County participation is an important factor when considering the feasibility of an EIFD. By securing a contribution of County property tax increment, the City leverages its own investment of increment. Another important consideration when forming an EIFD is to identify specific policy issues that the EIFD will address. A theme-based EIFD will be more likely to attract County participation if it resonates with County policy concerns.
4.5 Pay-For-Performance and Social Impact Bonds
Under a typical pay-for-performance model, a government agency contracts with an independent service provider to provide social services, and agrees to provide incentive payments to the provider if it achieves agreed-upon performance targets.
The government agency funds the incentive payments from cost savings realized by the government when outcomes exceed benchmarks based on historic norms. (An independent third party will typically verify outcomes.) The contractual agreement between the government agency and the social service provider is sometimes referred to as a pay-for-performance contract.
The service provider can obtain a loan from an investor to pay for capital expenditures and operations associated with services it provides under the pay-forperformance contract and pledge a share of the of the incentive payments it receives from the government agency towards repayment of the loan. These loans are referred to as Social Impact Bonds (SIBs).
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The Los Angeles County Department of Health Services (DHS) has developed an innovative and well performing health and social service delivery program called Flexible Housing Subsidy Pool (FHSP). The FHSP model represents an innovation that appears to produce a more efficient outcome than would result from the use of social impact bonds (SIB) and other pay-for-performance financing strategies.
Through the FHSP, DHS contracts with owners of rental properties to provide longterm rent subsidies to house DHS patients who are chronically homeless. Providing stable, service-enriched, housing for homeless individuals dramatically reduces County health care expenditures, the savings from which are redirected into the long-term rent subsidies.
4.6 Business Fees and Taxes
California cities are afforded wide latitude in the assessment of various kinds of business fees and taxes, subject to the potential election and other requirements of Proposition 62. Business taxes can be imposed or increased under Proposition 13, because they are not taxes on real property. However, if legislatively earmarked for housing when imposed by a city or county, they would be special taxes requiring a two-thirds vote of the electorate under Proposition’s 13’s terms.
Existing business taxes generally take one or more of the following forms:
n Flat business license fee;
n Employee head tax;
n Gross receipts tax;
n Payroll tax.
Table 1 summarizes the business license tax applied to all businesses in East Palo Alto except owners of five or more rental units. In 2016 East Palo Alto voters passed Measure O, with 77.5% approval, authorizing a tax equal to 1.5% of gross rental receipts on the owners of five or more rental units. The tax is a general tax, but the potential use of funds for housing-related purposes was emphasized. The Measure O business license tax may not be passed on to tenants. It does not apply to any units during the first 10 years after a certificate of occupancy is issued.
Anyone leasing less than five units, nonprofit operators of affordable housing, Section 8 units, or below market rate units with deed restrictions are exempt.
Hardship exemptions may be granted.
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Table 1
Business License Tax Rates
City of East Palo Alto
Annual Gross Receipts Range Tax
-- $1,000 $50
$1,001 $100,000 $125
$100,001 $250,000 $250
$250,001 $500,000 $500
$500,001 $10,000,000 $1 for each $1,000 of gross
receipts
$10,000,001 And up $10,000 + $0.50 for each
$1,000 of gross receipts above
$10,000,001
Source: City of East Palo Alto.
4.7 Transient Occupancy Tax
California Revenue and Taxation Code section 7880 authorizes the legislative body of any city, county or city and county to levy a tax on the privilege of occupying a room or other living space in a hotel or other lodging unless the occupancy is for a period of more than 30 days. Such transient occupancy taxes are often referred to as “hotel” taxes.
Transient occupancy tax revenues could be allocated to housing assistance. This may be justified, for instance, by the large number of low-paid hotel workers who need affordable housing.
An alternative to increasing the tax for housing assistance would be securing dedication for housing assistance from existing TOT revenues, or any increased revenues occurring at current tax rates, as a result of a growing hotel economy. It appears to be legally possible to rededicate all or portions of TOT revenues derived from assessments that existed prior to the passage of Proposition 13 (1978).
However, East Palo Alto does not appear to have any hotels that fall into this category.
Any new or increased TOT as a general tax requires a majority vote. To dedicate TOT for special purposes, such as affordable housing, requires two-thirds voter approval.
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Most cities set the rate of their TOT as a percentage of the hotel room rate.
Generally, TOT rates range from 8% to 14%1. Some cities set it as a cap, for example 12% or at any lesser rate that the city council shall determine by resolution. The City of East Palo Alto currently charges a TOT of 12%, which is the maximum approved by the City Council. Additional increases in the TOT in East Palo Alto must be voter-approved. Of the TOT collected, the General Fund keeps 80%, 10% goes to the TOT-Affordable Housing Fund (for affordable housing development), and 10% goes to Children Youth Family Fund (for local grants).
Short-term rentals have become a topic of interest in many communities, and an increasing number of cities, counties and states have passed laws to regulate these types of rentals. For example, the City of Pacific Grove requires owners of shortterm rentals (STRs) to obtain a STR or Home Sharing License. These ordinances apply to all properties (including rooms and guest houses whether or not detached) rented for less than 30 days. In 2017, the City Council approved an ordinance allowing a maximum of 250 STR licenses in the City at a time, and implementing a lottery to determine who receives those licenses. Vacation rental hosts are required to collect the city’s transient occupancy tax (TOT) from guests and file monthly TOT returns with the city. While Airbnb collects this tax from guests on behalf of its hosts, other short-term rental platforms (such as HomeAway and VRBO) do not. Short-term rental operators using those platforms are responsible for collecting it themselves. The TOT rate in Pacific Grove is 12%. The City estimates that STRs generate more than $1 million a year in TOT revenue.
As other examples, Redwood City passed a similar STR law in 2018, and estimates that the 12% TOT tax could generate $400,000 a year for the City.
DRA was unable to estimate the number of STR listings on AirBNB, or other STR sites, in East Palo Alto. However, an article published in the Silicon Valley Business Journal2 showing the top ten AirBNB listings that appeared most often on site uses’ “wish lists” including two properties in East Palo Alto, then listing for $209 per night and $96 per night, respectively.
1 Source: League of California Cities.
2 “These are Silicon Valley’s top 10 most wished for Airbnb listings,” by Olivia Schaber, July 18, 2017.
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4.8 General Occupancy, Parcel and Municipal Service Taxes Article 11 of the California Constitution permits cities to enact an “excise” tax, often called a “parcel” tax, on the privilege of occupying residential property in general, similar to but broader than a transient occupancy tax. In general, such taxes have been submitted to the voters as special taxes for an identified purpose, subject to a two-thirds approval requirement. A parcel or occupancy tax is not a special tax subject to Proposition 13 if its proceeds are not earmarked for a particular purpose.
Most parcel taxes assess a flat fee on each parcel of property, regardless of its size or value. Parcel taxes are regressive, since they represent a larger burden on less expensive properties. A parcel tax rate may differ based on the type of property, for instance improved and unimproved properties may have different rates and residential and commercial properties may have different rates.
Most parcel taxes in California are used to support local school districts. Relatively few school districts have attempted to pass a parcel tax. More than half of the parcel tax elections held since 1983 have passed, but the districts that passed them represent less than 10% of student population in California.1 In November, 2018, voters in the City of East Palo Alto approved Measure HH, with 79.6% approval, authorizing a parcel tax on large corporations holding real estate in the city. The measure imposes a tax of $2.50 per square foot on commercial office property over 25,000 square feet. Property that is 25,000 square feet or less and property that is not used for commercial office purposes (for example, where the primary business is retail trade, not including retail trade from non-store retailers), agriculture, accommodation and food serves are not subject to the parcel tax. The revenue generated from the tax can be used for affordable and supportive housing programs, with an emphasis on the creation of net new housing; as well as programs that facilitate access to job opportunities for East Palo Alto residents in the science, technology, engineering, and mathematics sectors, the building trades, and strengthen the City’s First Source Hiring Program.
A minimum of 35% of the revenue must be used exclusively for the construction of new, affordable housing stock. A maximum of 15% of the proceeds from the parcel tax can be used for reasonably incurred costs to the City for staff and overhead to 1 Source: ed100.org.
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administer the ordinance and provide annual reports on the amount of funds collected and expended, and the status of any project.
4.9 Utility User Tax
A Utility User Tax (UUT) may be imposed by a city on the consumption of utility services, including but not limited to electricity, gas, water, sewer, telephone (including dell phone and long distance), sanitation and cable television1. As long as the tax is enacted as a general tax, the two-thirds vote requirement of Proposition 13 does not apply. Such taxes are typically a flat percentage of total utility charges collected by the utility. Proposition 218 requires voter approval of any change in the “methodology” by which a tax is administered if the change increases the amount of the tax paid by the taxpayer.
Charged at a flat rate, a utility user tax is inherently regressive. Lower income households pay a tax that represents a higher percentage of their more modest incomes. A number of cities provide exemptions or credits from their utility user tax for low income households.
Approximately 157 cities and 4 counties in California impose Utility Users Tax, primarily for telephone, electricity and gas.2 All of these UUTs are general taxes except two. Voters in the City of Desert Hot Springs approved a UUT in June 2003 which dedicated 50% of the proceeds to resolving the City’s bankruptcy-related debt, while voters in the City of Mammoth Lakes approved the extension of the City’s sun-setting UUT and earmarked it for mobility, recreation, arts and culture.3 The City of East Palo Alto currently changes a UUT of 5% on water, cable television, gas and electricity.
4.10 Utility Franchise Fee
No person, unless exempted, may construct, install, or operate facilities in the public rights-of-way, or provide service using any facilities installed in the public rights-of-way, without a franchise that authorizes each and every service provided.
In consideration of the cost incurred to construct, install, operate or provide services using facilities in the public rights-of-way, franchisees pay the City a fee 1 General Law cities: Cal. Government Code Section 37100.5 2 Source: California City Finance.com, updated January 2017. 3 Source: ibid.
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expressed as a percentage of gross revenues. A franchise agreement (a contractual obligation) specifies the fee to the paid and the gross revenue to be included in the fee calculation. Electric, gas, and cable television are among the common franchises charged a franchise fee. Telephone utilities are specifically exempted from franchise fees by State law.
The Public Utilities Code regulates the franchise fees that general-law cities charge, but charter cities are not bound by those restrictions. The Public Utilities Commission ("PUC") regulates the way that privately owned utilities recover the cost of the franchise fees that exceed regional averages, but plays no role in establishing the validity of those fees.
California courts have always viewed franchise fees as negotiated compensation for the valuable use of public property, not as taxes. In Jacks v. City of Santa Barbara (Case No. S225589) (2017), the California Supreme Court confronted this issue of taxes versus fees in the context of franchise fees. The Supreme Court reversed a ruling by the Second District Court of Appeal that had found that a portion of the City of Santa Barbara’s electrical franchise fee was a tax because its purpose was to generate general revenue for the City. The Supreme Court held that “a fee paid for an interest in government property is compensation for the use or purchase of a government asset rather than compensation for a cost.
Consequently, the revenue generated by the fee is available for whatever purposes the government chooses rather than tied to a public cost." Moreover, the court acknowledged that the negotiated agreement between Santa Barbara and Southern California Edison could constitute evidence of the franchise’s value, so long as that agreement was reached through bona fide negotiations. It also indicated that unspecified “other indicia of value” could be used. However, it did not explain who would bear the burden of proving the value of a franchise. As a result, cities with existing franchise fees, and especially those with franchise surcharges, should evaluate what evidence they have available for their existing fees and prepare their records of decisions for new fees with this consideration in mind.
The City of East Palo Alto charges a franchise fee of 5% on water, cable television, gas, electricity and billboards.
4.11 Housing Conversion and Preservation Taxes and Fees Cities may charge development a tax not earmarked for any purpose or service, as opposed to a fee, which is justified by and earmarked for a specific need.
Examples include condominium conversion taxes.
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For taxes, the courts have allowed wider latitude to local government, not requiring a showing of nexus. Revenue-raising “taxes” need not be proportionate to any particular benefit or burden created by a particular activity. By taxing the “business” of development, cities may substitute taxes for fees, and avoid the need to show a reasonable relationship between the development and the need to be filled by the fees. They may then spend the proceeds for any general fund purpose, so long as they do not earmark the tax. There is not a nexus requirement for taxes that go into the general fund, even if the taxes apply to specific types of development. If earmarked for housing, such a tax would require a two-thirds voter approval.
A number of cities concerned about the loss of affordable housing stock have adopted housing preservation fee ordinances. Generally, these existing ordinances focus on residential hotels. Such ordinances generally require applicants who seek to demolish or convert residential housing that complies with a stated definition to either replace the units or pay a fee to help replace the lost housing. Fee levels may be set to encourage either paying the fee or developing a comparable unit.
Where a fee is charged, there must be a nexus between the requirement placed on development and the problem to be addressed. In the case of a residential hotel replacement requirement, the nexus appears clear: because affordable housing is lost, some contribution to replacing it is directly related.
There is a more serious legal obstacle than the nexus requirement to imposing fees on conversion of residential hotels or other affordable housing. The Ellis Act is a provision in California Law (Government Code section 7060-7060.7) that provides landlords with a legal way to go out of the rental housing business. The Ellis Act was adopted by the California legislature in 1985 after the California Supreme Court decision in the case of Nash v. City of Santa Monica (1984) 37 Cal.3d 97.
Therefore, a city may not impose a prohibitive price on choosing to develop the property for another use, particularly through demolition. In light of this legal issue, it might be helpful before instituting a fee on demolition or conversion of residential hotels or other affordable housing, to perform a study not only substantiating the nexus but also establishing that the fee is not “prohibitive” of conversions. The possibility of imposing a business tax on revenue-generating activities following demolition might avoid the legal hurdles facing a preservation fee.
The City of East Palo Alto currently has a condo conversion ordinance and charges a condominium conversion fee of $28,362 per unit (effective 10/1/2016).
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4.12 Sales and Use Tax
An increase in sales taxes to support a housing trust fund requires a two-thirds approval from the electorate. In some instances, it may be possible to include affordable housing as a component of a local proposition for raising or extending sales taxes.
Sales taxes fall under the restrictions imposed by Article 13. A local sales tax dedicated to a special purpose is considered a special tax and must be approved by two-thirds of the voters for adoption.
The California Department of Tax and Fee Administration (formerly part of the State Board of Equalization) administers the statewide general tax on the retail sale or use of merchandise or goods within the State. Tax Administration also collects the Bradley-Burns tax on behalf of cities and counties and distributes the revenue to those local governments. The Bradley-Burns tax imposes a statewide rate of
1.25%, or which 1% is allocated to counties or incorporated cities and the remainder is distributed to county local transportation funds (LTFs) to support transportation program.
In 2016, voters in the City of East Palo Alto passed, with 84.6% approval, Measure P, which authorized an additional 0.5% sales tax to provide funds for general city services. Measure P was placed on the ballot to address identified community priorities including:
• Maintaining East Palo Alto’s financial stability;
• Maintaining rapid police response times;
• Ensuring a reliable supply of drinking water;
• Upgrading storm drains to prevent flooding; and
• Maintaining street maintenance and pothole repair services.
Currently, the City of East Palo Alto collects a Bradley-Burns tax rate of 1.0% (which nets 0.95% to the City after a 0.05% administration fee) and the Measure P local sales tax of 0.50%. The combined total of state, county and city sales tax rates in East Palo Alto is 9.75%.
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4.13 General Obligation Bonds
General obligation (GO) bonds are commonly used to finance capital improvements that benefit the community, such as roads, bridges, water, sewer, schools and affordable housing. GO bonds are secured by the full faith and credit and taxing power of the issuing municipality. For California local governments, a GO pledge means that all unrestricted resources of the issuer may be used to meet debt service, including an unlimited property tax on all taxable property within the district. Local government GO bonds must be approved at an election by twothirds of voters (except for bonds issued by a school district or community college district, which require a 55% majority). Because GO bonds are very secure, they offer the lowest available interest rates.
4.14 Automobility (Rideshare) Taxes
Municipal officials in cities across the country are grappling with how to respond to the unexpected arrival and rapid growth of new mobility services. These include ride services such as Uber and Lyft (also called Transportation Network Companies, or TNCs), “microtransit” companies such as Via and Chariot and more recently dockless bikeshare and electric scooter offerings. Issues include managing general traffic congestion, as well as curbside use for pick-ups and dropoffs. Since the curbside is a scarce resource, many communities are exploring the imposition of user fees and congestion pricing to manage demand for curbside use as well as provide resources for ensuring road user safety.
For example, the District of Columbia raised taxes on ride-hailing services from 1 to 6 percent in July, 2018. Other cities and states that have enacted similar fees include New York state, Chicago, Seattle and Massachusetts.
Opponents of the taxes argue that they are regressive and disadvantage low income residents. A 2017 report from researchers at the University of California at Davis studied seven metropolitan areas and found that ride-hailing services were disproportionately used by wealthier passengers and are drawing passengers away from local bus and light-rail systems that serve a broader clientele. Proponents of the taxes argue that if rideshare companies are draining revenues from public transit and exacerbating traffic problems, they should play a part in the solution.
Some argue for maintaining lower taxes on pooled rides, which could keep ride share options affordable for low income residents.
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5.0 Foundation and Corporate Support
Foundations and private businesses can be sources of funding for a housing trust fund, although these sources of funds are not ongoing. Because these sources are not ongoing, private support in the form of grants should be considered supplemental, and not primary, sources of funds for a housing trust fund. A more appropriate strategy is to use corporate and foundation funds as “seed” funding for the establishment of the housing trust fund.
Private foundations have a long history of supporting affordable housing development. Foundations such as the Marin Community Foundation, the Koret Foundation, the Ford Foundation, the Irvine Foundation, the Fannie Mae Foundation, the Rockefeller Brothers Fund, the Mott Foundation, San Francisco Foundation, and the MacArthur Foundation, have been active in supporting affordable housing.
For the most part, foundations support affordable housing development through direct funding of developments or, more typically, funding of financial intermediaries such as the Low Income Housing Fund (LIHF), The Enterprise Foundation, or the Local Initiatives Support Corporation (LISC). Intermediaries such as LIHF or LISC then provide direct funding of affordable housing development through grants or loans to nonprofit affordable housing developers.
When foundations directly fund affordable housing developments, the funding is often in the form of a program-related investment (PRI). A PRI is a loan, not a grant, and therefore must be repaid. PRI’s typically carry below market rate interest loans but do not represent a funding source for a housing trust fund because the loans must be repaid.
Alternatively, foundations provide “capacity building” grants to nonprofit organizations to improve the nonprofits’ ability to develop and support affordable housing. Typically, these grants are small and are not used for directly financing affordable housing developments.
In rare instances, foundations have contributed funds to support housing trust funds under the control of a governmental agency. For example, the Hennepin County (Minnesota, including Minneapolis) Housing and Redevelopment Authority administers the Affordable Housing Incentive Fund, which has dedicated $8.4 million in local government money and $3 million from the McKnight Foundation to help finance affordable housing development in the County. Contributions from
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private foundations to housing trust funds administered by a government agency are rare and should not be considered a viable resource. DRA is not aware of an instance where a foundation has funded a government agency-controlled housing trust fund in California.
Private corporations do not typically contribute funds to housing trust funds. DRA is not aware of any circumstance where a corporation contributes to a housing trust fund administered by a government agency. In some instances, corporations have helped create housing trust funds administered by non-governmental entities.
Because of Community Reinvestment Act requirements, private financial institutions often provide loans to affordable housing developments. In addition, private corporations often make equity investments for the benefit of low income housing tax credits. These loans and investments are at market rates, however.
Similar to private foundations, private corporations often support affordable housing development through financial intermediaries. Private corporations, especially financial institutions, support intermediaries such as LISC, LIHF, and the Enterprise Foundation. In some instances, the funds provided by private corporations to these financial intermediaries is below market rate funding.
Below we describe existing foundation and corporate support for affordable housing and related activities in the San Francisco Bay area.
5.1 HOUSING TRUST SILICON VALLEY
Led by the County of Santa Clara and the Silicon Valley Leadership Group, Housing Trust Silicon Valley was created in 2000 to combine public and private resources to support housing solutions addressing needs including homeownership, rental housing, and homelessness prevention. Housing Trust’s foundation was built upon an initial $2 million grant from the County that was matched three-fold with $1 million each from Intel, Adobe, Cisco Systems, Applied Materials, Solectron and KB Homes. The Trust exceeded its $20 million fundraising goal within two years, and has since invested over $257 million in affordable housing, becoming one of the largest housing trusts in the nation and the first nonprofit Community Development Financial Institution (CDFI) to receive a Standard & Poor’s rating, AA-.
5.2 SILICON VALLEY COMMUNITY FOUNDATION
Silicon Valley Community Foundation (SVCF) was formed in 2007 to provide leadership, expertise and capital to help address the social, economic and
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environmental challenges facing communities in the region. There are four primary ways in which SVCF seeks to contribute:
• Commission research: To commission research to identify emerging issues, monitor trends and provide analysis.
• Conduct public discussions: To bring people together to engage in discussion and problem solving. These events often stimulate new insights while encouraging diverse perspectives.
• Advocate: To take principled positions on critical issues and advocate policy outcomes.
• Create initiatives: To launch initiatives and special projects, partnering with other foundations, corporations, nonprofits, donors and government agencies to work on specific topics or issues.
Since its inception, SVCF has awarded more than $6 billion in grants locally, nationally and globally, of which more than $3 billion has gone to support charities in the nine-county Bay Area in California.
The Silicon Valley Regional Fund was established in October 2015 to raise funds to expand housing and transportation strategies that link nonprofit organizations in San Francisco, San Mateo and Santa Clara counties. SVCF is currently working with regional organizations, including those in San Francisco, on issues relating to land use and housing transportation and public transit, and civic engagement of residents to participate in decision-making around these issues.
5.3 CHAN ZUCKERBERG INITIATIVE
The Chan Zuckerberg Initiative (CZI) was founded by Priscilla Chan and Mark Zuckerberg in 2015 with a mission to build a more inclusive, just and healthy future for everyone. Across three core Initiative focus areas--Science, Education and Justice & Opportunity—CZI pairs engineering with grantmaking, impact investing, policy work and advocacy to help accelerate the pace of social progress.
Since inception, CZI has awarded approximately $1.6 billion in grants and has made approximately $110 million in venture investments.
As one example of CZI’s work, Priscilla Chan founded The Primary School in East Palo Alto in August, 2018. CZI also works with local providers such as Life Moves, StarVista and Samaritan Housing in San Mateo County to increase their capacity to provide responsive and community-informed services to homeless and unstably housed community members.
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5.4 FACEBOOK
In October 2019 Facebook pledged to give $1 billion in a package of grants, loans and land with a goal of building 20,000 housing units for lower and middle income households in California. The package includes:
• a $250 million partnership with the state for mixed-income housing on excess state-owned land,
• $150 million for subsidized and supportive housing for homeless people in the San Francisco Bay Area,
• $225 million worth of land near its headquarters in Menlo Park for the construction of 1,500 units of mixed-income housing,
• $25 million for teacher housing in San Mateo and Santa Clara Counties, and
• $350 million for additional commitments based on the rollout and effectiveness of the other initiatives and to support affordable housing in other communities where Facebook has offices.
5.5 GOOGLE FOUNDATION
The Google Foundation (Google.org), the charitable arm of Alphabet, Inc. and its subsidiary, Google, was established in 2005. Googles efforts are focused in three main areas: Education, Economic Opportunity and Inclusion.
In June, 2019 Google announced it would commit $1 billion to boost housing construction in the San Francisco Bay Area. This includes repurposing $750 million of company-owned land from commercial to residential use on which an estimated 15,000 units will be built across all income levels. Google also committed to creating a $250 million fund for loans and other types of financing to preserve affordable housing and build new homes, including at least 5,000 new below-market-rate units.
5.6 SALESFORCE FOUNDATION
The Salesforce Foundation (Salesforce.org) is a tax-exempt 501(c)(3) nonprofit organization whose mission is to put technology in the hands of nonprofits and educational institutions. It provides technology, grants, and volunteering programs in three main areas:
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• Nonprofit Cloud: to help nonprofits track donor and donation data, engage with constituents, deliver programs and measure impact. • Education Cloud: to help deliver outstanding service, build lifelong alumni and donor relationships, and deliver a personalized experience for each student.
• Philanthropy Cloud: to connect companies and their employees with causes they are passionate about and measure and report impact.
5.7 EMPLOYER-ASSISTED HOUSING
Another form of housing assistance provided by corporations is employer-assisted housing.
Some major employers have participated in employer-assisted housing programs to further affordable housing opportunities in their communities. Employers may provide assistance in the form of downpayment assistance, credit enhancement, or leveraged banking/institutional relationships to assist employees with the purchase of homes. For the most part, employers that participate in these programs are municipalities and universities, although a few corporations, such as Computer Associates, Tyson Foods, Honeywell, Harley-Davidson, Kaiser Permanente, and the GMAC companies, have also participated in these programs (according to research by the Fannie Mae Foundation).
In California, there are examples of partnerships between local government agencies and corporations to further homeownership opportunities. In Santa Barbara, the Coastal Housing Partnership (CHP) collaborates with financial institutions and local employers to provide special mortgage financing. Created in 1987, CHP is a nonprofit organization that has 65 local employers as members.
These members are both corporations and local government agencies. Through financial institution partners, CHP offers low downpayment mortgages with no requirement for mortgage insurance. In addition, these loans allow for second mortgages to lower the monthly payments to homebuyers.
The California Housing Loan Insurance Fund (CaHLIF) has created partnerships between private corporations and local governments to assist homebuyers.
Through entities such as the Orange County Affordable Homeownership Alliance (OCAHA) or the California State Teachers’ Retirement System (CalSTRS), homebuyers are offered low downpayment loans as well as downpayment assistance loans. For example, OCAHA offers three percent (of purchase price)
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deferred payment loans at five percent interest that can be used for downpayments or to buy down the interest rate on the first mortgage. Additionally, OCAHA offers a two percent (of purchase price) deferred payment loan at five percent interest to buy down the mortgage insurance rate. OCAHA was created by large businesses and nonprofit organizations operating in Orange County. Members include Merrill Lynch, the Orange County Business Council, the Orange County Housing and Community Development Department, the Building Industry Association of Orange County, Wells Fargo Bank, GMAC Commercial Mortgage, and The Olson Company.
With CalSTRS, low downpayment loans with no out of pocket expenses for recurring and non-recurring closing costs are offered. In addition, second mortgages from a local government agency or employer-assisted housing program are allowed.
The AFL-CIO developed a Housing Investment Trust to promote affordable housing opportunities. For the most part, the AFL-CIO programs provide market rate financing that can be leveraged with affordable housing subsidies from other resources.
Each of these programs represents a form of partnership between corporations and local government agencies. Although none of these programs result in contributions to a local government housing trust fund, each program requires some form of financial participation by a corporation. Generally, these programs should be viewed as sources of leverage for affordable housing subsidies rather than resources for affordable housing subsidies.
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6.0 Estimated Revenue from New/Increased Revenue Sources Table 2 summarizes current tax rates and budgeted annual revenues for FY 2019/20 from key existing revenue sources to the City.
Table 2
Budgeted Annual Revenues from Selected Key Revenue Sources City of East Palo Alto
FY 2019/2020
Source
City
Tax
Rate
General Fund
and Internal
Reserves
Special
Revenue and
Enterprise
Funds
City Operating
Total
Sales Tax 1.45% $5,900,000 -- $5,900,000
Utility Users
Tax
5% $1,570,000 -- $1,570,000
Transient
Occupancy Tax
12% $2,300,000 $575,000 $2,875,000
Franchise Fees 5% $1,050,000 -- $1,050,000
Gross Rental
Receipts
Business
License Tax
1.5% $550,000 -- $550,000
Source: City of East Palo Alto Operating Budget Fiscal Year 2019-2020; City of East Palo Alto.
DRA estimated the projected increase in revenue generation to the City that would result from raising tax or fee rates in these categories. These estimates are summarized in Table 3. Additional potential sources that DRA was not able to estimate but the City may want to explore include:
• TOT tax on short-term rentals (AirBNB, VRBO, HomeAway, etc.); • Increasing the City’s condo conversion fee;
• Soliciting increased foundation support of affordable housing in East Palo Alto;
• Seeking employer-assisted housing commitments.
9.3.b
Packet Pg. 324 Attachment: David Rosen & Associates 2020 Housing Trust Fund Revenue Sources Report (2155 : Potential Ballot Measure for Affordable Housing Trust Fund Revenue Sources February 3, 2020
Administrative Review Draft Report 34
Table 3
Estimated Annual Revenue Potential from Increased Tax Rates Selected East Palo Alto Revenue Sources
Source
Existing Tax
Rate
Estimated Increase
in Annual Revenue
At Assumed New
Tax Rate of:
Sales Tax 1.45% $2,238,000 2.0%
Utility Users Tax 5% $314,000 6.0%
Transient
Occupancy Tax
12% $460,000 14%
Franchise Fees 5% $210,000 6%
Gross Rental
Receipts Business
License Tax
1.5% $183,000 2.0%
Source: DRA estimates based on current revenue generation.
9.3.b
Packet Pg. 325 Attachment: David Rosen & Associates 2020 Housing Trust Fund Revenue Sources Report (2155 : Potential Ballot Measure for Affordable
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: March 15, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: Valerie J. Armento, Interim City Attorney
SUBJECT: CalPERS Prefunding
Recommendation
It is recommended that the City Council adopt a Resolution to:
1. Commit $3 million General Fund Balance to prefund CalPERS future contributions: and
2. Submit the funds to CalPERS in the form of a direct payment as further described in the staff report.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 3: Increase Organizational Effectiveness and Efficiency Priority No. 5: Improve Communication and Enhance Community Engagement Background and Analysis
The City participates in the California Public Employees’ Retirement System (CalPERS), a defined benefit pension plan. A defined benefit pension provides retirement income based on a fixed or defined formula. What this means is the employer bears the risk of providing adequate resources to fund a defined amount of retirement income to employees.
The City has two basic CalPERS plan types: Miscellaneous for non-public safety personnel and Safety for all sworn or public safety-related personnel. Within in each type, there are also two sub-types, or tiers, of benefits: Classic and PEPRA. The PEPRA tier is required as a result of the California Public Employees’ Pension Reform Act of 2013, and generally restricts the provision of pension benefits for new employees joining a public retirement system on or after January 1, 2013. The City has the following fixed or “defined” benefit formulas:
9.4 Packet Pg. 326
Tiers Miscellaneous Safety
Tier 1 Classic 2.5% @ 55 yrs old 3% @ 55 yrs old
Tier 2 PEPRA
(Hired ≥ 1/1/13) 2.0% @ 62 yrs old 2.7% @ 57 yrs old
The following is a simple example illustrating the calculation of CalPERS monthly retirement allowance (not modified for other factors):
· Miscellaneous - Classic 2.5% @ 55
· Age 55
· 20 Years of Service
· $6,600 - 3-year final average compensation (monthly)
X = X = =
Service
Credits
Benefit
Factor
% of Final
Compensation
Final
Compensation
Unmodified
Allowance
20 x 2.5% = 50% x $6,600 = $3,300
City employees belonging to CalPERS do not earn social security benefit credits during the time they work for East Palo Alto. Unmodified allowance calculations may be further modified by chosen survivor benefit options, etc.
In recent years, a number of studies by the CalPERS Board highlighted the serious issues related to the long-term sustainability of the pension fund. In January 2018, the League of California Cities cited, “Several factors have contributed to un-sustainability of the CalPERS system-and as a result, the contributions paid by all public employers to CalPERS are dramatically increasing.” The fact that the CalPERS funding levels have remained low compared to previous economic expansions underscores the difficulty employers will face during the next recessionary cycle impacting investment returns.
Beginning in 2013, the CalPERS Board enacted a number of changes related to funding policies, demographic assumptions, risk mitigation strategies, discount rate reduction, and amortization policies aimed at improving system sustainability. The impact of those changes result in significantly increased annual pension contribution costs and costs are expected to ramp up over the next seven years. The table below reflects recent payroll and pension contribution history:
Fiscal Year Covered
Payroll
Contribtuion
Paid
Contribution as
a Percentage of
Covered Payroll
2020-21 $ 10,345 $ 2,261 21.9%
2019-20 $ 9,674 $ 1,976 20.4%
2018-19 $ 9,577 $ 1,812 18.9%
2017-18 $ 9,258 $ 1,642 17.7%
The pension contribution increases are a factor contributing to the City’s projected structural General Fund deficit gap, as rate of growth in pension contribution costs are expected to outpace the rate of growth in General Fund revenues.
9.4 Packet Pg. 327
As a consistent, long-term strategy to improve the City’s fiscal environment - including addressing the General Fund structural gap that intensified in the past few years - staff articulated three areas of emphasis:
1. Implementing, securing, and stabilizing local resources
2. Improving financial analytics, practices, and risk mitigation strategies
3. Improving information technology and information systems Council strategic priorities aimed at resiliency measures to address the City’s General Fund projected structural deficit include:
1 GOAL: Address Structural Deficit Through Fiscal Resiliency Measures
1.1 Perform Risk-based Study of General Fund Reserves
1.2 Adopt a General Fund Reserve Policy
1.3 Perform Actuarial Study of CalPERS Pension Obligations
1.4 Adopt a CalPERS Funding Plan
Performing an actuarial study and providing options to pre-fund the City’s net unfunded pension liabilities addressed Council Strategic Finance Goal 1.3 and accomplished the following:
1) Providing information about the range of future pension rates; 2) Providing comparison of options to fund additional contributions with the goal of reducing total future pension costs compared to only paying the minimum required contribution;
3) Allowing Council to move forward on Goal Items 1.2 and 1.4 decisions.
In the study session on 3/23/21, staff re-introduced basic information about the City’s CalPERS pension benefits and provided the available prefunding options with example payment plans.
As funding source, staff also identified a unique opportunity of available fund from cash conversion of Successor Agency sponsoring loan receivable. During the session, the Council started decision making process and expressed interest in considering the options, but did not choose one.
With the adoption of the General Fund Reserve Policy in September 2021, we now have clarity in available General Fund Reserve (after setting aside the target contingency reserve). The following tables show the General Fund Balance by classification (Table A) and the schedule of the cash conversion by the sponsoring loan receivable turnover (Table B), respectively.
Table A
9.4 Packet Pg. 328
Fund Balance Classification Per new GF
reserve policy Audited
Nonspendable 6,554,760 6,554,760
Restricted 23,784 23,784
Committed fund balance for:
Capital projects 980,355 980,355
Community benefits reserve 249,770 -
Information Technology Reserve 2,301,819 -
Vehicles and Equipment Reserve 1,147,742 -
Self Insurance Reserve 2,045,853 -
Total committed 6,725,539 980,355
Assigned 4,128,219 4,128,219
Unassigned fund balance for:
Minimum reserve fund balance 8,447,000* 4,250,000
Community benefits reserve - 249,770
Information Technology Reserve - 2,301,819
Vehicles and Equipment Reserve - 1,147,742
Self Insurance Reserve - 2,045,853
Other 16,924,057 21,121,056
Total unassigned 25,371,057 31,116,240
Total Fund Balances 42,803,358 42,803,358
* based on 30% targeted balance
General Fund Ending Fund Balance
June 30, 2021
Table B
FY20-21 FY21-22 FY22-23* FY23-24* FY23-24* Total
Available
SA Sponsoring Loan
Repayments
$2,300,000 $1,400,000 $2,200,000 $1,400,000 $950,000 $ 8,250,000 * Estimate based on the loan repayment schedules
Staff recommends the Council commits $3 million for future CalPERS prefunding in advance of deciding the option to pursue, because staff believes that the commitment of such funds is the first step to take and lies at the core of the decision-making process to address the unfunded liabilities regardless of the option selected - the options are just tools to fund the liabilities.
Additionally, the commitment will provide clarity in the available reserve for other future Council priorities and serve more for financial reporting purposes rather than appropriation of funds.
Since the commitment is not imposed by outside parties the Council will be able to remove or revise in the future if it wishes. In accordance with the Governmental Accounting Standards Board (GASB) 54 and the Reserve Management Policy, the City Council, as the highest level of decision-making authority, can impose and remove amounts used for specific purposes determined by a formal action which, in this case, would change the fund balance classification
9.4 Packet Pg. 329
for the amount ($3 million) to “Committed Fund Balance” from “Unassigned Fund Balance”.
With respect to the dollar amount of the commitment, staff believes $3 million is adequate to leverage potential saving with consideration of the available funding source discussed above.
The following illustrate the Pros-and-Cons and the potential saving for each available option followed by the payment plan with the assumption of $3 million prefunding. 1) Make payments directly to CalPERS (ADP) by either:
· Target specific amortization bases (Option#1)
Pros: Likely higher Investment return, higher saving, easy to implement, reduce net pension liability for GASB reporting
Cons: Locked in, no investment choice
Saving: $3,132,000 (PV = $1,367,000)
Example cities: City of Belmont, Town of Colma, City of San Carlos · Request shorter amortization period (Fresh Start) (Option#2) Pros: Likely higher Investment return, highest saving, earlier UAAL paid-off, reduce net pension liability for GASB reporting
Cons: Locked in and cannot revert
Saving: $3,544,000 (PV = $1,471,000)
2) Establishing an irrevocable supplemental (§115) pension trust (Option#3) Pros: Flexible, more visible, investment choice
Cons: Likely lower long-term return, lower saving, more administrative tasks Saving: $1,708,000 (PV =$602,000)
Example cities: Town of Hillsborough, City of Burlingame, City of Berkley Option: FY21-22 FY22-23 FY23-24 FY24-25 Total commitment ADP CalPERS direct
payment $1,500,000 $500,000 $500,000 $500,000 $ 3,000,000 Section 115 Trust $1,500,000 $500,000 $500,000 $500,000 $ 3,000,000 In this staff report, staff would also like to express a preference among the available options.
Staff recommend Option#1 because it would bring higher investment return and saving and does not require additional administrative process/fees such as RFP, contractual requirement, and investment management. Although Option#2 would provide the highest investment return and saving and the fastest pay-off of unfunded liabilities, it would lock into a shorter amortization period with higher annual contributions and the decision is irreversible.
Fiscal Impact
9.4 Packet Pg. 330
A resolution to commit $3 million for CalPERS prefunding will reclassify the fund balance from unassigned to committed for that amount. The ADP payments to CalPERS will require appropriation of $1.5 million in the fiscal year 2021-2022 and $0.5 million going forward in the following three fiscal years. Staff identified the cash conversion (repayments) of SA sponsoring loan receivables for the funding source as described in the Table B above.
Environmental
The action being considered by the City Council is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” pursuant to 15378(b)(4) because it is a fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant impact on the environment.
Attachments
1. Resolution to commit CalPERS prefunding
2. BA EastPaloAltoCi 22-03-07 CalPERS Council Slides
9.4 Packet Pg. 331
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF EAST PALO ALTO
COMMITTING FUND BALANCE TO PREFUND CALPERS FUTURE CONTRIBUTIONS
IN THE AMOUNT OF THREE MILLION DOLLARS
WHEREAS, the City participates in the California Public Employees’ Retirement System (CalPERS), a defined benefit pension plan.; and
WHEREAS, in recent years, studies by the CalPERS Board highlighted the serious issues related to the long-term sustainability of the pension fund.; and WHEREAS, in January 2018, the League of California Cities noted, “Several factors have contributed to un-sustainability of the CalPERS system-and as a result, the contributions paid by all public employers to CalPERS are dramatically increasing.”; and WHEREAS, the pension contribution increases are a factor contributing to the City’s projected structural General Fund deficit gap and the City Council strategic priorities aimed at resiliency measures to address the City’s General Fund projected structural deficit include adopting a CalPERS Funding Plan (Goal 1.4); and
WHEREAS, the City Council expressed interest in CalPERS prefunding options presented in a special study session held on March 23, 2021; and
WHEREAS, a Reserve Management Policy adopted in September 2021 states the strategic intent regarding financial decision-making and management of the General Fund reserve balances (1) promotes improved long-term strategic decisions; (2) clarifies and institutionalizes good financial practices; and, (3) manages risks to the City’s financial condition.
WHEREAS, in accordance with the Governmental Accounting Standards Board (GASB) 54 and the Reserve Management Policy, the City Council as the highest level of decision-making authority can impose and remove amounts that are used for specific purposes determine by a formal action; and
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EAST
PALO ALTO THAT,
1) In accordance with GASB 54, the City Council commits $3,000,000 of the General Fund Balance to prefund CalPERS future contributions as indicated by the Committed Fund classification ; and
2) Upon consideration of the information presented, the City Council desires to appropriate the funds in the form of direct payments to CalPERS as described in Exhibit A and incorporated by this reference.
BE IT FURTHER RESOLVED THAT the funds so committed cannot be used for any purpose other than as directed above, unless the City Council adopts another resolution to remove or change the constraint.
9.4.a
Packet Pg. 332 Attachment: Resolution to commit CalPERS prefunding (2145 : CalPERS Prefunding) PASSED AND ADOPTED this 15th day of March 2022, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Ruben Abrica, Mayor
ATTEST: APPROVED AS TO FORM:
James Colins, Interim City Clerk Valerie J. Armento, Interim City Attorney Exhibit A
Payment plan: FY21-22 FY22-23 FY23-24 FY24-25 Total commitment ADP CalPERS
direct payment $ 1,500,000 $ 500,000 $ 500,000 $ 500,000 $ 3,000,000
9.4.a
Packet Pg. 333 Attachment: Resolution to commit CalPERS prefunding (2145 : CalPERS Prefunding)
CITY OF EAST PALO ALTO
MISCELLANEOUS AND SAFETY PLANSCalPERS Actuarial Issues – 6/30/20 Valuation Preliminary Results
Presented by Doug Pryor, Vice President
Mary Elizabeth Redding, Vice President
Bianca Lin, Assistant Vice President Tina Liu, Associate Actuary Bartel Associates, LLC March 7, 2022
9.4.b
Packet Pg. 334
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) o:\clients\city of east palo alto\projects\calpers\6-30-20\ba eastpaloaltoci 22-03-07 calpers council slides draft2.docx Agenda How We Got Here Where Are Rates Going? What Options Does the City Have?
9.4.b
Packet Pg. 335
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 1
HOW
WE
GOT
HERE
–
INVESTMENT
RETURN
Returns (after 2001) shown are gross returns, unreduced for administrative expenses, from CalPERS valuation reports, when available.
The discount rate is based on expected returns net of administrative expenses. 20-Year and 30-Year average return rates on 6/30/21 are 6.9% and 8.3%, respectively
9.4.b
Packet Pg. 336
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 2
CALPERS
CHANGES
Many changes since 2013, designed to strengthen the funded status Increased cost to employers
21.3% return in FY21 greatly improved funded status and reduced projected contributions Reduction offset by risk mitigation policy - discount rate change In the November 2021 meeting, CalPERS Board adopted new Discount rate and investment allocation
Discount rate: 6.8% for 6/30/2021. UAL impact matches investment gain amortization (5-year ramp-up)
Asset allocation has higher investment risk than current portfolio Experience study (Demographic assumptions)
9.4.b
Packet Pg. 337
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 3
CALPERS
CHANGES
Risk Mitigation Strategy
Move to more conservative investments over time to reduce volatility Only when investment return is better than expected Lower discount rate in concert Essentially use ≈50% of investment gains to pay for cost increases
Likely get to 6.0% discount rate over 20+ years
Risk mitigation suspended from 6/30/16 to 6/30/18 valuation Did not trigger for 6/30/19 or 6/30/20 valuations First trigger for 6/30/21 valuation – 6.8% discount rate
9.4.b
Packet Pg. 338
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 4
PLAN
FUNDED
STATUS
-
MISCELLANEOUS
City CalPERS Assets and Actuarial Liability ($Millions)
9.4.b
Packet Pg. 339
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 5
CONTRIBUTION
PROJECTIONS
Market Value Investment Return:
June 30, 2021 21.3%1
Future returns based on stochastic analysis using 1,000 trials Single Year Returns at
2 25th Percentile 50th Percentile 75th Percentile
Current investment mix – first 10 years, without risk mitigation -2.1% 5.9% 14.6% Current investment mix – after 10 years, without risk mitigation -0.7% 7.4% 16.4% Assumes investment returns will generally be lower over the next 10 years and higher beyond that.
Discount Rate decreases due to Risk Mitigation policy – Ultimate rate 6.0% No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements Different from CalPERS projection Impact of Risk Mitigation Policy:
Combined impact of 2021 investment gain and discount rate change amortized over 20 years with 5 year ramp up
1 Gross return based on July 2021 CalPERS press release. 2 Nth percentile means N percentage of our trials result in returns lower than the indicated rates.
9.4.b
Packet Pg. 340
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 6
CONTRIBUTION
PROJECTIONS
-
MISCELLANEOUS
Impact of 20/21 Investment Return
9.4.b
Packet Pg. 341
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 7
CONTRIBUTION
PROJECTIONS
-
MISCELLANEOUS
9.4.b
Packet Pg. 342
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 8
PLAN
FUNDED
STATUS
-
SAFETY
City CalPERS Assets and Actuarial Liability ($Millions)
9.4.b
Packet Pg. 343
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 9
CONTRIBUTION
PROJECTIONS
-
SAFETY
Impact of 20/21 Investment Return
9.4.b
Packet Pg. 344
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 10
CONTRIBUTION
PROJECTIONS
-
SAFETY
9.4.b
Packet Pg. 345
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 11
COMBINED
MISCELLANEOUS AND
SAFETY
9.4.b
Packet Pg. 346
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 12
WHAT
OPTIONS
DOES THE
CITY
HAVE?
Make payments directly to CalPERS:
Likely best long-term investment return Must be considered an irrevocable decision Extra payments cannot be used as future “credit” PEPRA prevents contributions from dropping below normal cost Option #1: Request shorter amortization period (Fresh Start):
Higher short term payments Less interest and lower long term payments Likely cannot revert to old amortization schedule
9.4.b
Packet Pg. 347
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 13
WHAT
OPTIONS
DOES THE
CITY
HAVE?
Make payments directly to CalPERS (continued):
Option #2: ADP = Additional Discretionary Payment
Extra contribution’s impact muted by reduced future contributions CalPERS can’t track the “would have been” contribution No guaranteed savings
Larger asset pool means larger loss (or gain) opportunity
1. Paying off shortest amortization bases
Less interest savings vs paying off longer amortization bases
2. Paying off longest amortization bases
More interest savings vs paying off shorter amortization bases
3. Maintaining the current payment schedule – not letting payments reduce due to extra payment – gives the greatest long-term savings
9.4.b
Packet Pg. 348
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 14
IRREVOCABLE
SUPPLEMENTAL (§115)
PENSION TRUST
Can only be used to:
Reimburse City for CalPERS contributions Make payments directly to CalPERS Investments significantly less restricted than City investment funds Fiduciary rules govern Trust investments Usually, designed for long term returns Investment policy and Trust provider selected by City Assets don’t count for GASB accounting
Are considered Employer assets
Over 100 trusts established, mostly since 2015
Trust providers: PARS, PFM, Keenan, CalPERS
9.4.b
Packet Pg. 349
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 15
IRREVOCABLE
SUPPLEMENTAL (§115)
PENSION TRUST
More flexibility than paying CalPERS directly
City decides if and when and how much money to put into Trust City decides if and when and how much to withdraw to pay CalPERS or reimburse Agency
Funding strategies typically focus on
Reducing the unfunded liability, and/or Stabilizing contribution rates to better manage budget
9.4.b
Packet Pg. 350
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 16
COMPARISON OF
OPTIONS
Supplemental Trust
CalPERS ADP
Flexible
Locked In
Likely lower long-term
investment return
Likely higher long-term
investment return
Investment strategy choice
No investment choice
Does not reduce net pension
liability for GASB reporting
Reduces net pension liability for
GASB reporting
More visible
More restricted
9.4.b
Packet Pg. 351
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 17
ILLUSTRATION OF
ADDITIONAL
PAYMENTS
Following illustrates additional $1.5 million contribution on 6/30/2022 plus $0.5 million from 2022/23 through 2024/25 made at end of each year to CalPERS and to a Section 115 Supplemental Trust Assets split 50/50 between Miscellaneous and Safety (total $1.5 million each)
9.4.b
Packet Pg. 352
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 18
ILLUSTRATION OF
ADDITIONAL
PAYMENTS
Direct Payment to CalPERS
Estimated Savings net of ADP
Pay Off Longest Bases – pay reduced future payments as billed by CalPERS: ADP: $3 million $ Savings $ 3,132,000 Present Value Savings @ 3% 1,367,000 No Payment Reduction – follow original payment schedule ADP: $3 million $ Savings $ 4,476,000 Present Value Savings @ 3% 1,933,000 10-Year Fresh Start No ADP $ Savings $ 3,544,000 Present Value Savings @ 3% 1,471,000
9.4.b
Packet Pg. 353
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 19
ILLUSTRATION OF
ADDITIONAL
PAYMENTS
Payment to 115 Trust
Savings will depend on the length of time funds are left in the Trust before being applied to CalPERS payments.
Trust Contributions $3 million Trust Earnings 5% Trust Target 3 Example:
- 1st Year of Trust Withdrawals
4 2025/26
- Last Year of Trust Withdrawals
5 2037/38
$ Savings $ 1,708,000 Present Value of Savings @ 3% discount rate 602,000 3 14.3% and 29.3% target contribution rate, respectively, for Miscellaneous and Safety plans 4 2026/27 for Safety plan
5 2036/37 for Safety plan
9.4.b
Packet Pg. 354
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 20
ILLUSTRATION OF
ADDITIONAL
PAYMENTS
Direct Payment to CalPERS
9.4.b
Packet Pg. 355
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 21
ILLUSTRATION OF
ADDITIONAL
PAYMENTS
Direct Payment to CalPERS
Miscellaneous6
6 Based on 6/30/2020 UAAL – does not include any future new bases
9.4.b
Packet Pg. 356
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 22
ILLUSTRATION OF
ADDITIONAL
PAYMENTS
Payment to 115 Trust
Miscellaneous – Illustration of One Option
9.4.b
Packet Pg. 357
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 23
ILLUSTRATION OF
ADDITIONAL
PAYMENTS
Payment to 115 Trust
Miscellaneous – Illustration of One Option
9.4.b
Packet Pg. 358
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding) March 7, 2022 24
ILLUSTRATION OF
ADDITIONAL
PAYMENTS
Questions?
Thank you!
9.4.b
Packet Pg. 359
Attachment: BA EastPaloAltoCi 22-03-07 CalPERS Council Slides (2145 : CalPERS Prefunding)
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: March 15, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: Patrick Heisinger, Assistant City Manager
Patrick Heisinger, Assistant City Manager
SUBJECT: City Council consideration of partnership with County to explore options for 2415 University ($25,000)
Recommendation
It is recommended that the City Council adopt a resolution allocating $25,000 from the General Fund Reserve to partner with the County of San Mateo in jointly funding an analysis of potential development options for 2415 University Avenue as a City/County governmental center.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 4: Improve Public Facilities and Infrastructure Background
On May 18, 2021, the City Council adopted the City of East Palo Alto Facilities Master Plan (“Plan”) which included specific objectives and recommended actions. Objective #1 of the Plan, “Pursue 2415 University for Permanent Use by the City,” was prioritized by the City Council as an essential milestone that will allow the City to advance other facility planning efforts. Determining the future use of 2415 University (“Property”) will impact how the City approaches other facility needs.
Analysis
Since the Plan was adopted, City and County representatives have met on two occasions to discuss the Property and a potential partnership to re-envision the building. Both parties have agreed to partner to complete an analysis of options for the Property, with the ultimate goal of creating a City/County governmental center.
9.5 Packet Pg. 360
Proposed Approach
The County estimates that the appropriate level of analysis on the Property would require approximately $50,000 in total, which would be shared equally by the City and County. The scope of analysis would be limited to providing high-level concepts for use of the Property.
The City and County would be equal partners in this endeavor and the consultant would engage with City staff, members of the City Council, and the public to better understand the space needs for a civic facility in East Palo Alto. After the analysis is completed, staff recommends that the findings be presented to City Council in a Study Session.
The County will manage the contract with the firm for this analytical project; staff recommends the following structure for City payments to the County:
Payment Amount Project Milestone
1 $12,500 50% of the analysis is considered completed when the City is provided with the first draft concepts.
2 $12,500
Analysis is considered final upon completion of public
processes, including a presentation to and feedback from the City Council. If the analysis does not cost $50,000, the City’s final payment would be adjusted accordingly.
Next Steps
If the City Council adopts the staff recommendation to partner with the County to analyze development options for the Property, staff will work with the Mayor and Vice Mayor to place an item on a future agenda, at which time the selected consultant may obtain initial input from the City Council.
Fiscal Impact
At this time, there is no fiscal impact to the City associated with this report.
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo Co. Library located at 2415 University Avenue, East Palo Alto.
Environmental
The action being considered does not constitute a “Project” within the meaning of the California Environmental Quality Act (CEQA), pursuant to CEQA Guideline section 15378 (b)(5), in that it is a government administrative activity that will not result in direct or indirect changes in the environment.
Attachments
9.5 Packet Pg. 361
1. Resolution
9.5 Packet Pg. 362
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF EAST PALO ALTO
APPROPRIATING $25,000 FROM THE GENERAL FUND RESERVE TO PARTNER
WITH THE COUNTY OF SAN MATEO TO ANALYZE DEVELOPMENT OPTIONS FOR 2415 UNIVERSITY AVENUE
WHEREAS, On May 18, 2021, the City Council adopted the City of East Palo Alto Facilities Master Plan (“Plan”) which included specific objectives and recommended actions; and
WHEREAS, Objective #1 of the Plan, “Pursue 2415 University for Permanent Use by the City,” was prioritized by the City Council as an essential milestone that will allow the City to advance other facility planning efforts; and WHEREAS, City and County representatives have met on two occasions to discuss the Property and a potential partnership to re-envision the building and both parties agree to partner to complete an analysis of options for the Property, with the ultimate goal of creating a City/County governmental center; and WHEREAS, the County of San Mateo offered to utilize a consultant from the County’s list of preferred firms to conduct the analysis; and WHEREAS, the County of San Mateo estimates the analysis will cost $50,000 and suggests that the City and County share the cost equally.
NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO hereby adopts this resolution allocating $25,000 from the General Fund Reserve to partner with the County of San Mateo in jointly funding an analysis of potential development options for 2415 University Avenue as a City/County governmental center. The City’s payments shall be in accord with the following schedule:
Payment Amount Project Milestone
1 $12,500 50% of the analysis is considered completed when the City is provided with the first draft concepts.
2 $12,500
Analysis is considered final upon completion of public
processes, including a presentation to and feedback from the City Council. If the analysis does not cost $50,000, the City’s final payment would be adjusted accordingly.
ATTACHMENT 1
9.5.a
Packet Pg. 363 Attachment: Resolution (2134 : Partnership with County to explore options for 2415 University) PASSED AND ADOPTED this 15th day of March 2022, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
SIGNED:
________________________________
Ruben Abrica, Mayor
ATTEST: APPROVED AS TO FORM:
_____________________________ ________________________________ James Colin, Acting City Clerk Valerie J. Armento, Interim City Attorney
9.5.a
Packet Pg. 364 Attachment: Resolution (2134 : Partnership with County to explore options for 2415 University)
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: March 15, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: James Colin, Executive Assistant
James Colin, Executive Assistant
SUBJECT: COVID-19 Vaccination Program Regular Update
Recommendation
Discuss the COVID-19 vaccination program update and provide direction to staff.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Ø Priority #5: Improve Communication and Enhance Community Engagement Ø Priority #6: Create a Healthy and Safe Community
Background
On a weekly basis the Mayor and Vice Mayor meet with key staff to discuss and coordinate City of East Palo Alto COVID-19 Vaccination Program efforts and progress.
The purpose of this report is to present the information regarding the abovementioned program and efforts in an open forum engaging all members of the Council and the public.
Analysis
See Attachment 1.
The attachments included in this report routinely cover the items typically discussed at the COVID-19 vaccination briefing with the Mayor and Vice Mayor as well as key staff.
The format is discussed as follows:
1. Review of previous week vaccination efforts. This item identifies each event by the date at which it occurred, the time, the location provider, the address, and the vaccination
9.6 Packet Pg. 365
numbers (sometimes by vaccination type and 1st or 2nd dose).
2. Review of upcoming vaccination events for the week. This follows the same content format as number 1 but concentrates on the efforts to make the upcoming event organized and successful.
3. Outreach efforts (not always discussed). This item typically involved a review of outreach efforts as discussed in item 2 but in more detail and/or a change in strategy as circumstances may change.
4. Future Efforts
5. Incentives (Previously considered).
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin outside City Hall and making the agenda and report available at the City’s website and the San Mateo County Library at 2145 University Avenue, East Palo Alto.
Fiscal Impact
N/A as this is an informational report.
Environmental
The action being considered by the City Council is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” pursuant to 15378(b)(4) because it is a fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant impact on the environment.
Attachments
1. Draft Vaccination Meeting Agenda 3-15-2022
9.6 Packet Pg. 366
Vaccination Meeting Agenda
Tuesday, March 15, 2022
1. Review of previous week vaccination efforts:
Ravenswood Family Health Clinic
City
of
EPA Pfizer Adult Pfizer Pedi Moderna J & J Total
1st 2nd 3rd 1st 2nd 3rd 1st 2nd 3rd 1st 2nd
Thurs 3 4 15 0 0 0 1 1 6 0 0 30
Sat 3 7 14 0 0 0 0 3 15 0 0 42
Total 6 11 29 0 0 0 1 4 21 0 0 72
DATE LOCATION TYPE 1
st
Dose
2 nd
Dose
3 rd
Dose
Booster TOTAL
3/1/22 YMCA EPA
Pfizer
Moderna
Janssen
2 -
-
1 -
-
-
6 2
-
11 3/2/22 YMCA EPA
Pfizer
Moderna
Janssen
-
-
-
-
-
-
-
-
-
11 2
1 14
3/3/22 YMCA EPA
Pfizer
Moderna
Janssen
-
-
-
-
1 -
-
4 1
-
6 3/5/22
Woodland
Park
Apartments
Pfizer
(peds)
Pfizer
Moderna
Janssen
7 8
1 -
5 13
6 -
-
-
24 11
-
75 GRAND
TOTAL
18 26 - 62 106
9.6.a
Packet Pg. 367 Attachment: Draft Vaccination Meeting Agenda 3-15-2022 (2153 : COVID-19 Vaccination Program Regular Update)
2. Review of Upcoming vaccination event for week
3. Review of Testing Sites
*The Ravenswood City School District and the Sequoia Union High School District each have additional COVID testing capabilities for students of the districts. Any student or caregiver may contact either District’s main office to learn about how to secure a rapid test for the student.
Date Time Location Address
Tuesday, March 15, 2022 6:00pm –
9:00pm
Lewis And Joan Platt East Palo
Alto Family Ymca 2180 Euclid Ave, East Palo Alto, CA
Wednesday, March 16, 2022
6:00pm –
9:00pm
Lewis And Joan Platt East Palo
Alto Family Ymca 2180 Euclid Ave, East Palo Alto, CA
Thursday, March 17, 2022
6:00pm9:00pm
Lewis And Joan Platt East Palo
Alto Family Ymca 2180 Euclid Ave, East Palo Alto, CA
Thursday, March 17, 2022
5:00pm7:00pm RFHC 1885 Bay Rd, East Palo Alto, CA 94303 Saturday, March 19, 2022
9:00 am12:00pm RFHC 1885 Bay Rd, East Palo Alto, CA 94303 Saturday, March 19, 2022 11:00am6:00pmWoodland Park Apartments 45 Newell Rd., East Palo Alto, CA 94303
Date Time Location Address
Tuesday - Sunday 11:00am –
4:00pm
Ravenswood Shopping
Center
1781 E Bayshore Rd, Palo Alto, CA
94303
Tuesday, Wednesday, Thursday 6:00pm –
8:00pm
Lewis And Joan Platt East Palo
Alto Family YMCA 2180 Euclid Ave, East Palo Alto, CA
Monday - Friday
12:00pm7:00pm
(weekends
10am-4pm)
(Stanford) North Fair Oaks -
Drive Through 2685 Bay Road, Redwood City, CA
Thursday Only 8:00am8:00pmNorth Fair Oaks Library 2500 Middlefield Rd, Redwood City
9.6.a
Packet Pg. 368 Attachment: Draft Vaccination Meeting Agenda 3-15-2022 (2153 : COVID-19 Vaccination Program Regular Update)