Santa Cruz County Civil Grand Jury 2014-2015 Response Packet Funded for the Future?

R1

To prevent reductions in public services, each of the six public agencies studied in this report should increase, and make public, their efforts to manage and reduce retirement costs and obligations. HAS BEEN IMPLEMENTED X HAS NOT BEEN IMPLEMENTED BUT WILL BE IMPLEMENTED IN THE FUTURE - indicate timeframe below REQUIRES FURTHER ANALYSIS - explain scope and timeframe below (not to exceed six months) WILL NOT BE IMPLEMENTED - explain below Response summary, timeframe or explanation: The City recognizes the risk rising costs of retirement obligations in the short term and in the long term. Accordingly, the City has presented this information in public meetings in various occasions each year. Examples of these presentations can be found in the City’s website.  February 10, 2015, Audited Statements Financial Presentation to City Council (see pages 11 and 12 of this document). In addition, the full audited financial report was provided to the City Council as part of that public hearing. The financial audit contains information related to the unfunded liability and its status on pages 82 through 84. The document was also made available to the public for review. http://cityofwatsonville.org/download/City_Council/City_Council_Documents/2015/021015/It em%206.2a%20Mid%20Year%202014-15%20Budget%20Report.pdf  May 26, 2015, Budget Study Session Presented to City Council (refer to pages 7 and 8 of the report). The report highlights the challenge to continue funding continually rising retirement costs and obligations in the current year and future years. http://cityofwatsonville.org/download/City_Council/City_Council_Documents/2015/052615/It em%208.3%20Proposed%20Budget%202015-16%20&%202016-17%20Report.pdf  June 9, 2015, Budget Public Hearing conducted by the City Council (refer to pages 9 and 10 of the report). The report highlights the challenge to continue funding continually rising retirement costs and obligations in the current year and future years. http://cityofwatsonville.org/download/City_Council/City_Council_Documents/2015/060915/It em%206.2a%20Budget%20Summary%20Report.pdf The City will enhance what is already being presented to make a more complete statement about the retirement costs and obligations of the City. This enhanced reporting will be available with the publication of the FY 2015-16 budget document.

R2

Each of the six public agencies studied in this report should provide, in language understandable to the public, the totality of retirement obligations in their annual budget narratives beginning with the fiscal year 2015/16 budget. HAS BEEN IMPLEMENTED X HAS NOT BEEN IMPLEMENTED BUT WILL BE IMPLEMENTED IN THE FUTURE - indicate timeframe below REQUIRES FURTHER ANALYSIS - explain scope and timeframe below (not to exceed six months) WILL NOT BE IMPLEMENTED - explain below Response summary, timeframe or explanation: The City will enhance what is already being presented to make a more complete statement about the retirement costs and obligations of the City. This enhanced reporting will be available with the publication of the FY 2015-16 budget document.

R3

The Board of Supervisors and the City Councils of Santa Cruz, Scotts Valley and Watsonville should enroll in the California Employers Retiree Benefit Trust Fund (CalPERS Trust Fund) to pre-fund retiree health obligations and unfunded liabilities. HAS BEEN IMPLEMENTED HAS NOT BEEN IMPLEMENTED BUT WILL BE IMPLEMENTED IN THE FUTURE - indicate timeframe below REQUIRES FURTHER ANALYSIS - explain scope and timeframe below (not to exceed six months) X WILL NOT BE IMPLEMENTED - explain below Response summary, timeframe or explanation: The California Employers' Benefit Trust (CERBT) Fund is a Section 115 trust fund dedicated to prefunding Other Post-Employment Benefits (OPEB) for all eligible California public agencies. While the City of Watsonville has reported a net OPEB obligation of $4.5 million for fiscal year ending 06/30/2014; this liability will be significantly reduced in FY 2014-15 and future years due to changes made by the City to its health plan and how it segregates the costs and premiums associated with retirees. The City offers employees who have retired from service the option to continue receiving health care benefits at their own cost until age sixty-five. For the retiree to be fully eligible to participate in the plan offered by the City of Watsonville, the employee must be at least 50 years of age and have at least five years of service. Retirees pay for their benefit at 105% of the active per-capita health costs, as reset by the administrator every January 1st. In the past the City self-funded this plan by paying for the actual costs of claims received under the plan. Effective July 1, 2013; the City migrated to a pooled plan which limits the liability to the City to the monthly premium paid for each participating member of the City’s plan. This limits the current and future year obligations of the City for active employees and helps more closely align the cost paid for health care costs for retirees each fiscal year and their employee paid premiums. This shift will result in a significant reduction in the OPEB liability.