HomeMy WebLinkAboutCity Council - 2013-36 RESOLUTION NO. 2013-36
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
LEVYING A RETIREMENT PROPERTY TAX FOR FISCAL YEAR 2013/2014 TO
PAY FOR PRE-1978 EMPLOYEE RETIREMENT BENEFITS
WHEREAS, since 1948, the City has provided for employee pensions through a
contract with the California Public Employees Retirement System (CalPERS). Pursuant to
the 1966, 1978 and 2010 Charters, the voters of the City authorized the City Council to pay
for the cost of employee pensions through a separate retirement property tax. Section
607(b)(2) of the 2010 Charter provides that the City may impose a retirement tax
"sufficient to meet all obligations of the City for the retirement system in which the City
participates;" and
Proposition 13 was added to the California Constitution in 1978. It limits the local
property tax to 1% of assessed value, except that the City may levy an override tax in
excess of 1% to pay "any indebtedness approved by the voters prior to July 1, 1978" (Cal.
Const. Art. 13 A, §1(b)); and
In the case entitled Carman v. Alvord, 31 Cal.3d 318 (1982), the California
Supreme Court determined that under Proposition 13, an override property tax in excess of
1% of assessed value may be levied to pay for employee pension benefits the voters
approved prior to 1978. Consequently, after Proposition 13, the Huntington Beach City
Council continued to levy an override tax to pay for employee pensions. Since 1983-84,
Revenue and Taxation Code Section 96.31(a)(4) has limited the City to levying a
maximum override tax of $0.04930 per $100 of assessed value to pay for its retirement
system; and
In 2003, the Court of Appeal in Howard Jarvis Taxpayers Assn v. County of
Orange (2003) 110 Cal.App.4th 1375 held that the City may levy a separate property tax to
pay for retirement benefits for all retired, current, and future city employees contracted for
prior to July 1, 1978, but not enhancements to retirement benefits contracted for after July
1, 1978; and
Prior to July 1, 1978, the City entered into collective bargaining agreements with
employee associations representing its safety employees providing that, effective July 1,
1978, they would be entitled to a CalPERS retirement benefit known as 442% @ 50."
Subsequently, on June 30, 1999, pursuant to collective bargaining agreements the City had
entered into with its safety employees, the City provided its safety employees with the
CalPERS retirement benefit known as 3% @ 50. Consequently, it is necessary to allocate
the employer contribution to CalPERS for safety retirement between 2% @ 50 and 3% @
50, because only the employer contribution for 2% @ 50 may be paid through the override
property tax; and
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Resolution 2013-36
The City has received a report from John Bartel of Bartel Associates, a professional
actuary experienced in pension calculations, entitled, "City of Huntington Beach Ca1PERS
Actuarial Issues—Cost of 3% @ 50," dated August 10, 2004. The Report identified the
additional cost of 3% @ 50 as what Ca1PERS refers to as the "normal cost" of the benefit,
which represents the present value of future benefits employees earned during the current
year. Under this approach, the incremental cost of 3% @ 50 is 4.6% of safety payroll, and
the remainder of the employer contribution represents the cost of 2% @ 50; and
In April 2004, then Assemblyman Harman formally asked the Attorney General
regarding the correct method of allocating the employer contribution to Ca1PERS between
its pre-1978 and post-1978 components. In his February 7, 2005 Opinion (Opinion No.
04-413), the Attorney General opined that "any reasonable accounting method may be
used for purposes of determining which costs are not subject to the 1% property tax
limitation of the Constitution;" and
The City Council has determined that the allocation approach presented in the
Bartel Report is a reasonable accounting method for determining which costs are not
subject to the 1%property tax limitation of the Constitution; and
For 2013/2014, Ca1PERS is requiring the City to contribute 3 8.841% of safety
employee payroll as the City's employer's contribution. In order to set the tax override,
the City may subtract the 4.6% normal cost of 3% @ 50 from the 38.841% to set the
override tax at the equivalent of 34.241% of safety employee payroll. The cost to the City
of 34.241% of safety employee payroll for 2013/2014 will be $14,241,032 and
consequently, pursuant to Proposition 13, the City may set the override tax for 2013/2014
at$0.04921 per $100 of assessed value; and
Pursuant to Ordinance No. 3954, the City Council added Chapter 3.07 to the
Municipal Code which provides that the maximum retirement override tax rate for
2013/2014 shall be set at the rate adopted for Fiscal Year 2012/13, which is $0.01500 per
$100 of assessed valuation, which amount is less than the otherwise permitted retirement
override tax of$0.04921 per $100 of assessed value.
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Resolution 2013-36
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Huntington Beach that a retirement property tax levy of Zero and 0.01500/100th Dollars
($0.01500) per $100 of assessed value shall be levied for employee retirement costs for
Fiscal Year 2013/2014.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at
a regular meeting thereof held on the 5 th day of August , 2013.
s
Mayor
REVI D L
APPROVED: IN IT ATED AND APPROVED:
4v: C�tw awo'�'q
Ci an er Finance Director
APPROVED AS TO FORM:
c�Crty Attorney
13-3827/99652 3
Res. No. 2013-36
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, JOAN L. FLYNN the duly elected, qualified City Clerk of the City of
Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby
certify that the whole number of members of the City Council of the City of
Huntington Beach is seven; that the foregoing resolution was passed and adopted
by the affirmative vote of at least a majority of all the members of said City Council
at a Regular meeting thereof held on August 5, 2013 by the following vote:
AYES: Sullivan, Hardy, Boardman, Carchio, Shaw, Katapodis
NOES: Harper
ABSENT: None
ABSTAIN: None
Cit lerk and ex-officio CVlerk of the
City Council of the City of
Huntington Beach, California