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TC Agenda Packet 2017-07-19
TOWN OF TIBURON Tiburon Town Council Tiburon.Town Hall July 19,2017 1505 Tiburon Boulevard Special Meeting—6:30 p.m. Tiburon, CA 94920 Regular Meeting-7:30 p.m. TIBURON TOWN COUNCIL AGENDA SPECIAL MEETING 6:30 P.M. CALL TO ORDER AND ROLL CALL Councilmember Fredericks,Councilmember Kulik,Councilmember Thier,Vice Mayor O'Donnell,Mayor Fraser INTERVIEWS FOR VACANCIES ON TOWN BOARDS&COMMISSIONS (Design Review Board-One Vacancy for Tiburon appointee) • Stephen Wanat,1811 Mar West Street CLOSED SESSION CONFERENCE WITH LEGAL COUNSEL—EXISTING LITIGATION (Paragraph(1)of subdivision(d)of Section 54956.9) County of Marin vs.Martha Co.,Town of Tiburon,and Russell Keil et al;Russell Keil,Jerry Riessen,Maxwell Drever, Marilyn Knight,Joanna Kemper and Mark Bewsher vs.County of Marin,Martha Co.,and Town of Tiburon;Martha Co.vs. County of Marin —United States District Court,Northern District of California-Case No.C06 0200 SBA ADJOURNMENT— to regular meeting REGULAR MEETING 7:30 P.M. CALL TO ORDER AND ROLL CALL Councilmember Fredericks,Councilmember Kulik,Councilmember Thier,Vice Mayor O'Donnell,Mayor Fraser ANNOUNCEMENT OF ACTION TAKEN IN CLOSED SESSION IF ANY ORAL COMMUNICATIONS Persons wishing to address the Town Council on subjects not on the agenda may do so at this time. Please note however, that the Town Council is not able to undertake extended discussion or action on items not on the agenda. Matters requiring action will be referred to the appropriate Commission,Board, Committee or staff for consideration or placed on a future Town Council meeting agenda. Please limit your comments to three(3)minutes. PRESENTATIONS P-l. Recognition of Outgoing Board and Commission Members: o Peter Winkler,Parks,Open Space and Trails Commission 2008-2017 CONSENT CALENDAR All items on the Consent Calendar may be approved by one motion of the Town Council unless a request is made by a member of the Town Council,public or staff to remove an item for separate discussion and consideration. If you wish to speak on a Consent Calendar item, please seek recognition by the Mayor and do so at this time. CC-l. Town Council Minutes - Adopt minutes of July S, 2017 special and regular meetings (Town Clerk Stefani) CC-2. Town Signature Authority - Adopt resolution authorizing check signing authority to reflect changes in the composition of the Town Council(Director of Administrative Services Bigall) CC-3. Marin County Civil Grand Jury Responses -Approve Town's response to Marin County Civil Grand Jury Reports: Marin's Retirement Health Care Benefits &The Budget Squeeze (Office of the Town Manager) CC-4. Contract for New Financial Software - Authorize Town Manager to Enter into License and Services Agreement with Tyler Technologies (Director of Administrative Services Bigall) ACTION ITEMS AI-l. Beer Festival Special Event Permit - Consider application by the Ranch for event in autumn 2017(Department of Administrative Services) AI-2. Run for Reed Schools Special Event Permit - Consider application by The Foundation for Reed Schools for event in autumn 2017(Department of Administrative Services) AI-3. 8 Rolling Hills Road - Consider adoption of resolution partially granting appeal of Planning Commission approval of request for an Amending Parcel Map to remove certain development limitations from a vacant lot(Community Development Department) Owners/Applicant: Michele Hughes Appellant(s): Rita Burgess,David Readerman,et.al. Address: 8 Rolling Hills Road Assessor Parcel No.: 058-111-24 TOWN COUNCIL REPORTS TOWN MANAGER REPORT WEEKLY DIGESTS • Town Council Weekly Digests-July 7&14,2017 ADJOURNMENT GENERAL PUBLIC INFORMATION ASSISTANCE FOR PEOPLE WITH DISABILITIES In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting,please contact the Town Clerk at (415) 435- 7377. Notification 48 hours prior to the meeting will enable the Town to make reasonable arrangements to ensure accessibility to this meeting. AVAILABILITY OF INFORMATION Copies of all agenda reports and supporting data are available for viewing and inspection at Town Hall and at the Belvedere-Tiburon Library located adjacent to Town Hall. Agendas and minutes are posted on the Town's website, www.townoftiburon.org. Upon request, the Town will provide written agenda materials in appropriate alternative formats, or disability-related modification or accommodation, including auxiliary aids or services, to enable individuals with disabilities to participate in public meetings. Please send a written request, including your name, mailing address,phone number and brief description of the requested materials and preferred alternative format or auxiliary aid or service at least 5 days before the meeting. Requests should be sent to the Office of the Town Clerk at the above address. PUBLIC HEARINGS Public Hearings provide the general public and interested parties an opportunity to provide testimony on these items. If you challenge any proposed action(s) in court, you may be limited to raising only those issues you or someone else raised at the Public Hearing(s) described later in this agenda, or in written correspondence delivered to the Town Council at,or prior to,the Public Hearing(s). TIMING OF ITEMS ON AGENDA While the Town Council attempts to hear all items in order as stated on the agenda, it reserves the right to take items out of order. No set times are assigned to items appearing on the Town Council agenda. RECEIVEa JUL -It 2017 TOWN CLERK TOWN OF TIBURON TOWN OF TIBURON COMMISSION, BOARD & COMMITTEE APPLICATION The Town Council considers appointments to its various Town commissions, boards and committee throughout the year due to term expirations and unforeseen vacancies. In its effort to broaden participation by local residents in Tiburon's local governmental process and activities, the Council needs to know your interest in serving the Town in some capacity. Please indicate your specific areas of interest and special skills or experience which would be beneficial to the Town, by completing both sides of this form and returning it to Town Hall. Copies will be forwarded to the Town Council and informal applicant/Council interviews are scheduled periodically during the year. Your application will also remain on file at Town Hall for a period of one (1) year. Thank you for your willingness to serve the Tiburon community. Lea Stefani Town Clerk AREAS OF INTEREST Indicate Your Area(s)of Interest in Numerical Order (#I Being the Greatest Interest) 2 PLANNING PARKS, OPEN SPACE & TRAILS 1 DESIGN REVIEW RECREATION HERITAGE & ARTS DISASTER PREPAREDNESS LIBRARY COMMISSION ON AGING AFFORDABLE HOUSING OTHER S:dcrane%omm.app 1 PERSONAL DATA (PLEASE PRINT OR TYPE—A RESUME MAY BE ATTACHED AS WELL) NAME: Stephen Wanat MAILING ADDRESS: 1811 Mar West, Tiburon E-mail address (optional): sjwanat@yahoo.com TELEPHONE: Home: 415-435-1651 Work: Fax No. PROPERTY OWNERS ASSOC. (If applicable) TIBURON RESIDENT: (Years)41 DATE SUBMITTED: 7/10/17 REASONS FOR SELECTING YOUR AREAS OF INTEREST I have extensive experience in urban planning, design and architecture. I am retired now and would like to share what I know with my community. APPLICABLE QUALIFICATIONS ANS EXPERIENCE I have studied architecture, urban design and planning at Princeton, Harvard and the University of Pennsylvania. I have been an instructor and assistant professor in these subjects at the University of Oregon and Cal Poly. I have worked in these fields in this country and abroad for about 50 years. I would like to continue to be involved in what has been my life's work. ----------------------------------------------Town Hall Use------------------------------------------------- Date Application Received: Interview Date: Appointed to: (Date) Date Term Expires: Length of Term: 2 STEPHEN J. WANAT EDUCATION o University of Pennsylvania, Philadelphia, M. Arch. , 1966, M.C.P. , 1966 o Harvard University, Graduate School of Design, B. Arch. 1964 o Princeton University, A.B. (Magna cum laude) , Architecture, 1962 REGISTRATION o American Institute of Certified Planners, Member o Registered Architect, State of New South Wales, Australia PROFESSIONAL EXPERIENCE o Senior Planner/Project Manager with responsibilities in project management, project design and planning, liaison with government agencies and the public, coordination of consultants, and management of schedules and budgets. o Project Manager of over 30 environmental impact reports and statements for commercial, residential, institutional, aviation, rapid transit, and redevelopment projects in California, including the core area redevelopment plan for Sacramento. o Project Planner of numerous residential, commercial, industrial, recreational, and institutional projects in California, Southeast Asia, the Middle East, and Australia. o Land Use Planner and Project Director of numerous specific area plans in California and Australia, and the general plan for Hobart, the capital of Tasmania. o Expert witness regarding planning and urban development issues in court proceedings. o Chief Planner and Regional Manager for Urban Design and Planning Associates, Sydney, Australia (1970-1975). o Assistant Professor in Urban Planning and Architecture at the University of Oregon and California State Polytechnic University in San Luis Obispo (1967-1969). AFFILIATIONS o American Planning Association, Member 0 American Institute of Architects, Affiliate Member EXHIBIT NO. Lea Stefani Tiburon Town Hall Tiburon, CA Re: Town Council Vacancy Dear Lea Stefani: would like to be considered for one of the vacancies on the Town Council. am a 40 year resident of Tiburon. I am a retired urban planner and have experience in development, environmental issues and traffic issues. think I could contribute to the decision making process that the Town Council is involved in. I have taught urban planning and architecture at university level and have worked for large and small firms and as a consultant in the US and overseas. As a retired professional I would have the time to study the issues before the Council. I will be out of town in May until the 19th and would be available for an interview anytime after that. Yours truly, Stephen Wana 1811 Mar West Street Tiburon Phone: 415.435.1651 TOWN COUNCIL SPECIAL AND REGULAR MEETING DRAFT MINUTES SPECIAL MEETING— 7:00 P.M. n July 5, 2017 t)Council held a special meeting as follows: LUTO-ORDER AND ROLL CALL Councilmember Fredericks, Vice Mayor O'Donnell, Mayor Fraser ACTION ITEMS AI-1. Oath of Office—The Town Clerk will administer the oath of office to appointed Councilmembers Holli Thier and David Kulik, and they will take their seats on the dais The Town Clerk administered the Oath of Office to each David Kulik and Holli Thier. They took their seats on the dais, and the rest of the Council welcomed them. CLOSED SESSION 1) Conference with Legal Counsel —Existing Liti ag tion (Paragraph (1) of subdivision (d) of Section 54956.9) Peler Dempsey and Tracy P. Dempsey v. Tolvn of'Tiburon, et.al. Marin County Superior Court Case No. CIV 1700915 ADJOURNMENT—to regular fneetinQ REGULAR MEETING —7:30 P.M. CALL TO ORDER Mayor Fraser called the regular meeting of the Tiburon Town Council to order at 7:30 p.m. on Wednesday, July 5, 2017, in Town Council Chambers, 1505 Tiburon Boulevard, Tiburon, California. ROLL CALL PRESENT: COUNCILMEMBERS: Fraser, Fredericks, Kulik, O'Donnell, Thier PRESENT: EX OFFICIO: Town Manager Chanis, Town Attorney Stock, Director of Public Works/Town Engineer Barnes, Director of Administrative Services Bigall, Chief of Police Cronin, Town Clerk Stefani Town Council Minutes #1S-2017 DRAFT July 5, 2017 Page 1 ORAL COMMUNICATIONS James Hardy, President of the Hilarita Residents Association, said there had been an ongoing disagreement with the Hilarita-Tiburon Ecumenical Association Board about selling or conveying the property to a nonprofit organization. He wondered if the Town's appointment to the Ecumenical Association Board, who was already serving on the Board as a church representative, was voting with the churches to move forward with the process of selling or conveying the land based on a Town Council directive or independently. CONSENT CALENDAR CC-1. Town Council Minutes—Adopt minutes of June 7, 2017 special and regular meetings (Town Clerk Stefani) CC-2. Town Council Minutes—Adopt minutes of June 21,2017 regular meeting(Town Clerk Stefani) CC-3. Announce Special Vacancies on Town Boards & Commissions—Announce special vacancies on Planning Commission&Parks,Open Space and Trails Commission(Town Clerk Stefani) CC-4. Investment Summary — Adopt report for month ending May 31, 2017 (Director of Administrative Services Bigall) CC-5. League Voting Delegate — Approve appointment of delegate to League of California Cities Annual Meeting in September (Town Clerk Stefani) CC-6. Auto License Plate Reader System —Consider revisions of ALPRS Policy (Office of the Town Manager/Police Department) Vice Mayor O'Donnell requested Consent Calendar Item No. 6 be removed for discussion. MOTION: To adopt Consent Calendar Items 1-5, as written. Moved: O'Donnell, seconded by Fredericks VOTE: AYES: Unanimous CC-6. Auto License Plate Reader System—Consider Revisions of ALPRS Policy(Office of the Town Manager/Police Department) Vice Mayor O'Donnell voiced his support for the policy alterations,and said the Chief of Police has done a fantastic job with this program. He said he is confident that the proposed alterations will be an excellent tool for law enforcement, and for the law enforcement community. Town Council Minutes 415-2017 DRAFT Jule 5, 2017 Page 2 Councihnember Kulik asked if Vigilant will maintain the data at their site. Chief Cronin confirmed. Councilmember Thier echoed the Vice Mayor's comments, and thanked Chief Cronin for his forward-thinking. MOTION: To adopt Consent Calendar Item No. 6, as written. Moved: O'Donnell, seconded by Thier VOTE: AYES: Unanimous ACTION ITEMS AI-1. Pavement Repair Project—Rejection of all bids for 2017 Pavement Repair Project and consider authorization of design of 2018 Major Paving Project (Department of Public Works) Director Barnes gave a brief background of anticipated paving projects. He said the 2017 pavement repair project was included in this year's Capital Improvement Plan,and a major paving project was anticipated for 2019. He said there were only two bidders for the 2017 pavement repair project, and both were above his cost estimate. He said the low bidder has been unresponsive, and does not have the requisite experience. The remaining bidder was 50%above his estimate. He said there is a lot of paving work going on in the area, and prices are high, so the Town could not expect to get better prices this summer.I-le recommended the Town Council reject all bids and use the funds currently budgeted for this project to design the 2019 major paving project, for construction in 2018 instead. Vice Mayor O'Donnell wondered how streets were chosen for paving work.Director Barnes said the type of maintenance for streets,and when to conduct maintenance,was based on usage and pavement condition index. He added that the ideal PCI for regular maintenance work was between 82-85,and a road falling below 70 needed more maintenance. Mayor Fraser asked for confirmation that this action would not defer regular street maintenance,such as repairing potholes. Director Barnes said the regular maintenance program was still in place, and Public Works routinely repairs potholes. Fraser also inquired if the regular bidders for paving projects did not bid. Director Barnes said they did not, and added that many construction firms are very busy right now. Mayor Fraser opened the floor for public comment. There was none. MOTION: To reject all bids for the 2017 Pavement Repair Project,and to begin design of the 2018 Major Paving project, currently included in the CIP for FY 2018-19. Moved: Fredericks, seconded by O'Donnell VOTE: AYES: Unanimous 7'oiini Cozincll A9rriutes #I S-2017 DRAFT July 5, 2017 Page 3 AI-2. Town Council Board& Committee Assignments—Consider and adopt updated list of Town Council committees and board representation for the remainder of 2017,following the swearing-in of two new Town Councilmembers Town Clerk Stefani said it would now be timely for the new Town Council to conduct a review of the Town Council Committee Appointments list,and consider any new or revised appointments. She highlighted which appointments were now vacant, following the resignations of Councilmembers Doyle and Tollini. Councilmember Fredericks said she is now serving on the Transportation Authority of Marin sales tax renewal ad hoc committee, and as chair of the human resources ad hoc committee. Fredericks added that she is now the chair of the Golden Gate Bridge,Highway and Transportation District Labor Relations Advisory Committee. Mayor Fraser opened the floor for public comment. There was none. State and Regional Agencies Mayor Fraser said he would like to be removed as delegate to the Marin Telecommunications Agency Board of Directors, and would serve as delegate to the Richardson Bay Regional Agency Board of Directors and as alternate to the Transportation Authority of Marin. Vice Mayor O'Donnell said he would serve as delegate on the Community Development Block Grant Priority-Setting Committee. Councilmember Kulik said he would serve as delegate to the Marin Telecommunications Board of Directors, and as alternate to the Marin Clean Energy Board of Directors. Councilmember Thier said she would serve as alternate to the Marin Telecommunications Board of Directors and as an alternate to the League of California Cities. Local Agencies and Committees Councilmember Thier said she would serve as Primary Director on the Tiburon Peninsula Traffic Relief Joint Powers Agency. Town of Tiburon Ad Hoc Committees The Town Council agreed to sunset both the Capital Project Priority Setting and Downtown Parking ad hoc committees. Mayor Fraser said he would serve on the Budget committee. Toii�w COtt79cil A4inittes #1S-2017 DRAFT July S, 2017 Page 4 Councilmember Fredericks said she would serve on the Affordable Housing committee. Councilmember Kulik said he would serve on the McKegney Green Renovation and Utility Undergrounding Assessment District Policy committees. Councilmember Thier said she would serve on the Downtown Revitalization,Paths & Open Space Access, and the Shared Services committees. MOTION: To adopt the Town Council Committee Appointments List, as revised. Moved: Thier, seconded by Fredericks VOTE: AYES: Unanimous TOWN COUNCIL REPORTS Councilmember Fredericks followed up on her last Town Council report,in which she informed the Council she had nominated Tiburon as a site for study in a competition to get worldwide experts on mitigating sea level rise to design a project for Tiburon. She said the Marin County BayWAVE organization had requested Tiburon and Belvedere to submit their proposals together, as the entire Tiburon Peninsula. TOWN MANAGER REPORT Town Manager Chanis said the regular August 2 Town Council meeting would be tentatively cancelled. He also said there had been some interest in reviving the annual community forum, or neighborhood summit, and it would likely be scheduled for the fall. On behalf of the staff, Chanis welcomed Councilmembers Kulik and Thier to the Town Council. WEEKLY DIGESTS Received. ADJOURNMENT There being no further business before the Town Council of the Town of Tiburon, Mayor Fraser adjourned the meeting at 8:50 p.m., and the Town Council sat for a photo. JIM FRASER, MAYOR ATTEST: LEA STEFANI, TOWN CLERK Toren Council Minuses 915-2017 DRAFT July 5, 2017 Page 5 TOWN OF TIBURON Town Council Meeting t �l 1505 Tiburon Boulevard July 19, 2017 t� Tiburon, CA 94920 Agenda Item: STAFF PO . To: Mayor and Members of the Town Council From: Administrative Services Department Subject: Recommendation to Adopt Resolution to Establish Check Signature Anly,rity Reviewed By: � BACKGROUND The Town Council adopts by resolution those officials and employees who shall have authority to sign and endorse Town checks. With the resignation of Councilmembers Erin Tollini and Frank Doyle, it is appropriate to officially authorize replacement signatories for the newly appointed Councilmembers, Holli Their and David Kulik. FINANCIAL IMPACT There is no financial impact from this action. RECOMMENDATION Staff recommends that the Town Council: Move to adopt the exhibit Resolution authorizing the signing and endorsing of checks and other instruments of payment and access to documents retained in safekeeping Exhibits: Draft Resolution Prepared By: Heidi Bigall, Director of Administrative Services RESOLUTION NO. XX-2017 A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF TIBURON AUTHORIZING THE SIGNING AND ENDORSING OF CHECKS AND OTHER INSTRUMENTS OF PAYMENT & ACCESS TO DOCUMENTS RETAINED IN SAFEKEEPING WHEREAS, the Town of Tiburon has, by resolution, adopted a policy which identifies the employees and officials who may sign and endorse checks and other instruments of payment on behalf of the Town, and which employees may have authorization for access to Town documents held in safekeeping: and WHEREAS, from time to time as employees or Councilmembers authorized to sign and endorse checks and other instruments of payment on behalf of the Town leave the Town's service it becomes necessary to add an authorized signer, and NOW THEREFORE, BE IT RESOLVED THAT: 1. The Bank of Marin, Tiburon Branch, shall be the depository for all funds of the Town of Tiburon. Commercial accounts shall be established and maintained by and in the name of the Town of Tiburon at the designated bank upon and subject to such terms as may be agreed to from time to time. 2. All checks, drafts and other instruments for payment from the Town's commercial account in the amount of$2,500.00 or less, or relating to the Town's state and federal payroll tax obligations, PERS retirement, or health insurance obligations in any amount shall be signed on behalf of the Town by any two (2) of the following people: Town Manager Gregory Chanis, Director of Administrative Services Heidi Bigall, Director of Community Development Scott Anderson, or any member of the current Town Council (Jim Fraser, Alice Fredericks, Emmett O'Donnell, Holli Their, or David Kulik). 3. All payroll, payroll payable, and payroll benefit checks shall be signed by the Town Manager and Director of Administrative Services, and in the case of either's absence the Director of Administrative Services, or any member of the Town Council. 4. All other checks, drafts and instruments for payment shall be signed on behalf of the Town by either the Town Manager, Director of Administrative Services or Director of Community Development and by one member of the Town Council. 5. All checks, drafts or other instruments for payment made payable to the Town of Tiburon may be endorsed for deposit by written or stamped endorsement in the name of the Town of Tiburon without individual signatures. 6. Staff is directed to provide a certified copy of this resolution to the Bank of Marin along with signature authorization forms which include signatures of the individuals currently holding the following positions: Town Manager, Director of Administrative Services, Town Attorney, and Town Council members. The Town Clerk shall inform the Bank of Marin of any changes in these positions and provide new signature cards when necessary. -1- 7. The Bank of Marin is requested and authorized to honor, receive, certify or pay any instrument signed or endorsed in accordance with this Resolution. This Resolution and signature authorization forms submitted by the Town Clerk shall remain in full force and effect, and the Bank is authorized and requested to rely and act thereon, until such time as the Bank receives written notice of any changes from the Town Clerk. 8. The Bank of America, Tiburon Branch is the location of four Safe Deposit Boxes that the Town rents from the Bank. The following employees of the Town are authorized by signature to place, extract, or review items held in safekeeping: Town Manager (Greg Chanis), Director of Community Development (Scott Anderson), Town Clerk, (Lea Stefam), and Director of Administrative Services (Heidi Bigall). PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Tiburon on , 2017, by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: JIM FRASER, MAYOR Town of Tiburon ATTEST: LEA STEFANI, TOWN CLERK -2- TOWN OF TIBURON Town Council Meeting �, . ul y 19, 2017 1 = 1505 Tiburon Boulevard 5 Tiburon, CA 94920 Agenda Item: CC STAFF REPORT To: Mayor and Members of Town Council From: Office of the Town Manager Subject: Approve Town's Response to Two (2) Marin County Civil Grand Jury Reports Entitled Marin's Retirement Health Care Benefits and The .Bud et Squeeze Reviewed By: BACKGROUND On May 10, 2017, the Marin County Civil Grand Jury issued a report entitled Marin's Retire»2ent Health Care Benefits. The report, attached as Exhibit 1, identifies several findings and makes several recommendations regarding Other Postemployment Benefits financial obligations. The report requests the Town respond to all nine of the report's recommendations. Town staff has drafted a written response (Exhibit 2), which is attached for the Council's review. On May 25, 2017, the Marin County Civil Grand Jury issued a report entitled The Budget Squeeze. The report, attached as Exhibit 3, identifies several findings and makes recommendations regarding the obstacles to funding public employee pensions. The report requests the Town respond to three of the report's recommendations. Town staff has drafted a written response (Exhibit 4), which is attached for the Council's review. Both responses must conform to the format required by Penal Code section 933.05. RECOMMENDATION Staff recommends that the Town Council review and approve both response letters and authorize the Town Manager to sign and forward both letters to the Civil Grand Jury. EXHIBITS 1. Civil Grand Jury Report entitled Maria's Retirement Health Care Benefits 2. Draft Response Letter to Marin's Retirement and Health Care Benefits 3. Civil Grand Jury Report entitled The Budget Squeeze 4. Draft Response Letter to The Budget Squeeze Prepared By: Lea Stefani,Town Clerk I OWN I 11M ROS <,� 2016-2017 MARIN COUNTY CIVIL GRAND JURY a ri n s Retirement Health Care Benefits The Money Still isn 't There Report Date: May 10, 2017 Public Release Date: May 17, 2017 4 4 boo 10 COUNTY OF MARIN % MIBIT No.. i �1 � Marin County Civil Grand Jury Marin's Retirement Health Care Benefits The Money Still Isn 't There SUMMARY Four years ago, the Grand Jury released a report titled Maria's Retirement Health Care Benefits: The Money Isn't There,1 that discussed the funding of public agency liabilities for retiree health benefits. They discovered that most agencies were neither saving adequately nor implementing best practice cost containment strategies, and warned of the consequences. Since then, some agencies have started paying more attention to their unfunded benefit liabilities and are choosing to prepay at least a portion of their liabilities, as financial advisors recommend. However, while 16 of the 39 agencies we studied in this report collectively decreased their unfunded liability by $108.1 million (the County of Marin reduced its unfunded liability by $88.3 million), the remaining 23 agencies collectively increased their unfunded liability by$41.9 million. This problem has been escalating for years and will not be magically gone tomorrow. Left unchecked, the growing liabilities may eventually challenge agencies' fiscal health. The Grand Jury recognizes that all agencies face day-to-day operational challenges and that retiree health liabilities are likely not top-of-inind for many agencies. Officials and board members may not be expert at interpreting financial documents nor aware of the long-term implications of retiree health liabilities for their agency's viability—but they need to be. In this report, we offer strategies to help Marin agencies deal with their Other Postemployment Benefits liability(primarily health benefits) and make it easier for the average person to understand the scope and potential effects of such liabilities on our communities. "i�larin's Retiren"ent Hcahh Care Benefits:The Molle~Isn't There."Maria Coanrth,Civil Grand Jnrv.3.lune 2013. Marin's Retirennent Health Care Benefits: The Monei;Still Isn't There BACKGROUND Public employees are typically granted two retirement benefits: a pension and"Other Postemployment Benefits" (OPEB)—primarily retiree health care. This report is a follow-up to previous OPEB-related Marin County Grand Jury Reports from: 2004-2005, 2006-2007, and 2012-2013.4 We wanted to see how local public agencies' OPEB liabilities have changed since the 2012-2013 Report, and examine the impact of OPEB on agencies' financial health. METHODOLOGY The Grand Jury, in order to understand the financial and historical details of OPEB plans: • Reviewed Marin County Civil Grand Jury OPEB-related reports and agency responses: 2004-2005, 2006-2007, and 2012-2013. ■ Distributed detailed financial questionnaires (and analyzed responses) to the same public agencies surveyed in the 2012-2013 Grand Jury Report (see Appendix A: OPEB Questionnaire to Public Agencies). ■ Researched OPEB legal issues. ■ Reviewed OPEB-related Governmental Accounting Standards Board Statements 43, 45, 74, and 75 (GASB 43, GASB 45, GASB 74, and GASB 75) and related literature. ■ Analyzed all Comprehensive Annual Financial Reports (CAFRs) and audits of public agencies since Fiscal Year 2012. ■ Analyzed GASB 45 Actuarial Valuations of OPEB benefits and liabilities, prepared for public agencies. ■ Watched city/town council audit and financial presentations. ■ Interviewed agency staff and consultants involved with the actuarial process. ■ Surveyed literature for examples and best practices of OPER. I'he Bloated Rctiienmit Plans of Marin County, Its Cities and.Toms."Marin County Civil Grand my.9 May 2005. 3"Retiree Health Care t_ist,: I Think I`m 601111a Be Sick."Marin Counh,Civil Grand Jury. 19 March 2007. "l4arin's Retirement Plcal1h Care Benefits: ['he Monev Isn't There."Marin Countv Civil Grand Jan'v.3 Junc 2013. May 10, 2017 Marin County Civil Grand Jury Page 2 of 37 Marin'S Retirement Health Care Benefits: The Money Still Isn't There DISCUSSION If a public agency provides an employee with Other Postemployment Benefits (OPEB), and the employee meets specified periods of service and age, the agency will pay these benefits upon retirement to the employee (and to his/her spouse and/or dependents under some OPEB plans). The liability for providing these benefits is determined by an actuary and reported in an actuarial valuation. In accounting terminology, such a future financial obligation is called an Actuarial Accrued Liability (AAL). If an agency does not annually prepay their actuarial- determined Annual Required Contribution (ARC), the agency creates an Unfznnded Actuarial Accrued Liability (UAAL). Retiree Health Care OPEB "principally involve health care benefits,but also may include life insurance, disability, legal and other services."s Health care insurance costs continue to rise. These increased costs affect both the active employees and retirees. Public agencies blend employees and retirees into a single health care plan to calculate a premium that applies to both groups. The blending causes active employees, who are statistically healthier, to pay more for their health care to defray some of the additional costs of retiree health care. The additional cost of retiree claims is called an implied rate subsidy. If retiree health insurance costs rise, and employees are not charged sufficient premiums, then the public agency will have increased liabilities from the implied rate subsidy shortfall. $1,200 $1,000 Implied $800 E Subsidy v $600 � PFepni�f€� o $400 $200 $0 35 40 45 50 55 60 65 Age From:"Retiree I loalth Care:A Cost Containment f low-"ho Guide."League of California Cities. Sep.2016 "tither PostenAplovmcnt licnefits OPER)."Governmental Accounting Standards Board. May 10, 2017 Marin County Civil Grand Jury Page 3 of 37 Marin.'s Retirement Health Care Benefits: The Money Still Isn't There Prefunding vs. Pay-As-You-Go Public agencies can choose to either prefund their Actuarial Accrued Liability(AAL) or pay the annual retiree benefits as they come due (pay-as-you-go or pay-go). Prefunding into an OPEB trust fund allows the contributions to be invested, which can further reduce both the agency's AAL and Unfunded Actuarial Accrued Liability (UAAL). While prefunding is a smart long-term strategy, it may affect an agency's ability to pay its short-term bills. That is why some agencies choose pay-go-they do not have a sufficient budget or adequate cash flow. Basic aid school districts'for example, depend upon local property tax distribution to cover both their short-term and long-term obligations. Nevertheless,prefunding OPEB liabilities is a widely accepted best practice. As the Government Finance Officers Association (GFOA) states, "It is widely acknowledged that the appropriate way to attain reasonable assurance that benefits will remain sustainable is for a government to accumulate resources for future benefit payments in a systematic and disciplined manner during the active service life of the benefitting employees."7 The following graph shows a hypothetical example of the annual cost for an agency's OPEB payments$ for a closed group (no new employees) and illustrates how prefunding could be less expensive than pay-go, using 7.25% as the assumed rate of return on investments: 6,000,000- Pay-as-you-go f=unding 5,000,000- (Without a Trust) 4,000,000 — Actuarial Protunding (With a Trust) y F 3,000,000- 2,000,000— ,000,000 2,000,000 �Y J 1,000,000 Y 6 fS 0 t / 2014 2024 2034 2044 2054 2064 2074 2084 WITHOUT A TRUST WITH A TRUST Employer payments $160,000,000 $98,000,000 Investment income(7.25%) 0 62,000,000 Total cost of benefits 160,000,000 160,000,000 Weston,Margaret"Basic Aid School Districts."Public Policylnstitute q/'Califbi-nia.September 2013. "4ustanrrblc Funding nding Practices for Defined Benefit Pensions and Other Post:mployn i nt R ncfits KVI_13)."Government Finance O iicers Association.January 2016. s"Establishing an{)PER trust ftmd,."Millintan,Inc.2014. May 10, 2017 Marin County Civil Grand Jury Page 4 of 37 Maria's Retirenient Health Care Benefits: The Money Still Isn't Theme The Actuarial Valuation Process Actuaries prepare their valuations using Actuarial Standards of Practice and applicable standards of the Governmental Accounting Standards Board (GASB). The accounting standards are issued as implementation guides. During the 2012-2016 time period, actuaries followed the GASB 459 implementation. The purposes of a GASB 45 actuarial valuation include: ■ Informing an agency of its retiree benefits' financial future obligations, ■ Determining how much an agency should consistently prefund to ensure there will be sufficient funding for the retirees' benefits, and ■ Determining and measuring the funded status and funding progress of an OPER plan. The agency initiates the actuarial valuation process by providing basic data to the actuarial consultant, including: ■ Agency overview: agency directions and intentions for the valuation. ■ Valuation data: employee data, updates to health & welfare benefits and/or Memorandums of Understanding (MOUs), new resolutions about agency contributions, plan summaries and rates, and retiree benefits and other contributions paid recently. ■ Assumptions: rates of retirement, termination, disability, mortality, prefunding, and discount rates. Within a few months, the actuary arrives at a draft actuarial valuation report. The draft is shared with the finance or budget director, who can correct misunderstandings or misinterpretations. The final (GASB 45) valuation report is then used in the preparation of annual Comprehensive Annual Financial Reports (CAFRs) (See Appendix B: Example Actuarial Valuation Certification.) For agencies that have 200 or more employees, GASB 45 requires actuarial valuations at least biennially, and for smaller agencies at least triennially. `'"Statement l o.45 of the Governmental recounting Standards Board: Accounting<md Financial RCRorting ?—11lol�ers for Poste nulovment Benefits Other'lhan Pensions."Governrnentat Accounting Standards Board.June 2004. May 10. 2017 Marin County Civil Grand Jury Page 5 of 37 Marin's Retirement Health Care Benefits: The Money Still Isn't There What Has Changed Since the 2012-2013 Report? In the 2012-2013 report "Marin's Retirement Health Care Benefits: The Money Isn't There,i10 the 2012-2013 Marin County Grand Jury reviewed the OPEB funding status of 40 local government agencies. Since one agency (Sewerage Agency of Southern Marin)responded that it was staffed by City of Mill Valley employees, only 39 agencies were examined. This year's Grand Jury compared the financial information published in agencies' Audits and Comprehensive Annual Financial Reports (CAFRs) for Fiscal Year 2012 (FY 2012) and FY 2016. (For an example of locating OPEB financial data, please see Appendix C: Finding Key OPEB Information in CAFRs or Audits.) By this comparison, the Grand Jury discovered: OPEB Highlights FY2012 FY 2016 # of agencies that funded over 5% of their liability 11 18 # of agencies that funded between 1-5% of their liability 2 0 #of agencies that had not funded any of their liability 26 21 Collective 39-agency liability(AAL) $630.7 Million $650.2 Million Collectively set aside (OPEB plan assets) $24.6 Million $110.2 Million Collective Unfunded Actuarial Accrued Liability(UAAL) $606.1 Million $540.0 Million Collective Unfunded Actuarial Accrued Liability(UAAL) $223.4 Million $245.7 Million excluding County of Marin Because agencies have very different budgets, we chose to compare liabilities as the percentage Unfunded Actuarial Accrued Liability (UAAL) change from Fiscal Year FY 2012 to FY 2016. As of April 19, 2017, the City of Larkspur, the Town of Fairfax, and the Central Marin Police Authority had not released their FY 2016 CAFRs. For those agencies, we therefore needed to use their"older"FY 2015 financial data and applicable GASB 45 actuarial valuation data instead. Those agencies are indicated with an asterisk [*] following their names throughout this report. '""Marin's Retirement Health Care BenefitsAlic Money lsn'tThei e."Marin County Civil Grand Jurl). 22 May 2013. May 10, 2017 Marin County Civil Grand Jury Page 6 of 37 Maria's Retirement Health Care Benefits: The Money Still Isn't There % UAAL Change For Local Governments (FY 2012 to FY 2016) City of Belvedere ` City of Larkspur City of Mill Valley s City of Novato Cay of San Rafael City of Sausal,k) County of Marin I Town of Corte Madera Town of Fairfax' '.. Town of Ross Town of San Anseimo Town of'ilburon -200.00% -100.00% 0.00% 100.00% 200.00% Liability Decrease Liability Increase (Better) (Worse) % UAAL Change For School Districts (FY 2012 to FY 2016) Dixie Elementaryi Kentfield Larkspur--Cone Madera J Marin Community College Mill Valley Novato UnifiedReed Unioniz Ross School Ross Valley San Rafael Elem } f San Rafael HS I, Shoreline Unified Tamalpais Union HS -200M% -100.00% 0.00% 100.00% 200.00% Liability Decrease Liability Increase (Better) (Worse) % UAAL Change For Special Districts (FY 2012 to FY 2016) Central Marin Police' iC Central Mann sanitation //✓� KenKeld Fire 4la Las Gallinas Valley Sanitary Mann Municipal Water -y) Marialsonoma Mosquito ({� Mannwood CSD North Marin Water Novato Fire Protection Novato Sanitary 1' Ross Valley Fire �6 Ross Valley Sanitary 102Southern Merin Marin Fire Tiburon Fre -200.00% -100.00% 0.00% 100.00% 200.00% Liability Decrease Liability Increase (Better) (Worse) By reviewing agencies' published financial documents, we were able to prove that the agencies reduced their unfunded liability by a combination of actions: May 10, 2017 Marin County Civil Grand Jury Page 7 of 37 Maria's Retirement Health Ccn-e Benefits: The Money Still Isn't There ■ Fully contributing their Annual Required Contribution (ARC) and establishing an investment account. By keeping up-to-date with actuarial payments, future financial obligations are kept in check. ■ Setting aside "substantial assets" for OPER liability. Putting aside more money into a trust account for future OPEB benefits reduces the unfunded liability. Since FY 2012, the overall unfunded liability of$606.1 million (UAAL) was reduced to $540.0 million. However, for agencies that have increased their UAAL, we found two basic causes: ■ Underfunding the Annual Required Contribution (ARC). Agencies that opt to use pay-go and not completely fund their ARC, compound their UAAL each year(i.e., it grows). ■ Not Reporting Implied Rate Subsidies. As described previously, the implied rate subsidy effectively requires public agencies to calculate an implied liability whenever their retirees participate in group medical plans, but pay the same premiums as active employees. Effective March 31, 2015, all actuarial valuations must include the implicit subsidy liability.'' The Liability Fear Newspapers regularly cover the looming unfunded pension crisis across America. Where will the money come from to pay the retirees' pension? Less commonly reported is the looming unfunded OPER crisis. "The logic has been that the OPEB funding problem is 25 years old, so it can wait another year or two even though procrastinating simply makes the liabilities mushroom ... The problem of zero-funded OPEB plans is often ignored.i12 In Marin County, for the 39 agencies we studied, the unfunded pension liability is $956.3 Million and the unfunded OPER liability(UAAL) is $540.0 Million. Agencies need to look at their future budgets to decide if they will be able to pay an increasingly larger UAAL obligation. If they can, then the unfunded liability is simply an anticipated expense. If they cannot, then the unfunded liability is a much more urgent issue. To give some insight into the agency's potential challenge paying off its UAAL obligation, we compared each agency's most recent Annual Required Contribution (ARC) with its most recent total revenue. See Appendices D (municipalities), E (school districts), and F (special districts) for details. If an agency does not plan sufficiently for paying their OPEB liability, citizens may be asked to make hard choices: ■ Agencies may try to find the money. Agencies may reduce services ("crowd-out"), increase fees, attempt to raise taxes or issue bonds (with voter approval). If an agency proposes new taxes or bonds which may be used to reduce OPEB debt, the Grand Jury ".Actuarial Standard of Practice No.6."Actuarial Standards Board.May 2014. 12 Miller,Girard and Link,Jim. `_Netiti°Normal-Retirement Man DesiLns.' Government Finance Review.Aug. 2009. May 10, 2017 Marin County Civil Grand Jury Page 8 of 37 Maria's Reti7vtnent Ilealth Care Benefits: The Money Still Isn't There believes it should fully disclose that purpose, and not use language that is "virtually impenetrable, written by lawyers for lawyers who are also accountants."r3 ■ Retiree benefits may be reduced. "However, unlike pensions, OPEBs are typically not guaranteed or protected by state law. State and local governments have much more latitude to scale back OPEBs and share OPEB-related costs with retirees. Many have implemented several changes to that effect. ,14 Approaching Cost Containment Over the years, many organizations have investigated reducing OPEB liabilities through cost containment strategies. Because of legal and political issues, these strategies may not be appropriate for every public agency. Rather than limit agencies to specific strategies, the Grand Jury wants to ensure that decision makers in the agencies are aware of the breadth and depth of these options to better inform any future liability-reducing actions. In 2006, Governor Schwarzenegger established the Public Employee Post-Employment Benefits Commissions to identify the extent of unfunded OPEB liabilities and evaluate approaches for addressing the liabilities. The 34 recommendations contained in the Commission's final report addressed both pension and OPER funding. While some of these recommendations are now legally required or obsolete, the Grand Jury believes two recommendations are still warranted today: ✓ Public agencies providing OPEB benefits should adopt prefunding as their policy. As a policy, prefunding OPEB benefits is just as important as prefunding pensions. The ultimate goal of a prefunding policy should be to achieve full funding. ✓ Any employer considering the use of OPEB bonds should fully understand, and make public, the potential risks they bring. Such risks include: shifting costs to future generations and converting a future estimated OPEB liability into fixed indebtedness. In 2015, Smart Business Magazine highlighted cost containment strategies16 for company employee benefits, including: ✓ Consumer-Directed Health Plans (CDHPs). Combines a high-deductible plan with a health savings account. ✓ Adding Voluntary Benefits. Employees can add benefits as-needed with pre-tax dollars. ✓ Self-Funding the Health Plan. Employers directly pay for health care claims, and reduce their financial risk by purchasing stop loss insurance from an insurance carrier. 1'Herhold,Scott."Ro—w_ballot(luesdons for bonds mislead voters."The Mercuz),News.22 Aug.2016. a"Effective Advocacv& Ke v Citv tssucs."Leagzre of Cati%a nio Cities.20 Jan.2016. u. .. I unzlir Pe>>sions&Retiree Health Care for Public Eniplovees."Public Employee Post-Employment Bene/its Commission. Jan.2008. i('Pritts,Craig."Benefit Renewals: Cost containment str�egies that Can contI-01 y_gur health cau-e costs."Smart Business Pittsburgh.Sep.2015. May 10, 2017 Marin County Civil Grand Jury Page 9 of 37 Maria's Retirement Health Care Benefits: The Money Still Isn't There ✓ Expanding Wellness Programs. Reportedly, 75% of health costs are preventable. ✓ Reduce Spousal Subsidies or Add Spousal Surcharges. In 2016, the League of California Cities OPEB Task Force17 listed a number of strategies that agencies could consider-to reduce OPEB costs. The Grand Jury agrees that these strategies should be examined: ✓ Benefit Changes for Future Employees. Reduce benefits for new hires. ✓ Benefit Changes for Existing Employees. Reduce benefits for current employees (not retirees). ✓ Change Contributions to Fixed Amounts. Instead of paying a percentage of premiums, agencies would pay a fixed dollar amount as premiums increase. ✓ Limit Duration of Retiree Medical Benefit. Medical benefits would only extend until the retiree is eligible for Medicare. ✓ Close the Benefit to New Employees. Remove the benefit for new hires. ✓ Adopt or Increase Tenure Requirements. Require longer employment tenure before being eligible for benefits. ✓ Cover Only Retirees. Currently public agencies may cover the retiree's dependents as well. ✓ Make Agency Insurance Secondary. If the retiree has access to additional health care (from a spouse, previous employer, or veteran's program), use that primarily. ✓ Eliminate Retiree Health Care for New Employees. As pensions have become more generous, require retirees to pay for their own health care. ✓ Buy Down/Buy Out Benefits. Public agencies would pay a lump sum to reduce or- eliminate their health care benefit. ✓ Adjust Health Care Plans. Changing the health care plans offered can reduce both employee and retiree health costs. ✓ League Health Benefits Marketplace (Exchange). This plan "provides cities the flexibility lacking in other group coverage medical plan designs to decouple and unbundle active employee and retiree costs, which is key to reducing OPEB liabilities."rs ✓ Audit Retiree Medical Benefits. Ensure benefits are both compliant and not duplicative. ✓ Enroll Retirees in Medicare Part A. To the extent that some retirees are ineligible for full Medicare coverage and must pay for Medicare Part A, it may be more cost effective to pay for their enrollment in Part A. 17"Retiree F1ealth Care:A Cost Containment I-low-To Ouide."League of'California Cities.Sep.2016 is"Health Benefits Marketplace."League of California Cities.Accessed Feb 2017. May 10, 2017 Marin County Civil Grand Jury Page 10 of 37 Maria's Retie°eMentTlealth Care Benefits: The Money Still Isn't There ✓ Utilize Federally Subsidized Prescription Plan for Medicare Retirees. As possible, use available subsidies. The Grand Jury recognizes that there is no one-size-fits-all acceptable solution to reduce unfunded OPEB liabilities, and that changing benefits requires a dialogue not only with agency staff but also union representatives. Therefore, we encourage agencies to clearly articulate the risk that the promised retiree benefits may not be able to be funded and to work with unions and staff to create a solution that is sustainable and fair for all parties, including the public. Making a Dent The Grand Jury found that some agencies have made notable reductions in their unfunded liability(UAAL) and are implementing best practice cost containment strategies. Their efforts are highlighted below, as reported in their financial statements and actuarial valuations. The valuation dates shown in the charts are from the agencies' actual valuation reports. Marin Community College District's UAAL UAAL OPEB Plan Assets June 30,2012 June 30,2016 $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 Marin Community College District ("College of Marin") decreased its UAAL by changing its OPER funding policy. Through FY 2012, the district operated its OPEB plan solely on a pay-as- you-go basis ("pay-go"). However, during FY 2013, it established an irrevocable trust with the California Employers' Retiree Benefit Trust (CERBT) to prefund its OPEB costs through CaIPERS, in addition to its regular pay-go costs. County of Marin's UAAL UAAL OPEB Plan Assets June 30,2012 June 30,2016 $0 5100:000,000 $200,000,000 $300,000,000 $400,000,000 According to the CAFRs and actuarial valuations, the County of Marin accomplished its improvements primarily by changing its OPEB funding policy. Through FY 2012, the County was a pay-go funder but had also contributed to a reserve intended to be used to fund its OPEB plan. In February 2013, the County entered into an irrevocable trust agreement with the CERBT to prefund the County's OPEB costs through CalPERS, in addition to the regular pay-go contributions. The County transferred the reserve balance to the CERBT and began prefunding its full ARC during FY 2013. From FY 2013 through FY 2016, the County contributed 103.57% of its total ARC for that period. The most recent actuarial valuation reflects that the County also May 10, 2017 Marin County Civil Grand Jury Page 11 of 37 Maria's Reth-enzent Health Cape Benefits: The Money Still Isn't TheFe decreased its AAL by another factor within its control. It did not increase the maximum benefit for retirees eligible for its OPER "Plan 3": retirees hired between October 1, 1993 and December 31, 2007 and those hired earlier who elect Plan 3. Central Marin Sanitation Agency's UAAL URAL OPEB Plan Assets July 1,2011 July 1,2015 $0 $1,250,0410 $2,500,000 $3,750,000 $5,000,000 Before FY 2012, the Central Marin Sanitation Agency (CMSA) contracted with Ca1PERS to administer its OPEB plan and entered into an irrevocable trust agreement with the CERBT to prefund future OPEB costs. City of Mill Valley's UAAL UAAL OPER Plan Assets June 30,2012 July 1,2014 $0 $7,500,000 $15,000,000 $22,500,000 $30tOOO,OOO Through FY 2014, the City of Mill Valley's CAFRs reflect that the City was funding its OPEB on a pay-go basis, plus some amounts to its trust account to prefund future OPEB costs. The most recent actuarial valuation noted the City's increased trust account contributions and the City's intent to consistently make total OPEB contributions greater than or equal to ARC each year. During 2013, Mill Valley implemented two OPEB cost-containment methods for new employees: (1) it increased their length of service required to be eligible for OPEB from 15 years to 20 years; and (2) it restricted any OPEB benefit to the employee only. In March 2017, the City started public discussions to eliminate OPEB benefits for American Federation of State, County and Municipal Employees (AFSCME) union members hired after January 1, 2017 and establishing a Retiree Health Savings Account, which is estimated to save $3,000/year for each employee. May 10, 2017 Marin County Civil Grand Jury Page 12 of 37 Maria's Retirement Health Cure Benefits: The Money Still ISIO There Novato Fire Protection District's UAAL UAAL OPEB Plan Assets June 30,2012 June 30,2016 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 Starting in FY 2012, the Novato Fire Protection District (NFPD)has contributed 110.49% of its total ARC. The District implemented a cost-containment method providing that a retiree reaching age 65 must change to Medicare,pay its premiums, and has the option to select a Medicare supplement plan through the district. However, NFPD will only pay a maximum of 80% of the applicable Kaiser Medicare supplemental rate. A Fund Which Would Make a Dent The Grand Jury also found that at least three school districts in Marin County have established substantial Special Reserve Funds for OPEB: Mill Valley School District's UAAL UAAL Reserve Fund Balance June 30,2016 $0 $1,000.000 $2.00{7,000 $3,000.000 $4.000,000 $5,000,000 San Rafael Elementary School District's UAAL UAAL u Reserve Fund Balance June 30,2016 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 San Rafael City High School School District's UAAL UAAL Reserve Fund Balance June 30;2016 ; 721 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5:000,000 California law authorizes these funds and many school districts throughout the state have them. They are commonly referred to as a Fund 20, Special Reserve Fund,for Postemployment Benet ts. Such Funds may be an important step in financing future benefits, and these school districts should be commended for establishing a Fund 20. However, funds set aside for fixture benefits (as opposed to pay-go costs) should be considered contributions to an OPEB plan only "if the vehicle established is one that is capable of building assets that are separate from and independent of the control of the employer and legally protected from its creditors. Furthermore, the sole purpose of the assets should be to provide benefits under the plan. These conditions May 10, 2017 Marin County Civil Grand Jury Page 13 of 37 Maria's Retirement Health Care Benefits: The Money Still Isn't There generally require the establishment of a legal trust."19 The Mill Valley School District should also be commended for establishing a trust with CERBT. Yet, if a school district deposits its Fund 20 balance into a trust, the district will reduce (or further reduce) its UAAL. GASB 75 Most Marin agencies began implementing Governmental Accounting Standards (GASB) Statement 45 for their OPEB financial reporting on July 1, 2009. Beginning July 1, 2017, agencies will switch to using GASB 75. The changes to OPEB reporting are similar to changes in the GASB reporting of net pension liability(GASB 67 and 68). It states, "Employers that participate in a defined benefit pension plan administered as a trust or equivalent arrangement are required to record the net pension liability,pension expense, and deferred outflows/deferred inflows of resources related to pensions in their financial statements as part of their financial position."'0 These changes have increased financial scrutiny, and triggered public agencies across the United States to make changes to their pension funding strategies.`1 The primary objective of GASB 75 is to improve governmental accounting and financial reporting for OPEB, by improving the consistency, comparability and transparency of the information reported.22 The new reporting standards will cause actuaries to change how they prepare their OPEB valuations and cause agencies to change their financial reporting. (See Appendix G: GASB 45 vs. 75 Overview for more details.) Three important changes are GASB 75's requirements for biennial actuarial valuations, balance sheet liability reporting, and single blended discount rate. Biennial Actuarial Valuations. GASB 75 requires all agencies to obtain OPEB actuarial valuations biennially. In contrast, GASB 45 allowed agencies having fewer than 200 OPER plan members to obtain such valuations triennially. This change affects several Marin agencies. Balance Sheet Liability Reporting. GASB 75 requires agencies to report their Net OPEB Liability (NOL) for agencies with an OPEB trust, or Total OPEB Liability (TOL) for agencies that do not have an OPEB trust, upfront on the face of their balance sheets. NOL and TOL are the equivalent of UAAL and AAL under GASB 45 with some technical differences. GASB 75 also requires disclosure of how and why OPEB liability changed from year to year. Single Blended Discount Rate. The discount rate is the rate used to discount future benefit payments (i.e. actuarial accrued liability) to a present value. A lower rate increases that liability, and a higher rate decreases that liability. Both GASB 45 and GASB 75 permit having higher long-term discount rates with full prefunding over the amortization period and plan assets exist. ""City of Miil Valley,Actuariat Valuation of Other Post-Employment Benefit Programs.As ol'Jult_1,2014"Bickmore.Aug. 2015 20 1 1 V luation Reports."California "Notes to the Agent Iyh�lti ale-Em a(over Defined Benefit Pension Plan G��~,St3 6S Accounting, >a Public Employees Retirement System. 30 htn.2016. 21 Farmer,Liz and Maciag,Mike."Whv Some 1)ut-li4 Pensions Could Soon Look Much�,Vorse."Governing. 17 Mar.2015. 22"Sruunm} of'Statement N'4_ 5 lccounting.and 1 Financial Reportingfor Poste�loyment t3enef3is Other Than Pensions." Governmental Accounting Standards Board.June 2015. May 10, 2017 Marin County Civil Grand Jury Page 14 of 37 Marb7's Retirement Health Cate Bengfits: The Money Still ISIO There However, GASB 75 requires a single blended discount rate if the plan has some assets, but is projected to be insufficient to make benefit payments at some filture point. The single rate combines the long-term rate when assets are projected to cover the payments and a municipal bond (lower) rate when assets are projected to be insufficient. The Grand Jury also notes that actuaries determined an Annual Required Contribution (ARC) under GASB 45, while GASB 75 uses the term Actuarially Determined Contribution (ADC). However,both terms have a similar meaning. The ARC represents a target contribution required to ensure there are sufficient savings to finance and cover the promised OPEB.23 GASB 75 similarly defines the ADC as also representing a target contribution to an OPEB plan determined in conformity with Actuarial Standards of Practice (ASOP). ASOP No. 6, adopted in 2014, defines the ADC as a potential payment to prefund an OPEB plan, using a contribution allocation procedure that may include an amortization method.24 The ARC method may be used for the ADC.21 The Grand Jury believes that GASB 75 will cause a local public agency's financial situation to look much worse. The agency"should expect a larger total OPEB liability because the single blended rate calculated under [GASB] 75 is likely to be lower than the discount rate under existing standards."26 "The recognition of the Net OPER Liability in the employer's financial statements will likely be a significant increase in the amount of liability that was reported under prior GASB standards."Z7 This change will likely increase scrutiny of the agencies' balance sheet OPEB obligations, and force agencies to focus on addressing these liabilities. For example, the previous section ("Making a Dent") shows that agencies following full prefunding policies with plan assets achieve the goal of reducing their unfunded OPEB liabilities. Under GASB 75, all agency can reach that goal with a prefunding policy and practice supporting a projection that plan assets will be sufficient to make all projected benefit payments. "It's Hard to Wrap Your Head Around This!" —Marin County Elected Official "One of the most important responsibilities a local elected official has is oversight of the agency's spending. ,28 However, understanding the ins-and-outs of financial and actuarial standards imposed on public agencies is not easy, as evidenced by the (above) official's exclamation. Even if an elected official has business financial expertise, the standards that guide public agencies differ significantly. If an elected official has trouble understanding these "Guide Imolement pion of'GASB Staiernems 43 and 45 on Other Postemployment Benefits."Governmental Acco n li./I Standards Board.2005. 24,Actuarial Standard of'Practice No.6."Actuarial Standards Board.May 2014. ''"CiASB�Approves tieW-OPEB Employer Accountin;Standard(\o.'S)."Bru-tel Associates.July 2015. 26 McAllister,Brian and Spinellli,Connie and Belger,Diane."Gettin x familiar with OPEB."Journal oJAccormtancr. 1 Aug. 2016. "GASB issues Two Other Postemplovment Benefit(OPEB)Related Exposure Drabs."Millinunr.Aug.2014. 2s..- Hrd�eun�a�;d F'inanca.."Institute for Local Government.Accessed Feb.2017. May 10, 2017 Marin County Civil Grand Jury Page 15 of 37 Mann's Retirement Health C617-e Benefits: The Money Still Isn't There concepts,how can the average citizen hope to understand the annual Comprehensive Annual Financial Reports (CAFRs), budgets, or Audits? "Relatively few educational opportunities are provided to help trustees and policy makers understand how liabilities are calculated, in the role and sensitivity of actuarial assumptions, the impact that amortization periods and actuarial smoothing have on the retirement plan's short- term and long-term contribution rates, and of the full meaning of a plan's funded status."29 Therefore, the Grand Jury recommends that public agencies improve both their financial literacy and transparency: ■ Elected officials should take (and invite the public to attend) a financial literacy class such as one offered by: League of California Cities,3"" UC Davi S,12 ICMA University,33 Government Finance Officers Association,34 or the California State Association of Counties.35 ■ Financial documents issued by public agencies should be made easier to understand by the average resident. ■ Public financial presentations both by and to public agencies should be easier to understand. For example, the Government Finance Officers Association has established best practices for budget documents,36 and annually recognizes agencies with "Distinguished Presentation Awards." Governing Magazine's "Guide to Financial Literacy: Connecting Money, Policy and Priorities,"37 explains not only the terminology and purpose of various financial documents, it also offers essential questions that leaders should know to ask. Additional examples of classes and presentations can also be found in Appendix H (Example Financial Literacy Classes and Presentations). 29 Kehler,David."Pub tic Pension Plan Financing:The Devil's in_the_ActUarial Detail ."Society-of A(luories. 2010. i0"Nev,!Mas ors&Council Members Academv."League of California Cities.Accessed Mar.2017. 31"Municipal Finance Institute."League of California Cities.Accessed Mar.2017. 3`'Brinkley,Dr.Catherine."Community Governance."UC Davis. Spring 2016. 33"Local Government 101 Online Certificate Program."ICMA University. 34"Government Finance Officers Association Tr-ainin-,."Government Finance Officers Association. 3S"California State Association_of Counties Upcoming Courses."California State Association of Counties. 36"Makin,the Budvet Document Lasier to Understand."Government Finance Officers Association.Feb 2014. 37 Marlowe.Justin."Guide to Financial Literacv:Connecting Moncv,Poliev and Priorities."Governing.2014. May 10, 2017 Marin County Civil Grand Jury Page 16 of 37 Mann's Retirement Health Care Benefits: The Monei,Still Isn't There We Are Not Alone Marin County's public agencies are not unique in facing the challenges of OPER liabilities. "Total unfunded state other postemployment(OPER) liabilities have increased, according to S&P Global Ratings' latest survey of U.S. states. For states that have completed new OPEB actuarial studies since our last survey (which used 2013 or prior studies), total liabilities increased $59.4 billion, or 12% over a span of two years."38 In January 2016, California Controller Betty Yee "pegged the state's unfunded liability for other post-employment benefits (OPEB) at $74.1 billion. That's how much it will cost to allow workers to stay on their health plans after they retire until they're eligible for Medicare, subsidize their premiums, and then provide them with supplemental benefits after Medicare kicks in. The benefit's value can exceed $16,000 in the case of married couples and $20,000 in the case of retirees with children."39 The City of San Luis Obispo (California)reduced their 2009 estimated $5.9 million OPEB liability to $4.2 million by changing their amortization period and changing from pay-go to prefunding their Annual Required Contribution (ARC). In January 2010, the City of Beverly Hills (California) eliminated OPEB liabilities for new non-safety hires by shifting from a defined benefit health plan to a defined contribution retiree health plan.40 South Lake Tahoe (California) collaborated with its stakeholders to reduce OPEB liability by 73 percent by creating a new insurance plan.41 Sharing Our Data Despite the fact that agencies' OPEB financial documents are publicly available, the Grand Jury spent an enormous effort to gather the documents (not all of the documents were available online, nor text-searchable), extract the data, and analyze it. With the rise of the Open Data Movement(examples include: Data.gov, the Data Foundation, OpenGov, Marin County's Open Data Portal, and the City of Sausalito's Budget Transparency Too]), we wanted other organizations—including future Grand Juries—to be able to leverage our public data. Therefore, we have created a data portal consisting of all the Comprehensive Annual Financial Reports (CAFRs) and Audits for the 39 agencies we researched for FY 2011—FY 2016 along with a spreadsheet containing validated data extracted from those and other financial reports (including Annual Required Contributions (ARCS), discount rates, amortization periods, and the change of assets, liabilities, and unfunded liability). This information is available online, for free access here: lilt s,.//1oo.gTl/f,'_-',gO1X. Spain,Carol."Rising U.S.State Post-Employment Benefit' iabihties SiKnal An thesustainable Trend."Standard and Poors. 7 Sep.2016. s9 Eide,Stephen and Disalvo,Daniel."Phase out costly perks for retired state workers."San Diego Union Tribune. 1 Apr 2016. 40"Retiree I-lealth Care:A Cost Containment I-low-To Guide."League of California Cities.Sep.2016 41 Kerry,Nancy."Reducing Unfunded Liabilities for Other Post-Enmlm n_nt Benefits." Western Citta.May 2015. May 10, 2017 Marin County Civil Grand Jury Page 17 of 37 Marin's Retirenient Health Care Benefits: The Money Still Isn't There CONCLUSION Other Postemployment Benefits (OPEB) are just one of many financial obligations that public agencies face. Since the amount of the Annual Required Contribution (ARC) is a relatively small percentage for many agencies' annual total revenue, it is easy for them to not be too concerned (especially when faced by a much larger underfunded pension benefit). However, unlike pensions, agencies have more opportunities to reduce their OPEB obligations. The Grand Jury sees the delicate balance that agencies are facing: attracting new employees, negotiating with existing employees and retirees, and responsibly managing expenses in the public's interest. While some Marin agencies continue to reduce their unfunded OPEB liability, we are concerned that many agencies still have not yet done so. We hope that this report will give the agencies the additional reminders and tools to address this looming financial burden before more drastic measures need to be taken. FINDINGS F1. Many of the municipalities have decreased their UAAL obligation since FY 2012. F2. Some of the schools that have increased their UAAL obligation (since FY 2012) are setting aside OPEB contributions into reserve fiends (rather than irrevocable trust funds). F3. Many of the special districts have increased their UAAL obligation since FY 2012. F4. Some of the agencies that stated they comply with their actuarial funding guidelines, are not in compliance as shown in their CAFRs. F5. GASB 45 has increased the agency's reporting transparency, but the information in these financial reports is difficult for the average person to understand. F6. GASB 45 permits an agency with a full ARC funding policy in its GASB 45 valuation to increase its discount rate, thereby decreasing its OPEB liability and ARC payments. F7. Upcoming GASB 75 reporting will further improve an agency's OPER reporting transparency. RECOMMENDATIONS R1. Each agency should adopt a formal, written policy for contributions to its OPEB plan. R2. Each agency's standard practice should be to consistently satisfy its formal, written OPEB contribution policy. May 10, 2017 Marin County Civil Grand Jury Page 18 of 37 Marin's Retirement Health Care Benet ts: The Money Still Isn't There R3. Each agency's OPEB contribution policy and practice should support a projection under GASB 75 that its OPEB plan assets will be sufficient to make all projected OPEB benefit payments. R4. Each agency that uses special reserve funds for Postemployment Benefits should transition to a trust meeting the criteria of GASB 75. R5. Each term of service, elected or appointed officials of each agency should take a public agency financial class. R6. Each agency should make its CAFRs, Audits, and GASB valuations more readily understandable by the general public. R7. Each agency should ensure that all of its public financial presentations are more readily understandable and scheduled during hours convenient for the public. R8. Each agency should have the following downloadable and text-searchable documents readily accessible on their website: the last five years of CAFRs/Audits and the last three actuarial reports. R9. Before the next round of bargaining begins, each agency should prioritize the cost containment strategies to be used, including reducing or eliminating OPEB benefits for future employees. REQUEST FOR RESPONSES Pursuant to Penal code section 93 3.05, the grand jury requests responses as follows: From the following governing bodies: Municipalities ■ City of Belvedere (RI-R9) ■ City of Larkspur(R1-R9) ■ City of Mill Valley(R1-R9) ■ City of Novato (R I-R9) ■ City of San Rafael (R1-R9) ■ City of Sausalito (R1-R9) ■ County of Marin (R1-R9) ■ Town of Corte Madera (R1-R9) ■ Town of Fairfax (R1-R9) ■ Town of Ross (R I-R9) ■ Town of San Anselmo (R I-R9) ■ Town of Tiburon (R1-R9) May 10, 2017 Marin County Civil Grand Jury Page 19 of 37 Marie's Retirement Health Care Benefits: The Money Still Isn't There School Districts in Dixie Elementary School District (RI-R9) ■ Kentfield School District (R 1-R9) ■ Larkspur-Corte Madera School District (R1-R9) ■ Marin Community College District (R1-R9) ■ Mill Valley School District (R1-R9) ■ Novato Unified School District (RI-R9) ■ Reed Union School District (R1-R9) ■ Ross School District (RI-R9) ■ Ross Valley School District (R1-R9) ■ San Rafael City Schools (R1-R9) ■ Shoreline Unified School District (RI-R9) ■ Tamalpais Union High School District (R1-R9) Special Districts ■ Central Marin Police Authority (RI-R9) ■ Central Marin Sanitation Agency (R1-R9) ■ Kentfield Fire Protection District(R1-R9) ■ Las Gallinas Valley Sanitary District(R1-R9) ■ Marin Municipal Water District (RI-R9) ■ Marin/Sonoma Mosquito & Vector Control District (R1-R9) ■ Marinwood Community Services District (RI-R9) ■ North Marin Water District (RI-R9) ■ Novato Fire Protection District(R1-R9) o Novato Sanitary District (R1-R9) ■ Ross Valley Fire Department (RI-R9) in Ross Valley Sanitary District (R1-R9) ■ Southern Marin Fire Protection District (R1-R9) ■ Tiburon Fire Protection District(Rl-R9) The governing bodies indicated above should be aware that the comment or response of the governing body must be conducted in accordance with Penal Code section 933 (c) and subject to the notice, agenda and open meeting requirements of the Brown Act. Note:At the time this report was prepared information was available at the websites listed. Reports issued by the Civil Grand Jury do not identify individuals interviewed.Penal Code Section 929 requires that reports of the Grand Jury not contain the name of any person or facts leading to the identity of any person who provides information to the Civil Grand Jury.The California State Legislature has stated that it intends the provisions of Penal Code Section 929 prohibiting disclosure of witness identities to encourage full candor in testimony in Grand Jury investigations by protecting the privacy and confidentiality of those who participate in any Civil Grand Jury investigation. May 10, 2017 Marin County Civil Grand Jury Page 20 of 37 Maria's Retirement Health Care Benefits: The Money Still Isn't There GLOSSARY Actuary: A professional dealing with the assessment and management of risk for financial investments, insurance policies, and any other ventures involving a measure of uncertainty.42 Actuarial Accrued Liability (AAL): The portion of the actuarial present value benefits allocated to prior years of employment—and thus not provided for by future normal costs.43 Actuarially Determined Contribution (ADC): "A target or recommended contribution to a defined benefit OPER plan for the reporting period, determined in conformity with Actuarial Standards of Practice based on the most recent measurement available when the contribution for the reporting period was adopted.„ 44 Annual Required Contribution (ARC): The ARC is the employer's periodic required contribution to a defined benefit OPEB plan. The ARC is the sum of two parts: (1) the normal cost, which is the cost for OPEB benefits attributable to the current year of service, and(2) an amortization payment, which is a catch-up payment for past service costs to fund the Unfunded Actuarial Accrued Liability (UAAL) over the next 30 years.45 Despite the name "Annual Required Contribution,” the contribution is not legally required. California Employers' Retiree Benefit Trust (CERBT): This trust fund is dedicated to prefunding Other Post Employment Benefits (OPEB) for all eligible California public agencies. Even those not contracted with Ca1PERS health benefits can prefund future retiree benefits such as health, vision, dental, and life insurance.46 California Public Employees' Retirement System (CalPERS): An agency in the California executive branch that serves more than 1.7 million members in its retirement system and administers benefits for nearly 1.4 million members and their families in its health program.47 Discount Rate: A percentage rate required to calculate the present value of a future cash flow.48 Governmental Accounting Standards Board (GASB): "The independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local governments. Established in 1984 by agreement of the Financial Accounting Foundation (FAF) and 10 national associations of state and local government officials, the GASB is recognized by governments, the accounting industry, and the capital markets as the official source of generally accepted accounting principles (GAAP) for state and local governments.„49 42"Definition of'Actuart'."Inve.stopedia. 4.;"Other P stcmpl4}.:meat}3eneiits A Plain-LanYu rbc 5.t punas ti-.,.o:C,, _SB._......................................................i . }3.zn�dNo. ?5."Governmental Accounting Standards Board. 44<`Statcme rt No.75 of the Governmental Account'nu, Standards Board.”Governmental Accounting Standards Board.No.350. June 2015. 45"GASBhelp"Governmental Accornating Standards Board. 46a � C.,.lrtomia Employers'Retiree Benefit Tnrst{C'EiZBTL Fund."CuIPFRS.Accessed March 2017. 47"CallIFRS Story."Ca1PERS.Accessed March 2017. 48"Fixed Income Bond Terms."Corporate Finance Institute. 49"FACTS about GASB."Governmental Accounting Standards Board. 2012-2014. May 10, 2017 Marin County Civil Grand Jury Page 21 of 37 Marin's Retirement Health Care Benefits: The Money Still Isn't There Implied Rate Subsidy: The implicit rate is an inherent subsidy of retiree health care costs by active employee health care costs when health care premiums paid by retirees and actives are the same. 50 Net OPEB liability: Introduced in GASB 75, the liability of employers and nonemployer contributing entities to employees for benefits provided through a defined benefit OPEB plan that is administered through a trust.51 GASB 45 uses Unfunded Actuarial Accrued Liability (UAAL) to connote a similar liability. Other Postemployment Benefits (OPEB): Benefits (other than pensions) that U.S. state and local governments provide to their retired employees. These benefits principally involve health care benefits,but also may include life insurance, disability, legal and other services.52 Pay-As-You-Go Funding (Pay-go): With pay-as-you-go funding, plan contributions are made as benefit payments become due and funds necessary for future liability are not accumulated. That is, contributions made are for current retirees only, causing the majority of retiree health benefits liability to be considered unfunded.53 Public Employees' Retirement System (PERS): The retirement and disability fund for public employees in California. Unfunded Actuarial Accrued Liability (UAAL): The excess of the Actuarial Accrued Liability (AAL) over the actuarial value of assets.54 °"Glossary:[n lied RMO Suhsidv."Nlillimcm. 51 "�ummary of Statemcna No.7�: Accor t to ti sr d Financial Revortim for Posteznplovment Benefits Other.Than Pensions.,, Governmental Accounlimg Standards Board..lune 2015. 52« Outer Post;'.lnploytnent Benet-nti(t}PEt3 S."Governmental Accotntlilw Standards Board. 53"Glossary:iay- ., von-eo fundis- ." Mikman.; ___ V Other Postem_1)lo�muni_Benetits. ,4 Piarr l,t_�.__n ke_Sitmmary of CiASB Statements No.43 and No.�:_. Governmental nti Accoung Standards Board. May 10, 2017 Marin County Civil Grand Jury Page 22 of 37 Marin's Retirement Health Care Benefits: The Money Still Isn't There APPENDIX A: OPEB Questionnaire to Public Agencies OPEB Questionnaire Definitions A. Other Post Ernploymen,13 r) Benefits(other than pensions)that U.S.state Oilier------------- and local governments provide to their retired employees. These benefits principally involve health care benefits,but also may include life insurance,disability,legal and other services. 13. Actuarial Accrued Liabilily(AAj): Excess offlie present value of OPER fund's total of Future benclits(payable to the OPE-B beneficiaries)and fund administration expenses over the present value of'the future normal cost of'those benefits. C. ActiiarialValue(,)fAssets(AVA): The value of OPEB investments and other property used by the actuary For the purpose of*an actuarial valuation(sometimes referred to as valuation assets).Actuaries often select an asset valuation method that smoothes;the effects ofshort-terin volatility in the market value ot'assets. 1). Unfunded Actuarial Accrued LiabilityThe URAL is the Actuarial Accrued . .....—---------------------- Liability(AAL)minus the value ol'any assets(AVA)that have been irrevocably set aside to fund future benefits. L. Annual Required Contribution(ARC): The annual required contribution,or ARC,refers to the amount needed to be contributed by employers to adequately fund an OPEB plan.The ARC is the sum of two factors:a)the cost of OPER benefits being accrued in the current year (known as the normal cost),plus b)the cost to amortize,or pay off,the OPEB plan's unfunded liability.The ARC is the required employer contribution after accounting for other revenue, chiefly expected investment earnings and contributions from employee participants. R Discount Rate: The interest rate used to bring future cash flows to the present to account for the time value of money .................................................................................................................................................................................................................... May 10, 2017 Marin County Civil Grand Jury Page 23 of 37 Marin's Retirement Health Cal-e Benefits: The Money Still Isn't There APPENDIX A: OPEB Questionnaire to Public Agencies (cont'd) ..................................................................................................................................................................................................................... Agency Identification 1. Name of Responding Agency, Separate Investment Accounts Please:respond to this set of quf- tenons with regard to the existence of`a separate investment accotent into which you may deposit each years funds fi r amortizing your retiree health care benclits'UAAL? 2. leo you have such a separate investment account? 3. if you have a separate investment account,when did you set up that account? 4. If you do have such a separate investment account,what,is its current value? 5. If you do have a separate investment account,what is the value of your deposits into that account for each of the fiscal years 2011-2012 to the presenfl (1) Fiscal Year 2011-2012 (2) Fiscal Year 2012-2013 (3) Fiscal Year 2013-2014 (4) Fiscal Year 2014-2015 (5) Fiscal Year 2015-2016 6. If you have any other accounts to fund retiree health care benefits,please identify the nature, purpose and current value of those account(s). 7. If you do not have an investment account to fund retiree healthcare benefits why not? May 10, 2017 Marin County Civil Grand Jury Page 24 of 37 Ma7417.'s Retirement Health Care Benefits.- The Monev Still Isn't There APPENDIX A: OPEB Questionnaire to Public Agencies (cont'd) ..................................................................................................................................................................................................................... Annual Required Contribution ("ARC") S. What is your ARC for each of the fiscal years 2011-2012 to the present? (1) Fiscal Year 2011-2012 (2) Fiscal Year 2012-2013 (3) Fiscal Year 2013-2014 (4) Fiscal Year'1014-2015 (-S) Fiscal Year 2015-2016 9. Have you committed to fully fund cacti year's ARC? 10.If you have you committed to fully fund cacti year's ARC,when did you make that comin it tile(it'? 11.If you have you committed to fully fund each year ARC in whatamount did you fund each year's ARC for fiscal years 2011-2012 to the present? (1) Fiscal Year 2011-2012 (2) Fiscal Year 2012-2013 (3) Fiscal Year 2013-2014 (4) Fiscal Year 2014-2015 (5) Fiscal Year 2015-2016 12. If you have you not committed to fully fund each year's ARC,in what arnount did you fund each year's ARC for fiscal years 201.1-2012 to the present? (1) Fiscal Year 2011-2012 (2) Fiscal Year 2012-2013 (3) Fiscal Year 2013-2014- (4-) 013-2014(4) Fiscal Year 2014-2015 (5) fiscal Year ........................................................................................I................................................... .................................................................... May 10, 2017 Mann County Civil Grand Jury Page 25 of 37 Maria's Retirement Health Ccire Benefits: The Money Still En't There APPENDIX A: OPEB Questionnaire to Public Agencies (cont'd) ..................................................................................................................................................................................................................... 13.What discount rate(s)have you used to calculate your ARC for each year for.fiscal_years 2011-20 12 to the present? (1) Fiscal Year 2011-2012 _ (2) Fiscal Year 2012-2013 (3) Fiscal Year 2013-2014 (4) Fiscal Year 2014-2015 (5) Fiscal Year 2015-2016 14.Please explain how you arrived at such discount rate(s)for fiscal years 2011-2012 to the present. ........._.. . ..... ....._.... ........... ....... 1_..111.......................... 15.Please specify the amortization period which you have used for each year fiscal year from 2011-2012 to the present to calculate your ARC and to fund your retiree health care benefits 11AAL. (1) Fiscal Year 2011-2012 (2) Fiscal Year 2012-2013 (3) Fiscal Year 2013-2014 (4) Fiscal Year 2014-2015 (5) Fiscal Year 2015-2016 Nel4otiations to Reduce OPER Obli Dations 16.If from fiscal years 2011-2012 to the present you have negotiated any caps with any employee group(s)or negotiating group(s)on the amounts you commit to pay existing or new employees for retiree health care benefits,please specify the following for each negotiating group: (1) The employee group(s)or negotiating group(s): May 10. 2017 Marin County Civil Grand Jury Page 26 of 37 Maria's Retirement Health Care Benefits: The Money Still Ism't There APPENDIX A: OPEB Questionnaire to Public Agencies (cont'd) ..................................................................................................................................................................................................................... (2)The mature of the cap............... ._. _.._.._.._..ee.._.,_.._..._...._............m.__................_........................_....__ (3) The date such cap wars negotiated: (4) Whether applicable to both new and existing employees: (5) If there is no negotiated cap, what is your cap"? IT If from fiscal years 2011-2012 to the present you have negotiated with any employee group or negotiating g=roup as higher retirement rage on the amounts you commit to pay existing or new employees for retiree health care benefits,please specify the following for each employee group(s)and negotiating group(s): (1)The employee group(.)or negotiating group(s): (2)The change in retirement age: (3)'bite date such higher retirement age was negotiated:_,.......... (4)NVIietber the higher retirement age is applicable to both new and existing employees: 18.If From fiscal years 2011-2012 to the present you have negotiated with any employee roup(s)or negotiating group(s)to require active employees to contribute towards the cost of their retiree heahlt etre benefits,please specify the following for each employee group(s)and negotiating group(s): (1)The employee group(s)or negotiating group(s): (2)The nature of employee contribution: (3) Whether you increased the employee's compensation to satisfy part of this contribution: (4)The date such increased contribution went into effect: May 10, 2017 Marin County Civil Grand Jury Page 27 of 37 Maria's Retirement Health Care Benefits: The Money Still Isn't There APPENDIX A: OPER Questionnaire to Public Agencies (cont'd) ..................................................................................................................................................................................................................... (5) Whethcr applicable to both new and existing employc-es: (6)The amount of the employee contribution: 19.Please explain the nature of reduction in OPf,13 benefits,if any,when a recipient becomes eligible for Medicare. 20,What OPER benefits(by type and agency f-unding amount)do you offer to your employees. If the benclits differ between employee group or negotiating groups or based on date of hire, please explain. Your Website 21.Is there:a link on your Nvebsite to provide the latest following iufornuation? (1)actuarial valuation of your AAL, (2)your UAAL, (3)its consequent percent funded, (4)the Discount Rate(annual percentage)used to determine these values,and (5) a projection of outlays("Pay-Go")for retiree health care benefits ibr each of the current and subsequent 10 years? (Collectively"Website Link") 22,if you maintain a Website Link,when was this information first put on your website? 23.With regard to the Website Link infbrnnatien,to the extent such infonnation is not on your website,why not? May 10, 2017 Marin County Civil Grand Jury Page 28 of 37 Marin's Refi7-e7nent Health Care Benefits: The Mone.))Still Isn't There APPENDIX A: OPEB Questionnaire to Public Agencies (cont'd) ................................................................................................................I........I.................................................. ................................ 24.Please provide LIS the URL for the website page(s)that display this Website Link information. Financial Reporting 25,Please provide the audited Comprehensive Annual l"inancial Report(CA R)for fiscal year 2012(2011-2012)in one of the following formats: (1) a hyperlink to a publicly available web site containing the appropriate PDF' document(preferred):._, _................... (2) a digital copy of the appropriate PDF file,or a printed document. May 10, 2017 Marin County Civil Grand Jury Page 29 of 37 MmIll's Retirement Health Care Benefits: The Money Still Isn't There APPENDIX B: Example Actuarial Valuation Certification =Ac,rU7AR1AL VALUATION CERTIFICATION J This report presents the City of 1yov'ato's Retiree Healthcare Plan("Flan")January L 2014 actuarial valuation. The propose of this valuation is to: ■ Determine the Ciovernurental Accountin,2 Standards Board Statement Nos.•13 and 45 Januar° 1.2014 Benefit obliszations. ■ Detemiirre the Plan's January 1.2014 Funded Status,and ■ Caleulate the 20 14!1and 2013/16 Annual Required Contributions. The report provides information intended for reporlim.,under GASB 43 and 45,bili may not be appropriate fir other purposes. Information provided in dais report may be usefid to the City for the Pians financial nrana,genneut. Future valuations may differ significantly if the Plan's experience differs from our assumptions or if there are chances in Plan desicn,actuarial methods,or actuarial assumptions. The project scope did not include an analysis of this potential variation. The valuation is based on Plan provisions;participant data.and asset information provided by the City as stmmiarized in this report,which the relied on and slid not audit. Ave reviewed the participant data for reasonableness. To the best of our knowledge,this report is complete and accurate and lids been conducted using generally accepted actuarial principles and practices. additionally,in 0111.opinion.actuarial methods and assumptions comply with GASB 43 and 4s. As members of the American Acadenn of Actuaries meeting the Academy Qualification Stanclarcls,we certify=the actuarial res-lilts and opinions herein. Respectfiilly submitted. _/-D John E Bartel, ASA NLA-AA.FCA Bianca Lin,FSA.MAAA.EA President Assistant Vice President Bartel associates_,LLC Bartel Associates._LLC October 28,2014 October 28._1014 Source: "City of Novato Retiree Healthcare-Plan."City of Novato,California.January 1,2014. May 10, 2017 Marin County Civil Grand Jury Page 30 of 37 Marin's Retirement Health Care Benefits: The Money Still Isn't There APPENDIX C: Finding Key OPEB Information in CAFRs or Audits Where can people find important OPEB-related information in an agency's financial reports? Example from a Municipality's Comprehensive Annual Financial Report (CAFR) (note: no prefunding contributions made): NOTE 10 - Postemp{oyment Benefits Other Than Pensions Development of 2015 1 2016 Fiscal Year Annual OPEB Cost- Based on a 4.00%discount rate AAL Actuarial Accrued Liability $ :3,629,754 Actuarial Value of Assets - t AAL Unfunded Actuarial Accrued t.irability 3,62%7b4 Amortization Period 23 years Annual%rat Payroll Amortization of Unfunded.AAL $ 119,323 Normal Cost(based on the Entry Age Normal Method) 177,525 ARC 1 Annual Required Contribution 296,848 Interest on Net OPER Obligation 73,576 Adjustment to AFDC (89,962) Annual OPEB Cost 280,462 Pay-as--you-go Cost (105,580) Increase in net OPEB Obligation 174,882 Net OPER Obligation-beginning of year 1,839,397 Net OPEB Obligation-end of year 2,014,279 Example from a Municipality's Comprehensive Annual Financial Report (CAFR): Required Supplementary Information Schedule of Funding Progress(unaudited) Other Postemployment Benefits Plan As of June 30,2016 The Schedule of Funding Progress presents trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.Trend information from the actuarial studies is presented below: Actuarial UAAL Accrued Actuarial Unfunded as a % of Actuarial Liability Value of AAL Funded Covered Covered Valuation (AAL) Assets (UAAL) Ratio Payroll Payroll [(a- Date (a) (b) (a-b) (b/a) (c) b)/c] July 1,2008 S 1,747,300 S_ $ 1,747,300 0% $ 3,725,600 46.9% July 1,2011 $ 1,941,900 S _ $ 1,941,900 0% $4,068,100 47.7% July 1,2014 $ 1,628,827 S _ $ 1,628,827 0% $ 1,999,530 81.5% May 10, 2017 Marin County Civil Grand Jury Page 31 of 37 Marin's Retirement Health Care Benefits: The Money Still Isn't There APPENDIX C: Finding Key OPEB Information in CAFRs or Audits (cont'd) Example from School District's Audit: ARC > Annual required contribution (ARC) $ 24,585 Interest on net OPEB obligation (499) Adjustment to ARC 1,537 Annual OPER cost 25,623 Gantribut Contributions made: Contributions from governmental funds (19,944) Decrease in net OPER (asset) 5,679 Net OPER Obligation (asset) July 1,2015 12,465 Net OPER Obligation (asset)-June 30,2016 $ 6,786a Funded Status and Funding Progress - OPEB dans As of July 1, 2014, the most recent actuarial valuation date, the District did not have a funded plan. The actuarial liability(AAL)for benefits was $189,127 and the unfunded actuarial accrued liability(URAL) was $189,127. May 10, 2017 Marin County Civil Grand Jury Page 32 of 37 Marin's Retirement Health Care Benefits: The Money Still Isn't They-e APPENDIX D: Marin Municipalities' ARC as a Percentage of Total Revenue The amount of an agency's annual required contribution(ARC)can be compared to its total revenue. A higher Percentage may signal future budgetary challenges if not properly managed. UAAL UAAL UAAL ARC Total Municipality FY 2012 FY 2016 :Change FY 2016 Revenue 2016 City of Belvedere 53741116 $1,036,193 662,077 $118,105 $7,8551,000 City of Larkspur* $7,493,551 $13,698,307 6,204,756 $1,165,424 $21,009,094 City of Mill Valley $24,481,979 $20,156,488 (4,325,491) $2,157,955 $39,916,000 City of Novato $2,786,000 $3,673,318 887,318 $262,000 $47,954,000 City of San Rafael $24,295,000 $32,727,000 8,432,000 $2,148,000 $100,490,000 City of Sausalito $6,646,550 $5,730,670 (915,880) $428,391 $26,588,325 County of Marin $382,720,000 $294,375,000 (88,345,000) $21,937,000 $611,801,000 Town of Corte Madera $1 1,790,000 $9,704,000 (2,086,000) $1,855,000 $23,593,928 Town of Fairfax* $1,024,300 $835,400 (188,900) $116,600 $9,212,366 Town of Ross $417,000 $383,000 (34,000) $36,000 $9,264,385 Town of San Anselmo $1,941,900 $1,628,827 (313,073) $147,364 $19,216,454 Town of Tiburon $2,9001736 $3,629,754 729,018 $296,848 $11,341,758 Municipalities: FY 2016 ARC as Percentage of Total Revenue City of Belvedere City of Larkspur` City of Mill Valley City of Novato City of San Rafael City of Sausalito County of Mann Town of Corte Madera Town of Fairfax" Town of Ross Town of San Anselmo Town of Tiburon 0.0% 2.5% 5.0% 7.6% 10.0% Lower% - ; Higher% May 10, 2017 Marin County Civil Grand Jury Page 33 of 37 Marin's Reth-e>nent Health Care Benefits: The Money Still Isn't There APPENDIX E: Marin School Districts' ARC as a Percentage of Total Revenue The amount of an agency's annual required contribution(ARC)can be compared to its total revenue. A higher percentage may signal future budgetary challenges if not properly managed. UAAL UAAL UAAL ARC Total School District FY 2012 FY 201.6 Revenue Change FY 2016 FY 2016 Dixie Elementary $1,057,000 $1,128,416 71,416 $114,463 $25,361,193 Kentfield $1,432,000 $1,340,399 (91,601) $199,312 $19,712,081 Larkspur-Corte Madera $207,671 $189,127 (18,544) $24,585 $21,966,152 Marin Community College $6,604,85 $877,366 (5,727,491) $261,064 $67,403,849 Mill Valley $2,159,158 $4,662,117 2,502,959 $945,212 $50,815,837 Novato Unified $823,300 $1,503,161 679,861 $175,235 $94,185,666 Reed Union $2,730,727 $5,867,732 3,137,005 $855,510 $25,711,228 Ross School $2,085,000 $3,086,992 1,001,992 $338,061 $8,748,369 Ross Valley $1,838,000 $1,561,792 (276,208) $98,513 $29,323,920 San Rafael Elem $5,462,058 $6,200,000 737,942 $880,377 $62,306,271 San Rafael HS $4,943,154 $5,400,000 456,846 $726,362 $37,919,147 Shoreline Unified $1,798,111 $2,013,470 215,359 $286,133 $14,823,677 Tamalpais Union HS I $3,892,000 $3,053,537 (838,463) $505,711 $92,371,238 School Districts: FY 2016 ARC as Percentage of Total Revenue Dixie Elementary Kentfield - Larkspur-Corte Madera --_ Marin Community College Mill Valley Novato Unified Reed Union - ' Ross School Ross Valley San Rafael Elem San Rafael HS Shoreline Unified - ' Tamalpais Union HS , 0.0% 2.5% 5.0% 7.5% 10.000{e Lower% > Higher% May 10, 2017 Marin County Civil Grand Jury Page 34 of 37 Ma-in's Retirement Health Care Benefits: The Money Still Isn't There APPENDIX F: Special Districts' ARC as a Percentage of Total Revenue The amount of an agency's annual required contribution(ARC)can be compared to its total revenue. A higher Percentage may signal future budgetary challenges if not properly managed. UAAL UAAL UAAL ARC Total Special District Revenue FY 2012 FY 2016 Change FY 2016 FY 2016 Central Marin Police" $7,493,551 $15,155,425 7,661,874 $1,321,032 $11,087,891 Central Marin Sanitation $2,872,049 $2,496,424 (375,625) $301,327 $16,952,527 Kentfield Fire $2,004,784 $2,146,412 141,628 $195,606 $5,014,333 Las Gallinas Valley Sanitary $1,985,486 $2,094,980 109,494 $211,861 $12,976,695 Marin Municipal Water $34,264,000 $33,104,000 (1,160,000) '' $3,683,000 $62,502,430 Marin/Sonoma Mosquito $12,030,407 $15,038,000 3,007,593 $1,542,000 $8,638,747 Marinwood CSD $4,422,797 $6,477,757 2,054,960 $518,769 $5,837,007 North Marin Water $3,470,834 $4,085,375 614,541 $384,385 $17,912,719 Novato Fire Protection $16,751,185 $13,567,350 (3,183,835) $1,596,595 $27,838,320 Novato Sanitary $6,112,283 $6,313,211 200,928 $452,506 $19,299,289 Ross Valley Fire $4,917,120 $5,121,615 204,495 $485,075 $9,598,396 Ross Valley Sanitary $302,766 $693,717 390,951 $109,118 $23,623,985 Southern Marin Fire $5,285,282 $7,089,540 1,804,258 $916,153 $14,911,632 Tiburon Fire 1 $2,269,028 $2,182,181 (86,847) $249,592 $7,184,792 Special Districts: FY 2016 ARC as Percentage of Total Revenue Central Marin Police' Central Marin Sanitation ea3 _ _ Kentfield Fire '' Las Gallinas Valley Sanitary Marin Municipal Water MannlSonomaMosquito i✓✓?�.`l/ s� .� a�, � �i �l�," ���� 2 ✓.1����� � `�.`��iF Marinwood CSD er`✓y, rj'",�i. ,,�i� ,a. 5 North Marin Waterffi ' Vr Novato Fire Protection Novato Sanitary Ross Valley Fireu'dl ;>,�,�,2,' �t�.,�✓,"E Ross Valley Sanitary Southern Marin Fire i�,%% Tiburon Fire ,`Fz/'.',�/"j,",� ✓��', %% 0.0% 5.0% 10.0% 15.0% 20.0% Lowor% - > Higher% May 10, 2017 Marin County Civil Grand Jury Page 35 of 37 Marin's Retirement Health CCn-e Benefits: The Money Still Isn't There APPENDIX G: GASB 45 vs. GASB 75 Overview GASB 4515,16 GASB 7557'58'59'60 Effect Actuarial valuations required every 2 or Actuarial valuation required every 2 years for More current picture of actuarial 3 years(based on number of OPEB plan all OPEB plans,with optional alternative liability. members);with optional alternative measurement method if fewer than 100 plan measurement method if fewer than 100 members. plan members. No single discount rate is required when Requires single discount rate that reflects(l)a Improves consistency, an employer contributes less than ARC long-term rate on plan assets to the extent they comparability and transparency but has some plan assets. are projected to always be sufficient to cover of OPEB liability reporting. projected payments,and(2)a municipal bond (lower)rate for the years when plan assets are Long-term liability is more not projected to cover projected payments.The accurately stated. projection must be based in part on whether the employer has a policy and practice to make its benefit payments. Only"net OPEB obligation"required Net OPEB Liability(NOL)reported on the face Financial reporting of OPEB on face of balance sheet.Unfunded of the balance sheet.NOL equals actuarial liabilities parallels GASB 68 for liability(UAAL)reported in plan notes accrued liability(TOL)minus market value of pension reporting. in CAFR(Comprehensive Amaral plan assets(FNP).NOL same as UAAL with Financial Report)or Audit. some technical differences. Provides for limited disclosures in Provides for more extensive disclosures in Improves transparency of OPEB financial statement notes and required financial statement notes and schedules.The liability reporting. supplementary information schedules. note disclosures include(1)an explanation of how and why the NOL changed from year to year,(2)a description of contribution requirements and how they are determined,(3) a statement of assumptions and other inputs used to measure,(4)detailed information about the discount rate used,and(5)NOL calculations with I%increases and decreases in medical trend rate and discount rate. Six acceptable actuarial cost methods Must use a single actuarial cost method(entre Improves consistency, age actuarial cost method). comparability,and transparency of OPEB liability reporting Permits a choice between open or Must use a defined closed period amortization Improves consistency, closed amortization periods. for expenses. comparability,and transparency of OPEB liability reporting "SuntmamoLStatementNo.. 5 Accountim�,and Financial Reporhn rby Employers Postern lo�,ment 13enc1tts Ott er fhan ..... r P p.. Pensions."Governmental Accounting Standards Board.June 2004 56"Guide to finiflenmitation of G 513 Statements 4'and 45 on Other Postemployment Benefits." Governmenlal Ac(-ozariing Standards Board-2005. ;7« Summary of Statement No. 75:accounting and Financial Reporting for Postemployment Benefit-,Other Than Pensions." Governnnewal Accounting Standards Board.June 2015. 58"Overview of G.,VSB Statements?3,74.and 75."Millinran.March 2016 59" OPER Accountim-,Standards:GASB 74 and?5."Bartel Associates.July 2015. n"G 1513;\) routs.1 _«'_()1'f;l_3.._l.:_i.,l lo�.i--=lcc:ounting Standard(No. 5 ."Bartel Associates.July 2015. May 10, 2017 Marin County Civil Grand Jury Page 36 of 37 Marin's Retirement Health Care Benefits: The Monev Still Isn't There APPENDIX H: Example Financial Literacy Classes and Presentations Count- Financial Reporting and Budgeting Financial Management: for Nonfinancial Professionals Debt and Investment of Public Funds -.0 This course provides the tools for decision-makers,elected t.I,,F;,rt-t.,, officials,senior managers—other than accountants and auditors—who want to have an overview understanding of Elected and appointed officials make critical decisions on the government financial reporting.Participants discuss budgets, issuance and administration of debt,and the investment of financial statements and the audit,and at the 30,000'level public funds,but may have little experience or depth of what each of those is saying(or not saying!).Participants knowledge on this complicated subject.This class provides a should bring questions about terms or concepts they have foundation on understanding debt,debt capacity,options,and encountered as part of their interaction with county and county policy on debt It examines the fiduciary government financial reporting.The discussion reviews terms responsibilities of elected and appointed officials and then and definitions used with government financial reporting and explores investment of public fiords.An overview of prudent strategies on how to read financial statements and auditor investment policy,portfolio strategy and the role of the reports to identify critical information and understand what it investment advisors are also explored. means ... in plain English! From: Calilorrria Sh1ellSSOCi01i01R ofCotrrrtica• Rt tlree I Iealth Benefits Cixcunnstances That Would.Increase "I he Funding Issue Projected Costs „A • Medicare funding reductions or coat shifting • Unlike pensions,health benefits have not been pre-funded for a long,period of time • Unexpected new benefit recipients(from health benefit a?Most plan sponsors nationwide have not pre-funded cutbacks of other employers) health benefits either s Medical inflation worse than assumed;the actual future r,Currently very little investment income to help pay contributions will depend on future per capita health txnefits cost increases(health inflation) • Costs rise as more nnembersretire,and health inflation outpaces general inflation • Lower than expected investment returns;bigger impact • Pre-fielding contribution rates have been as plan assets grow calculated since 1994—but pre-funding started •This is not a complete list only recently GRS GRS From:"i�fichiaan State Ernpiovecs:Retiree health Actuarial Valuation."Gabriel Roeder Smith c&Company.30 Sep.2015 May 10, 2017 Marin County Civil Grand Jury Page 37 of 37 RESPONSE TO GRAND JURY REPORT FORM Town of Tiburon Report Title: Marin's Retirement Health Care Benefits Report Date: May 10, 2017 Public Release: May 17, 2017 Response By: Town of Tiburon FINDINGS • We agree with the findings numbered: Response not required. • We disagree with wholly or partially with the findings numbered: Response not required. RECOMMENDATIONS ■ Recommendations numbered 4, 6,7,8,9 have been implemented. ■ Recommendations numbered: NA have not yet been implemented, but will be implemented in the future. ■ Recommendations numbered: 1, 2, 3 require further analysis. ■ Recommendations numbered: 5 will not be implemented because they are not warranted or are not reasonable. Date: July 19. 2017 Signed: Number of pages attached: 3 EXHIBIT NO � 1 Office of the Town Manager , 2017 The Honorable Kelly Simmons Mr. Jay Hamilton-Roth, Foreperson Judge of the Marin County Superior Marin County Civil Grand Jury Count 3501 Civic Center Drive, Room 275 Post Office Box 4988 San Rafael, CA 94903 San Rafael, CA 94913-4988 Re: Response to Grand Jury Report Marin's Retirement Health Care Benefits Dear Honorable Judge Simmons and Mr. Hamilton-Roth: This letter explains in detail the Town of Tiburon's response to the Civil Grand Jury Report dated May 10, 2017. The Report directs the Town to respond to Recommendations Nos. 1-9. RECOMMENDATIONS Recommendation 1- Each agency should adopt a formal, written policy for contributions to its OPEB plan. Recommendation 2- Each agency's standard practice should be to consistently satisfy its formal, written OPEB contribution policy. Recommendation 3- Each agency's OPEB contribution policy and practice should support a projection under GASB 75 that its OPEB plan assets will be sufficient to make all projected OPEB benefit payments. Recommendation 4- Each agency that uses special reserve funds for Postemployment Benefits should transition to a trust meeting the criteria of GASB 75. Recommendation 5- Each term of service, elected or appointed officials of each agency should take a public agency financial class. Recommendation 6- Each agency should make its CAFRs, Audits, and GASB valuations more readily understandable by the general public. Recommendation 7- Each agency should ensure that all of its public financial presentations are more readily understandable and scheduled during hours convenient for the public. EXHIBITNO Recommendation 8- Each agency should have the following downloadable and text- searchable documents readily accessible on their website: the last five years of CAFRs/Audits and the last three actuarial reports. Recommendation 9- Before the next round of bargaining begins, each agency should prioritize the cost containment strategies to be used, including reducing or eliminating OPEB benefits for future employees. Town's Response to Recommendations: Response to Recommendation I: This recommendation requires further analysis. The Town of Tiburon recently issued a Request for Proposals for firms to serve as the Town's Municipal Advisor. We expect to work with the advisor on a number of issues related to the Town's finances, including an analysis of the Town's OPER liability. Based on that analysis, the Town may choose to develop a written policy. Response to Recommendation 2: This recommendation requires further analysis. As indicated in the Town's response to Recommendation 1, the Town may develop a written policy regarding OPEB in the future, but it does not have one at this time. If the Town chooses to develop a written policy regarding OPEB in the future, it would be with the intent that subsequent actions would be taken to comply with the policy. Response to Recommendation 3: This recommendation requires further analysis. As indicated in the Town's response to Recommendation 1, the Town may develop a written policy regarding OPEB in the future, but it does not have one at this time. Therefore, it would be premature to speculate as to what the provisions of that policy will be. Response to Recommendation 4: This recommendation has already been implemented. The Town of Tiburon established a trust, which meets the criteria of GASB 45, in October 2016. The current balance in that account is approximately $1,350,000, and the adopted Fiscal Year 2017-2018 Budget allocates an additional $290,000 for this purpose. Response to Recommendation 5: This recommendation will not be implemented because it is not warranted or is not reasonable. Elected and appointed officials routinely consider matters on a wide range of complex issues, including public finance matters. Although there may be a benefit for these officials to participate in a `class' on each of these issues, it is unreasonable to require, them to do so. On every issue considered by our elected and appointed officials, town staff strives to provide sufficient information for these individuals to make informed decisions. Response to Recommendation 6: This recommendation has already been implemented. CAF,R's. Audits and GASB valuations are complex financial documents. Town staff endeavors to snake them as understandable and readable as possible, and we do not have a record of residents voicing concerns on this matter. Response to Recommendation 7: This recommendation has already been implemented. Staff strives to make all presentations related to financial matters as understandable as possible. This typically includes a summary narrative as well as a simplified summary visual (PowerPoint)presentation at public Town Council meetings. These meetings are scheduled on weekday evenings to encourage participation by residents. Response to Recommendation 8: This recommendation has already been implemented. These documents can be found under the Administration & Finance page of the Town's website: http://townoftiburon.org/l 54/Administration-Finance. The page is one click away from the home page using the "Financial Reports" link in the mega-menu. All are downloadable and text-searchable. Response to Recommendation 9: This recommendation has already been implemented. As of Fiscal Year, 2013, the Town of Tiburon no longer offers post- employment medical benefits to new employees. The Tiburon Town Council reviewed and approved this response on 2017, at a duly noticed and agendized public meeting. If you have further questions on this matter, please do not hesitate to call. Very truly yours, GREG CHANIS Town Manager cc: Town Council Town Attorney 2016-2017 MARIN COUNTY CIVIL GRAND JURY TheBudget Squeeze How Will Marin Fund Its Public Employee Pensions? Report Date: May 25, 2017 Public Release Date: June 5, 2017 44 I i!i•i••i!i♦•!!#iilii•• • i• COUNTY OF MARIN �# EXHIBIT NO. s Marin County Civil Grand Jury .................... The Budget Squeeze How Will Marin Fund Its Public Employee Pensions? SUMMARY Twenty years ago, the only people who cared about public employee pensions were public employees. Today, taxpayers are keenly aware of the financial burden they face as unfunded pension liabilities continue to escalate. The Grand Jury estimates that the unfunded liability for public agencies in Marin County is approximately $1 billion. In 2012, the state passed the California Public Employees' Pension Reform Act of 2013 (PEPRA), which reduced pension benefits for new employees hired after January 1, 2013. PEPRA was intended to produce a modest reduction in the growth rate of these obligations but it will take years to realize the full impact of PEPRA. In the meantime, pension obligations already accumulated are undiminished. This report will explore several aspects of this issue: It's Worse than You Thought—While a net pension liability of$1 billion may be disturbing, the tike economic measure of the obligation is significantly greater than this estimate. The Thing That Ate My Budget—The annual expense of funding pensions for current and future retirees has risen sharply over the past decade and this trend will continue; for many agencies, it is likely to accelerate over the next five years. This will lead to budgetary squeezes. While virtually every public agency in Marin has unfunded pension obligations, some appear to have adequate resources to meet them, while many do not. We will look at what agencies are currently doing to address the issues and what additional steps they should take. The Exit Doors are Locked—Although there are no easy solutions, one way to reduce and eliminate unfunded pension liabilities in future years would be transitioning from the current system of defined benef t pension plans to defined contribution pension plans, similar to a 401(k). However, this approach is largely precluded by existing statutes and made impractical by the imposition of termination fees by the pension funds that manage public agency retirement assets. The Grand Jury's aim is to offer some clarity to a complex issue and to encourage public agencies to provide greater transparency to their constituents. The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? BACKGROUND Defined benefit pension plans are a significant component of public employee compensation. These plans provide the employee with a predictable future income stream in retirement that is protected by California Law.' However, the promise made by an employer today creates a liability that the employer cannot ignore until the f tune payments are due. The employer must contribute and invest funds today so that fixture obligations can be met when its employees retire. Failing to set aside adequate funds or investing in underperforming assets results in a funding gap often referred to as an urrfitnded pension liability. In order to be consistent with Governmental Accounting Standards Board's (GASB) terminology, this paper will refer to the funding gap as the Net Pension Liability(NPL). Actuaries utilize complicated financial models to estimate the Total Pension Liability, the present value of the liabilities resulting from pension plan obligations. Pension plan administrators employ sophisticated asset management strategies in an effort to meet targeted returns required to fund future obligations. Nevertheless, the logic behind pension math can be summed up in a simple equation: Total Pension Liability (TPL) -Market Value ofAssets (MVA) = The Net Pension Liability (NPL). The NPL represents the funding gap between the future obligations and the finds available to meet those obligations. Conceptually, it is an attempt to answer the question: "How much would it be necessary to contribute to the plan today in order to satisfy all existing pension obligations?" California is in the midst of an active public discussion about funding the retirement benefits owed to public employees. These retirement benefits have accumulated over decades and are now coming due as an aging workforce feeds a growing wave of retirements. The resulting financial demands will place stress on the budgets of public agencies and likely lead to reduced services, increased taxes or both. The roots of the current crisis in California stretch back to the late 1990's, when the California Public Employees Retirement System (CalPERS)held assets well in excess of its future pension obligations. The legislature approved and Governor Davis signed SB 400, which provided a retroactive increase in retirement benefits and retirement eligibility at earlier ages for many state employees. These enhancements were not expected to impose any cost on taxpayers because of the surplus assets held by the retirement fund. However, the value of those assets fell sharply as a consequence of the bursting of the dotcom bubble in the early 2000s and the Great Recession starting in 2008. (CalPERS suffered a 24% decline in the value of its holdings in 2009 alone.) Where there had been surplus assets, the state now has large unfunded liabilities. The following graph illustrates the problem. If you had invested $1,000 in 1999, when the decision to enhance retirement benefits was made, and received a return of 7.50% annually--a "Ca Iifolnia Public Employee emwit l aw(PER L)January_1.2016."CatPERS. ''Dolan,Jack."The Pension Gap."LATimes.com. 18 Sept.2016. June 5, 2017 Marin County Civil Grand Jury Page 2 of 61 The.Bztdget Squeeze:How Will Marin Fund Its Public Employee Pensions? commonly used assumption of California's pension fund administrators your investment would have grown to about $3,500 by the end of 2016. By contrast, had you received the returns of the S&P 500 over that same period, you would have only about$1,500, less than half of what had been assumed. ...................... ......... ....... ........... $1,000 Invested in the S&P 500 Index vs.Constant 7,5% Return Years 1999-2016 Invested in the S&P 500 index Invested at 52,500 7,5%Annual Return 2,000 50 2000 2004 2008 2012 2016 Year Last year, Moody's Investors Service reported that the unfunded pension liabilities of federal, state and local governments totaled $7 trillion.3 Closer to home, the California Pension Tracker, published by the Stanford Institute for Economic Policy Research,places the state's aggregate unfunded pension liability at just under$1 trillion.4 Marin has not been exempt. Recent published estimates put the NPL for public agencies in Marin at about$1 billion. This is confirmed by our research. The vast majority of employees of public agencies in Marin are covered by a pension plan. Three agencies administer these plans: ■ California Public Employees Retirement System (CalPERS), a pension fund with $300 billion in assets that covers employees of many public agencies, excluding teachers. ■ California State Teachers Retirement System (CaISTRS), a pension fund with $200 billion in assets that covers teachers. ■ Marin County Employees' Retirement Agency (MCERA), a pension fluid with $2 billion in assets that provides services to a number of Marin public agencies, the largest being the County of Marin and the City of San Rafael. 3 Kilroy,Meaghan,."Moody's:U.S.Pension Liabilities Moderate in Relation to Social Security,Medicare."Pension& Investments. 6 April 2016. 4 Nation,Joe"Pension_Tracker."Stan&W hstitnte for Economic Policy Research.Accessed 5 March 2017. June 5, 2017 Marin County Civil Grand Jury Page 3 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? The Grand Jury chose to address public employee pensions not because it is a new problem, but because it is so large that it is likely to have a material future impact on Marin's taxpayers, its public agencies and their employees. METHODOLOGY The Grand Jury chose to review and analyze the audited financial statements of the 46 agencies included in this report for the fiscal years (FY) 2012-2016 (see Appendix B, Methodology Detail). We captured a snapshot of the current financial picture as well as changes over this five- year period. In addition to reviewing net pension liabilities and yearly contributions of each agency, we collected key financial data from their balance sheets and income statements. We present all of this data both individually and in aggregate in the appendices. The agencies were organized into three main types: municipalities, school districts and special districts. The special districts were further separated into safety (fire and police) and all other, which includes sanitary and water districts and the Marin/Sonoma Mosquito and Vector Control District. Evaluating the agencies in this way provided insight into which types of agencies were most impacted by pensions. Comparing agencies within those designations provided further clarity on which agencies may need to take specific action sooner rather than later. The school districts, which have some unique characteristics, require a separate discussion. Financial Data and Standards The Grand Jury analyzed data from the Comprehensive Annual Financial Reports (CAFR), Audited Financial Reports and actuarial reports from the pension fund administrators. The Grand Jury analyzed the annual reports for each agency for the five fiscal years 2012 through 2016. A listing of the financial reports upon which the Grand Jury relied is presented in Appendix A, Public Sector Agencies. Additional scrutiny was paid to the fiscal years 2015 and 2016 due to reporting changes required by the Governmental Accounting Standards Board (GASB)'5 described in detail later in this report. For further information, see Appendix C. The Grand Jury interviewed staff and management from selected public agencies and selected pension fund administrators. The Grand July reviewed current law related to pensions. Our investigation was to determine only the pension obligations of each agency. The Grand Jury "GASB 68."Governmental Accounting Standards Board. June 5, 2017 Marin County Civil Grand Jury Page 4 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? did not attempt to analyze the details of individual pension plans for any of the public agencies. The Grand Jury did not analyze the mix of pension fiord investments; the investments for each public agency are managed by the appropriate pension fund according to standards and objectives established by that fiend as contracted by their customers. The Grand Jury did not investigate other employee benefits such as deferred compensation or inducements to early retirement. Financial Data Consistency The following agencies did NOT publish audited financial reports for FY 2016 in time for the Grand Jury to include those financial data in this report: ■ City of Larkspur ■ Town of Fairfax ■ Central Marin Police Authority The lack of a complete set of financial data for the fiscal years under investigation is reflected in this report in the following ways: The financial tables below include an asterisk (*) next to the name of agencies for which financial data is missing. Table cells with data which is Not Available are marked as N/A. Summary financial data totals do not include data for missing agencies for FY 2016. Percentages presented are calculated only with available data. One agency, the Central Marin Police Authority (CMPA),presents other complications. The predecessor agency of CMPA, the Twin Cities Police Authority (TCPA), was a Joint Powers Authority of the City of Larkspur and the Town of Corte Madera. Subsequent to the publication of the TCPA FY 2012 audit report, a new Joint Powers Authority was created consisting of the former TCPA members plus the Town of San Anselmo. Thus, a strict comparison of financial condition over the full five year term of this report is not possible. The FY 2012 audit report for TCPA is included in the CMPA statistics as the predecessor agency. June 5, 2017 Marin County Civil Grand Jury Pagc 5 of 61 The Budget Squeeze:How Will Maria Fund Its Public Enaplo_yee Pensions? DISCUSSION It's Even Worse than You Thought The Governmental Accounting Standards Board (GASB) establishes accounting rules that public agencies must follow when presenting their financial results. The recent implementation of GASB Statement 68 requires public agencies to report NPL as a liability on the balance sheet in their audited financial statements beginning with the fiscal year ended June 30, 2015.6 Prior to this accounting rule change, agencies only reported required yearly contributions to pension plans on the income statement, but NPL was not reflected on the balance sheet. The new method of reporting has provided greater transparency into the future impact of pension promises on current agency financials. The addition of NPL as a liability on the balance sheet of government agencies has resulted in dramatic reductions to most agencies' net positions. The net position (assets minus liabilities, which is referred to as net worth in the private sector) is one metric used to evaluate the financial health of an organization. In the private sector, when net worth is negative, a company is considered insolvent, which is a signal to the investment community of potential financial distress. During the course of our research, the Grand Jury discovered many agencies that now have negative net positions following the addition of NPL to their balance sheets. We will discuss the possible implications of this new reality in the section entitled The Thing That Ate My Budget. The calculation of the NPL involves complex actuarial Modeling including many variables. Specific to each agency are the number of retirees, the number of employees, their compensation, their age and length of service, and expected retirement dates. Also included in the evaluation are general economic and demographic data such as prevailing interest rates, life expectancy and inflation. Actuaries base their assumptions on statistical models. But these assumptions can change over time as economic or demographic conditions change, which make regular updates to actuarial calculations essential. The total of all present and future obligations is calculated based on these assumptions. A discount rate is then applied to calculate the present value of the obligations and account for the time value of money. This calculation yields the Total Pension Liability (TPL). Put simply, the total pension liability is the total value of the pension benefits contractually due to employees by employers. Agencies are required to make annual contributions to the pension plan administrator. A portion of the yearly contributions is used to make payments to current retirees and a portion is invested into a diversified portfolio of stocks, bonds,real estate and other investments. The investments are accounted for at market value (i.e. the current market price rather than book value or acquisition price.) In the calculation of NPL, the value of this investment portfolio is referred to r"G!.S.B 68."Governmental Accounting Standards Board 7 See Appendix C June 5, 2017 Marin County Civil Grand Jury Page 6 of 61 The Budget Squeeze:Holy Will Marr Fund lis Public Employee Pensions? as Market Value of Assets (MVA). Consequently the NPL = TPL - MVA. The net pension liability is simply the difference between how much an entity should be saving to cover its future pension obligations and how much it has actually saved. Although the NPL calculation depends on many variables, it is extremely sensitive to changes in the discount rate, the rate used to calculate the present value of future retiree obligations.8 The discount rate has an inverse relationship to the net pension liability (i.e. the higher the discount rate, the lower the NPL). GASB requires pension plan administrators to use a discount rate that reflects either the long-term expected returns on their investment portfolios or a tax-exempt municipal bond rate., It is common practice for government pension administrators to choose the higher discount rates associated with the expected return on their investment portfolios. Choosing the higher discount rate produces a lower NPL, which requires lower contributions from agencies today with the expectation that investment returns will provide the balance. While a portfolio mix that contains stocks and other alternative assets might produce a higher expected return, these portfolios are inherently more risky and will experience significantly more volatility,potentially leading to underfunding of the pension plans. Until recently, the three pension administrators (CaIPERS, Ca1STRS and MCERA) that manage the assets on behalf of all of Marin's current employees and retirees used discount rates between 7.50% and 7.60%. Prolonged weak performance in financial markets has resulted in the long- term historical returns of pension funds falling below the discount rate. For example, Ca1PERS 20-year returns dropped to 7.00% following a few years of very poor investment performance, falling under the 7.50% discount rate.10 In response, CalPERS announced in December 2016 that it would cut its discount rate to 7.00% over the course of the next three years.1' CaISTRS will cut its rate first to 7.25% and then to 7.00%by 2018.12 In early 2015, MCERA cut its discount rate from 7.50%to 7.25%. As noted before, a lower discount rate results in a higher NPL. A higher NPL leads to increasing yearly contributions. So you see, it's worse than you thought. But keep reading, because it may be even worse than that. Discount rates may yet be too high even at the new, lower 7.00-7.25% range. At this point, it is helpful to provide some historical context. The risk-free rate,13 typically the US 10-Year Treasury note, yielded 2.37% as this report is written. (Real-time rates are available on Bloomberg.com.14) US Treasury securities are considered risk free because the probability of 8"Measuring Pension Obligations."American Academy ofActuaries Issue Brief. November 2013,pg I 9"GASB 68 Government Accounting Standards Board 16 Gittelsohn,John."CalPERS Earns 0.6%as Long-Tenn Returns Trail Fund_s:T:ar_uet."Bloomberg.com. 18 July 2016. 11 Pacheco,Brad and Davis,Wayne and White,Megan."CalPERStol.-mver Discount Rate to Sc\cn Ilercait O\cl the Ncvt Thrce Years."CaIPERS.ca.gov. 21 Dec.2016. 12 Myers,John."California Teacher Pension Fund Lowers its Investnu.nt Predictions.Scndin a Bi ,ger Invoice to State Lawmakers."LATimes.conn. 1 Feb.2017. 13"Risk Free Rate of Retzu�n."Investopedia.com .............. _._..r 14"Ti easury�Yields."Bloomberg com June 5, 2017 Marin County Civil Grand Jury Page 7 of 61 The Budget Squeeze:How Will Maria Fund Its Public Employee Pensions? default by the US government is considered to be zero. Investment returns in the range of 7.00% - 8.00%were attainable with little volatility in the past because the risk-free rate was much higher. Between 1990 and 2016,risk-free rates have declined substantially, by around six percentage points.15 Discount rates in public sector pension plans have not declined proportionally. The following chart illustrates how the public sector has failed to reduce its assumed rates of return in response to the decline in risk-free rates. Assumed investment returns of public and private retirement systems and risk-free returns _.. ..... . ..��._ _._.............. ........... ... ........................... ...... _..... ..... .... - ..-.......... ...........-.............. .................................................. ......................... ... ..............- —State-local average assumed return ` Private average assumed return 10-year"Reasury yield 12- 10 ti 0 A_ C U 6- 4- 2] 0 ........_. ......... .............. ,......................................................... .....................................................r.......... _.. ..r...... ...... ..... .... ....................... 1990 1998 2000 2005 2010 2015 Pension fund fiscal year From:"The Pension Simulation Project:_I low flublic Plan lnvcstment Risk Affects Funding and Contribution Risk_." Rockefellerinstitute. Accessed on 23 March 17.pg.3. In the aftermath of the 2008 financial crisis, central banks around the world engaged in the artificial support of lower interest rates through quantitative easing to boost global growth.16 Record-low interest rates followed, with interest rates on some sovereign debt even falling into negative territory. While easy monetary policy aided in spurring global growth, the prolonged period of low interest rates and weak investment returns has contributed to the dramatic underfimding of pension plans around the world. 15 Boyd,Donald J.and Yin,Yimeng."flora Public Pension Plan Inc.stm.ent Risk Affects Funding en.d,Conti ibuton Risk."The Rockefeller Institute of Government State University of Ncw York. Jan.2017. 16 Martin,Timothy W.and Kantchev,Georgi and Narioka,Kosaku."Era of Low_Inteicst Ratcs Ilammcis Millions ofPensions Around World." WSJ.cwn 13 Nov.2016. June 5, 2017 Marin County Civil Grand Jury Page 8 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Pension plans in the private sector have lowered their discount rates in tandem with declining yields in the bond market. The Financial Accounting Standards Board(FASB) is the accounting rule-maker for for-profit corporations. FASB takes the view that, because there is a contractual requirement for the plan to make pension payments, the rate used to discount them should be comparable to the rate on a similar obligation. FASB Statement 87 says, "...employers may also look to rates of return on high-quality fixed-income investments in determining assumed discount rates."17 The effect is that pension obligations in the private sector are valued using a much lower discount rate than those used in the public sector. We looked at the ten largest pension funds of US corporations. Based on their 2015 annual reports, the average discount rate on pension assets was 4.30%.18 A significant body of research written by economists, actuaries and policy analysts has been devoted to the topic of whether discount rates used in public sector pensions are too high. Some suggest that the FASB approach is more appropriate, others believe the risk-free rate should be used, while still others contend that the current approach is perfectly reasonable. The Grand Jury cannot opine on which is the best and most accurate approach. Our research can only illuminate the financial impact of lower discount rates on Marin County agencies. An additional reporting requirement of GASB 68 is the calculation of the NPL using a discount rate one percentage point higher and one percentage point lower than the current discount rate in order to show the sensitivity of the NPL to this assumption. The current financial statements reflect the following rates, which, due to the recent discount rate reductions noted above, are already outdated: Pension Fund Discount Rate + 1 Percentage Point -1 Percentage Point Ca1PERS 7.50% 8.50% 6.50% Ca1STRS 7.60% 8.60% 6.60% MCERA 7.25% 8.250/0 6.25% Because of this new disclosure requirement, the Grand Jury compiled the NPLs of the agencies at a discount rate range of between 6.25% - 6.60%. The individual results are presented in Appendix E; the total amount for the Marin agencies included in this report is $1.659 billion. In this discussion, we have focused on the risk of lower rates of return, but there is a possibility that investment returns could exceed the discount rates assumed by the pension administrators. 17 ,Statement of Financial Accountin�_,Standards No, 87.Emplm ers:_Accouniim-, for Pension"Financial Accounting Standards Board.paragraph 44. 18 See Appendix r June 5,2017 Marin County Civil Grand Jury Page 9 of 61 The Budget Squeeze:How Will Maria Fund Its Public Employee Pensions? However, this possibility appears to be unlikely in that it would constitute a dramatic reversal of a decades-long trend. (See graph on page 7.) If that occurred, the effect would be lower NPLs and lower required contributions by employers. Regardless of investment returns, employers would still be required to make some contributions. While the discussion of growing NPLs and lower discount rates may seem abstract, ultimately they lead to higher required contributions by public agencies to their pension plans. Because these payments are contractually required, they are not a discretionary item in the agency's budgeting process. Consequently, steadily increasing pension payments will squeeze other items in the budget. In the next section, we discuss the impact on Marin's public agencies' budgets. The Thing That Ate My Budget A budget serves the same purpose in a public agency as it does in a for-profit enterprise or a household. It is a statement of priorities in a world of finite resources. As growing pension expenses demand an increasing share of available funding, agencies must figure out how to stretch and allocate their resources. This budgetary conundrum is not unique to Marin. A recent article in the Los Angeles Times 19 discusses what can happen at the end stage of rising pension expenses. The City of Richmond has laid off 20% of its workforce since 2008 and projects pension expenses rising to 40% of revenue by 2 02 1. The explosion of pension expenses played a key role in three California cities that have filed for bankruptcy protection since 2008: Vallej0,20 Stockton,21 and San Bernardino.22 Several factors played a role in these California bankruptcies. In the case of Vallejo, booming property tax revenues during the real estate bubble led city officials to offer generous salary and benefit increases. Property taxes plummeted after a wave of foreclosures during the financial crisis and city officials could not cut enough of the budget to meet obligations. In particular, the city's leadership was unable to negotiate cuts to pension benefits. This lack of flexibility forced Vallejo into bankruptcy. Further threats of litigation from CalPERS during the bankruptcy process kept the City from negotiating cuts to pension benefits as part of its bankruptcy plan. Despite exiting bankruptcy, Vallejo remains on unstable financial footing. Stockton and San Bernardino have similar stories: overly generous salary and benefits offered during boom times, some fiscal mismanagement (i.e. ill-timed bond offerings, failed redevelopment plans, etc.) followed by the inability to cut benefits when revenues declined. 19 Lin,Judy."Cutting Jobs.strect repairs,library books to kccp up with p cnsion cost,."Los Angeles Times 6 Feb.2017. 20 Hicken,Melanie."Once bankrupt,Vallejo still can't A oid its p i eypensions."Cv2.can 10 March 2014. 21 Stech,Katie."Stockton Calif To Exit Bankruptcy Proicctirnl..A\�cdnuday." IVSJ.com 24 Feb.2015. 22 Christie,Jim "Judge Confirms Said Bernardino.C�iIitoinm's Plan to Exit Bankruptcy."Reuters.cona 27 Jan 2017. June 5, 2017 Marin County Civil Grand Jury Page 10 of 61 The Bztdget Squeeze:How Will Marin Fund Its Public Employee Pensions? In budgeting for pension expense, agencies have two types of contributions to consider: the Normal Cost and the amortization of the NPL. The Normal Cost is the amount of pension benefits earned by active employees during a fiscal year. h1 addition, agencies must make a payment toward the NPL. A pension liability is created in every year the fund's investments underperform the discount rate. The liability for each underfiinded year is typically amortized over an extended period, which may be as long as 30 years. While the passage of PEPRA has reduced the Normal Cost somewhat, the payments needed to amortize the NPL have been rising and will continue to rise in the coming years. This trend will only be exacerbated by the recent decisions of Ca1PERS and CaISTRS to lower their discount rates. In this section, we will discuss the stress this is placing on the budgets of Marin public agencies. Revenues of public agencies come from defined sources, including property taxes, sales taxes, parcel taxes, assessments and fees for services. Cash flow may be supplemented by the issuance of general obligation bonds,but these require repayment of principal along with interest. The budgeting process of public agencies is not always transparent. Although final budgets are made public, the choices made along the way---specifically, which spending priorities did not make it into the final budget are usually not disclosed. In 2016, the Marin/Sonoma Mosquito and Vector Control District commissioned a study of the district's financial situation over a projected ten-year time frame, which concluded: In addition to the basic level of incurred and approved expenditures modeled.., the District has long term pension liabilities. Budgets have been reduced in recent years, but without additional revenues, the District would be./brced to implement severe cutbacks in services and staff ng.23 The report concludes that expenses will exceed revenues beginning in FY 2018,with a deficit widening through FY 2027, the final year of the study, and that the district's reserves will be exhausted by FY 2024. The Grand Jury commends the district for taking the responsible step of investigating its future financial obligations. We believe that a long term budgeting exercise whether done internally or by an outside consultant should be completed and made public by every agency every few years. The Grand Jury chose several balance sheet and income statement items to provide context in calculating the relative burden that pension obligations placed on each agency. We felt a more 23 Cover letter from NBS to the Board of Trustees and Phil Smith,Manager,Marin/Sonoma Mosquito Vector Control District dated November 9,2016. June 5, 2017 Marin County Civil Grand Jury Page 11 of 61 The Budget Squeeze:How Will Morin Fund Its Public Employee Pensions? meaningful analysis could be gleaned from examining ratios rather than absolute numbers. For example, the $48 million dollar pension contribution that the County made in 2016 might sound less shocking when presented as 8% of the county's revenues. The County's $203 million NPL might be perceived as extraordinary, but not necessarily so when presented with a balance sheet that held $400 million in cash. We focused on two metrics: 1) The percentage of revenue spent on pension contributions each year over a five-year period, and 2) The percentage of NPL to cash on the balance sheet to for fiscal years 2015 and 2016. The first metric was an attempt to answer the question of how much of an agency's budget is spent on yearly pension contributions. The second metric addressed the question of whether an agency had financial resources to pay down pension liabilities in order to reduce their future yearly contributions. The recent announcements of discount rate reductions at both CalPERS and CaISTRS will lead to increases in NPL, resulting in increasing contributions for their participating agencies. As CalPERS and CaISTRS have not yet implemented the discount rate reductions, the financial statistics we have used in the following discussion do not reflect these pending increases and, therefore, somewhat understate the budgetary impact. Given the wide scope of public missions, responsibilities and funding sources of the agencies investigated in this report, it is not easy to generalize about the consequences of budgetary shortfalls for individual agencies. However, we found similarities among agencies with similar missions. School Districts School districts share many characteristics: They are included in a single pool(i.e., identical contribution rates for all districts) for both CaISTRS and CalPERS; they have similar missions and similar financial structures and are, therefore, homogeneous. This is the only category where the agencies contribute to two pensions administrators: CaISTRS for certificated employees and CalPERS for classified staff. Both CaISTRS and CalPERS place eligible school-district employees into a single pool for purposes of determining the annual required contribution. Consequently, we see that pension contributions as a percentage of revenue are fairly consistent across districts. June 5, 2017 Marin County Civil Grand Jury Page 12 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? FY FY FY FY FY School District 2016 2015 2014 2013 2012 Bolinas-Stinson Union School District 6.2%° 5.1% 5.3% 4.4% 5.0%° Dixie Elementary School District 5.8% 5.`7% 5.2% 5.4% 5.3% Kentfield School District 5.4% 5.2% 4.9°l0 4,9°l0 5.1% Larkspur-Corte Madera School District 5.5% 5:3% 5.0°fo 4 6i% 5.0% Marin Community College District 5.8% 6.0% 4 7%n 3. % `3.6°fib: Marin County Office of Education 3. % 2:9% 2.$% 2.8% 2z7% Mill Valley School District Novato Unified School District 4 4%" 4,4°Io 4 % 4 g% 4.,.'89 o Reed Union School District 5.2% 4, % 4 7% 4 bplo' 4°/0 Ross School District 5.0% Ross Valley School District 5,5% 5.1% San Rafael Ci Schools -Elementar 4 6°�0;- 4 4°/v 4, 4 tY y . ., San Rafael City Schools -High School 5.3% 4$% 4-4% 4 % 4 4 Sausalito Marin City School District 3 4% 3 7% 13, = 3 0°/a 2 7% Shoreline Unified School District 49°�0'- 5 0o/fl: 5.0%" 3 f%o I°lo Tamalpais Union High School District 5.7% 4 °10 4 9% 5.0% Total 5.0% 4.7% 4 SQia 310 '43%; <5% 5%- 10% R 10%- 15% E> 15% Pension contributions as a percentage of revenue for Marin's school districts have increased from 4.3% in FY 2012 to 5.0% in FY 2016. Increases will continue over the next five years,but at a much higher rate. CaISTRS contribution rates are governed by law and,under AB 146924, contribution rates are scheduled to increase from 10.73% of certificated payroll in FY 2016 to 19.10% in FY 2021 (and remain at that level for the next 25 years), an increase of 78%.25 For classified employees, the CalPERS contribution rates will be increasing from 11.847% of payroll in FY 2016 to 21.50% in FY 2022, an increase of over 81%.26 This implies that school districts will be spending 9% of their revenues on pension contributions within the next five years. 24 AB-1469 State teachers retirement Defined Benefit Program: tunduu,' California Legislative Informative 2'"CaISTRS Fact Slim CaISTRS 201-1 Funding Plan."CaISTRS.July 8,2014. 26,CalPERS Schools Pool Actuarial valuation aS 01'Junr 30.2015."CaIPERS.April 19,2016. June 5, 2017 Marin County Civil Grand Jury Page 13 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? School districts are already running on tight budgets, with the average Marin school district expenses having slightly exceeded revenues in fiscal year 2016. Thus, increases in outlays for pensions will necessitate service reductions, tax increases or a combination of the two. Many of the school districts have General Obligation (GO)bonds outstanding, which contributes to their precarious financial position. With the recent addition of NPL to their balance shects, most of the school districts have negative net positions. As discussed earlier, in the private sector a negative net position is considered a sign of financial distress and possible insolvency. When we asked whether the rating agencies had expressed concerns or threatened to downgrade their existing debt, the responses from several districts were that they had no difficulties refinancing their bonds and had all maintained their high credit ratings. The Grand July found this particular issue perplexing. A healthy balance sheet is essential in the private sector to attaining a high credit rating. We learned, however, that this is not how rating agencies view a Marin County agency's credit worthiness. In addition to looking at a particular agency's financials, the rating firms also evaluate the likelihood of getting paid back in the event of a default from other resources, more specifically Marin taxpayers. GO bonds have a provision where, in the event of a shortfall or default on a bond, the agency can direct the tax assessor to increase property taxes to satisfy the obligation.27 Consequently, a rating agency is really assessing the ability to collect directly from Marin County taxpayers. Given Marin's relatively high home values and incomes, collection from Marin taxpayers is a safe bet in the eyes of the rating agencies, thereby making it completely defensible to assign a AAA rating on a GO bond from an agency with a negative net worth. Thus, taxpayers, and not bondholders, bear the risk of an individual agency's insolvency. Another concern for school districts is their reliance on parcel taxes to supplement revenue. Most Marin school districts have parcel taxes, which run as high as 20% of revenue in some districts and average 9.7%.28 This important source of revenue is subject to periodic voter approval and requires a two-thirds vote to pass. Historically,parcel tax measures have seldom failed in Marin. In November 2016, both Kentfield and Mill Valley had ballot measures to renew existing parcel taxes. Kentfield failed to get the required two-thirds and Mill Valley's measure barely passed. This raises two concerns: 1) that parcel tax measures will face greater opposition if voters believe the money is going for pensions; and 2) that districts' already tight finances will be substantially worsened if this source of finding is reduced. 27"California Dcht Issuance Pi nnci I Iandhoo6."California Debt and Investment Advisory Commission.pg 134. 28 Sources:parcel tax data from ed-data.org,revenue data from audit reports(see Appendix A) June 5, 2017 Marin County Civil Grand Jury Page 14 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Parcel Tax Revenue K-12 School District as % of Total Revenue Bolinas-Stinson Union School District 13.3% Dixie Elementary School District 7.6% Kenttield School District 20.0% Larkspur-Corte Madera School District 11.9% Mill Valley School District 20.0% Novato Unified School District 4.4% Reed Union School District 8.6% Ross School District 8.9% Ross Valley School District 12.5% San Rafael City Schools - Elementary 4.4% San Rafael City Schools -High School 7.0% Sausalito Marin City School District 0.0% Shoreline Unified School District 6.2% Tamalpais Union High School District 10.2% Average 9.3% Given these budget pressures, it is difficult to imagine how the impact of increasing pension contributions will not ultimately be felt in the classroom. Municipalities & the County The County and the 11 towns and cities in Marin County (we will refer to them collectively as the "municipalities")have broad responsibilities. Within this group, however, there are important differences. Populations differ widely, from Belvedere at about 2,000 to San Rafael at 57,000. In some municipalities,police and/or fire protection services are provided by a separate agency. In others they fall under the municipality's auspices. These factors lead to some variation among this category. Unlike school districts, municipalities (and special districts, which we will discuss next) have individualized schedules for amortization of their NPLs. Although we can make overall statements about recent and expected increases in pension expense, there can be substantial variation among jurisdictions.. The following table shows the pension contribution as a percent of revenue for each municipality over the past 5 years. June 5, 2017 Marin County Civil Grand Jury Page 15 of 61 The Budget Squeeze:How Will Matin Fund Its Public Employee Pensions? FY FY FY FY FY Municipality 2016 2015 2014 2013 2012 City of Belvedere 52% 5.7% City of Larkspur* N/A 3.8%' 5.0% 6.0% 7:0% City of Mill Valley 6.4% 5.5% 5.2% 5.1% 6.3% City of Novato 5.4% 5.2% 9.1% I' 8.4% 8.3% City of San Rafael City of Sausalito 6.6% 9.7% 6.9% 101Q I2 3° : County of Marin 7.9% 6.9% 8.1% 10 5%a Town of Corte Madera 7.7% 7.8% 8.5% Town of Fairfax* N/A 13 9 9.8% 1Q 5%; 9.8% Town of Ross I4`S°/a 2 2°l0 3 9°/0 7.2% 13 0°l0 Town of San Anselmo2'4°to 4.3%0 7.2% Town of Tiburon 6.6% 3 810 4 1% 4:7°10 5.8% Total 8.8% 7.9% 8.9% l3 6'O1© 1Q 7°0' K <5% 5%- 10% 9'110%- 15% M> 15% In FY 2016, the City of San Rafael and the Town of Ross had the highest contribution percentages, 19.2% and 14.5% respectively. The City of San Rafael's contribution rate has been consistently high for the last five years. MCERA, San Rafael's pension administrator, projects that contributions will remain high with only a slight decline over the next 15 years.29 In contrast, the Town of Ross had a relatively low contribution percentage through FY 2014 & FY 2015. The contribution rate would have remained low in FY 2016 but for a $1 million voluntary contribution to pay down its NPL. Nevertheless, the Town's pension administrator (CalPERS), projects that pension contributions will rise sharply from FY 2014/FY 2015 levels over the next five years.30 29`'Actuarial Valuation Rcport as of June 30,2016."Marin County Employees'Retirement Association.1).15. 3{),,Annual Valuation Report as of June 30.2015."California Public Employees'Retirement System.Reports for Town of Ross- Miscellaneous Plan,Town of Ross-Miscellaneous Second Tier Plan,Town of Ross-PEPRA Miscellaneous Plan&Town of Ross-Safety Plan June 5, 2017 Marin County Civil Grand Jury Page 16 of 61 The Budget Squeeze:Hovv Will Marie Fund Its Public Employee Pensions? Although Fairfax has not yet produced an audit report for FY 2016, we expect its required contributions will experience an increase over the next four to five years after which they are projected to decline somewhat over the following decade.31 Belvedere and San Anselmo had the lowest contribution percentages of 4.2% and 2.4% respectively. Examining NPL as a percentage of cash (see Appendix E), Tiburon and Ross were in the best position, with Tiburon having 25.2% of NPL to cash and Ross having 33.7% of NPL to cash. The Grand Jury recommends that cash-rich agencies evaluate their reserve policies and discuss whether a contribution to pay down the NPL (as Ross did in FY 2016), should be prioritized. Conversely, San Rafael and Fairfax (based on FY 2015) are also in the worst position based on our balance sheet metric with a NPL that is more than double both municipalities' respective cash positions. The County is in a strong financial position, spending 7.9% of its revenues on pension contributions. The County of Marin's balance sheet has assets of nearly $2 billion,yearly revenues of over$600 million and cash of over$400 million. When viewed in the context of its ample financial resources, the County does not currently appear to be financially strained by its pension obligations. Furthermore, the county's significant assets and ample cash cushion should protect it from further pressure caused by increasing pension contributions. In 2013, the County made a significant extra contribution ($30 million) to pay down its NPL and could do the same in future years to offset increasing contribution requirements from MCERA. Special Districts The Special Districts illustrate the stark differences among agencies. The safety districts (police and fire), out of all the agencies, spent the highest percentage of their revenues on pension contributions. The primary reason that safety agencies have high pension expenses relative to other agencies is that they are inherently labor intensive, with some of the most highly compensated public employees with the highest pension benefits (in terms of percentage of compensation for each year of service) and the earliest retirement ages. Other than some equipment, such as a fire engine, the bulk of the revenues are spent on employee compensation and benefits. 31 "Annual Valuation Report as of June 30,2015."California Public Employees' Retirement System.Reports for Town of Fairfax-Miscellaneous First Tier Plan,Town of Fairfax-Miscellaneous Second Tier Plan,Town of Fairfax-PEPRA Miscellaneous Plan,Town ofFairfax-PEPRA Safety Plan,Town of Fairfax-Safety First Tier Plan&Town of Fairfax-Safety Second Tier Plan June 5, 2017 Marin County Civil Grand Jury Page 17 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? FY FY FY FY FY Safety District 2016 2015 2014 2013 2012 Central Marin Police Authority* N/A Kentfield Fire Protection District 4 Novato Fire Protection District Ross Valley Fire Department 91% Southern Marin Fire Protection District 3 9°la 5.4% 12:.'6% 8°l0 13 %a Tiburon Fire Protection District Total <5% 5%- 10% IRA' 10%- 15% M> 15% The highest pension to revenue rates were in the Tiburon, Kentfield and Novato fire districts, which each spent more than 17% of their revenues on pension payments in FY 2016. Using the metric of NPL to cash on the balance sheet, the Ross Valley Fire Department had the highest ratio of nearly 600% (see Appendix E). However, Ross Valley Fire spent only 11.7% of its revenues on pension contributions in 2016. The ratios for Tiburon Fire in FY 2015 and FY 2016 are inflated by the voluntary contributions it made, totaling approximately $2 million over those two years. Sanitary districts as a group appeared to be in the best financial condition based on both balance sheet and income statement data. Sanitary districts tend to have few employees and own significant assets that require capital investments to maintain. A capital-intensive business requires cash,but not many employees. Consequently, their pension plans appear not to be a financial burden on the agencies. June 5. 2017 Marin County Civil Grand Jury Page 18 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Utility District FY2016 FY2015 FY2014 FY2013 FY2012 Central Marin Sanitation Agency 5.5% "","Al3 %a' 7.6% 7.4% Las Gallinas Valley Sanitary District 2.3% 2.3% 2.3% 3.6%: x"'3`.5%0 Marin Municipal Water District 9.2% 7.5% 6.5% 5.7% 6.4% Marin/Sonoma Mosquito &Vector Control 1 12% 1Ck2% 11 Marinwood Community Services District 5.5% 5.2% 8.0%° 8.7% North Marin Water District 4:6% '16% , 3:9%0 8.6% 6.5% Novato Sanitary District 1 5% 0.9% 4 1 8% Richardson Bay Sanitary District 2.b% 49 Ross Valley Sanitary District 2`3°0 2_.0% 3.8% Sanitary District#5 Tiburon-Belvedere 2,9% 3:5°1° 4 9°to Sausalito Marin City Sanitation District 3 3% 0°�0 3:4°1a 2.4% Tamalpais Community Services District 5.9% 5.9% 6.4% 5.8% 5.1% Total 6.5% 6.4% 6.0%° 55% 6.1% 1 G 5% 5%- 10% 1/ 10%- 15% > 15% Sanitary District#5 had a very high level of pension contributions at over 25% for each of the two most recent years. However, this is the result of large voluntary contributions. Further, the district had cash equal to three times its NPL. The Novato Sanitary District stood out as being in particularly good financial condition in that it spends less than 2% of its revenues on pension contributions and has a NPL that is 18% of its cash position. The real question for Marin County taxpayers is not whether we are in dire straits because of pensions for now, most of the agencies appear to be able to meet their pension obligations but which services are going to be squeezed, which roads aren't going to be paved, which buildings aren't going to be updated because of growing pension contribution requirements. Alternatively, how many more parcel taxes, sales tax increases and fee hikes will be required because pension contributions continue to spiral upwards? In the next section, we will discuss possible alternatives to the current system of retiree pay. The Exit Doors Are Locked In 2011, Governor Jerry Brown announced a 12-point plan for pension reform. This plan included raising the retirement age for new employees, increasing employee contribution rates, eliminating "spiking" (where an employee uses special bonuses, unused vacation time and other pay perquisites to increase artificially the compensation used to calculate their future retirement benefit) and prohibiting retroactive pension increases. Most of these proposals were incorporated June 5, 2017 Marin County Civil Grand Jury Page 19 of 61 The Budget Sgiteeze:How Will Marin Fund Its Public Employee Pensions? into the Public Employees Pension Reform Act of 2013 (PEPRA).32 One that was not was Governor Brown's proposal for"hybrid"plans for new employees. The hybrid proposal consisted of three components: I. New employees would be offered pensions but with reduced benefits requiring lower contributions by both employer and employee. 2. New employees would also be offered defined contribution plans. 3. Most new employees would be eligible for Social Security. (Currently, employees not eligible for Ca1PERS or Ca1STRS -- generally,part-time, seasonal and temporary employees -- are covered by Social Security.) The Governor's proposal was for each of these three components to make up approximately equal parts of retirement income. (For those not eligible for Social Security, the pension would provide two-thirds and the defined contribution plan one-third.) It may be helpful at this point to pause and define our terms. A traditional pension—like the plans covering public employees in Marin—is a defined benefit(DB) plan. Under a DB plan, the employee is eligible for a pension that pays a defined amount, typically a formula based on retirement age, years of service and average compensation. Because the benefit is defined, the contributions by employer and employee will be uncertain; they, along with the investment returns on the contributed assets, must be sufficient to fund the defined benefit. Under a defined contribution (DC) plan, such as a 401(k), both employer and employee make an annual contribution. Typically, the employee chooses a portion of pre-tax salary that is contributed to the plan and the employer matches a percentage of the employee's contribution. The funds are placed in an investment account and the employee chooses how the fiends are invested (usually from a range of choices established by the employer). What is undefined is the value of the account at the time the employee retires as this depends upon the total of contributions and the rates of return over the life of the account. By law, 401(k)plans are "portable"; they permit the employee to move the account to an Individual Retirement Account (IRA) should he/she change employers. The primary difference between DB and DC plans is who assumes the risk of lower investment returns and greater longevity. In a DB plan, it is the employer; in a DC plan, it is the employee. Furthermore, a DB plan poses some risk to the employee: If the employer does not make the required contributions, the pension administrator will be required to reduce pension benefits to the retirees of the employer. In November 2016, Ca1PERS announced that it would cut benefits for the first time in its history. Loyalton, California was declared in default by CalPERS after failing to make required contributions towards its pension plans. The Ca1PERS board voted to 32"Twelve Point Pension Reform Plan."Governor oJthe State of California.27 Oct.2011. June 5, 2017 Marin County Civil Grand Jury Page 20 of 61 The Budget Squeeze:How Will Marin Farad Its Public Employee Pensions? reduce benefits to Loyalton retirees.33 More recently, in March of 2017, CalPERS voted again to cut benefits for retirees of the East San Gabriel Valley Human Services Agency when it began missing required payments in 2015.34 Over the past several decades,private industry in the US has moved decidedly toward DC and away from DB. In 1980, 83% of employees in private industry were eligible for a DB plan (either alone or in combination with a DC plan).35 By March 2016, the Bureau of Labor Statistics reported that among workers in private industry, 62% had access to a DC plan while only 18% had access to a DB plan. This compares with workers in state and local government, where 85% had access to DB plans and 33% to DC plans (some workers are eligible for both).36 Eliminating the risk of an underfunded plan is the primary reason that private employers have been moving away from DB plans,but there are several others. In a traditional DB plan, the employer is responsible for managing the assets held in trust for future retirees. This leads to costs for both investment management and oversight of their fiduciary duties. In addition, as the economy has shifted from manufacturing toward service and high technology, new firms have sprung up that did not have unionized work forces or legacy DB plans and chose the simplicity and lack of risk of DC. The shift from DB to DC may also reflect the preference of younger employees for the portability and transparency of DC.37 In public employment, which has fewer competitive pressures and a higher percentage of workers represented by unions, these same trends have not occurred, leaving more DB plans in place. Under PEPRA,new employees hired after January 1, 2013 are still eligible for DB plans,but at a lower percentage of average compensation and a later retirement age (generally two years later). These important steps reduced the annual cost of employee pensions but still leave the employer with the administrative cost and fiduciary duty. While PEPRA prohibits retroactive increases, which prevents the state from making the same mistake it made in the late 1990's, investment performance that is significantly below target could again produce a large unfunded liability. It is argued by some 38 that everyone would benefit from a more secure retirement; rather than taking DB plans away from public employees, they should be made available to all workers. 33"Call'ER—S Finds the Citv of Lovalton in Default for_Non-Payment of Pension Obligation."CaIPERS.ca.gov 16 November, 2016.---- -------- 34 Dang,Sheila"CaIPLRS Cats Pension Benefits fior Last San Glbrid Valley l Iuman Services."Institutionalinvestor.com 16 March,2017. 35"Pell4ions: 1980 vs Today"Nen-York Timer,3 Sep.2009 36"National Coanyensation Survey."Bureau of Labor Statistics,March 2016 37 Barbara A.Butrica and Howard M.lams and Karen E.Smith&Eric J.Toder."The Disappc iumDetrned Buictrt Pension and Its Potential hvpact on the Retirement Incomes of Baby Boomers."Social Secrn�i I Bulletin, Vol.69,No.3,2009 38 Aaronson,Mel and March,Sandra and Romain,Mona "Everyone Should Il ave a Defincd Benefit Pension."Ner-v York ........... ...._._. Teacher. 17 Feb.2011. June 5, 2017 Marin County Civil Grand Jury Page 21 of 61 The Bztdget Squeeze:How Will Morin Fund Its Public Employee Pensions? While this argument has some appeal, it ignores the fact that US commerce has adopted DC plans as the de facto standard. Further, as DB plans for public employees exhibit significant unfunded liabilities, it stands to reason that DB programs for private employees with comparable benefits would suffer the same financial difficulties. It is easy to understand why taxpayers, who have to manage the risks of their own retirements using DC plans, would object to guaranteeing the retirement income of public employees with DB plans. In a February 2015 nationwide poll, 67% of respondents favored requiring new public employees to have DC instead of DB plans.39 A California poll in September 2015 put that number at 70%.40 As noted above, the changes to state retirement law under PEPRA did not make DC or hybrid plans an option for public employees. While existing DC plans were grandfathered by PEPRA, any agency proposing to offer a new DC or hybrid plan in place of an existing DB plan would face a series of hurdles: ■ According to the County Employees Retirement Law of 1937, the County of Marin would require specific legislative approval to amend the law to allow the introduction of a DC or hybrid DC/DB plan. ■ For other public agencies, PEPRA did not create any approved DC or hybrid models; although neither did it explicitly prohibit them. Any changes by agencies that are participants in CalPERS would require approval of the CalPERS board. It appears likely that CalPERS would disapprove such a request under PEPRA section 20502, as an impermissible exclusion of a class of employees. (Some differentiations by job classification, for example are permissible.) In addition, negotiations with the relevant collective bargaining unit would need to take place, a requirement that is made explicit in PEPRA section 20469. An additional obstacle is termination fees. If a CalPERS participating agency chooses to terminate its DB plan, it must make a payment to CalPERS to satisfy any unfunded liability. This fee would be calculated by discounting the liability using a risk-free rate (see Glossary for definition), which might be four-to five percentage points lower than the rate normally used to calculate the NPL. The actual calculation of the termination liability is done at the time of the termination, but in its annual actuarial valuation reports CalPERS provides two estimates intended to describe the range in which the liability is likely to fall. While CalPERS has used a 7.50% discount rate to calculate NPL for active plans, it uses a combination of the yields on 10-year and 30-year 39"Pension Poll 2015 Topline.R.cstiilt,"Reason-Rupe Public Opinion Survey,6 February 2015 �o<i-- .--.......__....-._..._.__._........._..... ......._... Californians and Their Government,"Public Polic.p Instituite of California Stateivide Survey,September 2015 June 5, 2017 Marin County Civil Grand Jury Page 22 of 61 The Budget Squeeze:How Will Mai-in Fund Its Public Employee Pensions? Treasury securities—which respectively yield 2.19% and 3.02% as this report is written—to calculate the termination liability. In its most recent actuarial reports, it provided estimates of agencies' termination liability using discount rates of 2.00% and 3.25%. To illustrate, at June 30, 2015 (reports for fiscal 2016 were not yet available as this was written), the City of Larkspur had a NPL of just over $9 million,but Larkspur's termination liability was estimated at between $46.8 million and $64.1 million, or between five and seven times its NPL. This range is very typical. Here, again, we should define our terms. When a pension plan is terminated, the claims of all eligible participants are satisfied, either through a lump-sum payment or through the purchase by the plan of annuities that pay all benefits to which the participants are entitled. The plan is then Liquidated; no further benefits accrue to employees and retirees and no further contributions are required from the employer. A pension plan freeze is different from a termination. A plan can be frozen in a variety of ways. A plan might terminate all future activity so that any benefits earned prior to the freeze are still due but no further benefits are earned by any employees. Alternatively, a pension plan might choose to keep all terms in place including benefit accruals for future service and required future contributions for existing employees and retirees but enroll all new hires in DC plans. Other variations are possible. Currently, CalPERS does not distinguish between a termination and a freeze. If an employer were to propose converting new employees to a DC plan, CalPERS would treat it as a termination because it is impermissible for a CalPERS plan to differentiate between groups of employees on the basis of when they were hired. Absent legislative action, an agency that wanted to freeze its current DB plan and make all new employees eligible for a DC-only or hybrid plan would make an application to CalPERS. The CalPERS board would conclude that excluding employees from the existing DB plan on this basis was impermissible and declare the plan terminated, triggering the imposition of a fee five to seven times the amount of the NPL. For an agency that wishes to take better control of its financial position, this would be a counter-productive endeavor. June 5,2017 Marin County Civil Grand Jury Page 23 of 61 The Budget Squeeze:Ho iv Will Maria Fund Its Public Employee Pensions? CONCLUSION The net pension liability of Marin's public agencies cannot be made to disappear. It represents benefits earned over several decades by public employees and constitutes a legal and ethical obligation. Some progress has been made to reduce growing liabilities (such as PEPRA's anti- spiking provisions, which are the subject of a lawsuit currently under appeal at the state Supreme Court).41 However, the vast bulk of this liability will need to be paid. The recommendations proposed by the Grand Jury are intended to achieve three objectives: 1. Avoid further increasing the pension liabilities of Marin's public agencies by shifting from DB to DC-only and/or hybrid retirement plans. 2. Increase the rigor and extend the planning horizon of fiscal management by Marin's public agencies. 3. Improve the depth and quality of information provided to the public. In the course of its investigation, the Grand Jury found two models that may help achieve these objectives, one from right next door and one from across the country. In September 2015, Sonoma County empanelled the Independent Citizens Advisory Committee on Pension Matters consisting of seven members, "none of whom are members or beneficiaries of the County pension system."42 The panel conducted an investigation and published in June 2016 a comprehensive and highly readable report with recommendations for containing pension costs, public reporting and improving fiscal management.43 In 2012,New York State Office of the State Controller introduced a Fiscal Monitoring System, which is intended to be an early-warning system for financial stress among the state's municipalities and school districts. It takes financial data from reports filed by the agencies and economic and demographic data to produce scores to identify fiscal stress. The OSC also offers advisory services to assist those agencies in developing plans to alleviate their financial stress.44 We believe that these two models could be helpful as Marin's public agencies come to terms with the fiscal realities of the years ahead. One final point: As bad as this report may make things look, they will almost certainly look worse in the next few years because of the lowering of discount rates by pension administrators. We believe that these actions by CalPERS, Ca1STRS and MCERA are well founded and prudent, but they will result in increases to the NPLs of every agency, necessitating higher payments in 41 Marin Association of Public Employees v.Marin County Employees Retirement Association 42« Independent Citizeuss Advisory Committee on Pension Matters."Caunty ofSouoma. 43"Report of Independent Citizens Advisory Committee on Pension Matters."County o/Sonoma. June 2016. 44"Three Years of the Fiscal Stress Monitoring System,"New York State Office of the State Controller,September 2015 June 5, 2017 Marin County Civil Grand Jury Page 24 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? the near term to amortize the higher NPI-s. The result will be that budgets, already under pressure, will be squeezed further. FINDINGS Fl. All of the agencies investigated in this report had pension liabilities in excess of pension assets as of FY 2016. F2. A prolonged period of declining global investment returns has led pension plan assets to underperform their targeted expected returns. F3. MCERA, CalPERS and Ca1STRS have lowered their discount rates, which will result in significantly higher required contributions by Marin County agencies in the next few years. F4. If pension plan administrators discounted net pension liabilities according to accounting rules used for the private sector, increases in required contributions would be vastly larger than those required by the recent lowering of discount rates. F5. Most Marin County school districts have a negative net position due in part to the addition of net pension liabilities to their balance sheets. F6. The required contributions of Marin school districts to Ca1STRS and CalPERS will nearly double within the next five to six years due to legislatively (Ca1STRS) and administratively (CalPERS) mandated contribution increases. F7. Pension contribution increases will strain Marin County agency budgets, requiring either cutbacks in services, new sources of revenue or both. F8. The private sector has largely moved away from defined benefit plans primarily due to the risk of underfunding, offering instead defined contribution plans to its employees. F9. Taxpayers bear most of the risk of Marin County employee pension plan assets underperforming their expected targets. F10. Retirees' pension benefits would be reduced if an agency was unable to meet its contribution obligations. June 5, 2017 Marin County Civil Grand Jury Page 25 of 61 The Budget Squeeze:How Will Marin Find Its Public Employee Pensions? RECOMMENDATIONS R1. The Marin Board of Supervisors should empanel a commission to investigate methods to reduce pension debt and to find ways to keep the public informed. The panel should be comprised of Marin citizens with no financial interest in any public employee pension plan and should be allowed to engage legal and actuarial consultants to develop and propose alternatives to the current system. R2. Ca1STRS and MCERA should provide actuarial calculations based on the risk-free rate as Ca1PERS does in its termination calculations. R3. Agencies should publish long-term budgets (i.e., covering at least five years), update them at least every other year and report what percent of total revenue they anticipate spending on pension contributions. R4. Each agency should provide 10 years of audited financial statements and summary pension data for the same period(or links to them) on the financial page of its public website. R5. For the purposes of transparency, MCERA, Ca1STRS and CalPERS should publish an actuarial analysis of the effect of Cost of Living Allowances (COLA) on unfilnded pension liabilities on an annual basis. R6. Elected state officials should support legislation to permit public agencies to offer defined contribution plans for new employees. R7. Elected state officials should support legislation to implement a statewide financial economic health oversight committee of all public entities similar to that implemented in NY. R8. Public agencies and public employee unions should begin to explore how introduction of defined contribution programs can reduce unfunded liabilities for public pensions. REQUEST FOR RESPONSES Pursuant to Penal code section 93 3.05, the grand jury requests responses as follows: From the following governing bodies: ■ Bolinas-Stinson Union School District(R3, R4, R8) ■ Central Marin Police Authority (R3, R4, R8) ■ Central Marin Sanitation Agency(R3, R4, R8) ■ City of Belvedere (R3, R4, R8) ■ City of Larkspur (R3, R4, R8) ■ City of Mill Valley (R3, R4, R8) ■ City of Novato (R3, R4, R8) ■ City of San Rafael (R3, R4, R8) ■ City of Sausalito (R3, R4, R8) Jule 5, 2017 Marin County Civil Grand Jury Page 26 of 61 The Budget Squeeze:Hoiv Will Marin Fund Its Public Employee Pensions? ■ Marin Community College District (R3, R4, R8) ■ Dixie Elementary School District (R3, R4, R8) ■ Kentfield Fire Protection District(R3, R4, R8) ■ Kentfield School District (R3, R4, R5, R8) ■ Larkspur-Corte Madera School District (R3, R4, R8) ■ Las Gallinas Valley Sanitary District (R3, R4, R8) ■ Marin County (RI, R3, R4, R8) ■ MCERA (R2, R5, R8) ■ Marin County Office of Education (R3, R4, R8) ■ Marin Municipal Water District(R3, R4, R8) ■ Marin/Sonoma Mosquito & Vector Control (R3, R4, R8) ■ Marinwood Community Services District (R3, R4, R8) ■ Mill Valley School District(R3, R4, R8) ■ North Marin Water District (R3, R4, R8) ■ Novato Fire Protection District(R3, R4, R8) ■ Novato Sanitary District(R3, R4, R8) ■ Novato Unified School District(R3, R4, R8) ■ Reed Union School District(R3, R4, R8) ■ Richardson Bay Sanitary District(R3, R4, R8) ■ Ross School District(R3, R4, R8) ■ Ross Valley Fire Department(R3, R4, R8) ■ Ross Valley Sanitary District(R3, R4, R8) ■ Ross Valley School District(R3, R4, R8) ■ San Rafael City Schools - Elementary (R3, R4, R8) ■ San Rafael City Schools - Secondary (R3, R4, R8) ■ Sanitary District# 5 (R3, R4, R8) ■ Sausalito Marin City Sanitation District (R3, R4, R8) ■ Sausalito Marin City School District(R3, R4, R8) ■ Shoreline Unified School District(R3, R4, R8) ■ Southern Marin Fire Protection District(R3, R4, R8) ■ Tamalpais Community Services District (R3, R4, R8) ■ Tamalpais Union High School District (R3, R4, R8) ■ Tiburon Fire Protection District(R3, R4, R8) ■ Town of Corte Madera (R3, R4, R8) ■ Town of Fairfax (R3, R4, R8) ■ Town of Ross (R3, R4, R8) ■ Town of San Anselmo (R3, R4, R8) ■ Town of Tiburon (R3, R4, R8) The governing bodies indicated above should be aware that the comment or response of the governing body must be conducted in accordance with Penal Code section 933 (c) and subject to the notice, agenda and open meeting requirements of the Brown Act. June 5, 2017 Marin County Civil Grand Jury Page 27 of 61 The Budget Sgiteeze:How Will Matin Fund Its Public Employee Pensions? The following individuals are invited to respond: ■ California State Assemblymember Marc Levine (R6, R7) ■ California State Senator Mike McGuire (R6, R7) ■ California Governor Edmund G. Brown, Jr. (R6, R7) ■ CalPERS Chief Executive Officer Marcie Frost(R5, R8) ■ Ca1STRS Chief Executive Officer Jack Ehnes (R2, R5, R8) Note:At the time this report was prepared information was available at the websites listed. Reports issued by the Civil Grand Jury do not identify individuals interviewed.Penal Code Section 929 requires that reports of the Grand Jury not contain the name of any person or facts leading to the identity of any person who provides information to the Civil Grand Jury.The California State Legislature has stated that it intends the provisions of Penal Code Section 929 prohibiting disclosure of witness identities to encourage full candor in testimony in Grand Jury investigations by protecting the privacy and confidentiality of those who participate in any Civil Grand Jury investigation. June 5, 2017 Marin County Civil Grand Jury Page 28 of 61 The Budget Squeeze:Hou) Will Marin Fund hs Public Employee Pensions? GLOSSARY 401(k): A retirement savings plan sponsored by an employer. A 401(k) allows workers to save and invest a piece of their paycheck before taxes are deducted. Taxes aren't paid until the amounts are withdrawn.45 Actuary: A professional specially trained in mathematics and statistics that gathers and analyzes data and estimate the probabilities of various risks, typically for insurance companies.46 California Bill SB 400: A California statute 47 passed by the legislature and signed by then Governor Grey Davis in 1999 retroactively raising the pension benefits for public employees. California Public Employees' Retirement System (CalPERS): An agency in the California executive branch that serves more than 1.7 million members in its retirement system and administers benefits for nearly 1.4 million members and their families in its health program.48 California State Teachers' Retirement System: A pension fund in California established in 1913 to manage the retirement benefits of public school educators. Cost of Living Allowance (COLA): An annual increase in pension benefits granted to retirees, typically based upon the rate of inflation in a specific geographic area. Comprehensive Annual Financial Report (CAFR): A report issued by a government entity that includes the entity's audited financial statements for the fiscal year as well as other information about the entity. The report must meet accounting standards established by the Governmental Accounting Standards Board (GASB).,,49 Audited financial reports may be referred to as "audit reports" or"financial statements"by various public agencies. Defined Benefit (DB): A type of retirement plan in which an employer/sponsor promises a specified payments (or payments) on retirement that is predetermined by a formula based on factors including an employee's earnings history, tenure of service and age.50 Defined Contribution (DC): A type of retirement plan in which the employer, employee or both contribute on a regular basis into an account where the fiends may be invested. At retirement, the employee receives a benefit whose size depends on the accumulated value of the funds in the retirement accounts' Discount Rate: The interest rate used in present value calculations. 4' ,What is a 401(kAT'WSJ.com. Accessed 25 March 2017. 46 Bodie,Zvi and Merton,Robert C.Finance.Upper Saddle River.Prentice-l-ialI Inc. 1998.Pg.223 47 Senate Bill No,400,Calilbrnia Law 48.< CaLP>✓RS._Stor}%."CaIPFRS.Accessed March 2017. 49 . Comprehensive Annual Financial Report(CAFR�."Municipal Securities IZulen�okin9 Boned. 50 Bodie,Zvi and Merton,Robert C.Finance.Upper Saddle River.Prentice-Nall Inc. 1998. Pg.50. '' Ibid. June 5, 2017 Marin County Civil Grand Jury Page 29 of 61 The Budget Squeeze:How Will Mari»Fzmd hs Public Eniplo}%ee Pensio7is? Financial Accounting Standards Board (FASB): "Established in 1973, the Financial Accounting Standards Board (FASB) is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP).1152 Fiduciary Duty: A legal obligation of one party to act in the best interest of another. Typically, a fiduciary is entrusted with the care of money or other asset for another person.53 Fiscal Year (FY): A term of one year, typically beginning on the 1 st day of July extending through the last day of June. Governmental Accounting Standards Board (GASB): "The independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local governments. Established in 1984 by agreement of the Financial Accounting Foundation (FAF) and ten national associations of state and local government officials, the GASB is recognized by governments, the accounting industry, and the capital markets as the official source of generally accepted accounting principles (GAAP) for state and local governments."54 Hybrid Plan: A pension plan that contains both defined benefit and defined contribution Options. Independent Retirement Account (IRA): Retirement accounts that permit and encourage savings by individuals through the pre-tax investment of wages and salaries. Such investment accounts accumulate returns that are not taxed until withdrawals at a later date. Market Value of Assets (MVA): The value of accumulated assets at the current value of individual assets as opposed to the original cost. Marin County Employees Retirement Association (MCERA): A pension find in Marin County, CA that manages the retirement assets and benefits of several municipalities and public agencies. Net Pension Liability (NPL): The total pension obligation of an organization for its employees less the value of assets held to fund those benefits. Normal Cost: The present value of future pension benefits earned during the current accounting period. 52 About the FASB,Financial Accounting Standards Board. 53"FIdUClaly Duty"Busmessdictionarj.xoan. 54"FACTS about GASB."Governmental Accomaing Standards Board. 2012-2014. June 5,2017 Marin County Civil Grand Jury Page 30 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Present Value (PV): The current worth of a future sum of money or stream of cash flows given a specified rate of return.55 Public Employees Pension Reform Act of 2013 (PEP.RA): An act of State Legislature, which imposes certain limits on pension benefits for public employees hired after 2013. Quantitative Easing: A monetary policy whereby a central bank, such as the Federal Reserve, creates money to fund the purchase of government securities - e.g. US Treasury Bonds - with the objective of stimulating the economy. Risk-Free Rate: A discount rate considered to have no risk of default over time, typically a United States Treasury obligation backed by the full faith and credit of the United States. Sensitivity Analysis: An analysis of the impact of different discount rates on unfunded liabilities. Typically, the discount rates used in the analysis are minus 1% and plus I% of the stated discount rate of the liability. Termination Fee: The fee levied by a pension fund against an agency for terminating the contract between the two parties. The fee amounts to the difference between the total liabilities calculated at the nominal discount rate versus the risk-free rate, typically a mix of 10-year and 30-year US Treasury bonds. The rationale for the fee is that as no additional contributions will be forthcoming from the agency to fund existing liabilities, a basket of securities without risk is required to prevent reductions of benefits. Time value of money: The core principal of finance holds that money in hand today is worth more than the expectation of the same amount to be received in the future. First, money may be invested and earn interest, resulting in a larger amount in the fixture. Second, the purchasing power of money may decline over time due to inflation. Third, the receipt of money expected in the future is uncertain.56 Total Pension Liability: The total obligation of an agency to fund pension benefits for active and retired employees. Unfunded Actuarial Accrued Liability (UAAL): The excess of the Actuarial Accrued Liability (AAL) over the actuarial value of assets.57 ss Bodie,Zvi and Merton,Robert C.Finance.Upper Saddle River.Prentice-}fall Inc. 1998.Pg.89. 56 Bodie,Zvi and Merton,Robert C.Finance.Upper Saddle River.Prentice-Hall Inc. 1998.Pg.82. 57"Other Postemploy_ m ment Benefits n Pla -Lan�tir tgctm Sun v of GASB Stanenis No.43 and No.-15."Governmental Accounting Standards Board. June 5,2017 Marin County Civil Grand Jury Page 31 of 61 The Budget Squeeze:How Will Marin Fund Its Public Eny)loyee Pensions? Appendix A: Public Sector Agencies The table below contains the list of public agencies, school districts and municipalities investigated in this report, the corresponding pension fund(s) for each and the source of audited financial statements used in this report. For each agency, the five fiscal years from 2012 through 2016 were examined. All agencies reviewed in this report use the calendar dates of July 1 through June 30 for the fiscal year. (Note: San Rafael City Schools is a single district, but it produces separate financial statements for the elementary schools and the high schools. This report presents them separately.) . Municipality Pension Audit Reports Funds County of Marin MCERA Comprehensive Annual Financial Report wwvv.marincounty.org City of Belvedere Ca1PERS Audited Financial Report www.ci.bclb City of Larkspur* CalPERS Audited Financial Report wvvw.ci.larkspw,ca.us City of Mill Valley CalPERS Audited Financial Report City of Novato CalPERS Comprehensive Annual Financial Report www.novato.oru City of San Rafael MCERA Comprehensive Annual Financial Report www.cit)�ofsanrafacl.or�� City of Sausalito CalPERS Comprehensive Annual Financial Report www.ci.sausalito.ca.us Town of Corte Madera CAPERS Comprehensive Annual Financial Report w��-•w.ci.cortc-madcra.ca.us Basic Financial Statements and Independent Auditor's Report Town of Fairfax* CalPERS Nvww.town-of-fairfax.or- Town of Ross CalPERS Financial Report w�.vw.townofross.or� Town of San Anselmo CalPERS Annual Financial Report \a-ww.townoisanansclmo.or' Town of Tiburon CAPERS Annual Financial Report ��-w��.townoftiburon.or� June 5, 2017 Marin County Civil Grand Jury Page 32 of 61 The Budget Squeeze: How Will Morin Fund Its Public Employee Pensions? Appendix A: Public Sector Agencies (cont'd) School District PensionFunds Audit Reports Bolinas-Stinson Union School CaISTRS Audit Report July 1,2012-June 30,2016 District CalPERS www.bolinas-stinson.ort1 College of Marin CaISTRS Financial Statements CalPERS w��wv.mann.cdu Dixie Elementary School CASTRS Audit Report District CAPERS N wvw.dixicschool.com Kentfield School District CaISTRS Audit Report CAPERS littpJ/wwvv\-.1centfielciscliools.or�-1!paaes/Kentfield School District Larkspur-Corte Madera School CaISTRS Audit Report District CAPERS N wwv.lcroschools.or�4 Marin County Office of CASTRS Audit Report Education CalPERS wvv\.v.marinschools.or� Mill Valley School District CaISTRS Audit Report CalPERS www.mvschools.oru, Novato Unified School District CASTRS Audit Report CAPERS wwiw.nusd.ori� Reed Union School District CaISTRS Audit Report CAPERS wvvw.rcedschools.ora Ross School District CaISTRS Audit Report CalPERS www.rossbears.oi Ross Valley School District CaISTRS Audit Report CalPERS �a�ww rossv .............. qrg San Rafael City Schools- CaISTRS Audit Report Elementary CalPERS vti�ww.sres,org San Rafael City Schools-High CaISTRS Audit Report School CAPERS %vww.sres.ore Sausalito Marin City School CASTRS Audit Report District CalPERS w\vw.smcsd.or�i Shoreline Unified School CaISTRS Annual Financial District CAPERS wvvw.shorclincunified.or� Tamalpais Union High School CaISTRS Audit Report District CalPERS �eww.tamdisuict.or� June 5,2017 Marin County Civil Grand Jury Page 33 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Safety District Pension Audit Reports Funds Central Marin Police Twin Cities Police Authority(FY 2012) Authority* CaIPERS Financial Statements and Independent Auditor's Report littp ccntralmarinpoice.grg Kentfield Fire Protection CAPERS Basic Financial Statements District www.kentfieldfir�.org Novato Fire Protection District Ca1PERS Independent Auditor's Report www.novato.or� Basic Financial Statements Ross Valley Fire Department CalPERS aN- v.rossvallcyfirc.� rv_ Southern Marin Fire Protection MCERA Basic Financial Statements District 5p_u.thcnunarinf7rc.org Tiburon Fire Protection District CaIPERS Comprehensive Financial Report www.tiburonfirc.ore Utility District Pension Audit Reports Funds Central Marin Sanitation CalPERS Financial Statements and Independent Auditor's Report Agency www.crosa.us Las Gallinas Valley Sanitary CalPERS Comprehensive Annual Financial Report District www.lgvsd.or�� Marin Municipal Water District CalPERS Comprehensive Annual Financial Report ww�a�.marinwater.or�� Marin/Sonoma Mosquito& MCERA Basic Financial Statements Vector Control District WWW.msmosquito_com Marinwood Community CalPERS Basic Financial Statements Services District www.marinwood.or�� North Marin Water District MCERA Comprehensive Annual Financial Report wwNv.nmwd.com Novato Sanitary District CalPERS Comprehensive Annual Financial Report wv\,\v-.novatosan.com Richardson Bay Sanitary CalPERS Financial Statements District \Nw.richardsonbaysd.orr* ..._.._,..............._w. Basic Financial Statements Ross Valley Sanitary District CalPERS w».rvsd g Sanitary District#5 Tiburon- Ca1PERS Financial Statements Belvedere «,\vvv,.san15.o Sausalito Marin City Sanitation CalPERS Financial Statements and Independent Auditor's Report Districtw\a-w.saus<ilitomarincitvsanitarydistrict.com Tamalpais Community Services CalPERS Financial Statements and Independent Auditor's Report District www.1csd.us June 5, 2017 Marin County Civil Grand Jury Page 34 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Appendix B: Methodology Detail The Grand Jury collected data from the sources described above: over 200 audited financial reports alone published by the entities (see Appendix A). Multiple jurors participated in the collection and review of all financial data items according to the process and methods described above. The collected data were entered into spreadsheets to allow the Grand Jury to analyze relevant financial statistics. In order to assure a consistent interpretation of the financial data from these audited reports, and to ensure the correct transcription of the data to spreadsheets used for the analysis, multiple jurors participated in validation of each data item. In those cases where data was provided in separate portions of the report (i.e. a school district's Ca1PERS and Ca1STRS pensions reported separately), the Grand Jury performed the appropriate summations to aid in our analysis. In examining the audited financial reports of the public entities, the Grand Jury captured basic financial data from multiple fiscal years to determine the relative health of the entities with regard to pensions. Audited reports tend to have a similar structure, containing the following four major sections: ■ The Independent Auditors Report ■ Management's Discussion and Analysis (MD&A) ■ Basic Financial Statements ■ Notes to Financial Statements Specific financial data was retrieved from these sections as follows: Basic Financial Statements Total Revenue Revenues are taken from the Statement of Revenues, Expenditures and Changes in Fund Balances using the Total Governmental Funds column. Revenue used in this investigation includes both operating revenue and non-operating revenue. In some instances, non-operating revenue was stated net of interest expense. In those cases, the appropriate calculations were performed to reverse the reduction of non-operating revenue to provide a true total of revenue from all sources. Revenue totals were then reconciled with statistics provided in the Basic Financial Statements. In the case of municipalities, which have diverse sources of revenue, we used revenue as stated in the MD&A section of the relevant audit report. June 5, 2017 Marin County Civil Grand Jury Page 35 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Total Expenses Total Expenses came from the Statement of Activities. Expenses cited in this investigation include both operating expenses and non-operating expenses. Financial data used in this investigation are derived primarily from balance sheets and statements of revenue and expenses. In the case of municipalities, which have diverse expenses, we used expenses as stated in the MD&A section of the relevant audit report. Total Assets The total assets of each entity were collected. Total assets include both short-term assets, long- term assets and capital assets. Cash Position Cash positions were considered to include cash and cash equivalents, the standard method of reporting. Net Position Net position is the excess of total assets of an entity minus the total liabilities. In the instance where liabilities exceed assets, the net position is negative. Net Pension Liability The net pension liability is provided in the Notes section of the audit reports. Net Pension Liability Sensitivity, +1% The net pension liability sensitivity for+I% is provided in the Notes section of the audit reports. Net Pension Liability_ Sensitivity, -1% The net pension liability sensitivity for -I% is provided in the Notes section of the audit reports. These statistics are provided in the Notes section of the audit report in compliance with GASB 68 requirements. Pension contribution The total contribution for pensions is included in the Notes section of the audit reports. The Grand July chose to use pension contributions, rather than pension expense (a new GASB 68 requirement) for comparison purposes with older financial reports. Total pension contributions for municipalities were stated in at least three separate sections of the CAFR: as a contribution in the Notes section on pensions, in the table labeled"Contributions June 5, 2017 Marin County Civil Grand Jury Page 36 of 61 The Budget Squeeze:Hous Will Marin Fund Its Public Employee Pensions? subsequent to measurement date" and in the supplementary notes section. In most cases, the pension contribution was identical throughout the report. In some cases there were small differences among the values, and in one case (Town of Fairfax) there were material differences. In all of these cases the Grand Jury chose to use the "Contributions subsequent to measurement date" number and did not attempt to reconcile the differences. The County of Marin changed its pension contribution reporting methodology in 2015 due to GASB 68. Prior to FY 2015, the County reported its pension contributions with a one-year lag. (For example, the FY 2014 report showed contributions for FY 2013). The result was that FY 2014 pension contributions were not included in either the FY 2014 or FY 2015 CAFR. Accordingly, the Grand Jury obtained FY 2014 pension contributions directly from the County Department of Finance. To address the one-year lag in reporting, the Grand Jury chose to use the contributions made in FY 2013 as provided by the Department of Finance rather than the number reported in the audit reports for FY 2012 &FY 2013. An explanation of discount rates and present value calculations is presented as Appendix C, Discount Rate Primer. Termination Statistics Risk Free Liability of Termination CalPERS provides to its participating agencies on an annual basis the one-time contribution required for the entity to terminate the pension plan. Under those circumstances, which are rare, CalPERS is no longer able to rely upon annual contributions by the entity to fund retirees and current employees. CalPERS has determined udder these circumstances that the discount rate for a termination must be "risk-free." That is, CAPERS is not willing to assume the risk normally associated with investment of an entity's assets in a balanced portfolio. Accordingly, CalPERS will price the termination discount rate using a combination of the 10-year and 30-year US Treasury obligations. Neither CaISTRS nor MCERA provide a similar calculation. Derived Statistics The Grand Jury created several statistics from the basic financial data to assist in the evaluation of pension liabilities. Pension Contributions as a Percenta�ze of Revenue Net Pension Liabilitvas a Percentage of Cash June 5, 2017 Marin County Civil Grand Jury Page 37 of 61 The Budget Squeeze:Mow Will Morin Fund Its Public Employee Pensions? Net Pension Liabilitv as a Percentage of Assets Fiscal Year 2015 to Fiscal Year 2016 % Change in Net Pension Liabilities June 5, 2017 Marin County Civil Grand Jury Page 38 of 61 The Budget Squeeze.-How Will.Marin Fund Its Public Employee Pensions? Appendix C: Discount Rate Primer Calculating Present Value of an Annuitysg The calculation of the value of pension benefits offered to employees can be viewed simply as the present value of an annuity: how much should be paid for an investment at present to produce an expected payment stream in the future. The concept of present value is based on the idea that money has time value. For example, if an investor were offered$1 today or$1 in the future, the investor would choose the dollar today because it can be invested to earn interest and produce more than $1 in the future. When determining how much should be paid today for an investment that is expected to produce income in the fiiture, an adjustment, or discounting, must be applied to income received in the future to reflect the time value of money. The calculation of present value (PV) for one time period is: 1 PV = FV (1 + i)n Where: FV =Future value i = interest rate n=number of years Example: How much should an investor put into a savings account today, with a 5% expected return, in order to receive $100 in a year? 1 PV = 100 (1 + .05)1 PV = 95.24 Answer: $95.24 Expanding on this principle, the calculation of an annuity, which spans multiple years, follows: PVA = R 1 + R 1 + R 1 ....+R 1 (1+i)1 (1+i)2 (1+i)3 (1+i)71 58 Bnieggeman,William B.and Fisher,Jeffrey D.(2005)Real Estate Finance and Investments.New York,NY McGraw Hill. June 5, 2017 Marin County Civil Grand Jury Page 39 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Alternatively: 1 PVA = R t=1 Where: PVA =Present value of an annuity R=payment i = interest rate n =number of years Example: How much would an investor need to set aside today in order to receive $100 a year for five years if the interest rate was 5%? PVA = 100 1 + 100 1 + 100 1 +100 1 +100 1 (1+.05)1 (1+.05)2 (1+.05)3 (1+.05)4 (1+.05)5 Answer: $432.95 Example: If the interest rate was 10%? Answer: $379.08 This simple example illustrates how a higher discount rate results in a much lower required initial investment to meet a particular future need. June 5, 2017 Marin County Civil Grand Jury Page 40 of 61 The Budget Squeeze:How Will Marin Fuad Its Public Ennployee Pensions? Appendix D: GASB Primer The Governmental Accounting Standards Board (GASB), founded in 1984, is an independent, nonprofit, non-governmental regulatory body charged with setting accounting and financial reporting standards for state and local governments. Prior to its founding, accounting standards for all types of enterprises were set by the Financial Accounting Standards Board (FASB). In November 1994, GASB issued Statement 27, which established standards for accounting and financial reporting of pension benefits. Some of the key parts of GASB 27 were: ■ The employer's expense for pensions was equal to the annual required contribution (ARC) as determined by the actuary in accordance with certain parameters, including the frequency of actuarial valuations and the methods and assumptions used. ■ If the employer's actual contributions were different than the ARC, the accumulated difference plus interest was reported as the Net Pension Obligation in the employer's financial statements. ■ Actuarial trend information was reported as Required Supplementary Information (RSI) to the financial statements, including note disclosures to the RSI.59 In June 2012, GASB 68 extensively amended GASB 27: ® Net Pension Liability on the Balance Sheet— Government employers that sponsor DB plans will now recognize a net pension liability [on their] balance Sheet. ■ New Discount Rate—The discount rate can continue to be the expected long- term rate of return on plan investments where current assets plus future contributions are projected to cover all future benefit payments. However, plans where current assets plus future contributions are projected not to cover all future benefit payments must use a municipal bond rate to discount the noncovered payments. ® More Variable Pension Expense—Pension expense will now be based on the net pension liability change between reporting dates, with some sources of the change recognized immediately in expense and others amortized over years. Service cost, interest on net pension liability, and expected investment earnings as well as liability for any plan benefit change related to past service since the last reporting period must also be expensed immediately. '9 Findlav,Gary."GASB's Pension Accounting Standards:D6ja vu all over again.",PenSiO17s B Inviceylmenls,October 22,2012 Jure 5, 2017 Marin County Civil Grand Jury Page 41 of 61 The Budget Squeeze.-How Will Marin Fund Its Public Employee Pensions? ® Changes in actuarial assumptions and experience gains and losses must be amortized over a closed period equal to the average remaining service of active and inactive plan members (who have no future service) a much shorter than typical period. Investment gains and losses must be recognized in pension expense over closed 5-year periods. ■ Cost-sharing Employers (those in plans where assets are pooled and can be used to pay benefits of any employer in the pool) Report a Proportionate Liability— These employers will now report a net pension liability and pension expense equal to their proportionate share of the cost-sharing plan. ■ More Extensive Disclosures and Required Supplementary Information—More extensive note disclosures are required, including types of benefits and covered employees, how plan contributions are determined, and assumptions/methods used to calculate the pension liability. 60 GASB 68 was effective for fiscal years beginning after June 15, 2014, which means that FY 2014-2015 was the first year for which it was reflected in the financial statements of the agencies that are the subject of this report. G0"GASB Approves New Pension Accounting Standards.",Bartel Associalcs,LLC,August 5,2012 June 5, 2017 Marin County Civil Grand Jury Page 42 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Appendix E: Public Agency Balance Sheet Data FY 2016 MunicipalitiesAssets Cash Net Position NPL NPL 4% NPI,+1% NPL% NPL%of of Assets Cash City of Belvedere $10,054,000 $3,595,630 $5,678,000 $3,080,855 $5,057,618 $1,451,306 30.6% 85.7% City of Larkspur" N/A N/A N/A N/A N/A N/A N/A N/A City of Mill Valley $61,952,000 $17,919,732 $4,017,000 525,010,100 $42,044,314 S 10,993,085 40.4% 139.6% City of Novato $375,695,895 $59,936,536 $291,122,782 532,111,535 $54,651,732 513,464,873 8.5% 53.6% City of San Rafael $300,378,000 $66,009,979 S141,542,000 5142,323,127 $263,741,368 542,614,784 47.4% 215.6% City of Sausalito $93,777,974 $28,955,501 $27,987,699 $19,635,621 531,512,817 $9,872,158 20.9% 67.8% County of Marin $1,992,947,827 $408,896,116 $1,390,055,902 $203,688,484 $377,458,682 $60,988,969 10.2% 49.8% Town of Corte Madera $78,944,247 $15,323,517 $47,275,642 $14,263,877 $22,204,244 $7,732,353 18.1% 93.1% Town ofFairfax" N/A N/A N/A N/A N/A N/A N/A N/A Tom of Ross $19,557,803 $10,528,331 513,434,401 53,548,143 $5,793,448 $1,701,623 18.1% 33.7% Town of San Ansclnno $29,217,215 $6,606,250 $10,925,168 $5,299,442 $8,601,144 $2,573,504 18.1% 80.2% Town of Tiburon $63,662,493 $21,441,460 $52,944,160 S5,412,997 $10,066,334 52,805,016 8.5% 25.2% Totals $3,026,187,454 $639,213,052 51,984,982,754 S454,374,181 $821,131,701 $154,197,671 15.0% 71.1% School Districts Assets Cash Net Position NPI, NPL-1% NPI,+1% N1PL% NPL%of of Assets Cash Bolinas-Stinson Union School District $4,810,121 $2,828,769 $1,406,313 $3,039,017 $4,710,035 $1,649,952 63.2% 107.4% Dixie Elementary School District $32,522,470 $18,194,342 411,279,305 $18,296,623 $28,111,026 $10,138,805 56.3% 100.6% Kentfield School District $36,650,017 $16,899,110 -$6,602,777 513,427,307 520,538,517 $7,516,633 36.6% 79.5% Larkspur-Corte Madera School District $63,370,037 $6,262,719 -520,314,913 S 15,695,360 $24,040,435 $8,759,042 24.8% 250.6% Marin Community College District $297,031,000 $17,8.57,000 -55,569,000 545,723,000 $74,506,000 $24,466,000 15.4% 256.1% Marin County Office of Education $71,319,233 $44,767,583 $39,274,235 $21,263,747 $33,325,302 $11,236,462 29.8% 47.5% Mill Valley School District $90,032,772 $21,001,383 -S22,426,359 533,102,435 $50,864,259 $18,356,989 36.8% 157.6% Novato Unified School District $144,877,763 $29,605,956 -57,019,803 $60,585,951 $93,087,454 $33,570,412 41.8% 204.6% Recd Union School District $52,162,124 $10,224,426 -5650.1.50 517,787,987 $27,309,547 $9,873,631 34.1% 174.0% Ross School District $35,969,694 $4,473,827 57,390,298 $5,578,419 58,558,914 $3,101,035 15.5% 124.7% Ross Valley School District $64,424,216 $18,159,492 -S 13,237,323 $20,577,136 1 $31,530,697 S11,472,647 31.9% 113.3% San Rafacl City Schools-Elementary $123,144,010 $50,000,124 -$15,195,483 533,037,132 $50,443.688 $28,569,426 26.8% 66.1% San Rafael City Schools-High School 5109,218,754 $54,037,304 417,227,292 528,004,648 $43,124,257 $15,436,855 25.6% 51.8% Sausalito Marin City School District $27,255,480 $4,092,629 52,360366 53,502,310 $5,426.137 $1.903,098 12.8% 85.6% Shoreline Unified School District $22,411,328 57,043,760 -S2374,726 510,009,533 515,448,543 $5,488,410 44.7% 142.1% Tamalpais Union High School District $203,339,657 $42,522,717 57,712,183 557,699,928 S88,683,304 $31,946,196 28.4% 135.7% Totals 51,378,538,676 5347,971,141 -$63,753,736 $387,330,533 S599,708,115 S223,485,593 28.1% 111.3% June 5, 2017 Marin County Civil Grand Jury Page 43 of 61 The Budget Squeeze:Hoiv Will Marin Fund Its Public Employee Pensions? Appendix E: Public Agency Balance Sheet Data (cont'd) Special Districts Assets Cash Net Position NPL NPL-l% NPL+1% NPL% NPL% Safety of Assets of Cash Central Marin Police Authority* N/A N/A N/A N/A N/A N/A N/A N/A Kentfield Fire Protection District $9,789,704 $3,507,855 52,947,286 $4,310,797 $7,233,383 $1,913,867 44.0% 122.9% Novato Fire Protection District S35,403,303 $15,930,859 510,305,465 517,430,800 $32,301,320 $5,219,178 49.2% 109.4% Ross Valley Fire Dcparttnent $3,008,924 $1,338,192 -$6,955,625 57,800,931 $13,770,507 $2,905,473 259.3% 582.9% Southern Marin Fire Protection District $13,349,870 $9,102,154 $7,896,367 56,033,143 $11,180,122 $1,806,460 45.2% 66.3% Tiburon Fire Protection District $11,652,619 $5,564,687 55,444,495 $5,232,050 $10,007,964 $1,314,991 449% 94.0% Total $73,204,420 535,443,747 $19,637,9881 $40,807,721 574,493,296 S13,159,969 55.7%1 115.1% Special Districts o NPL% NPL% Assets Cash Net Position NPL NPL-1% NPL+]/o Utility of Assets of Cash Central Marin Sanitation Agency $106,391,299 $14,974,538 $45,625,458 $6,643,602 $11,141,784 $2,929,830 6.2% 14.6% Las Gallinas Valley Sanitary District $81,480,447 $20,316,117 $63,883,215 $2,098,373 $3,571,571 $882,077 2.6% 10.3% Marin Municipal Water District $460,030,200 $16,947,252 $243,058,604 $69,753,895 $96,972,537 $47,010,300 15.2% 411.6% Marin/Sonoma Mosquito&Vector Control District $19,472,738 $11,634,371 $8,780,059 $4,135,340 $7,663,272 $1,238,215 21.2% 35.5% Marinwood Community Services District $6,784,666 $2,3877836 -$470,389 $3,322,116 $5,238,798 $1,624,470 49.0% 139.1% North Marin Water District $136,897,391 $5,411,426 S92,672,784 $8,619,837 $14,579,649 $3,833,847 6.3% 159.3% Novato Sanitary District $201,851,460 S19,742,079 5108,547,505 $3,528,249 S6,180,933 $1,338,148 1.7% 179% Richardson Bay Sanitary District $17,826,465 $1,595,379 $16,376,465 $1,101,797 $1,847,790 $485,893 6.2% 69.1% Ross Valley Sanitary District $122,064,345 S18,937,993 S66,824,699 54,506,476 $7,557,675 $1,987,357 3.7% 23.8% Sanitary District#5 Tiburon-Belvcdere $30,527,780 S5,434,555 $20,083,181 $1,7867666 $2,996,362 $787,920 5.9% 32.9% Sausalito Marin City Sanitary District $46,001,842 $11.215,025 539,986,927 $1,863,054 $3,124,472 $821,607 4.0% 16.6% Tamalpais Community Services District $8,062,948 $1,575,641 $1,239,870 $1,756,793 $3.255,545 5526,054 21.8% 111.5% Total $1,237,391,581 S130,172,212 $706,608,378 S109,116,198 S164,130,388 563,465,718 8.8%183.8%, June 5, 2017 Marin County Civil Grand Jury Page 44 of 61 The Budget Squeeze:Ilow Will Marin Fund Its Public Employee Pensions? Appendix E: Public Agency Balance Sheet Data (cont'd) FY 2015 Municipalities Assets Cash Net Position NPL NPL-1%o NPI,+1% NPL% NPL% of Assets of Cash City of Belvedere $9,635,000 $2,981,537 $5,341,000 $2,821,673 $5,039,427 $986,027 29.3% 94.6% City of Larkspu1_* $45,030,851 $14,151,668 524,277,367 $9,046,789 $15,797,243 $3,467,207 20.1% 63.9% City of Mill Valley $61,653,195 $20,419,625 $2,336,678 $21,174,403 $37,076,950 $8,022,272 34.3% 103.7% City of Novato $372,235,251 $60,646,987 S284,11 50,160 529,915,448 $51,486,548 $11,986,247 8.0% 49.3% City of San Rafael $290,551,982 $65,829,733 $151,480,204 $74,253,787 $159,506,132 $3,692,492 25.6% 112.8% City of Sausalito $65,193,649 $11,696,520 $17,106,631 $17,741,671 $29,127,780 $8,335,668 27.2% 151.7% County of Marin $1,947,970,000 $367,440,909 $1,342,737,000 $142,013,491 $304,297,935 $7,062,046 7.3% 38.6% Town of CorteMadcra $74,019,098 $9,073,608 $42,936,160 512,146,336 $19,631,470 $5,958,264 16.4% 133.9% Town of Fairfax* 51 1,962,960 $2,463,991 -$1,376,349 $6,078,042 $9,422,128 $3,314,672 50.8% 246.7% Town of Ross $18,236,166 510,234,934 S11,490,464 53,465,264 $5,999,505 $1,374,389 19.0% 33.9% Town of SanAnselmo $28,956,896 $5,822,276 $11,059,337 $4,002,434 $7,131,100 $1,405,939 13.8% 68.7% Town of Tiburon $62,234,833 $21,280,864 $52,632,219 $5,232,395 $9,162,200 $1,982,334 8.4% 24.6% Totals $2,987,679,881 S592,042,652 51,944,170,871 S327,891,733 $653,678,418 557,587,557 11.0% 55.4% School Districts Assets Cash Net Position NPL NPL-l% NPL+I% NPL%_ NPL%o of Assets of Cash Bolinas-Stinson Union School District $4,866,633 $2,865,817 $1,587,636 $2,499,021 $4,063,986 $1,192,965 51.4% 87.2% Dixie Elementary School District $32,345,802 $20,512,452 -S 12361,898 514,791,102 $23,752,949 $7,405,888 45.7%172.1% Kentfield School District $36,671,347 516,481,560 -57,350,022 511,241,124 $17,845,987 $5,731,639 30.7% 68.2% Larkspur-Corte Madera School District $67,710,441 $20,180,460 -S 18,662,067 $13,339,460 $21,229,928 $6,757,236 19.7% 66.1% Marin Community College District $296,646,697 $16,563,890 -51,453,534 $35,165,000 $57,576,000 $16,323,000 119% 212.3% Marin County Office of Education $65,200,872 $40,080,879 $35,148,165 $18,141,000 $29,793,000 $8,340,000 27.8% 45.3% Mill Valley School District $88,076,729 $17,389,526 -$25,517,249 $26,623,202 $42,487,967 $13,316,095 30.2% 153.1% Novato Unified School District 5147,677,796 $30,810,042 -$9,238,177 $51,786,928 $82,735,169 $25,967,877 35.1% 168.1% Reed Union School District $52,705,559 $9,360,996 -$1,378,282 513,830,041 $22,131,664 $6,904,029 26.2% 147.7% Ross School District $36,049,201 53,875,832 57,486,041 $4,733,569 $7,568,886 $2,368,118 13.1% 122.1% Ross Valley School District $58,186,120 512,864,248 -$12,811,202 $16,841,437 $26,841,518 $8,499,130 28.9% 130.9% San Rafael City Schools-Elementary $90,671,410 $18,526,824 -521,324,673 $26,576,187 $42,069,163 $13,668,565 29.3% 143.4% San Rafael City Schools-High School $57,092,257 $17,649,236 -$32,610,889 $21,868,291 $35,163,3001 $10,775,267 38.3% 123.9% Sausalito Marin City School District $27,343,812 $3,879,729 $2,795,062 $2.990.897 $4,824,034 $1,461,280 10.9% 77.1% Shoreline Unified School District $22,894,320 $6,451,291 -$2,544,996 58,800,020 $14,190,098 $4,302,465 38.4% 136.4% Tamalpais Union High School Disuict $207,432,180 $44,567,689 $3,702,851 $46,266.492 $74,079,210 $23,0648 2,2 22.3% 103.8% Totals 51,291,571,176 S282,060,471 -594,533,234 S315,493,771 5506,352,859 5156,075,802 24.4% 111.9% June 5, 2017 Marin County Civil Grand Jury Page 45 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Appendix E: Public Agency Balance Sheet Data (cont'd) Special Districts Assets Cash Net Position NPL NPL-I% NPL+I% NPL% NPL% Safety of Assets of Cash Central Marin Police Authority* $16,470,963 $178,725 -$1,124,490 511,532,085 $18,375,103 $5,889,395 70.0% 6452.4% Kcntfield Fire Protection District $9,630,272 $3,261,202 51,651,848 $5,202,429 $8,026,436 $2,875,079 54.0% 159J% Novato Fire Protection District $37,252,657 517,461,022 $3,778,037 $15,014,710 $32,172,613 $746,651 40.3% 86.0% Ross Vallcy Fire Department 52,499,767 5912,212 -58,316,114 57,679,794 513,318,349 $3,033,390 307.2% 841.9% Southern Marin Fire Protection District $12,413,494 $7,865,476 $5,848,381 $3,845,243 $8,239,354 $191,216 31.0% 489% Tiburon Fire Protcction District $11,338,453 $5,938,906 $4,874,704 $6,315,892 $10,889,109 $2,546,208 55.7% 106.3% Total S89,605,606 535,617,543 $6,712,366 $49,590,153 $91,020,964 $15,281,939 55.3% 139.2% Special Districts uo NPL% NPL% Assets Cash Net Position NPL NPL-I% NPL+1/o Utility ofAssets of Cash Central Marin Sanitation Agency 5109,050,874 $15,998,126 545,345,155 $6,024,473 $10,784,954 $2,073,726 5.5% 37.7% Las Gallinas Valley Sanitary District $77,052,295 $19,742,483 $587063,598 $1,693,868 $3,065,929 $555,188 2.2% 8.6% Marin Municipal Water District $462,338,812 $19,959,569 $243,685,640 $62,139,077 $87,637,727 $40,725,228 13.4% 311.3% Marin/Sonoma Mosquito&Vector Control District $18,321,390 $10,672,765 $7,632,034 $3,378,396 $7,239,023 $168,001 18.4% 31.7% Marinwood Community Services District $6,030,417 $1,858,999 -$294,365 $3,142,286 $4,975,627 $1,628,944 52.1% 169.0% North Marin Water District $134,483,309 $4,943,414 $88,155,270 $6,701,264 $12,079,630 $2,237,730 5.0% 135.6% Novato Sanitary District $203,141,502 $18,102,303 S105,599,405 $3,335,896 $5,943,534 $1,171,804 1.6% 18.4% Richardson Bay Sanitary District $17,887,393 $1,303,363 $16,613,138 $901,425 $1,793,212 $161,327 5.0% 69.2% Ross Valley Sanitary District $119,157,291 $14,295,359 $62,983,772 $3,708,693 $6,068,264 $1,750,473 3.1% 25.9% Sanitary District 4 5 Tiburon-Belvedere $30,993,246 $3,622,532 $18,117,614 $2,757,064 $3,943,406 $1,772,512 8.9% 76.1% Sausalito Marin City Sanitary District $39,718,939 $9,218,762 $32,797,172 $1,759,386 $3,134,682 $618,021 4.4% 19.1% Tamalpais Community Services District $8,676,425 $1,662,061 $1,698,672 $1,028,347 $2,203,480 $51,138 11.9% 61.9% Total 1S1,226,851,8931 5121,379,736 S680,397,105S96,570,175 5148,869,468 S52,914,0921 7.9%179.6% June 5,2017 Marin County Civil Grand Jury Page 46 of 61 The Budget Squeeze:How Will Matin Fund Its Public Employee Pensions? Appendix E: Public Agency Balance Sheet Data (cont'd) 2016 Totals Agencies Assets Cast) Net Position NPL NPL-l% NPL+I% NPL% NPL% of Assets of Cash Milli icipalitics $3,026,187,454 $639,213,052 $1,984,982,754 $454,374,181 $821,131,701 $154,197,671 15.0% 71.1% School Districts $1,378,538,676 $347,971,141 -S63,753,736 $387,330,533 $599,708,115 $223,485,593 28.1% 111.3% Special Districts Safety $73,204,420 $35,443,747 $19,637,988 $40,807,721 $74,493,296 $13,159,969 55.7% 115.1% Special Districts Utility $1,237,391,581 $130,172,212 $706,608,378 $109,116,198 $164,130,388 $63,465,718 8.8% 83.8% Total S5,715,322,131 S1,152,800,1521S2,647,475,3841 $991,628,633 $1,659,463,500 5454,308,951 17.4% 86.0% 2015 Totals Agencies Assets Cash Net Position NPL NPL-1% NPL+1% NPL% NPL'% of Assets of Cash Municipalities $2,987,679,881 $592,042,652 $1,944,170,871 $327,891,733 $653,678,418 $57,587,557 11.0% 55.4% School Districts $1,291,571,176 $282,060,471 -$94,533,234 $315,493,771 $506,352,859 $156,075,802 24.4% 111.9% Special Districts Safety $89,605,606 $35,617,543 $6,712,366 $49,590,153 $91,020,964 $15,281,939 55.3% 139.2% Special Districts Safety $1,226,851,893 $121,379,736 $680,397,105 $96,570,175 $148,869,468 $52,914,092 7.9% 79.6% Total 55,595,708,556 51,031,100,402 S2,536,747,108 $789,545,832 $1,399,921,709 5281,859,390 14.1% 76.6% June 5, 2017 Marin County Civil Grand Jury Page 47 of 61 The Budget Squeeze:How Will Marie Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data FY 2016 Municipalities Revenue Expenses Pension Pension Contribution Contribution as %of Revenue City of Belvedere S7,855,000 $7,404,000 $327,816 4.2% City of Larkspur" N/A N/A N/A N/A City of Mill Valley 539,916,000 S38,133,000 $2,551,885 6.4% City of Novato $47,954,000 S42,687,000 $2,604,320 5.4% City of San Rafacl $100,490,000 $110,893,000 $19,339,577 19.2% City of Sausalito $26,588,325 524,491,036 $1,763,040 6.6% County of Marin $611,801,000 $554,877,000 $48,302,323 7.9% Town of Corte Madera S23,593,928 S20,264,214 $1,810,099 7.7% Town of Fairfax" N/A N/A N/A N/A Town of Ross S9,264,385 $7,320,448 $1,339,398 14.5% Town of San Ansclmo S 19,216,454 $19,350,623 $466,182 2.4% Town of Tiburon S111341,758 $11,029,817 $753,153 6.6% Totals S898,020,850 S836,450,138 579,257,793 8.8% Scbool Districts Revenue Expenses Pension Pension Contribution Contribution as /°of Revenue Bolinas-Stinson Union School District $4,070,898 $4,252,221 $254,367 6.2% Dixie Elementary School District $25,361,193 $24,220,753 $1,463,819 5.8% Kentfield School District $19,712,081 $18,964,836 $1,065,278 5.4% Larkspur-Corte Madera School District 521,966,152 $23,618,998 $1,214,607 5.5% Marin Community College District S67,403,849 $82,922,415 $3,922,649 5.8% Marin County Office of Education 556,776,827 $55,642,573 $1,851,569 3.3% Mill Valley School District $50,815,837 547,724,947 $2,592,161 5.1% Novato Unified School District 594,185,666 S91,973,207 $4,150,779 4.4% Recd Union School District 525,711,228 $24,983,096 $1,333,084 5.2% Ross School District $8,748,369 58,844,112 $440,091 5.0% Ross Vallcy School District $29,323,920 $29,952,113 $1,621,067 5.5% San Rafacl City Schools -Elementary 562,306,271 559,610,089 $2,888,024 4.6% San Rafacl City Schools -High School 537,919,147 S39,926,631 $2,009,294 5.3% Sausalito Marin City School District 57,421,237 57,798,127 $253,588 3.4% Shoreline Unified School District 514,823,677 $14,594,704 $723,686 4.9% Tamalpais Union High School District 592,371,238 S88,169,381 $5,256,408 5.7% Totals I S618,917,5901 $623,198,2031 S31,040,471 5.0% June 5, 2017 Marin County Civil Grand Jury Page 48 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) Special Districts Pension Pension Contribution Safety Revenue Expenses Contribution as%of Revenue Central Marin Police Authority N/A N/A N/A N/A Kentficld Fire Protection District 55,014,333 $4,243,041 $951,986 19.0% Novato Fire Protection District $27,838,320 $21,367,857 $4,848,895 17.4% Ross Valley Fire Department $9,598,396 $8,237,907 $1,119,907 11.7% Southern Marin Fire Protection District $14,911,632 $12,863,646 $2,072,079 13.9% Tiburon Pirc Protection District $7,184,792 $7,604,639 $1,471,646 20.5% Total 564,547,473 $54,317,0901 $10,464,513116.2% Special Districts Pension` Pension Contribution Utility Revenue Expenses Contribution as%of Revenue Central Marin Sanitation Agency $16,952,527 $16,834,929 $936,613 5.5% Las Gallinas Valley Sanitary District $12,976,695 $7,881,853 $295,427 2.3% Marin Municipal Water District $62,502,430 $68,704,175 $5,725,637 9.2% Marin/Sonoma Mosquito&Vector Control Disuict $8,638,747 $8,584,599 $968,417 11.2% Marinwood Community Services District $5,837,007 $6,013,031 $321,909 5.5% North Marin Water District $17,912,719 $17,534,252 $828,792 4.6% Novato Sanitary District $19,299,289 $16,587,829 $280,935 1.5% Richardson Bay Sanitary District $2,993,714 $3,239,823 $77,297 2.6% Ross Valley Sanitary District $23,623,985 $19,998,903 $543,759 2.3% Sanitary District 4 5 Tiburon-Belvedere $6,264,746 $4,558,920 $1,781,586 28.4% Sausalito Marin City Sanitary District $8,391,876 $5,167,530 $276,804 3.3% Tamalpais Community Services District $5,245,439 $5,655,202 $308,274 5.9% Total 5190,639,174 $180,761,046 512,345,450 6.5% June 5, 2017 Marin County Civil Grand Jury Page 49 of 61 The Budget Squeeze:How Will Morin Fund hs Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) FY 2015 �7unicipalities Revenue Expenses Pension Pension Contribution Contribution as /o of Revenue City ofBelvedcrc $7,475,000 $7,191,000 $280,813 3.8% City of Larkspur* $21,009,094 $16,693,255 $802,226 3.8% CityofMill Valley $37,844,000 $36,158,000 $2,077,981 5.5% City of Novato $46,154,000 $41,545,000 $2,421,183 5.2% City of San Rafael $94,752,000 $80,572,000 $17,802,358 18.8% City of Sausalito $20,603,504 $17,970,673 $2,007,707 9.7% County of Marin $602,627,000 $538,354,000 $41,871,696 6.9% Town of Corte Madcra $21,324,184 $16,988,011 $1,667,545 7.8% Town of Fairfax* $9,212,366 $8,630,597 $1,276,895 13.9% Town of Ross $10,081,926 $6,667,416 $217,566 2.2% Town of San Anschno $18,707,969 $15,807,161 $359,492 1.9% Town of Tiburon $12,271,586 $9,589,263 $463,611 3.8% Totals S902,062,629 5796,166,376 571,249,073 7.9% School Districts Revenue Expenses Pensions' Pension Contribution Contribution as /o of Revenue Bolinas-Stinson Union School District $4,133,985 $3,839,557 $212,334 5.1% Dixie Elementary School District $21,577,176 $23,137,6481 $1,223,806 5.7% Kcntficld School District $17,024,884 $16,763,254 $879,311 5.2% Larkspur-Corte Madcra School District $19,285,300 $22,676,756 $1,016,124 5.3% Marin Community College District $65,743,077 $76,103,061 $3,955,070 6.0% Marin County Office of Education $53,863,696 $53,522,613 $1,571,597 2.9% Mill Valley School District $46,142,878 $44,916,603 $2,194,414 4.8% Novato Unified School District $84,447,074 $86,629,909 $3,710,767 4.4% Recd Union School District $23,.536,480 $22,614,955 $1,130,735 4.8% Ross School District $7,831,472 $8,062,949 $367,499 4.7% Ross Valley School District $26,202,736 $26,800,628 $1,343,461 5.1% San Rafacl City Schools -Elementary $53,530,867 $52,374,844 $2,370,708 4.4% San Rafael City Schools -HighSchool 534,638,111 $35,691,740 $1,672,501 4.8% Sausalito Marin City School District $6,650,074 $7,478,427 $243,111 3.7% Shoreline Unified School District $13,717,171 $15,547,928 $684,755 5.0% Tamalpais Union High School District $84,711,887 $82,324,797 $3,866,993 4.6% Totals S563,036,868 S578,485,6691526,443,186 4.7% Jule 5,2017 Marin County Civil Grand Jury Page 50 of 61 The Budget Squeeze:How Will Marie Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) Special Districts Pension Pension Con/o Contribution Revenue Expenses o Safety Contribution as of Revenue Central Marin Police Authority* $11,087,891 $12,682,790 $1,486,735 13.4% Kentfield Fire Protection District $4,949,898 $4,477,793 $828,090 16.7% Novato Fire Protection District $25,295,007 $21,313,411 $4,604,649 18.2% Ross Valley Fire Departnent $8,900,504 $9,225,977 $973,697 10.9% Southern Marin Fire Protection District $14,038,197 $14,067,722 $759,752 5.4% Tiburon Fire Protection District $6,966,748 $7,294,411 $2,159,000 31.0% Total $71,238,245 $69,062,104 $10,811,923 15.2% Special Districts Revenue Expenses Pension Pension Contribution u Utility Contribution as /o of Revenue Central Marin Sanitation Agency $17,873,113 $16,220,247 $2,319,236 13.0% Las Gallinas Valley Sanitary District $11,621,316 $7,930,633 $266,914 2.3% Marin Municipal Watcr District $61,455,537 $69,478,882 $4,633,745 7.5% Marin/Sonoma Mosquito&Vcctor Control District $8,396,908 $9,652,593 $856,583 10.2% Mai inwood Community Scrvices District $5,224,022 $4,919,009 $269,828 5.2% North Marin Water District $18,506,716 $17,456,194 $669,066 3.6% Novato Sanitary District $18,571,214 $15,799,078 $173,410 0.9% Richardson Bay Sanitary District $2,874,017 $2,976,836 $69,002 2.4% Ross Valley Sanitary Disu'ict $22,228,230 $20,570,289 $443,292 2.0% Sanitary District 4 5 Tiburon-Belvedere $6,316,447 $4,500,449 $1,600,837 25.3% Sausalito Marin City Sanitary District $7,640,843 $5,596,332 $302,863 4.0% Tamalpais Community Set vices District $5,161,781 $5,086,144 $306,954 59% Total 5185,870,144 5180,186,686 $11,911,73016.4% June 5, 2017 Marin County Civil Grand Jury Page 51 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) FY 2014 Pension Pension Contribution Municipalities Revenue expenses Contribution as%of Revenue City of Belvedere $7,151,000 $7,771,000 $280,312 3.9% City of Larkspur* $23,430,272 $16,496,021 $1,174,703 5.0% City ofMill Valley $35,104,000 $36,651,000 $1,832,914 5.2% City of Novato $45,725,000 $42,849,000 $4,167,992 9.1% City of San Rafael $93,536,000 $90,637,000 $17,576,796 18.8% City of Sausalito $19,374,007 $18,302,083 $1,339,935 6.9% County of Marin $578,298,000 $566,596,000 $46,803,624 8.1% Town ofCortc Madera $18,827,611 $16,188,853 $1,591,599 8.5% Town of Fairfax $9,854,550 $8,703,418 $964,694 9.8% Town of Ross $7,521,177 $5,161,437 $292,890 3.9% Town of SanAnsehno $17,157,724 $15,292,443 $426,878 2.5% Town of Tiburon $11,283,722 $9,040,2291 $460,630 4.1% Totals 5867,263,063 $833,688,484 $76,912,967 8.9% School Districts Revenue Expenses Pension, Pension Contribution Contribution as /o of Revenue Bolinas-Stinson Union School District $3,682,417 $3,611,583 $195,036 5.3% Dixie Elementary School Disuict $20,650,150 $21,303,737 $1,075,0581 5.2% Kcntfiield School District $15,874,438 $15,651,915 $782,734 4.9% Larkspur-Corte Madera School District $18,407,176 $18,693,706 $919,073 5.0% Marin Community College District $58,598,119 $69,675,296 $2,747,044 4.7% Marin County Office of Education $54,109,107 $53,845,241 $1,488,826 2.8% Mill Valley School District $43,586,940 $40,709,942 $1,931,950 4.4% Novato Unified School District $76,012,499 $80,693,043 $3,710,767 4.9% Recd Union School District $21,716,462 $22,510,117 $1,022,230 4.7% Ross School District $7,437,995 $7,755,357 $342,318 4.6% Ross Valley School District $25,052,122 $25,063,637 $1,202,960 4.8% San Rafael City Schools -Elementary 548,715,280 $48,643,315 $2,003,613 4.1% San Rafael City Schools -High School 533,065,771 532,764,963 $1,458,967 4.4% Sausalito Marin City School District $6,831,391 $7,212,560 $223,849 3.3% Shoreline Unified School District S 13,215,928 S 14,468,849 S660,935 5.0% Tamalpais Union High School District $80,916,231 $78,2097897 $3,931,527 4.9% Totals I S527,872,0261 $540,813,1581S23,696,8871 4.5% June 5, 2017 Marin County Civil Grand July Page 52 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) Special Districts Revenue ExPension Pension Contribution Expenses Safety Contribution as /a of Revenue Central Marin Police Autborityx $10,971,094 $12,540,840 $2,202,617 20.1% Kentfield Fire Protection District $4,346,334 $4,410,646 $640,419 14.7% Novato Fire Protection District $24,921,522 $27,094,328 $4365,000 17.5% Ross Valley Fire Department $8,319,924 $8,100,563 $757,240 9.1% Southern Marin Fire Protection District $13,177,067 $12,739,358 $1,661,560 12.6% Tiburon Fire Protection District $6,338,309 $5,793,305 $901,000 14.2% Total $68,074,250 S70,679,0401 $10,527,836 1.5.5% Special Districts Revenue Expenses Pension Pension Contribution Utility Contribution as /o of Revenue Central Marin Sanitation Agency $16,421,864 $18,386,011 $2,724,054 16.6% Las Gallinas Valley Sanitary District $11,490,884 $8,624,424 $262,743 2.3% Marin Municipal Water District $70,673,150 $70,431,104 $4,576,450 6.5% Marin/Sonoma Mosquito&Vcctor Control District $7,861,221 $8,860,632 $865,130 11.0% Marinwood Community Services District $5,096,846 $5,133,110 $408,037 8.0`%, North Marin Water District $20,817,357 $20,329,069 $819,854 3.9% Novato Sanitary District $17,963,721 $19,865,633 $258,904 1.4% Richardson Bay Sanitary District $2,824,511 $3,009,245 $88,999 3.2% Ross Valley Sanitary District $20,868,467 $18,309,740 $796,725 3.8% Sanitary District#5 Tiburon-Belvedere $5,963,722 $4,748,503 $172,890 2.9% Sausalito Marin City Sanitary District $7,486,444 $5,131,337 $258.040 3.4"/� Tamalpais Community Services District $5,149,167 $5,396,435 $328,757 6.4% Total S192,617,3541 $188,225,2431511,560,_583 16.0% June 5, 2017 Marin County Civil Grand Jury Page 53 of 61 The Budget Squeeze:Holt) Will Marin Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) FY 2013 Municipalities Revenue Expenses Pension Pension Contribution Contribution as /o of Revenue City of Bclvcdcrc $6,898,000 $7,778,000 $360,315 5.2% City of Larkspur* $18,603,639 $15,991,539 S 1,1 17.173 6.0% City ofMill Valley $32,911,000 $35,373,000 S1,690,435 5.1% City of Novato $42,845,000 $40,203,000 $3,600,767 8.4% City of San Rafael $97,329,000 $84,881,000 S 15,522,832 159% City of Sausalito $17,435,854 $19,290,681 S1,885,718 10.8% County of Marin $539,291,000 $578,123,000 $82,141,000 15.2% Town ofCorte Madera $16,917,648 $15,662,631 $1,420,037 8.4% Town Of Fairfax* $8,185,597 $8,393,424 5861,992 10.5% Town of Ross $5,954,371 $6,908,283 $426,227 7.2% Town of San Ansclmo $16,613,802 $15,335,139 $706,204 4.3% Town of Tiburon $10,080,056 $8,564,576 5473,302 4.7% Totals $813,064,967 $836,504,273 $110,206,002 13.6% School Districts Revenue Expenses Pension Pension Contribution Contribution as%oi'Revenue Bolinas-Stinson Union School District $4,166,654 $3,431,372 $181,797 4.4% Dixie Elementary School District $19,038,568 $20,037,236 $1,025,538 5.4% Kentficld School District $15,347,703 $14,949,309 $751,520 4.9% Larkspur-Corte Madera School District $16,692,448 $17,232,998 $760,498 4.6% Marin Community College District $73,695,039 $78,071,240 $2,867,705 3.9% Marin County Office of Education $53,965,926 $55,824,402 $1,537,897 2.8% Mill Valley School District $37,909,411 $36,847,491 $1,708,730 4.5% Novato Unified School District $74,691,071 578,375,760 S3,564,105 4.8% Reed Union School District $20,866,279 $20,722,970 $954,501 4.6% Ross School District $7,208,553 $7,757,976 $328,289 4.6% Ross Valley School District $23,544,533 $23,706,265 S1,126,078 4.8% San Rafael City Schools -Elementary S45,813,222 $45,904,573 S1,891,069 4.1% San Rafael City Schools -HighSchool 529,829,654 $30,110,447 S1,349,835 4.5% Sausalito Marin City School District $7,348,906 $7,412,975 5222,638 3.0`l'o Shoreline Unified School District 515,141,029 $13,384,148 $582,511 3.8% Tamalpais Union High School District $75,744,653 S73,616.062 53,790,319 5.0% Totals $521,003,649 S527,385,224 522,643,030 4.3`%, June 5, 2017 Matin County Civil Grand Jury Page 54 of 61 The Budget Squeeze:How Will Moria Fund Its Public Employee Pensions? Appendix: T: Public Agency Income Statement Data (cont'd) Special Districts Revenue Expenses Pension Pension Contribution Safety Contribution as /o of Revenue Central Marin Police Authority* $8,760,972 59,741,410 $1,546,456 17.7% Kentfield Fire Protection District $4,266,495 $4,027,584 $719,000 16.9% Novato Fire Protection District $23,981,238 $22,959,399 54,347,000 18.1% Ross Valley Fire Department $8,283,616 $8,324,612 51,352,592 16.3% Southern Marin Firc Protection District $13,009,009 $12,479,816 $1,798,760 13.8% Tiburon Fire Protection District $5,935,355 $5,505,107 5843,000 14.2% Total $64,236,685 $63,037,9281 $10,606,808 16.5% Special Districts Revenue Expenses Pension Pension Contribution a Utility Contribution as /o of Revenue Central Marin Sanitation Agency $15,760,045 $16,292,627 $1,202,050 7.6% Las Gallinas Valley Sanitary District $11,585,053 $8,366,225 5411,624 3.6% Marin Municipal Water District $69,738,216 $63,938,837 53,963,600 5.7% Marin/Sonoma Mosquito&Vector Control District $7,957,709 $8,665,503 $891,511 11.2% Mai inwood Community Services District $4,770,868 $5,053,618 $414,833 8.7% North Marin Water District $18,605,081 $16,568,138 $1,608,211 8.6% Novato Sanitary District $17,332,035 $15,759,901 $316,059 1.8% Richardson Bay Sanitary District $2,646,912 $2,867,406 $61,929 2.3% Ross Valley Sanitary District $20,314,968 $16,831,688 $778.004 3.8% Sanitary District#5 Tiburon-Belvedere $5,409,761 53,786.385 $186,990 3.5% Sausalito Marin City Sanitary District $6,804,580 $5,047,168 5165,778 2.4% Tamalpais Community Services District $4,782,049 $4,925,928 5278.274 5.8% Total I S18S,707,2771 S168,103,424 $10,278,863 5.5% June 5, 2017 Marin County Civil Grand Jury Page 55 of 61 The Budget Squeeze: How mill Marin Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) FY 2012 Municipalities Revenue Expenses Pension Pension Contribution Contribution as /o of Revenue City of Belvedere $6,809,417 $7,082,918 S386,682 5.7% City of Larkspur* $17,286,549 $18,920,650 S 1.216,41 1 7.0% City of Mill Valley $30,695,904 $32,412,000 S1.939,954 6.3% City of Novato $47,129,000 $44,317,469 53,897,198 8.3% City of San Rafael $87,243,000 S84,304,491 514,627,709 16.8% City of Sausalito $19,515,672 520,402,997 52,407,997 12.3% County of Marin $452,987,000 $461,104,000 S47,541,000 10.5% Town of Corte Madera $15,809,424 $14,025,216 S1,734,141 11.0% Town of Fairfax* $8,032,233 $8,190,115 5783,933 9.8% Town of Ross $5,711,293 $6,086,653 $744,696 13.0% Town of San Anschno $15,240,8651 $15,053,414 $1,103,350 7.2% Town of Tiburon $8,838,698 $8,520,072 $509,588 5.8% Totals 5715,299,055 5720,419,995 $76,892,659 10.7% School Districts Revenue Expenses Pension Pension Contribution Contribution as /o of Revenue Bolinas-Stinson Union School District $3,366,497 $3,171,763 5168,417 5.0% Dixie Elementary School District $19,027,021 $19,498,458 $1,000,029 5.3% Kentfneld School District $14,441,839 $14,841,354 $731,248 5.1% Larkspur-Corte Madera School District $16,554,817 $16,167,730 5833,718 5.0% Marin Community College District $73,985,992 $76,108,423 52,628,704 3.6% Marin County Office of Education $56,294,422 $56,662,756 $1,537,812 2.7% Mill Valley School District $34,740,584 535,382,157 51,657,232 4.8% Novato Unified School District $72,505,743 $77,553,300 53,453,655 4.8% Reed Union School District $20,662,117 S19,941,589 5918,955 4.4% Ross School District $6,834,205 $7,670.742 5296,989 4.3% Ross Valley School District $22,059,245 S21.179.6171 $1,023,687 4.6% San Rafael City Schools -Elementary $43,858,815 543,856,979 S 1,774,074 4.0% San Rafael City Schools -HighSchool $29,847,934 $29,862,827 51,311,053 4.4% Sausalito Marin City School District $7,285,990 $6,899,490 S197,027 2.7% Shoreline Unified School District 513,436,120 512,479,865 5546,884 4.1% Tamalpais Union High School District $73,882,043 $71,289,091 S3,630,314 4.9% Totals IS508,783,38415512,566,141 S21,709,798 4.3% June 5, 2017 Marin County Civil Grand Jury Page 56 of 61 The Budget Squeeze:How Will Mai-in Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) Special Districts Pension Pension Contribution Safety Revenue Expenses Contribution as°/of Revenue Central Marin Police Authority* $6,845,710 $7,930,868 $1,152,082 16.8% Kentfield Fire Protection District $4,040,717 $3.935.793 $706,000 17.5% Novato Fire Protection District $23,162,755 $23,503,892 $4.420,000 19.1% Ross Valley Fire Department $6,188,574 $6,222,678 53,822,902 61.8% Southern Marin Fire Protection District $9,514,727 58,852,899 $1,321,376 13.9% Tiburon Fire Protection District $5,692,247 $5,532,857 $900,000 15.8% Total S55,444,730 S55,978,987 $12,322,360 22.2% Special Districts Pension Pension Contribution Utility Revenue Expenses Contribution as%of Revenue Central Marin Sanitation Agency $15,242,715 $15,762,771 $1,130,652 7.4% Las Gallinas Valley Sanitary District $11,493,702 $6,665,852 5403,005 3.5% Marin Municipal Water District $61,957,837 $60,474,500 $3,962,731 6.4% Marin/Sonoma Mosquito&Vector Control District $7,573,456 58,219,315 $1,820,548 24.0% Marinwood Community Services District $4,115,789 $4,592.674 $438,549 10.7% North Marin Water District $15,972,477 $16,405,522 $1,031,112 6.5% Novato Sanitary District $16,313,384 $16,052,483 $215,351 1.3% Richardson Bay Sanitary District $2,672,170 $2,658,572 $60,129 2.3% Ross Valley Sanitary District $22,056,782 $18,228,904 $702,054 3.2% Sanitary District#5 Tiburon-Belvedere $4,927,600 53.612.300 $240.305 4.9% Sausalito Marin City Sanitary District $6,350,068 $4,319.548 S315,887 5.0% Tamalpais Community Services District $4,938,176 $4,935.448 5249,495 5.1% Total 5173,614,156 $161,927,889 $10,569,818 6.1% June 5, 2017 Marin County Civil Grand Jury Page 57 of 61 The Budget Squeeze:How Will Matin Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) Totals 2016 Special Districts Pension Pension Revenue Expenses Contribution Utility , Contribution as%of Revenue Municipalities $898,020,850 5836,450,138 $79,257.793 8.8% School Districts $618,917,590 $623,198,203 $31,040.471 5.0% Special Districts Safety $64,547.473 S54,317,090 510,464,513 16.2% Special Districts Utility S190,639,174 5180,761,046 512,345,450 6.5% Total I 51,772,125,087 S1,694,726,47715133,108,227 7.5% Totals 2015 Special Districts Pension Pension Utility Revenue Expenses Contribution Contribution as%of Revenue Municipalities $902,062,629 $796,166,376 $71,249,073 7.9% School Districts S563,036,868 5578,485,669 $26,443,186 4.7% Special Districts Safety S71,238,245 $69,062,104 $10,811,923 15.2% Special Districts Utility $185,870,144 $180,186,686 S11,911,730 6.4% Total I51,722,207,886 S1,623,900,835 S120,415,91217.0% Totals 2014 Special Districts Pension Pension Utility Revenue Expenses Contribution Contribution as /o of Revenue Municipalities $867,263,063 5833,688,484 $76,912,967 8.9% School Districts $527.872,026 S540,813,159 $23,696,887 4.5% Spccial Districts Safety $68,074,250 $70,679,040 $10,527,836 15.5% Special Districts Utility S 192,617,354 $188,225,243 $11,560,5831 6.0% Total $1,655,826,693 S1,633,405,9251 $122,698,273 7.4% June 5, 2017 Marin County Civil Grand Jury Page 58 of 61 The Budget Squeeze:How Will Marin Fund Its Public Employee Pensions? Appendix: F: Public Agency Income Statement Data (cont'd) Totals 2013 Special Districts Pension Pension Utility Revenue Expenses Contribution Contribution as%of Revenue Municipalities $813,064,967 $836,504,273 $110,206,002 13.6% School Districts $521,003,649 $527,385,224 $22,643,030 4.3% Special Districts Safety $64,236,685 $63,037,928 $10,606,808 16.5% Special Districts Utility $185,707,277 5168,103,424 510,278,863 5.5% Total $1,584,012,578 51,595,030,849 5153,734,703 9.7% Totals 2012 Special Districts Pension Pension Utility Revenue Expenses Contribution Contribution as /o of Revenue Municipalitics S715,299,055 $720,419,995 $76,892,659 10.7% School Districts $508,783,384 $512,566,141 $21,709,798 4.3% Special Districts Safety 555,444,730 $55,978,987 $12,322,360 22.2% Special Districts Utility $173,614,156 $161,927,8891 $10,569,81816.1% Total I 51,453,141,325 S1,450,893,012 $121,494,635 8.4% June 5, 2017 Marin County Civil Grand July Page 59 of 61 The Budget Squeeze: How Will Marin Fund Its Public Employee Pensions? Appendix G: CalPERS Termination Fees The table below lists the estimated termination payments at assumed rates of 2.00% and 3.25% for participating agencies, excepting school districts,per the annual CalPERS Actuarial Report for 6/30/2015. NPL as Reported Assumed Assumed AGENCY in FY 2015 Discount Rate Discount Rate Financials 2.00% 3.25% Central Marin Police Authority* $6,024,473 $71,565,039 $51,696,369 Central Marin Sanitation Agency $3,324,578 $45,302,181 $33,168,333 City of Belvedere $2,821,673 $22,330,041 $16,034,899 City of Larkspur $9,046,789 $64,068,837 $46,794,380 City of Mill Valley $21,174,403 $164,006,306 $119,143,571 City of Novato $29,915,448 $210,899,167 $154,434,070 City of Sausalito $17,741,671 $111,095,700 $80,854,968 College of Marin - CalPERS $14,503,000 $4,413,804 $3,117,900 Kentfield Fire Protection District $5,202,429 $25,682,839 $18,599,480 Las Gallinas Valley Sanitary District $1,693,868 $12,363,061 $9,004,250 Marin Municipal Water District $62,139,077 $291,279,084 $222,708,365 Marinwood Community Services District $3,142,286 $19,402,506 $13,677,782 North Marin Water District $6,701,264 $46,278,897 $34,041,789 Novato Sanitary District $3,335,896 $23,194,067 $17,250,223 Richardson Bay Sanitary District $901,425 $6,964,774 $5,134,984 Ross Valley Fire Department $7,679,794 $56,572,810 $40,834,714 Ross Valley Sanitary District $3,708,693 $21,982,458 $16,055,544 Sanitary District#5 $2,757,064 $11,272,815 $8,312,243 Sausalito Marin City Sanitation District $1,759,386 $12,874,490 $9,642,427 Tiburon Fire Protection District $6,315,892 $42,833,280 $30,695,410 Town of Corte Madera $12,146,336 $77,386,425 $56,430,103 Town of Fairfax $6,078,042 $40,460,118 $29,676,098 Town of Ross $3,465,264 $24,932,090 $17,959,639 Town of San Anselmo $4,002,434 $59,135,515 $44,288,748 Town of Tiburon $5,232,395 $38,702,774 $28,540,001 TOTAL $240,813,580 $1,504,999,078 $1,108,096,290 June 5, 2017 Marin County Civil Grand Jury Page 60 of 61 The Budget Squeeze:How Will Marin Fund Its Public E7771)10yee Pensions? Appendix J: Private Pension Discount Rates The table below lists the discount rates used by the 10 largest US corporate pension funds by total assets under management. Information was obtained from the 2015 Annual Reports and lOK filings of the listed corporations. Corporation Pension Fund Pension OPEB Assets ($Mils.) Discount Rate Discount Rate Boeing $101,931 4.20% 3.80% IBM $96,382 4.00% 3.70% AT&T $83,414 4.60% 4.50% General Motors $82,427 3.73% 3.83% General Electric $70,566 4.38% NA Lockheed Martin $63,370 4.38% 4.25% Ford $55,344 4.27% 4.22% Bank of America $51,000 4.51% 4.32% UPS $46,443 4.40% 4.18% Northrop Grumman $43,387 4.53% 4.47% Average 4.30% 4.14% June 5, 2017 Marin County Civil Grand Jury Page 61 of 61 RESPONSE TO GRAND JURY REPORT FORM Town of Tiburon Report Title: The Budget Squeeze— How Will Marin Fund Its Public Employee Pensions? Report Date: May 25, 2017 Public Release: June 5, 2017 Response By: Town of Tiburon FINDINGS • We agree with the findings numbered: Response not required. • We disagree with wholly or partially with the findings numbered: Response not required. RECOMMENDATIONS • Recommendation number 4 has been implemented. ■ Recommendations numbered: N/A have not yet been implemented, but will be implemented in the future. ■ Recommendations numbered: 3, 8 require further analysis. ■ Recommendations numbered: N/A will not be implemented because they are not warranted or are not reasonable. Date: July 19. 2017 Signed: Number of pages attached: 2 1 EXHIBIT NO. Off ce of the Town Manager , 2017 The Honorable Kelly Simmons Mr. Jay Hamilton-Roth, Foreperson Judge of the Marin County Superior Marin County Civil Grand Jury Court 3501 Civic Center Drive, Room 275 Post Office Box 4988 San Rafael, CA 94903 San Rafael, CA 94913-4988 Re: Response to Grand Jury Report The Budget Squeeze—How Will Marin Fund Its Public Employee Pensions? Dear Honorable Judge Simmons and Mr. Hamilton-Roth: This letter explains in detail the Town of Tiburon's response to the Civil Grand Jury Report dated May 25, 2017. The Report directs the Town to respond to Recommendations Nos. 3, 4 and 8. RECOMMENDATIONS Recommendation 3- Agencies should publish long-term budgets (i.e.,covering at least five years), update them at least every other year and report what percent of total revenue they anticipate spending on pension contributions. Recommendation 4- Each Agency should provide 10 years of audited financial statements and summary pension data for the same period (or links to them) on the financial page of its public website. Recommendation 8-Public agencies and public employee unions should begin to explore how introduction of defined contribution programs can reduce unfunded liabilities for public pensions. Town's Response to Recommendations: Response to Recommendation 3: This recommendation requires further analysis. The Town's current practice is to provide an annual budget. However. the Town Council has an ad-hoc Budget and Finance Committee and Staff will review this recommendation with them when they meet again in the fall to determine if it is their desire to implement this recommendation. Response to Recommendation 4: This recommendation has already been implemented. The Town of Tiburon currently provides over ten (10) years of audited financial statements on our financial page of our website. The Town also provides links to our Ca1PERS annual valuations for the past eight (soon to be nine) years and will continue to do so with fixture valuations. EXHIBIT NO._�L_ I Response to Recommendation 8: This recommendation requires further analysis. Staff will review this recommendation with the Town Council ad-hoc Budget and Finance Committee when they meet again in the fall to determine if it is their desire to implement this recommendation. The Tiburon Town Council reviewed and approved this response on 2017, at a duly noticed and agendized public meeting. If you have further questions on this matter, please do not hesitate to call. Very truly yours, GREG CHANIS Town Manager cc: Town Council Town Attorney Town Council MeetincT TOWN OF TIBURON July 19, 2017 1505 Tiburon Boulevard J Y Tiburon, CA 94920 Agenda Iteln:n + " C STAFF PO . To: Mayor and Members of the Town Council From: Administrative Services Department Subject: New i uncial Accounting Software—Authorize Town Manager to enter into ionse and Services Agreement Reviewed By: CC�� BACKGROUND The Town's adopted budget for FY 2017-18 includes a carry-over appropriation of$125,000 for the replacement of the Town's antiquated financial accounting software system. In November 2016, staff prepared a Request for Proposals (RFP) for new software. The RFP was sent to four vendors and also posted on the Town's website. In January 2017 the Town received two proposals, one from the Town's current vendor, Harris Computer Systems, and the other from Tyler Technologies. Two vendors declined to submit proposals. Town Staff received lengthy demonstrations from both vendors, analyzed the proposals, and conducted an exhaustive referral check. Either system would serve the needs of the Town and would be a substantial upgrade from what we are currently using. It is staff's opinion and recommendation that the Town contract with Tyler Technologies for their Incode system based on pricing (one-time costs of$76,250 versus $167,490), and the fact that Tyler has a broad user base in Marin County and California. The attached Memorandum (Exhibit 1) outlines the selection process in detail, the comparison of products, and the conclusion for Staff's recommendation to Council. Because the service contract item exceeds $40,000, Council action is required to enter into the License and Services Agreement. The financial outlay for the Tyler Incode system itself is $47,250, as outlined in Tyler Technologies' proposal (Exhibit 2). Not included in the proposal is the cost to convert five years of data to allow it to be imported to the new system by our current vendor in the amount of$20,000, and $9,000 in estimated travel costs that would be reimbursed to Tyler Technologies. Total one-time costs = $76,250. RECOMMENDATION Staff recommends that the Town Council: Authorize the Town Manager to execute the Licenses and Services between the Town and Tyler Technologies. Exhibits: 1. Memorandum dated June 29. 2017 2. Proposal from Tyler Technologies, dated July 12, 2017 T(m n C01-111eil \lectins; jIIIv° 19. ?117 3. License and Services Agreement between the Town of Tiburon and Tyler Technologies (To be submitted prior to meeting) Prepared By: Heidi Bigall, Director of Administrative Services ._....... ._........._.._.. __..............____....__.__._......_.....__��____.___��.. 7 th\V'x Ol ]-1111 l TOWN OF TIBURON 1505 Tiburon Boulevard Tiburon,CA 94920 MEMORANDUM Date: June 28,2017 To: Heidi Bigall, Director of Administrative Services From: Troy Bassett, Management Assistant Subject: Recommendation for new software services PROPOSAL For a new Accounting and Financial Management System The Town's current financial system, Harris Computer Systems' SELECT(aka wlntegrate)software was implemented over 20 years ago, and is no longer supported by current Microsoft Windows operating systems. We are currently running the software in XP Mode on individual Windows 7 PCs, and, while meeting the Town's needs, it is out-of-date, difficult to use, and requires set up on individual computers to run Windows 7 in a "virtual" environment. Because of the specialized set up and knowledge required to use SELECT, users outside of Finance do not directly access our current finance data, but rely on Finance personnel to query for information and provide reports. The primary criteria we identified in our search for a replacement software were: a) a program which specialized in governmental accounting; b) a software company with a strong California municipality client base (incorporating CaIPERs requirements in the solution); and c) a solution requiring minimal customization. In the course of reviewing our accounting functions,we identified preferences for a system that: • with an easier, more intuitive user interface, allowing for easier training of new employees and access by non-finance personnel • with better graphics producing clear and easy to read reports • With an easy to use report writing system • With improved automation and a reduction in manual processes and work-arounds • That allowed for greater overall system functionality than is currently being utilized • That improved organizational productivity by increasing efficiency in transaction processing • And that allowed for collaboration with all Town Departments, self-sufficiency for obtaining information, and less reliance on Finance EXHIBIT NO. 1 -i td i 1)1 i,s' A random survey of California cities identified common governmental accounting software currently in use. I identified four software companies (listed below by most common to least), specializing in governmental software,all of which could most likely meet our needs: • Tyler Technologies—currently, the most commonly used software solution • SunGard—TrakiT is included in their entire ERP solution • Harris ERP—updating from our current SELECT software to their INNOPRISE system • And Accela's Springbook Each of these companies offer complete Enterprise Resource Planning solutions,with Business License, Planning and Building, Public Works and Police components. It has not been our intent to work toward an integrated system;we have focused solely on the finance and accounting functions of each. On November 29, 2016,the Town issued a request for proposals; and requests were sent directly to the four companies identified in our preliminary research. The RFP identified our current system and work flow,the components that were needed,components that we were considering, and our rating criteria. We received two proposals on January 11, 2017 in response to our request; one each from Harris Enterprise Resource Planning and from Tyler Technologies. Accela and SunGard opted not to submit proposals. Accela indicated that they had received an overwhelming number of RFPs in December and were unable to respond to all; SunGard did not provide a reason,although we did reach out to our TrakiT (a SunGard product) representative to try to determine why they choose not to respond. We did not get a reply. We received no unsolicited responses. Harris provided the Town with an on-site general demonstration of their INNOPRISE software in February 2016,and we have not invited them back for a second demo in response to our RFP, although they have requested that they be given the opportunity for an updated and more detailed presentation than what was presented in 2016. Heidi Bigall and Troy Bassett were the only Town Staff present for their demo. Tyler Technologies provided an on-site demonstration of their INCODE solution February 7 this year; Suzanne Creekmore was able to join us for this presentation. Ken Lehr, our Marin IT consultant was also present for part of the presentation. On-Site Hosting or Software-as-a-Service On-site allows us to purchase the software;the software and data are hosted on our own servers. With SaaS,the product is cloud-based; the data continues to be owned by the Town. The annual subscription fee for SaaS includes the current, up-to-date software, data and backup storage, as well as redundant backups and security. Concerns regarding security and latency issues with a cloud based system seem to have ebbed in the past year. Tyler has indicated that when there have been problems, it is has been with on-site hardware. Proponents of cloud based solutions argue that data is MORE secure with a cloud based _------------------- .. _._.__._____ ----- _ ____.._ _ ._ . ._ system than an on-site solution,given the backups and redundancies built into the service. Our IT consultant has expressed a preference for a cloud based solution because it does away with the need to maintain the hardware to serve the software, as well as preferring this solution for security reasons. Given all of the above, I have focused on the cloud based solutions proposed by both Tyler and Harris; however pricing for purchased/on-premise systems are included for both Tyler and Harris products. Software Package Although both companies have basic Finance and Payroll modules, each company structures their software packages differently, resulting in different standard and optional components. Any component already included in our Harris SELECT software is included in Harris' INNOPRISE proposal at no extra cost to us (what they call "Software for Life"). Purchasing and Cashiering: we currently don't use these functions. Expenses are entered when an invoice is received; and revenue is entered directly into the GL using reports generated manually,or by the software taking in the revenue (TrakiT; Progressive Solutions; Police Alarm software). Both the purchasing and cashiering modules are integral parts of the basic INNOPRISE system, but can be purchased as stand-alone modules with Tyler. If we opt for the Tyler solution,we can consider not including these functions (and costs) in our original agreement; either, or both, can always be added at a later date. Fixed Assets: we currently do not have a fixed assets component; this information is accounted for separately using an excel spreadsheet. We can add the component to the Financial Module at any time as a stand-alone project with either solution, but I would recommend going ahead and purchasing it, so that we have it available for data entry as time permits. Human Resources and Payroll: Tyler's Personnel Management Suite incorporates payroll, employee information, payroll tax reporting, and benefit plans control, connecting benefits packages to positions (rather than employees). Tyler also indicates that built into their basic Personnel Management Suite is a "flexible budgeting feature". Harris' Human Resource solution also incorporates payroll and a Human Resource function in our existing Software for Life. Harris contends that one of their strengths is the "limitless flexibility" provided by their software. Employee Self Service Employee Self-Service and electronic time entry can be purchased as add-ons with both solutions, and both can follow at a later date, allowing the payroll process to become established prior to making it available to employees. Time and Attendance/Electronic time entry: The Sales folks all tout this feature, and promise it works with an exceptions based payroll, I want to believe it, and our police and corp yard administrators have indicated that they are hoping for an electronic timekeeping function, but I haven't spoken with anyone yet who has managed to successfully implement this function. I would suggest that we get the basic Payroll module up and running before implementing a time keeping system. _....._ ___----- _____ Pio". cd Implementation Management Both companies provide a dedicated management team to the Town for implementation, with separate individuals responsible for Finance and for Payroll. Both companies provide a separate expert (Application Consultants, Harris; Project Managers,Tyler)for the Finance and the Payroll modules. Change: everyone I spoke with stressed the value of spending the time up front to set up any new system for optimal use, and both companies strongly encourage not simply transferring data to the new system, but re-thinking our"work flow", or how things are done,to better take advantage of new software capabilities. Both companies include a process review, and will make recommendations for change prior to implementation. Both promise much hand-holding. History and Data Conversion Ideally, we would transfer all historical financial data in our current accounting software to the new. Short of maintaining a license for SELECT, we will lose the ability to read our historical SELECT data if it is not imported into the new system. Based on our Records Retention schedule requirements,we looked at the time and costs associated with migrating five years of historical data. Harris: Harris' price assumes current plus two years of historical data. The current process Harris (Alan LeBrun) uses for migrating SELECT data to INNOPRISE is to export it to an Excel file, and then to import the data into INNOPRISE. Harris can provide us with data extracted from SELECT into an Excel worksheet, which we can always import to a new system ourselves Because Harris has already created the conversion framework for SELECT to INNOPRISE,our responsibilities would be limited; however, Harris strongly recommended that we NOT simply migrate the data; they include in their services a review of our current Work Flow practices, and their best practice recommendations for change. Tyler: Tyler has included in their proposal an estimated fee of$10,250 for importing our General Ledger, Accounts Payable, and Payroll data, regardless of the number of years imported. They've explained that the cost is in setting up the conversion framework, rather than the amount of data. Harris has provided a $20,000 estimate for providing us with five years of data for import to another software; that amount would increase if we requested more. Training and Support On-Site training is included in both proposals as part of their implementation packages; for finance staff and for all intended non-finance users(eg.for view-only data queries, accounts payable approvals, pulling up "real-time" reports) Continuing Education and Training for new employees: Both companies provide continuing education opportunities on-line. The Innoprise web-based trainings are interactive and billable ($200/session); Harris includes a guarantee to schedule one session per week at minimum. "Tyler U" is an on-demand e- learning library included as part of their base support services (no extra cost). Both companies also have regular User Conferences. ............._------ ____ _. __w_ _...____________.....__.v_.__.______._ __ �___.____._. It�V,i?,11 i i1)[11i1i"1 Support: both companies offer immediate phone support in addition to logging support calls. I have heard that Tyler's phone support staff is hit or miss, but with some effort, it is always possible to get to a staff member that can help. Our experience with Harris (down to two remaining employees working with SELECT) has always been top-notch, (although they haven't always been patient with our entry-level staff) Document Management Both packages include an integrated document management and storage system, which allow for automatic saving of documents and reports in .pdf(or other OCR format), including scanned paper documents (invoices for payment; agreements and contracts, etc)to financial records. Document management also includes search capabilities. Laser fiche: Both offer a laserfiche add-on which would transfer information into our laserfiche storage; however,the search and storage capability built into the basic document management systems proposed by both Tyler and Harris seem more than adequate for our needs. Integration with existing programs We currently use several other software systems to track much of our incoming revenue, (eg.TrakiT, our business license software, and PDs security alarm software)which is then entered into our accounting software manually from summary reports produced by each stand-alone system. We can integrate these systems with either new finance software to avoid entering information twice. Harris: indicated that the simplest solution would be to build a custom Batch File and transfer via file export, at an additional cost of about$1,250. At least for the present, manual entry of cash receipts is simple, and not time consuming, and I'm not sure it needs to be included in the integration in our original Agreement. Harris suggested that this option could be discussed during implementation with the Application Consultant. Credit card receipts can be handled a) the same as we are doing now(using GovTel reporting and revenue summary reports fed through an Accounts Receivable account as part of our cash receipts process) or b)Tyler can integrate GovTel with the Tyler Cashiering component, or c)we can opt into Harris' own payment gateway instead of using GovTel. Microsoft Excel and Word integration is built in to both INNOPRISE and INCODE,allowing for a simple export. INCODE also includes the ability to email documents directly from within INCODE,something not yet available in INNOPRISE ! ,i, Pricing for on-premise hosting is a bit more expensive than SaaS up front since the software must be purchased. Harris is not charging us for the cost of software we are already using (priced at$49,800); optional,additional modules provided in the proposal include Fixed Assets, Employee Self Service, Inventory,, Laserfiche conversion, Capital Projects Planning and Contract Management. I have only included the first two in my pricing comparison,totaling$23,265.00(software AND professional services). 1't_ `>c,Ff� Tyler has itemized each of their software modules, allowing us to pick and choose. Since we don't use either purchasing functions, nor cashiering functions(Cash receipts are posted directly to the GL), these can be pulled out,further reducing their proposed price of$44,500(Software only)to$37,500. Tyler indicated in discussion that individual modules can be included in the Agreement, and deleted with no penalty cost if deemed unnecessary during the preliminary review process with our implementation specialist. Likewise, they can be added at a later date. Harris pricing is substantially higher up front. I've spent some amount of time trying to establish why the difference; some of it probably has to do with scale;Tyler is a much larger company, and handles many more conversions than Harris. I also believe it has to do with the amount of time Harris spends in migration and on training. A small amount may be included in Tyler's software costs, (remember, Harris is not charging us for much of the software package) Harris software $ 147,420(adding fixed assets and ESS only) Tyler software $ 59,750(including purchasing and cashiering) Add$20,000 to the Tyler solution for obtaining historical data from Harris The number of trips to Town Hall estimated by each company(see below) is by itself a major difference in time spent on installation, conversion and training services. Tyler does not make trips during the planning phase prior to migration; most work is done by phone and web-sharing. Travel: Travel costs are billed as incurred, and are not included in pricing; estimated by both companies at about$2,000/trip. Harris estimates 10 trips, (5 each for Financials and Payroll/HR);Tyler, 3 (2 for Financials, one for Payroll/HR). Each plan trips of 3 days each (Monday travel, meet Tue-Thu, and Friday travel). A. Tyler annual fees are higher than those charged by Harris; however, when calculating costs over seven years, plus adding initial one-time costs,Tyler remains less costly. It should also be noted that Harris increases their annual fees each year(by about 5%), while Tyler's will remain constant for the length of the Agreement. User Fees: Harris provides for unlimited users, which is included in their pricing. Tyler has an annual user fee of $575/user. User licenses are required for access to the accounting functions in INNOPRISE;there is no fee for users to be able to view data, create reports, or approve accounts payable invoices, (Tyler refers to this access as"Tyler Express"). Tyler has included 4 user licenses in their proposal for estimating purposes. We would most likely need only 2 or 3. Support Annual fees for the total package including updates and support. Tyler $ 27,612.00 Harris $ 19,092.00 Tyler offers direct line phone support, call support log-in, and on-line manuals and training sessions included in their base price. Harris provides phone support,with call support log-in and follow up. Online Trainings are offered at$200/session. The table below outlines costs for the Software as Service proposals,with the purchasing and cashiering components removed from the Tyler costs: Harris Tyler --7771 INSTALLATION&CONVERSION CONVERSION $ 124,155.00 $ 10,250.00 PROJECT MANAGEMENT INC $ 5,000.00 SITE TRAINING&ASSIST INC INC CORE FINANCIALS no charge $ - FMS $ 12,500.00 Purchasing INC $ ADDL Project Accounting INC $ - ADDL $ 2,000.00 Fixed Assets ADDL $ 9,405.00 ADDL $ 2,000.00 PAYROLL/HR no charge PMS $ 11,500.00 Employee Self Service ADDL $ 13,860.00 ADDL Time and Attendance INC ADDL CASHIERING INC ADDL CONTENT MANAGEMENT $ 4,000.00 Subtotal $ 147,420.00 $ 47,250.00 5 years historical data estimate $ 20,000.00 Travel cost reimbursement est. 10 $2,007 $ 20,070.00 3 $ 3,000.00 $ 9,000.00 ONETIME COSTS $ 167,490.00 $ 76,250.00 ANNUAL SUBSCRIPTION FEE Annual SaaS Fee $ 19,092.00 $ 21,610.00 Annual User Fee unlim $ 3 $ 575.00 $ 1,725.00 Addl:Fixed Assets $ 1,076.00 Add]:EmpE Self Service $ 3,300.00 ANNUALFEE $ 23,468.00 $ 23,335.00 FIRST YEAR TOTALS $ 190,958.00 $ 99,585.00 Installation&Conversion $ 167,490.00 $ 76,250.00 7 years Service $ 191,076.65 $ 163,345.00 Total over 7 years $ 358,566.65 $ 239,595.00 Either system will serve the needs of the Town and be a tremendous upgrade from what we currently are using. A key benefit of staying with Harris is that we would be upgrading, rather than replacing, our current software,with the advantage that Harris would be responsible for the old as well as the new data during migration, minimizing Town staff time. Our existing Harris support team (Genevieve Hollingsworth and Alan Lebrun)would be participants in the migration process. By staying with Harris, we would continue to work with the company we currently work with, and with people with whom we have existing relationships. ..--— _------------ .___. ____.___._._._.___- 1 tiv�'n ilii I ik.l cm Concerns regarding the Harris product include: • Harris' limited client base in California (16 California customers, with only two on Innoprise, Mono County and Grover Beach) • Harris' costs are substantially higher, although maintenance costs over seven years do somewhat alleviate the total outlay. Tyler's most obvious strength is the popularity of their product;they have a strong client base in Marin, (including Mill Valley, Larkspur, San Anselmo, with Corte Madera considering making the transition), and throughout California (around 200 in state), providing multiple resources for problem solving and use, and possibly less training for new employees. And then, there is the substantial difference in cost. The most common complaints heard about Tyler are • Ongoing support is less than ideal • Reports are slow to load, and not very flexible My takeaway is that Harris seems to provide the more sophisticated product for financial analysis,while Tyler provides a more popular product with standard reports, although it is not without its own data analysis capabilities; and while Harris gets higher customer service reviews,Tyler has a bigger pool of available resources. The downsides for Harris are facts(smaller company, limited California client base), while the downsides for Tyler tend to be matters of opinion (levels of satisfaction with customer service and reporting). I've heard a wide range of satisfaction levels for the INCODE product, but no one is unhappy with it. It is my opinion that Tyler provides the better choice for the Town. Proposed: 1. Installation of Personnel Management/Payroll for go-live January 1, 2018, corresponding with the calendar year, per payroll tax reporting requirements. My thinking is that rather than running two accounting systems simultaneously for an extended period of time,this may allow payroll to be entered into the GL(while it is still on SELECT) as a journal entry. 2. Installation of Finance for go-live with the start of the fiscal year,July 1, 2018, including Core Financials and Project Accounting. 3. Installation of new components (those not currently in use, such as Fixed Assets and Employee Self- Service) during fiscal year 2018-2019, after core components are up and running, or as determined during the planning phases with the implementation team. Harris has indicated that the proposed timeline is possible;Tyler has suggested that since so many of their customers are looking at January 1 go-live date,we would need to have an agreement in place asap in order to ensure availability of Tyler personnel. _----------__---- ___ ___ ....... __ tyl er rechnolq ies Proposal -A LAVE Presented to: Troy Bassett Finance Director Town of Tiburon 1505 Tiburon Blvd Tiburon, CA 94920 tbassett@townoftiburon.org Proposal date: July 12, 2017 Submitted by: David Snow (800) 646-2633 david.snow@tylertech.com Tyler Technologies Local Government Division Corporate Office-5519 53rd Street Lubbock, Texas 79414 EXHIBIT NO.. ty ,!er Prepared for: Quoted By: David Snow Troy Bassett Quote Date: 07/12/17 Town of Tiburon Expiration Date: 11/09/17 1505 Tiburon Blvd Tiburon,CA 94920 tbassett@townoftiburon.org SAAS Tyler Related Products and Services Incode Financial Management Suite Core Financials(GL,Budget Prep,Bank Recon,AP,Express,CellSer 100 $12,500 Fixed Assets 16 $2,000 Project Accounting 16 $2,000 Incode Personnel Management Suite Personnel Management(Includes Position Budgeting) 92 $11,500 Content Management Suite Custom Form Service(pricing per form) 1 Included Tyler Content Manager Standard Edition(TCM SE) 32 $4,000 Subtotal 256 $32,000 Conversion Services Financial Applications $4,250 16 $2,000 $6,250 Personnel Management/Payroll $3,000 8 $1,000 $4,000 Subtotal $7,250 24 $3,000 $10,250 Professional Services Project Management $5,000 $5,000 Subtotal - $5,000 $5,000 Tyler Hosted Applications Continuing Education Tyler U Included Tyler Network Services/Hardware/Third Party Network Services Disaster Recovery Services Included Basic Network Services Included Length of Agreement 7 Years-84 Months Annual SaaS Fee $ 21,610 Annual User Fee 3 $ 1,725 Total Annual SaaS Fee $ 23,335 -Additional fees will apply for additional users Summary One Time Fees Recurring Fees Total Tyler Services $47,250 Annual SaaS Fee $ 23,335 Summary Total $47,250 $23,335 Estimated Travel Expense: Note: Travel Expenses are billed as incurred based on Federal IRS per diem standards. tylerCS Prepared for: Quoted By: David Snow Troy Bassett Quote Date: 07/12/17 Town of Tiburon Expiration Date: 11/09/17 Tyler Conversion Services(NOTE:See Conversion Summary Documentation or SOW for Details on Scope) Financial Applications $4,250 $2,000 $6,250 General Ledger 1,500 8 1,000 -Chart of Accounts-Additional Fee for Historical Views Legacy/Historical Views 500 4 500 Accounts Payable 1,750 - - -Vendor Master Only-Additional Fee for Historical Views Legacy/Historical Views 500 4 500 Personnel/Payroll Applications $3,000 $1,000 $4,000 Personnel Management/Payroll $2,000 4 $500 -Employee Master,Deductions/Taxes,Retirement,Current Leave Totals,Current Direct Deposit-Additional Fee for Historical Views Legacy/Historical Views $1,000 4 $500 Subtotal $10,250 tyler SOFTWARE AS A SERVICE AGREEMENT This Software as a Service Agreement is made between Tyler Technologies, Inc. and Client. WHEREAS, Client selected Tyler to provide certain products and services set forth in the Investment Summary, including providing Client with access to Tyler's proprietary software products, and Tyler desires to provide such products and services under the terms of this Agreement; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and promises set forth in this Agreement,Tyler and Client agree as follows: SECTION A—DEFINITIONS • "Agreement" means this Software as a Services Agreement. • "Business Travel Policy" means our business travel policy. A copy of our current Business Travel Policy is attached as Schedule 1 to Exhibit B. • "Client" means Town of Tiburon, CA. • "Data" means your data necessary to utilize the Tyler Software. • "Data Storage Capacity" means the contracted amount of storage capacity for your Data identified in the Investment Summary. • "Defect" means a failure of the Tyler Software to substantially conform to the functional descriptions set forth in our written proposal to you, or their functional equivalent. Future functionality may be updated, modified, or otherwise enhanced through our maintenance and support services, and the governing functional descriptions for such future functionality will be set forth in our then-current Documentation. • "Defined Concurrent Users" means the number of concurrent users that are authorized to use the SaaS Services. The Defined Concurrent Users for the Agreement are three (3) users. • "Developer" means a third party who owns the intellectual property rights to Third Party Software. • "Documentation" means any online or written documentation related to the use or functionality of the Tyler Software that we provide or otherwise make available to you, including instructions, user guides, manuals and other training or self-help documentation. • "Effective Date" means the date on which your authorized representative signs the Agreement. • "Force Majeure" means an event beyond the reasonable control of you or us, including, without limitation, governmental action, war, riot or civil commotion, fire, natural disaster, or any other cause that could not with reasonable diligence be foreseen or prevented by you or us. • "Investment Summary" means the agreed upon cost proposal for the products and services attached as Exhibit A. • "Invoicing and Payment Policy" means the invoicing and payment policy. A copy of our current Invoicing and Payment Policy is attached as Exhibit B. • "SaaS Fees" means the fees for the SaaS Services identified in the Investment Summary. • "SaaS Services" means software as a service consisting of system administration, system management, and system monitoring activities that Tyler performs for the Tyler Software, and EXHIBIT N-0, 3 includes the right to access and use the Tyler Software, receive maintenance and support on the Tyler Software, including Downtime resolution under the terms of the SLA, and Data storage and archiving. SaaS Services do not include support of an operating system or hardware, support outside of our normal business hours, or training, consulting or other professional services. • "SLA" means the service level agreement. A copy of our current SLA is attached hereto as Exhibit C. • "Statement of Work" means the industry standard implementation plan describing how our professional services will be provided to implement the Tyler Software, and outlining your and our roles and responsibilities in connection with that implementation. The Statement of Work is attached as Exhibit E. • "Support Call Process" means the support call process applicable to all of our customers who have licensed the Tyler Software. A copy of our current Support Call Process is attached as Schedule 1 to Exhibit C. • "Third Party Terms" means, if any, the end user license agreement(s) or similar terms for the Third Party Software, as applicable. • "Third Party Hardware" means the third party hardware, if any, identified in the Investment Summary. • "Third Party Products" means the Third Party Software and Third Party Hardware. • "Third Party Software" means the third party software, if any, identified in the Investment Summary. • "Tyler" means Tyler Technologies, Inc., a Delaware corporation. • "Tyler Software" means our proprietary software, including any integrations, custom modifications, and/or other related interfaces identified in the Investment Summary and licensed by us to you through this Agreement. • "we", "us", "our" and similar terms mean Tyler. • "you" and similar terms mean Client. SECTION B—SAAS SERVICES 1. Rights Granted. We grant to you the non-exclusive, non-assignable limited right to use the SaaS Services solely for your internal business purposes for the number of Defined Concurrent Users only. The Tyler Software will be made available to you according to the terms of the SLA. You acknowledge that we have no delivery obligations and we will not ship copies of the Tyler Software as part of the SaaS Services. You may use the SaaS Services to access updates and enhancements to the Tyler Software, as further described in Section C(8). 2. SaaS Fees. You agree to pay us the SaaS Fees. Those amounts are payable in accordance with our Invoicing and Payment Policy. The SaaS Fees are based on the number of Defined Concurrent Users and amount of Data Storage Capacity. You may add additional concurrent users or additional data storage capacity on the terms set forth in Section H(1). In the event you regularly and/or meaningfully exceed the Defined Concurrent Users or Data Storage Capacity, we reserve the right to charge you additional fees commensurate with the overage(s). 3. Ownership. 3.1 We retain all ownership and intellectual property rights to the SaaS Services, the Tyler Software, and anything developed by us under this Agreement. You do not acquire under this Agreement any license to use the Tyler Software in excess of the scope and/or duration of the SaaS Services. 3.2 The Documentation is licensed to you and may be used and copied by your employees for internal, non-commercial reference purposes only. 3.3 You retain all ownership and intellectual property rights to the Data. 4. Restrictions. You may not: (a) make the Tyler Software or Documentation resulting from the SaaS Services available in any manner to any third party for use in the third party's business operations; (b) modify, make derivative works of, disassemble, reverse compile, or reverse engineer any part of the SaaS Services; (c) access or use the SaaS Services in order to build or support, and/or assist a third party in building or supporting, products or services competitive to us; or(d) license, sell, rent, lease, transfer, assign, distribute, display, host, outsource, disclose, permit timesharing or service bureau use, or otherwise commercially exploit or make the SaaS Services, Tyler Software, or Documentation available to any third party other than as expressly permitted by this Agreement. 5. Software Warranty. We warrant that the Tyler Software will perform without Defects during the term of this Agreement. If the Tyler Software does not perform as warranted, we will use all reasonable efforts, consistent with industry standards, to cure the Defect in accordance with the maintenance and support process set forth in Section C(8), below, the SLA and our then current Support Call Process. 6. SaaS Services. 6.1 Our SaaS Services are audited at least yearly in accordance with the AICPA's Statement on Standards for Attestation Engagements ("SSAE") No. 16, Type 2. We have attained, and will maintain,Type II SSAE compliance, or its equivalent, for so long as you are timely paying for SaaS Services. Upon execution of a mutually agreeable Non-Disclosure Agreement ("NDA"), we will provide you with a summary of our SSAE-16 compliance report or its equivalent. Every year thereafter, for so long as the NDA is in effect and in which you make a written request, we will provide that same information. 6.2 You will be hosted on shared hardware in a Tyler data center, but in a database dedicated to you, which is inaccessible to our other customers. 6.3 We have fully-redundant telecommunications access, electrical power, and the required hardware to provide access to the Tyler Software in the event of a disaster or component failure. In the event any of your Data has been lost or damaged due to an act or omission of Tyler or its subcontractors or due to a defect in Tyler's software, we will use best commercial efforts to restore all the Data on servers in accordance with the architectural design's capabilities and with the goal of minimizing any Data loss as greatly as possible. In no case shall the recovery point objective ("RPO") exceed a maximum of twenty-four(24) hours from declaration of disaster. For purposes of this subsection, RPO represents the maximum tolerable period during which your Data may be lost, measured in relation to a disaster we declare, said declaration will not be unreasonably withheld. 6.4 In the event we declare a disaster, our Recovery Time Objective ("RTO") is twenty-four(24) hours. For purposes of this subsection, RTO represents the amount of time, after we declare a disaster, within which your access to the Tyler Software must be restored. 6.5 We conduct annual penetration testing of either the production network and/or web application to be performed. We will maintain industry standard intrusion detection and prevention systems to monitor malicious activity in the network and to log and block any such activity. We will provide you with a written or electronic record of the actions taken by us in the event that any unauthorized access to your database(s) is detected as a result of our security protocols. We will undertake an additional security audit, on terms and timing to be mutually agreed to by the parties, at your written request. You may not attempt to bypass or subvert security restrictions in the SaaS Services or environments related to the Tyler Software. Unauthorized attempts to access files, passwords or other confidential information, and unauthorized vulnerability and penetration test scanning of our network and systems (hosted or otherwise) is prohibited without the prior written approval of our IT Security Officer. 6.6 We test our disaster recovery plan on an annual basis. Our standard test is not client-specific. Should you request a client-specific disaster recovery test, we will work with you to schedule and execute such a test on a mutually agreeable schedule. 6.7 We will be responsible for importing back-up and verifying that you can log-in. You will be responsible for running reports and testing critical processes to verify the returned data. At your written request, we will provide test results to you within a commercially reasonable timeframe after receipt of the request. 6.8 We provide secure data transmission paths from each of your workstations to our servers. 6.9 For at least the past ten (10) years, all of our employees have undergone criminal background checks prior to hire. All employees sign our confidentiality agreement and security policies. Our data centers are accessible only by authorized personnel with a unique key entry. All other visitors must be signed in and accompanied by authorized personnel. Entry attempts to the data center are regularly audited by internal staff and external auditors to ensure no unauthorized access. SECTION C—OTHER PROFESSIONAL SERVICES 1. Other Professional Services. We will provide you the various implementation-related services itemized in the Investment Summary and described in the Statement of Work. We will finalize that documentation with you upon execution of this Agreement. 2. Professional Services Fees. You agree to pay us the professional services fees in the amounts set forth in the Investment Summary. Those amounts are payable in accordance with our Invoicing and Payment Policy. You acknowledge that the fees stated in the Investment Summary are good-faith estimates of the amount of time and materials required for your implementation. We will bill you the actual fees incurred based on the in-scope services provided to you. Any discrepancies in the total values set forth in the Investment Summary will be resolved by multiplying the applicable hourly rate by the quoted hours. 3. Additional Services. The Investment Summary contains, and the Statement of Work describes, the scope of services and related costs (including programming and/or interface estimates) required for the project based on our understanding of the specifications you supplied. If additional work is required, or if you use or request additional services, we will provide you with an addendum or change order, as applicable, outlining the costs for the additional work. The price quotes in the addendum or change order will be valid for thirty (30) days from the date of the quote. 4. Cancellation. If travel is required, we will make all reasonable efforts to schedule travel for our personnel, including arranging travel reservations, at least two (2) weeks in advance of commitments. Therefore, if you cancel services less than two (2) weeks in advance (other than for Force Majeure or breach by us), you will be liable for all (a) non-refundable expenses incurred by us on your behalf, and (b) daily fees associated with cancelled professional services if we are unable to reassign our personnel. We will make all reasonable efforts to reassign personnel in the event you cancel within two (2) weeks of scheduled commitments. 5. Services Warranty. We will perform the services in a professional, workmanlike manner, consistent with industry standards. In the event we provide services that do not conform to this warranty, we will re-perform such services at no additional cost to you. 6. Site Access and Requirements. At no cost to us, you agree to provide us with full and free access to your personnel, facilities, and equipment as may be reasonably necessary for us to provide implementation services, subject to any reasonable security protocols or other written policies provided to us as of the Effective Date, and thereafter as mutually agreed to by you and us. 7. Client Assistance. You acknowledge that the implementation of the Tyler Software is a cooperative process requiring the time and resources of your personnel. You agree to use all reasonable efforts to cooperate with and assist us as may be reasonably required to meet the agreed upon project deadlines and other milestones for implementation. This cooperation includes at least working with us to schedule the implementation-related services outlined in this Agreement. We will not be liable for failure to meet any deadlines and milestones when such failure is due to Force Majeure or to the failure by your personnel to provide such cooperation and assistance (either through action or omission). 8. Maintenance and Support. For so long as you timely pay your SaaS Fees according to the Invoicing and Payment Policy, then in addition to the terms set forth in the SLA and the Support Call Process, we will: 8.1 perform our maintenance and support obligations in a professional, good, and workmanlike manner, consistent with industry standards, to resolve Defects in the Tyler Software (limited to the then-current version and the immediately prior version); 8.2 provide telephone support during our established support hours; 8.3 maintain personnel that are sufficiently trained to be familiar with the Tyler Software and Third Party Software, if any, in order to provide maintenance and support services; 8.4 make available to you all major and minor releases to the Tyler Software (including updates and enhancements) that we make generally available without additional charge to customers who have a maintenance and support agreement in effect; and 8.5 provide non-Defect resolution support of prior releases of the Tyler Software in accordance with our then-current release life cycle policy. We will use all reasonable efforts to perform support services remotely. Currently, we use a third-party secure unattended connectivity tool called Bomgar, as well as GotoAssist by Citrix. Therefore, you agree to maintain a high-speed internet connection capable of connecting us to your PCs and server(s). You agree to provide us with a login account and local administrative privileges as we may reasonably require to perform remote services. We will, at our option, use the secure connection to assist with proper diagnosis and resolution, subject to any reasonably applicable security protocols. If we cannot resolve a support issue remotely, we may be required to provide onsite services. In such event, we will be responsible for our travel expenses, unless it is determined that the reason onsite support was required was a reason outside our control. Either way, you agree to provide us with full and free access to the Tyler Software, working space, adequate facilities within a reasonable distance from the equipment, and use of machines, attachments, features, or other equipment reasonably necessary for us to provide the maintenance and support services, all at no charge to us. We strongly recommend that you also maintain your VPN for backup connectivity purposes. For the avoidance of doubt, SaaS Fees do not include the following services: (a) onsite support (unless Tyler cannot remotely correct a Defect in the Tyler Software, as set forth above); (b) application design; (c) other consulting services; or (d) support outside our normal business hours as listed in our then- current Support Call Process. Requested services such as those outlined in this section will be billed to you on a time and materials basis at our then current rates. You must request those services with at least one (1) weeks' advance notice. SECTION D—THIRD PARTY PRODUCTS 1. Third Party Hardware. We will sell, deliver, and install onsite the Third Party Hardware, if you have purchased any, for the price set forth in the Investment Summary. Those amounts are payable in accordance with our Invoicing and Payment Policy. 2. Third Party Software. As part of the SaaS Services, you will receive access to the Third Party Software and related documentation for internal business purposes only. Your rights to the Third Party Software will be governed by the Third Party Terms. 3. Third Party Products Warranties. 3.1 We are authorized by each Developer to grant access to the Third Party Software. 3.2 The Third Party Hardware will be new and unused, and upon payment in full, you will receive free and clear title to the Third Party Hardware. 3.3 You acknowledge that we are not the manufacturer of the Third Party Products. We do not warrant or guarantee the performance of the Third Party Products. However, we grant and pass through to you any warranty that we may receive from the Developer or supplier of the Third Party Products. SECTION E- INVOICING AND PAYMENT; INVOICE DISPUTES 1. Invoicing and Payment. We will invoice you the SaaS Fees and fees for other professional services in the Investment Summary per our Invoicing and Payment Policy, subject to Section E(2). 2. Invoice Disputes. If you believe any delivered software or service does not conform to the warranties in this Agreement, you will provide us with written notice within thirty (30) days of your receipt of the applicable invoice. The written notice must contain reasonable detail of the issues you contend are in dispute so that we can confirm the issue and respond to your notice with either a justification of the invoice, an adjustment to the invoice, or a proposal addressing the issues presented in your notice. We will work with you as may be necessary to develop an action plan that outlines reasonable steps to be taken by each of us to resolve any issues presented in your notice. You may withhold payment of the amount(s) actually in dispute, and only those amounts, until we complete the action items outlined in the plan. If we are unable to complete the action items outlined in the action plan because of your failure to complete the items agreed to be done by you, then you will remit full payment of the invoice. We reserve the right to suspend delivery of all SaaS Services, including maintenance and support services, if you fail to pay an invoice not disputed as described above within fifteen (15) days of notice of our intent to do so. SECTION F—TERM AND TERMINATION 1. Term. The initial term of this Agreement is seven (7) years from the first day of the first month following the Effective Date, unless earlier terminated as set forth below. Upon expiration of the initial term, this Agreement will renew automatically for additional one (1) year renewal terms at our then-current SaaS Fees unless terminated in writing by either party at least sixty(60) days prior to the end of the then-current renewal term. Your right to access or use the Tyler Software and the SaaS Services will terminate at the end of this Agreement. 2. Termination. This Agreement may be terminated as set forth below. In the event of termination, you will pay us for all undisputed fees and expenses related to the software, products, and/or services you have received, or we have incurred or delivered, prior to the effective date of termination. Disputed fees and expenses in all terminations other than your termination for cause must have been submitted as invoice disputes in accordance with Section E(2). 2.1 Failure to Pay SaaS Fees. You acknowledge that continued access to the SaaS Services is contingent upon your timely payment of SaaS Fees. If you fail to timely pay the SaaS Fees, we may discontinue the SaaS Services and deny your access to the Tyler Software. We may also terminate this Agreement if you don't cure such failure to pay within forty-five (45) days of receiving written notice of our intent to terminate. 2.2 For Cause. If you believe we have materially breached this Agreement, you will invoke the Dispute Resolution clause set forth in Section H(3). You may terminate this Agreement for cause in the event we do not cure, or create a mutually agreeable action plan to address, a material breach of this Agreement within the thirty(30) day window set forth in Section H(3). 2.3 Force Majeure. Either party has the right to terminate this Agreement if a Force Majeure event suspends performance of the SaaS Services for a period of forty-five (45) days or more. 2.4 Lack of Appropriations. If you should not appropriate or otherwise make available funds sufficient to utilize the SaaS Services, you may unilaterally terminate this Agreement upon thirty (30) days written notice to us. You will not be entitled to a refund or offset of previously paid, but unused SaaS Fees. You agree not to use termination for lack of appropriations as a substitute for termination for convenience. 2.5 Fees for Termination without Cause during Initial Term. If you terminate this Agreement during the initial term for any reason other than cause, Force Majeure, or lack of appropriations, or if we terminate this Agreement during the initial term for your failure to pay SaaS Fees, you shall pay us the following early termination fees: a. if you terminate during the first year of the initial term, 100% of the SaaS Fees through the date of termination plus 2S% of the SaaS Fees then due for the remainder of the initial term; b. if you terminate during the second year of the initial term, 100% of the SaaS Fees through the date of termination plus 15%of the SaaS Fees then due for the remainder of the initial term; and c. if you terminate after the second year of the initial term, 100% of the SaaS Fees through the date of termination plus 10% of the SaaS Fees then due for the remainder of the initial term. SECTION G—INDEMNIFICATION, LIMITATION OF LIABILITY AND INSURANCE 1. Intellectual Property Infringement Indemnification. 1.1 We will defend you against any third party claim(s)that the Tyler Software or Documentation infringes that third party's patent, copyright, or trademark, or misappropriates its trade secrets, and will pay the amount of any resulting adverse final judgment (or settlement to which we consent). You must notify us promptly in writing of the claim and give us sole control over its defense or settlement. You agree to provide us with reasonable assistance, cooperation, and information in defending the claim at our expense. 1.2 Our obligations under this Section G(1) will not apply to the extent the claim or adverse final judgment is based on your use of the Tyler Software in contradiction of this Agreement, including with non-licensed third parties, or your willful infringement. 1.3 If we receive information concerning an infringement or misappropriation claim related to the Tyler Software, we may, at our expense and without obligation to do so, either: (a) procure for you the right to continue its use; (b) modify it to make it non-infringing; or (c) replace it with a functional equivalent, in which case you will stop running the allegedly infringing Tyler Software immediately. Alternatively, we may decide to litigate the claim to judgment, in which case you may continue to use the Tyler Software consistent with the terms of this Agreement. 1.4 If an infringement or misappropriation claim is fully litigated and your use of the Tyler Software is enjoined by a court of competent jurisdiction, in addition to paying any adverse final judgment (or settlement to which we consent), we will, at our option, either: (a) procure the right to continue its use; (b) modify it to make it non-infringing; (c) replace it with a functional equivalent; or(d) terminate this Agreement and refund you the prepaid but unused SaaS Fees for the year in which the Agreement terminates. We will pursue those options in the order listed herein. This section provides your exclusive remedy for third party copyright, patent, or trademark infringement and trade secret misappropriation claims. 2. General Indemnification. 2.1 We will indemnify and hold harmless you and your agents, officials, and employees from and against any and all third-party claims, losses, liabilities, damages, costs, and expenses (including reasonable attorney's fees and costs)for(a) personal injury or property damage to the extent caused by our negligence or willful misconduct; or (b) our violation of a law applicable to our performance under this Agreement. You must notify us promptly in writing of the claim and give us sole control over its defense or settlement. You agree to provide us with reasonable assistance, cooperation, and information in defending the claim at our expense. 2.2 To the extent permitted by applicable law, you will indemnify and hold harmless us and our agents, officials, and employees from and against any and all third-party claims, losses, liabilities, damages, costs, and expenses (including reasonable attorney's fees and costs)for personal injury or property damage to the extent caused by your negligence or willful misconduct; or(b)your violation of a law applicable to your performance under this Agreement. We will notify you promptly in writing of the claim and will give you sole control over its defense or settlement. We agree to provide you with reasonable assistance, cooperation, and information in defending the claim at your expense. 3. DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES PROVIDED IN THIS AGREEMENT AND TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, WE HEREBY DISCLAIM ALL OTHER WARRANTIES AND CONDITIONS,WHETHER EXPRESS, IMPLIED, OR STATUTORY, INCLUDING, BUT NOT LIMITED TO,ANY IMPLIED WARRANTIES, DUTIES, OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 4. LIMITATION OF LIABILITY. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, OUR LIABILITY FOR DAMAGES ARISING OUT OF THIS AGREEMENT, WHETHER BASED ON A THEORY OF CONTRACT OR TORT, INCLUDING NEGLIGENCE AND STRICT LIABILITY,SHALL BE LIMITED TO YOUR ACTUAL DIRECT DAMAGES, NOT TO EXCEED (A) DURING THE INITIAL TERM,AS SET FORTH IN SECTION F(2),TOTAL FEES PAID AS OF THE TIME OF THE CLAIM; OR (B) DURING ANY RENEWAL TERM,THE THEN-CURRENT ANNUAL SAAS FEES PAYABLE IN THAT RENEWAL TERM. THE PRICES SET FORTH IN THIS AGREEMENT ARE SET IN RELIANCE UPON THIS LIMITATION OF LIABILITY. THE FOREGOING LIMITATION OF LIABILITY SHALL NOT APPLY TO CLAIMS THAT ARE SUBJECT TO SECTIONS G(1)AND G(2). S. EXCLUSION OF CERTAIN DAMAGES. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL WE BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES WHATSOEVER, EVEN IF WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 6. Insurance. During the course of performing services under this Agreement, we agree to maintain the following levels of insurance: (a) Commercial General Liability of at least$1,000,000; (b) Automobile Liability of at least $1,000,000; (c) Professional Liability of at least$1,000,000; (d) Workers Compensation complying with applicable statutory requirements; and (e) Excess/Umbrella Liability of at least$5,000,000. We will add you as an additional insured to our Commercial General Liability and Automobile Liability policies, which will automatically add you as an additional insured to our Excess/Umbrella Liability policy as well. We will provide you with copies of certificates of insurance upon your written request. SECTION H —GENERAL TERMS AND CONDITIONS 1. Additional Products and Services. You may purchase additional products and services at the rates set forth in the Investment Summary for twelve (12) months from the Effective Date by executing a mutually agreed addendum. If no rate is provided in the Investment Summary, or those twelve (12) months have expired, you may purchase additional products and services at our then-current list price, also by executing a mutually agreed addendum. The terms of this Agreement will control any such additional purchase(s), unless otherwise specifically provided in the addendum. 2. Optional Items. Pricing for any listed optional products and services in the Investment Summary will be valid for twelve (12) months from the Effective Date. 3. Dispute Resolution. You agree to provide us with written notice within thirty (30) days of becoming aware of a dispute. You agree to cooperate with us in trying to reasonably resolve all disputes, including, if requested by either party, appointing a senior representative to meet and engage in good faith negotiations with our appointed senior representative. Senior representatives will convene within thirty (30) days of the written dispute notice, unless otherwise agreed. All meetings and discussions between senior representatives will be deemed confidential settlement discussions not subject to disclosure under Federal Rule of Evidence 408 or any similar applicable state rule. If we fail to resolve the dispute, either of us may assert our respective rights and remedies in a court of competent jurisdiction. Nothing in this section shall prevent you or us from seeking necessary injunctive relief during the dispute resolution procedures. 4. Taxes. The fees in the Investment Summary do not include any taxes, including, without limitation, sales, use, or excise tax. If you are a tax-exempt entity,you agree to provide us with a tax-exempt certificate. Otherwise, we will pay all applicable taxes to the proper authorities and you will reimburse us for such taxes. If you have a valid direct-pay permit, you agree to provide us with a copy. For clarity, we are responsible for paying our income taxes, both federal and state, as applicable, arising from our performance of this Agreement. 5. Nondiscrimination. We will not discriminate against any person employed or applying for employment concerning the performance of our responsibilities under this Agreement. This discrimination prohibition will apply to all matters of initial employment, tenure, and terms of employment, or otherwise with respect to any matter directly or indirectly relating to employment concerning race, color, religion, national origin, age, sex, sexual orientation, ancestry, disability that is unrelated to the individual's ability to perform the duties of a particular job or position, height, weight, marital status, or political affiliation. We will post, where appropriate, all notices related to nondiscrimination as may be required by applicable law. 6. E-Verify. We have complied, and will comply, with the E-Verify procedures administered by the U.S. Citizenship and Immigration Services Verification Division for all of our employees assigned to your project. 7. Subcontractors. We will not subcontract any services under this Agreement without your prior written consent, not to be unreasonably withheld. 8. Binding Effect; No Assignment. This Agreement shall be binding on, and shall be for the benefit of, either your or our successor(s) or permitted assign(s). Neither party may assign this Agreement without the prior written consent of the other party; provided, however, your consent is not required for an assignment by us as a result of a corporate reorganization, merger, acquisition, or purchase of substantially all of our assets. 9. Force Majeure. Except for your payment obligations, neither party will be liable for delays in performing its obligations under this Agreement to the extent that the delay is caused by Force Majeure; provided, however, that within ten (10) business days of the Force Majeure event, the party whose performance is delayed provides the other party with written notice explaining the cause and extent thereof, as well as a request for a reasonable time extension equal to the estimated duration of the Force Majeure event. 10. No Intended Third Party Beneficiaries. This Agreement is entered into solely for the benefit of you and us. No third party will be deemed a beneficiary of this Agreement, and no third party will have the right to make any claim or assert any right under this Agreement. This provision does not affect the rights of third parties under any Third Party Terms. 11. Entire Agreement; Amendment. This Agreement represents the entire agreement between you and us with respect to the subject matter hereof, and supersedes any prior agreements, understandings, and representations, whether written, oral, expressed, implied, or statutory. This Agreement may only be modified by a written amendment signed by an authorized representative of each party. 12. Severability. If any term or provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement will be considered valid and enforceable to the fullest extent permitted by law. 13. No Waiver. In the event that the terms and conditions of this Agreement are not strictly enforced by either party, such non-enforcement will not act as or be deemed to act as a waiver or modification of this Agreement, nor will such non-enforcement prevent such party from enforcing each and every term of this Agreement thereafter. 14. Independent Contractor. We are an independent contractor for all purposes under this Agreement. 15. Notices. All notices or communications required or permitted as a part of this Agreement, such as notice of an alleged material breach for a termination for cause or a dispute that must be submitted to dispute resolution, must be in writing and will be deemed delivered upon the earlier of the following: (a) actual receipt by the receiving party; (b) upon receipt by sender of a certified mail, return receipt signed by an employee or agent of the receiving party; (c) upon receipt by sender of proof of email delivery; or(d) if not actually received, five (5) days after deposit with the United States Postal Service authorized mail center with proper postage (certified mail, return receipt requested) affixed and addressed to the other party at the address set forth on the signature page hereto or such other address as the party may have designated by proper notice. The consequences for the failure to receive a notice due to improper notification by the intended receiving party of a change in address will be borne by the intended receiving party. 16. Client Lists. You agree that we may identify you by name in client lists, marketing presentations, and promotional materials. 17. Confidentiality. Both parties recognize that their respective employees and agents, in the course of performance of this Agreement, may be exposed to confidential information and that disclosure of such information could violate rights to private individuals and entities, including the parties. Confidential information is nonpublic information that a reasonable person would believe to be confidential and includes, without limitation, personal identifying information (e.g., social security numbers) and trade secrets, each as defined by applicable state law. Each party agrees that it will not disclose any confidential information of the other party and further agrees to take all reasonable and appropriate action to prevent such disclosure by its employees or agents. The confidentiality covenants contained herein will survive the termination or cancellation of this Agreement. This obligation of confidentiality will not apply to information that: (a) is in the public domain, either at the time of disclosure or afterwards, except by breach of this Agreement by a party or its employees or agents; (b) a party can establish by reasonable proof was in that party's possession at the time of initial disclosure; (c) a party receives from a third party who has a right to disclose it to the receiving party; or (d) is the subject of a legitimate disclosure request under the open records laws or similar applicable public disclosure laws governing this Agreement; provided, however, that in the event you receive an open records or other similar applicable request, you will give us prompt notice and otherwise perform the functions required by applicable law. 18. Business License. In the event a local business license is required for us to perform services hereunder,you will promptly notify us and provide us with the necessary paperwork and/or contact information so that we may timely obtain such license. 19. Governing Law. This Agreement will be governed by and construed in accordance with the laws of your state of domicile, without regard to its rules on conflicts of law. 20. Multiple Originals and Authorized Signatures. This Agreement may be executed in multiple originals, any of which will be independently treated as an original document. Any electronic, faxed, scanned, photocopied, or similarly reproduced signature on this Agreement or any amendment hereto will be deemed an original signature and will be fully enforceable as if an original signature. Each party represents to the other that the signatory set forth below is duly authorized to bind that party to this Agreement. 21. Cooperative Procurement. To the maximum extent permitted by applicable law, we agree that this Agreement may be used as a cooperative procurement vehicle by eligible jurisdictions. We reserve the right to negotiate and customize the terms and conditions set forth herein, including but not limited to pricing, to the scope and circumstances of that cooperative procurement. 22. Contract Documents. This Agreement includes the following exhibits: Exhibit A Investment Summary Exhibit B Invoicing and Payment Policy Schedule 1: Business Travel Policy Exhibit C Service Level Agreement Schedule 1:Support Call Process Exhibit D Disaster Recovery Services Exhibit E Statement of Work SIGNATURE PAGE FOLLOWS IN WITNESS WHEREOF, a duly authorized representative of each party has executed this Agreement as of the date(s) set forth below. Tyler Technologies, Inc. Town of Tiburon By: By: Name: Name: Title: Title: Date: Date: Address for Notices: Address for Notices: Tyler Technologies, Inc. Town of Tiburon One Tyler Drive 1505 Tiburon Blvd Yarmouth, ME 04096 Tiburon, CA 94920 Attention: Chief Legal Counsel Attention: Troy Bassett ty er Exhibit A Investment Summary The following Investment Summary details the software and services to be delivered by us to you under the Agreement. This Investment Summary is effective as of the Effective Date. Capitalized terms not otherwise defined will have the meaning assigned to such terms in the Agreement. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK tyler Prepared for: Troy Bassett Town of Tiburon 1505 Tiburon Blvd Tiburon,CA 94920 Contract ID: 2017-0224 Issue Date: 07/18117 tbassettCbtownoftiburon.org Sales Rep: David Snow SAAS Tyler Related Products and Services i m€ Incode Financial Management Suite Core Financials(GL,Budget Prep,tank Recon"AP,Express,r 100 $12,500 Fixed Assets 16 $2,000 Project Accounting 16 $2,000 Incode Personnel Management Suite Personnel Managenrent(includes Position Budgeting) 92 $11,500 Content Management,Suite Custom Form Service(pricing per form) 1 Included Tyler Content;Manager Standard Etlitlori(i(JA SE) 32 $4,000 Subtotal 256 $32,000 Conversion Services Financial Applications $4,250 16 $2.000 $6,250 Personnel Marnagement/Payroll $3,000 8 $1,,000 S4,000 Subtotal $7,250 24 $3,000 510,250 Professional Services Project Management 35,000 SS,OOL Subtotal $5,000 $5,000 Tyler Hosted Applications - Continuing Education Tyler a included+ Tyler Network Services/Hardware[Third Party Network Services Disaster Recovery Services included< Basic Network Services Included Length of Agreement 7 Years-84 Months Annual SaaS Fee $ 21,610 Annual User Fee 3 $ 1,725 Total Annual SaaS Fee S 23,335 "Additional fees will apply for additional users Summary One Time Fees Recurring Fees Total Tyler Services 347,25x3 Annual SaaS Fee $ 23,335 Summary Total $47,250 $23,335 Estimated Tray.+el Expense: Note. Travaf Expenses are billed as incurred based on Federal lRS perdiern standards. ty Prepared for: Troy Bassett Town of Tiburon Tyler Conversion Services(NOTE:See Conversion Summary Documentation or SOW for Details on Scope) Financial Applications $4,250 $2,000 $6,250 CepeFal t edge[ � a . ', ,{� -Chart of Accounts-Additional Fee for Historical Views f Eega�r�,Hfsiori�l4�E84Gsst�t3 �" � 5L�0 Accounts Payable 1,750 -vendor Nfaster.0niy-Addit[onal Fee for Historical.Views Legacy/Historical Views 500 4 500 l�erionnel/Payroll A plications Personnel Management/Payroll $2,000 4 $507 Employee M"' Deductions/Taffies,Retirem6ftt, Current'Cea�'e Totals;Current Direct Deposit-Additional Fee,for Historical,iewris Legacy/Historical Views $1,000 4 $500 Subtotal TOWN OF TIBURON Town Council Meeting July 1505 Tiburon Boulevard J y 19,2017 Tiburon,CA 94920 Agenda Item:AI Y"- STAFF REPORT To: Mayor and Members of the Town Council From: Department of Administrative Services Subject: Tib n Taps Beer Festival Special Event Permit—September 23, 2017 Reviewed By: BACKGROUND The Belvedere-Tiburon Joint Recreation Committee (The Ranch) held the third Tiburon Taps Beer Festival on Saturday, September 24, 2016. The event, for the first time, was held on Shoreline Park, which required the closure of Paradise Drive. Council approved the permit for the event on April 20, 2016. The Ranch has submitted a permit to hold the event on September 23, 2017. The permit application includes several modifications. Staff from the Ranch will provide a brief presentation to Council and answer any questions. ANALYSIS For the proposed 2017 Tiburon Taps Beer Festival event, the Ranch has proposed an enlargement of the venue (Exhibit 1) at Shoreline Park. The check-in tent for the festival will be placed on the Ferry Plaza, in the vicinity of the benches and bike racks. The number of tents will remain the same, but with a different configuration, encompassing the entire requested space. The Ranch is again requesting a street closure for this event: Paradise Drive from the turnaround at Ferry Plaza to the parking lot across from Sanitary District No. 5. A detour is requested starting at Beach Road, and will direct traffic to travel along Mar West Street to the other side of the festival. The permit requests use of the Town's electronic sign to notify residents of the upcoming detour. FINANCIAL IMPACT Staff anticipates no financial impact as a result of Council approving the requested permit. RECOMMENDATION Staff recommends that the Town Council: 1) Review the Special Event Permit application and ask questions of staff and/or the applicant; 2) Hear any public testimony about the proposed event; and 3) Consider approval or modification of the permits, as submitted, or deny the permits. Exhibits: 1)New Venue Plan 2) Permit Application Prepared By: Patti Pickett, Administration Assistant -------------- Proposed Expanded Area of the Tiburon Taps Beer Festival - 9/23/17 IM 510, { 4 j # rr i t r k � n' i ?'a s 1 t` S rl n w� re<,< s i �ak s rtr s �� � ,e�', a z: � „�`�•a t. �"a'.�: �., ,, b ro k; y r im ?tom •• r U-NMI, � ay QBeverage Booth Bathrooms Food Booth Stage Q z H Ticket Booth Existing Festival AreaED #'—! w First Aid and Info Booth -------- Proposed Festival Expansion Town of Tiburon 1505 Tiburon Boulevard •Tiburon CA 94920 415-435-7373 2016 SPECIAL EVENT PERMIT APPLICATION FOR USE OF PUBLIC PROPERTY Name of Event: 11 1-#- tU/ Date of Event: rP A,bkd a (ft w f . q �) , V ) 7 Name of Organization: �� �i �' I✓t tr Type of Organization(IRS 501(C) or for profit): Mailing Address 11A V City T{{)i./b/11/1 Zip__7-0- Business DBusiness Phone Number: (41 ` Evening Phone Number: ( � Cellular Phone Number: 011-)) 4 , FAX Number: ( ) Contact Person "ON SITE" day of event: Jfl (Note: This person must be in attendance for the duration of the event and immediately available to Town Officials.) Cellular Phone Number: (I Alternate Contact Person "ON SITE" day of event: 4411 ! 1 Cellular Phone Number: ( ) TYPE OF EVENT: EVENT ACTIVITIES: ❑ Block Party ❑ Parade )6 Food Service ❑ Live Animals 0 Carnival ❑ Race/Walk/Run ❑ Fireworks ❑ Drawing/Raffle Street Festival 1�6 Fundraising Event ❑ Lights/Laser ] Amplified Music ❑ Wedding ❑ ❑ Motion Picture `, Location of Event: � � 1�1�'L(I (, IA, VV— (Attach Map to illustrate area) Date and hours of operation: (Indicate actual set-up and close down dates) Date: ' ' Start time; AI�/PM-Finish time: 601 AM& Actual"open to the public"or"advertised"event hours: Date: G Start time: I AM/ Finish time: AMI I 1 EXHIBIT NO. 2- Town of Tiburon 1505 Tiburon Boulevard•Tiburon CA 94920 415-435-7373 Estimated attendance: �� Admission fee (If applicable): 46 qen(/leo ad1 u' p Will items or services be sold at the event? ❑ Yes Y ;l No ` �� If es,please describe: %�e V ENTERTAINMENT: s No ❑ Are there any musical entertainment features related to your event? ❑ Will sound amplification be ed? Start time:�'�!AM/ M Finish time: 4 AM& ❑ Will sound checks be contted prior to the event? Start time: 1�i ANFinish time: AM& Amplification is subject to approval by the Town Manager pursuant to Chapter 25-t of the Town Code. ALCOHOL: Yes No ❑ Does the event involve the sale o us of alcoholic beverages? ❑ Does the event require an ABC permit? ❑ ❑ If yes,the Town must have a copy of the permit prior to approval of the event. STREET OR SIDEWALK CLOSURE: Yes No Does this event involve a moving route of any kind along streets, sidewalks or highways? If yes, attach a detailed map of your proposed route, indicate the direction of travel, and provide a written narrative to explain your route and its impact. ❑ Is street closure sought? If yes, who will place and pick up the barricades? I VWVy'-) �l 1,CJI + (� W 0 2 Town of Tiburon 1505 Tiburon Boulevard •Tiburon CA 94920 415-435-7373 PUBLIC WORKS DEPARTMENT: Describe request for Pu %Works Departm nt assistance, if any: G[Q 1✓ Uy'6 1 i �tL� +5� AAUYI Gi Gt 1Nt 0 S Public Works Department assistance will be provided based upon availability of staff time and materials. Applicata will be billed for staff time at rates established by the Town. Do you have a cost recovery agreement on file? ❑ Yes ❑No ACCESSIBILITY, SANITATION,RECYLING: The event sponsors shall maintain safe and accessible paths of travel in the public right of way,as required by the Americans with Disabilities Act(ADA) and state law. Accessible paths of travel must be at least four feet wide and free from debris and other obstructions. For further details,see the ADA Checklist provided by Town staff. Applicants are also encouraged to hire their own ADA consultant to ensure compliance. Portable and/or Permanent Toilet Facilities: • Number of portable toilets: 1 0 REQUIRED -4 One for every 250 people Number of ADA Accessible toilets: REQUIRED —> 10%of total portable toilets. • Note: Unless the applicant can substantiate the availability of adequate accessible and non- accessible toilet facilities in the immediate area of the event site,the above is required. Trash Containers and Dumpsters •Number of Trash Cans: Jbccals •Number of Dumpsters w/lids: REQUIRED -> One for every 400 people •Recycling Containers: 16 ` Describe the plan for clean-up and removal of waste and garbage during and after the event: i VC hLt1jQ C ayeo 1, Note: IMMEDIATELY UPON CONCLUSION OF THE EVENT,THE VENUE MUST BE RETURNED TO A CLEAN CONDITION. 3 Town of Tiburon 1505 Tiburon Boulevard•Tiburon CA 94920 415-435-7373 Pa king and Shuttle plansprovide a etailed de cription of location and parkin lot to be used): V9 dAL-1 Vi s p Impact to surrounding areas--residents, businesses, etc. (Describe impact and plan to notify those impacted): INSURANCE REQUIREMENTS: Insurance information must accompany the application materials. Liability insurance can be purchased through the Recreation Department, at 435-4355, or your own carrier. The Town of Tiburon must be named as an additional insured. The insurance information should include an endorsement providing the Town, its agents, officials and employees, primary and non-contributory coverage for claims,losses, etc.arising from the exercise of the permit. Is the insurance endorsement attached.? ❑ Yes ❑ No To be completed by Applicant: T,have reach, indersfood and accepted the foregoing conditions and the -0 -W 1. The Town reserves the right to deny any special event permit, impose any conditions it deems appropriate, and require payment for costs associated with an event, such as police and public works services. (Gatherings for the purpose of espousing views as permitted by the First Amendment do not require a permit.)Permission for an event in one year does not imply permission in future years. 2. ' Owner shall indemnify, de 4j14 hold 11 harmless the Town and,its officials, ezilployees,agents and contractors,fromany claims,:losses;.damages or other liabilities that any arise from this event: The obligation to defend is separate An distinct frorrl the obligation to zndemnify.arid hold harmless and shall apply even if neither the'I'owii nor.owher is found liable foz the aforesaiel claims,losses; damages or other liabilities. ature of Applicant UL Pr'nted Name of Applicant Date of Application 5 Town of Tiburon 1505 Tiburon Boulevard•Tiburon CA 94920 415-435-7373 To be completed by Town: Approved by: Date: Chief of Police Date: Director of Public Works Date: Director of Community Development Date: Town Manager Additional conditions or requirements: "After Action Reports"will be prepared by Town staff and filed with Town Manager and Chief of Police. 2016 form was last revised in 2014 by ARD. 6 TOWN OF TIBURON Town Council Meeting 1505 Tiburon Boulevard July 19,2017 Tiburon,CA 94920 Agenda Item:Al STAFF PO . To: Mayor and Members of the Town Council From: Department of Administrative Services Subject: Ru or Reed Schools Special Event Permit—October 13, 2017 Reviewed By: BACKGROUND The Reed Schools Foundation held the first"Run for Reed Schools" event on October 5, 2016 at 3:30 p.m. The route began and ended at Blackie's Pasture for both the 1 mile and 5K runs. Food was served at Blackie's Pasture. There were no outstanding concerns noted after the event. The Reed Schools Foundation is requesting to hold the 2017 Run for Reed Schools on October 13, 2017 in downtown Tiburon. Most notably, the Foundation has requested a closure of Main Street in the afternoon and evening. A representative for the event will present information to Council and be available to answer any questions. ANALYSIS 2017 Event Description For the 2017 event, the Reed Foundation is proposing the following: 1) New Venue: Start/finish on Juanita Lane straightaway—both 1 mile and 5K routes to travel out Beach Road, to Cove Road, then to the Old Rail Trail. The Route Map is attached as Exhibit 2. 2) New Start Time: The start times will be staggered at 4:45 p.m. and 4:55 p.m. 3) Closure of Main Street: The Foundation would like to hold a"Friday Nights on Main" style party following the event. The Foundation has proposed a band on to be staged on Main Street, restaurant participation on the street, and health-oriented booths in the immediate vicinity. The Foundation is working closely with the Chamber and restaurants concerning street activities and merchant participation. Main Street would be closed approximately 2 p.m. —9 p.m. 4) Expected Number of Participants: 750 child runners are expected to participate. The Foundation anticipates 1200-1500 attendees for the entire event. 5) All affected merchants will be notified in advance. FINANCIAL IMPACT Reed Foundation will be responsible for all work with volunteers. The financial impact to the Town will be the costs associated with use of the Department of Public Works and the Police Department. RECOMMENDATION Staff recommends that the Town Council: 1) Review the Special Event Permit application and ask questions of staff and/or the applicant; 2) Hear any public testimony about the proposed event; and 3) Consider approval or modification of the permits, as submitted, or deny the permits. Exhibits: 1) Reed Foundation Event Application 2) Route Maps Prepared By: Patti Pickett, Administration Assistant of Town of Tiburon 1505 Tiburon Boulevard•Tiburon CA 94920 415-435-7373 2016 SPECIAL EVENT PERMIT APPLICATION FOR USE OF PUBLIC PROPERTY Name of Event: A k LJ an Date of Event: i�b S 14 Name of Organization: oid (S Type of Organization (IRS 501(C)or for profit): non Mailing Address �{ 1 h)g= t/kj City b 1jQ Zip �L Business Phone Number: Phone Number: ( ) Cellular Phone Number: C2 � '70� q t FAX Number: (_ P Contact Person "ON SITE" day of event: GY may, (Note: This person must be in attendance for the duration of t e event and immediately available to Town Officials.) Cellular Phone Number: L3b)) �o6 q Alternate Contact Person "ON SITE" day of event: Cellular Phone Number: TYPE OF EVENT: EVENT ACTIVITIES: ❑ Block Party ❑ Parade ❑ Food Service ❑ Live Animals ❑ Carnival jN�Race/Walk/Run ❑ Fireworks ❑ Drawing/Raffle ❑ Street Festival Fundraising Event ❑ Lights/Laser 'P�'Amplified,Music ❑ Wedding ❑ ❑ Motion Picture ❑ all Location of Event: v (Attach Map to illustrate area) Date and hours of operation: (Indicate actual set-up and close down dates) Date: 1010 V�V—Start time: ` Finish time: l AM/F) Actual "open to the public"or"advertised" event hours: Date: J o I b l� Starttime: AM/Pg-Finish time: AM/I& EXHIBIT NO. {� 1 Town of Tiburon 1505 Tiburon Boulevard•Tiburon CA 94920 415-435-7373 Estimated attendance: 1 Admission fee (If applicable): Will items or services be sold at the event? Yes ❑ No If yes,please describe: wd � M-� ENTERTAINMENT: L ` � Y s No ❑ Are there any musical entertainment features related to your event? ❑ Will sound amplification be used? Start time: ( AM/P�Finish time: AM/P�4) ❑ Will sound checks be conducted prior to the event? Start time: AM!&—Finish time: _�AM/19 Amplification is subject to approval by the Town Manager pursuant to Chapter 25-1 of the Town Code. ALCOHOL: Y No ❑ Does the event involve the sale or use of alcoholic beverages? ❑ ❑ Does the event require an ABC permit? ❑ ❑ If yes, the Town must have a copy of the permit prior to approval of the event. STREET OR SIDEWALK CLOSURE: Yes No ❑ Does this event involve a moving route of any kind along streets, sidewalks or highways? If yes, attach a detailed map of your proposed route, indicate the direction of travel, and provide a written narrative to explain your route and its impact. ❑ Is street closure sought? If yes, who will place and pick up the barndes? 2 Town of Tiburon 1505 Tiburon Boulevard -Tiburon CA 94920 415 7 `\ PUBLIC WORKS DEPARTMENT: Describe request fo Public Works Department , ' any: aA Public Works Department assistance will be provided based upon availability of staff time and materials. Applicant will be billed for staff time at rates established by the Town. Do you have a cost recovery agreement on file? ❑ Yes ❑ No ACCESSIBILITY, SANITATION,RECYLING: The event sponsors shall maintain safe and accessible paths of travel in the public right of way,as required by the Americans with Disabilities Act(ADA) and state law. Accessible paths of travel must be at least four feet wide and free from debris and other obstructions. For further details, see the ADA Checklist provided by Town staff. Applicants are also encouraged to hire their own ADA consultant to ensure compliance. ❑ Portable and/or Permanent Toilet Facilities: • Number of portable toilets: REQUIRED —> One for every 250 people • Number of ADA Accessible toilets: REQUIRED —> 10% of total portable toilets. • Note: Unless the applicant can substantiate the availability of adequate accessible and non- accessible toilet facilities in the immediate area of the event site, the above is required. ❑ Trash Containers and Dumpsters •Number of Trash Cans: •Number of Dumpsters w/lids: REQUIRED —> One for every 400 people • Recycling Containers: Describe the plan for clean-up and removal of waste and garbage during and after the event: C } Note: IMMEDIATELY UPON CONCLUSION OF THE EVENT, THE VENUE MUST BE RETURNED TO A CLEAN CONDITION. 3 Town of Tiburon 1505 Tiburon Boulevard•Tiburon CA 94920 415-435-7373 It is the Event Organizers' responsibility to dispose of waste and garbage throughout the event.The Town does not provide clean up services for special events. If clean-up during or after the event is required,the Tiburon Department of Public Works will bill the applicant for staff time and overtime at rates established by the Town. SECURITY Yes No O Is there a Professional Security organization hired to handle security arrangements for this event? If yes, please list: Security Company: Security Organization Address: Security Director(Name): Phone: POLICE ON SCENE: _.. cumber of unifomu� ficers requested: Does this event have a cost recovery agreement on file? ❑ Yes No Police primary duties/responsibilities: Parking lot patrol: ❑ Yes No Interior venue patrol: ❑ Yes 6440 Stationary entrance security: ❑ Yes o Exterior: Other: Dates & Hours: V%, 7,77 PARKING PLAN • SHUTTLE PLAN • MITIGATION OF IMPACT -; �t✓� �.__ ..... . Note: Parking,traffic congestion,and environment pollution are all factors for concern with events. Consider and encourage the use of car pools, public transportation, and alternate modes of non-polluting transportation when in the planning stage of the event. T.f the ratio of total attendance to;available parking spaces exceeds three (3)p�aple per parking space, off site parking,and shuttle-service shall be provided to avoid illegai�parking and,fio,ensure eri�ergeney access for emergency vehicles is availably at all times: 4 Town of Tiburon 1505 Tiburon Boulevard•Tiburon CA 94920 415-435-7373 Parking and Shuttle plans (provide a detailed descri ion of ocations and arlting lots to be used): Impact N surrounding areas--residents, businesses, etc. (Describe impa t and pan to notify those impacted): YU INSURANCE REQUIREMENTS: Insurance information must accompany the application materials. Liability insurance can be purchased through the Recreation Department, at 435-4355, or your own carrier. The Town of Tiburon must be named as an additional insured. The insurance information should include an endorsement providing the Town, its agents; officials and employees, primary and non-contributorycoverage for claims, losses, etc.arising from the exercise of the permit. Is the insurance endorsement attached? Yes ❑ No To be completed by Applicant: I have read, understood ancl.accepted the foregoirig'conditions and the fallow ng 1. The Town reserves the right to deny any special event permit, impose any conditions it deems appropriate, and require payment for costs associated with an event, such as police and public works services. (Gatherings for the purpose of espousing views as permitted by the First Amendment do not require a permit.) Permission for an event in one year does not imply permission in future years. 2. lJwner_shalli0demnify,defend and hold harmless the Town and:its off eials;emplayees;agents and eontractflrs,:froinany claims, losses.damages or other1iabil`ties that.may arise from this event.,The; cbltgatzon to defend.is "separate and distinct#'roan the oblgation:to indemnify and hld.liarmles� and shall apply=W'fixierthe Town nor owner is found:lable fox the aforesaid claims,loses; darniages or ': S. Signature of Appli Printed Name of Applicant CQ q4 I Date of ipplication 5 Town of Tiburon 1505 Tiburon Boulevard•Tiburon CA 94920 415-435-7373 To be completed by Town: Approved by: Date: Chief of Police Date: Director of Public Works Date: Director of Community Development Date: Town Manager Additional conditions or requirements: "After Action Reports" will be prepared by Town staff and filed with Town Manager and Chief of Police. 2016 form was last revised in 2014 by ARD. 6 5K RACE • Start / Finish on Juanita Lane at alley intersection from Tiburon Blvd. • Left onto Beach Road, right onto Cove Road, merge onto Old Rail Trail at intersection of Mar West. • Turnaround at 1.55 miles on Old Rail Trail at 758 Tiburon Blvd. Return on same route back to Start / Finish. Turnaround 1.55 Miles 9<4� r :< t ,eti Sp ac t< Water „ Station IS, a 777777 ' . i' C wE i_ g F.P11 , T IRes ' S ` � f 3 3 START FINISH EXHIBIT NO. �' 1 MILE RACE • Same Start as 5k on Juanita Lane at alley intersection from Tiburon Blvd. • Turn left on Beach Road, right on Cove Road, slight left onto Lagoon Road • Turnaround at 0.5 miles at 94 Lagoon Road. Return on the same route to Start / Finish. s N '4 Turnaround 1/2 Mile ti �Fc CU Til r,01. brad: € E i bu ro n Tovi E ''Hall'office SA AD art 1 :t Barricades B nk [Ar RRia r:'i, � �?(���'( 'tie C r 3�3irbb Barricades C-t ty r_, rze �e jLiI F Arlo MOW :hoppi ;Q,C(, E Porta potties h 3. Ti[,,> rr)n ThrI f SII ` £L`;. v 3 J 5K & 1 MILE RACES - DETAILS • Barriers: o Barricades ■ Down middle of Beach Road to close off north side of street for races. Allows access out of Ark Row/ Main Street for Emergency vehicles. ■ At major intersections ■ Down Cove Road and at 1 Mile course Turnaround. o Cones ■ Divide course in half along entire route. ■ At other important sections on course. • Police Officers: stationed at 2 major intersections: 1) Juanita Lane & Beach Road 2) Cove Road & Beach Road 3) San Rafael Avenue & Tiburon Blvd. • Volunteers: o At Start / Finish, Turnarounds for both races, and Water Station o At major intersections: Beach & Juanita, Beach & Main, Beach & Cove, Cove & Mar West • Water Station: at 1 mile / 2 mile mark on 5k course. • Porta potties: at curve on Juanita Lane behind New Morning Cafe Turnaround for 1 Mile Race at 94 Lagoon Road . F / ` � ✓ s s ' y Barricades Turnaround for 5K Race on old Rail Trail at 758 Tiburon Blvd s yf/ a'f z 9sar�b ✓?/c �� �"s � , '� .`aayt ��� �� ii/�yy'�� svf/ � �� ✓�a� ��.�3 /l ��., � k ri��s� �/i��i/fps /, �:. ., „ , ... ..,,..:1 r, .5as,t �:.�'�e'/t✓:�.,w'� ., ....€€!Fes.°'.✓F,������1/,.,,'r��o,'ct��-�l,/..�E�,r,,fr,�,;u_ "�''�e Start Finish area on Juanita Lane a� OU MOM ME a y� } i 1 o, Course Start / Finish satellite view a h� + E r 4Town Council Meeting TOWN OF TIBURON i" 1505 Tiburon Boulevard July 19, 2017 l Agenda Item: Tiburon, CA 94920 A STAFF PO . To: Mayor and Members of the Town Council From: Community Development Department Subject: 8 Rolling Hills Road: Consider Adoption of a Resolution Partially Granting an Appeal of the Planning Commission's Approval of an Amending Parcel Map Removing a Building Envelope and a Height Restriction from a Lot in the RO-2 Zone; Michele Hughes/Joseph Lepera, Owner and Applicant; Rita Burgess and David Readerman, et al, Appellants; File No. OTHER2016-001; Assessor Parcel No. 058-111- 24 (Contin d from May 3, 2017) Reviewed by: ,.� _ BACKGROUND On May 3, 2017, the Town Council held a continued public hearing (from March 15, 2017) on an appeal of the Planning Commission's decision on this application. The Planning Commission had voted to remove a building envelope and height restriction from the parcel map that created the lot at 8 Rolling Hills Road. After closing the public hearing, the Council directed staff to return with a draft resolution that would eliminate the building envelope from the parcel map but retain the height limit restriction on the parcel map. For that reason, the action contemplated in the draft resolution would constitute a partial granting of the appeal. ANALYSIS At the May 3 meeting, both parties were urged to find as much common ground as possible, and the Town indicated it would consider including any such points of agreement in the draft resolution. Staff is unaware of significant progress being made between the parties subsequent to the May 3 Town Council meeting,but has provided advance copies of the draft resolution to the applicant and the attorney representing several of the appellants for their comments. No comments have been received as of the writing of this report. Minutes of the May 3, 2017 Town Council meeting are attached as Exhibit 1. The draft resolution is attached as Exhibit 2. RECOMMENDATION This is an action item. Staff recommends that the Town Council accept public comment, make any desired changes to the draft resolution, and adopt it as appropriate. Prepared By: Scott Anderson,Director of Community Development TOWN OF TIBURON PAGE 1 OF 1 PH-1. 8 Rolling Hills Road—Consider appeal of Planning Commission approval of a request for Amending Parcel Map to remove certain development limitations from a vacant lot (Continued from March 15, 2017) [taken out of order] Owners/Applicant: Michelle Hughes Appellant(s): Rita Burgess, David Readerman, et.al. Address: 8 Rolling Hills Road Assessor Parcel No. 058-111-24 Staff Report Director of Community Development Anderson said the proposed residence would step down the hill on the property and extend beyond the building envelope. He said a front setback Variance would be required for the garage as a result of the steep slope of the lot. Director Anderson said the existing story poles represent a"worst-case scenario",and might suggest view blockage from at least one home in the neighborhood.He said a comparably-sized home within the existing building envelope would be"blocky"in appearance, and would probably be unable to comply with the Hillside Design Guidelines. Councilmember Tollini asked how the previous agreement that imposed the building envelope and height restriction affects the Town. Town Attorney Stock said the agreement was between private property owners, and the Town did not sign it. Applicant Presentation Joseph Lepera said he was returning to the Council with a design for his proposed home that he was prepared to commit to,and added that story poles had been put in place.He said the story poles were certified that the home would be below the 10 foot height restriction imposed on the property from the agreement. His presentation included a 3D rendering of the proposed design, as well as schematics of the proposed home, the location of the building envelope, views from the street and from each neighbor's viewpoint.He said this home is slightly larger than others on the street,but it has a lower Floor Area Ratio. He said this proposal is in compliance with the Municipal Code, the Hillside Design Guidelines, and the existing height restriction. He said he was asking for a neighborhood compromise: to keep and abide by the height restriction in place, but to remove the building envelope, which would allow him to build down the hill, and further protect his neighbors' views. Councilmember Fredericks asked to review the drawing that showed the proposed home in relation to the existing building envelope.Mr.Lepera said this home would be less impactful on views than a home that would be built within the envelope.Fredericks also asked how much of the steep lot was actually buildable. Mr. Lepera replied that the steep slope does not prevent the lot from being buildable,but he would need to comply with the open space easement and setback requirements. Vice Mayor O'Donnell asked about the top level of the home, closest to the street. Mr. Lepera. identified the top level as the entryway into the home, and further confirmed that the primary living Town Council Minutes#09-2017 May 3, 2017 Page 7 ...s �� aro. areas would be below this level. O'Donnell asked if there would be a deck on the top level—Mr. Lepera confirmed there would not, and added that if he were to be permitted to build down the hill, perhaps the top level could be eliminated entirely. Councilmember Doyle wondered why the story poles were higher than the height restriction. Mr. Lepera said the design is not final yet. Doyle expressed concern about the angle of the home, and said the Lee property would likely experience light pollution. He believed the home could be cut further into the hillside, but added that building downhill would allow him to minimize impacts. Appellant Presentation Elizabeth Brekhus said there were three reasons for the Council to grant this appeal: legal (a contractual agreement), for the sake of fairness (as the neighbors relied on the Town to uphold the restrictions) and aesthetics for the neighbors, and eliminating the view of the open space from the street. She said the previous agreement was fair and should be enforced by the Town. James To highlighted the troublesome aspects of the proposed home.He said it does not comply with setbacks,the height restriction,or the building envelope.He believed the proposal does not attempt to cut the home into the hillside.He said the neighbors were concerned about the height of the home. Mr. To also questioned the large scale of the home. He said it was massive,and did not feel that the home was incompliance with Hillside Design Guidelines or the height restriction. George Lee said the story poles present a bulkier and more intrusive design than was expected, and said he anticipates view blockage from his home. Matt Chatham, 75 Rolling Hills Road,believed that the agreement was put in place to preserve the look and feel of the neighborhood. He asked why the applicant had not considered or presented a home that would comply with the building envelope, as an architect said it was possible and an explanation that it cannot be has not been provided. Public Comment There was none. Applicant Rebuttal Mr.Lepera said he was committed to working with the neighbors to ensure the size of the home will be minimally impactful during the Design Review process.He believed that only one home would be truly impacted, based on the view line photos he presented. He said if he were permitted to build down the hill,he could be more creative in the design so as to not impact the neighbors.He said he was willing to compromise: remove the building envelope, but adhere to the height restriction. Appellant Rebuttal Mr. To said building down the hill will still affect his home, and questioned the buildability of the steep lot based on factors other than conceptual planning drawings.Mr.To argued that the argument for removing the envelope has evolved from it being a zoning anomaly to the request to build a Town Council Minutes 909-2017 May 3, 2017 Page 8 larger home down the hill. He said scale and size of a potential home is just as important to a neighborhood as view impacts. Elizabeth Brekhus asked that if the Council does deny the appeal,the Town should require that the applicant indemnify the Town for any legal fees incurred as a result of the decision. She also proposed continuing the item so the point of what type of home could realistically be built within the envelope could be further explored. She also asked for a continuance so there could be further discussion between the applicant and the holder of the agreement. Council Discussion Vice Mayor O'Donnell believed a compromise could be met that would lessen view impacts,while allowing the property to be developed responsibly. He said the building envelope is outdated, and does not reflect the current Hillside Design Guidelines. He thought this proposal complied with the guidelines,but added that there are still troubling factors,most of which being view blockage from the Lee's property and from the street. He suggested removing the top floor to further improve neighboring views,and said allowing the house to come down the hillside will not negatively affect the neighbors. He agreed that the height limit should be maintained. Councilmember Doyle agreed with O'Donnell's suggestions.He said the applicant should be able to build on the lot, and allowing him to build further down the hill will result in a home with minimal impacts on the neighbors. He did not believe building a home within the existing envelope would result in a home either party would be satisfied with.He believed that a compromise to maintain the height restriction would allow the applicant to work with the neighbors during the Design Review process, and will end up with a nice home that fits in the neighborhood. Councilmember Fredericks said there were several different factors to balance,like the expectation that a view over an undeveloped lot may change and that the last house on the block should be developed by minimizing impacts on surrounding neighbors. She said the neighbor's assessment of impacts may be different than what is covered in the Hillside Design Guidelines,but these impacts are protected by the building envelope agreement. She agreed with the suggestions made by the Council, and added that if the Council does deny the appeal,the Council should direct the Design Review Board to consider both the Hillside Design Guidelines and the building envelope to determine the relative impacts on the surrounding neighbors. Councilmember Tollini did not believe the Council should act as the Design Review Board; she believed it was their job to decide if the existing building envelope would best serve the neighborhood. She also believed the building envelope is outdated, and building a home within would not result in a home that would comply with the Hillside Design Guidelines. She agreed that Council should provide direction to the DRB to consider the fact that the building envelope agreement was in place, and the protections it provided the rest of the neighborhood, in their deliberations. She thought a residence could be thoughtfully designed outside the envelope. Mayor Fraser agreed with the Council that clear direction to the Design Review Board is essential. He also agreed that the building envelope is outdated,and believed a home could be built on this lot. Town Council Minutes #09-2017 May 3, 2017 Page 9 Fraser added that he thinks the home could be built into the hillside more than it is now to minimize bulk and mass. He liked the idea of the compromise: removing the envelope, but maintaining the height limit. MOTION: To continue the item to a future meeting to adopt findings consistent with the statements made by the Council tonight. Moved: Fraser, O'Donnell VOTE: AYES: Unanimous TOWN COUNCIL REPORTS There were none. TOWN MANAGER REPORT Town Manager Chanis reminded the Council and the crowd that the first Tiburon Farmers Market of the season would be the following day, Thursday, May 4. WEEKLY DIGESTS Received. ADJOURNMENT There being no further business before the Town Council of the Town of Tiburon, Mayor Fraser adjourned the meeting at 10:07 p.m. JIM FRASER, MAYOR ATTEST: LEA STEFANI, TOWN CLERK Town Council Minutes #09-2017 May 3, 2017 Page 10 RESOLUTION NO. (Draft)-2017 A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF TIBURON PARTIALLY GRANTING AN APPEAL BY RITA BURGESS, DAVID READERMAN, ET AL, OF THE PLANNING COMMISSION'S APPROVAL OF AMENDMENTS TO A RECORDED PARCEL MAP (PM 5-90) INVOLVING A VACANT LOT LOCATED AT 8 ROLLING HILLS ROAD (ASSESSOR PARCEL NO. 058-111-24) WHEREAS, on January 25, 2017,the Planning Commission held a public hearing to consider an application (File #OTHER2016-001)requesting amendments to a recorded parcel map (PM 5-90) that created a lot at 8 Rolling Hills Road in 1971, said amendments requesting the removal of a building envelope and a height restriction placed on the lot on the face of the parcel map ("Project"); and WHEREAS, at that hearing, numerous property owners in the vicinity opposed the application and raised issues involving among other things, impacts on views and on neighborhood character; and WHEREAS, following the public hearing,the Planning Commission voted 3-2 to approve the application and adopted Resolution 2017-02 to that effect; and WHEREAS, on February 6, 2017, Rita Burgess, David Readerman, and several other nearby property owners (collectively "Appellants") filed a timely appeal of the Planning Commission's decision to the Town Council; and WHEREAS, on March 15, 2017, the Town Council held a duly-noticed public hearing, on a de novo basis, on the appeal, during which testimony was heard and considered regarding the application and the Planning Commission's review and decision on the application; and WHEREAS, after hearing all testimony and receiving all documents in the record,the Town Council voted 4-0 to continue the appeal and require the applicant and/or applicant's representatives to provide additional information and materials regarding a conceptual house design for the vacant lot at 8 Rolling Hills Road; and WHEREAS, the Town Council held a continued public hearing on May 3, 2017, at which it reviewed the additional information and materials submitted by or on behalf of the applicant, and considered all correspondence and testimony received at the continued hearing; and WHEREAS, the Town Council finds that the project application consists of File #OTHER2016-001, on file with the Town of Tiburon Community Development Department. The official record for this Project application is hereby incorporated and made part of this Town Council Resolution No. (Draft)-2017 -4-42017 Page 1 of 3 Resolution. The record includes, without limitation, the staff reports, minutes, application materials, and all comments and materials received at the public hearings; and WHEREAS, the Town Council further makes the following findings: 1) There are changes in circumstances, as set forth in the official project record, which make any or all of the conditions of the map no longer appropriate or necessary. (2) The modifications to the map do not impose any additional burden on the fee owners of the real property. (3) The modifications to the map do not alter any right, title, or interest in the real property reflected on the recorded map. (4) The map as modified continues to conform to Section 66464 of the Subdivision Map Act. NOW, THEREFORE, BE IT RESOLVED that the Town Council of the Town of Tiburon hereby partially grants the appeal of the Appellants by imposing the following conditions of approval: 1. The building envelope is hereby removed from the parcel map entitled "Lands of Noah and Wheary", filed for record on April 28, 1971 at Book 5, page 90 of Parcel Maps, Marin County Records. Said removal shall be implemented in a manner prescribed by law and acceptable to the County Surveyor of the County of Marin and the Marin County Recorder. 2. The note on the parcel map entitled"Lands of Noah and Wheary", filed for record on April 28, 1971 at Book 5, page 90 of Parcel Maps, Marin County Records, shall be modified to read as follows: "NOTE: THE BUILDING HEIGHT SHALL NOT EXCEED 10.0 FEET ABOVE THE STREET ELEVATION AT MONUMENT A." Said modification shall be implemented in a manner prescribed by law and acceptable to the County Surveyor of the County of Marin and the Marin County Recorder. 3. The Town Council directs the Design Review Board and/or Town staff to carefully consider the original rationale for the now-removed building envelope during review of any applications for site plan and architectural review associated with the lot, said rationale being set forth in Planning Commission staff report dated 1/25/2017 and the letter dated March 8, 1971 from Planning Director Wayne Moody (Exhibit 2 to said staff report). Said items are available for public review in the Town of Tiburon Planning Division in File#OTHER2016-001; 8 Rolling Hills Road. 4. The Town Council specifically directs the Design Review Board and/or Town staff to carefully review and consider the following in reaching a decision: Town Council Resolution No. (Draft)-2017 -4-42017 Page 2 of 3 a. Recognition that Rolling Hills Road is a private road and that its residents have an interest in protecting the existing views of the water and open space as much as is possible. b. The residence should be set back a reasonable distance from the roadway consistent with the Town's adopted ordinances and guidelines. c. The project should be designed to minimize light pollution and include an appropriate but not excessive use of glazing. d. The design should appropriately cut into and bench the residence into the hill as set forth in the Hillside Guidelines. e. The project should minimize the appearance of bulk and mass, as viewed from the street and neighboring residences, and protect existing view corridors. 5. To the extent permitted by law, the applicant shall indemnify and hold harmless the Town, its Town Council, its officers, employees and agents (the "indemnified parties") from and against any claim, action, or proceeding brought by a third party against one of more of the indemnified parties or one or more of the indemnified parties and the applicant to attack, set aside, or void this Resolution or any permit or approval authorized hereby for the application, including (without limitation) reimbursing the Town its actual attorneys' fees and costs incurred in defense of the litigation. The Town may, in its sole discretion, elect to defend any such action with attorneys of its choice. PASSED AND ADOPTED at a regular meeting of the Town Council on , 2017, by the following vote: AYES: COUNCILMEMBERS: NAYS: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: JIM FRASER, MAYOR TOWN OF TIBURON ATTEST: LEA STEFANI, TOWN CLERK Town Council Resolution No. (Draft)-2017 -4-42017 Page 3 of 3