Loading...
HomeMy WebLinkAboutRetirement Property Tax - pre-1978 Public Employee Retiremen 40 CITY OF HUNTINGTON BEACH Finance Department August 20 2010 Frank Davies Auditor-Controller County of Orange — Property Tax Unit P O Box 567 Santa Ana CA 92702-0567 SUBJECT CITY OF HUNTINGTON BEACH TAX RATE— FISCAL YEAR 2010/11 Dear Mr Davies On August 3 2010 the City of Huntington Beach adopted the Fiscal Year 2010/2011 Tax Rate by Resolution Number 2010-50 which levies a retirement property tax for Fiscal Year 2010/2011 to pay for pre-1978 employee retirement benefits Enclosed are the executed Resolution and staff report Please note this rate has not changed from Fiscal Year 2009/2010 Please continue to incorporate the retirement tax levy of Zero and 0 01500/100t" Dollars ($0 01500) per $100 of assessed value for the City of Huntington Beach If you have any questions or need additional information please do not hesitate to contact my office Sincerely l Bob Wingenroth Director of Finance BW/cg Enclosures 1) City of Huntington Beach Resolution Number 2010-50 2) Request for City Council Action Agenda dated August 2 2010 item 6 3) Action Agenda item 6 page 4 cc Fred A Wilson City Administrator Paul Emery Deputy City Administrator Joan Flynn City Clerk Jennifer Lampman Budget Manager 2000 Main Street California 92648 2702o Phone 714 536 5630E Fax 714 374 5365o www surfcity hb org A C TION AGENDA Monday, August 02, 2010 MAYOR AND CITY COUNCIL CITY COUNCIL, REDEVELOPMENT AGENCY CATHY GREEN ' and PUBLIC FINANCING AUTHORITY Mayor JILL HARDY GIL COERPER Mayor Pro TernCouncilmember CITY OF HUNTINGTON BEACH KEITH BOHR DEVIN DWYER _ 1909 oa Councdmember Councdmember 4 00 PM - Study Session, Room B-8 6 00 PM - Regular Meeting OEamember DONCou Hme EN ber Council Chambers - 2000 Main Street Huntington Beach, CA 92648 http //www surfcity hb orq 4 00 PM - ROOM B-8 CALL TO ORDER- 4 02 PM ROLL CALL Carchlo Coerper Hardy Green Bohr Dwyer Hansen All present- Coerper arrived at 4 08 PM, and Hardy arrived at 4 03 PM ANNOUNCEMENT OF LATE COMMUNICATION Joan L Flynn announced Late Communications Study Session (1) PUBLIC COMMENTS PERTAINING TO STUDY SESSION / CLOSED SESSION ITEMS (3 Minute Time Limit) No Speakers STUDY SESSION 1 City Administrator and City staff to present an overview of the City Administrator's recommended Proposed Fiscal Year 2010/2011 Budget RECESS TO CLOSED SESSION - 5 37 PM CLOSED SESSION 2 Pursuant to Government Code Section 54956 9, the City Council shall recess into Closed Session to confer with the City Attorney regarding the following workers compensation case Robert Lancaster, COHB-01-0134, 02-0037, Case No's ADJ2990647, 2691184, 3473744 1 D) Authorize the expenditure of$370 259 to pay for 700 MHz equipment Approved 7-0 4 Approve acceptance of the Gates Foundation Opportunity Online Broadband Grant to improve and support high speed Internet connections at the Helen Murphy branch library and the Banning branch library Recommended Action Approve and accept grant award in the amount of$20 312 - $15 252 in FY2010-2011 and $4 380 in FY2011-2012 - from the Bill and Melinda Gates Foundation Opportunity Online Broadband Grant program providing support for broadband connectivity charges at the Helen Murphy branch library and the Banning branch library and appropriate funds into Account numbers to be determined by the Finance Department Approved 7-0 5 Approve and authorize execution of the agreement for sale of City owned property near the intersection of Gothard and Main St to the adjacent owner, Gustafson Partners, LLC Recommended Action A) Approve the 'Agreement for Sale of Surplus Real Property and Escrow Instructions' for the sale of surplus property to buyer Gustafson Partners LLC and B) Authorize the Mayor and City Clerk to execute the Agreement for Sale of Surplus Real Property and Escrow Instructions By and Between the City of Huntington Beach and Gustafson Partners LLC and all other related documents to convey ownership of the surplus property and C) Authorize the Director of Economic Development to execute any other related escrow documents Approved 7-0 6 Adopt Resolution No 2010-50 to levy the annual retirement property tax for Fiscal Year 2010/2011 to pay for pre-1978 public employee retirement benefits Recommended Action Adopt Resolution Number 2010-50 A Resolution of the City Council of the City of Huntington Beach Levying a Retirement Property Tax for Fiscal Year 2010/11 to Pay for Pre-1978 Public Employee Retirement Benefits of$ 01600 per$100 of assessed valuation The tax rate of$ 01600 would increase general fund revenue approximately $250 000 Staff recommended action failed 3-4 (Carchio, Green, Dwyer, Hansen—No) Approved as amended to maintain current tax rate 6-1 (Bohr-No) 4 Council/Agency Meeting Held 'T D Deferred/Continued to A roved ❑ C nditionally A r ved ❑ D nie Cit ler Sign re lI i6-1 Council Meeting Date /2010 Department ID Number FN 10-019 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO Honorable Mayor and City Council Members SUBMITTED BY Fred A Wilson City Administrator PREPARED BY Bob Wingenroth Director of Finance SUBJECT Adopt Resolution No 2010-50 to levy the annual retirement property tax for Fiscal Year 2010/201-1 to pay for pre-1978 public employee retirement benefits Statement of Issue Should the City of Huntington Beach adopt a tax rate to fund the portion of employee retirement costs that can be legally collected in accordance with court cases state law and the City Charter? Financial Impact Not applicable ,Ocommended Action Motion to Adopt Resolution Number 2010-50 A Resolution of the City Council of the City of Huntington Beach Levying a Retirement Property Tax for Fiscal Year 2010/11 to Pay for Pre- 1978 Public Employee Retirement Benefits of$ 01600 per $100 of assessed valuation The ax rate of $ 01600 would increase general fund revenue approximately $250 000 Alternative Action(s) A) Adopt the current tax rate of $ 01500 which would not increase general fund revenue ) Adopt a tax rate of $ 01700 increasing general fund revenue approximately $500 000 �na1y—S1 ie retirement property tax has been levied each year since 1966 The retirement property Lax is collected on all real property in the City of Huntington Beach to recover costs related to pre-1978 employee retirement benefits The City is currently collecting only a portion of the d,iblic safety employee pre-1978 retirement costs For FY 2010/11 staff is recommending the City Council adopt a tax rate of $0 01600 per 100 of assessed valuation ($0 001 higher than the tax rate of $0 01500 in FY 2009/10 ) i his new rate would generate approximately $4 675 000 in revenue which is $250 000 more an would be generated by using the current rate of $0 01500 With this increase the �(commended rate would result in the City collecting 42% of the total that could legally be c'€lected for pre-1978 public safety employee retirement costs -105- stem 6 - Page 1 REQUEST FOR COUNCIL ACTION MEETING DATE /42010 DEPARTMENT ID NUMBER FN 10-019 Analysis Continued The table below Illustrates the impact of different tax rates on a home with an assessed value of$500 000 as well as the additional amount of revenue that would be generated Annual Increase for Parcel with Increased Annual Retirement Property Tax Rate Assessed Valuation of$500 000 Revenue to the City $0 01500 $0 $0 $0 01600 $5 $250 000 $0 01700 $10 $500 000 The additional revenue will help the City address the upcoming Increases in the CalPERS payment over the next several years The CalPERS annual cost will increase from approximately $20 million in the current fiscal year to over $26 million in FY 2013/14 The additional $250 000 generated by this recommended higher rate will not address the $6 million increase by itself Recent changes to employment agreements have resulted in City employees paying a larger share of their retirement costs Due to the County of Orange s timeline for approving the tax rate and the City's budget cycle the rate must be set before the City Council takes action on its annual budget The City has increased the tax rate incrementally each year for the last several years in order to maintain and enhance public safety services The recommended action will allow the city to continue to maintain public safety services without creating an undue burden upon residents Environmental Status Not Applicable Strategic Plan Goal Maintain financial viability and our reserves Maintain Public Safety Attachment(s) ® Di6s, rip ion 1 Resolution Number 2010-50 A Resolution of the City Council of the City of Huntington Beach Levying a Retirement Property Tax for Fiscal Year 201012011 to pay for Pre-1978 Public Employee Retirement Benefits of $ 01600 per $100 of assessed valuation Item 6 - Page 2 406- ATTACHMENT # 1 1 RESOLUTION NO 2010-50 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH LEVYING A RETIREMENT PROPERTY TAX FOR FISCAL YEAR 2010/2011 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 (CaIPERS), pursuant to the 1966 and 1978 Charter, 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 1978 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,' 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 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 2001 Proposition 13 as applied to the City Charter, was interpreted in Howard Jarvis Taxpayers Association et al v County of Orange and City of Huntington Beach as Real Party in Interest, Orange County Superior Court Case No 81-87-80 The Court held that the override tax may only be levied to pay for retirement benefits the City contracted for before July 1 1978, and may not encompass the benefits the City added after the passage of Proposition 13 This interpretation was upheld in Howard Jarvis Taxpayers Assn v County of Orange (2003) 110 Cal App 4th 1375 2 Cal Rptr 3d 514, Court of Appeal Case No G029292, 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 10 2574/49414 1 Resolution No 2010-50 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, Assemblyman Harman formally asked the Attorney General regarding the correct method of allocating the employer contribution to CalPERS 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 In 2003/2004 CalPERS requned the City to contribute 9% of safety employee payroll as the City s employer's contribution In order to set the tax override the City subtracted the 4 6% normal cost of 3% @ 50 from the 9% to set the override tax at the equivalent of 4 4% of safety employee payroll The cost to the City of 4 4% of safety employee payroll for 2003/2004 was $1,279 113 and consequently the City set the override tax for 2003/2004 at $0 00696 per $100 of assessed value which amount was designed to yield $1 279 000, and For 2010/2011 CalPERS is requiring the City to contribute 29 203% 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 29 203% to set the override tax at the equivalent of 24 603% of safety employee payroll The cost to the City of 24 603% of safety employee payroll for 2010/2011 will be $9 598,357 and consequently the City may set the override tax for 2010/2011 at$0 03777 per$100 of assessed value, and Notwithstanding this authority the City Council chooses to set the override tax rate for 2010/2011 at $ 01500 per$100 of assessed value which will yield approximately $4,425 000 in revenue This amounts to an override tax of approximately $15 00 per $100,000 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 01500/100th Dollars($0 01500)per$100 of assessed value shall be levied for employee retirement costs for Fiscal Year 2010/2011, BE IT FURTHER RESOLVED that the remainder of the Zero and 0 03777/100th Dollars ($0 0377) per $100 of assessed value levy authorized under Revenue & Taxation Code Section 96 31(a)(4) is suspended for Fiscal Year 2010/2011, BE IT FURTHER RESOLVED that the City Council declares that although it is suspending a portion of the retirement property tax for Fiscal Year 2010/2011 it retains the authority to levy the tax in future years up to the rate of$0 0493 per $100 of assessed value 10 2574/49414 2 Resolution No 2010-50 PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 2nd day of August 2010 if M or REVIE D APPROVED INITIATE AND APPROVED City i f trator Finance Director APPROVED AS TO FORM 3ty Atto y ��Kz g,q�to 10 2574/49414 3 a Iles No 2010-50 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 2, 2010 by the following vote AYES Carchio Coerper Hardy Green Dwyer Hansen NOES Bohr ABSENT None ABSTAIN None 40.01 mljj My Clerk and ex-officU Clerk of the City Council of the City of Huntington Beach California 7 RESOLUTION NO 2010-50 n � A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTO?TO EACH LEVYING A RETIREMENT PROPERTY TAX FOR FISCAL YEAR 2010/20 PAY FOR PRE-1978 EMPLOYEE RETIREMENT BENEFITS WHEREAS, since 1948, the City has provided for employee pen ons through a contract with the California Public Employees Retirement System (Ca1PERS) ursuant to the 1966 and 1978 Charter, the voters of the City authorized the City Council to ay for the cost of employee pensions through a separate retirement property tax Section 7(b}(2) of the 1978 Charter provides that the City may impose a retirement tax "sufficient t meet all obligations of the City for the retirement system in which the City participates, and Proposition 13 was added to the California Co trtution in 1978 It limits the local property tax to 1% of assessed value, except that the C y may levy an override tax in excess of 1%to pay "any indebtedness approved by the voters p or to July 1 1978," and In the case entitled Carman v Alvord, 3 Cal 3d 318 (1982) the California Supreme Court determined that under Proposition 13, an erride property tax in excess of 1% of assessed value may be levied to pay for employee pe sion benefits the voters approved prior to 1978 Consequently, after Proposition 13, the City founcil continued to levy an override tax to pay for employee pensions Since 1983-84, Reve 94e and Taxation Code Section 96 31(a)(4) has limited the City to levying a maximum over $100 of assessed value to pay for its retirement system, and In 2001, Proposition 13, as a plied to the City Charter, was interpreted m Howard Jarvis Taxpayers Association et al v Cl unty of Orange and City of Huntington Beach as Real Party in Interest, Orange County Super or Court Case No 81-87-80 The Court held that the override tax may only be levied to pay f r retirement benefits the City contracted for before July 1, 1978 and may not encompass the benefits the City added after the passage of Proposition 13 This interpretation was upheld i Howard Jarvis Taxpayers Assn v County of Orange (2003) 110 Cal App 4th 1375, 2 Cal R tr 3d 514, Court of Appeal Case No G029292, and Prior to July 1 1978, the City entered into collective bargaining agreements with employee association representing its safety employees providing that, effective July 1, 1978, they would be entrtl to a CaIPERS retirement benefit known as "2% @ 50 ' Subsequently, on June 30, 1999, pur uant to collective bargaining agreements the City had entered into with its safety employees the City provided its safety employees with the Ca1PERS retirement benefit known as 3% 50 Consequently, it is necessary to allocate the employer contribution to Ca1PERS for afety retirement between 2% @ 50 and 3% @ 50, because only the employer contribution or 2% @ 50 may be paid through the override property tax, and T e City has received a report from John Bartel of Bartel Associates, a professional actuary xperienced in pension calculations, entitled, "City of Huntington Beach CalPERS Actua al Issues—Cost of 3% @ 50,' dated August 10, 2004 The Report identified the additional co 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 10 2574/49414 1 Resolution No 2010-50 approach, the incremental cost of 3% @ 50 is 4 6% of safety payroll, and the remaindeZthe employer contribution represents the cost of 2% @ 50 and In April 2004, Assemblyman Harman formally asked the Attorney Genera regarding the correct method of allocating the employer contribution to Ca1PERS between s 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 u d for purposes of determining which costs are not subject to the 1% property tax limitatia of the Constitution ' and The City Council has determined that the allocation appr ach presented in the Bartel Report is a reasonable accounting method for determining which osts are not subject to the 1% property tax limitation of the Constitution, and In 2003/2004, Ca1PERS required the City to contrib to 9% of safety employee payroll as the City's employer s contribution In order to set the tax,roroverride, the City subtracted the 4 6% normal cost of 3% @ 50 from the 9% to set the override�tax at the equivalent of 4 4% of safety employee payroll The cost to the City of 4 4% of s�fety employee payroll for 2003/2004 was $1 279,113 and consequently the City set the override tax for 2003/2004 at $0 00696 per $100 of assessed value which amount was designed to y eId $1,279,000, and o For 2010/2011, Ca1PERS is requiring th City to contribute 29 203/o 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% @ 50rfrom the 29 203% to set the override tax at the equivalent of 24 603% of safety employee/payroll The cost to the City of 24 603% of safety employee payroll for 2010/2011 will be/$9,598,357 and consequently, the City may set the override tax for 2010/2011 at $0 03777 er $100 of assessed value, and 7, Notwithstanding this authority the City Council chooses to set the override tax rate for 2010/2011 at $ 01600 per $100 of ssessed value, which will yield approximately $4,675 000 in revenue This amounts to an override tax of approximately $16 00 per $100 000 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 01600/100th Dollars ($0 01600)per$100 of assessed value shall be levied for employee retirement costs for Fiscal Year 2010/2011, BE IT FURTHER RESOLVED that the remainder of the Zero and 0 03377/100th Dollars ($0 0377) per $100 of assessed value levy authorized under Revenue & Taxation Code Section 96 31(a)(4) is suspended for Fiscal Year 2010/2011, BE IT FURTHER RESOLVED that the City Council declares that although it is suspending a portion of the retirement property tax for Fiscal Year 2010/2011, it retains the authority to levy the tax in future years up to the rate of$0 0493 per $100 of assessed value l V1 1 lI _ , 10 2574/49414 2 i Resolution No 2010-50 /1� PASSED AND ADOPTED by the City Council of the City of Huntington at a regular meeting thereof held on the day of , 20Y0 Mayor REVIE D APPROVED INITIATED AND APPROVED' City/AcIndistrator Finance Director APPROVED AS TO FORM ,iy-City Attorney Djco Ika 10 2574/49414 3