In 2019, the Solano County Grand Jury issued a report cautioning that the city of Vacaville’s retirement benefits package was “not sustainable” and could result in a loss of employees and services if not addressed.
A
followup report, issued Tuesday, opined that even with steps taken to mitigate
unfunded liabilities, the city needs to do more to keep its services and fully
fund employee benefit obligations in the future.
The
2019 report focused on the city’s retirement package, also known as Other
Post-Employment Benefit (OPEB), with recommendations including lowering OPEB
costs through updated policies and labor relations strategies, forming a
citizen oversight committee to study OPEB and make recommendations to the City
Council, simplifying the language to address long-term financial impacts and
not placing OPEB-related matters on the council’s consent calendar.
For
its followup report, the Grand Jury interviewed a resident, City Council member
and a member of the OPEB Advisory Committee that was later formed. It also
viewed the Oct. 13 council meeting where the committee’s recommendations were
presented, a City Council special OPEB study session on March 2 and a webinar
on OPEB liabilities in Contra Costa County, hosted by Marc Joffee of the think
tank Reason Foundation, in addition to reviewing several documents.
Regarding
the recommendation of an OPEB oversight committee, then-Councilman Mitch
Mashburn balked at the idea of it being termed an “oversight” committee at a
2019 meeting but said he was supportive of establishing an advisory committee.
This idea was supported by the rest of the council, and the committee first met
in Jan. 2020 for a 120-day term to study and provide a report of
recommendations to the council. The committee was dissolved at the end of its
term.
According
to the Grand Jury report, the committee presented its report to the council,
which “accepted the report, took no action to address the recommendations, and
thanked the committee for its serve.”
One
of the confirmations of the OPEB Advisory Committee was that the city was
facing “significant fiscal challenges” from its OPEB benefit level. The
committee cited a 2020 report by state Sen. John Moorlach, R-Costa Mesa, which
ranked all of California’s cities based on financial soundness and placed
Vacaville in the bottom 10 percent.
Moreover,
a 2020 report by the California State Auditor found Vacaville to be in
“high-risk of pension obligations, funding, future pension costs and OPEB
funding, per the Grand Jury report.
Currently,
the city has two California Public Employees’ Retirement System (CalPERS)
pension plans: one for its public safety employees and another for its other
employees. Combined, the two plans had an unfunded liability of $209 million as
of June 2019.
“If
the City of Vacaville increased its current CalPERS Safety Plan payment by $2
million annually it would save $26 million in interest and retire the unfunded
liability within 15 years,” the report’s authors wrote. “If annual payments
were increased by $5 million the city would save $2 million in interest and retire
the unfunded liability in 10 years.”
Additionally,
the report indicated that Family Premium health care rates increased an average
of 8.5 percent per year from 1975 to 2020. Vacaville has three compensation
tiers for both its active and retired employees, which are dependent on the
date an employee was hired and how long they served.
In
recent years, the city has adopted a defined contribution model for Tier 3
employees. However, the report’s authors wrote that most current employees and
retirees continue to receive defined benefits under the first two tiers.
“The
private sector has moved towards defined contribution plans because the costs
of defined benefit plans are inherently unpredictable,” the report’s authors
wrote.
With
seven of the nine current memoranda of understanding between the city and seven
of the nine labor groups set to expire Oct. 31, and the remaining two slated to
end in 2022, the Grand Jury is recommending that the city convert to a defined
contributions benefit model in future negotiations with Tier 1 and 2 employees.
Other
recommendations included establishing an annual contribution schedule to retire
unfunded liabilities over a 10-to-15-year period, applying for American Rescue
Act funds for additional contributions toward decreasing liabilities,
negotiating all labor contracts with an independent facilitator, addressing
unfunded liabilities in all negotiations, re-establishing the advisory
committee and following up on its recommendations and continuing to regularly
and publicly review issues affecting pensions and liabilities to ensure the
city’s finances remain stable and services are not impacted.
Mayor
Ron Rowlett and the City Council are required to issue a formal response to the
report. Courtesy copies have also been provided to City Manager Aaron Busch and
the Solano County Board of Supervisors.
Kris
Concepcion, the city’s interim public information officer, said the city has
not thoroughly reviewed the report yet but is taking the matter seriously and
will have a formal response ready before the due date. Primarily, he said the
city is looking at areas that differed from the 2019 report and will formulate
appropriate actions after reviewing the recommendations.
“We
will be reviewing it thoroughly, taking into consideration all the Grand Jury’s
findings and recommendations and studying each one of them and considering them
and making sure that each of them get addressed,” he said.
The
full report can be read at Solano.courts.ca.gov/divisions/grand-jury/reports/.
Vacaville
Reporter
By NICK SESTANOVICH | nsestanovich@thereporter.com |
May 27, 2021
No comments:
Post a Comment