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HomeMy WebLinkAboutMINUTES - 04152008 - D.2 r , --sE.-L Contra TO: BOARD OF SUPERVISORS, FROM: FINANCE COMMITTEE .>; - , S Costa Mary Piepho, Chair John Gioia County DATE: April 15, 2008 SUBJECT: INTRODUCE ORDINANCE - OTHER POST EMPLOYMENT BENEFITS FUNDING SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATIONS: ACCEPT report prepared by County Counsel; INTRODUCE Ordinance 2008-16 "Other Post Employment Benefits Funding" and waive first reading; and FIX April 22, 2008 for adoption of Ordinance 2008-16. BACKGROUND: On April 4, 208, the Finance Committee received the attached report prepared by County Counsel discussing the possibility of a Board-sponsored ballot measure to approve an ordinance allocating money on an ongoing basis for OPEB funding and providing that such allocation could not be changed without a vote of the people. The report indicates that this measure would be an invalid exercise of initiative and referendum power. The report suggests that as an alternative to the measure under consideration, it would be possible for the Board to adopt an ordinance establishing the allocation of monies for OPEB funding and providing that the allocation of monies could only be set aside by a unanimous vote of the Board of Supervisors. The Committee is forwarding this item and the attached Ordinance to the full Board for consideration. CONTINUED ON ATTACHMEN . YES SIGNATURE: RECOMMENDATION C ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OT r SIGNATURE(S): Y � JOO H GIOIA ------ --- ---------- ---------——---------------------------- - ----------------------------- -- ------------ACTION OF BOARD ON APPROVE ED VOTE O SU04V+80 EREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN AND ENTERED ON THE UNANIMOUS(ABSENT J ) MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. AYES: NOES: ABSENT: ABSTAIN: ATTESTED: April 15,2008 CONTACT: LISA DRISCOLL(925)335-1023 JOHN CULLEN,CLERK OF THE BOARD OF SUPERVISORS AND CO NTYADMINISTRATOR CC: COUNTY ADMINISTRATOR County Counsel Q BY ,DEPUTY ADDENDUM TO ITEM D.2 April 15, 2008 On this day the Board considered accepting report from the Finance Committee, introducing Ordinance No. 2008-16 regarding Other Post Employment Benefits(OPEB) funding,waiving first reading, and fixing April 22, 2008 for ordinance adoption. Supervisor Piepho noted this item has been discussed before the Board of Supervisors and the Finance Committee on the commitment made by the Board to fund the County's OPEB retiree health care. She noted the Board would dedicate $588 million in future revenue and said to affirm this commitment an unanimous vote would be required should a future Board wish to change it. Supervisor Gioia elaborated on the purpose of the Board's commitment and noted the $588 million the Board agreed to commit out of future revenue towards the OPEB liability could only be changed by unanimous vote of the Board. He added that if there is a need to change the allocation and one Board member does not concur, the Board could introduce an Ordinance to change this Ordinance to one with a three-vote requirement„ and he noted that to do that would only require three votes. Chair Glover asked for public opinion, and the following person spoke: • Roland Katz, Business Agent, Local 1, suggested selling the equivalent of pension obligation bonds at a level that would cost$l Om or$20m and that money could be committed to OPEB. He said further studies should be done to provide an alternative to the Board's solution. Supervisor Gioia responded there are several issues associated with bonds and the key issue is the commitment by the Board. He noted the Board is trying to achieve transparency and public discussion of these issues. He explained if the Board does change the allocation, it would have to go through two processes plus the Ordinance would be subject to a referendum. By an unanimous vote with none absent, the Board took the following action: ACCEPTED report; introduced Ordinance 2008-16 and Waived first reading; and fixed April 22,2008 for adoption of Ordinance 2008-16. i ORDINANCE NO. 2008-16 (Other Post-Employment Benefits Funding) The Contra Costa County Board of Supervisors ordains as follows (omitting the parenthetical footnotes from the official text of the enacted or amended provisions of the County Ordinance Code): I SECTION I. SUMMARY. This ordinance adds Chapter 62-10 Other Post-Employment Benefits Funding, Section 62-10.002 "Allocation of Funding for Other Post-Employment Benefits." This ordinance allocates specific future resources for funding Other Post-Employment Benefits. This ordinance provides that the allocation can only be changed by a five-fifths vote of the Board of Supervisors. i SECTION II Chapter 62-10 and Section 62-10.002 are added to the County Ordinance Code to read: Chapter 62- 10 OTHER POST-EMPLOYMENT BENEFITS FUNDING 62-10.002 Allocation of Funds for Other Post-Employment Benefits (a) As used in this section, the phrase"Other Post-Employment Benefits"has the same meaning as in General Accounting Standards Board Statement 45. (b) As the following future resources become available, they will be allocated to funding Other Post-Employment Benefits. Resource Beginning Fiscal Year Amount Redirect From Workers 2008/2009 $10,000,000 Compensation Program Redirect From UAAL Rate 2009/2010 $10,000,000 Adjustment Payments Redirect Pension Obligation 2014/2015 $33,000,000 Bond Payments(Retired Bond) Redirect Pension Obligation 2022/2023 $47,000,000 Bond Payments (Retired Bond) Total Annual Future 2024-onward $100,000,000 Resource Redirection 1 Ordinance No. 2008- 16 (c)The allocation of future resources specified in this section can be changed only by a five-fifths vote of the Board of Supervisors. (d)Nothing contained herein shall prevent the County from complying with applicable state or federal laws. (Ords.2008-_, § 2.) SECTION III. This ordinance becomes effective 30 days after passage, and within 15 days after passage shall be published once with the names of supervisors voting for and against it in the Contra Costa Times, a newspaper published in this County. PASSED ON , by the following vote: AYES: NOES: ABSENT: ABSTAIN: ATTEST: JOHN CULLEN, Clerk of the Board and County Administrator By: Deputy Board Chair [SEAL] MAM: H:\retireehealth\OTdinalice-opeb funding allocation.wpd i 2 Ordinance No. 2008- 16 Office of the County Counsel Contra Costa County 651 Pine Street, 9th Floor Phone:(925)335-1800 Martinez, CA 94553 Fax:(925)646-1078 i Date: February 7, 2008 f To: Finance Committee i From: Silvano B.Marchesi, County Counsel By: Mary Ann McNett Mason,Deputy County Counsel Re: Board of Supervisors has Exclusive Authority Over Budgetary Matters Summary: A Board-sponsored ballot measure to approve an ordinance allocating money on an ongoing basis for OPEB funding and providing that such allocation could not be changed without a vote of the people would be an invalid exercise of the initiative and referendum power. In the statutory scheme governing county budgets,the Legislature generally has delegated exclusive authority over budgetary matters to the Board of Supervisors and has barred use of the initiative and referendum power in this area.' As an alternative, the Board could adopt an ordinance providing that the Board's allocation for OPEB funding could not be changed without a unanimous vote of the Board. Background: On June 26, 2007,the Board of Supervisors adopted an allocation of specific future eligible resources to meet the Government Accounting Standards Board requirements for funding Other Post Employment Benefits (OPEB). The Board directed that,in Fiscal Year 2008/2009 and annually thereafter, ten million dollars was to be redirected from the Workers' Compensation program and put toward funding OPEB. The initial redirection of ten million dollars will be implemented in the County budget adopted by the Board of Supervisors for Fiscal Year 2008/2009. The Board has also specified that, commencing in Fiscal Year 2009/2010 and annually thereafter, revenues used for UAAL Rate Adjustment payments will be redirected toward OPEB funding. In addition,revenues that are used for two Pension Obligation Bonds will be redirected annually toward funding OPEB when the bonds are retired in Fiscal Years 2014/2015 and 2022/2023 respectively. Over time, $588 million will be redirected toward OPEB funding. The allocation of all of these resources will be implemented through the County's budget process in each fiscal year. On January 15,2008, the Board of Supervisors established the Post Employment Medical Benefit Trust Agreement, creating an irrevocable trust to hold assets to pay for OPEB. In addition, the Board asked the County Counsel's Office to research the legality of placing a measure on the ballot to ensure that the Board's June 26, 2007 allocation of$588 million in future eligible resources for OPEB funding could not be changed without a vote of the people. I (See, Totten v.Board of Supervisors of Ventura,(2006)139 Cal.App.4th 826,839,review denied 2006 Cal.LEXIS 9678(Cal.Aug. 16,2006.) i i Finance Committee February 7, 2008 Page 2 Such a ballot measure would ask the voters to approve an ordinance which affirmed the future allocation of revenues to fund OPEB and specified that this revenue allocation could not be changed without a vote of the people. Discussion: i A. Constitutionality of Board Sponsored Measure to Make Ongoing Allocation of Resources for OPEB Funding and to Require Voter Approval Before Change in Allocation The allocation of revenues for specific purposes is part of the County's budgetary process. Adoption of a budget is a legislative act.' The voters' authority over legislative acts is generally coextensive with the legislative power of the local governing body. In addition, through use of the initiative power, the voters may bind future legislative bodies, other than the people themselves.' The voters usually exercise their power through their rights of initiative and referendum guaranteed by article II, section 11 of the California Constitution. The electorate of the County may propose an ordinance through a petition signed by a requisite number of voters, requiring the Board of Supervisors to either adopt the ordinance or submit it to the electorate.' Elections Code section 9140 also permits a board of supervisors to bring the voters into the legislative process through referendum,without a petition,by submitting to them at a regular or special election,"an ordinance for the repeal, amendment,or enactment of any ordinance." i However,the right to use the initiative and referendum power may be restricted by the Legislature. If there is a clear showing that the Legislature intended to delegate the exercise of authority exclusively to the governing body, initiative and referendum are precluded.' To determine whether or not the Legislature intended to delegate authority exclusively to the governing body, a court will consider 1) statutory language with reference to the local governing body, with a reference to"board of supervisors"deserving a stronger inference that the Legislature intended to restrict the initiative or referendum power; 2)whether or not the subject at issue is a municipal affair or a matter of statewide concern which indicates a greater probability of intent to bar initiative and referendum; and 3)whether the State's regulatory z Totten v.Board of Supervisors of Ventura,(2006) 139 Cal.App.4th 826,833,review denied 2006 Cal. LEXIS 9678(Cal.Aug. 16,2006.) 9 Totten,supra. 139 Cal.App.4th at 833 citing DeVita v. County of Napa(1995)9 Cal.4th 763,775;and at 840,fn 7. 4 Elections Code§§9116,9118. 5 Totten,supra, 139 Cal.App.4th at 833-834. i Finance Committee I February 7, 2008 Page 3 j i interests reveal a legislative intent to exclusively delegate authority to the local governing body.' In some cases, exclusive delegation is inferred on the grounds that the Legislature must have intended to prevent disruption of routine operations of government.' Use of the initiative and referendum powers to determine ongoing budget allocations was recently addressed in Totten v. Board of Supervisors of Ventura County, supra.B The Board claimed that an initiative ordinance that set ongoing annual budget amounts for county safety agencies and the source of funding for those budgets unconstitutionally impaired the Board's exclusive authority over the County budget. Applying the three part test described above,the court held that the ordinance exceeded the initiative power of the electorate and was constitutionally invalid: . . . the Legislature's use of the term `board' in sections [Government Code] 29000 to 290939 gives rise to a strong inference that the Legislature intended to preclude the electorate from exercising authority over the adoption of a county budget. . . . the board . . . must strike a balance between public safety needs and the county's obligation to fund state-mandated programs unrelated to public safety. It is a matter of statewide concern that a proper balance be struck to ensure adequate funding in both areas. . . . the Ordinance seriously impair[s] the exercise of[the board's] essential governmental function of managing the county's financial affairs. [The Board] would have no discretion to decrease public safety funding below this level if the crime rate plummeted, if improved efficiency or innovations reduced public safety costs, or if the required level of public safety funding prevented the county from adequately funding state-mandated programs unrelated to public safety.10 6 Totten,supra 139 Cal.App.4th at 834,838. 'De Vita,supra,9 CalAth at 776,781. 8 The ordinance at issue in Totten was proposed by an initiative petition signed by a large number of voters and then,pursuant to Elections Code section 9116,was adopted by the Ventura Board of Supervisors without being submitted to a vote of the electorate. s Requirements for the Board of Supervisors'budgetary process are found in Government Code sections 29000-29093 which expressly delegate authority over the County budget to the Board. Totten,supra, 139 Cal.AppAth at 834- 835. 10" Because of their experience in government and knowledge of local conditions and interests,members of the Board of Supervisors are particularly well qualified to make budgeting decisions. ... On the other hand,'voters are not immersed in day-to-day government so as to be able to make reasoned judgments on the complex financial management of Finance Committee February 7,2008 Page 4 i We conclude that in enacting sections 29000 to 29093 the Legislature intended that the authority to adopt budgets for county public safety agencies be exercised specifically and exclusively by the board of supervisors,barring use of the local initiative power." Using the elements of the three-part Totten test, a court would likely find a ballot measure to approve an ordinance allocating monies on an ongoing basis for OPEB funding and providing such allocation could not be changed without a vote of the people, to be an invalid exercise of the power of initiative and referendum. 1) The statutory county budget scheme discussed above expressly provides for an exclusive delegation of budgetary authority to the Board. 2) OPEB funding requirements stem from a national accounting standard, and OPEB funding is quickly becoming a statewide concern. The Governor appointed the Public Employee Post-Employment Benefits Commission to assess the size of the OPEB problem statewide and to recommend potential solutions. In addition, as Totten recognizes, a statewide concern is raised because the County must be able to balance its OPEB funding needs with its obligation to fund state-mandated programs to ensure adequate funding for such programs. 3) The measure under consideration would allocate revenues for OPEB on an ongoing basis, and the allocation could not be changed without a vote of the people, even in the event of a natural disaster like a severe earthquake or of a severe budget crisis. As a result such a measure most likely would be viewed as impairing the Board's exercise of its essential function of managing the County's fiscal affairs.12 In these circumstances, where the Legislature has exclusively delegated the budgetary function and management of the County's fiscal affairs to the Board of Supervisors, neither the people nor the Board can exercise the powers of initiative and referendum.13 B. Alternative Board of Supervisors Restriction on Actions to Redirect Funding Allocated for OPEB As an alternative to the measure under consideration, it would be possible for the government,e.g.,the various appropriations on a budget.'" Totten,supra, 139 Cal.AppAth at 839. 11 Totten,supra, 139 Cal.AppAth at 835,837,839. 12 The budgetary measure under consideration must be distinguished from Board of Supervisors Measure L which extended the term of the Urban Limit Line and required voter approval for certain expansions of the Urban Limit Line. In De Vita v. County of Napa,(1995)9 Cal.4th 763,780,784,the California Supreme Court held that the Legislature implicitly declared that the general plan amendment process is not a matter of statewide concern and is thus subject to the initiative process. 13 Totten,supra, 139 Cal.AppAth at 840,fn 7. Finance Committee February 7, 2008 Page 5 Board to adopt an ordinance establishing the allocation of monies for OPEB funding and providing that the allocation of monies could only be set aside by a unanimous vote of the Board of Supervisors. Government Code section 25003 permits a board of supervisors to adopt rules regarding its voting procedures.14 MAM/am cc: County Administrator County Finance Director Members,Board of Supervisors,District Offices 14 66.Op.Cal.Atty.Gen.336(198.3). While it would be possible for a future board to repeal such an ordinance by majority vote,this action would need to occur before any reallocation could be made. The process and timelines would be the same as those for adoption of an ordinance,and this would allow time for public discussion and careful consideration of such a change.