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CITY OF HUNTINGTON BEACH
City Council Interoffice Communication
To: Honorable Mayor and City Council Members
From: Billy O'Connell, City Council Member
Date: April 10, 2017
Subject: CITY COUNCIL MEMBER ITEM FOR THE APRIL 17, 2017, CITY
COUNCIL MEETING — REQUEST FOR STUDY SESSION
REGARDING CALPERS UNFUNDED LIABILITIES AND
INCREASED COST PROJECTIONS
The City is contracted to the California Public Employees' Retirement System ( CaIPERS) for
our employees' pensions. As we well know, CaIPERS recently lowered their assumed rate
of return from 7.5% to 7% and this action, in addition to other actions by CaIPERS, will
greatly increase our pension expenditures on a year -over -year basis by well over $5 million
for a total increase of $29 million over the next six years. The increased expenditure on
pension obligations jeopardizes our responsibility of providing services to our residents and
further erodes our ability to be efficient and effective with our current tax revenues.
CaIPERS, and specifically its Board of Directors, have a fiduciary responsibility mandated by
the California Constitution, under Article XVI, Section 17, to include "plenary authority and
fiduciary responsibility for investment of moneys and administration of the system." Section
17 (b) of the California Constitution states in part, "The members of the retirement board of a
public pension or retirement system shall discharge their duties with respect to the system
solely in the interest of, and for the exclusive purposes of providing benefits to, participants
and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable
expenses of administering the system. A retirement board's duty to its participants and their
beneficiaries shall take precedence over any other duty. " CaIPERS has failed in their
fiduciary responsibility and this failure poses great risk to cities, our hardworking employees,
and the taxpayers who will ultimately foot the bill for CaIPERS' failures.
RECOMMENDED ACTION:
Request a CaIPERS representative attend a Study Session to discuss current and future
CaIPERS obligations and the steps CaIPERS is taking to enact legislative changes to
address these ongoing fiscal concerns.
xc: Fred Wilson, City Manager
Ken Domer, Assistant City Manager
Lori Ann Farrell, Chief Financial Officer
Robin Estanislau, City Clerk
Michael Gates, City Attorney
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