HomeMy WebLinkAboutCity Council - 2016-52 RESOLUTION NO. 2016-52
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
LEVYING A RETIREMENT PROPERTY TAX FOR FISCAL YEAR 2016/2017
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. 13A,
§1(b)); and
In the case entitled Carman v. Alvord, 31 Ca1.3d 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.AppAth 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 "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 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
The City has received a report from John Bartel of Bartel Associates, a professional
actuary experienced in pension calculations, entitled, "City of Huntington Beach CalPERS
Actuarial Issues—Cost of 3% @ 50," dated August 10, 2004. The Report identified the additional
cost of 3% @ 50 as what CalPERS 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. 2016-52
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 2016/2017, Ca1PERS is requiring the City to contribute 45.123% 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 45.123% to set the override tax at the
equivalent of 40.523% of safety employee payroll. The cost to the City of 40.523% of safety
employee payroll for 2016/2017 will be $17,379,453 and pursuant to Proposition 13, the City
could have set the override tax for 2016/2017 at $0.05190 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 2016/2017 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 per Revenue and Taxation Code Section 96.31(a)(4)
of$0.04930 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 0.015001100th Dollars ($0.01500) per $100
of assessed value shall be levied for employee retirement costs for Fiscal Year 2016/2017.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the /g�►day of , 2016.
-T
Mayo
REVI ND APPROVED: INITIAT/ED AND APPROVED:
City M rigger Chief Financial Officer
APPROVED A 0
ORM:
City torney
1I y1I
RLS 6/30/16/16-5335/139429/PD 2
Res. No. 2016-52
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, ROBIN ESTANISLAU the duly appointed, 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 18, 2016 by the
following vote:
AYES: O'Connell, Sullivan, Katapodis, Hardy, Delgleize
NOES: Posey, Peterson
ABSENT: None
ABSTAIN: None
City Clerk and ex-officio Clerk of the
City Council of the City of
Huntington Beach, California