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HomeMy WebLinkAbout2004 05-25 CC ADJ AGENDA PKTv ADJOURNED REGULAR MEETING OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY Tuesday, May 25, 2004 at 11:00 a.m. City Council Chambers 1243 National City Boulevard National City, CA 91950 BUSINESS ROLL CALL 1. PUBLIC HEARING: JOINT CITY COUNCIL AND CDC PUBIC HEARING REGARDING THE SALE OF REAL PROPERTY TO MARINA GATEWAY DEVELOPMENT COMPANY, LLC AND SYCUAN TRIBAL DEVELOPMENT CORPORATION LOCATED ON THE SOUTHEAST CORNER OF BAY MARINA DRIVE AND HARRISON AVENUE. 2. RESOLUTION NO. 2004-90: APPROVING THE SALE OF REAL PROPERTY OWNED BY THE COMMUNITY DEVELOPMENT COMMISSION TO MARINA GATEWAY DEVELOPMENT COMPANY, LLC AND SYCUAN TRIBAL DEVELOPMENT CORPORATION LOCATED ON THE SOUTHEAST CORNER OF BAY MARINA DRIVE AND HARRISON AVENUE 3. CLOSED SESSION: CONFERENCE WITH LEGAL COUNSEL — ANTICIPATED LITIGATION — GOVERNMENT CODE SECTION 54956.9(C) — (TWO POTENTIAL CASES) 4. PERS RISK POOLING AND OPTION TO COMBINE SAFETY PLANS TO AVOID RISK POOLING PUBLIC ORAL COMMUNICATIONS ADJOURNMENT Next Regular Meeting of the City Council — Tuesday — June 1, 2004 - 6:00 pm — Council Chambers — Civic Center Upon request, this agenda can be made available in appropriate alternative formats to persons with a disability in compliance with the Americans with Disabilities Act. Please contact the City Clerk's Office at 336-4228 to request a disability -related modification or accommodation. Notification 24 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. City of National City COUNCIL AGENDA STATEMENT AEETING DATE: May 25, 2004 AGENDA ITEM NO. 1 / ITEM TITLE: PUBLIC HEARING: CONTINUED JOINT CITY COUNCIL AND CDC PUBLIC HEARING REGARDING THE SALE OF REAL PROPERTY TO MARINA GATEWAY DEVELOPMENT COMPANY, LLC AND SYCUAN TRIBAL DEVELOPMENT CORPORATION LOCATED ON THE SOUTHEAST CORNER OF BAY MARINA DRIVE AND HARRI- SON AVENUE PREPARED BY: Benjamin Martinez Executive Director EXPLANATION: DEPARTMENT Community Development Commission A Public Hearing by the legislative body (City Council) is required before any property acquired by the Community Development Commission (CDC) with tax increment funds is sold for a redevelopment pur- pose. This joint public hearing complies with the requirements of the California Community Redevelop- ment Law Health and Safety Code Section 33433. A Summary Report was completed in accordance with this code section pertaining to the fair reuse value of the property. The Summary Report was made available for public review prior to today's public hearing and public notices were published in compli- ance with the above code section as well. This is the time and place for the Joint Public Hearing. A resolution approving the sale of the property to Marina Gateway Development Company, LLC and Sycuan Tribal Development Corporation is pro- vided later in this agenda. On May 18, 2004, a Joint Public Hearing was conducted as required for this item. Upon the conclusion of the discussion, the Joint Public Hearing was continued to this meeting. Environmental Review X N/A Financial Statement The CDC will receive $2,752,992 for the sale of the 6.32 acre parcel located on the southeast corner of Bay Marina Drive and Harrison Avenue. This translates into a purchase price of $10 per square foot. STAFF RECOMMENDATION Hold the continued public hearing as required by Community Redevelopment Law Health and Safety Code Section 33433 BOARD/COMMISSION RECOMMENDATION N/A J ATTACHMENTS (Listed Below) 1. Proof of Publication - Notice of Joint Public Hearing 2. Summary Report Pertaining to Section 33433 Resolution No. NFORMATION News Construction Finance Government Law Real Estate,?` -'- Technology - Hospitality Commentary RESOURCES' Online Plan Room Attorney Directory:: San Diego SourceBook''-==- World - „- Newspapers Active Living':. RESEARCH Site Index'= Public Notices: Source Sales Tools '-pecial Reports Water COMMUNITY' Locales ..._ Landmarks' Arts and Entertainment Events Movies' Restaurants Hotels Weather Traffic 'l' CBE! Richard NAVIGATING A NEW WORLD SEARCH Enter Keywords or SourceCode PUBLIC NOTICES PUBLISHED IN THE DAILY TRANSCRIPT Advertised public notices, printed in a newspaper of general circulation, are required by California law. Within the individual category, notices are arranged by print publish day in reverse chronological order. 501 Miscellaneous Notices PUBLISHED: Friday May 14, 2004 NOTICE OF A SPECIAL MEETING OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY AND JOINT PUBLIC HEARING WITH THE COMMUNITY DEVELOPMENT COMMISSION NOTICE IS HEREBYGIVEN that on Tuesday, May 18, 2004, at 3:00 p.m., or as soon thereafter as the matter may be heard, the City Council of the City of National City will hold a Special Meeting for a Joint Public Hearing with the Community Development Commission of the City of National City in the National City Council Chambers located at 1243 National City Boulevard, National City, California to consider the following: TO PROVIDE FOR PUBLIC COMMENT, IN ACCORDANCE WITH SECTIONS 33433 AND 33445 OF THE STATE HEALTH & SAFETY CODE, REGARDING THE PROPOSED TERMS AND CONDITIONS FOR THE SALE OF LAND PROPOSED IN A DISPOSITION AND DEVELOPMENT AGREEMENT BETWEEN THE COMMUNITY DEVELOPMENT COMMISSION AND MARINA GATEWAY DEVELOPMENT COMPANY, LLC FOR REAL PROPERTY LOCATED ON THE SOUTHEAST CORNER OF BAY MARINA DRIVE AND HARRISON AVENUE. SAID LAND, CONSISTING OF APPROXIMATELY 6.4 ACRES, IS PROPOSED TO BE CONSTRUCTED WITH A 150 ROOM 3-STAR HOTEL WITH A 4,000 SQUARE FOOT RESTAURANT AND A 8,000 SQUARE FOOT OFFICE/COMMERCIAL BUILDING. A copy of the proposed Disposition and Development Agreement, a Summary Report Pertaining to the Sale of Real Property Pursuant to the proposed Agreement, as well as other documentation required by Section 33445 of the State Health & Safety Code are on file for public review at the Community Development Commission office located at 140 East 12th Street, Suite B, National City, California, 91950. Further information can be obtained by contacting the Office of the CDC at (619) 336-4250. The purpose of the joint public hearing is to receive testimony from the public regarding the proposed disposition and development of property as set forth in the proposed Disposition and Development Agreement. All interested parties are invited and encouraged to attend said meeting and express their opinions for or against this item. If you challenge the nature of the proposed action in court, you may be limited to raising only those issues you or someone else raised at the joint public hearing described in this notice, or in written correspondence delivered to the undersigned, or to the City Council of the City of National City at, or prior to, the joint public hearing. Furthermore, you must exhaust any administrative remedies prior to commencing a court challenge to City Council or Community Development Commission action. DATED: May 4, 2004 Benjamin Martinez, Executive Director Pub. May 7,14-k111366 Friday_May14_20 Ohl 6ciwr£S. t1 HAU.A.SYr1f 760 3154762 Attachment "1" SUMMARY REPORT FOR THE DISPOSITION AND DEVELOPMENT AGREEMENT BETWEEN THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY AND MARINA GATEWAY DEVELOPMENT COMPANY, LLC AND SYCUAN TRIBAL DEVELOPMENT CORPORATION MARCH 8, 2004 INTRODUCTION This document is the Summary Report ("Report") for the Disposition and Development Agreement ("Agreement") by and between the Community Development Commission of the City of National City ("CDC") and Marina Gateway Development Company, LLC and Sycuan Tribal Development Corporation ("Developer"). The Agreement facilitates: (1) the sale of a CDC owned property located at the southeast corner of Bay Marina Drive and Harrison Avenue, and (2) the development of a one hundred and fifty (150) room three star hotel with a restaurant and 8,000 square feet conference facilities, in addition to other structures which include: a 4,000 square foot restaurant, approximately 10,000 square feet of office/commercial/tourist space, a 1,000 square foot public vista point and all the associated parking and on -site improvements ("Improvements"). This Report has been prepared pursuant to Section 33433 of the California Health and Safety Code (California Community Redevelopment Law or "Law") and presents the following: • A summary of the proposed Development. • The cost of the Agreement to the CDC. • The estimated value of the interest to be conveyed, determined at the highest and best uses permitted by the CDC's Redevelopment Plan. • The estimated value of the interest to be conveyed determined at the use with the conditions, covenants, and development costs required by the Agreement. • An explanation of why the sale of property pursuant to the Agreement will assist in the elimination of blight. • Conformance with the CDC's Five -Year Implementation Plan. THE DEVELOPMENT In July of 1995 the CDC adopted the National City Redevelopment Project. The purpose was to further the community development objectives of the California Community Redevelopment Law. With this in mind, the CDC desires to redevelop a parcel comprised of approximately 6.32 acres located in the National City Redevelopment Project Area (the "Project Area") at the southeast corner of Bay Marina C:\DOCUME-1\MPerezyACALS-1\Temp\MARINA 33433 FINANCIAL SUMMARYttloc Attachment "2" THE COST OF THE AGREEMENT TO THE CDC As previously mentioned, the CDC currently owns the Project Site. In September of 1998, the CDC expended $3,527,000 in total acquisition costs for the Site. The costs were distributed as follows: ▪ Acquisition of real property in the amount of $1,102,000. ▪ Relocation costs in the amount $1,975,000. • Environmental mitigation costs in the amount of $450,000. The Developer will purchase the Property for $2,752,992, which will offset these costs. The net cost of the Agreement to the CDC will be $774,008. This net cost will be further reduced over time as a result of the net new tax increment revenue discussed above. ESTIMATED VALUE OF INTEREST TO BE CONVEYED The CDC commissioned an appraisal report, prepared by Hendrickson Appraisal Company in 1997 and by Keagy Real Estate in 2003, to determine the Property's land and improvement values. The more recent appraisal identified an adjusted land value for similar commercial property of $10.00 per square foot of land area. Recent market sales data for like properties was reviewed to determine if the land values presented in the appraisal report are still current. This review concluded that the stated per square foot value is still valid. The Property's land area is approximately 275,299 square feet. Multiplying the land area by the adjusted land value generates a value of the interest to be conveyed of $2,752,992. The CDC is selling the cleared parcel to the Developer for a value of $2,752,992. ESTIMATED VALUE OF THE INTEREST TO BE CONVEYED, DETERMINED AT THE USE AND WITH THE CONDITIONS, COVENANTS, AND DEVELOPMENT COSTS REQUIRED BY THE AGREEMENT The estimated value of the interest being conveyed is $2,752,992. This reflects the fair market value of vacant commercial property that must be developed with the conditions, covenants, and development costs required by the CDC and the City of National City.. EXPLANATION OF WHY THE SALE OF THE PROPERTY PURSUANT TO THE AGREEMENT WILL ASSIST IN THE ELIMINATION OF BLIGHT The actions contemplated by the Agreement will redevelop a property that is currently occupied with dilapidated structures and is impacted by deferred maintenance. Furthermore, the CDC's disposition of the Site to the Developer, and the Developer's acquisition of the Site and construction of the Improvements pursuant to the terms of this Agreement, are in the vital and best interest of the City and the health, safety, morals and welfare of its residents, and in accord with the public purposes and C:VOCUME-t\MPerez\LOCALS-t\Temp\MARtNA 33433 FINANCIAL SUMMARY1 doc 3 City of National City COUNCIL AGENDA STATEMENT 4EETING DATE: May 25, 2004 AGENDA ITEM NO. 2 ITEM TITLE: RESOLUTION NO. 2004-90 : APPROVING THE SALE OF REAL PROPERTY OWNED BY THE COMMUNITY DEVELOPMENT COMMISSION TO MARINA GATEWAY DEVEL- OPMENT COMPANY, LLC AND SYCUAN TRIBAL DEVELOPMENT CORPORATION LOCATED ON THE SOUTHEAST CORNER OF BAY MARINA DRIVE AND HARRISON AVENUE PREPARED BY: Benjamin Martinez DEPARTMENT Community Development Commission Executive Director EXPLANATION: A copy of the Summary Report pertaining to Section 33433 is included with the agenda item relative to the Joint Public Hearing held this date on this subject. The Summary Report concludes that the Fair Market Value of the property for sale to Marina Gateway Development Company, LLC and Sycuan Tribal Development Corporation is fair market. State Law requires that the Commission make one of the following findings: a) The consideration is not less than the fair market value at its highest and best use in accordance with the Plan; or, b) The consideration is not less than the fair reuse value at the use and with the covenants, condi- tions and development costs authorized by the sale or lease. The Resolution makes the finding related in a) above. A Disposition & Development Agreement (DDA) also subject to Public Hearing will be required prior to the actual sale of the property. This item will be considered on the CDC Agenda following ap- proval of this resolution. r Environmental Review X N/A Financial Statement The CDC will receive $2,752,992 for the 6.32 acre parcel located on the southeast corner of Bay Ma- rina Drive and Harrison Avenue. Additional financial details are provided in CDC Agenda. STAFF RECOMMENDATION Approve above -subject resolution BOARD/COMMISSION RECOMMENDATION N/A ATTACHMENTS (Listed Below) Resolution No. 2004-90 RESOLUTION NO. 2004 — 90 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY APPROVING THE SALE OF REAL PROPERTY OWNED BY THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY (CDC) LOCATED ON THE SOUTHEAST CORNER OF BAY MARINA DRIVE AND HARRISON AVENUE TO MARINA GATEWAY DEVELOPMENT COMPANY, LLC AND SYCUAN TRIBAL DEVELOPMENT CORPORATION AND MAKING CERTAIN FINDINGS IN CONNECTION HEREWITH WHEREAS, the Community Development Commission of the City of National City (the "CDC") is engaged in activities necessary to execute and implement the Redevelopment Plan (the "Redevelopment Plan") for the National City Redevelopment Project (NCRP); and WHEREAS, in furtherance of the objectives of the California Community Redevelopment Law (California Health and Safety Code Section 33000 et seq.), the CDC desires to redevelop a certain approximately 6.32 acre portion of the NCRP area located on the southeast corner of Bay Marina Drive and Harrison Avenue (the "Site") which is owned by the CDC; and WHEREAS, the Implementation Plan adopted by the CDC with respect to the NCRP area calls for the CDC's objective to "increase private investment wherever possible, to promote jobs and improve the property and sales tax base of the City"; and WHEREAS, the CDC and Marina Gateway Development Company, LLC and Sycuan Tribal Development Corporation (the "Developers"), propose to enter into a Disposition and Development Agreement (the "Agreement") pursuant to which the CDC would convey the Site to the Developers, and the Developers would construct improvements on the Site consisting of a 150 room three -star hotel with a restaurant and 8,000 square feet of conference facilities, a tourist commercial facility with a 4,000 square foot restaurant and 10,000 square feet of office/commercial/tourist space, a 1,000 square foot public vista point, and all of the associated parking and on -site improvements (the "Project"); and WHEREAS, pursuant to Section 33433 of the Community Redevelopment Law, the CDC is authorized, with the majority approval of the City Council after public hearing, to convey the Site for redevelopment purposes pursuant to the Redevelopment Plan upon a determination by the City Council that the sale of the Site will assist in the elimination of blight and that the consideration for such sale is not less than fair reuse value in accordance with the covenants and conditions governing the sale and development costs thereof; and Resolution No. 2004 —90 May 25, 2004 Page Two WHEREAS, pursuant to Section 33445 of the Community Redevelopment Law, the CDC has determined that the Project is of benefit to the NCRP area, the area in which it is proposed to be located; and WHEREAS, a public hearing notice was duly noticed in accordance with the requirements of Health and Safety Code Section 33433; and WHEREAS, the proposed Agreement, and summary report meeting the requirements of Health and Safety Code Section 33433, was available for public inspection consistent with the requirements of Health and Safety Code Section 33433; and WHEREAS, on March 23, April 6, April 20, May 18, and May 25, 2004, the City Council and CDC held joint public hearings on the proposed Agreement and evaluated all of the information, testimony, and evidence presented during the public hearing; and WHEREAS, the CDC has reviewed the summary report required pursuant to Health and Safety Code Sections 33433 and evaluated other information provided to it pertaining to the findings required pursuant to Sections 33433 and 33445; and WHEREAS, the sale of the Site pursuant to the proposed Agreement will improve the quality of life of the residents of the City of National City and its visitors through the elimination of blight and the development of quality projects in the NCRP area by providing for the reuse and redevelopment of a portion of the NCRP area which formerly contained the City landfill; and WHEREAS, the value of the consideration for the Site, pursuant to proposed Agreement will not be less than the fair reuse value of the Site as set forth in the summary report completed per Section 33433; and WHEREAS, on March 2, 2004, the CDC adopted Resolution No. 2004-17 approving the Concept Plan and Consistency Report for the Marina Gateway Development Project. In adopting said Resolution, the CDC determined that the Concept Plan is consistent with both the Harbor District Specific Area Plan and its Supplemental Environmental Impact Report. The CDC also determined that the review, consideration and approval of a Disposition and Development Agreement for the Project by the CDC shall not be subject to environmental review pursuant to the requirements of California Environmental Quality Act (the "CEQA"), nor will any applications for entitlement approvals, due to the fact that the consistency determination shall serve as the required CEQA environmental review; and Resolution No. 2004 —90 May 25, 2004 Page Three WHEREAS, all actions required by all applicable law with respect to the proposed Agreement has been taken in an appropriate and timely manner; and WHEREAS, the CDC has duly considered all terms and conditions of the proposed Agreement and believes that the disposition of the Site pursuant thereto is in the best interests of the City of National City and the health, safety, and welfare of its residents, and in accord with the public purposes andprovisions of applicable state and local law requirements. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of National City as follows: Section 1. The City Council hereby finds and determines, based upon substantial evidence provided in the record before it, that the consideration for the disposition of the Site, pursuant to the terms and conditions of the proposed Agreement, is not less than the fair reuse value of the Site in accordance with the covenants and conditions governing the sale, and the development costs required under the proposed Agreement. Section 2. The City Council hereby finds and determines, based upon substantial evidence provided in the record before it, that the Project is of benefit to the NCRP area, the area in which it is proposed to be located. Section 3. The City Council hereby finds and determines that the disposition of the Site pursuant to the proposed Agreement will eliminate blight within the Project Area by providing for the reuse and redevelopment of a portion of the Project Area which was declared blighted for the reasons described above. Section 4. The CDC Executive Director is authorized to file a Notice of Exemption with the County Clerk of the County of San Diego following adoption by the CDC of the resolution approving the proposed Agreement. Section 5. The CDC Chairman is authorized to execute the proposed Agreement following adoption by the CDC of the resolution approving the proposed Agreement. Section 6. The City Council hereby finds and determines that the Agreement is consistent with the Implementation Plan for the Redevelopment Plan. --- Signature Page to Follow --- Resolution No. 2004 — 90 May 25, 2004 Page Four PASSED and ADOPTED this 25th day of May 2004. Nick Inzunza, Mayor ATTEST: Michael Dalla, City Clerk APPROVED AS TO FORM: George H. Eiser, Ill City Attorney City of National City COUNCIL AGENDA STATEMENT .1EETING DATE: May 25, 2004 AGENDA ITEM NO. 3 / ITEM TITLE: CLOSED SESSION: CONFERENCE WITH LEGAL COUNSEL —ANTICIPATED LITI- GATION —GOVERNMENT CODE SECTION 54956.9(C) - TWO POTENTIAL CASES PREPARED BY: Benjamin Martinez DEPARTMENT Community Development Commission Executive Director EXPLANATION: Environmental Review N/A Financial Statement I STAFF RECOMMENDATION BOARD/COMMISSION RECOMMENDATION ♦ I ATTACHMENTS (Listed Below) l City of National City, California COUNCIL AGENDA STATEMENT FETING DATE May 25, 2004 AGENDA ITEM NO. 4 ITEM TITLE PERS RISK POOLING AND OPTION TO COMBINE SAFETY PLANS TO AVOID RISK POOLING PREPARED BY EXPLANATION George H. Eiser, III (Ext. 4221) DEPARTMENT City Attorney The City makes contributions to PERS to fund the PERS retirement benefit for City employees. Currently, there are separate rate plans for the different employee groups. Quite recently, the administrators of PERS informed the City that for its public safety employees, the City must choose between combining the rate plans for fire and police employees, or having the fire and police plans pooled into a risk pool created by PERS. The City must inform PERS of its decision by June 1, 2004. If PERS is not informed of the City's decision by that time, the City will be assigned to a risk pool by PERS. Attached is a letter from PERS which provides background information, as well as a letter from the City's Financial Advisor discussing the pro's and con's of combining safety plans as opposed to risk pooling. CEnvironmental Review X N/A Financial Statement Future PERS contribution rates may increase or decrease. Approved By: Finance Director Account No. STAFF RECOMMENDATION Direct staff. BOARD / COMMISSION RECOMMENDATION N/A ATTACHMENTS ( Listed Below ) Letter from CalPERS Letter form Estrada Hinojosa & Company Resolution No. A-200 (9.99) To: From: Re: ESTRADA 'HIN(JOSA INVESTMENT BANKERS 437 J Street I Suite 212 I San Diego, California 92101 (619) 234-7783 1 Fax (619) 234-1576 May 18, 2004 Chris Zapata c: Marylou Matienzo Ruben Mendoza, Financial Advisor to the City PERS Risk Pooling and Option to Combine Safety Plans to Avoid Risk Pooling PERS is mandating that all agencies that have safety groups with less than 100 active employees must join the PERS risk pool for normal costs. The risk pools are scheduled to go into effect June 1, 2004. The City of National City falls into this category (less than 100 active employees in Police and Fire safety plans), so it must decide before June 1, 2004 to either join the risk pools or combine the safety plans into one plan which would not be subject to mandated participation into risk pooling. To that end, I researched the pros and cons of combining the plans into one or taking the alternative of joining the risk pools. There are many arguments for each. In my research, I contacted other cities which are currently in the same situation as National City. I was hoping to discover overwhelming arguments for oneparticular course of action. As it turned out, some cities are combining their safety plans, while others are joining the risk pools. What I decided to do is present to you the arguments being used by both sides to determine the direction taken. Arguments to Combine Safety Plans 1. The conversion of unused sick leave to retirement service credit is mandated under risk pooling. 2. The cancellation of any remaining payments owed by the member for the purchase of optional service credit upon the employment related disability of the member (industrial disability retirement, or IDR) is mandated under risk pooling. This means that the member walks away from the balance due, which would result in the pool paying for the service credit. 3. Once a plan is in one of the risk pools, it will not be allowed to leave the risk pool structure and become a stand-alone plan. So at any point in the future, should the number of members exceed 100, the agency will still be required to stay in the risk pool. 4. Risk pooling consists of pooling assets and liabilities across employers. This implies that all the assets of the pool, regardless of source, will be used to pay the benefits of all members participating in the pool. This is the reason employers will lose control over their assets in a risk pool. If the City plans a "fresh start" reamortization of unfunded liabilities with PERS for 2004/05, and plans to prepay retirement contributions for 2004/05, it is important that the City HEADQUARTERS ESTRADA HINOJOSA & COMPANY, INC. 1717 Main Street 47th Floor, Lockbox 47 I Dallas, Texas 75201 (214) 658-1670 11 (800) 676-5352 I Fax (214) 658-1671 Mr. Chris Zapata Page 2 of 4 May 18, 2004 maintain control over its own assets and liabilities with CALPERS, and not commingle them with all of the other employers in the pool. 5. Optional benefits will be allowed to vary within the same pool, but an employer contracting for a more expensive optional class I benefit will be required to pay a surcharge in addition to the pool's rate. Pros 1. Each bargaining unit can have different benefits, but the PERS rate will be a blended rate. 2. The City will have control over the total benefit costs. Any benefit changes will need to be negotiated. 3. It is easier to control your own bargaining units, rather than statewide bargaining units. Cons I. You may lose bargaining flexibility. For example, if one bargaining unit has surpluses and the other has unfunded liabilities, the surpluses from one group can be used to offset the liabilities in the other group. 2. During labor negotiations, Police may think that they are paying for Fire benefits, or vice versa. 3. If the City decides to combine PERS rates and later determines that the risk pool appears the better choice, it will have to wait five years after the implementation of the combined rate to join the risk pool. 4. Since the rate is blended, the Fire department will have fewer costs assigned to them than the benefits are worth, and the Police department will be charged more than the benefits are worth. 5. Agencies are giving bargaining units a common bond to increase benefits. The two bargaining units can use the strategy to increase benefits for both, thereby having more negotiation power. 6. PERS actuarial staff will provide the City with a combined rate, but they cannot provide the component Police and Fire rates to be used for negotiations. The only option would be to use the current established ratios for future negotiation calculations. Arguments to Join and Not Join Risk Pool Risk pooling consists of pooling assets and liabilities across employers to produce large risk sharing pools that will dramatically reduce or eliminate the large fluctuations in the employer's contribution rate caused by unexpected demographic events. Each pool will have a basic rate for mandated benefits and surcharges for various optional benefits. HEADQUARTERS ESTRADA HINOJOSA & COMPANY, INC. 1717 Mair, Street 47th Floor, Lockbox 47 1 Dallas, Texas 75201 (214) 658-1670 1(800) 676-5352 1 Fax (214) 658-1671 Mr. Chris Zapata Page 3 of 4 May 18, 2004 Pros 1. If the City experiences a high volume of disability retirements, PERS rates won't increase significantly because the cost is spread among a number of agencies. 2. If the City has high PERS normal rates, these rates may decline over the five-year phase -out period if the City joins the risk pool. 3. Since Police and Fire have different benefit plans, they can be pooled with employees who have the same benefits. Therefore, the costs assigned to each employee and each department will correctly reflect the benefits they receive. 4. If the City is considering increasing the benefits for a bargaining unit, the costs for those increased benefits will be known. Cons 1. If other agencies experience high volume of disability retirements, PERS rates will increase because our rates are affected by the other agencies in the pool. 2. Per the February 27, 2004 PERS Circular Letter, there will now be certain benefits that were previously optional contract revisions that will now be mandated for plans participating in risk pools, such as the Police conversion of unused sick leave to retirement service credit. 3. Once a plan is in one of the risk pools, it will not be allowed to leave the risk pool structure and become a stand-alone plan, even if the number of active members exceeds 100 for both Police and Fire. 4. Agencies with a lower than average normal rate will choose to combine their Police and Fire rates, while agencies with a high normal rate will choose to join the risk pool. 5. The PERS Board is perceived as pro -union and the Board could elect to give Police and Fire benefits in the future without the need of labor negotiation or City input. It is possible for the Board to increase retirement benefits. Other agencies have experienced this issue regarding the rising costs for PERS health coverage. 6. The estimated rates provided for the risk pools may be low. 7. In an effort to stabilize PERS rates, there will be a five-year phase -out period. Therefore, if the City's normal rate in the risk pool is lower than outside the risk pool, it will take five years to reduce the PERS rate to that of the pool. 8. PERS rates are dependent on the history of disabilities. Over time, you don't know what will happen with the pool rate. HEADQUARTERS ESTRADA HINOJOSA & COMPANY, INC. 1717 Main Sheet 47Ih Floor, Lockbox 47 I Dallas, Texas 75201 i(214) 658-1670 1(800) 676-5352 I Fax (214) 658-1671 Mr. Chris Zapata Page 4 of 4 May 18, 2004 Please advise if I can assist further. RM/dt Sincerely, Ruben Mendoza Senior Vice President HEADQUARTERS ESTRADA HINOJOSA a COMPANY, INC. 1717 Main Street 47th Floor, Loclmox 47 1 Dallas, Texas 75201 (214) 658-1670 3 (800) 67ESa52 I Fax (214) 658-1671 CaIPERS April 6, 2004 Actuarial & Employer Services Division P.O. Box 942709 Sacramento, CA 94229-2709 Telecommunications Device for the Deaf - (916) 326-3240 (888) CaIPERS (225-7377) FAX (916) 326-3005. Ms. Tess Limfueco Senior Accountant City of National City. 1243 National City Boulevard National City, CA 91950-4397 SUBJECT: Option to Combine Safety Plans to Avoid Risk Pooling. Dear Tess: CaIPERS' staff has been working toward implementing risk pools for the last few years: The implementation is fast approaching. Mandated participation is required for all rate plans with less than 10Q active_,members. Pooling will help reduce fluctuation in employer contribution rates caused by unexpected demographic events. Please refer to CaIPERS' Circular Letter 200-140-04 for more information on risk pooling. You currently have separate safety fire and safety police rate plans., According to our records, your fire and safety plans will be subject to mandated participation into risk pools since they each less than 100 active members. However, you may choose not to pool these plans and instead combine your two safety plans into a single safety plan which would have more than 100 active members. The combined safety plan would not be subject to mandated participation into risk pooling. You should be aware that different actuarial assumptions will continue to be applied to fire and police. Rate volatility due to demographic gains and losses willpotentially be greater in your combined safety plan than if you do separate each into larger pools at CaIPERS.. If you decide to combine your two rate plans into a single safety rate plan, note that your employer contribution will be based on a single contribution rate beginning with the 05- 06 fiscal year, and not on two different rates. As an estimate, the 05-06 employer rates for your plans are 31.2% for your fire plan and 24.0% for your police plan. If the l5lans were combined, the estimated rate for 05-06 is 26.4%. _If you choose tocombine your safety rate plans, you may also want to consider the potential loss in bargaining flexibility before making this important decision. California Public Employees' Retirement System Lincoln PIaza - 400 P Street Sacramento, CA 95814 Ms. Tess Limfueco 2 April 6, 2004 If you choose to combine your safety plans, you must notify us befor Please use the attached election form and return envelope to notify As your CaIPERS actuary, I will call you shortly after you receive this letter to discuss this issue. If we are unable to reach you and if we do not hear from you by June 1, 2004 or receive your election form, we will proceed to move one or both of your safety plans into the appropriate pool. It should be kept in mind that once a plan is included in a pool, it cannot withdraw from being pooled. If you have any questions contact the Actuarial & Employer Services Division at 1-888-Ca1PERS (1-888-225-7737). Sincerely, Nancy E. Campbell, A.S.A. Senior Pension Actuary Name of Agency City of National City Employer ID No .190 Contact Name. Check Box X I choose to combine my safety plans as described in the attached letter. I choose not to combine my safety plans as described in the attached letter. Authorized Signature for Agency Date