HomeMy WebLinkAboutSupplemental Information Received During Oral CommunicationEMPOWERING KIDS THROUGH
WATER SAFETY RULES
Prevent drowning.
Never swim alone.
Children and adults
drown without a
sound. Drowning is
the leading cause of
accidental death for
children under the
age of five and can
happen in less than
two inches of water.
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Prevent drowning! Never swim alone.
Kids need to ask an adult before going in or around a pool or
spa. Adults should also never swim alone. Remember, if no one
is with you, no one can help save you.
There is no substitute for active supervision.
Keep an eye on the water at all times and use the Water Watcher
card strategy, which designates an adult as the Water Watcher for
a certain amount of time (i.e. 15- minute periods), especially when
multiple adults are present.
Learn to swim. Don't rely on swimming aids.
Remember that swimming aids such as water wings or noodles
are fun toys but never use them in place of U.S. Coast Guard -
approved personal. flotation devices (life jackets).
Go feet first!
Rocks, sandbars, and other dangers can hide just below the
water's surface. Going feet first helps to find these dangers and
allows you to know how deep the water is in that area.
Play safely around the water.
Running, jumping, or pushing others in or around the pool can
be dangerous. Be safe and walk around pool decks. Have an
adult get toys or other objects out of the water
uca e a swimming safely.
Everyone is different. Enroll in swim lessons when you feel you
and your child are ready. Start slowly with babies; some are ready
at 12 months or even earlier, others are not. Swim in designated
areas only and always have an adult Water Watcher and never
swim alone.
Don t let drains drag you down!
Drains can create a lot of suction, which can trap people under
water. Teach children to stay away from drains and install safety
drain covers.
Always wear sunscreen and drink plenty of fluids.
Swimming in the cool water can hide signs of sunburns and
dehydration. Reapply sunscreen, even if it is waterproof, and
drink plenty of water or fluids without caffeine.
Task force offers tips to prevent drownings - Orange County Register, 2016 -09 -01 Page 1 of 2
ActivePaoer Archive Task force offers tips to prevent drownings - Orange County Register, 2016 -09 -01
Task force offers tips to prevent drownings
Speakers urge
vigilance at pools and beaches over holiday weekend.
BY LAYLAN CONNELLY
STAFF WRITER
Foster
Parnell
ANA VENEGAS, STAFF PHOTOGRAPHER
Team USA water polo player Kaleigh Gilchrist and
Foster Parnell, whose 18- year -old son, Anthony,
drowned off Laguna Beach last year, spoke Wednesday
at an Orange County Task Force on Drowning
Prevention press conference.
"I've learned that over the
years, no matter how athletic
you are, the ocean will always
be a dangerous place."
a ALEIGH GILCHRIST
WATER POLO OLYMPIAN
AND PRO SURFERp,,�
have been 213 drownings at beat
Foster Parnell's voice cracks
and he pauses to control his
emotions before talking about
his 18- year -old son, Anthony,
who died after being swept off
rocks by big waves in Laguna
Reach.
The Las Vegas man hasn't
done many speeches since his
son's death in February, 2015.
But Parnell had a very
important message to tell.
"You
don't want to go through
what my family has gone
through, losing a child," he
said to a group gathered in
Newport Beach on
Wednesday. "As far as making
your children aware, just do everything you can."
The Orange County Task Force on Drowning Prevention was holding a press
conference to remind the public — especially with packed beaches and
pool inviting weather expected for the 1011" ]toli la r weekend — to stay safe while
near the water.
According to Orange County Fire Authority spokesman Steve Concialdi, there
:hes, pools, spas and in bathtubs since 2012 in Orange County.
"One is too many." he said. "That's why this task force was developed, to continue to stop that trend from
happening. If we can make a dent, we can make a ditl'erence."
6 Concialdi gave a few safety tips, including never to take },our eyes off children when they are near a pool.
"Kids love the water, they are attracted to it. That's play time to them. They do not see t e tey are not scared
of the water at all," he said. "That's why the toddlers get out and they find their way. You don't hear them. you don't
hear yelling or screaming. They drown without a sound."
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September 12, 2016
To whom it may Concern,
My name is Rick Paap. I hired on to the City of Seal Beach (Police Dept.)
on January 18,1978.1 have known the Meyer family since that time.
David Meyer a successful local businessman. Barbie Meyer Director of
the Miss Seal Beach Pageant and worked for A &W finance and handled
my loan on a home I had purchased.
Their daughters (Jennifer and Heather) grew up in the Los Al school
district. I taught them when I was involved In the SANE /DARE Drug
education program at McGaugh Elementary. They were good
students /athletes. Jennifer worked for the City's Recreation Dept. for
over 20 years. As time went on I even sold one of my cars to Heather.
I have over the years found the Meyer family to be one of good
character, integrity, values, and faith. The whole family has a strong
work ethic and has always been a supporter of this community.
Sincerely
Rick Paap
rpaap @socal.rr.com
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I request that the following be placed on the City of Seal Beach agenda:
That the City of Seal Beach establish a 5 year forward budget and projected
balance sheet as a Strategic Objective to be completed by May 10"' of 2017
Placing this proposal on the Agenda will allow the City Council members to discuss,
modify and vote on the above objective. Without this being added to the Public
Agenda the Council members are severely limited by the Brown Act as to who,
what, when and how they may speak or communicate on this topic.
Here are four main reasons I recommend this objective.
1. Compliance with County guidelines. The Orange County Grand Jury in 2013-
2014 after hearing testimony from many OC city managers and financial
officers recommended each City in the County have a 5 year forward budget.
The Grand Jury required the Cities including the City of Seal Beach to respond
to a number of recommendations. The City Manager responded in 2014. The
letter stated that the city has not followed a few of the suggestions including
the 5 year forward budget.
2. Increased understanding of the budgeting process. Our existing operations
expose new council, staff, local businesses and interested residents to an
issue -by -issue process over a long time period. These issues include timing
of bond redemption payments, timing and amount of funding pension
liability, multiyear capital improvement projects, water costs and rate hikes,
wage and salary contracts, sand replenishment projects, new pool
replacement, health care liability, new fire department contract, future
timing of grants etc. It can take 2 to 4 years for those engaged to acquire a
more complete understanding of the city's needs and resources. A five -year
projection will immediately provide a better understanding of the city's
financial outlook.
3. Improved decision making and operations. Certainly a single set of
documents that projects these issues forward will add clarity to decision
making on long term issues and improve operations. The City does a great
job of providing an annual statement and a one year budget. (In fact I believe
they have won a number of awards for their financial statements.) An
extension of the one year budget to include the forward projection will assist
existing and new council members, city staff and residents of the city's
resources and obligations and how they affect the city from day one.
4. Greater public transparency. By placing this proposal on the agenda the
Council may discuss the issue. It allows the Public more transparency and a
better understanding of the willingness of the Council to deal with complex
and continuing issues.
In summary, many items needed to prepare a 5 year forward budget with a
Projected Balance Sheet are already done on a routine basis. The staff prepares
most of the necessary information in a number of reports and documents during
the year. These include but are not limited to a 5 -year capital improvement budget,
a schedule of Bond Redemption and Interest payments, etc. Outside agencies, such
as CalPERS, also provide a number of reports. For example, CalPERS' Annual
Summary of Pension Liability includes a funding payment schedule to reduce
unfunded pension liability. The relevant internal and external reports need only be
consolidated on one set of statements. These longer term budgets do not need to
be as exact as the current one year budget. I believe it will better serve everyone
to obtain a clear picture of the City's projected financial situation. In addition the
City will follow the OC Grand Jury's recommendation.
I call for each council member to request the proposal be added to the agenda,
discussed and voted on. If affirmed, add it to the city's Strategic Objectives.
Bruce Bennett
9/12/2016
Z2-7 29 3t .+ 57-
ORANGE COUNTY CITY PENSION
LIABILTIES
Budget Transparency Critically Needed
I
Table of Contents
SUMMARY.................................................................................................... ............................... 4
REASONFOR THE STUDY ....................................................................... ............................... 6
BACKGROUNDAND FACTS .................................................................... ............................... 8
SomeKey Terms Defined ........................................................................ ...............................
10
Overviewsof Ca1PERS and OCERS ........................................................ .............................11
Pension Reform in California ( PEPRA) ................................................. ...............................
13
Unfunded liabilities of CalPERS and OCERS are both large and volatile ........................
13
METHODOF STUDY .................................................................................. .............................17
ANALYSIS..................................................................................................... .............................17
Ca1PERS Data on Unfunded Pension Liabilities of OC Cities ............ ...............................
17
PerCapita Assessment ............................................................................... .............................19
Assessment of Unfunded Liabilities as a Percent of General Fund Revenues ...................
20
Calculating Unfunded Liabilities using Market Value instead of Actuarial Value of
Assets......................................................................................................... ...............................
21
GrandJury Interviews ............................................................................. ...............................
23
Interviewswith CalPERS ........................................................................ ...............................
24
Interviewwith OCERS ............................................................................ ...............................
25
Interviews with City Hunan Resource Managers .................................. ...............................
27
Interviews with City Finance Managers ................................................. ...............................
28
Assessment of Budget Information Available Online ........................... ...............................
30
General budget information available online ........................................ ...............................
31
Pension specific budget information available online ........................... ...............................
32
The impact of OC cities' outsourcingfor public safety on transparency of budget
information — a tale of two cities ............................................................ ...............................
32
Conclusions............................................................................................... ...............................
35
FINDINGS.................................................................................................... ...............................
35
RECOMMENDATIONS............................................................................. ...............................
36
REQUIREDRESPONSES .......................................................................... ...............................
38
APPENDICES.............................................................................................. ...............................
41
` ORANGE COUNTY CITY PENSION LIABILTIES
AppendixA — Acronyms .......................................................................... ............................... 42
AppendixB — Glossary ............................................................................ ............................... 43
AppendixC — A Brief Primer on Pensions ............................................ ............................... 45
Pensionsand their purpose .................................................................... ............................... 45
Two major types of pension plans .......................................................... ............................... 46
How pension benefits are specified ........................................................ ............................... 47
How pension benefits (actuarial liabilities) for retired members are computed .................. 47
How pension (actuarial liabilities) for active members are computed .. ............................... 47
Actuarial Accrued Liability 47
ActuarialValue of Assets ........................................................................ ............................... 47
What it means to say a pension has unfunded liabilities ........................ ............................... 47
2013 -2014 Orange County Grand Jury Page 3
ORANGE COUNTY CITY PENSION LIABILTIES
SUMMARY
Orange County (OC) cities rely almost entirely on two pension systems for their Public Safety
(fire and police) and "Miscellaneous" employees (basically everyone except fire or police), both
for their retirees and for current employees who will retire in the years ahead. Those two
pension systems are 1) the California Public Employees Retirement System (CAPERS) and 2)
the Orange County Employee Retirement System ( OCERS) for cities which outsource their
police services to the Orange County Sheriff's Department (OCSD) and /or their fire services to
the Orange County Fire Authority (OCFA).
Current assets of both systems fall far short of what is needed to pay current and future retirees.
CalPERS at the state level had assets of $236.8 billion, liabilities of $340.4 billion, unfunded
liabilities of $103.6 billion and a funding ratio of 70% as of June 30, 2012'. OCERS had assets
of $9.5 billion, liabilities of $15.1 billion, unfunded liabilities of $5.7 billion and a funding ratio
of 63% as of December 31, 2012'.
The 2013 -2014 Grand Jury investigated the ability of OC cities to recover from these unfunded
liabilities. Reviews of public financial data from the CaIPERS /OCERS pension systems and city
budgets, and more importantly reviews of city internal budget and planning data with city
finance managers showed that there were reasons to accept that OC cities are making plans to
pay down (amortize) these unfunded liabilities and will be able to do so.
There are important actions being taken by cities which provide some assurance that OC cities'
optimism that they can recover from their unfunded pension obligations has some basis in
reality. Most important of these is that CaIPERS and OCERS are committed to amortize their
unfunded pension liabilities over the next 20 -30 years to zero via Annual Required Contributions
(ARCs) from the agencies they support. So long as OC cities meet their ARCS, the unfunded
liabilities should approach zero. OC cities so far have been able to meet CAPERS' ARCs.
OC cities' relationships with OCERS are more complex, but cities have also been able so far to
pay for their outsourced fire /police services. Both the OCSD and the OCFA have their own
unfunded pension obligations with OCERS. However, so long as the amortization of
OCSD /OCFA unfunded liabilities is reflected in the costs of their services to the cities they
support, and so long as the cities can pay these costs, these unfunded OCERS liabilities will be
amortized as well.
In addition some cities have been successful in negotiating with their employee bargaining units
for their employees to carry a larger portion of the burden of pension costs and in some cases for
' Comprehensive Annual Financial Report. Fiscal Year Ended June 30, 2013, page 132, huo //www.calpers,ca.eov/eil)-(Iocs/about/pubs/cair-
2011 pdf
2OCERS by the Numbers, 2012, page 26, huo'/ /www ocerc or¢ /odf/ publications /brochures/bythenumbers.nd(
2013 -2014 Orange County Grand Jury Page 4
ORANGE COUNTY CITY PENSION LIABILTIES
reduced benefits. This reduces the future overall costs of pensions and frees up funds that these
cities can apply to amortizing their unfunded liabilities. Some cities are also looking at
accelerating their amortization of unfunded pension liabilities.
Another long term factor in reducing unfunded pension liabilities is the Public Employees'
Pension Reform Act (PEPRA), which went into effect January t, 2013. However, since the
reforms only affect employees hired after January, 2013, it will be many years before these
reforms will have an impact on unfunded liabilities.
Unfunded pension liabilities can be extremely volatile because they are driven by two
unpredictable elements:
1. Occasional extreme fluctuations in the market value of assets
2. Changes to key actuarial assumptions, and especially changes to assumed future rates of
return on investments
Hence, budgeting to reduce unfunded pension liabilities presents particular challenges for cities:
I. Pension catch up contributions typically comprise a significant percentage of projected
city General Fund expenditures
2. Projected annual contributions to catch up on unfunded liabilities are ramped up over
two to five years by Ca1PERS and OCERS. The impact of amortizing unfunded
liabilities is not completely revealed by looking only one year into the future, which is
typically as far as city budgets are projected
3. Unlike most planned city expenditures, there is essentially no way to reduce or defer
require d pension contributions in future years
4. Projected unfunded pension liabilities are at risk of large changes year to year because
Annual Required Contributions are so dependent on the fluctuating market value of
assets and on key actuarial assumptions used in calculating the liabilities
Unfortunately, after examining a large sample of OC cities' budgets published online, the Grand
Jury found those budgets to be-inadequate to establish any confidence that these cities are
addressing their unfunded pension liabilities. There are several reasons for this:
1. Cities typically do not show explicit line items for amortizing their unfunded pension
liabilities
2. Cities typically only show budget projections one year into the future
3. Cities that outsource fire and /or police services to Orange County Sheriffs Department
and/or Orange County Fire Authority typically provide minimal detail on planned future
expenditures for these services even as OCSD /OCFA deal with their own unfunded
pension liabilities with OCERS
2013 -2014 Orange County Grand Jury Page 5
ORANGE COUNTY CITY PENSION LIABILTIES
It is extremely important to note the Grand Jury's assessment that a city's published budget data
is inadequate to establish confidence that a city will be able to address its unfunded pension
liabilities is not the same thing as an assessment that the city will be unable to address its
unfunded liabilities.
The 2013 -2014 Grand Jury is very concerned that although cities have somewhat improved the
transparency of their budgets (partly in response to prior Grand Jury recommendations),
members of the public of Orange County cities will still find it difficult or impossible to
understand the current and changing impacts of unfunded pension liabilities on their city budget.
Of special concern to the Grand Jury is the lack of any traceability of OCERS OCSD/OCFA
unfunded pension liabilities to the budgets of cities which outsource to these agencies.
Given the potential impact of unfunded pension liabilities on Orange County cities and the
current lack of information visible to the public, the Grand Jury finds that it is critically urgent
that Orange County cities increase the transparency of this information. The Grand Jury believes
that a better informed public will more effectively engage with their political leadership to
address budget problems including the impact of large and volatile unfunded pension liabilities.
There is, of course, the added benefit that being required to show budget planning further into the
future and at a greater depth will require greater thoughtfulness on the part of cities in preparing
such budgets. The 2013 -2014 Grand Jury also believes that a discussion of the critical
assumptions which form the basis in projecting out -year budgets and the associated risks
inherent in these assumptions is needed as part of any city's budget.
REASON FOR THE STUDY
Orange County cities are obligated to provide on -going pension benefits to retired employees
(and often to those employees' survivors) and to current employees who will retire sometime in
the future. These cities use two major pension systems to provide these pensions: the California
Public Employees' Retirement System (CaIPERS) and the Orange County Employee Retirement
System (OCERS). Significant portions of these pension systems are unfunded.
Pensions for public employees are taking larger and larger percentages of OC City budgets both
for contributions to fund future pensions for current employees and to make up for insufficiently
funded pension obligations for retired employees. Cities are also dealing with their need to have
current employees contribute more toward their retirement. This report examines the size of OC
cities' unfunded pension liabilities for both their general /administrative / technical personnel and
for their public safety personnel. It also examines metrics to help understand the relative
financial impacts of unfunded liabilities on OC cities.
2013 -2014 Orange County Grand Jury Page 6
ORANGE COUNTY CITY PENSION LIABILTIES
Media stories have raised major concerns that unfunded pension obligations are not only
growing, but are growing exponentially at all levels of government. Unfunded pension liabilities
with the Ca1PERS system have led two California cities to contemplate bankruptcy as a means of
dealing with the problem, although such drastic steps have been avoided so far.
The 2013 -2014 Grand Jury is aware that there is a political element to any discussion of
unfunded pension liabilities. Unions may view the problem as being exaggerated as a means to
weaken the power of public employee unions and strip hard -won benefits and influence future
negotiations. Others are concerned with the affordability of pensions that many people describe
as "generous ". The Public Employee Pension Reform Act (PEPRA) took effect in 2013 and is
designed to end practices and policies that permitted very high pension payments to some
retirees. No doubt some unfunded pension liabilities can be attributed to these practices, and it is
true that most current employees are not subject to these reforms because they apply only to
employees hired after January 1, 2013. However, the main contributors to current unfunded
liabilities are the result of the Great Recession and changing actuarial assumptions.
The focus of this report is forward looking. In whatever fashion OC cities got to their present
situation, the unfunded liabilities are real and must be dealt with. The objectives of this report are
to:
1. provide factual information about the extent of unfunded city pension obligations
2. provide sufficient background information on pensions such that members of the public
can follow and engage in informed discussion on unfunded pension obligations and their
impact on a city
3. assess the availability and utility of pension information in city budgets
The public commitment to addressing the issues in a timely manner and accepting some pain
now and not pushing the issues off to the future must be in place. If unfunded pension liabilities
are not addressed, cities could reach a crisis where outcomes are painful enough that they affect
the quality of life in Orange County. Money spent by OC cities to deal with unfunded pension
obligations necessarily comes at the expense of other services cities provide to their residents.
Catch up contributions to amortize these unfunded liabilities can be a significant expenditure in a
city's budget, and the growth and unpredictability of these unfunded liabilities make it difficult
to budget for future years. Orange County cities made painful cuts in services to their residents
in response to the 2008 Great Recession and would like to restore these services as the economy
recovers. However, restoration of services will be delayed or even further reduced in many cities
until unfunded liabilities are dealt with.
As a necessary part of the report's discussion of pension funding, some basic explanations of key
pension related terms are provided. The Grand Jury hopes this background will be an additional
2013 -2014 Orange County Grand Jury Page 7
ORANGE COUNTY CITY PENSION LIABILTIES
benefit of the report in helping the OC electorate to understand and make informed decisions in
response to pension funding issues when they are discussed.
Although Orange County is relatively wealthy compared to many other California counties,
unfunded pensions are still an issue for the county, its cities, and other county governmental
entities. Although unfunded pension liabilities are a problem for every County governmental
entity, due to the limited Grand Jury resources, this report focuses on pension issues for the 34
cities in Orange County. Another motivation for this choice is that discussions of unfunded
pension liabilities in the media have typically not gone to the level of detail of individual cities.
A prior 201 t -2012 Grand Jury report' identified the need for greater transparency in public
employee compensation, especially in the area of employee pension costs. That report was well
written and had very valid recommendations. Subsequent to that report city budgets now contain
far more pension information for individual classes of employees, indeed sometimes down to
individual positions. However, the pension costs are not summarized in most city budgets such
that the cumulative costs of current employee pension obligations are visible. It is not possible
to see the forest for the trees. In addition, the focus of the 2011 -2012 Grand Jury report was on
transparency of city pension - related compensation for current employees in city budgets. The
need for transparency on the cumulative effect of pension obligations for both current and retired
employee and on the impact of unfunded pension liabilities was not addressed.
This report does not examine other pension systems of importance to Orange County, which
definitely have their own unfunded pension liabilities. In particular Special Districts, Teacher
Retirement Systems, and Community College Districts are not studied. This report also does not
address the other elephant in the room, which is a post - retirement obligation for medical care and
similar non - pension benefits, an issue which deserves attention similar to that needed for pension
funding.
BACKGROUND AND FACTS
Table I lists the 34 Orange County cities alphabetically, their population, and the pension
systems they use.. Note that some OC cities which use Ca1PERS for their Miscellaneous (non -
safety) employees' pensions also have "outsourced" public safety (police and /or fire protection)
to County agencies. Some cities contract with the Orange County Sheriff's Department (OCSD)
for police services, some with the Orange County Fire Authority (OCFA) for fire protection and
medical response services, and some cities contract with both. Cities that outsource for public
safety services also inherit pension obligations (and any associated funding issues) from the
County agencies to which they have outsourced. Ten OC cities rely on Ca1PERS for pensions
''TRANS PAR FNCY BREAK ING UP COMPENSATION FOR —BUT WHY HIDE PENSION COSTS"_ 2011 ?012 Orange County Grand Jury
Report, Into / /www.oc randiw .or / dfs /trans arenc breakin u com nsationfo . df
2013 -2014 Orange County Grand Jury Page 8
ORANGE COUNTY CITY PENSION LIABILTIES
for all their public safety as well as their non - public safety employees, eleven for one but not
both of their public safety services, and thirteen outsource both fire and police services.
Table 1. Orange County Cities, Population, and Pension Systems
City
Popula-
tion
Non - Safety
Employee
Retirement
System
Safety Employee -
Police Protection
Safety Employee -
Fire Protection
Aliso Viejo
47,823
CaIPERS
Outsourced - OCSD
Outsourced - OCFA
Anaheim
336,365
CalPERS
Inhouse - CalPERS
Inhouse - CaIPERS
Brea
39,282
CaIPERS
Inhouse - CalPERS
Inhouse - CalPERS
Buena Park
80,530
CaIPERS
In house- CaIPERS
Outsourced - OCFA
Costa Mesa
109,960
CalPERS
Inhouse - CalPERS
Inhouse - CaIPERS
Cypress
47,802
CaIPERS
in house - CalPERS
Outsourced - OCFA
Dana Point
33,351
CaIPERS
Outsourced - OCSD
Outsourced - OCFA
Fountain Valley
55,313
CaIPERS
Inhouse - CalPERS
Inhouse - CaIPERS
Fullerton
135,161
CaIPERS
Inhouse- CalPERS
Inhouse - CalPERS
Garden Grove
170,883
CalPERS
In house - CalPERS
In house - CalPERS
Huntington Beach
189,992
CaIPERS
In house - CalPERS
In house - CalPERS
Irvine
212,375
CaIPERS
Inhouse - CaIPERS
Outsourced - OCFA
La Habra
60,239
CalPERS
In house - CalPERS
LA County FD
La Palma
15,568
CaIPERS
In house - CalPERS
Outsourced -OCFA
Laguna Beach
22,723
CalPERS
In house - CaIPERS
In house - CaIPERS
Laguna Hills
30,344
CalPERS
Outsourced - OCSD
Outsourced -OCFA
Laguna Niguel
62,979
CalPERS
Outsourced - OCSD
Outsourced -OCFA
Laguna Woods
16,192
CaIPERS
Outsourced - OCSD
Outsourced - OCFA
Lake Forest
77,264
CaIPERS
Outsourced - OCSD
Outsourced -OCFA
Los Alamitos
11,449
CaIPERS
Inhouse - CalPERS
Outsourced - OCFA
Mission Viejo
93,483
CaIPERS
Outsourced - OCSD
Outsourced - OCFA
Newport Beach
85,287
CalPERS
Inhouse - CaIPERS
Inhouse - CalPERS
Orange
136,416
CaIPERS
In house - CalPERS
In house - CaIPERS
Placentia
50,533
CalPERS
Inhouse - CalPERS
Outsourced - OCFA
Rancho Santa Margarita
47,853
CalPERS
Outsourced - OCSD
Outsourced - OCFA
San Clemente
63,522
Great West
Outsourced - OCSD
Outsourced - OCFA
San Juan Capistrano
34,593
OCERS
Outsourced - OCSD
Outsourced -OCFA
Santa Ana
329,427
CaIPERS
Inhouse - CalPERS
Outsourced - OCFA
Seal Beach
24,168
CalPERS
In house - CalPERS
Outsourced - OCFA
Stanton
38,186
CaIPERS
Outsourced - OCSD
Outsourced - OCFA
Tustin
75,540
CaIPERS
Inhouse - CalPERS
Outsourced - OCFA
Villa Park
5,812
none
Outsourced - OCSD
Outsourced - OCFA
Westminster
89,701
CaIPERS
Inhouse- CalPER$
Outsourced - OCFA
Yorb Unnda
64,234
CaIPERS
Outsourced - OCSD
Outsourced - OCFA
2013 -2014 Orange County Grand Jury Page 9
ORANGE COUNTY CITY PENSION LIABILTIES
Some notes on Table 1 follow:
L Population data is from 2010 Census (except for Mission Viejo and Santa Ana where
the data is from 2011)
2. Population data will be used later in the report as a way of scaling the size of
unfunded liabilities on a per capita basis. (Using consistent census data, even if a bit
old, does allow for a better apples -to- apples comparison among cities.)
3. La Habra in North OC outsources its fire protection to the adjacent Los Angeles
County Fire Department
4. San Clemente uses Great West Retirement Systems for its non - safety employees,
although it is considering transferring to CAPERS for these employees. It currently
uses CalPERS for its five lifeguards
5. Villa Park no longer uses Ca1PERS for its non - safety employees, but unfunded
liabilities still exist since the city previously did use CAPERS for pensions for these
employees
6. Some CalPERS data later in the report is provided for "Safety" without specifying
whether Safety includes Police or Fire or both. In other cases CalPERS provides data
separately for Police and Fire
7. Many cities that currently outsource for fire and/or police services previously used in-
house employees for these services and still use CalPERS for those retired employees
and for the pension obligations incurred before active employees transferred to
OCFA/OCSD
Some Key Terms Defined
Pension systems receive contributions from current employees and from their employers and
accumulate and invest these assets to generate the stream of pension payments (the system's
liabilities) for their members.
The difference between the assets they hold and the assets they should have on hand to meet
their current pension payout obligations and to invest for future pension payments are their
unfunded liabilities.
The ratio of total assets to total liabilities is the "Funded Ratio" for each pension system.
Pension systems specify Annual Required Contributions from employers that are comprised of
current employee pension contributions, corresponding employer contributions, and catch up
contributions from employers to amortize their unfunded obligations.
Appendix B provides an extensive glossary of pension related terms. Appendix C provides a
general background discussion of pensions.
2013 -2014 Orange County Grand Jury Page 10
ORANGE COUNTY CITY PENSION LIABILTIES
Overviews of CaIPERS and OCERS
Both CaIPERS and OCERS provide top level descriptions in their Annual Financial Reports that
give excellent summaries of their systems, their scope, and some key financial indicators.
Extracts from these publications are provided below.
California Public Employees' Retirement System (CaIPERS) Overview from its Comprehensive
Annual Financial Report (CAFR) 2013'
"Established by legislation in 1931, the System became operational in 1932 for the
purpose of providing a secure retirement to State employees. A defined benefit retirement
plan, CaIPERS provides benefits based on a member's years of service, age, and highest
compensation.
The California Public Employees' Retirement System ( CaIPERS) is now the nation's
largest public pension fund with total net position in the Public Employees' Retirement
Fund (PERF) of $262.0 billion as of June 30, 2013. CaIPERS membership consists of
1,104,237 active and inactive members and 574,759 retirees, beneficiaries, and survivors.
The PERF paid $16.6 billion in retirement benefits to 566,975 annuitants during the
Fiscal Year 2012 -2013, compared with $15.4 billion paid to 543,722 annuitants during
the Fiscal Year 2011 -2012. Benefit payments increased primarily due to an increase in
the number of retirees and the average benefit amount, including cost- of- living-
adjustments (COLA).
As of June 30, 2012, the date of the most recent actuarial valuation, the PERF was funded
at 83.1 percent, based on the actuarial value of assets. A better measure of benefit
security is the funded status on the market value of assets basis. On that basis, as a result
of the 0.14 percent investment return in 2011 -2012, the funded status declined from 73.6
percent at June 30, 2011 to 69.6 percent at June 30, 2012. CaIPERS is making good
progress recovering from the financial crisis of 2008 -2009 and Great Recession. As of
June 30, 2013, the PERF was approximately 74 percent funded.
The past fiscal year produced a landmark pension reform law in California called the
Public Employees' Pension Reform Act (PEPRA), which went into effect on January 1,
2013. The reforms apply to nearly all California public employee pension systems,
including CaIPERS, and generally to public employees hired on January t, 2013, or later,
but not to public employees hired before the effective date."
' Comprehensive Annual Financial Report, Fiscal Year Ended June 13. 2013. CaIPERS document located at hitp://www.calpers.cit.gov/eip-
docs/about/pubs2013- executive- summary.pdf
201.3 -2014 Orange County Grand Jury Page 11
ORANGE COUNTY CITY PENSION LIABILTIES
Orange County Employee Retirement System ( OCERS) Overview from its Comprehensive
Annual Financial Report (CAFR) 2012'
" OCERS is a public retirement system that provides service retirement, disability, death
and survivor benefits, administered in accordance with the County Employees Retirement
Law of 1937 (Government Code Section 31450, et seq.), to its members.
Member pension benefit payments increased by $46.3 million or 9.6% in 2012. The
number of retired members and beneficiaries receiving a benefit payment increased 5%
from 13,289 payees at the end of 2011 to 13,947 as of December 2012. The average
annual benefit paid to retired members and beneficiaries during 2012 was $38,020 an
increase of 4.4% over the average annual benefit payment of $36,422 in 2011.
Contributions received from employers and employees totaled $629.0 million in 2012, an
increase of 2.3% compared to 2011 contributions received of $614.8 million. The net
year -to -date rate of return on investments on a fair value basis was approximately 12.26%
in 2012, up from 0.74% return earned in 2011.
OCERS maintains a funding goal to establish contributions that fully fund the System's
liabilities, and that, as a percentage of payroll, remain as level as possible for each
generation of active members.
Based upon the most recent actuarial valuation as of December 31, 2012, prepared by the
System's independent actuary, OCERS funding status for the pension plan, as measured
by the ratio of the actuarial value of assets (which smooths market gains and losses over
five years) to the actuarial value of liabilities, decreased from 67.03% at December 31,
2011 to 62.52% at December 31, 2012 due primarily to the impact of decreasing the
investment assumed rate of return from 7.75% to 7.25 %. The December 31, 2012,
OCERS funding status of 62.52% reflected a UAAL [Unfunded Actuarial Accrued
Liability] of $5.7 billion. OCERS funding status when measured using market value of
assets was 63.17% at the end of 2012 compared to 62.60% at the end of 2011.
OCERS had been using a 7.75 % assumed rate of return in its annual actuarial valuations
since 2004. In 2011, the Board [of Retirement] received a recommendation from the
System's actuary to reduce the assumed rate of return to either 7.5% or 7.25 %. After a
thorough review and lengthy discussions, the Board decided to maintain the existing
assumption and revisit the matter in 2012 after they considered the revision to the
investment asset allocation policy. Even with the subsequent improved projections for
the revised asset allocation then evident, the System's actuary again recommended the
System's rate of return be reduced to either 7.50% or 7.25 %. The Board adopted 7.25%
5 Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2012. OCERS document
2013 -2014 Orange County Grand Jury Page 12
ORANGE COUNTY CITY PENSION LIABILTIES
as the System's assumed rate of return to be effective with the 2012 actuarial valuation.
The ensuing cost impact to the employer's contribution rate as a result of this assumption
change will be phased -in over two years."
Pension Reform in California (PEPRA)
Recent reforms in California's public employee retirement systems have tried to address pension
cost drivers. These reforms have created two classes of employees: 1) employees who were
members of a California public employee pension system prior to January 1, 2013 ( "Legacy "),
and 2) employees hired after January 1, 2013, who at the time of hiring were not members of a
California public employee pension system ( "New "). Briefly excerpted below are highlights of
the pension reform legislation published by The California State Association of Counties:
"Two bills (AB 340 and AB 197) enacted the California Public Employees' Pension
Reform Act (PEPRA). AB 340 made several changes to the pension benefits that may be
offered to employees hired on or after January 1, 2013, including setting a new maximum
benefit, a lower -cost pension formula for safety and non- safety employees with
requirements to work longer in order to reach full retirement age and a cap on the amount
used to calculate a pension. Among other things, AB 340 also enacted pension spiking
reform for new and existing employees, required three -year averaging of final
compensation for new employees, and provided counties with new authority to negotiate
cost - sharing agreements with current employees."
These reforms will mitigate the pension problem in the long term. However, since these reforms
generally only apply to New employees, there remains a large problem to be dealt with in the
next 10 -30 years, which is pension payments for employees already retired or covered as Legacy
employees under the prior and far more generous pre -PEPRA rules. Given the slow rate of
hiring by cities and the grandfathering of Legacy employees, it will be a long time before these
reforms have any significant impact on pension liabilities.
Unfunded liabilities of Ca1PERS and OCERS are both large and volatile
Table 2 shows a history of the unfunded Public Employees' Retirement Fund (PERF) liabilities
for CalPERS, both as dollar amounts and in terms of funding ratio of assets divided by
liabilities.' Unfunded liabilities varied dramatically between 2003 and 2012 from $36.6 billion
in unfunded liabilities in 2003 down to ($2.9) billion (parentheses indicate a negative number,
which in turn implies an overfunded state) in 2007 and back up to $103.6 billion in 2012. The
Great Recession from December 2007 to June 2009 led to the CalPERS funding ratio dropping
dramatically from 101% in June of 2007 to 61% in June of 2009.
California State Association of Counties, "2013 Public Employees Pension Reform Act Resources'. h¢p flwwwxsaccounties. ore/' 013-pliblic
e pf v-es -pens on- reform - act- resources
v Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2013. page 132, In d/ c Ip 20 / ip- docs/about/oubs /cafr-
2013.pdf
2013 -2014 Orange County Grand Jury Page 13
ORANGE COUNTY CITY PENSION LIABILTIES
Table 2. Unfunded Accrued Liabilities Historical Data for Ca1PERS
Actuarial Valuation Date
Actuarial Accrued
Liabiity (AAL)
Market Value
of Assets
. UAAL
Funded Ratio -
Market Value of
Assets Basis
6/30/2003
$180,922
$144,330
$36,592
79.77%
6/30/2004
$194,609
$167,110
$27,499
85.87%
6/30/2005
$210,301
$189,1031
$21,198
89.92%
6/30/2006
$228,131
$211,1881
$16,943
92.57%
6/30/2007
$248,224
$251,162
- $2,938
101.18%
6/30/2008
$268,324
$238,041
$30,283
88.71%
6/30/2009
$294,042
$178,860
$115,182
60.83%
6/30/2010
$308,343
$201,632
$106,711
65.39%
6/30/2011
$328,567
$241,740
$86,827
73.57%
6/30/2012
$340,429
$236,800
$103,629
69.56%
Dollars are in Millions
Figure l and Table 3 below are from an OCERS paper "The Evolution of OCERS Unfunded
Actuarial Accrued Liability'. These data show the dramatic growth of unfunded pension
liabilities in the OCERS system not dissimilar to CalPERS' experience. However, the data also
provide a good example of why focusing on the raw dollars does not paint a complete picture
and that funding ratios are needed to paint a complete picture. Figure I shows the OCERS
pension system's accrued liabilities going from a small overfunded status in 2000 to an unfunded
status approaching $5.7 billion by 2012.
What is missing from Figure I is the fact that the OCERS assets were also growing fairly
dramatically during this period, although not fast enough to keep up with liabilities growth.
Table 3 shows the same dramatic growth in OCERS unfunded liabilities as shown in Figure 1,
but also shows the growth in value of OCERS assets paralleling the growth in liabilities.
Unfortunately, asset growth did not keep up well enough with liabilities growth to avoid a
significant decline in funding ratio. OCERS went from a funding ratio of 104% in 2000 to 63%
in 2012. However, it should be noted that the funding ratio was relatively stable between 2004
and 2010 while at the same time the unfunded liability went from $2.2 billion to $3.8 billion.
Media coverage that only deals in terms of unfunded liabilities without looking at funding ratios
is misleading.
a The Evolution of OCERS Unfunded Actuarial Accrued Liability, dated December 31.2012,
hap / /www ocers oro /pdf /finance/actuaiial /evolution of oeers uaal.pdC
2013 -2014 Orange County Grand Jury Page 14
ORANGE COUNTY CITY PENSION LIABILTIES
Changes in the value of assets are not the only source of volatility in unfunded liabilities. For
example, the seemingly small OCERS change in December, 2012, from an assumed rate of
return on investments of 7.5% down to 7.25% caused the County of Orange's projected county
retirement costs in 2015 -2016 to grow by $50 million from $377 to $427 million
Figure L Unfunded Accrued Liabilities Historical Data for OCERS
7 7 J] ! 1
f i OCERSTota6UAAl 1
3 J i J I
J _ ._
I
I
I I I I
SS.CODAOD
-
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i
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9E6, 1987ty1958 19ltl 1990 +991�1992�1993�194.r 99a19%1997Y1993 19992009 20MF201)2 =.Ztl8
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[The Y axis in OCER's paper should have indicated dollars are in thousands.]
" County of Orange 2012 Strategic Financial Plan, December 18, 2012.
Ittp / /al so 6 'o /web Publisher SarnlAgenda12 18 2011 tileslmaees156- 121 8201 2PDF
2013 -2014 Orange County Grand Jury Page 15
ORANGE COUNTY CITY PENSION LIABILTIES
Table 3. Historical OCERS Assets, Unfunded Liabilities, and Funding Ratios
Actuarial Valuation Date
December 31
Valuation Value of Plan
Assets
Total Unfunded Actuarial
Accrued Liabiliity (UAAL)
Funded Ratio
1985
$613,863
$462,121
57.05%
1986
$713,506
$507,409
58.44%
1987
$821,884
$522,098
61.16%
1988
$985,030
$468,828
67.75%
1989
$1,136,210
$515,778
68.78%
1990
$1,297,575
$543,340
70.49%
1991
$1,576,131
$196,763
88.84%
1992
$1,807,319
$332,763
84.45%
1993
$2,024,447
$280,572
87.83%
1994
$2,177,673
$372,386
85.40%
1995
$2,434,406
$199,478
92.43%
1996
$2,675,632
$176,262
93.82%
1997
$3,128,132
$204,835
93.85%
1998
$3,504,708
$177,978
95.17%
1999
$3,931,744
$85,535
97.87%
2000
$4,497,362
($162,337)
103.74%
2001
$4,586,844
$257,055
94.69%
2002
$4,695,675
$978,079
82.76%
2003
$4,790,099
$1,309,334
78.53%
2004
$5,245,821
$2,158,151
70.85%
2005
$5,786,617
$2,303,010
71.53%
2006
$6,466,085
$2,298,960
73.77%
2007
$7,288,900
$2,549,786
74.08%
2008
$7,748,380
$3,112,335
71.34%
2009
$8,154,687
$3,703,891
68.77%
2010
$8,672,592
$3,753,281
69.79%
2011
$9,064,355
$4,458,623
67.03%
2012
$9,469,208
$5,675,680
62.52%
2013 -2014 Orange County Grand Jury Page 16
ORANGE COUNTY CITY PENSION LIABILTIES
METHOD OF STUDY
The Grand Jury took the actions listed below to accomplish this study:
1. Interviews were conducted with HR managers from three selected cities concerning their
pension systems.
2. Interviews were conducted with finance managers from three selected cities concerning
their pension systems.
3. Interview(s) were conducted with CAPERS experts on how they compute the value of
their assets, project their future liabilities, and identify and deal with unfunded pension
liabilities. Key actuarial assumption changes recently made and other changes that may
occur in the near future and their impact on unfunded liabilities were also discussed as
well as the impact of pension reform and further pension reforms being contemplated.
4. Interviews were conducted with OCERS senior managers on how they handle unfunded
pension liabilities.
5. Analyses were made of CalPERS- provided data on unfunded liabilities for each city's
Public Safety (Fire and Police) and Miscellaneous (i.e., their management and
administrative staff or more simply stated - their non - Public Safety staff) employees. The
analysis looked at the absolute dollar values of the unfunded liabilities as well as
measuring the liabilities on a per capita basis and relative to the size of the General Funds
of each city.
6. Criteria for minimum expectations for budget content and quality were identified and an
assessment of OC city budget data published online against these criteria was conducted.
ANALYSIS
Ca1PERS Data on Unfunded Pension Liabilities of OC Cities
Ca1PERS provided the 2013 -2014 Grand Jury with the funding status of each Miscellaneous/
Safety pension plan which Ca1PERS provides for OC cities as shown earlier in Table 1. Table 4
shows data as of June 30, 2012, for those 34 OC cities.
The city of Anaheim, which uses Ca1PERS for all its employees including fire and police, has an
unfunded liability totaling $612 million. The city of Santa Ana has an unfunded liability totaling
$461 million, and this total does not include any unfunded pension liabilities carried by the
OCFA to whom Santa Ana outsources its fire protection.
The highest funding ratios (around 80 %) are for "Second Tier" plans which pay a lower
percentage of final salary and set a much higher minimum age of retirement. The rest of the
plans vary significantly among OC cities, having funding ratios from a high of 77.5% to a low of
2013 -2014 Orange County Grand Jury Page 17
ORANGE COUNTY CITY PENSION LIABILTIES
59 %. The aggregate unfunded CalPERS pension liabilities of the 34 OC cities shown in Table 2
using Market Value of Assets (the current baseline approach) is over $3.3 billion dollars.
It is important to note that Table 4 does not show the total exposure to unfunded pension
liabilities for those cities which outsource fire and/or police services to OCFA and OCSD,
respectively and should be read accordingly. (Table 1 showed which cities outsourced these
services.)
Table 4. Unfunded Pension Liabilities by City and Plan Using Market Value of Assets
CITY
PLAN
Accrued
Liability
Market Value
of Assets
UAL
Funded
Ratio
ALISO VIEJO
MISCELLANEOUS
$2,570,113
$1,983,533
$586,580
77.2%
Anaheim
MISCELLANEOUS
$1,045,037,179
$712,496,875
$332,540,304
68.2%
Anaheim
SAFETY POLICE
$565,213,783
$395,053,409
$170,160,374
69.9%
Anaheim
SAFETY FIRE
$345,724,884
$236,154,719
$109,570,165
68.3%
Brea
SAFETY
$191,751,7501
$127,377,145
$64,374,605
66.4%
Brea
MISCELLANEOUS
$102,226,046
$72,815,975
$29,410,071
71.2%
BUENA PARK
SAFETY
$185,001,886
$136,426,394
$4$575,492
73.7%
BUENA PARK
MISCELLANEOUS
$109,953,460
$77,968,001
$31,985,459
70.9%
Costa Mesa
MISCELLANEOUS
$225,186,488
$141,225,952
$83,960,536
62.7%
Costa Mesa
SAFETY POLICE
$212,645,063
$129,017,818
$83,627,245
60.7%
COSTA MESA
SAFETY FIRE
$161,328,098
$100,677,450
$60,650,648
62.4°/
CYPRESS
SAFETY
$65,259,215
$47,574,444
$17,684,771
72.9%
Cypress
MISCELLANEOUS
$58,995,0201
$44,534,686
$14,460,334
75.5%
DANA POINT
MISCELLANEOUS
$14,606,788
$11,273,064
$3,333,724
77.2%
FOUNTAIN VALLEY
SAFETY 1STTIER
$144,802,443
$99,113,405
$45,689,038
68.40/.
FOUNTAIN VALLEY
MISCELLANEOUS 15TTIER
$78,548,900
$51,520,993
$27,027,907
65.6%
FOUNTAIN VALLEY
SAFETY POLICE 2NDTIER
$100,138
$75,901
$24,237
75.8%
FOUNTAIN VALLEY
MISCELLANEOUS 2ND TIER
$31,032
$24,768
$6,264
79.8%
FOUNTAIN VALLEY
SAFETY FIRE 2NDTIER
$422
$315
$107
74.6%
Fullerton
SAFETY
$372,812,731
$247,403,994
$125,408,737
66.40/
Fullerton
MISCELLANEOUS
$227,961,5761
$170,608,016
$57,353,560
74.8%
Garden Grove
SAFETY
$387,791,595
$251,498,319
$136,293,276
64.9%
Garden Grove
MISCELLANEOUS
$231,098,351
$155,545,807
$75,552,544
67.3%
Huntington Beach
SAFETY
$552,535,708
$350,648,228
$201,887,480
63.5%
Huntington Beach
MISCELLANEOUS
$431,175,037
$298,603,254
$132,571,783
69.3%
Irvine
MISCELLANEOUS
$262,485,223
$168,840,560
$93,644,663
64.3%
Irvine
SAFETY
$162,425,349
$114,537,221
$47,888,128
70.5%
LA HABRA
SAFETY
$124,453,943
$87,149,408
$37,304,535
70.0%
La Habra
MISCELLANEOUS
$79,216,2761
$59,609,354
$19,606,922
75.2%
LA HABRA
SAFETY POLICE 2ND TIER
$753
$563
$190
74.8%
LA PALMA
SAFETY
$33,248,911
$24,518,826
$8,730,085
73.7%
LA PALMA
MISCELLANEOUS
$22,117,712
$16,031,551
$6,086,161
72.5%
LA PALMA
SAFETY 2ND TIER
$7,511
$5,895
$1,616
78.5%
LA PALMA
MISCELLANEOUS 2ND TIER
$576
$460
$116
79.9%
2013 -2014 Orange County Grand Jury Page 18
ORANGE COUNTY CITY PENSION LIABILTIES
CITY
PLAN
Accrued
Liability
Market Value
of Assets
UAL
Funded
Ratio
Laguna Beach
MISCELLANEOUS
$80,291,956
$55,443,941
$24,848,015
69.1%
LAGUNA BEACH
SAFETY POLICE
$57,585,435
$42,465,368
$15,120,067
73.7%
LAGUNA BEACH
SAFETY FIRE
$45,735,935
$33,727,163
$12,008,772
73.7%
LAGUNA BEACH
SAFETY LIFEGUARD
$4,662,336
$3,533,903
$1,128,433
75.8%
LAGUNA BEACH
SAFETY FIRE 2NDTIER
$21,221
$16,085
$5,136
75.8%
LAGUNA BEACH
SAFETY POLICE 2ND TIER
$119
$90
$29
75.6%
a--
HILLS
MISCELLANEOUS
$11,150,476
$8,428,814
$2,721,662
75.6 %
LAGUNA NIGUEL
MISCELLANEOUS
$21,979,272
$16,962,917
$5,016,355
77.2%
LAGUNA NIGUEL
MISCELLANEOUS 2ND TIER
$576
$460
$116
7c
LAGUNA WOODS
MISCELLANEOUS
$1,799,940
$1,389,138
$410,802
77.2%
LAKE FOREST
MISCELLANEOUS
$16,886,211
$13,032,252
$3,853,959
77.2%
LOS ALAMITOS
SAFETY
$24,809,272
$18,091,332
$6,717,940
72.9%
LOS ALAMITOS
MISCELLANEOUS
$23,970,858
$17,582,564
$6,388,294
73.3%
Mission Viejo
MISCELLANEOUS
$55,336,400
$37,971,519
$17,364,881
68.6%
Newport Beach
SAFETY
$424,868,507
$252,131,503
$172,737,004
59.3%
Newport Beach
MISCELLANEOUS
$302,006,850
$200,149,332
$101,857,518
66.3%
Orange
SAFETY
$395,287,607
$265,861,717
$129,425,890
67.3%
Orange
MISCELLANEOUS
$271,876,517
$187,707,479
$84,169,038
69.0%
PLACENTIA
SAFETY
$69,929,197
$47,548,284
$22,380,913
68.0%
PLACENTIA
MISCELLANEOUS
$44,543,255
$34,400,240
$10,143,015
77.2%
PLACENTIA
MISCELLANEOUS 2ND TIER
$70
$56
$14
80.0%
RANCHO SM
MISCELLANEOUS 1STTIER
$3,578,445
$2,373,225
$1,205,220
66.3%
RANCHO SM
MISCELLANEOUS 2ND TIER
$66
$53
$13
80.3%
SAN CLEMENTE
SAFETY LIFEGUARD
$4,771,964
$3,412,298
$1,359,666
71.5%
Santa Ana
SAFETY
$886,484,216
$639,122,005
$247,362,211
72.1 °%
Santa Ana
MISCELLANEOUS
$670,676,090
$456,703,295
$213,972,795
68.1%
SEALBEACH
SAFETY
$55,626,490
$41,020,779
$14,605,711
73.7%
SEALBEACH
MISCELLANEOUS
$37,784,994
$29,273,349
$8,511,645
77.5%
STANTON
MISCELLANEOUS
$16,135,869
$11,943,044
$4,192,825
74.0%
TUSTIN
SAFETY
$96,725,338
$67,268,742
$29,456,596
69.5%
Tustin
MISCELLANEOUS
$79,578,148
$60,726,631
$18,851,517
76.3%
TUSTIN
SAFETY POLICE 2ND TIER
$634
$474
$160
74.9%
VILLA PARK
MISCELLANEOUS
$3,584,194
$2,504,067
$1,080,127
69.9%
WESTMINSTER
SAFETY
$190,808,021
$140,326,367
$50,481,654
73.5%
Westminster
MISCELLANEOUS
$103,786,629
$70,524,912
$33,261,717
68.0%
Yorba Linda
MISCELLANEOUS
$52,656,198
$35,770,166
$16,886,032
67.9%
Per Capita Assessment
Since the cities in Table 4 vary greatly in size, the Grand Jury calculated these unfunded
liabilities for a selected set of cities on a per capita basis to provide a normalized measure of the
impact of these liabilities. Table 5 below provides this assessment for the 10 OC cities that rely
on Ca1PERS for all their Miscellaneous and Safety employees. These 10 cities are the only ones
for which an apples -to- apples comparison is possible because unfunded pension liabilities for
those cities which outsource fire and /or police services to OCFA and OCSD are not available.
2013 -2014 Orange County Grand Jury Page 19
ORANGE COUNTY CITY PENSION LIABILTIES
No city on the list stands apart as having an overwhelming liability when measured using this
metric. However, the table does show that unfunded liabilities on a per capita basis do vary by a
factor of well over two among these cities. Notably, the city with the highest per capita liability
in the list is one of the wealthiest as well.
Table 5. Unfunded Actuarial Liabilities (UAL) by City Computed on a Per Capita Basis
City
Total Misc plus
Public Safety
UAL
City
Population
Per Capita UAL
for Misc plus
Public Safety
Anaheim
$612,270,843
343,248
$1,783.76
Brea
$93,784,676
40,330
$2,325.43
Costa Mesa
$228,238,429
111,918
$2,039.34
FOUNTAIN VALLEY
$72,747,553
56,464
$1,288.39
Fullerton
$182,762,297
138,534
$1,319.26
Garden Grove
$211,845,820
174,389
$1,214.79
Huntington Beach
$334,459,263
194,708
$1,717.75
Laguna Beach
$53,110,452
23,176
$2,291.61
Newport Beach
$274,594,522
87,068
$3,153.79
Orange
$213,594,928
139,419
$1,532.04
Assessment of Unfunded Liabilities as a Percent of General Fund Revenues
Another (and potentially better) way of comparing the burden of unfunded pension liabilities is
by looking at the ratio of the unfunded pension liabilities of a city to one year's General Fund
revenues for that city. Arguably, the differences in wealth of these cities would be reflected in
the differences in their General Fund revenues tied to property and sales taxes and would provide
a better measure of the burden of these liabilities on the city's resources. The Grand Jury
calculated these ratios in Table 6 for the same 10 cities shown in Table 5. Again the cities when
assessed using this metric vary by over a factor of well over two, and again there is not any city
in the list that stands apart as having an overwhelming liability when measured using this metric.
Also interesting is that different cities fare better depending on the metric used - per capita versus
percent of General Fund. A significant drawback to the General Fund Percentage metric is the
difficulty to achieve any reliable apples -to- apples comparison since city revenues are structured
differently. In addition, some cities have their own water and power utilities which have their
own associated revenues, and all cities have different sources of grant and bond revenues.
2013 -2014 Orange County Grand Jury Page 20
ORANGE COUNTY CITY PENSION LIABILTIES
Table 6 — Unfunded Pension Liabilities as a Percentage of Annual General Fund Revenues
CITY
Total Misc plus
Public Safety UAL
Total General
Fund Assumed
Revenues from
Current
Adopted Budget
Budget Year
of Adopted
Budget
Unfunded
Pension
Liability asa
Percent of
General Fund
Revenues
Anaheim
$612,270,8431
$491,847,000
2013
124.5 %
Brea
$93,784,6761
$49,431,294
2013 -2014
189.7%
Costa Mesa
$228,238,429
$103,250,486
2013 -2015
221.1%
FOUNTAIN VALLEY
$72,747,553
$37,032,042
2013 -2014
196.4%
Fullerton
$182,762,297
$154,333,191
2013 -2014
118.4%
Garden Grove
$211,845,820
$92,351,000
2013 -2014
229.4%
Huntington Beach
$334,459,263
$298,239,325
2013 -2014
112.1%
Laguna Beach
$53,110,452
$48,425,000
2013 -2014
109.7%
Newport Beach
$274,594,522
$255,333,875
2013 -2014
107.5%
Orange
$213,594,928
$90,139,158
2013 -2014
237.0%
It is critical to note that attempts at measuring the impact of unfunded pension liabilities such as
provided in Tables 5 and 6 would not be needed if the cities provided adequate budget data! It
would be a simple matter of checking whether a city's predicted revenues for current and future
years are sufficient to meet total planned expenditures in those years including the pension
related expenditures. In order to have a balanced budget, increased pension expenditures will
have to be matched with increased revenues and /or carts to other major budget items.
Calculating Unfunded Liabilities using Market Value instead of Actuarial Value of Assets
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change
its amortization and smoothing policies. Prior to this change, CalPERS employed a smoothing
policy which spread investment returns over a 15 -year period; after the change investment
returns were smoothed over a 5 -year period. As a result, the dramatic impact of the 2007 -2009
Great Recession on investment returns, which fell in the middle of this 5 year period, was much
more heavily weighted than when 15 years of returns were used.
Table 7 below shows data for the plans listed in Table I as of June 30, 2012, but now showing
unfunded liabilities computed using Actuarial Value of Assets instead of Market Value of
Assets. These data were provided at Grand Jury request in order to assess the impact of the
CalPERS decision in 2012 to use Market Value instead of Actuarial Value of Assets in
computing unfunded liabilities. Recall that the aggregate unfunded liabilities using Market
Value of Assets from Table 4 was $3.3 billion. The aggregate unfunded CalPERS pension
2013 -2014 Orange County Grand Jury Page 21
ORANGE COUNTY CITY PENSION LIABILTIES
liabilities from Table 7 of the 34 OC cities calculated using Actuarial Value of Assets (the prior
baseline approach) is $1.9 billion dollars.
The 2013 decision by CalPERS to use Market Value instead of Actuarial Value resulted in an
increase in the calculation of unfunded liabilities of OC cities of $1.4 billion!
Table 7. Unfunded Liabilities using Actuarial Value of Assets
CITY
PLAN
Accrued Liability
Actuarial Value
of Assets
UAL (AVA)
-
Funded
Ratio
ALISO VIEJO
MISCELLANEOUS PLAN
$2,570,113
$2,343,664
$226,449
91.2%
Anaheim
MISCELLANEOUS PLAN
$1,045,037,179
$854,296,252
$190,74D,927
81.7%
Anaheim
SAFETY POLICE PLAN
$565,213,783
$473,232,689
$91,981,094
83.7%
Anaheim
SAFETY FIRE PLAN
$345,724,884
$283,210,761
$62,514,123
81.9%
Brea
SAFETY PLAN
$191,751,750
$152,827,533
$38,924,217
79.791
Brea
MISCELLANEOUS PLAN
$102,226,046
$87,360,7041
$14,865,342
85.5%
BUENA PARK
SAFETY PLAN
$185,001,886
$162,856,5901
$22,145,296
88.0%
BUENA PARK
MISCELLANEOUS PLAN
$109,953,460
$93,518,527
$16,434,933
85.1%
Costa Mesa
MISCELLANEOUS PLAN
$225,186,488
$169,039,653
$56,146,835
75.1%
Costa Mesa
SAFETY POLICE PLAN
$212,645,063
$153,878,616
$58,766,447
72.4%
COSTA MESA
SAFETY FIRE PLAN
$161,328,098
$120,181,921
$41,146,177
74.5%
CYPRESS
SAFETY PLAN
$65,259,215
$56,791,149
$8,468,066
87.09/
Cypress
MISCELLANEOUS PLAN
$58,995,020
$53,426,741
$5,568,279
90.65/
DANA POINT
MISCELLANEOUS PLAN
$14,606,788
$13,319,805
$1,286,983
91.2%
FOUNTAIN VALLEY
SAFETY FIRSTTIER PLAN
$144,802,443
$118,314,8701
$26,487,573
81.7%
FOUNTAIN VALLEY
MISCELLANEOUS FIRSTTIER PLAN
$78,548,900
$61,269,357
$17,279,543
78.09'/
FOUNTAIN VALLEY
SAFETY POLICE SECOND TIER PLAN
$100,138
$90,352
$9,786
90.2%
FOUNTAIN VALLEY
MISCELLANEOUS SECOND TIER PLAN
$31,032
$29,439
$1,593
94.9%
FOUNTAIN VALLEY
SAFETY FIRE SECOND TIER PLAN
$422
$378
$44
89.6%
Fullerton
SAFETY PLAN
$372,812,731
$296,723,845
$76,088,886
79.60/6
Fullerton
MISCELLANEOUS PLAN
$227,961,576
$204,542,656
$23,418,920
89.7%
Garden Grove
SAFETY PLAN
$387,791,595
$301,757,326
$86,034,269
77.8%
Garden Grove
MISCELLANEOUS PLAN
$231,098,351
$186,575,8131
$44,522,538
80.7%
Huntington Beach
SAFETY PLAN
$552,535,708
$420,518,8191
$132,016,889
76.1%
Huntington Beach
MISCELLANEOUS PLAN
$431,175,037
$357,911,3941
$73,263,643
83.09'/
Irvine
MISCELLANEOUS PLAN
$262,485,223
$198,147,0711
$64,338,152
75.5%
Irvine
SAFETY PLAN
$162,425,349
$134,847,3981
$27,577,951
83.0%
LA HABRA
SAFETY PLAN
$124,453,943
$104,033,0611
$20,420,882
83.6%
La Habra
MISCELLANEOUS PLAN
$79,216,276
$71,487,6041
$7,728,672
90.2%
LA HABRA
SAFETY POLICE SECOND TIER PLAN
$753
$675
$78
89.6%
LA PALMA
SAFETY PLAN
$33,248,911
$29,268,9141
$3,979,997
88.0//
LA PALMA
MISCELLANEOUS PLAN
$22,117,712
$18,886,8951
$3,230,817
85.4%
LA PALMA
SAFETY SECOND TIER PLAN
$7,511
$7,025
$486
93.5%
LA PALMA
MISCELLANEOUS SECOND TIER PLAN
$576
$546
$30
94.8%
Laguna Beach
MISCELLANEOUS PLAN
$80,291,956
$66,214,802
$14,077,154
82.5%
LAGUNA BEACH
SAFETY POLICE PLAN
$57,585,435
$50,692,281
$6,893,154
88.09/.
LAGUNA BEACH
SAFETY FIRE PLAN
$45,735,935
$40,261,203
$5,474,732
88.0%
LAGUNA BEACH
SAFETY LIFEGUARD PLAN
$4,662,336
$4,206,731
$455,605
90.2%
LAGUNA BEACH
SAFETY FIRE SECOND TIER PLAN
$21,221
$19,147
$2,074
90.2%
LAGUNA BEACH
SAFETY POLICE SECOND TIER PLAN
$119
$107
$12
89.9%
2013 -2014 Orange County Grand Jury Page 22
ORANGE COUNTY CITY PENSION LIABILTIES
CITY
PLAN
Aarued Liability
Actuarial Value
of Assets
UAL (AVA)
Funded
Ratio
LAGUNA HILLS
MISCELLANEOUS PLAN
$11,150,476
$10,018,286
$1,132,190
89.8%
LAGUNA NIGUEL
MISCELLANEOUS PLAN
$21,979,272
$20,042,710
$1,936,562
91.2%
LAGUNA NIGUEL
MISCELLANEOUS SECOND TIER PLAN
$576
$546
$30
94.8%
LAGUNA WOODS
MISCELLANEOUS PLAN
$1,799,940
$1,641,350
$158,590
91.2%
LAKE FOREST
MISCELLANEOUS PLAN
$16,886,211
$15,398,391
$1,487,820
91.2%
LOSALAMITOS
SAFETY PLAN
$24,809,272
$21,596,207
$3,213,065
87.0%
LOS ALAMITOS
MISCELLANEOUS PLAN
$23,970,858
$20,714,154
$3,256,704
86.4%
Mission Viejo
MISCELLANEOUS PLAN
$55,336,400
$44,251,357
$11,085,043
80.0%
Newport Beach
SAFETY PLAN
$424,865,507
$302,365,698
$122,502,809
71.2%
Newport Beach
MISCELLANEOUS PLAN
$302,006,850
$238,869,992
$63,136,855
79.1%
Orange
SAFETY PLAN
$395,287,607
$318,640,102
$76,647,505
80.6%
Orange
MISCELLANEOUS PLAN
$271,876,517
$225,061,652
$46,514,865
82.5%
PLACENTIA
SAFETY PLAN
$69,929,19,71
$56,759,921
$13,169,276
81.2%
PLACENTIA
MISCELLANEOUS PLAN
$44,543,2551
$40,645,959
$3,897,296
91.3%
PLACENTIA
MISCELLANEOUS SECONDTIER PLAN
$70
$66
$4
943%
RANCHO SM
MISCELLANEOUS FIRST TIER PLAN
$3,578,445
$2,822,266
$756,179
78.9%
RANCHOSM
MISCELLANEOUS SECOND TIER PLAN
$66
$63
$3
95.5%
SAN CLEMENTE
SAFETY LIFEGUARD PLAN
$4,771,964
$4,061,973
$709,991
85.1%
Santa Ana
SAFETY PLAN
$886,484,216
$766,597,172
$119,887,044
86.5%
Santa Ana
MISCELLANEOUS PLAN
$670,676,090
$547,675,894
$123,000,1961
81.7%
SEALBEACH
MISCELLANEOUS PLAN
$37,784,994
$34,588,228
$3,196,7661
91.5%
SEALBEACH
SAFETY PLAN
$55,626,490
$48,967,828
$6,658,662
SS.O%
STANTON
MISCELLANEOUS PLAN
$16,135,869
$14,111,427
$2,024,442
87.5%
TUSTIN
SAFETY PLAN
$96,725,338
$80,300,869
$16,424,4691
83.0%
Tustin
MISCELLANEOUS PLAN
$79,578,145
$72,395,531
$7,182,617
91.0%
TUSTIN
SAFETY POLI CE SECON D TI ER PLAN
$634
$568
$66
89.6%
VILLA PARK
MISCELLANEOUS PLAN
$3,584,194
$2,958,706
$625,488
82.5%
WESTMINSTER
SAFETY PLAN
$190,808,021
$167,512,113
$23,295,908
87.8%
Westminster
MISCELLANEOUS PLAN
$103,786,629
$84,550,883
$19,235,746
81.5%
Yorba Li nda
MISCELLANEOUS PLAN
$52,656,195
$42,905,265
$9,750,933
81.5%
Grand Jury Interviews
As discussed under Method of Study, the Grand Jury conducted interviews with experts
representing the three key players in the pension processes for cities: city human resources
managers, city finance managers, and senior staff from CalPERS and OCERS, the primary
pension systems used by OC cities. Before summarizing those individual discussions, it will be
useful to share some candid comments without being more specific as to where these comments
came from.
The one word used to describe public employee pensions was "generous ", Given Grand Jury
members' knowledge of Social Security and private employer pensions, it finds that adjective
appropriate. However, whether the pensions were generous before pension reform or are
generous even after pension reform, the focus of this Grand Jury is on the ability of cities to deal
e
2013 -2014 Orange County Grand Jury Page 23
ORANGE COUNTY CITY PENSION LIABILTIES
with unfunded obligations tied to these pensions and on how transparent city budgets are with
respect to the impact of these liabilities.
One other topic discussed was the recent practice of cities offsetting newly required increased
employee contributions to their pensions by raising employees' salaries by a corresponding
percentage. A city, instead of directly paying part of what is nominally the employee's share of
pension contributions to the pension system instead pays it to the employee, who in turn pays it
to the pension system as part of his /her contribution. To take a real example, the city of Garden
Grove decided to offset an increase of 3% in public safety employee pension contributions with a
3 % increase in salary.° In some ways this looks like a very tempting zero -sum game; the new
rules are followed, and the city's budget and employee's take home pay are essentially
unaffected. The catch is that the employee will now have a base salary at retirement 3% higher
than the pension system had been assuming in predicting its pension payout to that employee.
This increased pension payment will be made for the remainder of that employee's life, i.e., a
new unfunded pension liability has been created.
Interviews with CalPERS
Experts from CalPERS were very helpful in discussing with the Grand Jury the actuarial
assumptions they use in projecting pension liabilities. Of particular interest was the recent
decision by CalPERS to use Market Value of Assets instead of Actuarial Value of Assets. The
choice is obviously a philosophical one since Actuarial Value had been the standard approach for
many years. On April 17, 2013, the CalPERS Board of Administration approved a
recommendation to change its amortization and smoothing policies. Prior to this change,
CalPERS employed an amortization and smoothing policy which spread investment returns over
a 15 -year period; after the change investment returns were smoothed over a 5 -year period. The
consequence of this change in asset valuation method was discussed in the Analysis section of
this report.
Other possible changes to critical actuarial assumptions were also discussed. CalPERS plans to
move from the mortality tables they currently use to tables used by the Social Security system,
which reflect the longer life expectancies enjoyed by US residents. Also being considered is a
further move to mortality tables which reflect the life expectancies of the residents of California
who live almost two years longer than the average US resident. Good news for Californians is
to "Police to get Raises to Offset Higher Pension Payments', Voice of Orange County article dated September 24. 2013,
http//www.voiceofoc.oig/oc central /garden rove /article e96a94 d4- 24(le- Ile3- bl84- 0019bb2963f4 html
2013 -2014 Orange County Grand jury Page 24
ORANGE COUNTY CITY PENSION LIABILTIES
not good news for pension liabilities since California pension systems can expect to be paying
pensions to their retirees for two to four years longer than they had been planning.
Interview with OCERS
Senior Managers from OCERS discussed their perspective on unfunded pension liabilities for
Orange County cities which outsource fire and/or police to OCFA and OCSD. OCERS
experienced the same increase in unfunded pension liabilities for all pensions managed by
OCERS as did CalPERS due to the impact of the Great Recession which began in 2007 on the
value of their assets. In 2012, OCERS changed their assumed rate of return on assets from
7.75% to 7.25 %, which had a large impact on their computation of unfunded liabilities. They
also moved to amortizing unfunded liabilities over 20 years instead of 30 years. Both these
changes significantly increased the catch up contributions they require from their members. On a
positive note, OCERS is starting to see a recovery in the current prices of their equity and real
estate holdings, which is beginning to be reflected in the actuarial (smoothed) values of their
assets.
Like CalPERS, OCERS also worries about events that could cause their unfunded liabilities to
grow — the greatest possible impact would come from a decision to further reduce the actuarial
assumption of the rate of investment return on their assets. Another concern is whether even the
7.25% rate of return can be maintained over the next several years. Many markets have
recovered to pre -Great Recession valuations after a six year bull market, which may be losing
steam. Despite the uncertainties, OCERS managers are confident that their system is robust
enough to work through short term ups and downs and that they will continue to improve their
funding status.
OCERS managers also pointed out that tracing the flow of OCERS unfunded pension liabilities
to cities is much harder than tracing the equivalent flow from CalPERS to Orange County cities.
CalPERS has a direct fiduciary relationship with individual cities and communicates the pension
contributions required from each city via its Annual Valuation Reports. CalPERS provides
Valuation Reports for pension plans for each city, one for Miscellaneous employees, one for
Police, and one for Fire. Sometimes the Police and Fire plans are combined into a single Safety
plan and sometimes plans are split into "Tier I" and "Tier 2 ", but it is always clear which plan
applies to which city. (This structure is easily seen in Table 2.) OCERS does not have a direct
fiduciary relationship with any OC city for public safety employees. The two agencies relevant to
this report that OCERS has such a relationship with are the Orange County Fire Authority and
County of Orange. The flow of unfunded pension liabilities from OCERS to the Orange County
Fire Authority and to the County of Orange and then from the Orange County to the Orange
County Sheriffs Department is reasonably straightforward. But the flow from those agencies to
2013 -2014 Orange County Grand jury Page 25
ORANGE COUNTY CITY PENSION LIABILTIES
individual cities which outsource public safety functions to them is far more convoluted and far
less visible.
OCERS breaks down pension fund assets, liabilities, unfunded liabilities, and required annual
contributions by "Rate Groups ". OCFA has its own unique rate groups with OCERS, one for
general personnel and one for safety. OCERS does not have a direct relationship with the
Orange County Sheriffs Department; its fiduciary relationship is with the County of Orange.
However OCERS pensions for Sheriffs department employees can be isolated in the Annual
Valuation Report for the County of Orange. A separate rate group for Sheriffs Department
personnel (Group 7) within the overall Annual Valuation is where data for fund assets, liabilities,
unfunded liabilities, and required annual contributions for police personnel can be found.
OCERS has become more aware of the fact that their final pension "customers" are not only the
County of Orange or even the OCSD and OCFA. In many cases individual OC cities that
outsource fire and/or police services to OCFA and OCSD are their ultimate customers whose
budgets are impacted as OCERS works to recover from unfunded liabilities. OCERS is working
on developing better outreach to and communication with OC cities.
A further discussion on tracing unfunded pension liabilities to cities which
outsource to OFCA
OCFA provides fire services to two classes of cities in Orange County, eight Structural Fire Fund
(SFF) members and fifteen Cash Contract Cities (CCC) members. SSF cities have part of their
property tax designated for fire protection, which is paid directly to the OCFA and is typically
not shown on a city's budget. CCC cities are directly billed quarterly for fire services, and these
expenditures are typically shown as an expenditure on a city's budget. Tracing the impact of
OCFA's unfunded pension liabilities owed to OCERS to individual OC city budgets via material
online does not appear possible.
The OCFA makes general statements" about reducing its unfunded pension liabilities:
"The policy .... was last updated on May 22, 2008 to require the OCFA to annually
review the feasibility of accelerating payment of the unfunded pension liability."
"OCFA employer retirement rates for safety members were scheduled to decrease by
about 2.3 %, however, in order to help pay down OCFA's Unfunded Actuarially Accrued
Liability (UAAL) the budget includes a carryover of the higher safety member employer rates
Orange County Fire Authority 20132014 Adopted Budget. http�l/www.ocfa.ot-/ uvioaddndf /2013- 14%20Adooted`9o20Bud,et website I )df
2013 -2014 Orange County Grand Jury Page 26
ORANGE COUNTY CITY PENSION LIABILTIES
from 2012/2013. This is a first small step to help address OCFA's intent to reduce long term
liabilities."
However, since "Salaries and Employee Benefits" are lumped together as a single line item
throughout the remainder of the budget, there is no way of really seeing actual dollar amounts for
what this UAAL is nor for planned expenditures to reduce it, if any. No discussion of how
pension costs are allocated to individual CCC cities is provided, and no discussion of how
pension costs are incorporated into current and future quarterly billings for SFF cities is
provided.
Interviews with City Hwnan Resource Managers
Very early in the study interviews were held with the Human Resource (HR) Managers of three
OC cities to get their perspective on how their city was dealing with pensions for their
employees. The city HR managers were very open in answering Grand Jury questions, and all
were consistent in describing their pension processes.
The Grand Jury was informed that benefits including pensions are part of labor negotiations
conducted with unions representing different groups of employees. Memoranda of
Understanding (MOUs) document the results of these negotiations. Specific terms of city
pension plans vary depending on the negotiated labor agreements and are drawn from a menu of
plans supported by CalPERS. Pension plans specify the minimum age of retirement and the
pension benefit to be paid in terns of a percentage of the employee's highest year of salary times
the number of years of service. The total percentage is capped, but for Legacy employees there
is no cap on highest salary used in computing the pension benefit. Hence there is no cap on the
annual pension benefit paid. However, post - PEPRA employees' pensions are currently capped
at - $130K.
When a person is hired, that employee is assigned to a particular pension plan based on position
and job title. Typically movement across pension plans is rare for current employees. A more
typical situation is when an employee is hired from another city to do the same type of work, in
which case pension benefits will be grandfathered.
The HR managers helped clarify the impact of pension reform in the near term (not much since
nearly all their employees are grandfathered as Legacy employees under the more generous
pension agreements. Only New employees hired since January 1, 2013, fall under the PEPRA
reformed pension rules. With the continued slowdown in hiring, only a small percentage of
current employees are New (typically much less than 10 %). The managers were well aware of
the issues associated with pensions, their impact on city finances, and the impact of pension
2013 -2014 Orange County Grand Jury Page 27
ORANGE COUNTY CITY PENSION LIAIIILTIES
reform. In general they were confident that they had processes in place to avoid abuses of the
pension rules by any attempt on the part of a retiring employee to include "non- PERSable"
income as part of the base salary used to compute pension benefits. They (and city finance
managers whom the Jury talked with separately) believe the PEPRA pension reforms will
substantially reduce future unfunded pension liabilities. However, they were quick to point out
that it will be many years before any significant effect falls to the bottom line of their city's
pension liabilities.
Interviews with City Finance Managers
Interviews were held with the Finance Managers of the same three OC cities the Grand Jury had
previously met with to interview the HR managers. These interviews sought their perspective on
how their city was dealing with unfunded pension liabilities. The city finance managers were
very open in answering Grand Jury questions and made helpful suggestions on some key areas
on which to focus. _
The Finance Managers the Grand Jury met with project revenues and expenditures one year out
in their formal budgets. Current year budgets are posted online as they are first proposed to and
then adopted by their city. None of the cities' budgets shows separate line items at the summary
level for pension expenditures, although pension /retirement benefit expenditures are provided in
substantial detail at lower levels in their budgets. The Finance Managers acknowledged that it
would be arduous to sum up all the detailed pension expenditures to arrive at the total pension
related expenditures. Planning budgets are developed for several years further into the future and
discussed internally, but not typically posted.
When CalPERS does its Annual Valuation Report for a city's pension plan(s), CalPERS will
discuss the report with the city and (very rarely) make adjustments based on those discussions.
City Finance Managers use the Annual Required Contributions from the Annual Valuation
Reports to develop the pension related expenditures for their budget.
Each city withholds employee pension contributions and sends them bi- weekly to Ca1PERS. The
city's employer pension contributions and any city catch up pension contributions are paid from
the city General Fund to CalPERS.
When asked about the recent move by CalPERS from an Actuarial Value basis for estimating
current value of assets to a Market Value basis, no value judgment was expressed, but the
resulting jump in unfunded liabilities was noted by all. The finance managers viewed the
remaining actuarial assumptions used by CalPERS as reasonable under current economic
conditions, but are aware that the assumptions can be expected to change if circumstances
change. They are particularly sensitive to any downward adjustment to projected rates of return
2013 -2014 Orange County Grand Jury Page 28
ORANGE COUNTY CITY PENSION LIABILTIES
on investment of plan assets as such an adjustment could substantially increase the actuarial
value of their unfunded liabilities and hence their catch up contributions.
Another concern discussed was the likely move by pension funds to use more realistic mortality
assumptions based on Social Security tables, which will increase unfunded liabilities. In
addition, Californians have the third highest life expectancy in the United States (only residents
of Hawaii and Minnesota live longer, by L I I and 0.48 years, respectively) and have a life
expectancy 1.7 years longer than the average expectancy for the United States total population. A
further move to using mortality tables reflecting California's better than national average life
expectancy, if implemented as expected, will further increase unfunded liabilities.
City Finance Managers were consistent with their HR managers in their evaluation of the impact
of pension reform. Nearly all current employees are Legacy employees; "New" employees
typically comprise a few percent and well less than 10% of their total employee population.
Only employees hired after January I, 2013 are New under the PEPRA definitions, and hiring of
new employees has primarily occurred only in the cases of retirements of current employees.
New hires to replace positions cut in response to the 2008 Great Recession have been on hold for
the most part.
Except for one of the three cities which outsourced fire protection to OCFA, all three cities
interviewed by the Grand Jury use CaIPERS for their Miscellaneous employees and for their
public safety employees. The city outsourcing lire protection is a Cash Contract City member of
OCFA and is billed quarterly for fire services. The quarterly rate paid reflects an agreed to
number of skilled personnel and physical assets such as fire stations, trucks, and ambulances.
Pension costs including any catch up pension costs are included in the bottom line charge to the
city and not separately accounted for.
The managers were well aware of the issues associated with dealing with unfunded pension
liabilities and their impact on their city's finances. However, none of them saw the liabilities,
even at their current size, as catastrophic and were making adjustments in planned city
expenditures to deal with them. They acknowledge that the adjustments will not come without
pain as valuable city services that were cut in response to revenue shortfalls caused by the Great
Recession will not be reinstituted as quickly as they had hoped. Significant amounts of the
revenue increases they are seeing as the recovery develops will be going to catching up on
unfunded pension liabilities. For example, one city's internal budget shows pension
contributions ramping up from 8% to 12% of their General Fund and remaining there for several
years and then ramping back down to 8% based on CaIPERS projected Annual Required
Contributions. The link between Ca1PERS projected annual contributions and the city's budget is
critical to establishing some confidence that unfunded pension liabilities, while painful, are not
2013 -2014 Orange County Grand Jury Page 29
ORANGE COUNTY CITY PENSION LIABILTIES
catastrophic. It must also be noted, of course, that as discussed earlier in this report, unfunded
liabilities can be volatile, and budgets as they are updated annually must keep in synch with
changes in annual required contributions from CaIPERS.
Some of the finance managers were working to develop better ways to present future
expenditures for pensions in their budgets and in their briefings to their City Councils. In one
case the finance manager was already planning a proposed update to their budget structure to
clearly identify and separate pension expenditures at the top level of the city budget, an approach
which matched the model the Grand Jury had brought to the interview.
The ability of some of the finance managers to communicate the impact of unfunded pension
liabilities to their City Councils and labor unions has led to some success in labor negotiations
regarding pensions. Such agreements where employees have agreed to carry a larger portion of
the burden of pension costs and in some cases agreed to reduced benefits have also made it
possible for these cities to meet their overall pension funding obligations by offsetting increased
amortization payments for unfunded liabilities with higher employee contributions.
This better understanding of unfunded pension liabilities has also led to the consideration of
accelerated catch up payments to CalPERS to increase the amount of assets being managed and
to obtain the projected returns on those assets.
Assessment of Budget Information Available Online
Since cities are expected to make their budget information available online, the Grand Jury
examined a large sample of OC cities' online budget information. Significant effort was
expended reviewing and assessing how well each city's posted budget disclosed how it was
dealing with its unfunded pension liabilities. Although the original intent was to look at
budgeting for pension liabilities, it quickly became apparent that the quality and usefulness of
posted budget information in all areas varied greatly among the cities. Fundamental deficiencies
in budget information posted by OC cities need to be addressed before looking in detail at
pension information in those budgets.
Based on discussions with city Finance Managers and on its review of budget data posted by
cities, the Grand Jury developed a conceptual "Ideal Budget Practices" model that will provide
the necessary visibility to members of the public of how their cities are budgeting in general and
budgeting for pension liabilities in particular. The paragraphs below describe the general criteria
against which city budgets were assessed and then the criteria used to assess budgeting for
pension expenditures.
2013 -2014 Orange County Grand Jury Page 30
ORANGE COUNTY CITY PENSION LIABILTIES
Rather than scoring each city against each criterion, which would be very labor intensive and
subject to possible error /oversight, the Jury has listed the key elements of the ideal model as
separate recommendations to each city in this report. In some cases a city may already meet
some of the recommendations, and some cities may agree to implement some of the
recommendations and not others. However, as the recommendations are implemented, the
members of the public of these cities will benefit from better budget information and from the
discipline imposed on the cities in preparing high quality and transparent budgets.
General budget information available online
The Grand Jury assessed each city's web site for the general quality of budget information
posted according to the following criteria:
1. Is annual budget information posted?
2. Are prior annual budgets posted, and if so, for how many years?
3. Does the current budget show prior year budgets, and if so, for how many years?
4. Does the current budget show future year budget projections, and if so, for how many
years?
5. Are key assumptions about future revenues discussed?
6. Do budgets show prior, current, and projected future city General Fund reserves?
7. Is there any discussion of trends in city General Fund reserves?
8. Is there any discussion of a target for how much reserve the city deems desirable?
9. If the city reserves are below the desired level, is there a discussion of how the desired
level of reserves will be accumulated?
Prior year budget data are important in order to discern trends in revenues and expenditures. Just
having prior year budgets posted is helpful, but including at least one year's prior budget data in
the city's current budget makes it far easier to make comparisons than to separately download
multiple files and bounce back and forth among them to look for trends. Budget information
should include at least two prior years, as projecting a "trend" based on only two data points
(current and most recent prior year) is dubious at best.
Even more important than prior year budget information are projections of future year revenues
and expenditures. Future year budget projections are especially important for understanding the
impact of unfunded pension liabilities. Unfunded pension liabilities have five critical attributes:
1. Budgeted pension catch up contributions typically comprise a significant percentage of
projected General Fund expenditures.
2. Projected annual contributions to catch up on unfunded liabilities are ramped up over
two to five years by CaIPERS and OCERS, so the impact of unfunded liabilities is not all
revealed by looking only one year into the future.
2013 -2014 Orange County Grand Jury Page 31
ORANGE COUNTY CITY PENSION LIABILTIES
3. Unlike most planned city expenditures, there is essentially no way to reduce or defer
required pension contributions in future years.
4. Projected unfunded pension liabilities are at risk of large changes year to year because
they are so dependent on the key actuarial assumptions used in calculating them.
5. The recent switch to Market Value of Assets used in calculating unfunded liability will
introduce more volatility in the estimate of these unfunded liabilities.
Pension specific budget information available online
After assessing the general utility of city budget data, the Grand Jury looked for budget data
relevant to assessing that city's budgeting for pension expenses and in particular for addressing
unfunded pension liabilities. Each city's budget was assessed against the following criteria:
1. Are pension related sources of revenue and expenditures visible as separate line items
under revenues and expenditures at the summary level of the budget?
2. Are city expenditures for pension related expenses broken out into at least 3 sub-
categories: pension contributions withheld from employee pay, employer pension
contributions for current employees, and employer catch up contributions for unfunded
liabilities as assessed by the pension system?
3. Does the budget clearly specify the source of the Annual Required [Pension]
Contributions (ARC) assessed by the pension system (typically CalPERS) used in its
budget by document title and date?
4. Is there a clear mapping of the total Annual Required [Pension] Contributions (ARC)
assessed by the pension system (typically CaIPERS) into one or more line items at the
Summary level of the budget?
5. Annual Required [Pension] Contributions (ARC) are updated annually by the pension
system. Does the budget discuss the risks associated with these predictions of future
catch up contributions? The city needs to state whether they are using the projections
provided or whether they have adjusted them down or up because the city believes the
projections are respectively too pessimistic or too optimistic.
The impact of OC cities' outsourcing for public safety on transparency of budget information —a
tale of two cities
When cities outsource public safety services to OCFA and OCSD, the transparency and quality
of information provided can decrease dramatically. The paragraphs below look at the impact of
outsourcing fire protection to OCFA and to OCSD on transparency in two cities' budgets.
2013 -2014 Orange County Grand Jury Page 32
ORANGE COUNTY CITY PENSION LIABILTIES
Santa Ana
In April 2012, the city of Santa Ana joined OCFA as its 23rd member city. OCFA added Santa
Ana's 192 firefighters and 11 non -sworn personnel and 10 fire stations." Santa Ana continued to
maintain its own police department, as it had done since its founding. Santa Ana's Adopted
2013 -2015 Budget° is an excellent example of what can happen to transparency of budget
information when a city outsources a public safety service. The table below compares the
information available in Santa Ana's budget for its police and fire services.
Budget Information Metrics
Police
Fire
Pages of budget information
47
9
FY 2013 -2014 Budget (Millions)
$103.8
$40.2
Percent of total General Fund
51%
20%
Budget line items
23
1
Total Personnel (FY 13 -14)
580
UNKNOWN
Line items for personnel assignments to
department/ office positions
144
46
Line items for personnel assignments to
department/ office positions Containing
Meaningful Data
144
0
The page counts of budget information for Santa Ana fire and police look proportional, but once
the data are examined in any detail, the lack of comparable information is remarkable. The
budget for in -house police services breaks down personnel expenditures by office /department
and for each of these down to expenditures for salaries, retirement, health services, and even to
training and membership /dues, etc. The job titles of authorized personnel budgeted to work in
each office /department are also listed separately. For example, the budget shows 3 Police
Sergeants budgeted for Police Investigations and 24 Police Sergeants to Field Operations, etc. In
particular, expenditures for each office /department for "Salaries Retirement" are provided.
(Unfortunately, a further sub - division of these retirement expenditures into employee, employer
matching, and amortization of unfunded liabilities is lacking, which is a problem for all OC
cities.) The information provided for outsourced fire services is reduced a single line of data (the
one containing the $40.2 million total cost in the Table above), and all 46 authorized positions
are listed as "0 "!
'Orange County Fire Authority 20133014 Adopted Budget, page 2. hnp // ocfa.org/ olo d /od01013-
14920Adopted %20Budeet websitel odC
13 City of Santa Ana FY 2013 -2015 Adopted Budget, hup H sat na ca /t-na t ce/b de tC013- 2015 /documents/2013-
2015 adopted budeet.pdt
2013 -2014 Orange County Grand Jury Page 33
ORANGE COUNTY CITY PENSION LIABILTIES
Note that Santa Ana is a OCFA Cash Contract City (CCC), so at least the annual cost for fire
protection does show up as a single line item on Santa Ana's budget. As we will see below, not
even this single dollar value for the cost of fire protection is available in Lake Forest's budget.
Lake Forest
The city of Lake Forest outsources to OCFA for its fire protection and to OCSD for its police
protection. A review of their Operating Budget for Fiscal Year 2013 -2014" shows a wide
variation of the budget information provided by the city even when they outsource both safety
services. Because Lake Forest outsources both fire and police services, Lake Forest's budget for
Public Works was looked at as an example of the extent and quality of budget information
provided for work to be done with in house resources.
Lake Forest is a Structural Fire Fund (SFF) member of OCFA, and the cost of fire protection is
deducted as a part of their property tax. As far as the cost of fire protection outsourced to OCFA
to Lake Forest, the following is the entirety of the information provided in the their budget: "The
Orange County Fire Authority funds its service in the City of Lake Forest using a formula
derived from direct property tax income. The amount allocated is based on 11.11 % of I% of the
total value of properties in Lake Forest." No dollar value is provided. Out -year projections,
risks to cost of service and /or cuts in service if property tax values do not support current levels
of service, etc., are not discussed.
Budget Information Metrics
Public Works
Police
Fire
Pages of budget information
16
6
2
FY 2013 -2014 Budget (Millions)
$9.4
$13.4
UNKNOWN
Percent of total General Fund
24%
34%
0%
Budget line items
56
36
NONE
Total Personnel (FY 13 -14)
15
53.5
UNKNOWN
Line items for personnel assignments to
department/ office positions
1
9
NONE
Line items for personnel assignments to
department/ office positions Containing
Meaningful Data
1
9
NONE
As can be seen, the city does provide comparable levels of detail for planned expenditures for
their public works and police services even though the first is done in -house and the latter is
outsourced. In this instance there is actually better information about staffing levels for the
"City of Lake Forest. operating Budget, Fiscal Year 2013-14, bttoWwww lakeforestcu gov /civic Jfilebank/blobdload.acn ?BlobID =8219
2013 -2014 Orange County Grand Jury Page 34
ORANGE COUNTY CITY PENSION LIABILTIES
outsourced work for police protection than for the in house work. It is worth noting that the fact
that police services are outsourced to OCSD is not called out explicitly in the Lake Forest budget
and even the fact that it is outsourced is only apparent because the expenditures are labeled as
"Contract Personnel ".
Mechanisms for closing the loop from the unfunded OCERS pension liabilities for OCFA and
OCSD through those agencies to the individual OC cities which outsource one or both of their
public safety functions to them must be developed. Otherwise it will be difficult for the taxpayers
of these cities to feel confident in their city's budgeting for these services.
Conclusions
Orange County cities have large unfunded pension liabilities. They do appear to have sufficient
resources to amortize these liabilities, but these liabilities are volatile and need to be clearly
addressed in cities' budgets in order to gain the confidence of their residents that this is actually
the case. Such confidence can only be achieved by far greater transparency in their budgets.
FINDINGS
In accordance with California Penal Code Sections 933 and 933.05, the 2013 -2014 Grand Jury
requires (or, as noted, requests) responses from each agency affected by the findings presented in
this section. Although the findings are stated in terms of all Orange County cities, each city
should respond to each finding as it applies to itself only. The responses are to be submitted to
the Presiding Judge of the Superior Court.
Based on its investigation of Pension Funding Status of Cities in Orange County, the 2013 -2014
Orange County Grand Jury has arrived at 12 principal findings, as follows:
El. OC cities have large unfunded pension liabilities both in terms of absolute dollar value and
on a per capita basis and as a percentage of city General Fund revenues.
F.2. OC cities' unfunded pension liabilities have been increasing on a year over year basis over
the past several years as a result of the 2007 -2009 Great Recession and as key actuarial
assumptions have been changed by CalPERS and OCERS.
F.3. There are risks to OC cities of changes to key actuarial assumptions including revisions
downward of expected returns on investment and the likely move by pension funds to using
more realistic mortality assumptions, which would increase unfunded liabilities.
F.4. Locating city budget information on a city web site is not always straightforward and prior
year budgets are sometimes not posted by a city.
E5. City budgets posted online project revenues and expenditures for at most one or two years
into the future and sometimes do not show prior year data.
2013 -2014 Orange County Grand Jury Page 35
ORANGE COUNTY CITY PENSION LIABILTIES
F.6. City budgets often lack footnotes explaining key assumptions, risks, and unusual changes in
budgeted amounts or revenues and expenditures.
F.7. City budgets sometimes do not provide trend data on the accumulation /drawdown of
reserves and lack details on the city's plan for the size of its reserves or their intended uses.
F.B. Cities can control most future expenditures by increasing or decreasing budgets for those
expenditures as funds are available. However, increases to annual required contributions to their
pension systems are imposed externally, change unpredictably, and when they occur, are ramped
up over two to five years,
F.9. City budgets posted online do not explicitly show the link between planned city pension
expenditures and pension system actuarial reports and those reports' annual required
contributions. Risks associated with predictions of future annual required pension contributions
based on risk assessment data provided by their pension systems and/or based on their own
analysis are not discussed.
F.10. Pension costs for New (Post- PEPRA) employees will be substantially lower than for
Legacy employees, but only a small percentage of current employees, typically only a few
percent of total employees, are New. Substantially reduced pension costs for cities as a result of
pension reform will not be realized for one or more decades.
F.11. Ca1PERS Annual Valuation Reports for Miscellaneous and Safety City employees are
available to the public online for a very small number of cities.
F.12. OCERS provides pension plans for OCFA and OCSD employees, but there is no way to
trace through publically available sources OCERS unfunded pension liabilities to the city
budgets which outsource to OCFA and OCSD for fire and police services.
Penal Code §933 and §933.05 require governing bodies and elected officials to which a report is
directed to respond to findings and recommendations. Responses are requested, from
departments of local agencies and their non - elected department heads.
RECOMMENDATIONS
In accordance with California Penal Code Sections 933 and 933.05, the 2013 -2014 Grand Jury
requires (or, as noted, requests) responses from each agency affected by the recommendations
presented in this section. The responses are to be submitted to the Presiding Judge of the
Superior Court.
2013 -2014 Orange County Grand Jury Page 36
ORANGE COUNTY CITY PENSION LIABILTIES
Based on its investigation of Pension Funding Status of Cities in Orange County, the 2013 -2014
Orange County Grand Jury makes the following 8 recommendations:
R.I. Each city should post its current and at least three most recent prior year budgets on the
city's web site, and these budgets should be easily located. Each city's web site should have a
search engine and a single search on the word "budget" should immediately link to the current
budget. (F.1) (F.4)
R.2. Each city's budget information should contain not only this year /next year budget
projections, but should show at least five years of projected revenues and expenditures.
Projections should be at the same level of detail and use the same line item structure as
information for the current budget. (F.1) (E2) (F.3) (F.5) (F.8) (F.10)
R.3.,Each city's budget should show separate line items for predicted employee and predicted
employer contributions for the city pension systems. (F.8) (F.9)
R.4. Each city's budget should provide trend data on the accumulation/drawdown of reserves
and provide details on the city's policy for the size of its reserves and on the intended uses of
such reserves. In particular any discussion of reserves should address possible use of reserves to
accelerate amortization of unfunded pension liabilities. (F.7)
R.S. Each city using CalPERS for one or more of its pension plans should identify the names and
dates of the CalPERS Annual Valuation Report(s) which call out Annual Required Contributions
(ARCS) for these plans and should provide a separate expenditure line item for predicted city
catch -up contributions for the city pension systems based on these ARCS. A discussion of the
risks associated with these CaIPERS projections should also be provided by the city. (F.1) (F.2)
(F.8) (F.9)
R.6. Each city which outsources fire or police services to OCFA and/or OCSD should require
them to provide projections of future costs of service out at least five years into the future and
require that these projected costs explicitly show the relationship of projected pension costs
including amortization of unfunded liabilities. This level of pension cost information should be
provided in budgeted expenditures for outsourced services. A discussion of the risks associated
with these projections should also be provided by the agencies and incorporated in the city's
budgets. (F.6) (F.12)
R.7. Each city that has CalPERS as a provider for pensions should include a provision in their
agreements with CalPERS that CalPERS will post their Annual Valuation Reports online. (F.11)
2013 -2014 Orange County Grand Jury Page 37
ORANGE COUNTY CITY PENSION LIAIIILTIES
REQUIRED RESPONSES
The California Penal Code §933 requires any public agency which the Grand Jury has reviewed,
and about which it has issued a final report, to comment to the Presiding Judge of the Superior
Court on the findings and recommendations pertaining to matters under the control of the
agency. Such comment shall be made no later than 90 days after the Grand Jury publishes its
report (filed with the Clerk of the Court); except that in the case of a report containing findings
and recommendations pertaining to a department or agency headed by an elected County official
(e.g. District Attorney, Sheriff, etc.), such comment shall be made within 60 days to the
Presiding Judge with an information copy sent to the Board of Supervisors.
Furthermore, California Penal Code Section §933.05 (a), (b), (c), details, as follows, the manner
in which such comment(s) are to be made:
(a) As to each Grand Jury finding, the responding person or entity shall indicate one of the
following:
(1) The respondent agrees with the finding
(2) The respondent disagrees wholly or partially with the finding, in which case the response
shall specify the portion of the finding that is disputed and shall include an explanation of the
reasons therefore.
(b) As to each Grand Jury recommendation, the responding person or entity shall report one of
the following actions:
(1) The recommendation has been implemented, with a summary regarding the implemented
action.
(2) The recommendation has not yet been implemented, but will be implemented in the future,
with a time frame for implementation.
(3) The recommendation requires further analysis, with an explanation and the scope and
parameters of an analysis or study, and a time frame for the matter to be prepared for discussion
by the officer or head of the agency or department being investigated or reviewed, including the
governing body of the public agency when applicable. This time frame shall not exceed six
months from the date of publication of the Grand Jury report.
(4) The recommendation will not be implemented because it is not warranted or is not
reasonable, with an explanation therefore.
(c) If a finding or recommendation of the Grand Jury addresses budgetary or personnel matters
of a county agency or department headed by an elected officer, both the agency or department
head and the Board of Supervisors shall respond if requested by the Grand Jury, but the response
2013 -2014 Orange County Grand Jury Page 38
ORANGE COUNTY CITY PENSION LIABILTIES
of the Board of Supervisors shall address only those budgetary /or personnel matters over which
it has some decision making aspects of the findings or recommendations affecting his or her
agency or department.
Comments to the Presiding Judge of the Superior Court in compliance with Penal Code section
§933.05 are required from:
Required/Requested
Responses
Fl
F2
F3
F4
F5
F6
F7
F8
F9
F10
Flt
F12
Cities Councils of-.
Aliso Viejo
X
X
X
X
X
X
X
X
X
X
X
X
Anaheim
X
X
X
X
X
X
X
X
X
X
X
X
Brea
X
X
X
X
X
X
X
X
X
X
X
X
Buena Park
X
X
X
X
X
X
X
X
X
X
X
X
Costa Mesa
X
X
X
X
X
X
X
X
X
X
X
X
Cypress
X
X
X
X
X
X
X
X
X
X
X
X
Dana Point
X
X
X
X
X
X
X
X
X
X
X
X
Fountain Valley
X
X
X
X
X
X
X
X
X
X
X
X
Fullerton
X
X
X
X
X
X
X
X
X
X
X
X
Garden Grove
X
X
X
X
X
X
X
X
X
X
X
X
Huntington Beach
X
X
X
X
X
X
X
X
X I
X
X I
X
Irvine
X
X
X
X
X
X
X
X
X
X
X
X
La Habra
X
X
X
X
X
X
X
X
X
X
X
X
La Palma
X
X
X
X
X
X
X
X
X
X
X
X
La gum Beach
X
X
X
X
X
X
X
X
X
X
X
X
Ugum Hills
X
X
X
X
X
X
X
X
X
X
X
X
La um Niguel
X
X
X
X
X
X
X
X
X
X
X
X
L'r • Woods
X
X
X
X
X
X
X
X
X
X
X
X
Lake Forest
X
X
X
X
X
X
X
X
X
X
X
X
Los Alantitos
X
X
X
X
X
X
X
X
X
X
X
X
Mission Viejo
X
X
X
X
X
X
X
X
X
X
X
X
Newport Beach
X
X
X
X
X
X
X
X
X
X
X
X
Orange
X
X
X
X
X
X
X
X
X
X
X
X
Placentia
X
X
X
X
X
X
X
X
X
X
X
X
Rancho Santa Margarita
X
X
X
X
X
X
X
X
X
X
X
X
San Clemente
X
X
I—X
X
X
X
X
X
X
X
X
X
X
San Juan Capistrano
X
X
X
X
X
X
X
X
X
X
X
Santa Ana
X
X
X
X
X
X
X
X
X
X
X
X
Seal Beach
X
X
X
X
X
X
X
X
X
X
X
X
Stanton
X
X
X
X
X
X
X
X
X
X
X
X
Tustin
X
X
X
X
X
X
X
X
X
X
X
X
Villa Park
X
X
X
X
X
X
X
X
X
X
X
X
Westminster
X
X
X
X
X
X
X
X
X
X
X
X
Yorba Linda
X
X
X
X
X
X
X
X
X
X
X
X
2013 -2014 Orange County Grand Jury Page 39
ORANGE COUNTY CITY PENSION LIAIIILTIES
Required/Requested
Responses
RI
R2
R3
R4
R5
R6
R7
Cities Councils of:
Aliso Viejo
X
X
X
X
X
X
X
Anaheim
X
X
X
X
X
X
Brea
X
X
X
X
X
X
Buena Park
X
X
X
X
X
I X
X
Costa Mesa
X
X
X
X
X
X
Cypress
X
X
X
X
X
X
X
Dana Point
X
X
X
X
X
X
X
Fountain Valley
X
X
X
X
X
X
Fullerton
X
X
X
X
X
X
Garden Grove
X
X
X
X
X
X
Huntington Beach
X
X
X
X
X
X
Irvine
X
X
X
X
X
X
X
La Habra
X
X
X
X
X
X
X
La Palms
X
X
X
X
X
X
X
Laguna Beach
X
X
X
X
X
X
Laguna Hills
X
X
X
X
X
X
X
Laguna Niguel
X
X
X
X
X
X
X
Laguna Woods
X
X
X
X
X
X
X
Lake Forest
X
X
X
X
X
X
X
Los Alamitos
X
X
X
X
X
X
X
Mission Viejo
X
X
X
X
X
X
X
Newport Beach
X
X
X
X
X
X
Orange
X
X
X
X
X
X
Placentia
X
X
X
X
X
X
X
Rancho Santa Margarita
X
X
X
X
X
X
X
San Clemente
X
X
X
X
X
X
X
San Juan Capistrano
X
X
X
X
X
X
X
Santa Ana
X
X
X
X
X
X
X
SealBeach
X
X
X
X
X
X
X
Stanton
X
X
X
X
X
X
X
Tustin
X
X
X
X
X
X
X
Villa Park
X
X
X
X
X
X
X
Westminster
X
X
X
X
X
mxx
Yorba Linda
X
X
X
X
X
2013 -2014 Orange County Grand Jury Page 40
ORANGE COUNTY CITY PENSION LIABILTIES
APPENDICES
2013 -2014 Orange County Grand Jury Page 41
ORANGE COUNTY CITY PENSION LIABILTIES
Appendix A — Acronyms
ARC — Annual Required Contribution
CAFR — [CaIPERS] Consolidated Annual Financial Report
CaIPERS - California Public Employees' Retirement System
COLA — Cost of Living Adjustment
GDP - Gross Domestic Product (GDP)
OC - Orange County
OCERS - Orange County Employee Retirement System
OCFA- Orange County Fire Authority
OCSD — Orange County Sheriff /Coroner's Department
PEPRA - Public Employees' Pension Reform Act
PERF — Public Employees' Retirement Fund
2013 -2014 Orange County Grand Jury Page 42
ORANGE COUNTY CITY PENSION LIABILTIES
Appendix B — Glossary
Accumulated Plan Benefits - Benefits attributable under the provisions of a pension plan to
employees for services rendered to the benefit information date.
Actuarial Assumptions - Assumptions used in the actuarial valuation process as to the
occurrence of future events affecting pension costs, such as mortality, withdrawal, disablement
and retirement; changes in compensation and national pension benefits; rates of investments
earnings and asset appreciation of depreciation; procedures used to determine the actuarial value
of assets; characteristics of future entrants for open group actuarial cost methods and others
relevant items.
Accrual Basis - The recording of the financial effects on a government of transactions and other
events and circumstances that have cash consequences for the government in the periods in
which those transactions, events and circumstances occur, rather than only in the periods in
which cash is received or paid by the government.
Actuarial Accrued Liability - The portion, as determined by a particular cost method, of the
total present value of benefits that is attributable to past service credit.
Actuarial Gain (Loss) - A measure of the difference between actuarial and expected experience
based upon a set of actuarial assumptions. Examples include higher than expected salaries
increases (loss) and a higher return on fund assets than anticipated (gain).
Actuarial Present Value - The discounted value of an amount or series of amounts payable or
receivable at various times, determined as of a given date by the application of a particular set of
actuarial assumptions.
Amortization - (1) The portion of the cost of a limited -life or intangible asset charged as an
expense during a particular period. (2) The reduction of debt by regular payments of principal
and interest sufficient to retire the debt by maturity.
Annuity - A fixed sum of money paid to someone each year, typically for the rest of their life.
Auditor's Report - In the context of a financial audit, a statement by the auditor describing the
scope of the audit and the auditing standards applied in the examination, and setting forth the
auditor's opinion on the fairness of presentation of the financial information in conformity with
generally accepted accounting principles (GAAP) or some other comprehensive basis of
accounting.
Comprehensive Annual Financial Report (CAFR) - The official annual report of a
government. It includes the basic financial statements and their related notes prepared in
2013 -2014 Orange County Grand Jury Page 43
ORANGE COUNTY CITY PENSION LIABILTIES
conformity with GAAP. It also includes supporting schedules necessary to demonstrate
compliance with finance - related legal and contractual provision, required supplementary
information, extensive introductory material and a detailed statistical section.
Defined Benefit Pension - A company pension plan in which an employee's pension payments
are calculated according to length of service and the salary they earned at the time of retirement.
Defined Contribution Pension - A defined contribution plan, unlike a defined benefit plan, does
not promise a specific amount of benefits at retirement. In these plans, the employee or the
employer (or both) contribute to the employee's individual retirement account.
Entry Age Actuarial Cost Method - A method under which the actuarial present value of the
projected benefits of each individual included in an actuarial valuation is allocated on the level
basis over the earnings or services of the individual between entry age and assumed exit age(s).
Normal Cost - The ongoing annual cost allocated to the system by a particular actuarial cost
method for providing benefits (future cost). Normal cost payments are made during the working
lifetime of the member.
Pension - a regular payment made during a person's retirement from an investment fund to
which that person or their employer has contributed during their working life.
Pension Contribution - The amount paid into a pension plan by an employer (or employee),
pursuant to the terms of the plan, state law, actuarial calculations or some other basis for
determinations.
Pension Trust Fund - A fund used to account for public employee retirement benefits. Pension
trust funds, like nonexpendable trust funds, use the accrual basis of accounting and have a capital
maintenance focus.
PERS -able — payments to an employee which can be included as "salary" in calculation of
pension benefits.
UAAL Amortization Payment - The portion of pension contributions, which is designed to pay
off (amortize) the unfunded actuarial accrued liability in a systematic fashion. Equivalently, it is
a series of periodic payments required to pay off a debt.
Unfunded Actuarial Accrued Liability (UAAL) - The excess of the actuarial accrued liability
over the actuarial value of assets.
2013 -2014 Orange County Grand Jury Page 44
ORANGE COUNTY CITY PENSION LIABILTIES
Appendix C — A Brief Primer on Pensions
A discussion on pensions is needed as background to this report for those members of the public
who may be aware of and concerned about problems with unfunded pension liabilities, but are
not familiar with the sometimes arcane terms used in discussing them. The primer below is a
synthesis and simplification of material publically available from various sources including:
1. Comprehensive Annual Financial Reports from CAPERS and OCERS
2. Discussions with senior management and technical staff of CalPERS and OCERS
3. Discussions with senior financial managers from three Orange County cities
4. Wikipedia
Any violation of Einstein's (possibly apocryphal) dictum, "Everything should be made as simple
as possible, but no simpler," is solely the responsibility of the Grand Jury and not of the various
sources listed above.
The paragraphs below briefly examine:
L Pensions and their purpose
2. Two major types of pension plans
3. How pension benefits are specified
4. How pension benefits (actuarial liabilities) for retired members are computed
5. How pension benefits (actuarial liabilities) for active members are computed
6. Actuarial Accrued Liability (AAL)
7. Actuarial Value of Assets
8. What it means to say a pension has unfunded liabilities
Pensions and their purpose
A pension is a contract for a fixed sum to be paid regularly to a person, typically following
retirement from service. There are many different types of pensions, including defined benefit
plans, defined contribution plans, as well as several others. A retirement plan is an arrangement
to provide people with an income during retirement after they are no longer earning a steady
income from employment. Often retirement plans require both the employer and employee to
contribute money to a fund during their employment in order to receive defined benefits upon
retirement. A recipient of a retirement pension is known as a pensioner or retiree. Retirement
pensions are typically in the form of a guaranteed life annuity, thus insuring against the "risk of
longevity" (i.e., outliving one's savings).
2013 -2014 Orange County Grand Jury Page 45
ORANGE COUNTY CITY PENSION LIABILTIES
Two major types of pension plans
Retirement plans are classified as defined benefit or defined contribution according to how the
benefits are determined and by their associated methods of funding. A defined benefit plan
guarantees a certain payout at retirement, according to a fixed formula which usually depends on
the member's salary and the number of years' of membership in the plan. A defined contribution
plan will provide a payout at retirement that is dependent upon the amount of money contributed
and the performance of the investment vehicles utilized.
Defined benefit plans
A defined benefit (DB) plan is a plan in which an employee's benefit on retirement is determined
by a set formula, rather than depending on investment returns on that employee's savings.
Traditionally, retirement plans have been administered by institutions which exist specifically for
that purpose. A typical form of defined benefit plan is the final salary plan, under which the
pension paid is equal to the number of years worked, multiplied by a percentage of the member's
salary at retirement. Normally a minimum number of years worked and /or a minimum
retirement age are specified.
The employer's cost of a defined benefit plan is not easily predicted since it depends so much on
the plan's ability to achieve the predicted rate of return on investment of the plan's assets as they
are accrued. Since the pension benefit to the employee is defined, any shortfall in investment
returns or longer than actuarially predicted employee life span post retirement for example must
be made up by the employer. The employer assumes all the risk in providing the defined benefit.
Defined contribution plans
In a defined contribution plan, contributions are paid into an individual account for each
member. The contributions are invested, for example in the stock market, and the returns on the
investment (which may be positive or negative) credited to the individual's account. On
retirement, the member's account is used to provide retirement benefits, sometimes through the
purchase of an annuity which then provides a regular income. Defined contribution plans have
become widespread all over the world in recent years, and are now the dominant form of plan in
the private sector in many countries.
In a defined contribution plan, investment risk and investment rewards are assumed by each
individual /employee /retiree and not by the sponsor /employer, and these risks may be substantial.
In addition, participants do not necessarily purchase annuities with their savings upon retirement,
and bear the risk of outliving their assets.
Despite the fact that the participant in a defined contribution plan typically has control over
investment decisions, the plan sponsor retains a significant degree of fiduciary responsibility
over investment of plan assets, including the selection of investment options and administrative
providers.
2013 -2014 Orange County Grand Jury Page 46
ORANGE COUNTY CITY PENSION LIABILTIES
Both the CalPERS and OCERS plans used by OC cities are defined benefit plans.
How pension benefits are specified
Pension benefits are specified as a percentage of highest annual average compensation times the
number of years of service at the age of retirement. For example, "3% at 50 ", a benefit held by
many city public safety employees, means that such an employee can retire at age 50 and receive
3% of his/her highest salary times the number of years of service. For example, a police officer
hired at age 25 and retiring at age 50 with his/her highest annual salary at $160,000 will receive
an annual pension of $120,000 (3% times 25 years times $160,000).
How pension benefits (actuarial liabilities) for retired members are computed
The pension liability for a retired member is computed based on his /her current pension
payment, current age, and predictions of cost of living increases, inflation, and mortality.
How pension (actuarial liabilities) for active members are computed
The pension liability of an active member is computed based on his /her current salary, age, and
predictions of the age at which the member will retire, salary increases occurring until
retirement, inflation, and mortality. Other factors taken into consideration are the probabilities
the member will become disabled or will terminate his /her service earlier than anticipated.
Actuarial Accrued Liability
The present value of the sum of active and retired members' pension benefits is the actuarial
accrued liability
Actuarial Value of Assets
The value of pension plan investments and other property used by an actuary for the purpose of
an actuarial valuation is the actuarial value of assets (sometimes referred to as valuation assets).
Actuaries often select an asset valuation method that smoothes the effects of short -term volatility
in the market value of assets.
What it means to say a pension has unfunded liabilities
The difference between the actuarial accrued liability and the actuarial value of assets
accumulated to finance a public pension is its unfunded liability.
2013 -2014 Orange County Grand Jury Page 47
Q�sER��
AMERICA
Explore and Er joy Our Heritage
COMMUNITIES PROGRAM:
2016 COMMUNITY APPLICATION
BACKGROUND
Preserve America is a national program developed in cooperation with the Advisory Council on
Historic Preservation (ACHP) and the U.S. Departments of the Interior, Agriculture, and other
agencies. It highlights the efforts of the President and First Lady to preserve our national heritage. It has
several components, one of which is the designation of Preserve America Communities.
Preserve America Community designation is granted to eligible communities that meet three
general criteria:
1) The community has recently supported a historic or cultural preservation project that has
promoted and/or is currently promoting heritage tourism or otherwise fostering economic vitality,
and also involved a public - private partnership between government entities and at least one civic
association, non - profit, and/or business enterprise.
2) The governing body of the community has adopted a resolution indicating its commitment to the
preservation of its heritage assets.
3) The community meets at least five criteria specified in three broad categories: discovering
heritage through historic places, protecting historic resources, and promoting historic assets.
ELIGIBLE COMMUNITIES
Communities eligible to apply for designation as a Preserve America Community may be located in any
U.S. state or territory, including the District of Columbia, and include:
Municipalities of any size with a mayor, city council or board chair, or equivalent chief
elected governing official;
Counties with a county executive, board or commission chair, or equivalent chief elected
governing official; and
Clearly defined, populated, unincorporated communities that lack an elected governing
official and that are located within a county or territory, provided the application for
designation is submitted by the appropriate county or territorial government.
All of the above may use this application form, which is available in .pdf or Word formats at
www.preservcamerica.gov /communities - form.pdf or www.preserveamerica.gov/communities-
form.doc.
[Note: There are two other kinds of Preserve America Community application forms. One is for use by
federally recognized Indian tribes or Alaska Native Village corporations with a tribal chairman, and
for subdivisions of such tribes that are represented by elected officials within the greater tribal
PRESERVE AMERICA COMMUNITIES PROGRAM: 2016 COMMUNITY APPLICATION Page I of 6
government — districts, villages, chapters, and other equivalent communities. For details, see
wwev.preserveamerica.gov /tribal- communities form.pdfor www.preserveamerica.gov/tribal-
communities form.doc. The other is for clearly defined neighborhoods within large cities or
consolidated city- counties (cities with a population of 200,000 or higher). For details, see
www.preserveamerica.gov /neighborhoods form.pdf or www.preserveamerica.gov/neighborhoods-
form.doc.J
THE APPLICATION PROCESS
Copies of the application forms, sample resolution language, deadlines, and links to information on
previously designated communities can be found at www. PreserveAmerica .gov /communities.html.
Requests for information or forms can also be made by calling Judy Rodenstein at the ACHP at (202)
517 -1488, or by e- mailing her at jodenstein@achp.gov.
Applications are received and reviewed by ACHP staff for completeness. Complete applications are
shared with the National Park Service (NPS) for their independent review and concurrence.
Communities with incomplete or unclear applications will be contacted by ACHP staff for additional
information or clarification.
When an application is judged complete by the ACHP and the NPS, the name of the community is
added to a list pending the next announcement of designated communities. Announcement of
designated Preserve America Communities will take place several times a year and may be made by
official letter or at a public event.
Attached to your application, please provide the name and title of the head of your local convention and
visitors bureau and of your state tourism office, as well as both mailing addresses. if your community is
designated as a Preserve America Community, the ACHP will notify them of your designation.
HELPFUL HINTS FOR PREPARING SUCCESSFUL APPLICATIONS
Communities should follow some simple guidelines in preparing their applications for Preserve
America Community designation to ensure their applications are complete and can be processed in a
timely manner (item numbers refer to sections of the application form):
Item 1: Be sure to consult with your State Historic Preservation Officer while developing your
application and mail him or her a copy of the completed application.
Items 3 & 7. The application must be signed and submitted by the chief elected governing official of
the jurisdiction. In most cases, this will mean a mayor, county executive, or chair of a Board of
Supervisors. If someone else is designated to do this, there should be a clear authorization for this
delegation included in the submission package.
Item 4A: The project you select to feature needs to be one that has been supported by the community
within the last three years and is complete and/or already having a positive economic impact. Make sure
the project description includes information on the public and private partners involved and their roles,
and clearly documents how the specific project is promoting heritage tourism or economic vitality in
the community. Any data you can share on the economic or other impacts of the project is desirable. If
the project is a program that has been ongoing for longer than three years, please specify what has been
added or changed within that time frame. Please note that a history of the community, a list of projects
supported over the years, or information about planned projects that are still prospective do not meet
this criterion. However, such information is welcome as supplementary material.
Item 4B: Resolutions of the local government should be recent and specific to the Preserve America
initiative, or should be comprehensive and current enough (within the last five years) to show the
PRESERVE AMERICA COMMUNITIES PROGRAM: 2016 COMMUNITY APPLICATION Page 2 of 6
community's present commitment to the preservation of its heritage assets and the goals of the
program. Make sure the resolution is signed and dated, and that the governing body that has adopted it
is clearly identified. Model resolution language is available at
www.PreserveAmerica.gov/communities.html.
Item 4C: Communities should carefully read through the additional criteria for designation and ensure
that they adequately document how they meet at least five of the criteria, including at least one from
each of the three categories (discovering heritage through historic places, protecting historic resources,
and promoting historic assets). If there is any question about how well the community meets one of the
five selected criteria, then the community should provide information on more than five. Communities
should feel free to contact ACHP staff if they have a question about how they fulfill and document
specific criteria.
Item 4C(l): An "ongoing, publicly available inventory of historic properties" means the product of a
survey that identifies, describes, and evaluates the condition of historic properties in the community. Be
sure to include information on when this was done, any subsequent updates, as well as how and where
the public can access the results of this research.
Item 4C(5): The "local governmental body, such as a board or commission, charged with leading
historic preservation activities within the community" should be specifically authorized or established
by the local government to carry out its duties. Its members must be appointed by the local government
and its duties spelled out in a governmental document. Non -profit or quasi - governmental organizations
with ex- officio membership of a governmental representative do not meet this requirement unless they
have a recognized role under a governmental charter or ordinance.
Item 4C(1O): "A historic preservation awards or recognition program" means a program through which
the community seeking designation gives awards recognizing outstanding efforts in historic
preservation. It does not mean that the community has received awards for its preservation efforts.
Item 4D: Communities are asked to submit three to five color images that illustrate their community's
character and show people using and enjoying local historic resources. Digital images on a CD with a
minimum resolution of 300 dots per inch (dpi) are preferred; 4" x 6" or larger photographs are
acceptable. Photocopies and images printed on paper are not acceptable. Please provide captions and
credits for these images and identify the community on the CD or on the back of the photos. Do not
superimpose captions, credits, or dates on the images. The images may be used on the Preserve
America Web site or for other publicity purposes, which will increase the visibility of the community.
Item 5: Additional materials are strongly encouraged, since applications will certainly be enhanced
with a showing of community interest and involvement through letters of endorsement and illustrative
materials. However, they are not required.
Items 6 &7. Make sure to read the release authorization and logo use agreement, and to have the chief
elected official sign and date the application. Since applications are reviewed by at least two reviewers,
remember to submit an original and one copy set.
PRESERVE AMERICA COMMUNITIES PROGRAM: 2016 COMMUNITY APPLICATION Page 3 of 6
PRESERVE AMERICA
COMMUNITIES PROGRAM: 2016 COMMUNITY APPLICATION
Application Form
1. GENERAL INSTRUCTIONS
Communities must consult with their State Historic Preservation Officer (SHPO) during the
development of this application and send a copy of the completed application to the SHPO when it is
submitted. SHPO names and addresses can be found at www.ncshpo.org or by calling (202) 624 -5465.
❑ Check this box to signify that you have completed the above instructions.
Applications must be submitted in hard copy and will not be returned. Please provide an original and
one copy set of all materials and three to five related images as described on page 5. Please do not
use sheet protectors, binders, or tabbed dividers. Submission well in advance of one of the quarterly
deadlines (March 1, June 1, September 1, December 1) will facilitate timely review.
Submit applications to:
Preserve America Communities
Advisory Council on Historic Preservation
401 F Street NW, Suite 308
Washington, DC 20001 -2637
Sources of additional information:
Office of Preservation Initiatives
Advisory Council on Historic Preservation
(202) 517 -1488
Web site: www.PreserveAmefca.gov
2. COMMUNITY INFORMATION
All incorporated or unincorporated communities are eligible to seek designation as Preserve America
Communities. Eligible tribal communities and neighborhoods within very large cities should use
specialized application forms available at www. PreserveAmerica .gov /communities.html.
Name of community seeking designation
❑ City ❑ County ❑ Other
This community is in
Congressional District Name of
Certified Local Government?
Population
County, State or Territory.
3. APPLICANT INFORMATION
The applicant for designation can only be one of the following:
• A mayor or equivalent chief elected governing official of an incorporated community: or
• A county executive or equivalent chief elected governing official of a county or of the
appropriate jurisdiction of an unincorporated community
Applicant's Name:
Mailing Address:
City:
Phone:
State:
Fax:
Street/Delivery Address (No Post Office Boxes):
City:
Attn:
For more information, contact:
Phone: Fax:
Phone:
State:
Title:
E -mail:
Title:
E -mail:
Zip:
PRESERVE AMERICA COMMUNITIES PROGRAM: 2016 COMMUNITY APPLICATION Page 4 of 6
4. DESIGNATION CRITERIA AND REQUIRED DOCUMENTATION
A community will qualify for designation as a Preserve America Community if
A. The community has supported (within the last three years) a historic or cultural preservation project
that has promoted and /or is promoting heritage tourism or otherwise fostering economic vitality. The
project must have involved a public- private partnership between government entities and at least one
civic association, non -profit organization, or business enterprise. (Please provide a written description
of one specific project, documenting how it fulfills these requirements. Do not exceed 500 words.)
B. The governing body of the community has recently adopted a resolution indicating its commitment
to the preservation of its heritage assets. (Please include a signed and dated copy of the resolution.)
C. The community meets at least five of the criteria outlined below (with at least one from each
specified category). (Please check the criteria below under which you are seeking Preserve America
Community designation. For each criterion, please provide a written description of no more than 250
words explaining how your community meets the criterion.)
Category 1: Discovering Heritage Through Historic Places
❑ An ongoing, publicly available inventory of historic properties
❑ A community- supported museum, interpretive facility, archive, or local history records
collection (private or public)
❑ Active citizen volunteer involvement, such as a docent or guide program for
interpretation of local history and culture, or volunteer participation in improving the
condition of heritage assets within the community
❑ Opportunities for children to learn about local heritage in the schools, through either
established curriculum or special outreach activities
Category 2: Protecting Historic Resources
❑ A local governmental body, such as a board or a commission, charged with leading
historic preservation activities within the community
❑ An adopted community-wide historic preservation plan that is being implemented
❑ A historic preservation review ordinance and volunteer or professional staff to
implement it
Category 3: Promoting Historic Assets
❑ A local heritage tourism program, or active participation in a regional program, with
such promotional material as a walking/driving trail or tour itinerary, map of historic
resources, etc.
❑ A regularly scheduled heritage observance or event
❑ A historic preservation awards or recognition program
D. Submit three to five images that show people using and enjoying your historic cultural and natural
resources (CD with digital images scanned at a resolution of 300 dots per inch (dpi) or greater or 4" x
6" color photographs) and provide caption and credit information for each.
E. Provide approximately 100 -200 words on the history of your community, including founding date,
key events, evolution of the economy, and information on local historic attractions not otherwise noted
in the application. This information will be edited and incorporated into profiles of designated
communities (for examples see www. preserveamerica .gov /PAcommunities.html).
PRESERVE AMERICA COMMUNITIES PROGRAM: 2016 COMMUNITY APPLICATION Page 5 of 6
5. ADDITIONAL SUPPORTING MATERIAL
Written endorsements by preservation organizations, civic organizations, members of Congress, and
other elected officials are encouraged. These should be addressed to Mr. Ronald D. Anzalone, Director,
Office of Preservation Initiatives, Advisory Council on Historic Preservation, 401 F Street NW, Suite
308, Washington DC 20001 -2637. (Please provide copies of any letters of endorsement.)
Documenting participation in other nationwide preservation programs is encouraged. (Please let us
know if your community is a Certified Local Government, a Main Street Community, a recipient of
funds under the Save America's Treasures program, or a recipient of Transportation Enhancements
funding fir historic preservation, etc.)
Brochures, additional photos, reports, publications, etc. may be appended if desired.
6. RELEASE AUTHORIZATION/LOGO USE AGREEMENT
The undersigned gives the ACHP and the Preserve America Communities program absolute right to
use, in whole and in part, all material submitted in furtherance of this application. All submitted
materials become the property of Preserve America. Materials may be used in program activities,
including publications and Web sites. Preserve America is given permission to make any editorial
changes and/or additions to the subject material. The undersigned guarantees to have on file all
necessary individual agreements and signatures to ensure Preserve America unencumbered use of all
associated material.
I further acknowledge that, if designated a Preserve America Community, our community will be
authorized to use the Preserve America logo or to refer to Preserve America solely for non - commercial
purposes related to the promotion and public understanding of the Preserve America Community
designation and the Preserve America initiative. I agree that the logo, or any reference to Preserve
America, will not be used in for -profit commercial applications or ventures and acknowledge that the
Preserve America logo is a registered trademark entitled to the legal protections attendant to such
status. I further agree that any use of the Preserve America logo, or any reference to Preserve America,
will be consistent with the stated purposes of the Preserve America Community designation and the
Preserve America initiative. I further acknowledge that the authorizations described in this paragraph
can be revoked at any time and for any reason by the ACHP.
7. SIGNATURE OF APPLICANT
The chief elected governing official of the community must sign and date this form.
Signature must be original and in ink.
Signature:
Name (please print):
Title:
Organization (if applicable):
Date:
PRESERVE AMERICA COMMUNITIES PROGRAM: 2016 COMMUNITV APPLICATION Page 6 of 6