Score: +7 (8/2/1)

Santa Clara County Grand Jury • 2011-2012 • Agency Response

Response to: City of Mountain View

City of Mountain View Office of the City Manager*

Published: September 13, 2012 5 pages

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⚠️ Aviso de traducción: Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.

⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.

Note: Missing finding numbers detected: F6

Findings and Recommendations 6 findings

Public sector employees are eligible for retirement at least 10 years earlier than is common for private sector employees. City Response: The City of Mountain View agrees with this finding. For many nonpublic safety job classifications, employees may retire at an earlier age than their private-sector counterparts. However, in the case of public safety positions such as Police and Fire, there are no comparable positions in the private sector. Additionally, it is worth noting that retirement benefits are only one part of employee compensation.

Related Recommendations (1)

The Cities should adopt pension plans to extend the retirement age beyond current retirement plan ages.

Campbell, Gilroy, Los Altos Hills, Los Gatos, Milpitas and Palo Alto have adopted second tier plans that offer reduced Benefits, which help reduce future costs, but further changes are needed to address today's unfunded liability. Santa Clara County and the cities of Cupertino, Los Altos, Monte Sereno, Morgan Hill, Mountain View, San Jose, Santa Clara, Saratoga and Sunnyvale have not adopted second tier plans. City Response: The City of Mountain View agrees with this finding; however, while it is true that the City of Mountain View has not adopted second-tier pension plan, this is not the only mechanism for addressing pension liabilities. As noted in the Grand Jury report, "Comparing the Sunnyvale pension costs expressed in percent of payroll to Mountain View (same plans) demonstrates that employee contributions toward the cost of pensions is just as effective at keeping the cost under control as curtailing the level of pension benefits being offered. Mountain View actually compares favorably to other cities offering lower benefits."

Related Recommendations (3)

R2A

Page 3

Santa Clara County and the Cities of Cupertino, Los Altos, Monte Sereno, Morgan Hill, Mountain View, San Jose, Santa Clara, Saratoga and Sunnyvale should work to implement second tier plans.

R2B

Page 3

— Does not apply to the City of Mountain View.

R2C

Page 3

All Cities' new tier of plans should close the unfunded liability burden they have pushed to future generations. The new tier should include raising the retirement age, increasing employee contributions, and adopting pension plan caps that ensure pensions do not exceed salary at retirement.

Retroactive Benefit enhancements were enacted by Cities using overly optimistic ROI and actuarial assumptions without adequate funding in place to pay for them. City Response: The City partially agrees with this finding as ROI and actuarial assumptions have not been realized in recent years. However, the City of Mountain View did work to ensure adequate funding existed for benefit enhancements, negotiating with Mountain View employees to contribute toward the cost of enhanced retirement benefits. These additional employee contributions have helped moderate cost increases associated with lower-than-projected investment returns and longer-than- projected retiree life spans.

Related Recommendations (1)

The Cities should adopt policies that do not permit Benefit enhancements unless sufficient monies are deposited, such as in an irrevocable trust, concurrent with enacting the enhancement, to prevent an increase in unfunded liability. The City does not anticipate any Benefit enhancements for the

The Cities are making an overly generous contribution toward the cost of providing Benefits. The City of Mountain View disagrees with this finding as City City Response: employees pay between 9.5 percent and 15.4 percent of their salary toward pension benefits, a notably higher rate than most other public agencies.

Related Recommendations (2)

R4A

Page 4

The Cities should require all employees to pay the maximum employee contribution rate of a given plan.

R4B

Page 4

The Cities should require employees to pay some portion of the Past Service Cost associated with the unfunded liability, in proportion to the Benefits being offered.

The Cities are not fully funding OPEB benefits as evidenced by large unfunded liabilities and small funded ratios. City Response: The City of Mountain View partially agrees with this finding as the OPEB funded ratio is indeed low for many agencies. However, the City of Mountain View has the highest funded ratio of all agencies in the County; significantly more than the rate of the next highest city as noted on Table 6. Additionally, the City has negotiated with bargaining groups to reduce the costs associated with retirees' health benefits by offering an optional defined contribution plan for miscellaneous employees, and by negotiating employee contributions to the City's retirees' health trust. As a result, this funded ratio is expected to increase in the future.

Related Recommendations (1)

The Cities should immediately work toward implementing policy changes and adopting measures aimed at making full OPEB ARC payments as soon as possible.

The Cities' defined benefit pension plan costs are volatile. Defined contribution plan costs are predictable and therefore more manageable by the Cities. The City agrees that defined contribution plan costs are more City Response: predictable.

Related Recommendations (1)

The Cities should transition from defined benefit plans to defined contribution plans as the new tier plans are implemented.

Agency Responses 1

Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.

City of Mountain View

September 13, 2012 • 5 pages • 15 responses • Score: +7 (+8, 2, -1) View Details ▾

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15 responses to findings and recommendations

Response: Agree Score: +1

The City of Mountain View agrees with this finding. For many nonpublic safety job classifications, employees may retire at an earlier age than their private sector counterparts. However, in the case of public safety positions such as - Police and Fire, there are no comparable positions in the private sector. Additionally, it is worth noting that retirement benefits are only one part of employee compensation.

The Cities should adopt pension plans to extend the retirement age beyond current retirement plan ages.

Response: Will Implement

Score: +1

This recommendation will be implemented effective January 1, 2013. Recently approved State pension legislation has established pension formulas for new employees which will extend retirement ages. The City of Mountain View has focused on increased employee pension contributions rather than adopting a second tier of benefits which could include higher retirement ages.

Response: Agree Score: +1

The City of Mountain View agrees with this finding; however, while it is true that the City of Mountain View has not adopted second-tier pension plan, this is not the only mechanism for addressing pension liabilities. As noted in the Grand Jury report, "Comparing the Sunnyvale pension costs expressed in percent of payroll to Mountain View (same plans) demonstrates that employee contributions toward the cost of pensions is just as effective at keeping the cost under control as curtailing the level of pension benefits being offered. Mountain View actually compares favorably to other cities offe...

R2A

Santa Clara County and the Cities of Cupertino, Los Altos, Monte Sereno, Morgan Hill, Mountain View, San Jose, Santa Clara, Saratoga and Sunnyvale should work to implement second tier plans.

Response: Will Implement

Score: +1

, the City of Mountain View has negotiated significantly greater-than-normal employee pension contributions in order to address pension liabilities. Finding 3 Retroactive Benefit enhancements were enacted by Cities using overly optimistic ROI and actuarial assumptions without adequate funding in place to pay for them. City Response: The City partially agrees with this finding as ROI and actuarial assumptions have not been realized in recent years. However, the City of Mountain View did work to ensure adequate funding existed for benefit enhancements, negotiating with Mountain View employees ...

R2B

— Does not apply to the City of Mountain View.

Response: Will Implement

Score: +1

This recommendation will be implemented effective January 1, 2013. As noted in the response to

R2C

Response: Will Implement

Score: +1

This recommendation will be implemented effective January 1, 2013. As noted in the response to

Response: Disagree Partially Score: 0

The City partially agrees with this finding as ROI and actuarial assumptions have not been realized in recent years. However, the City of Mountain View did work to ensure adequate funding existed for benefit enhancements, negotiating with Mountain View employees to contribute toward the cost of enhanced retirement benefits. These additional employee contributions have helped moderate cost increases associated with lower-than-projected investment returns and longer-thanprojected retiree life spans. -2-

Response: Will Implement

Score: +1

The City does not anticipate any Benefit enhancements for the foreseeable future. If this changes, the City will implement this recommendation.

Response: Disagree Score: -1

The City of Mountain View disagrees with this finding as City employees pay between 9.5 percent and 15.4 percent of their salary toward pension benefits, a notably higher rate than most other public agencies.

R4A

The Cities should require all employees to pay the maximum employee contribution rate of a given plan.

Response: Unknown

Score: 0

The City of Mountain View has implemented this recommendation. City employees pay both the maximum employee contribution rate as well as a portion of the employer contribution rate for pension benefits.

R4B

The Cities should require employees to pay some portion of the Past Service Cost associated with the unfunded liability, in proportion to the Benefits being offered.

Response: Unknown

Score: 0

The City of Mountain View has implemented this recommendation. As noted previously, the City of Mountain View has adopted a different strategy for addressing costs associated with pension benefits with employees paying part of the employer contribution for pension benefits. The employer contribution is based on both the normal cost of benefits and the Past Service Cost.

Response: Disagree Partially Score: 0

The City of Mountain View partially agrees with this finding as the OPEB funded ratio is indeed low for many agencies. However, the City of Mountain View has the highest funded ratio of all agencies in the County; significantly more than the rate of the next highest city as noted on Table 6. Additionally, the City has negotiated with bargaining groups to reduce the costs associated with retirees' health benefits by offering an optional defined contribution plan for miscellaneous employees, and by negotiating employee contributions to the City's retirees' health trust. As a result, this funded ...

The Cities should immediately work toward implementing policy changes and adopting measures aimed at making full OPEB ARC payments as soon as possible.

Response: Unknown

Score: 0

The City of Mountain View has implemented this recommendation and already contributes full ARC payments.

Response: Agree Score: +1

The City agrees that defined contribution plan costs are more predictable.

The Cities should transition from defined benefit plans to defined contribution plans as the new tier plans are implemented.

Response: Unknown

Score: 0

The City of Mountain View has implemented this recommendation for OPEB, instituting a defined contribution plan option for retirees' health benefits for nonsafety employees. As noted above, the City of Mountain View has focused on working with bargaining groups to increase employee contributions toward pension benefits in order to manage the City's costs associated with these benefits. Additionally, the City of Mountain View, as a member of the. California Public Employees Retirement System (Ca1PERS), can only offer benefits as allowed under Ca1PERS law. Currently, no defined contribution plan...

* This report's PDF did not contain easily extractable text and required Optical Character Recognition (OCR) for analysis. There may be minor errors in the extracted findings and recommendations due to OCR limitations with scanned documents.