HomeMy WebLinkAboutCity Council - 2015-36 RESOLUTION NO. 2 015-3 6
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
LEVYING A RETIREMENT PROPERTY TAX FOR FISCAL YEAR 2015/2016
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 (CAPERS). 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. 13A,
§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 Ca1PERS retirement benefit known as "2% @ 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 CAPERS 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
The City has received a report from John Bartel of Bartel Associates, a professional
actuary experienced in pension calculations, entitled, "City of Huntington Beach CAPERS
Actuarial Issues-Cost of 3% @ 50," dated August 10, 2004. The Report identified the additional
cost of 3% @ 50 as what CAPERS 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
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Resolution No . 2015-36
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 2015/2016, Ca1PERS is requiring the City to contribute 42.969% 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 42.969% to set the override tax at the
equivalent of 38 369% of safety employee payroll. The cost to the City of 34.451% of safety
employee payroll for 2015/2016 will be $15,670,538 and pursuant to Proposition 13, the City
could have set the override tax for 2015/2016 at$0.04906 per $100 of assessed value; and
The City Council added Chapter 3.07 to the Municipal Code which provides that the
maximum retirement override tax rate for 2015/2016 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$0.04906 per$100 of assessed value.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington
Beach that a retirement property tax levy of Zero and 0.0 150011 00th Dollars ($0.01500)per$100
of assessed value shall be levied for employee retirement costs for Fiscal Year 2015/2016.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the 2 0 t h day of 1 2015.
Av
REVIE A D APPROVED: INITI TED AND AP
PRO D:
Cit ag r Finance Director
APPROVED FORM:
rty tomey U 7-
15-4816/122948 2
Res. No. 2015-36
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 July 20, 2015 by the following vote
AYES: Posey, Katapodis, Hardy, Sullivan, Delgleize, Peterson
NOES: None
ABSENT: O'Connell
ABSTAIN: None
am
City Ark and ex-officio -erk of the
City Council of the City of
Huntington Beach, California