was provided by your agency and the benefit provisions under your contract with CalPERS. Section 2 of
this report is based on the member and financial data as of June 30, 2018 provided by employers participating
in the Miscellaneous Risk Pool to which the plan belongs and benefit provisions under the CalPERS contracts for
those agencies.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the
risk pool containing your Miscellaneous Second Tier Plan has been performed in accordance with generally
accepted actuarial principles consistent with standards of practice prescribed by the Actuarial Standards Board,
and that the assumptions and methods are internally consistent and reasonable for the risk pool as of the date
of this valuation and as prescribed by the CalPERS Board of Administration according to provisions set forth in
the California Public Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the plan, it is my opinion as the plan actuary that Unfunded Accrued Li ability amortization
bases as of June 30, 2018 and employer contribution as of July 1, 2020, have been properly and accurately
determined in accordance with the principles and standards stated above.
The undersigned is an actuary for CalPERS, a member of both the American Academy of Actuaries and Society
of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial
opinion contained herein.
STUART BENNETT, ASA, MAAA
Senior Pension Actuary, CalPERS
Plan Actuary
B-35
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Changes Since the Prior Year’s Valuation
• Subsequent Events
B-36
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2018 actuarial valuation of the Miscellaneous Second Tier Plan
of the City of Rancho Palos Verdes of the California Public Employees’ Retirement System (CalPERS). This
actuarial valuation sets the required employer contributions for Fiscal Year 2020-21.
Purpose of Section 1
This Section 1 report for the Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes of the California
Public Employees’ Retirement System (CalPERS) was prepared by the plan actuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2018;
• Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2020
through June 30, 2021; and
• Provide actuarial information as of June 30, 2018 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to GASB
Statement No. 68 for a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation
report for such purposes is available from CalPERS and details for ordering are available on our website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer
should contact their actuary before disseminating any portion of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and
changes in plan provisions or applicable law.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial
Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception
of including the original base amounts of the various components of the unfunded liability in the Schedule of
Amortization Bases shown on page 10.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in
the Model Disclosure Elements document and consistent with the recommendations of Actuarial Standard of
Practice No. 51:
• A “Scenario Test,” projecting future results under different investment income scenarios.
• A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates
of 6.0 percent and 8.0 percent.
• A “Sensitivity Analysis,” showing the impact on current valuation results using a 1.0 percent plus or
minus change in the inflation rate.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming post-retirement rates
of mortality are 10 percent lower or 10 percent higher than our current mortality assumptions adopted
in 2017. This type of analysis highlights the impact on the plan of improving or worsening mortality
over the long-term.
• Plan maturity measures which indicate how sensitive a plan may be to the risks noted above.
B-37
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 4
Required Employer Contributions
Fiscal Year
Required Employer Contributions 2020-21
Employer Normal Cost Rate 8.794%
Plus, Either
1) Monthly Employer Dollar UAL Payment $ 1,324.08
Or
2) Annual UAL Prepayment Option* $ 15,360
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31). Any prepayment totaling over $5 million requires a 72-hour notice email to
FCSD_public_agency_wires@calpers.ca.gov. Plan Normal Cost contributions will be made as part of the
payroll reporting process. If there is contractual cost sharing or other change, this amount will change.
In accordance with Sections 20537 and 20572 of the Public Employees’ Retirement Law, if a contracting
agency fails to remit the required contributions when due, interest and penalties may apply.
Fiscal Year Fiscal Year
2019-20 2020-21
Development of Normal Cost as a Percentage of Payroll1
Base Total Normal Cost for Formula 14.996% 15.712%
Surcharge for Class 1 Benefits2
None 0.000% 0.000%
Phase out of Normal Cost Difference3 0.000% 0.000%
Plan’s Total Normal Cost 14.996% 15.712%
Formula's Expected Employee Contribution Rate 6.915% 6.918%
Employer Normal Cost Rate 8.081% 8.794%
Projected Payroll for the Contribution Fiscal Year $ 2,074,583 $ 2,146,877
Estimated Employer Contributions Based on Projected Payroll
Plan’s Estimated Employer Normal Cost $ 167,647 $ 188,796
Plan’s Payment on Amortization Bases4 3,107 15,889
% of Projected Payroll (illustrative only) 0.150% 0.740%
Estimated Total Employer Contribution $ 170,754 $ 204,685
% of Projected Payroll (illustrative only) 8.231% 9.534%
1 The results shown for Fiscal Year 2019-20 reflect the prior year valuation and may not take into account any lump sum
payment, side fund payoff, or rate adjustment made after April 30, 2018.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit.
3 The normal cost difference is phased out over a five-year period. The phase out of normal cost difference is 100 percent
for the first year of pooling, and is incrementally reduced by 20 percent of the original normal cost difference for each
subsequent year. This is non-zero only for plans that joined a pool within the past 5 years. Most plans joined a pool June
30, 2003, when risk pooling was implemented.
4 See page 10 for a breakdown of the Amortization Bases.
B-38
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 5
Plan’s Funded Status
June 30, 2017 June 30, 2018
1. Present Value of Projected Benefits (PVB) $ 3,886,331 $ 4,746,244
2. Entry Age Normal Accrued Liability (AL) 945,109 1,446,497
3. Plan’s Market Value of Assets (MVA) 895,554 1,330,795
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 49,555 115,702
5. Funded Ratio [(3) / (2)] 94.8% 92.0%
This measure of funded status is an assessment of the need for future employer contributions based on the
selected actuarial cost method used to fund the plan. The UAL is the present value of future employer
contributions for service that has already been earned and is in addition to future normal cost contributions for
active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets
to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Ana lysis”
section.
Projected Employer Contributions
The table below shows projected employer contributions (before cost sharing) for the next six fiscal years.
Projected results reflect the adopted changes to the discount rate described in Appendix A, “Statement of
Actuarial Data, Methods and Assumptions” of the Section 2 report. The projections also assume that all actuarial
assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will
occur during the projection period.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2018-19)
Fiscal Year 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26
Normal Cost % 8.794% 8.8% 8.8% 8.8% 8.8% 8.8%
UAL Payment $15,889 $16,000 $17,000 $17,000 $18,000 $18,000
Changes in the UAL due to actuarial gains or losses as well as changes in actuarial assumptions or methods are
amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded Actuarial
Accrued Liability” under “Actuarial Methods” in Appendix A of Section 2. This method phases in the impact of
unanticipated changes in UAL over a 5-year period and attempts to minimize employer cost volatility from year
to year. As a result of this methodology, dramatic changes in the required employer contributions in any one
year are less likely. However, required contributions can change gradually and significantly over the next five
years. In years where there is a large increase in UAL the relatively small amortization payments during the
ramp up period could result in a funded ratio that is projected to decrease initially while the contribution impact
of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section.
B-39
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Changes Since the Prior Year’s Valuation
Benefits
None. This valuation generally reflects plan changes by amendments effective before the date of the report.
Please refer to the “Plan’s Major Benefit Options” and Appendix B of Section 2 for a summary of the plan
provisions used in this valuation.
Actuarial Methods and Assumptions
In December of 2016 the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00
percent using a three-year phase-in beginning with the June 30, 2016 actuarial valuation. The minimum
employer contributions for Fiscal Year 2020-21 determined in this valuation were calculated using a discount
rate of 7.00 percent, payroll growth of 2.75 percent and an inflation rate of 2.50 percent. The projected employer
contributions on Page 5 are calculated under the assumption that the discount rate remains at 7.00 percent
going forward and that furthermore the realized rate of return on assets for Fiscal Year 2018-19 is 7.00 percent.
The decision to reduce the discount rate was primarily based on reduced capital market assumptions provided
by external investment consultants and CalPERS investment staff. The specific decision adopted by the Board
reflected recommendations from CalPERS staff and additional input from employer and employee stakeholder
groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced
discount rate assumption provides a more realistic assumption for the long-term investment return of the fund.
CalPERS has implemented a new actuarial valuation software system for the June 30, 2018 valuation. With this
new system we have refined and improved some of our calculation methodology. Any difference in liability
between the old software and new software calculations is captured as a method change line item.
Subsequent Events
The CalPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019
actuarial valuation. The new policy shortens the period over which actuarial gains and losses are amortized from
30 years to 20 years with the payments computed using a level dollar amount. In addition, the new policy
removes the 5-year ramp-up and ramp-down on UAL bases attributable to assumption changes and non-
investment gains/losses. The new policy removes the 5-year ramp-down on investment gains/losses. These
changes will apply only to new UAL bases established on or after June 30, 2019.
For inactive employers the new amortization policy imposes a maximum amortization period of 15 years for all
unfunded accrued liabilities effective June 30, 2018. Furthermore, the plan actuary has the ability to shorten the
amortization period on any valuation date based on the life expectancy of plan members and projected cash
flow needs to the plan. The impact of this has been reflected in the current valuation results.
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2018, and may reflect additional discretionary payments made by the
employer through April 30, 2019. Changes in the value of assets subsequent to that date are not reflected.
Investment returns below the assumed rate of return will increase the required contribution, while investment
returns above the assumed rate of return will decrease the required contribution.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions through
January 2019. Any subsequent changes or actions are not reflected.
B-40
Assets and Liabilities
• Breakdown of Entry Age Normal Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change
• Development of Plan’s Share of Pool’s Market Value of Assets
• Schedule of Plan’s Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
B-41
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Breakdown of Entry Age Normal Accrued Liability
Active Members $ 1,058,595
Transferred Members 67,893
Terminated Members 67,280
Members and Beneficiaries Receiving Payments 252,729
Total $ 1,446,497
Allocation of Plan’s Share of Pool’s
Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience gains/losses
and assumption changes in a manner that treats each employer equitably and maintains benefit security for the
members of the System while minimizing substantial variations in employer contributions. The Pool’s experience
gains/losses and impact of assumption/method changes is allocated to the plan as follows:
1. Plan’s Accrued Liability $ 1,446,497
2. Projected UAL balance at 6/30/18 75,436
3. Pool’s Accrued Liability1 17,424,237,070
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/181 3,777,499,883
5. Pool’s 2017/18 Investment & Asset (Gain)/Loss1 (135,628,188)
6. Pool’s 2017/18 Other (Gain)/Loss1 66,272,613
7. Plan’s Share of Pool’s Asset (Gain)/Loss: [(1) - (2)] ÷ [(3) - (4)] × (5) (13,626)
8. Plan’s Share of Pool’s Other (Gain)/Loss: (1) ÷ (3) × (6) 5,502
9. Plan’s New (Gain)/Loss as of 6/30/2018: (7) + (8) (8,125)
10. Increase in Pool’s Accrued Liability due to Change in Assumptions1 453,914,155
11. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (3) × (10) 37,682
12. Increase in Pool’s Accrued Liability due to Change in Method1 128,995,852
13. Plan’s Share of Pool’s Change in Method: (1) ÷ (3) × (12) 10,709
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market
Value of Assets
14. Plan’s UAL: (2) + (9) + (11) + (13) $ 115,702
15. Plan’s Share of Pool’s MVA: (1) - (14) $ 1,330,795
B-42
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
Schedule of Plan’s Amortization Bases
On the next page is the schedule of the plan’s amortization bases. Note that there is a two-year lag between
the valuation date and the start of the contribution fiscal year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2018.
• The required employer contributions determined by the valuation are for the fiscal year beginning two years
after the valuation date: Fiscal Year 2020-21.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and
financial data, and the need to provide public agencies with their required employer contribution well in advance
of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled
forward two years from the valuation date to the first day of the fiscal year for which the contribution is being
determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal
year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected
Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution
for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second
year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected
Payments column in the fiscal year they were made by the agency.
B-43
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 10
Schedule of Plan’s Amortization Bases
Amounts for Fiscal 2020-21
Reason for Base
Date
Established
Ramp
Up/Down
2020-21
Escalat-
ion
Rate
Amorti-
zation
Period
Balance
6/30/18
Payment
2018-19
Balance
6/30/19
Payment
2019-20
Balance
6/30/20
Scheduled
Payment
for 2020-21
FRESH START 06/30/18 No Ramp 2.750% 15 $115,702 $(28,087) $152,855 $(12,191) $176,165 $15,889
TOTAL $115,702 $(28,087) $152,855 $(12,191) $176,165 $15,889
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s
Experience/Assumption Change” earlier in this section. These (gain)/loss bases will be amortized according to Board policy over 30 years with a 5-year ramp-up.
If the total Unfunded Liability is negative (i.e., plan has a surplus), the scheduled payment is $0, because the minimum required contribution under PEPRA must be at
least equal to the normal cost.
B-44
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 11
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these
unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate
amortization schedules to help analyze the current amortization schedule and illustrate the advantages of
accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on: 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate
“fresh start” amortization schedules using two sample periods that would both result in interest savings relative
to the current amortization schedule. Note that the payments under each alternate scenario increase by 2.75
percent for each year into the future, except for inactive plans.
The Current Amortization Schedule typically contains individual bases that are both positive and negative.
Positive bases result from plan changes, assumption changes or plan experience that result in increases to
unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that result
in decreases to unfunded liability. The combination of positive and negative bases within an amortization
schedule can result in unusual or problematic circumstances in future years such as:
• A positive total unfunded liability with a negative total payment,
• A negative total unfunded liability with a positive total payment, or
• Total payments that completely amortize the unfunded liability over a very short period of time
In any year where one of the above scenarios occurs, the actuary will consider corrective action such as replacing
the existing unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current
amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know
today whether such a scenario will in fact arise since there will be additional bases added to the amortization
schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate
action based on guidelines in the CalPERS amortization policy.
B-45
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Amortization Schedule and Alternatives
Alternate Schedules
Current Amortization
Schedule 10 Year Amortization 5 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2020 176,165 15,889 176,165 21,721 176,165 39,458
6/30/2021 172,061 16,326 166,028 22,318 147,681 40,543
6/30/2022 167,218 16,775 154,564 22,932 116,081 41,658
6/30/2023 161,571 17,236 141,662 23,563 81,116 42,803
6/30/2024 155,052 17,710 127,205 24,211 42,518 43,981
6/30/2025 147,586 18,197 111,065 24,877
6/30/2026 139,093 18,698 93,107 25,561
6/30/2027 129,489 19,212 73,185 26,264
6/30/2028 118,680 19,740 51,140 26,986
6/30/2029 106,568 20,283 26,806 27,728
6/30/2030 93,047 20,841
6/30/2031 78,002 21,414
6/30/2032 61,312 22,003
6/30/2033 42,844 22,608
6/30/2034 22,457 23,230
6/30/2035
6/30/2036
6/30/2037
6/30/2038
6/30/2039
6/30/2040
6/30/2041
6/30/2042
6/30/2043
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Totals 290,162 246,160 208,443
Interest Paid 113,996 69,995 32,277
Estimated Savings 44,001 81,719
B-46
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 13
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan, as determined by
the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year.
[
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
2016 - 17 7.159% $0
2017 - 18 7.200% $198
2018 - 19 7.634% $1,413
2019 - 20 8.081% $3,107
2020 - 21 8.794% $15,889
Funding History
The funding history below shows the plan’s actuarial accrued liability, share of the pool’s market value of assets,
share of the pool’s unfunded liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Plan’s Share of
Pool’s Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/2013 $ 10,846 $ 9,146 $ 1,700 84.3% $ 193,164
06/30/2014 112,112 117,095 (4,983) 104.4% 789,242
06/30/2015 267,196 258,118 9,078 96.6% 1,214,520
06/30/2016 557,863 503,485 54,378 90.3% 1,636,677
06/30/2017 945,109 895,554 49,555 94.8% 1,905,466
06/30/2018 1,446,497 1,330,795 115,702 92.0% 1,979,072
B-47
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Inflation Rate Sensitivity
• Maturity Measures
• Hypothetical Termination Liability
B-48
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 15
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios
assumed to occur during the next four fiscal years (2018-19, 2019-20, 2020-21 and 2021-22). The projections
also assume that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur.
For fiscal years 2018-19, 2019-20, 2020-21, and 2021-22, each scenario assumes an alternate fixed annual
return. The fixed return assumptions for the five scenarios are 1.0 percent, 4.0 percent, 7.0 percent, 9.0 percent
and 12.0 percent.
These alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four-year period ending June 30, 2022. Using the expected returns and volatility of the asset
classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based
on the most recently completed Asset Liability Management process. We then selected annual returns that
approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the 4 -year
outcomes generated in the stochastic analysis, approximately 25 percent of them had an average annual return
of 4.0 percent or less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment
returns will average less than 1.0 percent or greater than 12.0 percent over this four-year period, the possibility
of a single investment return less than 1.0 percent or greater than 12.0 percent in any given year is much
greater.
Assumed Annual Return From
2018-19 through 2021-22
Projected Employer Contributions
2021-22 2022-23 2023-24 2024-25
1.0%
Normal Cost 8.8% 8.8% 8.8% 8.8%
UAL Contribution $18,000 $23,000 $29,000 $38,000
4.0%
Normal Cost 8.8% 8.8% 8.8% 8.8%
UAL Contribution $17,000 $20,000 $23,000 $28,000
7.0%
Normal Cost 8.8% 8.8% 8.8% 8.8%
UAL Contribution $16,000 $17,000 $17,000 $18,000
9.0%
Normal Cost 9.0% 9.2% 9.3% 9.5%
UAL Contribution $16,000 $16,000 $15,000 $13,000
12.0%
Normal Cost 9.0% 9.2% 9.3% 9.5%
UAL Contribution $15,000 $12,000 $0 $0
In addition, the projections above reflect the recent changes to the new amortization policy effective with the
June 30, 2019 valuation. The projections above incorporate the impact of the CalPERS risk mitigation policy
which reduces the discount rate when investment returns are above specified trigger points.
B-49
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 16
Discount Rate Sensitivity
Shown below are various valuation results as of June 30, 2018 assuming alternate discount rates. Results are
shown using the current discount rate of 7.0 percent as well as alternate discount rates of 6.0 percent and 8.0
percent. The rates of 6.0 percent and 8.0 percent were selected since they illustrate the impact of a 1 percent
increase or decrease to the 7.0 percent assumption. This analysis shows the potential plan impacts if the PERF
were to realize investment returns of 6.0 percent or 8.0 percent over the long-term.
This type of analysis gives the reader a sense of the long-term risk to required contributions. For a measure of
funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination
liabilities, please see “Hypothetical Termination Liability” at the end of this section.
Sensitivity Analysis
As of June 30, 2018 Plan’s Total
Normal Cost
Accrued
Liability Unfunded
Accrued Liability Funded
Status
7.0% (current discount rate) 15.712% $1,446,497 $115,702 92.0%
6.0% 19.375% $1,701,650 $370,855 78.2%
8.0% 12.879% $1,240,990 $(89,805) 107.2%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2018 plan costs and funded ratio under two different
longevity scenarios, namely assuming post-retirement rates of mortality are 10 percent lower or 10 percent
higher than our current mortality assumptions adopted in 2017. This type of analysis highlights the impact on
the plan of improving or worsening mortality over the long-term.
As of June 30, 2018 Current Mortality 10% Lower
Mortality Rates 10% Higher
Mortality Rates
a) Accrued Liability $1,446,497 $1,474,105 $1,420,940
b) Market Value of Assets $1,330,795 $1,330,795 $1,330,795
c) Unfunded Liability
(Surplus) [(a)-(b)]
$115,702 $143,310 $90,145
d) Funded Status 92.0% 90.3% 93.7%
A 10 percent increase (decrease) in assumed mortality rates over the long-term would result in approximately
a 1.7 percent increase (decrease) to the funded ratio.
B-50
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 17
Inflation Rate Sensitivity
The following analysis looks at the change in the June 30, 2018 plan costs and funded ratio under two different
inflation rate scenarios, namely assuming the liability inflation rate is 1 percent lower or 1 percent higher than
the current valuation inflation rate assumption of 2.50%, while holding the discount rate fixed at 7.0%. This
type of analysis highlights the impact on the plan of increased or decreased inflation of active salaries and retiree
COLAs over the long-term.
As of June 30, 2018 Current Inflation
Rate -1% Inflation Rate +1% Inflation Rate
a) Accrued Liability $1,446,497 $1,317,522 $1,557,152
b) Market Value of Assets $1,330,795 $1,330,795 $1,330,795
c) Unfunded Liability
(Surplus) [(a)-(b)]
$115,702 $(13,273) $226,357
d) Funded Status 92.0% 101.0% 85.5%
A decrease of 1 percent in the liability inflation rate (2.50 percent to 1.50 percent) reduces the Accrued Liability
by 8.9 percent. However, a 1 percent increase in the liability inflation rate (2.50 percent to 3.50 percent)
increases the Accrued Liability by 7.6 percent.
Maturity Measures
As pension plans mature they become much more sensitive to risks than plans that are less mature.
Understanding plan maturity and how it affects the ability of a pension plan to tolerate risk is important in
understanding how the plan is impacted by investment return volatility, other economic variables and changes
in longevity or other demographic assumptions. One way to look at the maturity level of CalPERS and its plans
is to look at the ratio of a plan’s retiree liability to its total liability. A pension plan in its infancy will have a very
low ratio of retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature plan will
often have a ratio above 0.60 to 0.65. For both CalPERS and other retirement systems in the United States,
these ratios have been steadily increasing in recent years.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2017 June 30, 2018
1. Retired Accrued Liability 0 252,729
2. Total Accrued Liability 945,109 1,446,497
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.00 0.18
Another way to look at the maturity level of CalPERS and its plans is to look at the ratio of actives to retirees. A
pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures, and
members retire, the ratio starts declining. A mature plan will often have a ratio near or below one. The average
support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2017 June 30, 2018
1. Number of Actives 16 17
2. Number of Retirees 0 2
3. Support Ratio [(1) / (2)] N/A 8.50
B-51
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 18
Actuarial calculations are based on a number of assumptions about long-term demographic and economic
behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary growth, and
investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-
to-year differences between actual experience and the assumptions are called actuarial gains and losses and
serve to lower or raise required employer contributions from one year to the next. Therefore, employer
contributions will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage
of payroll) due to investment return. For example, a plan with an asset -to-payroll ratio of 8 may experience
twice the contribution volatility due to investment return volatility than a plan with an asset-to-payroll ratio of
4. Shown below is the asset volatility ratio, a measure of the plan’s current contribution volatility. It should be
noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize
as the plan matures.
Liability Volatility Ratio (LVR)
Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a percentage
of payroll) due to investment return and changes in liability. For example, a plan with a liability-to-payroll ratio
of 8 is expected to have twice the contribution volatility of a plan with a liability-to-payroll ratio of 4. The liability
volatility ratio is also shown in the table below. It should be noted that this ratio indicates a longer-term potential
for contribution volatility. The asset volatility ratio, described above, will tend to move closer to the liability
volatility ratio as the plan matures.
Contribution Volatility June 30, 2017 June 30, 2018
1. Market Value of Assets $ 895,554 $ 1,330,795
2. Payroll 1,905,466 1,979,072
3. Asset Volatility Ratio (AVR) [(1) / (2)] 0.5 0.7
4. Accrued Liability $ 945,109 $ 1,446,497
5. Liability Volatility Ratio (LVR) [(4) / (2)] 0.5 0.7
6. Accrued Liability (7.00% discount rate) 975,191 1,446,497
7. Projected Liability Volatility Ratio [(6) / (2)] 0.5 0.7
B-52
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 19
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2018. The plan liability on a termination basis is calculated differently
compared to the plan’s ongoing funding liability. For the hypothetical termination liability calculation, both
compensation and service are frozen as of the valuation date and no future pay increases or service accruals
are assumed. This measure of funded status is not appropriate for assessing the need for future employer
contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS
retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit
security for members is increased while funding risk is limited. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on
the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 2-year period
centered around the valuation date.
[]
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
@ 2.50%
Funded
Status
Unfunded
Termination
Liability
@ 2.50%
Hypothetical
Termination
Liability1,2
@ 3.25%
Funded
Status
Unfunded
Termination
Liability
@ 3.25%
$1,330,795 $2,648,086 50.3% $1,317,292 $2,325,018 57.2% $994,224
1 The hypothetical liabilities calculated above include a 5 percent mortality contingency load in accordance with Board policy.
Other actuarial assumptions can be found in Appendix A of the Section 2 report.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S.
Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The
discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point,
which is a good proxy for most plans. The 20-year Treasury yield was 2.91 percent on June 30, 2018, and was 2.83 percent
on January 31, 2019.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with
the plan actuary before beginning this process.
B-53
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 20
Participant Data
The table below shows a summary of your plan’s member data upon which this valuation is based:
June 30, 2017 June 30, 2018
Reported Payroll $ 1,905,466 $ 1,979,072
Projected Payroll for Contribution Purposes $ 2,074,583 $ 2,146,877
Number of Members
Active 16 17
Transferred 3 3
Separated 1 2
Retired 0 2
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
B-54
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 21
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Benefit Group
Member Category Misc
Demographics
Actives Yes
Transfers/Separated Yes
Receiving Yes
Benefit Group Key
Benefit Provision
Benefit Formula 2% @ 60
Social Security Coverage No
Full/Modified Full
Employee Contribution Rate 7.00%
Final Average Compensation Period Three Year
Sick Leave Credit Yes
Non-Industrial Disability Standard
Industrial Disability No
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level Level 4
Special No
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $500
Survivor Allowance (PRSA) No
COLA 2%
B-55
CALPERS ACTUARIAL VALUATION - June 30, 2018
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 22
Section 2
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Section 2 may be found on the CalPERS website
(www.calpers.ca.gov) in the Forms and
Publications section
B-56
California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 |Phone: (916) 795-3000 | Fax: (916) 795-2744
888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov
July 2019
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2018
Dear Employer,
Attached to this letter, you will find the June 30, 2018 actuarial valuation report of your CalPERS pension plan.
Provided in this report is the determination of the minimum required employer contributions for Fiscal
Year 2020-21. In addition, the report contains important information regarding the current financial status of the
plan as well as projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2018.
Section 2 can be found on the CalPERS website (www.calpers.ca.gov). From the home page, go to “Forms &
Publications” and select “View All”. In the search box, enter “Risk Pool” and from the results list download the
Miscellaneous or Safety Risk Pool Actuarial Valuation Report as appropriate.
Your June 30, 2018 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. Your assigned CalPERS staff actuary, whose signature appears in the Actuarial Certification section on page
1, is available to discuss the report with you after August 1, 2019.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts
the contribution rates as needed. This valuation is based on an investment return assumption of 7.0% which was
adopted by the board in December 2016. Other assumptions used in this report are those recommended in the CalPER S
Experience Study and Review of Actuarial Assumptions report from December 2017.
Required Contribution
The exhibit below displays the minimum employer contributions, before any cost sharing, for Fiscal Year 2020-21 along
with estimates of the required contributions for Fiscal Year 2021-22. Member contributions other than cost sharing
(whether paid by the employer or the employee) are in addition to the results shown below. The employer
contributions in this report do not reflect any cost sharing arrangements you may have with your
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
PEPRA Employee
Rate
2020-21 7.732% $12,837 6.750%
Projected
Results
2021-22 7.7% $13,000 TBD
B-57
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2018
Page 1
The actual investment return for Fiscal Year 2018-19 was not known at the time this report was prepared. The
projections above assume the investment return for that year would be 7.00 percent. If the actual investment
return for Fiscal Year 2018-19 differs from 7.00 percent, the actual contribution requirements for the
projected years will differ from those shown above. For additional details regarding the assumptions and
methods used for these projections please refer to the “Projected Employer Contributions” in the “Highlights and
Executive Summary” section. This section also contains projected required contributions through fiscal year 2025-26.
Changes from Previous Year’s Valuation
CalPERS continues to strive to provide comprehensive risk assessments regarding plan funding and sustainability
consistent with the Board of Administration’s pension and investment beliefs. Your report this year includes new metrics
on plan maturity in recognition of the fact that most pension plans at CalPERS are maturing as anticipated. As plans
mature, they become more sensitive to risks than plans that are less mature. The “Risk Analysis” section of your report
will help you understand how your plan is affected by investment return volatility and other economic assumptions.
We have included plan sensitivity analysis with respect to longevity and inflation to further that discussion and
encourage you to review our most recent Annual Review of Funding Levels and Risks report on our website that takes
a holistic view of the system.
Upcoming Change for June 30, 2019 Valuations
The CalPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial
valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20
years with the payments computed using a level dollar amount. In addition, the new policy removes the 5-year ramp-
up and ramp-down on Unfunded Accrued Liability (UAL) bases attributable to assumption changes and non-investment
gains/losses. The new policy removes the 5-year ramp-down on investment gains/losses. These changes will apply
only to new UAL bases established on or after June 30, 2019.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and
funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A, “Statement of Actuarial Data, Methods and Assumptions” of the Section 2 report.
We understand that you might have a number of questions about these results. While we are very interested in
discussing these results with your agency, in the interest of allowing us to give every public agency their results, we
ask that you wait until after August 1 2019 to contact us with actuarial questions.
If you have other questions, please call our customer contact center at (888) CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO
Chief Actuary
B-58
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Actuarial Valuation
as of June 30, 2018
for the
PEPRA Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2020 - June 30, 2021
B-59
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
B-60
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Section 1
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMEN T SYSTEM
Plan Specific Information
for the
PEPRA Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
(Valuation Rate Plan ID: 26567)
B-61
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Employer Contributions 4
Plan’s Funded Status 5
Projected Employer Contributions 5
Changes Since the Prior Year’s Valuation 6
Subsequent Events 6
Assets and Liabilities
Breakdown of Entry Age Normal Accrued Liability 8
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 8
Development of Plan’s Share of Pool’s Market Value of Assets 8
Schedule of Plan’s Amortization Bases 9
Amortization Schedule and Alternatives 11
Employer Contribution History 13
Funding History 13
Risk Analysis
Future Investment Return Scenarios 15
Discount Rate Sensitivity 16
Mortality Rate Sensitivity 16
Inflation Rate Sensitivity 17
Maturity Measures 17
Hypothetical Termination Liability 19
Participant Data 20
List of Class 1 Benefit Provisions 20
Plan’s Major Benefit Options 21
PEPRA Member Contribution Rates 23
B-62
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2018
which was provided by your agency and the benefit provisions under your contract with CalPERS. Section 2 of
this report is based on the member and financial data as of June 30, 2018 provided by employers participating
in the Miscellaneous Risk Pool to which the plan belongs and benefit provisions under the CalPERS contracts for
those agencies.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the
risk pool containing your PEPRA Miscellaneous Plan has been performed in accordance with generally accepted
actuarial principles consistent with standards of practice prescribed by the Actuarial Standards Board, and that
the assumptions and methods are internally consistent and reasonable for the risk pool as of the date of this
valuation and as prescribed by the CalPERS Board of Administration according to provisions set forth in the
California Public Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the plan, it is my opinion as the plan actuary that Unfunded Accrued Li ability amortization
bases as of June 30, 2018 and employer contribution as of July 1, 2020, have been properly and accurately
determined in accordance with the principles and standards stated above.
The undersigned is an actuary for CalPERS, a member of both the American Academy of Actuaries and Society
of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial
opinion contained herein.
STUART BENNETT, ASA, MAAA
Senior Pension Actuary, CalPERS
Plan Actuary
B-63
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Changes Since the Prior Year’s Valuation
• Subsequent Events
B-64
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2018 actuarial valuation of the PEPRA Miscellaneous Plan of the
City of Rancho Palos Verdes of the California Public Employees’ Retirement System (CalPERS). This actuarial
valuation sets the required employer contributions for Fiscal Year 2020-21.
Purpose of Section 1
This Section 1 report for the PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes of the California Public
Employees’ Retirement System (CalPERS) was prepared by the plan actuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2018;
• Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2020
through June 30, 2021; and
• Provide actuarial information as of June 30, 2018 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to GASB
Statement No. 68 for a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation
report for such purposes is available from CalPERS and details for ordering are available on our website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer
should contact their actuary before disseminating any portion of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and
changes in plan provisions or applicable law.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial
Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception
of including the original base amounts of the various components of the unfunded liability in the Schedule of
Amortization Bases shown on page 10.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in
the Model Disclosure Elements document and consistent with the recommendations of Actuarial Standard of
Practice No. 51:
• A “Scenario Test,” projecting future results under different investment income scenarios.
• A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates
of 6.0 percent and 8.0 percent.
• A “Sensitivity Analysis,” showing the impact on current valuation results using a 1.0 percent plus or
minus change in the inflation rate.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming post-retirement rates
of mortality are 10 percent lower or 10 percent higher than our current mortality assumptions adopted
in 2017. This type of analysis highlights the impact on the plan of improving or worsening mortality
over the long-term.
• Plan maturity measures which indicate how sensitive a plan may be to the risks noted above.
B-65
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 4
Required Employer Contributions
Fiscal Year
Required Employer Contributions 2020-21
Employer Normal Cost Rate 7.732%
Plus, Either
1) Monthly Employer Dollar UAL Payment $ 1,069.77
Or
2) Annual UAL Prepayment Option* $ 12,410
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31). Any prepayment totaling over $5 million requires a 72-hour notice email to
FCSD_public_agency_wires@calpers.ca.gov. Plan Normal Cost contributions will be made as part of the
payroll reporting process. If there is contractual cost sharing or other change, this amount will change.
In accordance with Sections 20537 and 20572 of the Public Employees’ Retirement Law, if a contracting
agency fails to remit the required contributions when due, interest and penalties may apply.
Fiscal Year Fiscal Year
2019-20 2020-21
Development of Normal Cost as a Percentage of Payroll1
Base Total Normal Cost for Formula 13.735% 14.482%
Surcharge for Class 1 Benefits2
None 0.000% 0.000%
Phase out of Normal Cost Difference3 0.000% 0.000%
Plan’s Total Normal Cost 13.735% 14.482%
Plan's Employee Contribution Rate4 6.750% 6.750%
Employer Normal Cost Rate 6.985% 7.732%
Projected Payroll for the Contribution Fiscal Year $ 1,772,771 $ 2,627,397
Estimated Employer Contributions Based on Projected Payroll
Plan’s Estimated Employer Normal Cost $ 123,828 $ 203,150
Plan’s Payment on Amortization Bases5 2,239 12,837
% of Projected Payroll (illustrative only) 0.126% 0.489%
Estimated Total Employer Contribution $ 126,067 $ 215,987
% of Projected Payroll (illustrative only) 7.111% 8.221%
1 The results shown for Fiscal Year 2019-20 reflect the prior year valuation and may not take into account any lump sum
payment, side fund payoff, or rate adjustment made after April 30, 2018.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit.
3 The normal cost difference is phased out over a five-year period. The phase out of normal cost difference is 100 percent
for the first year of pooling, and is incrementally reduced by 20 percent of the original normal cost difference for each
subsequent year. This is non-zero only for plans that joined a pool within the past 5 years. Most plans joined a pool June
30, 2003, when risk pooling was implemented.
4 For detail regarding the determination of the required PEPRA employee contribution rate see Section on PEPRA Member
Contribution Rates.
5 See page 10 for a breakdown of the Amortization Bases.
B-66
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 5
Plan’s Funded Status
June 30, 2017 June 30, 2018
1. Present Value of Projected Benefits (PVB) $ 2,971,872 $ 4,595,581
2. Entry Age Normal Accrued Liability (AL) 616,259 987,801
3. Plan’s Market Value of Assets (MVA) 584,158 907,088
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 32,101 80,713
5. Funded Ratio [(3) / (2)] 94.8% 91.8%
This measure of funded status is an assessment of the need for future employer contributions based on the
selected actuarial cost method used to fund the plan. The UAL is the present value of future employer
contributions for service that has already been earned and is in addition to future normal cost contributions for
active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets
to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Ana lysis”
section.
Projected Employer Contributions
The table below shows projected employer contributions (before cost sharing) for the next six fiscal years.
Projected results reflect the adopted changes to the discount rate described in Appendix A, “Statement of
Actuarial Data, Methods and Assumptions” of the Section 2 report. The projections also assume that all actuarial
assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will
occur during the projection period.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2018-19)
Fiscal Year 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26
Normal Cost % 7.732% 7.7% 7.7% 7.7% 7.7% 7.7%
UAL Payment $12,837 $13,000 $14,000 $14,000 $14,000 $15,000
Changes in the UAL due to actuarial gains or losses as well as changes in actuarial assumptions or methods are
amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded Actuarial
Accrued Liability” under “Actuarial Methods” in Appendix A of Section 2. This method phases in the impact of
unanticipated changes in UAL over a 5-year period and attempts to minimize employer cost volatility from year
to year. As a result of this methodology, dramatic changes in the required employer contributions in any one
year are less likely. However, required contributions can change gradually and significantly over the next five
years. In years where there is a large increase in UAL the relatively small amortization payments during the
ramp up period could result in a funded ratio that is projected to decrease initially while the contribution impact
of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section.
B-67
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Changes Since the Prior Year’s Valuation
Benefits
None. This valuation generally reflects plan changes by amendments effective before the date of the report.
Please refer to the “Plan’s Major Benefit Options” and Appendix B of Section 2 for a summary of the plan
provisions used in this valuation.
Actuarial Methods and Assumptions
In December of 2016 the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00
percent using a three-year phase-in beginning with the June 30, 2016 actuarial valuation. The minimum
employer contributions for Fiscal Year 2020-21 determined in this valuation were calculated using a discount
rate of 7.00 percent, payroll growth of 2.75 percent and an inflation rate of 2.50 percent. The projected employer
contributions on Page 5 are calculated under the assumption that the discount rate remains at 7.00 percent
going forward and that furthermore the realized rate of return on assets for Fiscal Year 2018-19 is 7.00 percent.
The decision to reduce the discount rate was primarily based on reduced capital market assumptions provided
by external investment consultants and CalPERS investment staff. The specific decision adopted by the Board
reflected recommendations from CalPERS staff and additional input from employer and employee stakeholder
groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced
discount rate assumption provides a more realistic assumption for the long-term investment return of the fund.
CalPERS has implemented a new actuarial valuation software system for the June 30, 2018 valuation. With this
new system we have refined and improved some of our calculation methodology. Any difference in liability
between the old software and new software calculations is captured as a method change line item.
Subsequent Events
The CalPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019
actuarial valuation. The new policy shortens the period over which actuarial gains and losses are amortized from
30 years to 20 years with the payments computed using a level dollar amount. In addition, the new policy
removes the 5-year ramp-up and ramp-down on UAL bases attributable to assumption changes and non-
investment gains/losses. The new policy removes the 5-year ramp-down on investment gains/losses. These
changes will apply only to new UAL bases established on or after June 30, 2019.
For inactive employers the new amortization policy imposes a maximum amortization period of 15 years for all
unfunded accrued liabilities effective June 30, 2018. Furthermore, the plan actuary has the ability to shorten the
amortization period on any valuation date based on the life expectancy of plan members and projected cash
flow needs to the plan. The impact of this has been reflected in the current valuation results.
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2018, and may reflect additional discretionary payments made by the
employer through April 30, 2019. Changes in the value of assets subsequent to that date are not reflected.
Investment returns below the assumed rate of return will increase the required contribution, while investment
returns above the assumed rate of return will decrease the required contribution.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions through
January 2019. Any subsequent changes or actions are not reflected.
B-68
Assets and Liabilities
• Breakdown of Entry Age Normal Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change
• Development of Plan’s Share of Pool’s Market Value of Assets
• Schedule of Plan’s Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
B-69
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Breakdown of Entry Age Normal Accrued Liability
Active Members $ 841,308
Transferred Members 128,945
Terminated Members 17,548
Members and Beneficiaries Receiving Payments 0
Total $ 987,801
Allocation of Plan’s Share of Pool’s
Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience gains/losses
and assumption changes in a manner that treats each employer equitably and maintains benefit security for the
members of the System while minimizing substantial variations in employer contributions. The Pool’s experience
gains/losses and impact of assumption/method changes is allocated to the plan as follows:
1. Plan’s Accrued Liability $ 987,801
2. Projected UAL balance at 6/30/18 53,199
3. Pool’s Accrued Liability1 17,424,237,070
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/181 3,777,499,883
5. Pool’s 2017/18 Investment & Asset (Gain)/Loss1 (135,628,188)
6. Pool’s 2017/18 Other (Gain)/Loss1 66,272,613
7. Plan’s Share of Pool’s Asset (Gain)/Loss: [(1) - (2)] ÷ [(3) - (4)] × (5) (9,289)
8. Plan’s Share of Pool’s Other (Gain)/Loss: (1) ÷ (3) × (6) 3,757
9. Plan’s New (Gain)/Loss as of 6/30/2018: (7) + (8) (5,531)
10. Increase in Pool’s Accrued Liability due to Change in Assumptions1 453,914,155
11. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (3) × (10) 25,733
12. Increase in Pool’s Accrued Liability due to Change in Method1 128,995,852
13. Plan’s Share of Pool’s Change in Method: (1) ÷ (3) × (12) 7,313
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market
Value of Assets
14. Plan’s UAL: (2) + (9) + (11) + (13) $ 80,713
15. Plan’s Share of Pool’s MVA: (1) - (14) $ 907,088
B-70
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
Schedule of Plan’s Amortization Bases
On the next page is the schedule of the plan’s amortization bases. Note that there is a two-year lag between
the valuation date and the start of the contribution fiscal year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2018.
• The required employer contributions determined by the valuation are for the fiscal year beginning two years
after the valuation date: Fiscal Year 2020-21.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and
financial data, and the need to provide public agencies with their required employer contribution well in advance
of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled
forward two years from the valuation date to the first day of the fiscal year for which the contribution is being
determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal
year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected
Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution
for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second
year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected
Payments column in the fiscal year they were made by the agency.
B-71
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 10
Schedule of Plan’s Amortization Bases
Amounts for Fiscal 2020-21
Reason for Base
Date
Established
Ramp
Up/Down
2020-21
Escalat-
ion
Rate
Amorti-
zation
Period
Balance
6/30/18
Payment
2018-19
Balance
6/30/19
Payment
2019-20
Balance
6/30/20
Scheduled
Payment
for 2020-21
FRESH START 06/30/18 No Ramp 2.750% 15 $80,713 $(29,697) $117,082 $(16,485) $142,330 $12,837
TOTAL $80,713 $(29,697) $117,082 $(16,485) $142,330 $12,837
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s
Experience/Assumption Change” earlier in this section. These (gain)/loss bases will be amortized according to Board policy over 30 years with a 5-year ramp-up.
If the total Unfunded Liability is negative (i.e., plan has a surplus), the scheduled payment is $0, because the minimum required contribution under PEPRA must be at
least equal to the normal cost.
B-72
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 11
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these
unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate
amortization schedules to help analyze the current amortization schedule and illustrate the advantages of
accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on: 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate
“fresh start” amortization schedules using two sample periods that would both result in interest savings relative
to the current amortization schedule. Note that the payments under each alternate scenario increase by 2.75
percent for each year into the future, except for inactive plans.
The Current Amortization Schedule typically contains individual bases that are both positive and negative.
Positive bases result from plan changes, assumption changes or plan experience that result in increases to
unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that result
in decreases to unfunded liability. The combination of positive and negative bases within an amortization
schedule can result in unusual or problematic circumstances in future years such as:
• A positive total unfunded liability with a negative total payment,
• A negative total unfunded liability with a positive total payment, or
• Total payments that completely amortize the unfunded liability over a very short period of time
In any year where one of the above scenarios occurs, the actuary will consider corrective action such as replacing
the existing unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current
amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know
today whether such a scenario will in fact arise since there will be additional bases added to the amortization
schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate
action based on guidelines in the CalPERS amortization policy.
B-73
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Amortization Schedule and Alternatives
Alternate Schedules
Current Amortization
Schedule 10 Year Amortization 5 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2020 142,330 12,837 142,330 17,549 142,330 31,879
6/30/2021 139,014 13,190 134,140 18,032 119,317 32,756
6/30/2022 135,101 13,553 124,878 18,528 93,786 33,657
6/30/2023 130,539 13,926 114,454 19,037 65,536 34,582
6/30/2024 125,271 14,309 102,773 19,561 34,351 35,533
6/30/2025 119,239 14,702 89,734 20,099
6/30/2026 112,378 15,106 75,225 20,651
6/30/2027 104,618 15,522 59,128 21,219
6/30/2028 95,886 15,949 41,318 21,803
6/30/2029 86,100 16,387 21,657 22,402
6/30/2030 75,176 16,838
6/30/2031 63,021 17,301
6/30/2032 49,536 17,777
6/30/2033 34,615 18,266
6/30/2034 18,144 18,768
6/30/2035
6/30/2036
6/30/2037
6/30/2038
6/30/2039
6/30/2040
6/30/2041
6/30/2042
6/30/2043
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Totals 234,431 198,881 168,408
Interest Paid 92,101 56,551 26,078
Estimated Savings 35,550 66,024
B-74
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 13
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan, as determined by
the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year.
[
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
2016 - 17 6.555% $90
2017 - 18 6.533% $214
2018 - 19 6.842% $1,011
2019 - 20 6.985% $2,239
2020 - 21 7.732% $12,837
Funding History
The funding history below shows the plan’s actuarial accrued liability, share of the pool’s market value of assets,
share of the pool’s unfunded liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Plan’s Share of
Pool’s Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/2013 $ 3,810 $ 5,112 $ (1,302) 134.2% $ 128,274
06/30/2014 34,829 37,902 (3,073) 108.8% 469,813
06/30/2015 153,966 147,363 6,603 95.7% 859,764
06/30/2016 339,576 305,445 34,131 89.9% 1,351,084
06/30/2017 616,259 584,158 32,101 94.8% 1,628,257
06/30/2018 987,801 907,088 80,713 91.8% 2,422,034
B-75
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Inflation Rate Sensitivity
• Maturity Measures
• Hypothetical Termination Liability
B-76
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 15
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios
assumed to occur during the next four fiscal years (2018-19, 2019-20, 2020-21 and 2021-22). The projections
also assume that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur.
For fiscal years 2018-19, 2019-20, 2020-21, and 2021-22, each scenario assumes an alternate fixed annual
return. The fixed return assumptions for the five scenarios are 1.0 percent, 4.0 percent, 7.0 percent, 9.0 percent
and 12.0 percent.
These alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four-year period ending June 30, 2022. Using the expected returns and volatility of the asset
classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based
on the most recently completed Asset Liability Management process. We then selected annual returns that
approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the 4 -year
outcomes generated in the stochastic analysis, approximately 25 percent of them had an average annual return
of 4.0 percent or less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment
returns will average less than 1.0 percent or greater than 12.0 percent over this four-year period, the possibility
of a single investment return less than 1.0 percent or greater than 12.0 percent in any given year is much
greater.
Assumed Annual Return From
2018-19 through 2021-22
Projected Employer Contributions
2021-22 2022-23 2023-24 2024-25
1.0%
Normal Cost 7.7% 7.7% 7.7% 7.7%
UAL Contribution $15,000 $18,000 $22,000 $28,000
4.0%
Normal Cost 7.7% 7.7% 7.7% 7.7%
UAL Contribution $14,000 $16,000 $18,000 $21,000
7.0%
Normal Cost 7.7% 7.7% 7.7% 7.7%
UAL Contribution $13,000 $14,000 $14,000 $14,000
9.0%
Normal Cost 7.9% 7.3% 7.5% 7.7%
UAL Contribution $13,000 $13,000 $12,000 $11,000
12.0%
Normal Cost 7.9% 7.3% 7.5% 7.7%
UAL Contribution $12,000 $11,000 $0 $0
In addition, the projections above reflect the recent changes to the new amortization policy effective with the
June 30, 2019 valuation. The projections above incorporate the impact of the CalPERS risk mitigation policy
which reduces the discount rate when investment returns are above specified trigger points.
B-77
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 16
Discount Rate Sensitivity
Shown below are various valuation results as of June 30, 2018 assuming alternate discount rates. Results are
shown using the current discount rate of 7.0 percent as well as alternate discount rates of 6.0 percent and 8.0
percent. The rates of 6.0 percent and 8.0 percent were selected since they illustrate the impact of a 1 percent
increase or decrease to the 7.0 percent assumption. This analysis shows the potential plan impacts if the PERF
were to realize investment returns of 6.0 percent or 8.0 percent over the long-term.
This type of analysis gives the reader a sense of the long-term risk to required contributions. For a measure of
funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination
liabilities, please see “Hypothetical Termination Liability” at the end of this section.
Sensitivity Analysis
As of June 30, 2018 Plan’s Total
Normal Cost
Accrued
Liability Unfunded
Accrued Liability Funded
Status
7.0% (current discount rate) 14.482% $987,801 $80,713 91.8%
6.0% 17.929% $1,214,383 $307,295 74.7%
8.0% 11.838% $809,949 $(97,139) 112.0%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2018 plan costs and funded ratio under two different
longevity scenarios, namely assuming post-retirement rates of mortality are 10 percent lower or 10 percent
higher than our current mortality assumptions adopted in 2017. This type of analysis highlights the impact on
the plan of improving or worsening mortality over the long-term.
As of June 30, 2018 Current Mortality 10% Lower
Mortality Rates 10% Higher
Mortality Rates
a) Accrued Liability $987,801 $1,008,797 $968,342
b) Market Value of Assets $907,088 $907,088 $907,088
c) Unfunded Liability
(Surplus) [(a)-(b)]
$80,713 $101,709 $61,254
d) Funded Status 91.8% 89.9% 93.7%
A 10 percent increase (decrease) in assumed mortality rates over the long-term would result in approximately
a 1.9 percent increase (decrease) to the funded ratio.
B-78
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 17
Inflation Rate Sensitivity
The following analysis looks at the change in the June 30, 2018 plan costs and funded ratio under two different
inflation rate scenarios, namely assuming the liability inflation rate is 1 percent lower or 1 percent higher than
the current valuation inflation rate assumption of 2.50%, while holding the discount rate fixed at 7.0%. This
type of analysis highlights the impact on the plan of increased or decreased inflation of active salaries and retiree
COLAs over the long-term.
As of June 30, 2018 Current Inflation
Rate -1% Inflation Rate +1% Inflation Rate
a) Accrued Liability $987,801 $862,190 $1,106,580
b) Market Value of Assets $907,088 $907,088 $907,088
c) Unfunded Liability
(Surplus) [(a)-(b)]
$80,713 $(44,898) $199,492
d) Funded Status 91.8% 105.2% 82.0%
A decrease of 1 percent in the liability inflation rate (2.50 percent to 1.50 percent) reduces the Accrued Liability
by 12.7 percent. However, a 1 percent increase in the liability inflation rate (2.50 percent to 3.50 percent)
increases the Accrued Liability by 12.0 percent.
Maturity Measures
As pension plans mature they become much more sensitive to risks than plans that are less mature.
Understanding plan maturity and how it affects the ability of a pension plan to tolerate risk is important in
understanding how the plan is impacted by investment return volatility, other economic variables and changes
in longevity or other demographic assumptions. One way to look at the maturity level of CalPERS and its plans
is to look at the ratio of a plan’s retiree liability to its total liability. A pension plan in its infancy will have a very
low ratio of retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature plan will
often have a ratio above 0.60 to 0.65. For both CalPERS and other retirement systems in the United States,
these ratios have been steadily increasing in recent years.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2017 June 30, 2018
1. Retired Accrued Liability 0 0
2. Total Accrued Liability 616,259 987,801
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.00 0.00
Another way to look at the maturity level of CalPERS and its plans is to look at the ratio of actives to retirees. A
pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures, and
members retire, the ratio starts declining. A mature plan will often have a ratio near or below one. The average
support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2017 June 30, 2018
1. Number of Actives 33 54
2. Number of Retirees 0 0
3. Support Ratio [(1) / (2)] N/A N/A
B-79
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 18
Actuarial calculations are based on a number of assumptions about long-term demographic and economic
behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary growth, and
investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-
to-year differences between actual experience and the assumptions are called actuarial gains and losses and
serve to lower or raise required employer contributions from one year to the next. Therefore, employer
contributions will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage
of payroll) due to investment return. For example, a plan with an asset -to-payroll ratio of 8 may experience
twice the contribution volatility due to investment return volatility than a plan with an asset-to-payroll ratio of
4. Shown below is the asset volatility ratio, a measure of the plan’s current contribution volatility. It should be
noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize
as the plan matures.
Liability Volatility Ratio (LVR)
Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a percentage
of payroll) due to investment return and changes in liability. For example, a plan with a liability-to-payroll ratio
of 8 is expected to have twice the contribution volatility of a plan with a liability-to-payroll ratio of 4. The liability
volatility ratio is also shown in the table below. It should be noted that this ratio indicates a longer-term potential
for contribution volatility. The asset volatility ratio, described above, will tend to move closer to the liability
volatility ratio as the plan matures.
Contribution Volatility June 30, 2017 June 30, 2018
1. Market Value of Assets $ 584,158 $ 907,088
2. Payroll 1,628,257 2,422,034
3. Asset Volatility Ratio (AVR) [(1) / (2)] 0.4 0.4
4. Accrued Liability $ 616,259 $ 987,801
5. Liability Volatility Ratio (LVR) [(4) / (2)] 0.4 0.4
6. Accrued Liability (7.00% discount rate) 640,289 987,801
7. Projected Liability Volatility Ratio [(6) / (2)] 0.4 0.4
B-80
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 19
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2018. The plan liability on a termination basis is calculated differently
compared to the plan’s ongoing funding liability. For the hypothetical termination liability calculation, both
compensation and service are frozen as of the valuation date and no future pay increases or service accruals
are assumed. This measure of funded status is not appropriate for assessing the need for future employer
contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS
retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit
security for members is increased while funding risk is limited. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on
the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 2-year period
centered around the valuation date.
[]
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
@ 2.50%
Funded
Status
Unfunded
Termination
Liability
@ 2.50%
Hypothetical
Termination
Liability1,2
@ 3.25%
Funded
Status
Unfunded
Termination
Liability
@ 3.25%
$907,088 $1,651,091 54.9% $744,004 $1,408,772 64.4% $501,685
1 The hypothetical liabilities calculated above include a 5 percent mortality contingency load in accordance with Board policy.
Other actuarial assumptions can be found in Appendix A of the Section 2 report.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S.
Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The
discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point,
which is a good proxy for most plans. The 20-year Treasury yield was 2.91 percent on June 30, 2018, and was 2.83 percent
on January 31, 2019.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with
the plan actuary before beginning this process.
B-81
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 20
Participant Data
The table below shows a summary of your plan’s member data upon which this valuation is based:
June 30, 2017 June 30, 2018
Reported Payroll $ 1,628,257 $ 2,422,034
Projected Payroll for Contribution Purposes $ 1,772,771 $ 2,627,397
Number of Members
Active 33 54
Transferred 2 3
Separated 7 8
Retired 0 0
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
B-82
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 21
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Benefit Group
Member Category Misc
Demographics
Actives Yes
Transfers/Separated Yes
Receiving No
Benefit Group Key
Benefit Provision
Benefit Formula 2% @ 62
Social Security Coverage No
Full/Modified Full
Employee Contribution Rate 6.75%
Final Average Compensation Period Three Year
Sick Leave Credit Yes
Non-Industrial Disability Standard
Industrial Disability No
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level Level 4
Special No
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $500
Survivor Allowance (PRSA) No
COLA 2%
B-83
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 22
PEPRA Member Contribution Rates
The table below shows the determination of the PEPRA Member contribution rates based on 50 percent of the Total Normal
Cost for each respective plan on June 30, 2018. Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas
and a final compensation period as well as new contribution requirements for new employees. In accordance with Section
Code 7522.30(b), “new members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The
normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly
the entry age into the plan. Should the total normal cost of the plan change by one percent or more from the base total
normal cost established for the plan, the new member rate shall be 50 percent of the new normal cost rounded to the nearest
quarter percent.
Basis for Current Rate Rates Effective July 1, 2020
Rate Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost
Change Change
Needed
Member
Rate
26567 Miscellaneous PEPRA Level 13.735% 6.750% 14.482% 0.747% No 6.750%
B-84
CALPERS ACTUARIAL VALUATION - June 30, 2018
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Section 2
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Section 2 may be found on the CalPERS website
(www.calpers.ca.gov) in the Forms and
Publications section
B-85