Staff Report
PREPARED BY: STEPHEN CONWAY
FINANCE DIRECTOR
Reviewed by: Town Manager, Interim Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 1/17/2017
ITEM NO: 8
DATE: JANUARY 10, 2017
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: APPROVE THE RESPONSE TO THE SANTA COUNTY CIVIL GRAND JURY’S REQUEST
DATED DECEMBER 21, 2016 FOR ADDITIONAL INFORMATION REGARDING THE
TOWN’S ACTIONS RELATIVE TO THE GRAND JURY’S 2011-2012 PENSION AND
OTHER POST-EMPLOYMENT BENEFITS REPORT
RECOMMENDATION:
Approve the response to the Santa Clara County Civil Grand Jury’s request dated December 21,
2016 for additional information regarding the Town’s actions relative to the Grand J ury’s 2011-
12 Pension and Other Post-Employment Benefits (OPEB) Report.
BACKGROUND:
On June 13, 2012, the Santa Clara County Civil Grand Jury issued a report presenting its findings
and recommendations based on its analysis of Pension and OPEB costs for local government
agencies in Santa Clara County. On September 4, 2012, the Town Council approved the Town
of Los Gatos response and it was transmitted to the Grand Jury. At that time, the Town agreed
with all of the Grand Jury’s findings that pertained to Los Gatos and identified that the Town
had implemented five of the eight recommendations that were relevant to Los Gatos.
On December 21, 2016, the 2016-17 Santa Clara County Civil Grand Jury requested the Town of
Los Gatos provide information regarding: (1) how the Town views the various
recommendations, (2) whether the recommendations were accepted, and (3) if there is a plan
for future action. Attachment 1 contains the new request and it includes the Town’s 2012
response. Attachment 2 contains the proposed 2017 response is due Tuesday, January 31,
2017.
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SUBJECT: APPROVE THE RESPONSE TO THE SANTA COUNTY CIVIL GRAND JURY’S REQUEST
DATED DECEMBER 21, 2016 FOR ADDITIONAL INFORMATION REGARDING THE
TOWN’S ACTIONS RELATIVE TO THE GRAND JURY’S 2011-2012 PENSION AND OTHER
POST-EMPLOYMENT BENEFITS REPORT
DATE: JANUARY 9, 2017
S:\COUNCIL REPORTS\2017\01-17-17\Grand Jury Reply\Staff Report FINAL.docx 1/13/2017 8:58 AM SLL
DISCUSSION:
The 2011-12 Civil Grand Jury concluded that pension and OPEB costs overall are interfering with
the delivery of essential services and that the costs are increasing. The Town of Los Gatos
recognized similar trends. In 2012, the Town and employee groups worked collaboratively on
cost-containment efforts, including adopting a two-tier system for all new non-sworn
employees to reduce future costs.
Subsequent to the publication of the Civil Grand Jury report, the Governor announced the
passage of the California Public Employees’ Pension Reform Act of 2013 (PEPRA). The PEPRA
significantly modified pension benefits by increasing the retirement age, reducing pension
formulas, applying and income cap, increasing required employee contribution, and placing a
number of other restrictions that will serve to reduce future cost. The Town implemented
PEPRA in 2013, which put into place a second tier system for safety employees and other
changes.
In addition to PEPRA, since 2012, the Town has implemented three other actions:
Paid off the CalPERS safety pool side fund liability of $4.5 million in FY 2014/15, lowering
the required contribution rate for safety employees.
Approved agreements with bargaining units that included provisions to cap the retiree
medical reimbursements for employees retiring after February 1, 2016, estimated to
save approximately $200,000 per year in actuarially required contribution payments to
the Town’s OPEB trust. The cap for retirees of Medicare-eligible age of is the maximum
amount of benefit matching “Kaiser North” Employee or Employee plus One (i.e.,
typically the lowest cost plan).
Established a CalPERS Reserve in June 2016 to mitigate the Town’s unfunded pension
liabilities. As part of the June action, the Council funded the CalPERS Reserve up to $2.5
million from available FY 2014/15 year end savings with an additional annual payment
of $300,000 if available at future year-end savings.
Attachment 2 contains the Town’s draft response, detailing the actions taken since 2012. The
Town has implemented one more of the three remaining recommendations relevant to Los
Gatos. One of the other recommendations will be considered in future negotiations with the
Town’s bargaining units (Recommendation 4B). The last of the pertinent recommendations will
not be implemented by the Town because it involves leaving CalPERS and paying an estimated
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SUBJECT: APPROVE THE RESPONSE TO THE SANTA COUNTY CIVIL GRAND JURY’S REQUEST
DATED DECEMBER 21, 2016 FOR ADDITIONAL INFORMATION REGARDING THE
TOWN’S ACTIONS RELATIVE TO THE GRAND JURY’S 2011-2012 PENSION AND OTHER
POST-EMPLOYMENT BENEFITS REPORT
DATE: JANUARY 9, 2017
S:\COUNCIL REPORTS\2017\01-17-17\Grand Jury Reply\Staff Report FINAL.docx 1/13/2017 8:58 AM SLL
DISCUSSION (Continued):
upfront cost of $217 million dollars, which is well beyond the Town’s fiscal means
(Recommendation 7).
CONCLUSION:
Staff recommends approval of the letter with the detailed response as contained in Attachment
2. Once approved, the letter will be transmitted to the Santa Clara County Grand Jury by letter.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
There is no fiscal impact for approving the 2017 response to the Civil Grand Jury.
Attachments:
1. Request from the 2016-2017 Santa Clara County Civil Grand Jury, including the Town’s 2012
response.
2. Proposed 2017 Response to the Santa Clara County Civil Grand Jury.