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HomeMy WebLinkAboutMINUTES - 07201993 - 1.67 In the Board of Supervisors of Contra Costa County, State of California July 20, 1993 19 In the Matter of Retirement Association Audit The Board received a memorandum dated July 7, 1993, from':the Additor-Controller with respect to the annual audit report for the Contra Costa County Employees' Retirement Association for the year ended December 31, 1993. IT IS BY THE BOARD ORDERED that the aforementioned report is ACKNOWLEDGED. 1 hereby certify that the foregoing is a true and correct copy of an order entered on the minutes of said Board of Supervisors on the date aforesaid. Witness my hand and the Seal of the Board of Supervisors 20th93 affixed this day of July 19 Phil Batchelor,Clerk of the Bna►ri of upervisors and Coun Adm �• R. OLSSON, Clerk By . Deputy Clerk cc.:. Auditor Retirement H-24 3/79 15M '1 . 67 Contra Costa County Office of Kenneth J.Corcoran COUNTY AUDITOR-CONTROLLER - `'' Auditor-Controller 625 Court Street ^,i Martinez, California 94553-1282 ;; JudRh A.Van Note �. Assistant Auditor-Corti,ler Telephone (510) 646-2181 Fax (510) 646-2649 July 7,1993 RECEIVED. ►JUL - 81993 The Board of Supervisors _ Contra Costa County CLERK BOARD Or SUPERVISORS Martinez, CA 94553 CONTRA COSTA CO. Ladies and Gentlemen: Enclosed are twelve (12) copies of the annual audit report for the Contra County Employees' Retirement Association for the year ended December 31, 1993. Very truly yours, Kenneth J. Corcoran Auditor-Controller By: '-OliC v'd David A. Sumn r Staff Auditor DAS/ds Enclosures 14S I.LFJ9a II � I I Contra Costa County �-cob i I I I ,I I REPORT ON THE FINANCIAL CONDITION ' OF THE CONTRA COSTA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION I FOR THE YEAR ENDED DECEMBER 31, 1992 i t I i I I i I AUDITOR-CONTROLLER DIVISION OF AUDITS I i 1 i r r r r REPORT ON THE FINANCIAL CONDITION r OF THE CONTRA COSTA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION FOR THE YEAR ENDED rDECEMBER 31, 1992 r r i . r r r r r r ' CONTRA COSTA COUNTY Employees' Retirement Association Annual Financial Report ' Table of Contents December 31, 1992 ' Page Financial Section ' Auditor's Report . . . . . . . . . . . . . . . . . . . . . . 1 Statement of Financial Condition 3 Schedule of Investments in Securities. . . . . . . . . . . . 4 ' Schedule of Investments in Real Property . . . . . . . . . . 5 Schedule of Activity and Balances - Deposits andReserves . . . . . . . . . . . . . . . . . . . . . . 6 Statement of Investment Income and Changes in ' Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . 7 Schedule of Income from Securities and Trust DeedInvestments . . . . . . . . . . . . . . . . . . . . . 8 Statement of Administrative Expense. . . . . . . . . . . . . 9 Notes to Financial Statements. . 10 Comments on Financial Statements . . . . . . . . . . . . . . 20 ' Supplementary Information Organization of Retirement Association . . . . . . . . . . . 23 Analysis of Funding Progress . . . . . . . . . . . . . . . . 24 ' Revenues by Source - Ten Year History Expenses by Type - Ten Year History. . 25 Contra Costa County Office of Kenneth J.Corcoran ' COUNTY AUDITOR-CONTROLLER Auditor-Controller 625 Court Street _ �:<_�i ' Martinez,California 94553-1282 c - Judith A.Van Note . *�.,�:"' 4� Assistant Auditor-Cont,:.,i er Telephone (510)646-2181 �'• .fir Fax (510) 646-2649C ��sr=-- :- \'A SO ' June 1, 1993 Independent Auditor's Report on Examination of Financial Statements The Board of Supervisors Contra Costa County Martinez, California 94553 The Retirement Board Contra Costa County Employees' Retirement Association Concord, California 94520 Members of the Board: ' We have audited the accompanying general purpose financial statements of the Contra Costa County Employees' Retirement Association for the year ended December 31, 1992 pursuant to Sections 31593 and 7504 of the ' Government Code. 'These general purpose financial statements are the responsibility of the Retirement Association's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards as prescribed by the Governmental Accounting Standards Board. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test ' basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as ' well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. ' As disclosed in Note 6 to the financial statements, the Retirement Association has changed its accounting procedure regarding recognition of revenue for the Capital Guardian Public Funds International Equity Fund. The Board of Supervisors June 1, 1993 Contra Costa County The Retirement Board Contra Costa County ' The Retirement Association has established an accounting policy to recognize appraised market value declines on investments in commercial real estate over a five year accounting cycle. Generally accepted accounting principles (GAAP) require that such declines be reflected in the current financial statement presentation. However, we believe this departure from GAAP is appropriate in the circumstances and that the ' financial statements included herein do not misrepresent the long-term marketability of this investment group as described in Note 7. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Contra Costa County Employees' Retirement Association as of December 31, 1992 and the results of its operations for the fiscal year then ended in conformity with generally accepted accounting principles. The supplementary financial information required by Governmental ' Accounting Standards Board Statement No. 5 has been subjected to audit procedures applied in the examination of the basic general purpose financial statements and is, in our opinion, fairly stated in all material respects in relation to the basic general purpose financial statements, ' taken as a whole. Very truly yours, KENNETH J. CO ORAN Auditor-Con 'oller KJC/LDS:ad ' Enclosures 2 6 n W d ON %0 O O M O N n 0 p H M Ir: .c .0 HO n M N H n N M O O O H O I`- '0 O O, '0 t 11.1 N N N O, 1r) u1 N ? 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O 6 -i u C cd tj Ra) I� N o 0 u a) p. 3.i M H z C u 4✓ a) w v a a 0 a a, W a A m tx n a EXHIBIT A SCHEDULE I 1CONTRA COSTA COUNTY Employees' Retirement Association Schedule of Investments in Securities ' December 31, 1992 (1) Unamortized Net Face or Cost Premium Book Value (Discount) Value Bonds: Domestic $419,099,179 $ $419,099,179 ' Foreign 39,265,390 (1,376,619) 37,888,771 (2) Total Bonds 458,364,569 (1,376,619) 456,987,950 Stocks: (4) Index Fund 60,845,310 60,845,310 (5) International Fund 45,491,950 45,491,950 Common 209,924,081 209,924,081 (3) Total Stocks 316,261,341 316,261,341 First Mortgages FHA/VA 124,893 (2,861) 122,032 Short Term Investments 24,726,000 24,726,000 Total $799,476,803 $ (1,379,480) $798,097,323 ' (1) Domestic Bonds at Amortized Cost, First Mortgages Brinson International Bonds and Short Term at Face; Common Stocks at Cost. ' (2) Total Market Value of Bonds at December 31, 1992 was $467,525,191. 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N N M Ln M n u•1 10 W O• JJ .D N r� M rn O `1 >; H n to ro o Cy, � MD D O {i V1 H M M .D N N rn N � 1 P U1 Ln O t co .D n D n N N D 00 ri n H N CO ri O+ N v n O N r-1 H .O 00 00 O .D 00 •D CO {-I n N Ul n n C� M O -1li N d .O rn r1 ri N 00 Cl) M N C ri ri M ul O+ U1 Vl {i N 0 Y a OO 'a y !4 -4 •rl .r4 N to 'O w 000 y Oa ri A .� � FLo O •1 E 4J 4JJ a-.l ' 41 o - Y t4-4 U U A ¢ C 41 N rd •aV O 00 riW 4.J J • N C C 0) C C W >l T N O O O •00 yFj CLl CQin '3y 41 r01 9 0 0 w L U C :3 C O U U •0 rp0 •-g0 O) I J-1 vI pt� �p H W W H Val b PU a Q A 0.0 A r� Pel d W [ t7 W ' EXHIBIT B CONTRA COSTA COUNTY ' Employees' Retirement Association Statement of Investment Income and Changes in Surplus For the Year Ended December 31, 1992 Income for the Year: ' Income from Securities and Trust Deeds (Exhibit B, Schedule I) $ 93,340,212 ' Income from Real Property (Less Service fee of $384,315, Operating Expense of $1,458,109 and Write Down of Value of $4,593,882) (Note 1.B. ) (463,369) Miscellaneous Income (Expense) (421,186) Total Income (Net of Fees) 92,455,657 ' Less: Administrative Expense (Exhibit B, Schedule II) 1,391,067 Net Income 91,064,590 Less Interest Credited to Reserves: Interest Credited to Reserves, Current Year (Exhibit A, Schedule III) 65,332,221 Miscellaneous Prior Year Adjustments (116,289) Net Interest Credited to Reserves 65,215,932 Income (Loss) Closed to Surplus 25,848,658 ' Surplus, Beginning of Year 18,202,244 Distributions from Surplus (Note 4) (9,123,060) Capital Guardian Prior Period Income (Note 6) 3,665,267 Other Adjustments 54,534 Surplus, End of Year $ 38,647,643 See Accompanying Notes to Financial Statements ' 7 -�r M I\ O It N N 00 C% �o N %0 Ln ri rM Ln N ip O I\ to N -4 '-i .7 O .t O 'O O c0 %0 CO O %0 ri I\ .T H JJ ri IA N r•I .t O M F .Mt c N Ln Hid A v} xH �G U Go00000 Go Iri u') u1 O O O 4J i N N lb� E M OI N N �j 00 r-I O O 1 d) O N r-I F .7 M C10 O �7 4 ri ri ri E H N i-. + ) En 4J C4 •d m td o C) N 14 N %D �O %D CIS � 41 ON -4J-7 •ri A ri 0 V� r-f r-I Gi? 0 co c0IA - 0 -4 :j - •ri tjw0 - M CT N 1-4 00 M G4 Hrn F W n ago 00+ O F .O ?4 CT .-i .-i M r- 0 +, O cd E u -:r rn It C� IT En U 4J 4) O IC1 O %0 N M � m U - - - F E •� A V) O M C � Z cn d -P O _4W ub It CT 1 MO OD d •� co � U G CT O %�0 a0 M i� r-I 7, per. w w Lr) n 7 O O O z - w 'C ri �t C r .-i NC; PL O m E M G " CID C\ rn s a0 in E U d O N O ri ao N M r� O d 4 CG - u r01 N 0 M O d E O d wu $4 ' H (� W O u d d d 41 r� L*r a) C�i/ �+ d >+ G 1-4 It 0 avi W O d bo• > 0j H w O d U W b > A O Sa d b N O w Sa p O O 4l �7 U O O H d u 4J H cd +-J V w •,i co w 0 d ami Eu N 4j 4-jE" In z rn t-4 a H �l 8 ' EXHIBIT B SCHEDULE II CONTRA COSTA COUNTY Employees' Retirement Association Statement of Administrative Expense For the Year Ended December 31, 1992 Expenses Board of Directors $ 10,600 Salaries and Wages 607,383 ' Retirement 111,965 Employee Group Insurance 62,814 Workers Compensation Insurance 4,309 Communications 8,135 Maintenance - Equipment 3,811 Memberships 5,135 Office Expense 55,238 Professional and Specialized Services 186,772 Insurance 55,835 Rent - Structure 78,877 Rent - Equipment 5,122 Minor Equipment 3,868 Travel - Fudiciary Education/Staff Training 51,298 Data Processing Service 90,413 Depreciation & Amortization 42,079 Other 7,413 Total Administrative Expenses $1,391,067 i i f r See Accompanying Notes to Financial Statements 9 ' CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements December 31, 1992 Summary of Plan, Funding and Accounting Policies A. Retirement Program ' The Contra Costa County Employees' Retirement Association is a contributory retirement plan governed by the County Employees' Retirement Law of 1937, as amended. The plan covers substantially all of the employees of the County and County Special Districts and fourteen other member agencies. The total membership of 12,118 is divided among active general and safety members, and retired members, as follows: Retirees and beneficiaries receiving benefits 3,981 Terminated employees entitled to benefits but not yet receiving them 546 Vested active general employees 3,901 Vested active safety employees 1,194 Non-vested general employees 2,180 Non-vested safety employees 316 Total Membership 12,118 The plan is divided into three separate benefit sections of the ' 1937 Act. Each section provides for retirement, disability, death and survivor benefits. Annual cost-of-living (C.O.L.) adjustments to retirement allowances can be granted by the Retirement Board as provided by State statutes. Service retirements are based on age, length of service and final average salary. Subject to vested status, employees can withdraw contributions plus interest credited or leave them as a deferred retirement when they terminate or transfer to a reciprocal retirement system. Pertinent provisions for each section follow: ' General - Tier I Covers all employees eligible to become General members before August 1, 1980 and who did not elect to transfer to the General - Tier II Plan. Members may elect service retirement at age 50 with 10 years of service or with 30 years of service regardless of age. Disability retirements may be granted as service connected with no years of employment required or non-service connected with five years of service credit required. The retirement benefit is based on a one year final average salary. 1 10 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 1. Summary of Plan, Funding and Accounting Policies (Continued) A. Retirement Program (Continued) General - Tier II Covers all employees eligible to become General members on or after August 1, 1980 and all General members before August 1, 1980 who elected to transfer to the General - Tier II Plan. Members may elect service retirement at age 50 with 10 years of service, or with 30 years of service regardless of age. Disability retirements may be granted as service connected with no years of employment required or non-service connected with ten years of service credit required. Those members who elected to transfer from General - Tier I to General - Tier II are eligible for non-service connected disability retirement with 5 years of service credit. The definition of disability is more strict under General Tier II than in the General Tier I plan. The retirement benefit is based on a three year final average salary. As of December 31, 1992 three employers had adopted Government Code 31751 (General - Tier II) . Safety Generally covers all members who are in active law enforcement, active fire suppression work or certain other "safety" classifications as designated by the Retirement Board. Members may elect service retirement at age 50 with 10 years of service, or with 20 years of service regardless of age. Disability retirements may be granted as service connected with no years of employment required or non-service connected with five years of service credit required. The retirement benefit is based on a one year final average salary. The 1937 act statutes require employees to pay 1/2 of the basic retirement benefit (General - Tier II members pay 40% of the General - Tier I rate) and 1/2 of future C.O.L. costs. The employers make up the balance of the basic and C.O.L. contributions needed. However, as shown in Note 1D, the employers subverted part of the employees' basic contributions and most of the C.O.L. costs were covered by surplus investment earnings. B. Summary of Significant Accounting Policies and Plan Asset Matters Basis of Accounting The accompanying financial statements are prepared on the accrual basis of accounting. Employee and employer contributions are recognized in the period in which employee services are performed. The financial statements include solely the accounts of the association, which include all programs, activities, and 11 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 1. Summary of Plan, Funding and Accounting Policies (Continued) B. Summary of Significant Accounting Policies and Plan Asset Matters (Continued) Basis of Accounting (Continued) functions relating to the accumulation and investment of the assets and related income necessary to provide the service, disability and death benefits required under the terms of the governing statutes and amendments. Methods Used to Value Investments Investments are carried at the following values: Bonds, FHA/VA First Mortgages and Short Term - Amortized Cost (face value adjusted by unamortized premium or discount) . The total market value of bonds held by the Retirement Association at December 31, 1992 was greater than their carrying value (See Exhibit A, Schedule I) . Corporate Stock - Acquisition Cost Because of the wide fluctuations in market values from year to year, gains and losses are recognized only at the time of sale; however, if the aggregate market value of stocks is less than cost as of the statement date, surplus is reserved for any net difference that exceeds the statutory reserve. (See Note 3) ' Index Fund - Acquisition Cost At December 31, 1992, $60,845,310 was invested in the Alliance Index Trust Fund. International Equity Fund - Acquisition Cost At December 31, 1992, the Retirement Association had invested $45,491,950 in the Capital Guardian Public Funds International Equity Fund managed by the Capital Guardian Trust Company. This fund was established in September 1988 with an initial investment of $10,000,000. 12 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 1. Summary of Plan, Funding and Accounting Policies (Continued) B. Summary of Significant Accounting Policies and Plan Asset Matters (Continued) Methods Used to Value Investments (Continued) Real Property 1) County Leases - Amortized Cost (Original investment less return of principal) . At December 31, 1992 the Retirement Association owned one completed building which was leased to the County. The lease agreement provides for amortization of the total Retirement Association investment in monthly installments over the life of the lease. Although the useful life of the building is longer than the lease period, it is our opinion that the policy of reducing income by the amount of the lease amortization is realistic in that it recognizes the probability that the County will exercise its purchase option at the end of the lease period, and in so doing avoid a write-off of Retirement Association assets when the option is exercised. The County has the option to purchase the property at the price specified in the agreement. Title to the land on which the building is located is held by the County. Should the County fail to exercise its purchase option, the lease agreement provides a procedure for sale of the land to the Retirement Association. 2) Commercial Leases - Acquisition Cost, plus Unamortized Cost of Leasehold Improvements. At December 31, 1992 the Retirement Association owned ten commercial properties managed by Mellon-McMahan Real Estate Advisors. Net earnings are gross rents less the manager's service fees, and building operating expenses. The Board approved having periodic appraisals performed on each commercial property to establish current market values. These market values could then be compared to the original investment cost reported in the annual general purpose financial statements. The following four properties were appraised during calendar year 1992: Report Date Title Location Cost Market 7-1-92 Laguna Beach Shopping Center Laguna Beach, CA $ 9,066,387 $7,200,000 7-1-92 Scripps Marshalls Plaza San Diego, CA 10,516,403 8,300,000 1-1-93 . South Valley Industrial Park Phoenix, AZ 2,660,369 900,000 ' 1-1-93 Civic Center Industrial Bldg. Phoenix, AZ 3,806,901 2,750,000 Totals $26,050,060 $19,150,000 13 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 Summary of Plan, Funding and Accounting Policies (Continued) Investment Risk I The Retirement Association's investments are authorized by the County Employee's Retirement Law of 1937. Statutes authorize a "Prudent Expert" guideline as to the form and types of investments which may be purchased. The Retirement Association's investments are required by Governmental Accounting Standards Board Statement #3 to be categorized to give an indication of the level of risk assumed by each investment portfolio at year end. All Retirement Association's investments are in Category 1. Category 1 includes investments that are insured or registered or for which the securities are held by the Retirement Association or its agent in the agent's nominee name, with subsidiary records listing the Retirement Association as the legal owner. The Retirement Association's investments and related market values as of December 31, 1992 are as follows: Carrying Market Amount Value Common-Preferred Stocks $316,261,341 $ 431,271,132 Corporate-Governmental Bonds 45699879950 4679525,191 Real Estate 95,726,213 84,878,471 Short Term 24,7269000 24,726,000 Other 122,032 122,032 Total $8939823,536 $1,0089522,826 ' Included in the Corporate - Government Bonds reported above are the following securities pledged in reverse repurchase agreements. In a reverse repurchase agreement the custodian essentially borrows cash and pledges securities to back the loan. The custodian actually enters into an agreement to sell securities and to buy them back at the end of an agreed-upon period at an agreed-upon price. The proceeds were used to increase portfolio yields. The reverse repurchase agreements are as follows: Agreement Underlying Security ' $4,511,000 .received, to be $4,500,000 GNMA maturing August 20, 2022. repaid with interest of 4.607 on January 5, 1993. $6,222,106 received, to be $6,275,814 GNMA maturing July 20, 2022. repaid with interest of 4.60% on January 5, 1993. 14 ' CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 1. Summary of Plan, Funding and Accounting Policies (Continued) C. Funding Status and Progress The amount shown below as "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and any step-rate benefits, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the Association on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among employers. The measure is the ratio of assets available to pay benefits to the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the Association. The pension benefit obligation was computed as part of an actuarial valuation performed as of December 31, 1992. Significant actuarial assumptions used in the valuation include (a) a rate of return on the investment of present and future assets of 8.25 percent per year, (b) projected salary increases of 5.25 percent per year ' compounded annually, attributable to inflation, (c) additional projected salary increases of 1 percent per year, attributable to longevity and merit, and (d) post-retirement benefit increases of 3 percent for Tier I and Safety and 4 percent for Tier II, ' attributable to inflation as measured by the Consumer Price Index. Total unfunded pension benefit obligation applicable to the Association's employees was $452.0 million at December 31, 1992 as `follows (in millions) : Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits $ 625.6 Current employees: Accumulated employee contributions including ' allocated investment income 163.3 Employer-financed vested 539.8 Employer-financed nonvested 49.1 Other reserves (post-retirement death benefit and C.O.L supplement) 2.2 Total pension benefit obligation $1,380.0 ' Net assets available for benefits, at cost 928.0 ' Unfunded pension benefit obligation $ 452.0 i 15 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 1. Summary of Plan, Funding and Accounting Policies (Continued) D. Contributions Required and Contributions Made New contribution rates based on the actuarial study of January 1, 1992 became effective July 1, 1992. The employer rates were calculated on the alternate funding method permitted by Section 31453.5 of the Government Code. The "entry age normal" funding method is used to calculate the rate required to provide all the benefits promised to a new member. Unfunded costs resulting from this calculation are amortized over 18.5 years from the January 1, 1992 valuation date. Contributions totaling $60,588,268 ($48,510,091 employer and $12,078,177 employee) for 1992 were made in accordance with actuarially determined contribution requirements determined through actuarial valuations performed at January 1, 1992 and January 1, 1991 and adopted by the Retirement Board. For the fiscal year beginning July 1, 1992 these contributions consisted of (a) normal costs at (8.5 percent of current covered payroll) and (b) amortization of the unfunded actuarial accrued liability at (8.75 percent of current covered payroll) . The employer contributions include $7,349,361 paid on behalf of employees. During 1992, employers generally paid 50% of employees' basic contributions pursuant to agreements reached during salary negotiations. The Retirement Board paid cost-of-living contributions by transferring from surplus $5,090,058 to the employers C.O.L. reserves and $2,462,804 to the employees C.O.L. reserves. The significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those used to compute the pension benefit obligation as described in I.C. Additionally, the 1983 Group Annuity Mortality tables are used as part of the assumptions for actuarial valuation for service retirements, and the 1981 Disability Mortality table for valuation for disability retirements. E. Historical Trends Ten-year historical trend information, designed to provide information about the Contra Costa County Employees' Retirement Association's progress in accumulating sufficient assets to pay benefits when due, is presented as supplementary information. 16 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 2. Installment Contributions and Interest Receivable The Retirement Association has entered into agreements with the City of Pittsburg and the Riverview Fire Protection District to accept their employees as members of the Association. Each employer agreed to contribute, over a thirty year period, the amounts necessary to fund the acquired benefits of its employees for services rendered prior to the date of their entry into the Association. The following summary lists the pertinent details of each agreement plus the amounts due at December 31, 1992. City of Riverview Pittsburg Fire District Effective date of agreement 7-1-73 7-1-75 First annual payment due 7-1-74 7-1-76 Rate of interest 57 5.757 Annual principal and interest payment $ 107,051 $ 19,380 Original principal 1,645,626 274,067 Receivable at December 31, 1992: Future principal payments 889,184 166,543 Interest accrued from July 1, 1992 22,230 4,788 Total Receivable at December 31, 1992 $ 911,414 $171,331 3. Statutory Reserve The statutes require that surplus up to one percent of the Association's assets be retained in the fund as a reserve against future deficiencies in interest earnings, losses on investments and other contingencies. The Retirement Board has resolved that unreserved surplus up to two percent of the Association's assets be designated as a contingency reserve. 4. Distributions from Surplus The following amounts were paid from or charged to surplus as authorized by the Retirement Board: -- $7,552,862 to the Cost of Living Reserves to reduce contribution rates for one year. -- $1,565,294 to give retirees a monthly supplemental cost-of- living allowance. This allowance was authorized for the year April 1, 1992 through March 31, 1993. -- $4,904 to pay health plan premiums for retirees. 17 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 5. Employer Contribution Unearned The Retirement Board and the County of Contra Costa (County) agreed for the County to prepay its 1992-93 employer contributions. During July 1992 the County advanced $30,597,000 to the Retirement Association. These funds are invested in the short term account controlled by the County Treasurer. Each month, the investment and advance accounts are reduced per the prepayment amortization schedule included in the agreement. The Retirement Association receives the actual contributions calculated by the County payroll system. 6. Prior Period Adjustments An International Equity Fund managed by Capital Guardian Trust Company was established in September 1988. At that time, it was determined that no income or change in value should be recognized except when units are bought or sold. It was subsequently determined by Retirement Management, that income earned and realized gains/losses should be recognized as they occur. $3,665,267 is attributed to the income and realized gains/losses from inception through December 31, 1991 for Capital Guardian Public Funds International Equity Fund and is recorded in 1992 as a prior period item, and $1,826,682 was recorded as income and recognized gain in 1992. 7. Valuation of Real Estate Commercial Properties The ten properties owned by the Retirement Association should be presented at cost subject to adjustment for market value declines judged to be other than temporary to comply with generally accepted accounting principles (GAAP) . One measure of the market value would be a current appraisal. During 1992, the Retirement Association recorded a market decline on two buildings for $4,593,882. The Willows Office Park Building was reduced $2,500,000 for a decline in appraised value and Northwestern Parkway Industrial Building was reduced $2,093,882 because the property is offered for sale at a value less than the original carrying value. As of December 31, 1992, all of the ten buildings had been recently appraised resulting in an unrecorded market decline of $13,468,876. GAAP recommends that a market decline in asset values, that are judged to be other than temporary, be recognized in the Financial Statements through reporting a loss and a corresponding reduction of building investments. The Retirement Association has adopted a policy ' to recognize declines in market values based on periodic appraisals 18 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1992 7. Valuation of Real Estate Commercial Properties (Continued) over time. Beginning in 1993, these market declines will be recognized over a five year accounting cycle. This policy recognizes that the underlying investment will be held as a long term investment and will not be actively traded. Also, appraisals will be performed on a two year cycle which will enhance management's ability to judge if market declines are other than temporary. 19 CONTRA COSTA COUNTY Employees' Retirement Association Comments on Financial Statements December 31, 1992 Investments Yield on Investments As a measure of the overall effectiveness of the Retirement Association's investment program, we have computed the percent of total earnings for 1992 to the average investable assets owned by the Association during 1992. Our computations show the earnings to be 10.25 percent of average assets. The following schedule summarizes and compares, by class, the ratio of earnings to average investments for the last five years. The percentages shown as return on total investments are weighted to reflect the total investment represented by each class. r 20 41 11 H V! N °O, 10 °ul M° OJ rl \c o r cn CT ri 1� R C D O CI N fi � r C% I"N U O O 1 I I I I I oO H O I I I C I OI I I CT NA E-4�I N I NII o3 I 7I I ul V1 (� In O I r, I °`\D° I oOl c M M r-I I -1 I r. r• r_ w d N W G4 r r0 I �GO I .0p1 l I oV.p° I �NL0�l I I NI!1 nO H 00 0 r,HVl 00 I dul I IO ^ .d Q1 O 4 •uH 3•i O N O L(1 I Lr) oN oN n° O •H C k Ri N ui I!'1 N C'I u1 u'1 M M IC U 41 0C O d � U ui �p 1 SDI � i0 �0 t N SCI I H v I II co E 31 UO w V P. Q gd 00+ U 4, fC�1 v1 N H Q H ,., •� or-i r-i oN N Q1 VI M H .�-I co 00 00 co CO M M 00 \, ri v •� d U owl I ° I °I �, m 00 0 rn II WW I II +•� � P C7 I I I a U u Pa u U N •H A C y ^ II 1 '•i° °O p p °0N9 p o H I v I I 0 11 1-4 I 4 H ?G O+ W r M M10 O 00 00 10 O N C H 0 OD 10r•II I Lr) M CM i 0� CO r-1-4O r .O r-I 00 O +.1 N O fl II N c,l L1 M CTI N N p 1-4 I I OII H H a\° o 'C r-I r-I N r °\\00 0� o U °� on'1 M 00 4' O 00 ti O T d N r r 4 M N PA S N �II 00 MI r-,tll 00 r Cp O+ 0O 00 v 00 I I I I _ 1 If 'O N a 0 O U N O O C In O .H C a ^ O H U U v v IH ri Py N N "N O UI y U) 0 C ^ C ^ O C M o a•'I 'O N .—I VI >+ A Vl A •O to H N •H N •H N N A w A In A rn m N N O v) O 0 0 O O w v a N v a ,j a �' a H w D v > � w In QI U C_� F a, L) U CSO H �I C U F �I U �I C�0 F Im m MMM imam r M NM M m* r M Mob " r on CONTRA COSTA COUNTY Employees' Retirement Association Comments on Financial Statements (Continued) December 31, 1992 Investments (Continued) Yield on Investments (Continued) RATIO OF EARNINGS TO AVERAGE INVESTMENTS (CONTINUED) (1) Earnings less service or counselor fees and operating expenses as shown on Exhibit B and Exhibit B, Schedule I for the applicable year. (2) Rate reflects average uninvested cash held throughout the year. (3) On September 27, 1988, the Diablo Bank Building was sold for $5,250,000. After reduction of all closing costs and fees, a gain of $939,192 was recognized. This gain, based on the purchase price of $4,073,766, is included in its entirety in the 1988 Yield on Investments. The net gain of 237 (939,192 = 4,073,766) is over the holding period. The annualized yield computed from the acquisition date of August 2, 1984 is 5.537 per year. (4) Beginning Be in 1990 the Index Fund is combined with the other stocks. g In prior years the Index Fund was segregated to show how the following types of investments affected its yield. -- Capital Guardian Public Funds International Equity Fund (Capital) was funded from the Index Fund and the two funds were combined for yield analysis in 1988. Capital was excluded from yield analysis in 1990 and 1991 since its income/loss was not recognized unless the Retirement Association liquidated its investment in Capital. Capital's income and recognized gain/loss is included in the 1992 yield analysis for stocks since the Retirement Association has decided to record earnings as they occur. �, -- The options program ended in 1988. That program was to enhance the yield on the Index Fund. 22 CONTRA COSTA COUNTY Employees' Retirement Association Supplementary Information December 31, 1992 Organization of the Retirement Association The Contra Costa County Employees' Retirement Association was formed July 1, 1945 and operates pursuant to the provisions of the Government Code known as the County Employees' Retirement Law of 1937. At December 31, 1992, the Association was governed by the following Board of Retirement: Retirement Board Term Expires .Richard Cabral, Chairman June 30, 1993 Gerald Cruson June 30, 1993 William Cullen June 309 1994 Ed Fleming June 30, 1994 F. Robert Koenig June 309 1993 Alfred P. Lomeli, County Treasurer Permanent by Office Sharon Naramore June 30, 1995 Helen J. Shea June 30, 1995 William Shin (alternate) June 30, 1994 Wayne L. Price June 309 1995 Officer of the Board: Patricia Wiegert, Retirement Administrator ell 1 23 ' CONTRA COSTA COUNTY Employee's Retirement Association Supplementary Information (Continued) December 31, 1992 Analysis of Funding Progress 1. Going Concern Basis (Millions) End of Net Assets Pension Calendar Available Benefit Percentage Year for Benefits Obligation Funded ' 1986 $528.5 $770.4 68.67 1987 573.5 837.0 68.57 1988 619.1 913.4 67.87 1989 692.0 995.2 69.57 (1)1990 741.3 1120.1 66.27 1991 826.2 1238.2 66.77 1992 928.0 1380.0 67.27 2. Unfunded Pension (Millions) Unfunded Pension End of Unfunded Annual Benefit Obligation Calendar Pension Benefit Covered as a Percentage Year Obligation Payroll of Covered Payroll 1986 $241.9 $195.4 123.87 1987 263.5 210.7 125.07 1988 294.3 232.6 126.57 1989 303.2 256.6 118.27 (1)1990 378.8 290.8 130.37 1991 412.0 306.5 134.47 1992 452.0 327.4 138.07 ' Analysis of the dollar amounts of net assets available for benefits, pension benefit obligation, and unfunded pension benefit obligation in isolation can be misleading. Expressing the net assets available for benefits as a percentage of the pension benefit obligation provides one indication of the Association's funding status on a going-concern basis. Analysis of this percentage over time indicates whether the Association is becoming financially stronger or weaker. Generally, the greater this 1 percentage, the stronger the Association. Trends in unfunded pension benefit obligations and annual covered payroll are both affected by inflation. Expressing the unfunded pension benefit obligation as a ! percentage of annual covered payroll approximately adjusts for the effects of inflation and aids analysis of the Association's progress made in accumulating sufficient assets to pay benefits when due. Generally, the smaller this percentage, the stronger the Association. Trend information is not available for years prior to 1986. (1) Restated November 22, 1991 by the actuary based on corrected salary data for the January 1, 1991 actuarial study. ' 24 14 CONTRA COSTA COUNTY Employee's Retirement Association ' Supplementary Information (Continued) December 31, 1992 Revenues by Source Calendar Employee Employer Investment Year Contributions Contributions Income Total (1) 1983 5,807,159 22,725,202 42,525,432 71,057,793 1984 5,354,994 18,725,550 34,962,733 59,043,277 1985 5,776,334 20,733,251 47,822,120 74,331,705 1986 6,011,139 25,152,522 66,318,067 97,481,728 1987 6,434,956 25,879,174 47,930,046 80,244,176 1988 7,359,040 28,288,397 49,502,909 85,150,346 1989 8,634,487 34,916,060 70,399,815 113,950,362 1990 10,180,155 40,662,786 51,629,516 102,472,457 1991 11,139,858 44,806,942 76,245,939 132,192,739 1992 12,078,177 48,510,091 94,979,922 155,568,190 Expenses by Type Calendar Administrative Year Benefits Expenses Refunds Total 1983 20,121,086 472,114 502,193 21,095,393 1984 23,050,043 465,355 1,859,517 25,374,915 1985 26,516,054 462,955 1,172,437 28,151,446 1986 29,975,295 500,737 1,358,223 31,834,255 1987 33,322,342 602,240 1,084,968 35,009,550 1988 36,714,986 666,859 1,231,017 38,612,862 1989 39,147,569 850,554 769,391 40,767,514 1990 41,959,542 1,069,980 677,252 43,706,883 1991 47,550,048 1,145,435 624,646 49,320,129 1992 52,945,939 1,391,067 1,070,229 55,407,235 ' Contributions were made in accordance with actuarially determined contribution requirements. (1) Employer contributions include contributions paid on behalf of employees as described in Note 1.D. ' 25