HomeMy WebLinkAboutCity Council - 2023-23 RESOLUTION NO. 2023-23
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF HUNTINGTON BEACH LEVYING A RETIREMENT
PROPERTY TAX FOR FISCAL YEAR 2023/2024 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 City 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 both
the 1978 and 2010 Charters provide 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 the 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 Ass'n 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 "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 Pension
Override Tax Study" dated February 10, 2020. 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 4.482% of safety payroll, and the remainder of the employer
contribution represents the cost of 2% @ 50; and
22-11369/283825 • •1
RESOLUTION NO. 2023-23
In April 2004, then 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
For 2023/2024, CalPERS is requiring the City to contribute 58.299% of safety employee
payroll as the City's employer's contribution. In order to set the tax override, the City may
subtract the 4.482% normal cost of 3% @ 50 from the 58.299% to set the override tax at the
equivalent of 53.817% of safety employee payroll. The cost to the City of 53.817% of safety
employee payroll for 2023/2024 will be $26,134,579 and pursuant to Proposition 13 and
Revenue and Taxation Code Section 96.31(a)(4), the City could have set the override tax for
2023/2024 at$0.05503 per$100 of assessed value; and
In August 2012, the City Council added Chapter 3.07 to the Municipal Code which sets
the future retirement tax rate to the Fiscal Year 2012/13 rate of$0.01500 per $100 of assessed
value, which amount is less than the otherwise permitted retirement tax per Revenue and
Taxation Code Section 96.31(a)(4) of$0.04930 per $100 of assessed value. For the Fiscal Year
2021/2022, the most recent year available, the levied retirement tax of $0.01500 per $100
assessed value generated $7,911,896.
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 2023/2024.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the 26th day of June , 2023.
REVI WE AND A PROVED: 1'4'7
Mayor
INITIATED AND APPROVED:
City er\
Chief Fi , Officer
APPROVED AS TO FORM:
City ttorney
23-12815/308703 2
Res. No. 2023-23
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, ROBIN ESTANISLAU, 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 an adjourned regular meeting thereof held
on June 26, 2023 by the following vote:
AYES: Kalmick, Moser, Van Der Mark, Strickland, McKeon, Bolton, Burns
NOES: None
ABSENT: None
ABSTAIN: None
eWeriftid, 940-40,1410
City Clerk and ex-officio-Clerk of the
City Council of the City of
Huntington Beach, California