Loading...
CC - Item 3B - Minutes 06-12-07• • MINUTES OF THE SPECIAL MEETING ROSEMEAD CITY COUNCIL June 12, 2007 The special meeting of the Rosemead City Council was called to order by Mayor Tran at 4:34 p.m. in the conference room of the City Hall, 8838 E. Valley Boulevard, Rosemead, California. The pledge to the flag and invocation were waived as having been completed during the meeting just adjourned. ROLL CALL OF OFFICERS: Present: Councilmembers Clark, Low, Taylor, Mayor Pro Tern Nunez and Mayor Tran Absent: None 1. PUBLIC COMMENT FROM THE AUDIENCE - None 2. ADMINSTRATIVE MATTERS A. Benefits Modification At our May 29, 2007 meeting staff was directed to bring back additional details for City Council review as it relates to the proposed changes in the City's benefits package. In addition, staff was asked to provide a more detailed breakdown of the cost savings associated with the move. To comply with GASB 45, the City worked with Milliman Consultants and Actuaries, a firm that conducts actuarial valuations for a variety of jurisdictions. The valuation shows that the City's total liability for its retirement health benefit is $9,850,614. Based on negotiations with the Rosemead Employee Association (REA), new benefits package was agreed upon. The cost to implement this new benefits package is estimated to be around $1,632,167.As part of the agreement reached with the REA, retirement health care coverage would be eliminated for any employee hired after July 1, 2007. In addition, retirement health care coverage for existing employees would be limited. In speaking with our actuary, this means that our retirement health care liability would be significantly reduced. When taken together, this means that the City could potentially save around $8.2 million by implementing the new benefits plan. The true cost savings can be determined once an actuary completes a new valuation for the City's limited retirement health care package. Rosemead City Council Minutes: Special Budget Meeting 6-12-07 Page 1 of 9 • • Recommendation: That the City Council take the following action: 1) Approve the MOU with the Rosemead Employee Association. 2) Direct staff to bring back for City Council approval all necessary authorizing resolutions to implement the provision contained in the Memorandum of Understanding. Alternatives to Staff Recommendation: 1) Take no action and keep the City's existing benefits plan and benefits provider. 2) Approve a modified version of the negotiated benefits agreement with the REA. 3) Refrain from transitioning to a new benefits provider and stay with all of the City's existing health insurance carriers. 4) Decide to transition only some of the City's benefits to new health insurance providers. Acting City Manager Chi summarized decision points for Council consideration: 1) Transition of healthcare coverage from PERS Health to CIGNA; 2) Dental Insurance; 3) Vision Insurance; and 4) Ancillary benefits providers. Acting City Manager Chi introduced two representatives from CIGNA health insurance and one from the benefits brokerage firm contracted by the City. After benefits were sent out to market, the City may save the following by changing insurance carriers: • Medical 18% • Vision 41 % • Dental 16.7 % • Short Term Disability 9.8% • Life Insurance 41% It was reported CaIPERS is planning to raise copays by $5. The City will have control over plan design with CIGNA so even if costs are higher, the City can choose whether to pass on to employees or absorb the higher costs. Councilmember Clark inquired about a figure quoted in the 2007 Personnel Changes staff report that referenced the amount saved with new benefits at $14,000. She inquired why the benefit changes were recommended for such a small amount saved. Acting City Manager Chi responded that in the past the City had covered 100 % of employee health care costs. The proposal to switch to a cafeteria plan is that now each employee would be given an allocation of $1,200 a month to use to purchase health Rosemead City Council Minutes: Special Budget Meeting 6-12-07 Page 2 of 9 0 0 insurance and further explained the report she referenced was not an apple to apples comparison and indicated the City would save $167,000 in gross premiums costs with the same number of employees. Councilmember Clark pointed out that by implementing a cafeteria plan additional costs are being shifted to employees and put a cap on what the City will pay. Acting City Manager Chi conceded that if the City were to stay with PIERS Health that would be true because the $1,200 cafeteria amount would not cover the most expensive plan (Family PPO). But by switching to CIGNA, the Cafeteria Plan amount will cover the widest employee coverage (Family PPO) as CIGNA costs are lower ($1,116 vs. $1,800 for the same coverage with PERS). The following situations were discussed: 1) Contracted hospitals and doctors; 2) Pre-existing conditions exclusion waiver; 3) Transition of care benefit for 90 days; 4) Lower in-network provider charges than for out-of-network providers. Councilmember Clark asked what the $1,200 cafeteria amount will cover - the PPO or the HMO. Mayor Tran explained that CIGNA PPO (Family) is $1,148 and with dental and vision, it totals out to about $1,275. CIGNA representatives indicated the Family HMO cost is $938. Councilmember Low surmised that if an employee chooses the HMO (Family) option and if the City pays $1,200 in a cafeteria amount, the employee can pocket the difference of a couple hundred dollars. Councilmember Clark inquired about the HMO capitation arrangement (a form of provider reimbursement limit where patients are denied coverage when a certain level of service is reached) and expressed dissatisfaction with proposed vision and dental providers. She pointed out that CalPERS covers thousands of employees and felt the coverage size provides a safety net for the City. Councilmember Clark made a motion, with a second by Councilmember Taylor to stay with the PERS health insurance system for one year. Councilmember Taylor discussed GASB 45 regulations discussed in a Western City magazine article distributed by Acting City Manager Chi. The article highlighted retirement funding liabilities facing government agencies which advocated a delay in making retirement benefit changes as new products may be available in the near future. Mayor Tran indicated he did not support Councilmember Clark's motion due to the increased costs if the PPO Family option is chosen. Councilmember Taylor pointed out that about 60% of employees choose the Single PPO option. Rosemead City Council Minutes. Special Budget Meeting 6-12-07 Page 3 of 9 0 0 Councilmember Low commented that capitation rates are only for HMO carriers and exist within PERS Blue Shield HMO as well. She also discussed the difference between the VSP and Eye Mat plans. Mayor Pro Tem Nunez made a substitute motion, with a second by Councilmember Low to accept the recommendation to move to CIGNA with an increased cafeteria amount of $1,276 per month. Mayor Tran suggested medical with CIGNA and dental and vision with current providers. Councilmember Taylor referenced the figure quoted in the staff report that indicated the City might save $8.2 million by implementing the new benefits plan. He asked how the City will save this money. Acting City Manager indicated the answer involves examination of the overall benefits provided by the City beyond just medical benefits. Councilmember Low suggested the Council focus on the vote on the current motion to transition to CIGNA with a cafeteria amount of $1,276. Mayor Pro Tern Nunez made another substitute motion to accept the recommendation to move to CIGNA for medical care and retain the current vision and dental insurance provider. Councilmember Low advocated giving employees a choice of dental and vision providers. Mayor Train asked the maker of the motion to consider the following amendment: 1) Switch to CIGNA medical health care, 2) Retain the current vision and dental providers; 3) Change ancillary benefits providers (short term and long term disability, life insurance, accidental death insurance) to providers recommended by staff and 4) Raise the cafeteria amount allocated for each employee to $1,350 per month to cover the higher dental and vision coverage costs with current providers. Mayor Pro Tem Nunez accepted Mayor Tran's amendment and Councilmember Low supported the motion with a second. Vote resulted: Yes: Low, Nunez, Tran No: Clark, Taylor Abstain: No Absent: No Rosemead City Council Minutes: Special Budget Meeting 6-12-07 Page 4 of 9 • • The meeting recessed at 6:05 pm to convene the Community Development Commission meeting scheduled for 6:00 pm and reconvened to the City Council meeting after roll call for the CDC meeting was taken. Councilmember Clark inquired about the Long Term Care coverage. Acting City Manager Chi indicated it will be available for employee purchase. Acting City Manager Chi reminded the Council they had to provide direction on the MOU with the Rosemead Employee Association. Councilmember Clark indicated she did not agree with transition from the 2% PERS to the 2.7& PERS as it will not provide an incentive to staff to stay at the City. She also disagreed with the change to a one- year highest salary calculation from the previous three year average. Councilmember Clark made a motion, with a second by Councilmember Taylor to approve the Memorandum of Understanding with the REA with the deletion of the 2.7% PERS and the deletion of the single year highest salary calculation. Acting City Manager Chi reported the changes were proposed in exchange for a fully paid medical benefit at retirement. Mayor Pro Tern Nunez made a substitute motion with a second by Councilmember Low to accept the MOU with the Cafeteria Plan modification reflected. Vote resulted: Yes: Low, Nunez, Tran No: Clark, Taylor Abstain: None Absent: None Councilmember Taylor stated for the record he did not feel staff had adequately planned for the additional financial burden to the City. Councilmember Low stated for the record she supported the motion because she felt the benefits negotiated with the REA was a fair exchange for the deletion of the medical benefit at retirement. B. Personnel Changes: FY 2007-2008 The 2007-2008 budget details an expenditure plan for all City operations and capital improvement projects totaling $37.2 million. This spending plan also projects revenues of $33.2 million and reflects a reduction in fund balance of $4 million. The General Fund budget is $16.2 million, or 44% of the City's total budget. It is important to note that the General Fund reserves will decrease by $1.4 million; however, overall General Fund reserve levels will remain healthy at $21.1 million. There are a total of nine new positions that are included in this budget for City Council review. The new positions proposed include: Rosemead City Council Minutes: Special Budget Meeting 6-12-07 Page 5 of 9 0 0 1) Assistant to the City Manager 2) People Manager 3) Public Communications Manager 4) Assistant Planner 5) Accounting Manager 6) Public Safety Coordinator 7) Administrative Assistant (Public Safety Services Department) 8) Management Analyst (CDBG & HOME programs) 9) Grants Specialist (CDBG & HOME programs) Recommendation: That the City Council provide direction Acting City Manager Chi outlined the new proposed positions and pointed out that CDBG & HOME positions had already been approved at a previous City Council meeting. Each department director highlighted the need and duties for their respective requested position(s). Councilmember Low suggested the Assistant to the City Manager and the People Manager responsibilities might be combined into one position. She felt additional personnel will provide the community with better services. Councilmember Clark advocated caution in hiring so many additional employees and suggested the use of interns instead and/or providing bonuses to existing staff. She referenced neighboring cities that are encountering problems with high costs associated with additional staff. Mayor Pro Tem Nunez pointed out that referenced cities were plagued by separate retirement benefits offered to police and fire personnel. He suggested the additional staff will move the City forward and give staff the ability to provide detailed analytical reports to the Council. Mayor Tran pointed out the City has actually saved money by hiring an in-house employee versus a contracted employee. Councilmember Taylor inquired about the reduction of the General Fund due to funds required for additional staff. He stated he was not comfortable supporting the additional staff due to the additional $1,000,000 cost to the City. Councilmember Taylor asked how the City plans to raise additional revenue to sustain additional positions in the future. Interim City Manager Chi indicated he will work with staff to come up with strategies. Councilmember Low made a motion with a second by Mayor Pro Tern Nunez to combine the Assistant to the City Manager position with the People Manager position Rosemead City Council Minutes: Special Budget Meeting 6-12-07 Page 6 of 9 • • and approve the remaining positions recommended by staff as listed above. Vote resulted: Yes: Low, Nunez, Tran No: Clark, Taylor Abstain: None Absent: None Councilmember Clark stated for the record her "No" vote was because she felt the City should provide bonuses to current staff for additional work and utilize college students through internships to address staffing needs. Mayor Pro Tem Nunez stated for the record his "Yes" vote was to help the City grow, reach out and provide more services to residents. C. PARS Alternate Retirement System The City of Rosemead is required, on behalf of each part-time employee, to contribute to Social Security an amount equal to 6.2% of his or her salary. The employee also contributes 6.2% to Social Security for a combined contribution of 12.4%. The United States Congress adopted the Omnibus Budget Reconciliation Act (OBRA) in 1990. OBRA mandated that all part-time, seasonal, and temporary employees participate in a Qualifying Retirement System in lieu of Social Security. Congress specifically provided alternatives with statutory language spelling out the minimum requirements for alternate systems. The Public Agency Retirement System (PARS) offers an alternate retirement system (ARS) that meets the statutory requirements as specified by Congress. Under the PARS ARS program, part-time employees who work less than 1,000 hours per fiscal year can enroll. By enrolling, the total contribution to the retirement system for these employees will be 7.5% rather than the 12.4% mandated by Social Security. The 7.5% contribution rate can be split equally between the employee and the employer, meaning that the employee would contribute 3.75% to the program, and the employer would contribute 3.75% to the program. This program could save the City around $15,000 per year. In addition employees would be able to take home additional salary under the plan because of the reduced contribution rate. Recommendation: That the City Council approve Resolution 2007-21 providing for PARS as an alternative retirement system for part-time, seasonal, and temporary employees. Rosemead City Council Minutes: Special Budget Meeting 6-12-07 Page 7 of 9 Juan Nunez, Rosemead resident, asked if proposed benefit changes will apply to all employees across the board. Staff indicated that the changes would if approved. Mr. Nunez expressed concern about this item and felt employees would miss out on retirement benefits. Staff explained changes will only apply to part-time, seasonal and temporary employees. Mayor Pro Tern Nunez pointed out the proposed PARS alternate retirement system is IRS approved. Mayor Pro Tern Nunez made a motion, with a second by Councilmember Low to approve the PARS alternate retirement system. Vote resulted: Yes: Clark, Low, Nunez, Tran No: Taylor Abstain: None Absent: None 3. CONSENT CALENDAR A. Approval of the 2007-08 Annual Budget Activity/Accounts Recommendation: That the City Council approve the 2007-08 Annual Budget Activity/Accounts Mayor Pro Tern Nunez made a motion with a second by Councilmember Low to approve the 2007-08 Annual Budget Activity Accounts. Vote resulted: Yes: Low, Nunez, Tran No: Clark, Taylor Abstain: None Absent: None 4. MATTERS FROM THE MAYOR & CITY COUNCIL - None 5. MATTERS FROM THE CITY MANAGER & STAFF - None Rosemead City Council Minutes: Special Budget Meeting 6-12-07 Page 8 of 9 • • 6. ADJOURNMENT The meeting adjourned at 7:55 pm. The next regular meeting is scheduled for June 12, 2007 at 7:00 p.m. Respectfully submitted: Nina Castruita City Clerk APPROVED: John Tran MAYOR Rosemead City Council Minutes: Special Budget Meeting 6-92-07 Page 9 of 9