HomeMy WebLinkAbout2012-10-23 - AGENDA REPORTS - CITY COUNCIL HEALTH BENEFITS (2)INWW09131m►i li
DATE:
SUBJECT:
DEPARTMENT:
Agenda Item: 9
CITY OF SANTA CLARITA
AGENDA REPORT
City Manager Approval:
Item to be presented by:
October 23, 2012
�/.��,�.Jennifer CurtisJoe Montes
CITY COUNCIL HEALTH BENEFITS (UPDATED 10/22/12 TO
INCLUDE END NOTES)
City Managers Office
The City Council receive and file this staff report concerning the implementation of the City's
two-tier health benefit system as it applies to Councilmembers and employees.
BACKGROUND
At the May 22, 2012, regular City Council meeting, Councilmember Boydston requested that an
item be agendized to discuss the discrepancy in amounts received by him versus other
Councilmembers with respect to the cash in lieu of health insurance benefit that Councilmembers
and employees are eligible to receive. This discrepancy is a result of the implementation of a
two-tier benefit program that the City Council previously approved. Councilmember Boydston
requested a legal analysis of that implementation as well as administrative options for the City
Council to consider. At the next regular City Council meeting on June 12, 2012, Councilmember
Boydston requested this item be postponed to a future Council meeting pending guidance from
the California Fair Political Practices Commission (FPPC) concerning whether he may
participate in discussions related to the amount of benefits he receives.
Councilmember Boydston sought advice from the FPPC on this matter, and in a letter dated
October 1, 2012, the FPPC concluded Councilmember Boydston could not participate due to a
conflict.
This report describes the implementation of the City's two-tier health benefit system as it applies
to Councilmembers and employees. However, this report does not address administrative
DECEIVED
options (if any) that might increase Councilmember Boydston's benefit level. In light of the
FPPC's opinion that Councilmember Boydston has a conflict in this regard, undertaking that
analysis for consideration by the City Council based upon his request from the dais at the
May 22, 2012, Council meeting contradicts the FPPC's advice.
While the focus of this item is on cash in lieu benefits, it should be noted that other benefits also
differ from Councilmember to Councilmember. For instance, some Councilmembers have opted
to enroll in the City's pension plan with the California Public Employees' Retirement System
(PERS) while others elected to participate in a deferred compensation account. Eligibility for
retiree health benefits and the amount of this benefit depend on whether the Councilmember is a
member of PERS, hire date, and length of service with the City. Some Councilmembers are
eligible for Supplemental Benefit Dollars because they use their full cafeteria dollars to purchase
health, vision, and dental coverage.
I. Review of Benefits by Emplovee Workgroup
In the fall of 2010, a workgroup of unrepresented employees from each City department was
formed to review and evaluate the benefit package offered by the City to its employees. The goal
of this workgroup was to ensure that employee benefits were competitive in the labor market, fair
to employees, defensible to the public, and sustainable in the long-term.
In light of the workgroup findings, a closed session discussion was held on November 23, 2010,
for the City Council to provide direction to the City Manager. Subsequent to the closed session
discussion, at the December 14, 2010, regular Council Council meeting, benefit changes having a
fiscal impact were included with the Fiscal Year 2010-2011 mid -year budget and outlined in
Resolution Number #10-92, a copy of which is attached. The City Manager met with
unrepresented employees on December 15, 2010, to review these benefit changes. The City and
SEN met and negotiated benefit changes for represented employees, including changes to the
cash in lieu benefit (taxable cash), consistent with the direction provided to staff by the City
Council.
H. Overview of Chanties to Health Benefits
A. Cafeteria -Style Health Insurance Plan
The City offers health insurance benefits on a "cafeteria -style" plan. That is, the City provides a
fixed amount of $1,016.58 per month to each eligible employee, including Councilmembers, to
be used toward health, dental and/or vision insurance for the employee/Councilmember and/or
eligible dependents as well as life insurance, cancer insurance, short-term disability, flexible
spending accounts and deferred compensation. Two of the changes approved by the City Council
on December 14, 2010, were to freeze the cash in lieu amount at $1,016.58 per month for those
employees employed by the City prior to January 1, 2011, and who do not enroll in health
insurance, and to reduce the cash in lieu option for new hires after January 1, 2011, to equal to
half of the lowest cost employee -only health insurance plan. This change is described in more
detail in Section C below.
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B. Supplemental Benefit Dollars
Given that the cafeteria allowance was capped in the amount of $1,016.58 per month, the City
instituted a new benefit titled "Supplemental Benefit Dollars." This benefit also became
effective January 1, 2011. Employees and Councilmembers who are enrolled in City health
insurance plans and who spend more than the cafeteria allowance of $1,016.58 per month to pay
for City health, dental and/or vision premiums are eligible to receive "Supplemental Benefit
Dollars" up to $159.02 per month to apply toward City benefit premiums.
If an eligible employee or Councilmember does not enroll in a City health insurance plan, both
the employee and Councilmember are eligible to receive a cash payment, in lieu of City health
insurance benefits, but will not receive Supplemental Benefit Dollars.
C. Two -Tier Health Benefit System
Another change to benefit offerings that became effective as of January 1, 2011, was the creation
of a two-tier system for the amount of cash payment provided to employees or Councilmembers
in lieu of enrolling in City health insurance.
1. Terms of Two -Tier Health Benefit System
The terms of the two-tier system have been most comprehensively documented in a Side Letter
Agreement entered into between the City and the Service Employees' International Union, Local
721, CTW, CLC ("SEIU' ),i although the terms also apply to the non -represented employees and
the City Council (by virtue of the fact that the Council has historically received the same benefits
as the employees and cannot receive benefits greater than the employees—see discussion below).
The Side Letter Agreement explains that "employees hired on or after January 1, 2011, (new
employees)" are eligible for a cash payment in the fixed amount of $213.79 per month in 2011, if
they do "not enroll in any health insurance" benefit. This amount is aligned to half of the lowest
cost employee -only health insurance plan and therefore increased to $214.62 per month in 2012.
Whereas, "employees hired prior to January 1, 2011, (current employees)" are eligible for a cash
payment for all or any unused portion of the $1,016.58 per month cafeteria allowance, which was
not used by the employee to enroll in City health insurance benefits.
For implementation purposes, City staff prepared a "City Council Benefit Summary" sheet for
newly elected councilpersons, describing the Tier 2 benefits (post January 1, 2011 benefits), and
Councilmember Boydston, upon his election, was provided with a copy of that sheet along with
other new hire paperwork. The other Councilmembers were not provided with a copy of the
summary as they were already employed.
2. Determination of "Employment" Date and "Break in Service"
a. Employees
With respect to both unrepresented and represented employees, the dividing line between
eligibility for the higher and lower cash payment associated with the two tiers is the date an
employee is hired by the City into a benefited position. Hire date for purposes of implementing
the two tiers is the date that the employee commences employment with the City. If a City
employee separates from City service and is later re -hired or re-employed, he or she is considered
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to have a break in City service. For an employee re-employed after a break in service, his or her
eligibility will be based on the date of re-employment, not the date of initial employment before
the break in service. A City employee who promotes, transfers, demotes, or is reassigned from
one position to another position at the City is not assigned a new date of employment because
there is no break in City service. Instead, the employee maintains his or her original employment
date.
b. Councilmembers
Similarly, because historically Councilmembers have received the same benefits as City
employees, City staff has applied the same eligibility criteria used for City employees to
Councilmembers. As such, City staff has interpreted the term "hired" to refer to the date when a
Councilmember is "employed" by virtue of being elected into office. If a Councilmember
completes a term of office, does not serve a consecutive term, but is later re-elected, the date
when his or her term of office commences after re-election is the "re-employment" date used for
purposes of determining eligibility under the two-tier system. Like with a City employee, a break
in City service determines when a Councilmember is issued a re-employment date by City staff.
A Councilmember who serves consecutive terms of office is not assigned a re-employment date
because there is no break in City service and none of the administrative actions associated with a
break in City service are undertaken (see below). Instead, a Councilmember would retain his or
her original hire date throughout each consecutive term in office.
3. Administrative Significance of "Break In Service"
A break in City service by both a represented or unrepresented employee is documented by City
staff following these steps:
1) Recording the end of service on a City -specific Personnel Action Form
2) Terminating the employee from:
a) the City's payroll system
b) City health benefit plan coverage
c) membership in California Public Employees' Retirement System
(PERS)
d) enrollment in the City deferred compensation plan, if applicable
3) City Staff transferring the employee's personnel file from an active file to a
terminated file
Notably, City staff takes the exact same measures to document a break in City service for a
Councilmember.
When a represented or unrepresented employee is hired for the first time or re -hired following a
break in service, City staff documents the start of service by:
1) Generating a new Personnel Action Form
2) Having the employee complete new hire paperwork including a W-4 form, I-9
Employment Eligibility Verification Form, emergency contact form, and a direct
deposit form. Employment eligibility is verified through E -Verify and the new
employee is asked to review and sign City policies.
3) Reactivating and re -hiring the employee in the City's payroll system.
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4) Enrolling or re -enrolling in, as appropriate, in Ca1PERS pension plan,
City -offered benefit plans, and deferred compensation plan.
5) A new personnel file is created for new employees. For a re -hired employee, the
City retrieves the previously established personnel file from terminated storage and
reclassifies it as an active file.
Notably again, City staff takes the exact same measures to document the start of City service by a
Councilmember. Further, none of the above actions is undertaken when a Councilmember is
re-elected to Council for a successive term of office.
III. Effect of Second Tier on "Re -Employed" Employees and Councilmembers
To -Date
Thirty-four City employees have become employed in a benefited position after January 1, 2011.
Based on their hire date, these employees are eligible to receive the lower cash payment in the
two-tier benefit system, which amounts to $214.62 per month, in lieu of enrolling in City health
insurance. Also, since the enactment of the two-tier benefit system, there has been one City
employee who separated from City service, resulting in a break in City service, who was later
re-employed. At the time of separation the employee was eligible to receive all or any unused
portion of $1,016.58 in cash because he/she was employed prior to January 1, 2011. Upon
re-employment this City employee was issued a re-employment date, which fell after
January 1, 2011. As such, this employee was deemed to only be eligible for a cash payment in
the amount of $214.62.
Similarly, there has been one Councilmember who separated from City service, resulting in a
break in City service, who was later re-elected. At the time of separation from City service, this
Councilmember was eligible to receive all or any unused portion of $1,016.58 in cash because he
was employed prior to January 1, 2011. Upon re-election following a break in City service the
Councilmember was issued a re-employment date, which fell after January 1, 2011. As such, this
Councilmember was deemed to only be eligible for a cash payment in the amount of $214.62.
IV. Benchmark City Application of Two -Tier Benefits
Like Santa Clarita, two nearby cities, Thousand Oaks and Simi Valley, have Councilmembers
who receive different levels of benefits based on hire date.
At the City of Thousand Oaks, a new Councilmember who began his term in 2012 is eligible for
different benefits than the other members of the Council based on his "hire" date. Another
Council seat is vacant and will be filled in November 2012. As a result, two of the
Councilmembers in Thousand Oaks will receive benefits at lower levels than the other three
Councilmembers solely based on "hire" or election/appointment date. At the City of Simi
Valley, Councilmembers "hired" after July 1, 2010, are not eligible for a retirement
enhancement, which the other Councilmembers continue to receive.
The reality today is that Councilmembers and employees working for the same organizations in
the same positions have different level benefits and the difference in the benefits offered is based
on hire date or re -hire date after a break in service.
CONSIDERATION OF "EMPLOYEE" STATUS OF COUNCILMEMBERS FOR
PURPOSES OF STATUTES GOVERNING ELIGIBILITY FOR HEALTH BENEFITS
There are various statutes which recognize and define the term "employee." Some of these
statutes exclude a Councilmember from their application. For example, the Fair Labor Standards
Act ("FLSA'), which primarily sets the minimum wage, overtime pay, and recordkeeping
standards for employees covered by the act, excludes elected officials from the definition of
employee for these purposes.2 However, although Councilmembers are not treated as employees
for purposes of the FLSA, because the FLSA does not speak to a Councilmembers' eligibility to
receive City health insurance benefits, it does not guide our analysis here.
The California Public Employees' Retirement Law (PERL), provides for membership of eligible
employees of contracting agencies, unless permissibly excluded. However, PERL specifically
states that an "elective officer" is excluded from membership unless an election is filed with
CalPERS to waive the exclusion and establish membership.3 Persons who are "elected to a City
Council," are included in the definition of "elective officer." n Again, even though the PERL
treats employees and Councilmembers differently in terms of coverage being elective, because
the PERL does not speak to a Councilmembers' eligibility to receive City health insurance
benefits, it does not guide our analysis here.
Instead, critical to our analysis are Sections 53200 — 53210 of the Government Code, which
provide the statutory scheme that authorizes the City to grant health and welfare benefits to
officers and employees of the City. With respect to these statutes, the term "employee" is
defined to include "members of the legislative body," which extends to members of a City
Council. 5
ANALYSIS
V. Statutory Framework: Salary vs. Benefits vs. Compensation and the
Requirement that Benefits for Council not Exceed those of Employees
Section 36516 of the Government Code authorizes the City to provide Councilmembers with a
salary, limited depending upon the size of the City's population.6 In accordance with Section
36516, the City has adopted Ordinances throughout the years to establish the amount of salary to
be paid to Councilmembers. Those changes in salary may take effect when a Councilmember
begins a new term of office and can apply to such Councilmember, or all sitting
Councilmembers, depending upon the terms of the ordinance.
Benefits are specifically excluded from the salary limitation, pursuant to subdivision (d) of
Section 36516, which states:
Any amounts paid by a city for retirement, health and welfare, and federal social security benefits
shall not be included for purposes of determining salary under this section, provided that the
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same benefits are available and paid by the city for its employees. (Emphasis added.)
Government Code Sections 53200 — 53210 also provide for the granting of health, welfare and
retirement benefits to the officers and employees of a city, including members of the legislative
body.s Again, these sections specify that the health, welfare and retirement benefits of the City
Council "shall be no greater than that received by nonsafety employees of that public agency." 9
In the case of a City with "different benefit structures," the benefits of the City Council "shall not
be greater than the most generous schedule of benefits being received by a category of nonsafety
employees."io Plans of health and welfare benefits authorized by sections 53200 through 53208
are not restricted by limits on compensation, in the same manner that health and welfare benefits
are not considered salary under Government Code section 36516(d).n
With regard to the term "compensation," as described above, Government Code section 36516
makes a distinction between salary (limited by population and must be adopted by ordinance) and
health, welfare and retirement benefits (which do not require an ordinance for adoption, and do
not count against the salary caps). The term compensation is used at the end of 36516 as a
catch-all (describing salary and benefits) where the section provides that a Councilmember may
waive any or all "compensation" permitted by section 36516.
Section 36516.5 mixes the term salary and compensation, stating that a change in
"compensation" does not apply to a Councilmember during his term, but a change in "salary" can
be made for all Councilmembers when one or more of them become eligible for a change in
salary by virtue of starting a new term of office.
VI. Interpretive Authority
Tiering of benefits is being considered by cities throughout California and recently adopted
legislation has created two tier pension benefits as of January 1, 2013. The statewide push for a
reduction of benefits for public employees is a new trend. Accordingly, there is very limited law
on the issue of implementation of two-tier benefit systems for elected officials. No cases were
found dealing directly with City Councilmembers.
One Attorney General (AG) Opinion was found that addressed differing benefit levels among
members of an elected school board. As a preliminary matter, it is important to note that
Attorney General opinions are not binding law. They represent the California Attorney General's
opinion of a legal issue in response to a question presented by a member of the public. Such
opinions may be persuasive to a court, but a court is not obligated to follow such opinions. 12
In 1984, the Attorney General was asked whether a school district that currently provides health
and welfare benefits to present and former (retired) boardmembers may discontinue such benefits
a) during the terms of current boardmembers, b) as to former boardmembers who had already
qualified for lifetime benefits, c) upon the commencement of new terms of current board
members, or d) as to future new board members. The AG opined that the school district could
not discontinue such benefits a) during the current terms of boardmembers or b) as to former
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boardmembers who had already qualified for lifetime benefits, but may discontinue such benefits
c) upon the commencement of new terms of current board members or d) as to future new board
members. 13
With regard to c) and d) (current boardmembers commencing new terms, and future new
boardmembers), the AG had the following to say:
With respect to the discontinuance of health and life insurance benefits upon the commencement
of a succeeding term following the discontinuance, it will be assumed in the absence of any
suggestion to the contrary that such benefits had not been accompanied by an express promise of
continuance through succeeding terms. Hence, no issue arises with respect to any contractually
vested interest in the continuation of benefits following the current term. In such a case, it is clear
that a member who completes one term during which he was entitled to benefits and elects to
enter a new term has impliedly agreed to be bound by those benefits only which are offered for
the different term. (Olson v. Cory, supra, 27 Cal.3d at 540.) Similarly, a member entering office
for the first time following the declaration of discontinuance, whether entering upon his own
term or upon the unexpired term of a predecessor, may not claim such benefits. (Id.) Thus, it is
possible that for a certain period some members (e.g., those serving the remainder of a current
term) may be entitled to benefits while others (e.g., those entering upon a new term) might not.
VII. Councilmember Boydston and future newly elected Councilmembers
With regard to the reduction of the cash in lieu benefit and its application to Councilmember
Boydston and any newly elected councilpersons (i.e., those not serving successive terms), the
previously quoted excerpt is important for two reasons. First, it recognizes that there may be
periods of time when benefit levels for sitting boardmembers/councilmembers will be different.
Second, the AG recognized that a reduction in or elimination of a benefit can be imposed upon a
future new boardmember/councilmember.
The AG based its conclusion with regard to newly elected councilpersons on the case of Olson v.
Cory, in which the California Supreme Court interpreted the application of a statute that limited
state judge salaries and pension benefits. 14 The Court held that the salary reduction and pension
benefit reduction could not be applied to sitting judges—it could only be applied to those elected
or re-elected after the change in salary and benefits was made. The Court held that the judges
had a vested right to their salary and benefit levels protected by the Contracts clause of the
California Constitution.
Thus, based upon the above authorities, Councilmember Boydston and other newly elected
councilpersons would be subject to the new benefit level put in place as of January 1, 2011.
VIII. Councilmembers servine continuously since January 1, 2011
With regard to the reduction of the cash in lieu benefit and its application to sitting
Councilpersons serving successive terms, the AG opinion does state that the change in benefits
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can be imposed upon commencement of a new term of office. However, the AG qualifies the
opinion with regard to those that are commencing a succeeding term by stating "it will be
assumed in the absence of any suggestion to the contrary that such benefits had not been
accompanied by an express promise of continuance through succeeding terms."
Because elected officials have constitutionally vested rights in salary and benefits, any reduction
or elimination of such must be undertaken cautiously. In the Olson case described above, the
Court found that a judge who completes one term at a higher salary and benefit level who elects
to enter a new term has impliedly agreed to be bound by salary benefits then offered by the state
for the different term.is But there was also nothing in the legislation at issue in that case that
would create a "suggestion to the contrary" as identified by the AG opinion. So the issue for
successive term Councilmembers is whether there is any suggestion to the contrary that such
benefits were to continue through succeeding terms.
In Retired Employees Association of Orange County, Inc. v. County of Orange16 the California
Supreme Court held that the past practice of administering a benefit could give rise to a vested
right in how the benefit was set up for employees. The Court held that the intent of the parties,
supported by evidence was the determining factor. The opinion concluded, that not all terms of
benefits need to be expressed—some can be implied, based upon the intent of the parties with
respect to the benefit, as well as the evidence supporting that intent.
In the present situation, City staff charged with implementing the two-tier benefit system believes
the intent of the Council was that Tier 1 benefits would continue for Councilmembers holding
office prior to January 1, 2011, through succeeding terms. The City Council has received the
same benefits as the employees since incorporation. State law mandates that the benefits for the
Council can be no greater than those of City employees. The Side Letter Agreement between the
City and the represented employees makes a distinction between employees hired prior to and
those hired after January 1, 2011 ("new employees").
As applied to the City Council and as described in detail in the background section of this report,
re-elected Councilmembers have historically not been treated as "new employees." None of the
paperwork and processes utilized for new employees has been undertaken upon a re-election.
Further, for purposes of benefits, the City has not historically treated re-election as new
employment. When a Councilmember is first elected, that is a triggering event that allows for
selection of benefits. Annually, the Council may change benefits during open enrollment or upon
certain triggering events (such as birth of child, marriage, etc.). However, the Council has not
previously been allowed to change benefits upon re-election, only upon first being elected or
upon being elected after a break in service. In short, Councilmembers who are re-elected to
successive terms are treated by the City as continuously employed—they have not been treated as
"new employees" as referenced in the Side Letter outlining the two-tier benefits.
The Olson case 17, which addressed benefits for elected judges, and the AG opinion discussing
benefits for elected schoolboard members, were benefit systems that only applied to elected
officials—so there was no overlay of non -elected employees involved. Further, those benefit
systems were not tied to change for "new employees" and consequently there was no need to
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interpret what constitutes a "new employee" under those benefit systems. In contrast, the City's
benefits apply to all employees --elected and non -elected alike. It is therefore necessary under
the City's benefit system to define what constitutes a "new employee." Thus, the City's
historical treatment of Councilmembers as either new or existing employees is extremely relevant
in terns of the expectation of how changes in benefits will be administered.
Based upon the historical treatment of Councilmembers as continuously employed through
successive terms in relation to benefit selection, the historical receipt of the same benefits by the
Council and other employees, and the fact that the two-tier benefits were set up based upon
commencing employment with the City before versus after January 1, 2011, there is a suggestion
that such benefits were to continue through successive terms of office. The further fact that
Councilmembers have constitutionally protected vested rights in benefits mitigates in favor of
protecting the entitlement to such benefits through successive terms, rather than reducing
benefits, where there is a suggestion that benefits were to continue. Thus, those Councilmembers
in office prior to January 1, 2011, who continue to serve through successive terms should not
have their benefits reduced absent further action by the Council to clearly establish that benefits
for such persons will be reduced upon re-election.
One Additional Consideration:
As described in the Side Letter Agreement with the represented employees, the cafeteria dollars
may be used to purchase cafeteria plan options other than just health insurance (such as life
insurance, short-term disability, cancer insurance, flexible spending accounts or deferred
compensation), and this is the same benefit the Council receives. The terms of the cafeteria
dollars do not require that they be used to purchase insurances and cash in lieu is available
instead. As explained in the "Terms of Two -Tier Health Benefit System" above, however, the
maximum available cash in lieu amount varies based on hire date.
In connection with researching the issues raised by Councilmember Boydston, an Attorney
General (AG) opinion addressing cash in lieu health benefits for City Councilmembers and the
use of that benefit for cafeteria plan options and deferred compensation was identified. The AG
indicates under its interpretation of a "plan of health and welfare benefits" (the terminology used
in the Government Code) in order to avoid a determination that a cash in lieu benefit is salary
that exceeds the statutory salary cap rather than an actual health benefit, the cash in lieu benefit
should be used in a manner that clearly indicates that the cash is being used for health, welfare of
retirement purposes. is Again, although not binding as law, AG opinions can be persuasive to a
court in future legal challenges. While there have been no court cases interpreting this particular
AG opinion, in an abundance of caution, and for ease of administration, city Human Resources
staff will work with individual Councilmembers to ensure that use of the cash in lieu benefit, if
such benefit is selected by a Councilmember, is limited to use toward any of the cafeteria plan
options.
ALTERNATIVE ACTIONS
Other action as determined by the City Council.
to
FISCAL IMPACT
As no action is requested in this report, there is no fiscal impact.
ATTACHMENTS
Side Letter of Agreement between the City of Santa Clarita and SEN, January 24, 2011
Resolution #10-92, Providing Compensation of the Employees of the City and Amending the
Classification Plan
Government Code Section 36516
Government Code Sections 53200-53210
Memorandum from Ken Pulskamp, City Manager, to the City Council providing Answers to
Questions about Pension Formulas for Council, May 30, 2012
Fair Political Practices Commission Advice Letter to Councilmember Boydston, October 1, 2012
Footnotes related to October 23, 2012 Agenda Item #9, City Council Health Benefits
SIDE LETTER AGREEMENT
January ,[�c , 2011
This Side Letter of Agreement modifies the Memorandum of Understanding between the
City of Santa Clarita (City) and the Service Employees' International Union, Local 721,
CTW, CLC (Union) for the period of January 1, 2010 through December 31, 2012. Upon
the signing of this Side Letter the MOU is amended as follows:
Article 10 Health, Dental and Vision Plans.
a) Employees hired prior to January 1, 2011 (current employees) may use up to $1,016.58
per month (cafeteria dollars) to purchase health, dental, and vision insurance for
themselves and any eligible dependents.
Taxable Cash - current employees who use none of or less than the full cafeteria
dollars toward the purchase of city health, dental, and vision insurance may
receive all or any of the unused portion as taxable cash. Employees may also use
cafeteria dollars toward the purchase of optional benefits such as AFLAC,
additional life insurance, flexible spending accounts and/or deferred
compensation.
Supplemental Benefit Dollars — current employees who spend more than the
cafeteria dollars of $1,016.58 per month to purchase city health, dental, or vision
insurance for_ themselves and any eligible dependents may receive supplemental
benefit dollars for the sole purpose of paying the actual cost of health, dental, and
vision insurance premiums which are in excess of the cafeteria dollar amount not
to exceed a maximum of $154.76 per month for 2011. The supplemental benefit
dollars will be adjusted based on changes to the lowest cost family health, dental,
and vision plans in 2012, subject to City Council approval.
Employees hired on or after January 1, 2011 (new employees) may use up to $1,016.58
per month (cafeteria dollars) to purchase health, dental, and vision insurance for
themselves and any eligible dependents.
• Taxable Cash — new employees who do not enroll in any health insurance may
receive 50% of the lowest cost employee -only health insurance plan ($213.79 for
2011). Such employees may opt to enroll in dental, vision, or any optional
insurance at their own expense.
Supplemental Benefit Dollars —new employees who spend more than the cafeteria
dollars of $1,016.58 per month to purchase city health, dental, or vision insurance
for themselves and any eligible dependents may receive supplemental benefit
dollars for the sole purpose of paying the actual cost of health, dental, and vision
insurance premiums which are in excess of the cafeteria dollar amount not to
exceed a maximum of $154.76 per month for 2011. The supplemental. benefit
dollars will be adjusted based on changes to the lowest cost family health, dental,
and vision plans in 2012, subject to City Council approval.
'IM
Article 11 Retiree Health Insurance
• Employees hired before January 1, 2008, who retire on or after January 1, 2012,
will receive a maximum monthly retiree medical benefit up to the employee plus
one dependent rate of the lowest cost health insurance plan available to employees
($855.16 in 2011, subject to annual changes).
Article 12 Retirement
• Employees hired on or after March 1, 2011, will be covered by the PERS 2% @
60 retirement program with final compensation based on the 36 highest paid
consecutive months. Employees hired on or after March 1, 2011, will be
responsible for paying the entire seven (7%) employee retirement contribution.
Except as specifically modified by this Side Letter Agreement, the Memorandum of
Understanding between the City and Union for the period of January 1, 2010 through
December 31, 2012 remains in full force and effect.
nen �rtpun, Assistant c ny manager
Jennifey Curtis, Mman Resources Manager
For the Union
RAe Rangel, Ne§otiator Date
Street Maintenance Worker
Matt Demott,
Vehicle
SIDE LETTER AGREEMENT, Page 2 of 2 /
r
RESOLUTION NO. 10-92
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA CLARITA, CALIFORNIA, PROVIDING FOR COMPENSATION OF
THE EMPLOYEES OF THE CITY AND AMENDING THE
POSITION CLASSIFICATION PLAN
WHEREAS, Section 37206 of the Government Code requires the City Council to
prescribe the time and method of paying salaries, wages, and benefits for employees of the City;
and
WHEREAS, the City Council has authorized and directed, under provisions of the
Municipal Code of the City of Santa Clarita, Section 2.080.060, the City Manager to prepare a
proposed salary plan for all employees of the City, and it has authorized and directed under the
Provision of Ordinance 88-52, Section 3.d., the City Manager to prepare and revise a position
classification plan.
NOW, THEREFORE, the City Council of the City of Santa Clarita does hereby resolve as
follows:
SECTION]. The position classification plan is hereby amended to include the
following changes effective January 1, 2011:
Classification
Graduate Management Intern
Grade 32
Human Resources Analyst
Grade 45
Management Analyst
Grade 45
Pool Technician
Grade 23
Assistant Planner II
Grade 42
Change
Administrative Clerk
Grade 22
Communications Specialist
Grade 39
Community Preservation Administrator
(Title Change Only)
Grade 45
Aquatics Specialist
Grade 27
Administrative Analyst (Labor Compliance)
Grade 39
A SECTION 2. The employee benefit program is hereby amended to include the following
change for unrepresented employees, effective the first pay day in January 2011:
I
P%
In lieu of increasing cafeteria dollars for all regular employees, create Supplemental
Benefit Dollars of up to $154.76 per month, which may be used only by those employees whose I cost of health, dental, and/or vision insurance exceeds the 2010 cafeteria dollars.
SECTION 3. The benefit program is hereby amended to include the following change
for unrepresented employees effective on January 1, 2012:
Freeze retiree health care contributions at the 2010 rate for current retirees and employees
hired prior to January 1, 2008, and who retire prior to January 1, 2012.
Amend the retiree health care contribution for regular employees hired prior to
January 1, 2008, but who retire on or after January 1, 2012, to the employee plus one dependent
rate for the lowest cost health insurance plan offered by California Public Employees' Retirement
System (PERS), and implement a vesting schedule so that the retiree health benefit provided is
pro -rated based on years of 'service as a regular employee following this schedule:
• 501/o upon completing 5 years of service with the City of Santa Clarita
• 75% upon completing 10 years of service with the City of Santa Clarita
• 100% upon completing 15 years of service with the City of Santa Clarita
SECTION 4. The City intends to implement a second-tier retirement formula through
the California Public Employees' Retirement System for future hires. This item will be
submitted to Council for consideration at a future date. 1
J
SECTION 5. Pending the completion of negotiations between the City and Service
Employees' International Union (SEIU) Local 721 and reaching substantially equal agreements
on the items listed in Sections 2, 3, and 4, implement these changes for represented employees
using the agreed upon effective dates. If substantially equal agreement is not reached a separate
resolution will be presented to Council.
SECTION 6. All prior resolutions and parts of resolutions in conflict with this
resolution are hereby rescinded.
SECTION 7. The City Clerk shall certify to the adoption of this Resolution.
2 /5
r,
`r
PASSED, APPROVED AND ADOPTED this 14th day of December, 2010.
SON-
0 A EWA Lai
ATTEST:
DATE:", r%— �_
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss.
CITY OF SANTA CLARITA )
I, Sarah P. Gorman, City Clerk of the City of Santa Clarita, do hereby certify that the
foregoing Resolution was duly adopted by the City Council of the City of Santa Clarita at a
regular meeting thereof, held on the 14th day of December, 2010, by the following vote:
AYES:
NOES:
ABSENT:
COUNCILMEMBERS: Weste, Kellar, Ender, McLean
COUNCILMEMBERS: None
COUNCILMEMBERS: Ferry
3
GOVERNMENT CODE
SECTION 36516
36516. (a) A city council may enact an ordinance providing that each
member of the city council shall receive a salary, the amount of which
shall be determined by the following schedule:
(1) In cities up to and including 35,000 in population, up to and
including three hundred dollars ($300) per month;
(2) In cities over 35,000 up to and including 50,000 in population,
up to and including four hundred dollars ($400) per month;
(3) In cities over 50,000 up to and including 75,000 in population,
up to and including five hundred dollars ($500) per month.
(4) In cities over 75,000 up to and including 150,000 in
population, up to and including six hundred dollars ($600) per month.
(5) In cities over 150,000 up to and including 250,000 in
population, up to and including eight hundred dollars ($800) per
month.
(6) In cities over 250,000 population, up to and including.one
thousand dollars ($1,000) per month.
For the purposes 'of this section the population shall be determined
by the last preceding federal census, or a subsequent census, or
estimate validated by the Department of Finance.
b) At any municipal election, the question of whether city council
members shall receive compensation for services, and the amount of
compensation, may be submitted to the electors. If a majority of the
electors voting at the election favor it, all of the
council members shall receive the compensation specified in the
election call. Compensation of council members may be increased
beyond the amount provided in this section or decreased below the
amount in the same manner.
c) Compensation of council members may be increased beyond the amount
provided in this section by an ordinance or by an amendment to an
ordinance but the amount of the increase may not exceed an amount
equal to 5 percent for each calendar year from the operative date of
the last adjustment of the salary in effect when the ordinance or
amendment is enacted. No salary ordinance shall be enacted or amended
which provides for automatic future increases in salary.
d) Any amounts paid by a city for retirement, health and welfare, and
federal social security benefits shall not be included for purposes of
determining salary under this section'provided the same benefits are
available and paid by the city for its employees.
l-7
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WAIS Document Retiieval Page I of 7
CALIFORNIA CODES
GOVERNMENT CODE
SECTION 53200-53210
53200. As used in this article:
(a) "Local agency" means a county, city, school district,
district, municipal corporation, political subdivision, public
corporation, or other public agency of the state.
(b) "Group life insurance" and "group policies of life insurance"
includes "group annuities", and "group annuity contracts."
(c) "Legislative body" means the board of supervisors of a county
or city, or the governing board, by whatever name called, of a school
district, district, municipal corporation, political subdivision,
public corporation, or other public agency of the state.
(d) "Health and welfare benefit" means any one or more of the
following: hospital, medical, surgical, disability, legal expense or
related benefits including, but not limited to, medical, dental,
life, legal expense, and income protection insurance or benefits,
whether provided on an insurance or a service basis, and includes
group life insurance as defined in subdivision (b) of this section.
(e) "Employees" or "officers and employees" mean all employees and
officers, including members of the legislative body, who are
eligible under the terms of any plan of health and welfare benefits
adopted by a local agency pursuant to this article.
53200.1. For the purposes of this article, employees employed by
the county superintendent of schools and whose salaries are paid from
the county school service fund are county employees. The employer's
contribution for such employees is a proper charge against the county
school service fund.
53200.2. For the purposes of this article, school district
employees whose salaries are paid through the county school service
fund, pursuant to the provisions of Section 13843 of the Education
Code, are county employees. The employer's contribution for such
employees shall be paid through the county school service fund in the
same manner as the salaries of such employees.
53200.3. For the limited purpose of the application of this
article, judges of the superior and municipal courts and the officers
and attaches of said courts whose salaries are paid either in whole
or in part from the salary fund of the county are county employees
and shall be subject to the same or similar obligations and be
granted the same or similar employee benefits as are now required or
granted to employees of the county in which the court of said judge,
officer, or attache is located.
53200.4. Employees of a district may be treated as county employees
for purposes of this article subject to approval of the district's
governing board and the county board of supervisors. �/
WAIS Document Retrieval Page 2 of 7
The board of supervisors may impose as a condition to that
approval a charge to cover the added costs to the county of
administering the inclusion of the district's employees in the county
program.
53200.5. Employees of an agency or entity created for the joint
exercise of powers pursuant to the provisions of Chapter 5
(commencing with Section 6500) of Division 7 of Title 1, are county
employees for purposes of this article when the county is a party to
the joint exercise of powers agreement, subject to the approval of
the board of supervisors and the governing body of the joint powers
agency or entity.
53201. (a) The legislative body of a local agency, subject to
conditions as may be established by it, may provide for any health
and welfare benefits for the benefit of its officers, employees,
retired employees, and retired members of the legislative body, as
provided in subdivision (b), who elect to accept the benefits and who
authorize the local agency to deduct the premiums, dues, or other
charges from their compensation, to the extent that the charges are
not covered by payments from funds under the jurisdiction of the
local agency as permitted by Section 53205.
(b) The legislative body of a local agency may also provide for
the continuation of any health and welfare benefits for the benefit
of former elective members of the legislative body who (1) served in
office after January 1, 1981, and whose total service at the time of
termination is not less than 12 years, or (2) have completed one or
more terms of office, but less than 12 years, and who agree to and do
pay the full costs of the health and welfare benefits.
(c) (1) Notwithstanding any other provision of law, a legislative
body of a local agency that provided benefits pursuant to subdivision
(b) to former elective members of the legislative body January 1,
1995, shall not provide those benefits to any person first elected to
a term of office that begins on or after January 1, 1995, unless the
recipient participates on a self -pay basis, as provided in
subdivision (b).
(2) A legislative body of a local agency that did not provide
benefits pursuant to subdivision (b) to former elective members of
the legislative body before January 1, 1994, shall not provide those
benefits to former elective members of the legislative.body after
January 1, 1994, unless the recipients participate on a self -pay
basis.
(3) A legislative body of a local agency that provided benefits
pursuant to subdivision (b) to former elective members of the
legislative body before January 1, 1994, may continue to provide
those benefits to those members who received those benefits before
January 1, 1994.
(d) The legislative body of a local agency that is a local
hospital district may provide for any health and welfare benefits for
the benefit of (1) members of its medical staff, employees of the
medical staff members, and the dependents of both groups on a
self -pay basis; and (2) employees of any entity owned, managed,
controlled, or similarly affiliated with, the legislative body of the
local hospital district, and their dependents, on a self -pay basis.
(e) The provisions of this section are severable. If any provision
of this section or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given ' /�
WAIS Document Retrieval Page 3 of 7
effect without the invalid provision or application.
53202. In providing health and welfare benefits the local agency
may approve plans of their officers and employees or may contract
with one or more admitted insurers, health service organizations, or
legal service organizations for such plan or plans of health and
welfare benefits as the local agency shall determine to be in the
best interests of the local agency and the officers and employees
electing to accept the benefits. Approval of or application for such
benefits may be made by the local agency upon its own motion or with
the consent of the legislative body after considering the preference
of the employees of the.agency, and two or more alternative plans of
health and welfare benefits may be offered to the employees if the
local agency determines that such action is desirable.
53202.1. In approving a plan or plans of health and welfare
benefits, the local agency may approve policies of life, health,
legal expense, and accident insurance, or any of them, from an
admitted insurer or from a nonprofit membership corporation, as
defined in Section 1157, wherein a bona fide association, as defined
in Section 1157.1, is the policyholder or contractholder, for the
benefit of the agency and the officers and employees authorizing the
purchase.
53202.2. When a policy is approved or adopted and carried into
effect the local agency may prescribe such rules, regulations and
procedures as may properly implement the system, to provide for its
administration and to advise its officers and employees of the terms
and provisions of the system or systems as approved or adopted and
carried into effect.
53202.25. When in the possession of the local agency, applications,
claims and all individual records of persons entitled to benefits
from any policies or plans established pursuant to this article shall
be confidential and shall not be disclosed to anyone except to the
extent expressly authorized in such application, claims, policies or
plans or insofar as it may be necessary for the administration of
this article, the policy or plan, or other policies or plans
affecting a person covered under the policy or plan, or upon order of
a court of competent jurisdiction.
53202.3. All plans, policies or other documents used to effectuate
the purposes of this article shall provide benefits for large numbers
of employees. No plan or policy may be approved pursuant to this
article unless its issuance or the payment of benefits thereunder is
otherwise lawful in this State. This article does not authorize the
issuance of any group policy or the representation of any insurance
benefits as group insurance unless the policy concerning which the
representation is made is designated as a group policy by the
applicable provisions of the Insurance Code.
WAIS Document Retrieval Page 4 of 7
53205. From funds under its jurisdiction, the legislative body may
authorize payment of all, or such portion as it may elect, of the
premiums, dues, or other charges for health and welfare benefits of
officers, employees, retired employees, former elective members
specified in subdivision (b) of Section 53201, and retired members of
the legislative body subject to its jurisdiction.
Those expenditures are charges against the funds. If the employer
pays any portion of the premiums, dues, or other charges for the
health and welfare benefits, any dividends paid or premiums refunded
or other rebates or refunds under any of those health and welfare
benefits up to the aggregate expenditures of the employer for the
benefits are the employer's property. The excess, if any, shall be
applied by the employer for the benefit of the employees or their
dependents generally.
53205.1. (a) From funds under its jurisdiction, the legislative
body may authorize payment of all or any portion as it may elect of
the premiums, dues, or other charges for health and welfare benefits
on the spouse and dependent children under the age of 21, dependent
children under the age of 25 who are full-time students at a college
or university, and dependent children regardless of age who are
physically or mentally incapacitated, of those officers and
employees, including retired officers and employees, subject to the
jurisdiction and for whom those health and welfare benefits have been
provided.
(b) Those expenditures are charges against the funds. If the
employer pays any portion of the premiums for that insurance, any
dividend paid or premiums refunded under any such insurance up to the
aggregate expenditures of the employer for that insurance are the
employers property. The excess, if any, 'shall be applied by the
employer for the benefit of insured employees or their dependents
generally.
53205.16. It is the intention of the Legislature to allow
legislative bodies to validate or approve any prior, existing, or
future payments or claims resulting from insurance or health benefits
or health and welfare given their officers and employees and their
dependents.
The purpose of the amendments to Sections 53200 and 53205.1
enacted at the 1972 Regular Session and the 1973-74 Regular Session
of the Legislature is to make it clear that the Legislature intended
that legislative bodies be able to pay for insurance or health
benefits or health and welfare benefits including, but not limited
to, medical, dental, life, legal expense, and income protection
insurance or benefits, for their officers and employees and their
dependents under the provisions of Sections 53205 and 53205.1.
53205.2. In granting the approval specified in Sections 53202 and
53202.1 the local agency or governing board shall give preference to
such health benefit plans. as do not terminate upon retirement of the
employees affected, and which provide the same benefits for retired
personnel as for active personnel at no increase in costs to the
retired person, provided that the local agency or governing board
makes a contribution of at least five dollars ($5) per month toward
I/
WAIS Document Retrieval Page 5 of 7
the cost of providing a health benefits plan for the employee or the
employee and the dependent members of his family. In the case of
retired personnel who receive retirement benefits under the State
Employees' Retirement System, the health benefits coverage provided
for annuitants by a health benefits plan under the Meyers -Geddes
State Employees' Medical and Hospital Care Act shall satisfy the
requirements of this section.
53205.3. School districts and community college districts may join
with other school districts or community college districts, or any
combination of those districts, in providing for the payment of
health and welfare benefits by entering into a pooling arrangement
under a joint exercise of powers agreement or on a self-insured or
self-funded basis or partly by means of self-insurance or
self -funding and partly by means of insurance or service agreements
as herein described. Any such arrangement, otherwise valid under this
section, as amended by the Statutes of 1982, which was entered into
prior to, and is in effect on the effective date of such amendments
to this section, is hereby validated and confirmed.
53205.5. Subject to any applicable limitations of Section 53205 the
legislative body may authorize payments to the trustees of a fund
established to procure insurance pursuant to insurance Code Sections
10202.8 or 10270.5 (a)(4) and may deduct from the employees'
compensation amounts for payment to such trustees; provided, that
such payments and such deductions must be the same as payments made
by other employers for their employees and payments made by the
employees of such other employers, respectively to the trustees of
said trust fund. Subject to the trust agreement, the local agency may
receive from the trustees a return of payments up to the aggregate
expenditures of the local agency. The excess, if any, shall remain in
the fund for the benefit of all of the beneficiaries of the trust or
their dependents generally.
53206. Any law prohibiting, restricting, or limiting the assignment
of or order for wages or salary does not prohibit, restrict, or
limit the powers conferred in this article nor the power of officers
or employees to authorize and approve payment of charges for health
and welfare benefits.
The local agency may pay amounts derived from pay roll deductions
permitted by Section 53202 of the Government Code and amounts derived
from employer contributions pursuant to Section 53205 of the
Government Code directly to the contracting insurers or service
organizations, or to the trustees of a fund established to procure
health and welfare benefits, or to such other recipients as the
contracting insurers, service organizations, and the local agency may
designate.
53207. This article does not require an officer or employee of a
local agency to accept or join in any plan of health and welfare
benefits or to authorize deductions from their wages or salaries for
any portion of the costs thereof.
d1.9--
WAIS Document Retrieval Page 6 of 7
53208, Notwithstanding any statutory limitation upon compensation
or statutory restriction relating to interest in contracts entered
into by any local agency, any member of a legislative body may
participate in any plan of health and welfare benefits permitted by
this article.
53208.5. (a) It is the intent of the Legislature in enacting this
section, to provide a uniform limit on the health and welfare
benefits for the members of the legislative bodies of all political
subdivisions of the state, including charter cities and charter
counties. The Legislature finds and declares that uneven,
conflicting, and inconsistent health and welfare benefits for
legislative bodies distort the statewide system of intergovernmental
finance. The Legislature further finds and declares that the
inequities caused by these problems extend beyond the boundaries of
individual public agencies.
Therefore, the Legislature finds and declares that these problems
are not merely municipal affairs or matters of local interest and
that they are truly matters of statewide concern that require the
direct attention of the state government. In providing a uniform
limit on the health and welfare benefits for the legislative bodies
of all political subdivisions of the state, the Legislature has
provided a solution to a statewide problem that is greater than local
in its effect.
(b) Notwithstanding any other provision of law, the health and
welfare benefits of any member of a legislative body of any city,
including a charter city, county, including a charter county, city
and county, special district, school district, or any other political
subdivision of the state shall be no greater than that received by
nonsafety employees of that public agency. In the case of agencies
with different benefit structures, the benefits of members of the
legislative body shall not be greater than the most generous schedule
of benefits being received by any category of nonsafety employees.
(c) Notwithstanding any other provision of law, members of the
legislative body of a city, including a charter city, county,
including a charter county, city and county, special district, school
district, or any other political subdivision of the state shall not
be eligible to accrue multiple health and welfare benefits greater
than the most generous schedule of benefits being received by any
category of nonsafety employees from two or more public agencies for
concurrent service except in the case of a member who serves as a
regular full-time employee in a separate public agency.
(d) This section shall be applicable to any member of a
legislative body whose first service commences on and after January
1, 1995.
53209. Amendments made in this article by the Legislature at the
1957 Regular Session, including, but not limited to, the repeal of
Government Code Sections 53203 and 53204, are intended to enlarge the
classification of service -type organizations eligible for pay roll
deductions and employer contributions hereunder, to liberalize
restrictions on the extent of employer contributions permitted, and
to broaden the classes of employees eligible for benefits hereunder,
and no change effected in this article by the Legislature at the 1957
Regular Session shall be construed to alter or affect the legal
WAIS Document Retrieval Page 7 of 7
status or eligibility of any organization heretofore eligible for pay
roll deductions or employer contributions hereunder.
53210. The legislative body of a county may authorize payment from
funds under its jurisdiction of all or such portion as it may elect
of the premiums or other charges for hospital, medical, surgical,
disability, death benefits, or related benefitswhether provided on
an insurance or a service basis for persons who on a voluntary basis
and without compensation perform services on behalf of any county
department or district of which the board of supervisors is the
governing body.
Any dividends paid, premiums refunded or other rebates or refunds
received under insurance or other benefits provided pursuant to this
section shall be the property of the county.
CITY OF SANTA CLARITA
INTEROFFICE MEMORANDUM
TO: "ens
nd Members of the City Council
FROM: Ma ger
DATE: May 30, 2012
SUBJECT: ANSWER TO QUESTION ABOUT PENSION FORMULAS FOR COUNCIL
At the request of Mayor Ferry, I wanted to provide an answer to a question that came up regarding
pension formulas for City Councilmembers.
As part of several benefit changes that became effective last year, the city amended its contract
with the California Public Employees' Retirement System (PERS) to add a second tier pension
formula of 2.0% at 60 for employees hired on or after April 9, 2011, and to require this group to
pay the full 7% member pension contribution.
Since the city does not participate in social security, Councilmembers have the option of enrolling
in a deferred contribution plan wherein the city contributes 7.5% of their salary to that plan or
enrolling in PERS. Councilmembers who are not currently enrolled in PERS and have never been
enrolled in PERS with the city, may choose to switch from the deferred compensation plan to
PERS, but would be enrolled in the 2.0% at 60 formula since the initial membership date is after
April 9, 2011. hi addition, Councilmembers, like all employees enrolled in the 2.0% at 60 plan,
would also pay the 7% member contribution. Once enrolled in PERS, Councilmembers are locked
in and cannot later elect to move back to the deferred compensation plan.
Employees and City Councilmembers who were employed and enrolled in PERS at the 2.7% at 55
formula prior to April 9, 2011, remain at the level with the city paying the 8% member
contribution. However, the Fiscal Year 2012-2013 budget includes a resolution that would change
the city -paid member contribution from 8% to 6% thereby requiring unrepresented employees and
Councihnembers to contribute 2% toward their pension costs.
A review of current participation shows Mayor Ferry and Councilmembers Boydston and McLean
are enrolled in PERS at the 2.7% at 55 level with the city making the 8% member contribution.
As mentioned above, in July 2012 all participants in this plan will begin contributing 2% toward
their pensions. Councilmembers Kellar and Weste are enrolled in a 457 deferred compensation
plan to which the city makes a 7.5% contribution. If Councilmembers Kellar and Weste wish to
join PERS, they would be enrolled in the 2.0% at 60 plan and would contribute the full 7%
member contribution toward their pensions,
KP:jc
cc: Ken Striplin, Assistant City Manager and Personnel Officer
Jennifer Curtis, Human Resources Manager
October I, 2012
i
mben Bo dston
Re: Your Request for Advice
Our File No. A-12-133
Dear Mr, Boydston:
This letter responds to your request for advice regarding the conflict-of-interest
provisions of the Political Reform Act (the "Act"),' Please note that our advice is based solely
on the provisions of the Act. We therefore offer no opinion on the application, if any, of other
conflict-of-interest laws such as common law conflict of interest. Also, the Commission does
not act as a finder of fact in providing advice. (In re Oglesby (1975) 1 FPPC Ops. 72.)
QUESTION
Does the Act prevent you from participating in a decision that affects your compensation
as a council member for the City of Santa Clarita?
CONCLUSION
Yes. Because the decision would only affect your salary, the decision would have a
disqualifying foreseeably material financial effect on your economic interest in your personal
finances and you may not participate in the decision.
FACTS
In 2006, you were appointed as a council member for the City of Santa Clarita in order to
complete the term of another council member elected to the state legislature. You did not run for
election at the expiration of the term in 2008, but in 2010 you ran and lost. In 2012, you ran
again and won a seat on the City Council.
The Political Reform Act is contained in Government Code Sections 81000 through 91014. All statutory
references are to the Government Code, unless otherwise indicated. The regulations of the Fair Political Practices
Commission are contained in Sections 18110 through 18997 of Title 2 of the California Code of Regulations. All
regulatory references are to Title 2, Division 6 of the California Code of Regulations, unless otherwise indicated.
File No. A-12-133
Page No. 2
While recently completing forms related to your compensation as a council member, you
learned that the City Council reduced the monthly cash amount a council member receives in
lieu of obtaining medical benefits by approximately $800.00 from the 2006 level. You also
learned that the remaining four council members were exempt from this reduction because they
were "grandfathered" in under the former amount. You were told that the exemption does not
apply to your situation because you "permanently separated" from government employment after
the expiration of your prior term as council member.
You believe the exemption should apply to you because it is your understanding that you
never "permanently separated" from government employment following your prior term. You
claim that according to the "pers (sic) system, (you are) considered a continuing official."
Accordingly, you have requested that this item affecting your compensation be placed on the
agenda for discussion and a possible vote.
ANALYSISI
Section 87100 prohibits any public official from making, participating in making, or
using his or her official position to influence a governmental decision in which the official has a
financial interest. A public official has a "financial interest" in a governmental decision, within
the meaning of the Act, if it is reasonably foreseeable that the decision will have a material
financial effect on one or more of the public official's economic interests. (Section 87103;
Regulation 18700(a).) The Commission has adopted an eight -step standard analysis for deciding
whether an individual has a disqualifying conflict of interest in a given governmental decision.
Please see the Ehrenkanz Advice Letter, A-10-128, for a full discussion of the eight steps as
applied to a city council member (copy attached).
As a city council member that would be called upon to vote on the issue regarding your
cash payments in lieu of medical benefits, you are a public official that would be making a
governmental decision.2 Thus, you would meet steps one and two. The remaining steps will be
analyzed below.
Step Three: What are your economic interests?
The Act's conflict-of-interest provisions apply only to conflicts of interest arising from
certain enumerated economic interests of a public official, Under Section 87103 of the Act,
there are six different types of economic interests that may result in a conflict of interest for a
public official. Only two of those are relevant to your situation: 1) a public official has an
economic interest in any source of income, including promised income, which aggregates to
$500 or more within 12 months prior to the decision (Section 87103(c); Regulation 18703.3);
Z Please note, if a public official has a conflict of interest in an agenda item noticed at a public meeting,
then he or she must: (1) publicly identify the financial interest immediately prior to discussion of the item, as
detailed in Regulation 18702.5(b); (2) recuse himself or herself from discussing, voting on, or otherwise influencing
the matter; and (3) leave the room until after the discussion, vote, or conclusion of any other disposition of the
matter. (Section 87105.) However, under Regulation 18702.5(d)(3), you may speak as a member of the public so
long as you comply with the rules located in Regulation 18702.5(b)(1) and (b)(2). A copy of Regulation 18702.5 is
enclosed.
d_�
File No. A-12-133
Page No. 3
and 2) a public official has an economic interest in his or her personal expenses, income, assets,
or liabilities, as well as those of his or her immediate family. This is known as the "personal
financial effects" rule (Section 87103; Regulation 18703.5).
Your inquiry concerns cash payments to which council members are entitled in lieu of
receiving medical benefits. The salary and benefits paid by the City to its employees are
generally not considered "income" under Section 82030(b)(2) and Regulation 18232(a).
However, material financial effects on an official's governmental salary may still be
disqualifying under limited circumstances as a material and foreseeable financial effect on the
official's personal finances. Thus, we continue the analysis limited to personal financial effects.
Step Four: Is your economic interest directly or indirectly involved in the governmental
decision?
"A public official or his or her immediate family is deemed to be directly involved in a
governmental decision which has any financial effect on his or her personal finances or those of
his or her immediate family." (Regulation 18704.5.) Here, a decision by the City Council to
increase your monthly cash payments in lieu of medical benefits by $800.00 would have a
financial effect on your personal finances. Therefore, your economic interest would be directly
involved in the decision.
Steps Five and Six: Will the financial effect of the decision on your economic interest be
material and reasonably foreseeable?
Once a public official identifies his or her relevant economic interests, the official must
evaluate whether it is reasonably foreseeable that the decision will have a material financial
effect on any of those economic interests. A material financial effect on an economic interest is
"reasonably foreseeable" if it is substantially likely that one or more of the materiality standards
will be met as a result of the governmental decision. (Regulation 18706(a).) An effect need not
be certain to be considered "reasonably foreseeable," but it must be more than a mere possibility.
(1n reThorner (1975) 1 FPPC Ops, 198)
Regulation 18705.5(a) provides that a reasonably foreseeable financial effect on a public
official's personal finances is material if it is at least $250 in any 12 -month period. While
Regulation 18705. 5 sets the materiality standard at $250, Regulation 18705. 5(b) provides an
exception for certain governmental decisions regarding salary which, as discussed above,
includes benefits:
"The financial effects of a decision which affects only the salary, per diem, or
reimbursement for expenses the public official or a member of his or her immediate
family receives from a federal, state, or local government agency shall not be deemed
material, unless the decision is to appoint, hire, fire, promote, demote, suspend without
pay or otherwise take disciplinary action with financial sanction against the official or a
member of his or her immediate family, or to set a salary for the official or a member of
his or her immediate family which is different from salaries paid to other employees of
the government agency in the same job classification or position."
M
File No. A-12-133
Page No. 4
(Regulation 18705.5(b).)
You have indicated that the four remaining council members are exempt from the
$800.00 reduction in the monthly cash payment in lieu of receiving medical benefits because
they were "grandfathered" in under the former amount. The City has advised that you are not
similarly exempt from the reduction because you "permanently separated" following the
expiration of your previous term as a council member. The implication here is that your alleged
"permanent separation" has created a job classification for you that is different from the other
four council members who did not permanently separate from government employsment, and that
you are not thus entitled to the same exemption that they enjoy. If that is the case , then a
decision to provide you with an exemption from specified reduction would set a salary for you
that is different from salaries paid to other council members with the same job classification who
are not entitled to the reduction. Accordingly, you would have a conflict of interest in
participating in the decision because your salary would be the only salary affected by the
decision.
Steps Seven and Eight: The public generally and legally required participation exceptions.
An official who otherwise has a conflict of interest in a decision may still participate
under the "public generally" exception. This exception applies when the financial effect of a
decision on a public official's economic interests is substantially the same as the effect on a
significant segment of the public. The "legally required participation" rule applies when the
official's participation in a governmental decision is legally required. (Section 87101;
Regulation 18708.)
Nothing you have provided indicates any facts pertinent to the analysis of these
exceptions so we provide no analysis concerning their applicability to your situation.
If you have other questions on this matter, please contact me at (916) 322-5660.
Sincerely,
Zackery P. Morazzini
General Counsel
By: Jack Woodside
Senior Counsel, Legal Division
JCW:jgl
' As mentioned, the Commission does not act as a finder of fact in providing advice (In re Oglesby (1975)
1 FPPC Ops. 72), so we are unable to determine whether you actually "permanently separated" from government
employment following the expiration of your last term, and whether you are entitled to the same exemption enjoyed
by the four other council members.
�-9
Footnotes related to October 23, 2012 Aizenda Item #9, City Council
Health Benefits
' Side Letter Agreement, January 24, 2011, attached hereto.
2 29 C.F.R. §553,10 (the "Act excludes from the definition of "employee", and thus
from coverage, certain individuals employed by public agencies. This exclusion
applies to elected public officials .... A condition for exclusion is that the employee
must not be subject to the civil service laws of the employing State or local agency").
' Government Code §20322.
Government Code §20322(b),
5 Government Code §53200 (e)("'Employees' or `officers and employees' mean all
employees and officers, including members of the legislative body, who are eligible
under the terms of any plan of health and welfare benefits adopted by a local agency
t'ursuant to this article"),
Government Code §36516.
7 Government Code §36516.5
s With respect to this statute, the term "local agency" includes a City and the term
"legislative body" includes a City Council; and the word "employees" includes
members of the City Council. Government Code §53200(a), (c) and (e), respectively.
Government Code §53208.5(b).
10 Government Code §53208.5(b).
" Government Code §53208
'a See California Assn. of Psychology Providers v. Rank (1990) 51 Cal.3d
[opinions of Attorney General are not binding, but are entitled to great weight]; but
see People v. Garth (1991) 234 Cal.App.3d 1797 (Although opinions of the Attorney
General are entitled to great weight, they are not binding .. , and we do not find the
attorney General's conclusion in this one persuasive. Id at 1800).
" 67 Ops.Cal.Atty.Gen. 510 (1984).
°27 Cal.3d 532 (1980)
5 Id. At p. 540.
G 52 Cal.4i° 1171
(1980) 27 Cal.3d 532.
e 89 Ops.Cal.Atty.Gen. 107 (2006)
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