Title
Recommendation to Receive an Update to the July 23, 2013 Report on the City's Other Post-Employment Benefits (OPEB) Liabilities (City Manager 2110)
Body
To: Honorable Mayor and Members of the City Council
From: John A. Russo, City Manager
Re: Receive an Update from the July 23, 2013 Report on the City's Other Post-Employment Benefits (OPEB) Liabilities
BACKGROUND
OPEB was a rarely discussed and even more rarely understood matter until 2004, which is when the Governmental Accounting Standards Board1 (GASB) released Statement 45 (GASB 45) concerning health and other non-pension benefits. This regulation required cities to account for and disclose on their financial statements their liability for non-pension related benefits paid to retirees by Fiscal Year 2008/092. The goal was to create greater financial statement accuracy and transparency. These benefits and associated liabilities had existed for many years; they just had not been openly reported.
At the time the City was coming into compliance with GASB 45, the City Council received several reports from both staff and the Fiscal Sustainability Committee, which included the City Treasurer and Auditor and several members of the public, stressing the importance of addressing the growing OPEB liability. Several options were discussed including setting up an Irrevocable Trust Fund, issuing OPEB Bonds, and pre-funding the liability using recurring revenue streams such as interest owed the General Fund from loans given to Alameda Municipal Power (AMP) and the Alameda Reuse and Redevelopment Authority (ARRA) (neither of which is available today). The general consensus was that a mere "pay-as-you-go" approach was an unwise long-term approach and that some pre-funding was necessary.
DISCUSSION
OPEB benefits, which are considered part of the compensation negotiated between the employer and its employees, but not received until retirement, can include medical, dental, vision, hearing,...
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