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Recommendation to Amend the General Fund Fiscal Year 2015-16 Budget by Appropriating $3,000,000 from the General Fund Committed Fund Balance to Pay for the City’s Other Post Employment Benefits (OPEB) Obligation as Stated in the Safety Bargaining Groups Memoranda of Understanding. (Finance 2410)
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To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Recommendation to Amend the General Fund Fiscal Year 2015-16 Budget by Appropriating $3,000,000 from the General Fund Committed Fund Balance to Pay for the City’s OPEB Obligation as Stated in the Safety Bargaining Groups Memoranda of Understanding
BACKGROUND
In December 2014, the City Council approved a $3 million commitment for funding the City’s long term liabilities. Later on April 29, 2015, the City Council approved memoranda of understanding (MOUs) for the International Association of Fire Fighters (IAFF), Alameda Fire Chiefs Association (AFCA), Alameda Police Officers Association (APOA) and Alameda Police Management Association (APMA) (collectively the safety bargaining groups). All four MOUs contain an Other Post-Employment Benefits (OPEB) section that stipulates that a one-time City contribution of $5 million be made in January 2016 to an irrevocable OPEB Trust. Of the $5 million, $3 million was to come from the General Fund committed fund balance that was approved by the City Council in December 2014.
DISCUSSION
The City is in the process of setting up a separate account with an existing PARS OPEB Trust (Trust) for the purpose of setting aside and accumulating funds to be used toward the payment of OPEB benefits for those sworn employees in the City’s Fire and Police Departments who pay into the Trust and retire after January 1, 2019. The January 2019 date was established to ensure at least 3 years of contributions were made before benefits could be drawn upon. It also allows the Trust to earn interest for an additional 3 years.
Under the safety MOUs, the City is obligated to make a one-time lump sum contribution of $5 million into the Trust in January 2016. Of the $5 million, $3 million is currently accounted for in the General Fund as part of the committed fund balance. This money must be appropriated to authorize disbursement of these funds.
As a clarifying point, the City Council voted at the September 15, 2015 meeting to allocate $3 million out of a $14.5 million one-time surplus, to OPEB funding for existing retirees. This allocation was made in addition to the $3 million approved in December 2014.
FINANCIAL IMPACT
Tonight’s staff report is presented to amend the General Fund Fiscal Year 2015-16 Budget by $3,000,000 by increasing Transfer Out to OPEB Fund appropriation and reducing General Fund committed fund balance.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378(b)(4) of the CEQA Guidelines, because it involves governmental fiscal activities (acceptance of the Treasury report), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION
Recommendation to amend the General Fund Fiscal Year 2015-16 Budget by appropriating $3,000,000 from the General Fund committed fund balance to pay for the City’s OPEB obligation as stated in the Safety Bargaining Groups Memoranda of Understanding.
Respectfully submitted by,
Elena Adair, Finance Director