A Report by the 2011-2012 Contra Costa County Grand Jury

No discussion of the 2010 Bond's possible financial ramifications took place at open Board meetings before the Board passed the resolution to proceed with a ballot measure. Response: The respondent disagrees with the finding and is unclear as to the factual basis there for (sic). The Board had an extensive conversation on March 9, 2010, concerning the possible financial ramifications of the bond. The Board discussed the tax rate extension, tax rate estimates, the par amount of the bond, and a possible bond proceeds schedule. There has been no allegation that the Board neither was provided, nor failed to consider all legally required information. Furthermore, the Board prudently fulfilled its fiduciary responsibilities in selling $109,996,475 of bonds in 2010 at a TIC of 4.392%. The ratio of debt service to principal is 1.94, which means that for every dollar of principal there is .94 cents of interest. The term and interest rates compare very favorably to the District’s original bond sales in 2002, 2005, and 2006 as well as other bonds sold throughout the state.

Some of the capital projects, such as solar panels, insulation and window replacement, to be financed with the 2010 Bond should generate energy cost savings for the Districts Response: The respondent agrees with the finding.

The organization’s restructuring of the General Counsel's responsibilities has not resulted in anticipated operational effectiveness and may not have fulfilled the cost savings originally projected. Response: The respondent disagrees with the finding. Due to severely decreased state funding and declining enrollment, the District has been forced to make deep budget cuts and to combine positions and responsibilities. Accordingly, the District eliminated the Assistant Superintendent for Administrative Services position. The responsibilities of that position were reallocated to the General Counsel and Chief Financial Officer. This was a financial exigency with no reasonable expectation of enhanced organizational efficiency. The cost savings originally projected were only the elimination of the Assistant Superintendent for Administrative Services position. Accordingly, all the savings originally projected have been realized. The increased responsibility of the General Counsel position has not diverted legal resources. The District’s legal budget was consolidated and reduced 50% during the 2009-10 fiscal year. The District’s current legal expenditures are quiet similar to what they were immediately before the reorganization.

In addition to the anticipated relief to the general fund from specific 2010 Bond projects, further savings could be achieved through further salary and benefit expense reductions. Response: The respondent agrees with the finding as it is intuitively obvious from an economic and budgetary perspective.

The adoption of a County anti-nepotism policy was proper. Response: Agree

Due to a lack of publicly available information about the KCMF, not all non- profit organizations, nor the public, are aware of the fund, its mission, and its processes, and thus are unable to benefit from it. Response: Partially Disagree. The Board of Supervisors makes an appropriation of KCMF funds during the annual budget process. In addition, prior to policy enhancements to the KCMF allocation process approved by the Board of Supervisors on May 24, 2011 (Attachment D), the District V Supervisor would submit an allocation plan to the Board of Supervisors each fiscal year for approval. A copy of the 2010/11 allocation plan, as approved by the Board of Supervisors, is included for reference (Attachment E).

It is possible for retirees to receive more in pension benefits than the combined base salary those retirees earned while employed at the County. Response: Agree.

Taxpayers are ultimately responsible for covering the shortfall between the cost of pensions and the amount accumulated from employee/employer contributions and pension fund investment income. Response: Agree.

Some of the possible changes require State legislation, as noted in the table on . Response: Agree that some of the possible changes require State legislation. Disagree with some of the elements of the first three categories of data presented in the table on : 1. Design new pension tiers with lower benefits. For new hires the Board can design a new pension tier for new hires, but must obtain the unions’ agreement to the terms of the new tier. Legislation would be required to authorize the new tier for newly hired general members. As to safety members, the need for legislation depends on whether the elements of the new tier are already in the County Employees Retirement Law (CERL). Any aspects not currently in the CERL would require legislation. For current employees the Board can design a new pension tier for current employees, but lack legal authority to require current employees to enter such a tier. Legislation would be required to authorize the Board to negotiate movement of current employees to a lower tier and to authorize any components of the tier not currently found in the CERL. The County and the unions would have to reach a negotiated agreement on the new tier. The new tier may be subject to legal challenge by any affected current employee. 2. Utilize three year final average salary rather than the highest year. For new hires the Board must obtain the unions’ agreement on the use of three year averaging to calculate final compensation for new hires. Legislation would be required to authorize this change for newly hired general members. For current employees the Board lacks legal authority to require that three year averaging be used to calculate final compensation for current employees. Legislation would be required to authorize the Board to negotiate this pension benefit reduction for current employees. The County and the unions would have to reach a negotiated agreement on the change. The pension benefit reduction may be subject to legal challenge by any affected current employee. 3. Eliminate terminal pay add-ons. The Contra Costa County Employees’ Retirement Association (CCCERA) determines which employment benefits are countable for purposes of determining Final Average Compensation. This is not a Board of Supervisors or Union decision. The Board and unions may negotiate elimination of employment benefits.

Pension reform is complex due to the differing legal opinions on what can be done, who can make it happen and when it can be done. This has led to public interest. Response: Agree that pension reform is complex and agree that there are differing legal opinions on what can be done, who can make it happen and when it can be done.