HomeMy WebLinkAbout11/23/2016AT/ST
OFFICE OF THE CITY MANAGER
November 23, 2016
TO: Honorable Mayor and City Council
FROM: Alan Tandy, City Manager
SUBJECT: General Information
* City offices will be closed on Thursday and Friday, November 24th – 25th *
Notable Items
The post-election count of provisional and absentee ballots seem to drag out
formal election results. Nevertheless, we would like to finally congratulate
Mayor-elect Karen Goh on her election. We look forward to working with you
in the near future.
Attached is a recent article from the Sacramento Bee, which discusses the
issues surrounding a potential upcoming decision by CalPERS to raise
contribution rates. The potential increases are in response to consecutive
years of poor investment returns, well below the 7.5% target, coupled with
CalPERS investment consultants reportedly urging the pension fund to lower
future investment forecasts over the next decade. As you are aware, City
staff closely monitors CalPERS information regarding the City’s pension plans
in order to project CalPERS cost increases several years into the future for
planning purposes. While City staff has anticipated future annual increases in
CalPERS costs, a decision to increase rates by the CalPERS Board of Directors
will further add to future increases. We will continue to monitor this situation
closely and update our projections accordingly. For your reference, also
attached is a recent memorandum produced by the Finance Director
(previously provided in the September 16, 2016, General Information Memo)
that highlights the most current information we have from CalPERS specific to
the City’s plans.
General Information
November 23, 2016
Page 2
Traffic and other Road Advisories
Traffic Control Scheduled Next Week for State Route 178
Motorists are advised that work on the State Route 178 Widening Project may
cause short delays next week. Traffic control will be needed between
Canteria Drive and Masterson Street on Monday, November 28th. Intermittent
traffic control will also be needed between Canteria Drive and Valley Street
for earthwork, Tuesday, November 29th through Friday, December 2nd.
Flagging personnel will need to stop traffic in these areas between the hours
of 8:00 a.m. and 4:00 p.m., each day, affecting both directions of travel.
Motorists can expect to be stopped for up to 10 minutes and are
encouraged to select an alternate route or allow extra time to reach their
destinations while this work is underway.
Rosedale Highway Median Work – Calloway Drive to Gibson Street
Crews will be placing woodchips in the new medians along Rosedale
Highway, between Calloway Drive and Gibson Street, starting Monday,
November 28th and continuing through Friday, December 2nd. This work will
require closures of the inside travel lane in each direction while work is
underway. Closures are expected to be in effect between the hours of
8:30 a.m. and 4:00 p.m. Two lanes will remain open to traffic in each
direction. Motorists are advised to drive carefully and pay attention to
construction crews and equipment while driving through this area.
Referrals
Councilmember Parlier
o Letter regarding Aquifer Exemptions
Reports
Streets Division work schedule for the week of November 28th
Event Notifications
Event calendar for the Rabobank Arena Theater and Convention Center
The Sacramento Bee
November 21, 2016
Page 1 of 3
With investments soft, CalPERS eyes higher contribution
rates. What does that mean for workers?
CalPERS headquarters in Sacramento
BY DALE KASLER
dkasler@sacbee.com
CalPERS is preparing more pension rate hikes, and they could cost government agencies billions of dollars.
With consultants predicting long-term declines in investment earnings, the big California pension fund is
considering substantially higher contribution rates for the state and the thousands of municipalities and
school districts that rely on CalPERS to serve their retirees. Workers could get hit with higher
contributions, too, although that would depend on contract negotiations.
A decision isn’t likely until February, but CalPERS’ deliberations are already causing anguish to
employers, employees and the pension fund itself. The move will surely cause more budget strain for
government agencies, particularly at the local level, even though the higher rates are likely to be phased in
over a number of years.
Union officials worry that higher pension contributions will leave less money for pay raises – and could
increase political pressure for major reforms in the pension system. Dave Low, who runs a group
http://www.sacbee.com/news/business/article116331443.html
The Sacramento Bee
November 21, 2016
Page 2 of 3
called Californians for Retirement Security, told CalPERS board members last week not to fall for
pessimistic financial forecasts.
“We don’t see enough data that shows us an immediate change is warranted,” said Low, also executive
director of the California School Employees Association. “I think the train needs to be slowed down.”
But several CalPERS board members, speaking at a meeting of the fund’s finance and administration
committee, said the fund needs to face up to its financial realities.
“The most important thing we can do is shore up the funding,” said Richard Gillihan, who serves as
representative of Gov. Jerry Brown’s Department of Human Resources. “We can’t wait to do that. It’s pay
now, or pay more later.”
Said board member Priya Mathur, a BART official who represents employees of local government
agencies: “We all find ourselves in an uncomfortable position.”
CalPERS collected $13.8 billion from employers and employees last year, with the biggest contribution –
$5.4 billion – coming from the state. The pension fund raised contribution rates two years ago, largely
because of forecasts showing retirees are expected to live longer. Unlike CalSTRS, the teachers’ pension
fund, CalPERS has the authority to impose rate hikes without permission from the Legislature.
This time around, it’s the pension fund’s own troubled finances – combined with predictions of a gloomy
investment climate – that is pressuring the board to raise rates.
The $300 billion pension system is 68 percent funded, meaning that while it has enough cash for the
foreseeable future, it has only 68 cents on hand for every $1 in long-term pension obligations. Over the past
year, CalPERS has become “cash flow negative,” meaning it’s taking in fewer dollars than it’s spending on
pension benefits.
A rescue from Wall Street doesn’t seem likely. While historically CalPERS gets about 60 percent of its
money from investments, the most recent results aren’t strong. The California Public Employees’
Retirement System earned just a 0.61 percent return on its investments in the 2015-16 fiscal year, following
a subpar 2.4 percent the year before.
The latest investment returns mean CalPERS has earned an average of just over 7 percent over the past 20
years. That’s below CalPERS’ current “discount rate” of 7.5 percent.
The discount rate sounds arcane but plays a crucial role in pension fund financing. It serves as an official
forecast of yearly investment earnings and generally guides how much investment risk CalPERS is willing
http://www.sacbee.com/news/business/article116331443.html
The Sacramento Bee
November 21, 2016
Page 3 of 3
to take. Lowering the rate means charting a more cautious approach, which usually means lower returns.
That forces CalPERS to demand higher contributions from the state and other employers.
Now, outside consultants are urging CalPERS to lower its investment forecast. CalPERS’ investment
adviser Wilshire Consulting said last week that CalPERS can expect to earn just 6.2 percent a year over the
next decade as global economic growth continues to slow. Andrew Junkin, the firm’s president, told board
members to expect “a very painful decade.”
CalPERS has been cautious about adjusting the discount rate. Last fall it adopted a complicated
mechanism that could reduce the rate to 6.5 percent – over 20 years.
Brown blasted the plan as “irresponsible.” The governor said CalPERS should have slashed the discount
rate in five years, despite the budgetary pain it would cause.
Local officials, mindful of recent municipal bankruptcies in Stockton and San Bernardino, are nervous
about more rate hikes from CalPERS but said they want the pension system to be financially sound.
Fatter contributions to CalPERS would be “a hard pill to swallow,” said Dane Hutchings of the League of California Cities in an interview. But he added: “Our members are prepared for it.”
CalPERS officials indicated the higher contribution rates are likely to be phased in, although it isn’t clear
how quickly.
Pension politics could play a role in the decision. The CalPERS board generally has a pro-union tilt; six of
its 13 members are elected by public workers or retirees. Another big cost increase could provide
ammunition for those advocating major pension reforms. Although Brown signed a law that cuts benefits
for new workers starting in 2013, critics note that it doesn’t touch benefits for those already in the system.
Dan Pellissier, the head of a group called California Pension Reform, said the CalPERS board is struggling
with the looming decision.
“They’re confronted with their system being substantially out of whack,” Pellissier said in an interview.
“The consequences of doing the right thing are going to be significant.”
Those sensitivities were on full display at last week’s meeting. Board member Theresa Taylor, a vice
president with Local 1000 of the Service Employees International Union, which represents thousands of
state workers, was among those warning that CalPERS was in danger of rushing to judgment.
“We need to step back and breathe,” she said.
http://www.sacbee.com/news/business/article116331443.html
MEMORANDUM
TO: Alan Tandy, City Manager
FROM: Nelson K. Smith, Finance Director
DATE: September 16, 2016
SUBJECT: PERS Rates for 2017-18 and Updated Funding Status
The City recently received its Annual Valuation Report from CalPERS, which
includes employer rates for future years and also provides updated information
regarding the funding status of the various City retirement plans as of the June
30, 2015 CalPERS actuarial valuation date.
CalPERS has made another significant change this year in the way the actuarial
reports are prepared as well as how the City will remit funds in the future. The
most recent actuarial reports no longer provide full cost employer rates as a
percentage of city payroll. CalPERS has decided to separate out the unfunded
liability portion of the rates from the “normal cost” portion of the rates. The
normal cost portion of the plan funding requirements will continue to be paid on
a bi-weekly basis as a percentage of payroll costs. The unfunded liability portion
of the plan funding requirements will now be billed annually as a flat dollar cost.
The City will pay CalPERS on a monthly basis for the unfunded liability portion.
The table below shows the employer unfunded liability costs we are currently
paying for each plan, along with our new PERS costs for 2017-18. The CalPERS
report also provides “projected costs” for each plan, estimating the future year
employer expense for the 2018-19 fiscal year.
Unfunded Liability Costs 2016-17 2017-18 2018-19
(monthly payment plan) estimated projected
Fire $ 2,972,687 $ 3,663,652 $ 4,623,430
Police $ 7,561,905 $ 8,815,778 $10,471,645
Miscellaneous $ 6,887,078 $ 8,289,188 $10,201,156
Total UL Cost – All Plans $17,421,670 $20,768,618 $25,296,231
As you can see the costs are scheduled to go up by $3,346,948 for the 2017-18
budget year, with additional cost increases of $4.5 million in FY 2018-19. These
cost escalations are higher than estimated one year ago due to lower earnings
on the CalPERS investment portfolio.
The next table (below) shows the employer “normal cost” rates we are currently
paying for each plan, along with our new PERS rates for 2017-18. The CalPERS
report also provides “projected rates” for each plan, estimating the future year
employer rates for the 2018-19 fiscal year.
Rates 2016-17 2017-18 2018-19
(as a % of payroll) Projected
Fire 16.580 % 16.120 % 16.1 %
Police 19.364 % 18.465 % 18.5 %
Miscellaneous 9.186 % 9.122 % 9.1 %
These costs are paid as a percent of payroll expenses on a bi-weekly basis and
are in addition to the unfunded liability costs shown in the prior table (page 1).
As you can see there are slight reductions in the normal cost component for
each of the plans; especially the police plan. This can be associated with the
lower costs of the statewide PEPRA benefit structure compared to the more
robust City benefit structure (3%@50/3%@60). As more employees retire and get
replaced with PEPRA plan employees, the normal cost component for the City
will continue to go down.
The fact remains that total cost to the City for funding retirement obligations
(both normal cost plus unfunded costs) continues to go up by significant
amounts each year. These cost increases may be offset to some extent by
lower “normal cost” rates as more employees come under the reduced pension
PEPRA rules, but the overall negative trend is clear for the next several years.
Funding Status of the Plans
In addition to the new employer rate data, the annual PERS report also provides
us with updated funding status of the plans and unfunded liabilities of the plan.
The prior year valuation reports showed the City’s unfunded liability for all plans
combined at approximately $294 million. The most recent reports (valuation
date of June 30, 2015) shows an increase in our unfunded liability of $54 million,
bringing the City’s overall unfunded liability up to $348 million. The increase can
be attributed to below average earnings on the PERS investments of 2.4% during
the 2014-15 fiscal period, compared to the CalPERS target rate of 7.5%. CalPERS
has also disclosed their earnings for 2015-16 came in at zero %, which is reflected
in their estimated cost increases for Fiscal Year 2018-19. The overall funding
status for the three City plans combined has dropped from 73.7% down to 70.3%.
cc: Steven Teglia / Chris Huot - Assistant City Managers
File name: nks:/s:/nelson/memo-PERS rates for 2017-18 and other info.doc
Week of November 28_2016_Work Schedule
Page 1 of 2
STREETS DIVISION – WORK SCHEDULE
Week of November 28, 2016 – December 2, 2016
Resurfacing/Reconstructing streets in the following areas:
Maintenance Grind & Pave on Chester Ave between 24th St and 30th St
Maintenance Grind & Pave on Harris Rd between Wible Rd and Gosford Rd
Resurfacing Brimhall Rd between Jewetta Ave and Calloway Dr
Paving on Ashe Rd from White Ln to Harris Rd
Miscellaneous Streets Division projects:
Video inspection of City owned sewer and storm lines to evaluate condition of pipes
Repairing damaged sewer line found during video inspection
Miscellaneous concrete repairs throughout the City
Concrete repairs to various bus stops throughout City limits
Grading for sidewalk at Mesa Marin
Working with the Railroad on repairs to crossings at “Q” St north of Golden State Ave and at 30th St and
“M” St
Concrete work in the four HUD areas for curb and gutter, sidewalk, and handicap ramps prior to street
repairs; the four areas are (1) El Toro Dr Area (2) Oleander Ave Area (3) Castro Ln Area, (4) “P” St Area
NOTE: If raining, there will be no street sweeping service and all street cleaning personnel will be assigned
to cleaning plugged drains and part circle culverts. This also applies when a large number of street
sweepers are in Fleet for repairs. Areas that have been missed during this time will be swept at the end of
the month only when possible.
THIS SPACE INTENTIONALLY LEFT BLANK
Week of November 28_2016_Work Schedule
Page 2 of 2
STREETS SWEEPING SCHEDULE
Monday, November 28, 2016
Between Coffee Rd. & Verdugo Ln. – Brimhall Rd., south to the Kern River boundary.
Cul-De-Sacs, west of Windsong St., between Brimhall Rd. & Thistlewood Ct.
City areas between Rosedale Hwy. & Stockdale Hwy. – Verdugo Ln. to the west City limit.
Between Jenkins Rd. & Allen Rd. – Stockdale Hwy. & Birkenfeld Ave.
Between Hosking Rd. & Astro Ave. – So. “H” St. & Union Ave.
Tuesday, November 29, 2016
All sweepers are assigned to sweeping streets that are not on a set sweeping schedule.
Wednesday, November 30, 2016
All sweepers are assigned to sweeping streets that are not on a set sweeping schedule.
Thursday, December 1, 2016
City areas between Kentucky St. & Quincy St. – Owens St. & Virginia St.
Between Union Ave. & Washington St. – E. Truxtun Ave. & Brundage Ln.
Between Gosford Rd. & Old River Rd. – Panama Ln. & Pacheco Rd. (alignment)
City areas between Progress Rd. & Old River Rd. – Meadow Falls Dr. & Rose Creek Dr.
Friday, December 2, 2016
Between Buena Vista Rd. & Allen Rd. – Pensinger Rd. & Panama Ln.
Between Buena Vista Rd. & Mountain Vista Dr. – Panama Ln. & Berkshire Rd.
Between 178 Hwy. & Paladino Dr. – W. Columbus St. & Morning Dr.
City areas between Sterling Rd. & Morning Dr. – 178 Hwy. & College Ave.
Between Valley St. & Lene Pl. – 178 Hwy. & Hickory Dr.
Between 178 Hwy. & Reynard Rd. – Kern Canyon Rd. & McKenna St.
Between Stockdale Hwy. & Joseph Dr. – McDonald Wy. & N. Stine Rd.
BOX OFFICE HOURS
Mon-Fri 10 AM - 5 PM
(Excluding Event Days)
CHARGE-BY-PHONE
1-888-929-7849
GROUP SALES INFORMATION
661-852-7309
SEASON TICKET INFORMATION
Bakersfield Condors
661-324-PUCK (7825)
www.bakersfieldcondors.com
Bakersfield Symphony
661-323-7928
www.BSOnow.org
Broadway In Bakersfield
661-852-7308
Week of November 21nd
UPCOMING EVENTS
November 22 – Condors vs San Jose7:00 PM
$35, $25, $20, $16, $12 On Sale Now
November 26 – Condors vs San Diego7:00 PM
$40, $30, $25, $21, $17 On Sale Now
December 2 – Condors vs Charlotte7:00 PM
$35, $25, $20, $16, $12 On Sale Now
December 3 - Condors vs Tucson6:00 PM
$35, $25, $20, $16, $12 On Sale Now
December 9 – Condors vs Charlotte7:00 PM
$35, $25, $20, $16, $12 On Sale Now
December 10 – Condors vs Stockton6:00 PM
$35, $25, $20, $16, $12 On Sale Now
January 20-21 - Monster Trucks 7:30 PM
$40, $21, $18, $16, $11 On Sale Now
February 16 – Blake Shelton 7:30 PM
$77.50, $57.50, $27.50 On Sale 12/2
February 20 – Harlem Globetrotters2:00 PM
$90, $50, $40, $33, $25, $18 On Sale Now
September 30 – Tim McGraw/Faith Hill7:30 PM
$129.50, $99.50, $69.50 On Sale Now
December 9 – The Nutcracker 7:30 PM
$36, $32, $30 On Sale Now
December 10 – The Nutcracker1 PM/7:30 PM
$36, $32, $30 On Sale Now
December 11 – The Nutcracker1 PM
$36, $32, $30 On Sale Now
December 18 – Merry-achi Christmas7:30 PM
$45.50, $35.50, $25.50 On Sale Now
December 22 – Rudolph The Musical7:30 PM
$55, $45, $35 On Sale Now
December 31 – George Lopez 8:00 PM
$59.50, $39.50 On Sale Now
January 5 – Annie 7:30 PM
$65, $55, $35 On Sale Now
February 4 – Bakersfield Symphony7:30 PM
$45, $35, $30, $20 On Sale Now
February 10 – Super Love Jam 7:30 PM
$69.50, $52.50, $42.50, $35.50, $30.50 On Sale Now
March 11 – Bakersfield Symphony7:30 PM
$45, $35, $30, $20 On Sale Now
April 8 – Bakersfield Symphony 7:30 PM
$45, $35, $30, $20 On Sale Now
May 18 – Cinderella 7:30 PM
$65, $55, $35 On Sale Now
www.rabobankarena.com - www.bhnamphitheatre.com