Agenda Item No. 8
CITY COUNCIL STAFF REPORT
TO: Honorable Mayor and City Council DATE: June 12, 2023 FROM: Matthew Bronson, City Manager
PREPARED BY: Matthew Bronson, City Manager
SUBJECT: Five Cities Fire Authority (FCFA) Joint Powers Authority Agreement, Appointment of Council Representatives to FCFA Board, and Policy Direction on Agreements with Oceano Community Services District
RECOMMENDATION
Approve the Joint Powers Authority agreement for an Amended and Restated Five Cities Fire Authority (FCFA); appoint Council representatives to the reconstituted FCFA Board; and provide policy direction on agreements with the Oceano Community Services District on temporary fire and emergency medical services and ongoing obligations for CalPERS pension liabilities.
DISCUSSION
On April 24, 2023 the Council received an update on fire and emergency medical services following a February 27th presentation by outside consulting firm Baker Tilly of their review into fire and emergency medical services needs in Grover Beach and Arroyo Grande provided by the Five Cities Fire Authority (FCFA) Joint Powers Authority (JPA). This review was commissioned in October 2022 to provide an outside, third-party review of this important policy issue. The need for the review stemmed from the pending withdrawal of the Oceano Community Services District (OCSD) from FCFA on July 1, 2023 given the failure of Measure A-22 which would have generated additional funding for fire and emergency medical services in Oceano. As part of the prescribed “wind down” process in the existing Third Amendment to the Joint Powers Authority Agreement, OCSD filed a request with the Local Area Formation Commission (LAFCO) to divest the District from the responsibility of providing fire and emergency medical services within Oceano.
Baker Tilly’s scope included a service level analysis, staffing deployment options, fiscal analysis, and review of alternative service models and governance structure. This work included reviewing the financial impacts of OCSD’s departure from FCFA including their current funding contribution and whether it would be beneficial for FCFA to provide fire service to Oceano under a contractual fee-for-service arrangement. Following the February 27th presentation, Baker Tilly finished its review and submitted a final report to the cities which was provided to the Council on April 24. In addition to this report, the April 24th update outlined proposed fire service level and staffing recommendations in FY 2023-24 including temporary contractual service delivery to Oceano and presented a draft JPA agreement for an Amended and Restated FCFA based on a two-city structure with Arroyo Grande and Grover Beach. The Council provided policy direction to support the service level and staffing recommendations as well as the draft JPA agreement.
This staff report covers the following items subsequent to the April 24th update:
• Final JPA agreement for an Amended and Restated FCFA
• Appointment of Council representatives to reconstituted FCFA Board Staff Report: FCFA JPA Agreement, Board Representatives, and Oceano Agreements Page 2 June 12, 2023
• Proposed agreements with OCSD regarding temporary fire and emergency medical services and ongoing obligations for CalPERS pension liabilities • FCFA service levels and budget for FY 2023-25
A similar agenda item is scheduled in Arroyo Grande on June 13 so that the two City Councils can receive information and take related actions on successive meeting nights in preparation for the upcoming fiscal year.
JPA Agreement for an Amended and Restated Five Cities Fire Authority Attachment 1 includes the final version of the Five Cities Fire Authority JPA Agreement for Council approval. Key provisions of the agreement include:
• Authority governance. There will be a four-member Board of Directors to provide policy oversight of the Authority. The Board will have a Chair and Vice Chair, meet at least quarterly, and consist of two representatives of each city with the Chair and Vice Chair appointed from each respective city.
• Executive management. The agreement calls for the executive management of the Authority to be vested in a two-person Management Committee made up of the current City Manager for both Member Agencies. The Management Committee shall hire, terminate, and provide executive management of the Fire Chief who in turn will be responsible for operational management of the Authority. While both City Managers will be part of the Management Committee, one of the City Managers will serve as the Chief Executive Officer (CEO) to carry out decisions of the Management Committee and act on urgent matters as needed. The CEO role will rotate between the City Managers at the same annual frequency as the Board Chair and Vice Chair roles so the Chair and CEO would be from the same city.
• Other Authority positions. The agreement continues the current assignment of the Director of Administrative Services for Arroyo Grande serving as the Authority Treasurer. The Board and Management Committee, in consultation with the Fire Chief, shall appoint or designate a Secretary who shall serve at the pleasure of the Board and be the official custodian of records for the Authority. The Board would also appoint an attorney to serve as legal counsel for the Authority. Employees of the Authority would officially be employees of Arroyo Grande, as they are under the current agreement, but will be assigned to the Authority through an agreement between Arroyo Grande and the Authority.
The Authority will use Arroyo Grande’s CalPERS contract for Authority employees. • Fire stations, other real property, and equipment. Similar to the current arrangement, buildings and structures owned by Member Agencies may be utilized for the Authority’s use but shall remain the property of the respective Member Agency. Each Member Agency shall be responsible for maintenance and insurance of Member Agency buildings.
Similarly, all equipment owned by Member Agencies shall remain the property of each Member Agency but may be utilized by the Authority. The Authority may acquire any equipment or other personal property for the Authority’s use. The Authority’s principal business and governance office will remain at the Authority’s Station 1 in Arroyo Grande. • Cost-sharing and budget. The agreement retains the Member Agency funding formula which is currently based on population, service calls, and number of stations and personnel. Based on this formula, Arroyo Grande would pay 58% of FCFA costs and Grover Beach would pay 42%. The formula would be re-evaluated by the Member Agencies at least every two years prior to the Agencies’ respective biennial budget Staff Report: FCFA JPA Agreement, Board Representatives, and Oceano Agreements Page 3 June 12, 2023
adoption. The agreement also states that the Board initially adopt a budget within 30 days of execution of this Amended and Restated JPA and annually adopt a budget prior to April 30 in order for Member Agencies to review and incorporate contract costs into their respective fiscal year budgets.
• New members and membership withdrawal. The agreement provides the ability to admit new Member Agencies to the Authority. New members may only be admitted with unanimous approval from the Board and governing bodies of each Member Agency. There is also language allowing withdrawal of membership with continued payment of its share of liabilities incurred by the Authority.
The final JPA agreement is largely identical to the draft version presented to the Council on April 24 and includes minor editing modifications and a provision in Section 4.4 to bolster the enforceability of the separate liabilities agreement between OCSD and FCFA shown in Attachment 3 for the Council’s inform. Pending Council adoption and adoption by the Arroyo Grande City Council, the agreement would go into effect on June 22, 2023 to tie into the scheduled date for the initial meeting of the reconstituted FCFA Board where a temporary service agreement with OCSD will be considered.
Appointment of Council Representatives to Reconstituted FCFA Board of Directors Pending adoption of the JPA Agreement by the respective Councils, the initial action for the Council is to appoint representatives to the reconstituted FCFA Board. The Board will provide policy oversight of the Authority and consist of two representatives of each city with a Chair and Vice Chair appointed from each respective city. The Board will meet at least quarterly with the initial regular meeting held on June 22 as mentioned above to carry out actions tied to the new fiscal year including adoption of a budget for FY 2023-24 and approval of a temporary service agreement to provide fire and emergency medical services to Oceano. The Council is asked to select its two representatives to the FCFA Board effective for this initial meeting with subsequent appointment on an annual basis as part of the Council’s appointments to outside committees or organizations. If desired, Council may also appoint an alternate to serve if one or more appointed City representatives to the FCFA Board are unavailable to attend a meeting.
Proposed Agreements with the Oceano Community Services District Staff is bringing two agreements with OCSD for Council review that will be considered by the FCFA Board. The first is an agreement to provide temporary fire and emergency medical services to Oceano. This draft agreement is shown in Attachment 2. Under this agreement, FCFA would contract with OCSD to provide fire and emergency medical service to Oceano for a 12-month period from July 1, 2023 to June 30, 2024 while the LAFCO divestiture process is underway (the agreement would officially go into effect upon approval by both the OCSD and FCFA Boards).
This divestiture process was initiated in January and is expected to take 9-12 months to complete through early 2024. Below are the terms in this draft agreement:
• Term: 12 months to provide time for completion of the LAFCO divestiture process. • Cost: $1,150,000 which is the maximum amount OCSD can pay for fire and medical service in FY 2023-23 with OCSD’s current share of property tax revenue. • Scope of Service: Fire and emergency response services, including the minimal fire prevention services currently provided by the FCFA.
• Location: Service will be provided from companies stationed at Station 1 in Arroyo Grande or Station 2 in Grover Beach. There are identified deficiencies at Station 3 in Oceano that make continued use of this station by FCFA unadvisable beyond use as a storage area.
Staff Report: FCFA JPA Agreement, Board Representatives, and Oceano Agreements Page 4 June 12, 2023
Staff would note that this payment amount reflects a 13% effective share of FCFA costs for the next fiscal year which is a lower percentage than the percentage in the current fiscal year (16%).
A cost based on this 16% percentage would be approximately $1.4 million while a cost based on the percentage specified in the current Third Amendment to the JPA Agreement (20%) would be $1.7 million. OCSD is unable to fund any additional costs beyond their $1.15 million share of property tax revenue given the failure of their tax measures and the County is not in a position to make up this difference for next fiscal year for a service they are not currently responsible for.
However, if the County requests ongoing contract service to Oceano at the conclusion of the LAFCO process, staff would recommend that the FCFA charge the County a higher annual amount based on the proportional allocation of FCFA costs to the cities. Staff from Grover Beach and Arroyo Grande have provided the County an initial cost estimate of $2.1 million which includes an increase in staffing to provide three 3-person companies as recommended by Baker Tilly for the FCFA service area with ongoing contract service delivery to Oceano. The County Board of Supervisors will discuss this issue at their June 20th meeting which staff will attend to represent the City. Further deliberation of this potential service contract will continue into FY 2023-24 and will be brought to the FCFA Board and Council at the appropriate time.
The second agreement addresses the OCSD’s ongoing obligations for its share of the FCFA’s post-retirement (CalPERS) liabilities. This agreement is shown in Attachment 3. Under the terms of the Third Amendment, OCSD is subject to ongoing obligations to pay its share of CalPERS liabilities incurred by FCFA since the formation of the Authority on June 7, 2010. Staff for the two cities and the OCSD have prepared an agreement that will address these ongoing liabilities following the OCSD’s exit from the FCFA. Key terms of the agreement include:
• FCFA will prepare an actuarial analysis each year identifying the estimated liabilities of FCFA, from which OCSD’s obligation will be calculated until the obligations are fully paid.
A draft actuarial report is attached to the agreement as an example. • OCSD may pay its share of FCFA’s CalPERS obligations on a yearly basis, based on the yearly actuarial analysis, or as a lump sum.
• OCSD’s share of FCFA’s CalPERS obligations will be offset by its share of FCFA’s assets as of June 30, 2023. The assets include:
o OCSD’s proportionate share of the FCFA fund balance as of June 30, 2023, as determined by the FCFA Treasurer based on the audited financial report for FY 2022-23, and
o The OCSD’s proportionate ownership share of FCFA’s physical assets as of June 30, 2023, which equals $278,109.
• Based on the actuarial analysis of the FCFA’s 2021 CalPERS liabilities, it is estimated that OCSD’s annual payments may be approximately $20,000 per year. OCSD’s cumulative share of FCFA’s assets are anticipated to be approximately $500,000, which may cover OCSD’s yearly payment for its share of CalPERS liabilities for 20-25 years depending on the actuarial results each year.
The Council is asked to review these draft agreements with OCSD for fire and emergency medical service for FY 2023-24 and ongoing CalPERS liabilities and provide policy direction to the Council’s representatives on the FCFA Board which will ultimately approve the agreements. Staff would note that the Arroyo Grande City Council has previously provided direction in support of the service agreement and the OCSD Board will consider approval of the agreement on June 14 followed by consideration by the FCFA Board at its initial meeting on June 22.
Staff Report: FCFA JPA Agreement, Board Representatives, and Oceano Agreements Page 5 June 12, 2023
FCFA Service Levels and Budget for FY 2023-24
Lastly, staff wished to review with the Council the proposed FCFA service levels and budget for FY 2023-25. OCSD’s payment for service in FY 2023-24 is reflected in the FCFA budget shown in Attachment 4 which will be considered by the FCFA Board at its initial meeting. As part of the City’s FY 2023-25 Proposed Budget, the City is increasing its contribution to FCFA from $2.02 million in FY 2022-23 to $2.77 million in FY 2023-24 or a total increase of approximately $750,000.
The City’s estimated contribution in FY 2024-25 will be $2.86 million. These increases will fund an additional 3.5 full-time equivalent (FTE) positions including 2.0 FTE Firefighter Engineers, 1.0 FTE Battalion Chief, and 0.5 FTE administrative staff. This staffing level will enable a 24x7 2- person third company to better serve the FCFA service area along with the existing two 3-person companies.
Pending adoption of budgets by the two cities, FCFA plans to fill these positions on a temporary basis through overtime and acting assignments until these positions are filled permanently. Staff would note that both Grover Beach and Arroyo Grande plan to perform fire inspection services not currently performed by FCFA though the use of the cities’ respective building services contractors. The costs and revenues for these inspections are included in the City’s proposed budget and these services will be reviewed in the upcoming fiscal year to determine long-term viability of this approach.
FISCAL IMPACT
The cost to the City of the recommended service levels and staffing for fire services for FY 2023- 24 is $2.77 million with an FY 2024-25 projected cost of $2.86 million. These costs are approximately $750,000-850,000 higher than the City’s current cost of approximately $2 million.
ALTERNATIVES
The Council has the following alternatives to consider:
1) Approve the Joint Powers Authority agreement for an Amended and Restated Five Cities Fire Authority (FCFA); appoint Council representatives to the reconstituted FCFA Board; and provide policy direction on agreements with the Oceano Community Services District on temporary fire and emergency medical services and ongoing obligations for CalPERS pension liabilities; or
2) Do not approve the Joint Powers Authority agreement; or 3) Approve a modified version of the agreement which would need to be approved by Arroyo Grande; or
4) Provide alternative direction to staff.
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.
Staff Report: FCFA JPA Agreement, Board Representatives, and Oceano Agreements Page 6 June 12, 2023
Attachments
1. Agreement for an Amended and Restated Joint Powers Authority
2. Draft Service Agreement with OCSD
3. Draft Liabilities Agreement with OCSD
4. FCFA Budget for FY 2023-24
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AMENDED AND RESTATED
JOINT EXERCISE OF POWERS AGREEMENT
OF
THE FIVE CITIES FIRE AUTHORITY
This JOINT EXERCISE OF POWERS AGREEMENT (the “Agreement” or “JPA”) is dated this __ day of ____, 2023, for reference purposes only, and is entered into by and between the undersigned Member Agencies. The undersigned Member Agencies, the Cities of Arroyo Grande and Grover Beach, may be referred to herein individually as “Member Agency” and collectively as “Member Agencies” or “Members.”
RECITALS
A. The City of Arroyo Grande (“Arroyo Grande”) and the City of Grover Beach (“Grover Beach”), (collectively, “Member Agencies”) have the authority under California law to provide fire protection, emergency medical and related services within their respective jurisdictions.
B. Each Member Agency is a public agency authorized and empowered to contract with the other Member Agency for the joint exercise of powers under the Joint Exercise of Powers Act, Sections 6500, et seq., of the California Government Code (the “Act”).
C. Each Member Agency is a local public entity, and are municipalities in contiguous geographical proximity, having similar fire protection needs, and a history of coordination and cooperation between each other.
D. By jointly exercising fire protection, emergency medical and related services, each Member Agency is able to achieve cost savings and operational efficiencies for the benefit of the persons residing in the Member Agencies’ respective service areas.
E. On June 7, 2010, the Member Agencies, desirous of improving the quality and level of fire suppression and emergency medical service delivery within their communities through the sharing of resources and expertise, entered into a Joint Powers Authority Agreement (the “JPA”) and have operated as Five Cities Fire Authority pursuant to the terms and conditions in that agreement since that time. Under that agreement, the Member Agencies have shared fire services, allowing for cost savings and operational efficiencies in providing fire services to the public.
Consolidation of such fire services into a single public entity has allowed for an efficient fire protection organization significant command and administrative benefits, and a net-decrease in operational costs with a concurrent increase in operational efficiency.
F. The Oceano Community Services District was previously a member of the JPA, but voluntarily exited the JPA in June 2023 due to an inability to meet its contribution obligations under the JPA.
G. The Member Agencies have now determined the specific terms of the 2010 agreement should be amended so that this Amended and Restated Joint Powers Agreement accurately reflects the Authority's current structure and operations.
Attachment 1 - 1
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NOW, THEREFORE, for and in consideration of the mutual covenants and conditions hereinafter stated the Member Agencies agree as follows:
1. Recitals. The recitals above are true and correct, and are hereby incorporated into the terms of this Agreement as though fully set forth herein.
2. Term. The term of this Agreement shall commence as of the date the Member Agencies have fully executed this Agreement and continue until terminated pursuant to the terms of this Agreement.
3. Definitions. Except where the context otherwise clearly requires, the following words and phrases shall have the meanings specified below:
“Act” shall mean the Joint Exercise of Powers Act of the State of California, commencing with California Government Code Section 6500, as now existing or as may hereinafter be amended or supplemented.
“Agreement” shall mean this Joint Exercise of Powers Agreement by and between the Member Agencies, as supplemented, amended and/or restated from time to time. “Authority” shall mean the Five Cities Fire Authority, a joint powers authority created by this Agreement in accordance with the Act, made up of the Member Agencies, the Cities of Arroyo Grande and Grover Beach.
“Authority Area” means that geographic area encompassing the total combined jurisdictional boundaries of the Member Agencies, as lawfully changed from time to time. “Board” or “Board of Directors” means the governing body of the Authority as established by this Agreement.
“Board member” or “Director” means a member of the governing body of the Authority. “Fiscal Year” means July 1 of one year through June 30 of the following year. “Formation Date” means the date when the Authority was originally created, June 7, 2010.
4. Creation of Authority.
4.1 Authority Created. The Authority was created as a public entity on June 7, 2010 as the “Five Cities Fire Authority” by operation of the prior Joint Powers Authority agreements.
The Authority was and is formed pursuant to the provisions of Article 1, Chapter 5, Division 7, Title 1 (commencing with Section 6500) of the Government Code of the State of California, which authorizes two or more public agencies, by a joint powers agreement entered into respectively by them and authorized by their legislative or governing bodies, to exercise jointly any power or powers common to the member agencies. The Authority shall be a public entity separate from the Member Agencies and is responsible for the administration of this agreement. 65501.00001\41161259.18
The debts, liabilities and obligations of the Authority shall be the debts, liabilities and obligations of the Authority alone and not of one or more of the Member Agencies. (a) Confirmation of Authority Name. The Authority is known as the “Five Cities Fire Authority.”
4.2 Notices. Within thirty (30) days after execution of this Amended and Restated Agreement, the Authority shall cause a notice of such amendment to be prepared and filed with the office of the California Secretary of State containing the information required by California Government Code § 6503.5. Within ten (10) days after execution of this Amended and Restated Agreement, the Authority shall cause an amended statement of information concerning the Authority, as required by California Government Code § 53051, to be filed with the office of the California Secretary of State and with the County Clerk, of any change in facts as required by Government Code § 53051(a).
4.3 Authority Area. The geographic boundaries of the Authority (“Authority Area”) shall be coextensive with those of the Member Agencies, as lawfully changed from time to time.
4.4 Other Joint Powers Agreements Superseded. As of the Effective Date of this Agreement, any prior JPA agreements and/or amendments of the Five Cities Fire Authority shall have no further force and effect. Notwithstanding the foregoing, nothing in this Agreement supersedes the obligations, or otherwise absolves the former member agency of the Authority, Oceano Community Services District, of its ongoing share of unfunded CalPERS liabilities, including but not limited pension/CalPERS, accrued fringe benefits, and other liabilities incurred from Oceano’s participation in the Five Cities Fire Authority, prior to June 30, 2023 (“Liabilities”). The Authority shall enter into a standalone agreement with Oceano Community Services District with respect to those ongoing Liabilities.
4.5 Bylaws. The Board may adopt bylaws and any other regulations, policies, or procedures for the operation of the Authority not inconsistent with State constitutional, statutory, or decisional case law or the California Code of Regulations.
4.6 Purpose. The purpose of this Agreement is to jointly exercise fire protection, emergency medical, and related services. The purpose shall be accomplished, in the manner set forth in this Agreement. The Member Agencies each possess the powers necessary or convenient for the accomplishment of such purposes.
(a) Through the Authority and its governing body, the Member Agencies shall collaborate, cooperate and seek to determine ways in which the Member Agencies and the citizens residing within the Authority Area can benefit from joint services. (b) The Authority shall provide fire protection, emergency medical, and related services within the Member Agencies.
(c) The Member Agencies shall jointly benefit through the sharing of resources, which may include but is not limited to the sharing of executive and/or administrative staff. Among other public benefits, the Member Agencies shall receive reduced costs and more efficient services through the sharing of such resources. 65501.00001\41161259.18
(d) The purposes of this Agreement shall not be construed as limiting, and the Authority, and the Board shall be authorized to further define the means by which the joint exercise of services may be accomplished.
(e) The Authority may, if approved by the Member Agencies, accept new Parties to this Agreement, and the purposes of this Agreement shall include the provision of fire protection, emergency medical, and related services within the territorial jurisdiction of any new Parties. The purposes of this Agreement shall apply to any new Parties.
5. Powers of Authority.
5.1 The Authority shall exercise the powers common to the Member Agencies, powers otherwise permitted under the Act, and powers necessary to accomplish the purposes of this Agreement.
5.2 The Authority is hereby authorized, in its own name, to do all acts necessary, convenient and appropriate for the exercise of the foregoing powers for the purposes set forth in this Agreement and to do any or all of the following:
(a) Setting and adopting policies, including the scope of the Management Committee’s authority under Section 7.1.
(b) Adopting an annual budget.
(c) Employing personnel, consultants, advisors and independent contractors, setting parameters for labor negotiations, and ratifying labor agreements. (d) Entering into contracts, leases and other agreements, which may include, but are not limited to, a contract for administrative and fiscal services and a contract with a Certified Public Accountant for annual audit services or mutual aid or automatic response agreements or contracts for service to other jurisdictions. (e) Applying for; receiving and disbursing grants, loans or other aids from any private or public agency.
(f) Setting fees for service where permitted by law.
(g) Receiving, disbursing and investing funds.
(h) Purchasing and holding title to property, and obtaining leaseholds, licenses, and other interests in property, including the authority to acquire, dispose of, construct, manage, maintain or operate any building, works or improvements. (i) Issuing revenue bonds pursuant to California Government Code Section 6540, et seq.
(j) Obtaining in its own name all necessary permits, licenses, opinions and rulings.
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(k) Expending funds of the Authority only for the purpose of carrying out the provisions of this Agreement as they now exist or may hereafter be amended. Such powers shall be exercised in the manner provided in the Act subject only to such restrictions as set forth in this Agreement or other applicable law.
(l) Suing and being sued in its own name.
(m) Carrying out and enforcing all of the provisions of this Agreement. (n) To incur debts, liabilities or obligations, which do not constitute a debt, liability or obligation of any Member Agency.
(o) To receive gifts, contributions and donations of property, funds, services and other forms of assistance from persons, firms, corporations, and governmental entities, provided that the Authority consents to such gifts, contributions and donations. (p) To fix the compensation, if any, paid to the Board of Directors, Secretary, Treasurer, Controller and Attorney, in compliance with all applicable laws. (q) To prescribe the duties, compensation and other terms and conditions of employment of other agents, officers and employees.
(r) To adopt reasonable rules and regulations for the conduct of the day-today operations of the Authority. (s) To apply for, accept, receive and disburse grants, loans and other aid. (t) To invest money in the treasury, pursuant to Government Code section 6505.5, that is not required for the immediate necessities of the Authority, as the Authority determines advisable, in the same manner and on the same conditions as local agencies, pursuant to Section 53601 of the Government Code.
(u) To exercise any and all powers which are provided for in the Act and in Government Code section 6584 et. seq. including, without limitation Government Code section 6588, as they exist on the Effective Date of this Agreement or may hereafter be amended. (v) Other powers and duties incidental to those enumerated herein.
5.3 Manner of Exercise of Powers. The powers of the Authority shall be limited only by the terms of this Agreement, the Act, and applicable law, as amended from time to time. The laws of the State of California applicable and common to general law cities shall govern the Authority in the manner of exercising its powers common between the cities, subject to such restrictions as are applicable to the City of Arroyo Grande in the manner of exercising such powers, as required by Government Code section 6509.
6. Governance.
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6.1 Board of Directors. The Authority shall be governed by a four-member Board of Directors (collectively “Board,” individually “Board member” or “Director”). Each Member Agency may appoint Board members, as follows: two (2) elected city councilmembers, which may but is not required to include the Mayor from each Member Agency. Each of the four (4) Authority Board members, and any alternates, shall be appointed as determined by the respective Member Agencies’ City Councils and any applicable local policies. All the power and rights of the Authority shall be exercised by the Board, subject to the rights reserved by the Member Agencies as set forth in this Agreement; provided, however, that the Board may delegate such powers and authority to committees, sub-committees, the Management Committee, and others as the Board deems appropriate.
6.2 Compensation. Directors may receive such compensation from the Authority for services as may from time to time be established by the Board, subject to the limits of applicable law. Directors shall be reimbursed for necessary and actual expenses incurred in the conduct of the Authority’s official business as permitted by law and by policies adopted by the Board.
6.3 Board Officers, Alternating Member Agency Term. In the interest of full representation between the two Member Agencies, the role of Board Chair and Vice Chair shall alternate between the two Member Agencies as follows:
(a) A Board member from one of the two Member Agencies shall serve as Board Chair over a one-year term (“Chair Term”). During each Chair Term, the Vice Chair shall be selected from a different Member Agency than that of the Board Chair, ensuring the Vice Chair serves a city council that is not part of the City organization on which the Board Chair serves.
(b) Following each one-year Chair Term, the Chair and Vice Chair shall alternate between the two Member Agencies, so at all times the Board Chair and Vice Chair shall be from the separate Member Agencies.
(c) The Chair, or in the Chair’s absence the Vice Chair, shall preside at and conduct all meetings of the Board and execute agreements and other official instruments on behalf of the Authority. In the absence or inability of the Chair to act, the Vice Chair shall act as Chair. In the absence of the Chair and the Vice Chair, the absent members may appoint a different member of the Board to serve as an alternate. (d) The procedure for selecting the Board Chair and Vice Chair shall be set forth within the Authority’s adopted by-laws or other adopted Authority policy as soon as practical.
6.4 Meetings of the Board.
(a) Annual Meeting. The Board shall hold an annual meeting to review the services provided by the Authority and to consider approval of a budget, which shall be a regular meeting conducted in accordance with the provisions of the Ralph M. Brown Act, Sections 54950 et seq. of the California Government Code. The Board shall also hold regular meetings at least quarterly, on a schedule adopted pursuant to subsection 6.4(d) below. The Board may hold additional regular meetings as determined by the Board and may adopt such procedures and 65501.00001\41161259.18
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resolutions for conducting such meetings and other business as the Board deems appropriate.
Alternatively the Board may establish an executive or other committee to hold regular meetings. (b) Conduct of Meetings. All meetings of the Board including, without limitation, regular, adjourned regular, and special meetings shall be called, noticed and conducted in accordance with the provisions of the Ralph M. Brown Act, Sections 54950 et seq. of the California Government Code.
(c) Quorum. A simple majority of the Board shall constitute a quorum for the purpose of transacting business. The affirmative vote of a majority of the quorum shall be required for the Authority to take any action and must include at least one affirmative vote from one Board member from each Member Agency, except: (i) where different voting requirements are provided for by applicable law or local Authority policies; and (ii) approval of budgets, issuance of any bonds, exercise of eminent domain, and incurrence of any debts, liabilities, obligations, certificates of participation or other evidence of indebtedness shall require an affirmative vote of the majority of the membership of the Board subject to any specific, adopted or applicable Authority purchasing policy. This section shall not prohibit the Board from delegating the authority to purchase goods and services, including goods and services consistent with any adopted or applicable Authority purchasing policy, specified herein. (i) In the absence of a quorum at any meeting of the Board, a majority of the directors present, or the Chair in the absence of all directors, or the secretary may adjourn the meeting from time to time without further notice, but no other business may be transacted. (d) Location and Date. The Board shall meet at the Principal Governance and Business Office as set forth in Section 9 of this Agreement, or at such other place as may be designated by the Board for its regular, adjourned regular, and special meetings consistent with this Agreement. The dates upon which, and the hour and place at which, any regular meeting shall be held shall be fixed by resolution of the Board and a copy of such resolution shall be provided to each Member Agency.
(e) Agendas and Minutes. The Board may select, appoint, or employ a secretary to keep or cause to be kept, at the principal business office, the principal governance office, or such other place as the Board may order, a book or electronic copy of minutes of all meetings of the Board and its committees as required by law, with the time and place of holding, whether regular or special, the notice thereof given, the names of those present at the meetings, and the proceedings thereof. As soon as practicable after each meeting, the secretary shall cause a copy of the minutes to be forwarded to each director of the Board, and to the Member Agencies. The secretary need not be a director and shall serve at the pleasure of the Board.
6.5 Board Committees
(a) Committees. The Board may create any standing or ad hoc committees as it sees fit. The Board may delegate to any committee the authority to approve any action or transact any business of the Board, except for business that is required by this Agreement to be approved by the full Board.
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(b) Actions of Full Board. Approval of budgets, issuance of any bonds, exercise of eminent domain, and incurrence of any debts, liabilities, obligations, certificates of participation or other evidence of indebtedness as may be set forth in the Authority’s effective purchasing policy and any legislative actions as defined by State law shall require an action of the full Board and shall not be delegated to any Board committees. (c) Procedures. Except for exempt ad hoc committees, all meetings of committees including, without limitation, regular, adjourned regular, and special meetings shall be called, noticed and conducted in accordance with the provisions of the Ralph M. Brown Act, Sections 54950 et seq. of the California Government Code. Committees shall maintain minutes of their proceedings.
6.6 Bylaws. The Board may adopt bylaws and any other regulations, policies, or procedures for the operation of the Authority.
7. Executive Officers and Personnel
7.1 Management Committee. The management of the Authority shall vest in a Management Committee made up of the current City Manager for both Member Agencies or the City Managers of any Member Agencies added to this Agreement. The Management Committee shall be participants in, and oversee all non-Management Committee Executive Officers, and any Executive Officers’ responsibilities as set forth in this Agreement. The Management Committee shall have the power, subject to any Board direction or Board-adopted policies:
(a) To execute any contract up to an amount consistent with any ordinance or rules adopted by the Board establishing the Authority’s purchasing policies and procedures, and/or policies for capital costs of special services, equipment, materials, supplies, maintenance, or repair that involves an expenditure by the Authority within budgetary limits approved by the Board (“Board purchasing policies”);
(b) To hire, terminate, and oversee the performance of the Fire Chief; (c) To expend funds of the Authority subject to any Board purchasing policies and enter into contracts, whenever required for the immediate preservation of the public protection, health, or safety;
(d) To sell any personal property of the Authority up to a value consistent with the Board’s purchasing policies;
(e) To support the Board as determined by the Board in labor negotiations and management;
(f) To administer the priorities and policies established by the Board for fire services of the Authority;
(g) To perform such other duties as may be assigned by the Board, and to report at such times and concerning such matters as the Board may require. 65501.00001\41161259.18
7.2 Executive Officers. The executive officers of the Authority shall include the Management Committee, the Chief Executive Officer, the Fire Chief, the Treasurer, the Auditor/Controller, and such other executive offices as created by the Board. All executive officers shall report to the Management Committee, and the acting Chief Executive Officer. (a) Chief Executive Officer. The Chief Executive Officer will be the City Manager from the Management Committee that is employed by the same Member Agency from which the current Board Chair serves as a city councilmember or Mayor. The Chief Executive Officer shall alternate automatically, serving during the same Chair Term that the Board Chair serves on the Chief Executive Officer’s Member Agency city council. The Chief Executive Officer shall carry out the decisions of the Management Committee and act as the signatory for the Authority on all actions requiring approval of the Management Committee. (b) Fire Chief. The Fire Chief shall be responsible for the proper and efficient operation of the Authority as is or hereafter may be placed in his or her charge, or under his or her jurisdiction or control, pursuant to the provisions of this Agreement, or of any ordinance, resolution, bylaw or minute order of the Board. The Management Committee shall appoint and oversee the performance of the Fire Chief. The Fire Chief, as an at will employee of the Authority, shall report to the Management Committee and Chief Executive Officer, and by extension the Board, on all of the following, in a manner prescribed by the Board in consultation with the Management Committee:
(i) Plan, coordinate, supervise, and evaluate the Authority’s operations, and conduct day-to-day operations of the Authority; (ii) Supervise and manage Authority fire personnel;
(iii) Coordinate and supervise training of fire personnel; (iv) Make recommendations to the Management Committee and Board on Authority operations;
(v) Establish policies and procedures of the Authority to implement directives from the Board and the Management Committee; (vi) In conjunction with the Treasurer, prepare an annual budget for submission to the Management Committee and the Board;
(c) Treasurer. The Director of Administrative Services of Arroyo Grande shall be the Authority Treasurer. The Authority Treasurer shall perform such duties as are set forth in this Agreement and any other duties specified by the Board or as required by the Act, and shall perform the duties specified in Government Code sections 6505 and 6505.5, as amended from time to time. The Authority Treasurer shall be the depositary of funds and shall have custody of all money of the Authority, from whatever source. (i) The Board may at any time select, employ, or appoint a new or different Authority Treasurer who shall be: (1) the Treasurer or Finance Director of one of the Member Agencies; (2) a certified public accountant; or (3) such other officer or employee of one 65501.00001\41161259.18
of the Member Agencies as the Board shall deem qualified to act as the Authority Treasurer, so long as permitted by law.
(d) Auditor/Controller. The Authority Auditor or Authority Controller shall be the same officer or employee of the City serving as the Authority Treasurer. The Authority Auditor or Authority Controller shall perform such duties as are set forth in this Agreement and any other duties specified by the Board or as required by the Act. (i) The Board may at any time select, employ, or appoint a new or different Authority Auditor or Authority Controller who shall be: (1) the auditor or controller of one of the Member Agencies; or (2) such other officer or employee of one of the Member Agencies as the Authority shall deem qualified to act as Authority Auditor or Authority Controller, so long as permitted by law.
(e) Secretary. The Board shall appoint, or designate to the Management Committee in consultation with the Fire Chief to appoint a Secretary who shall serve at the pleasure of the Board. The Secretary shall be the official custodian of records for the Authority, make all filings requested by the Board and legally required, and be responsible for agendas and meeting minutes as provided in Section 6.4(f) of this Agreement.
7.3 Official Bond. Pursuant to Government Code section 6505.1, the public officer, officers or persons who have charge of, handle or have access to any property of the Authority shall file an official bond in an amount of $25,000, unless fixed by the Parties to this Agreement in a different amount by unanimous decision of the Board.
7.4 Other Officers and Staff
(a) Attorney for Authority. The Attorney for the Authority shall be appointed by the Board of Directors. The Attorney for the Authority or a designated deputy shall attend all meetings of the Board of Directors; provided, however, that the absence of the Authority Attorney shall not affect the validity of any meeting. The Attorney shall perform such other duties the Board of Directors specifies.
(b) Officers and Professional Services. The Board may select, appoint, or employ any other officers, or professional and expert services as may be necessary or appropriate to accomplish the purposes of this Agreement, including but not limited to, legal counsel, financial consultants, accountants, engineers, architects, contractors, appraisers and any other consultants and advisors, which may be a corporation, partnership, firm or individual. The Board may delegate to the Fire Chief or to a committee the authority to hire officers and professional services.
(c) Employees of Authority. Employees of the Authority are (i) those individuals employed by Arroyo Grande, but assigned to the Authority between the Authority and Arroyo Grande referenced in Exhibit A of this Agreement; and (ii) those individuals employed directly by the Authority. The Parties’ governing bodies may meet in closed sessions for the purpose of providing input to the Board regarding the terms of compensation for Authority employees.
65501.00001\41161259.18
(d) Shared Resources. The Board may contract with a Member Agency, or its officers, to provide necessary administrative services to the Authority as appropriate. All personnel employed by the individual Member Agencies shall remain employees of their respective Member Agency unless and until the Authority affirmatively employs such personnel pursuant to its powers. No express or implied employment contract between any Member Agency employee and the Authority exists as a result of this Agreement.
7.5 Interference Prohibited. The Board and the Member Agencies shall deal with the administrative services of the Authority (which includes the Authority’s Treasurer, Auditor/Controller and Secretary) only through the Management Committee who may delegate to the Fire Chief and their responsibility set forth herein, except for the purpose of inquiry.
Neither the Board, the governing body of any Member Agency, nor any individual members of either shall give orders to any subordinate of the Fire Chief.
7.6 Rules and Regulations. The Board shall forthwith adopt rules and regulations and perform all other acts necessary so that the Authority may hire personnel. Existing personnel operations remain in effect and control at the time this Agreement takes effect, until such time that the Board adopts rules and regulations that augment those existing personnel operations.
8. Equipment and Facilities.
8.1 Fire Stations and Other Real Property
(a) Member Agency Buildings and Structures. Buildings and structures owned by Member Agencies may be utilized for the Authority’s use, but shall remain the property of the respective Member Agency. Each Member Agency shall be responsible for the maintenance and insurance of Member Agency buildings. The Authority shall not directly own, maintain, or insure any existing building or structure, unless the Authority and a Member Agency expressly agree in writing that the Authority accepts ownership, responsibility for maintenance, or responsibility to insure a particular building or structure. Any building constructed or owned by the Authority after the Formation Date shall be the property of the Authority, and in the event of dissolution of the Authority, shall be disposed of as provided in this Agreement. (i) Maintenance By Members. The respective Members owning a fire station shall be responsible for the maintenance, repair, replacement, and improvements to the building structure, mechanical systems, electrical, plumbing, and exterior infrastructure (i.e., roof coverings, driveway, etc.). The Members are not responsible for (i) the maintenance or repair of any systems that have been installed by the Authority and are unique to fire service operations (e.g., dispatch/radio systems, computer networks, etc.), and (ii) the cost of performing any such maintenance or repairs caused by the negligence of the Authority or its employees, agents, servants, licensees, contractors, or invitees.
(ii) Maintenance By Authority. The Authority shall be responsible for routine maintenance of fire stations, interior decorating, landscaping, and fire alarm systems. The Authority is also responsible for the maintenance, repair, replacement, and improvements of the dispatch telecommunication systems and all systems that have been installed by the Authority 65501.00001\41161259.18
which are unique to fire service operations (e.g., dispatch/radio systems, computer networks, etc.).
(b) Contributions of Real Property. Either Member Agency may contribute real property to the Authority for the Authority’s use. The Member Agency owning the interest in the real property shall continue to own said interest, unless the Member Agencies and Authority agree otherwise. The Board and the Member Agency owning the interest shall agree on the terms of the contribution.
(c) Lease or Purchase of Additional Stations. The Authority shall be authorized to lease, purchase, or obtain any other interest in real property for the Authority’s uses.
8.2 Equipment and Other Personal Property
(a) Equipment Provided by Member Agencies. As soon as reasonably practicable, the Authority shall inventory all equipment owned by the Member Agencies that is available for the Authority’s use. All Member Agency equipment shall remain the property of that Member Agency, unless the Member Agencies otherwise agree. The Member Agency may contribute additional equipment for the Authority’s use upon terms agreed between the Member Agencies and the Authority. The Authority may rent or borrow equipment from the Member Agencies for temporary use. All equipment owned by the Authority or subject to an equipment lease for financing purposes, shall remain the property of the Authority. (b) Acquisition of Equipment. The Authority may acquire any equipment or other personal property for the Authority’s use.
8.3 Separate Property of the Parties. Exhibit C, attached and incorporated by reference, establishes the property which is owned by a Member Agency and not the Authority, notwithstanding that the Authority may use that property.
9. Principal Offices.
9.1 Principal Governance and Business Office. The principal business office and governance office of the Authority at the date this Agreement is effective shall be Authority’s Station 1, at 140 Traffic Way, Arroyo Grande, California, 93420, (“Principal Governance and Business Office” or “Principal Office”) or as otherwise determined by the Board. The Board may change the Principal Office, from time to time, and from one location to another, within the Authority Area. Any change shall be noted by the Authority Secretary and reflected in Authority document, but shall not be considered an amendment to this Agreement.
10. Financial Provisions.
10.1 Administrative services shall be provided by, and allocated between the Member Agencies as shown on Exhibit A, attached and incorporated by reference to this Agreement.
10.2 Operation and capital improvements costs shall be allocated among the jurisdictions in accordance with the cost-sharing formula in Exhibit B, adopted by the Board and 65501.00001\41161259.18
the governing bodies of the Member Agencies, and attached and incorporated by reference into this Agreement.
10.3 Member Agencies will be billed quarterly by the Authority Treasurer, in accordance with the provisions of Exhibit A and B. Member Agencies agree to pay the invoices on a quarterly basis.
10.4 Capital Purchases. Capital purchases that solely benefit a Member Agency shall be funded by that Member Agency. All other capital purchases shall be funded on terms established by the Board. The funding of capital purchases that are not budgeted shall be separately approved by each Local Sub-Committee.
10.5 Budget.
(a) The Board shall initially adopt a budget within 30 days of execution of this Amended and Restated JPA. The Board shall adopt a budget for maintenance and operation costs, and costs of special services in time to allow review by the Member Agencies prior to April 30th of each fiscal year. The Authority’s fiscal year shall be July 1 to June 30. Each Member Agency shall prepare its own annual budget for capital costs related to Authority services. Subject to the exception provided below in Section 10.5(b), no expenditures may be made by or on behalf of the Authority unless authorized by a budget or budget amendment approved by the Board.
10.6 Invoicing. Upon completion of the initial budget, and thereafter at such other intervals as determined appropriate by the Board, the Authority shall determine the amount of the budget expenses payable during the ensuing period pursuant to each Member Agency’s share of expenses required by this Agreement, and the budget approved by the Board. The Authority shall submit to each Member Agency an invoice showing the Member Agency’s share for the applicable period together with a calculation of the Member Agency’s share. Each Member Agency shall pay to the Authority the amount invoiced within 30 days after the date of the invoice. Any amount not paid within 60 days of the date of an invoice shall be delinquent.
10.7 Default and Delinquency. Any Member Agency which defaults in its obligation to pay or advance any amounts due pursuant to this Agreement after such amounts have become delinquent shall be deemed to have waived and relinquished any rights and benefits it may have under this Agreement. Any defaulting Member Agency shall be liable to the Authority for interest on the unpaid amount at the rate of 10% per annum, or the maximum rate allowed by law if it is less than 10% per annum, until the overdue invoice amount is paid in full. If the Agreement is terminated, then the defaulting Member Agency shall remain liable for payment of its share of debts, liabilities and obligations under this Agreement incurred prior to the date of termination, plus interest.
10.8 Accounting. The Authority shall maintain strict accountability of all funds, receipts and expenses, and shall keep and maintain appropriate records and accounts of all funds, receipts and expenses under this Agreement in accordance with generally accepted accounting practices for California public agencies and the requirements of the Act. The Authority shall 65501.00001\41161259.18
allow any Member Agency, or any of its employees, accountants, attorneys or agents to review, inspect, copy and audit any such records and accounts.
10.9 Record of Contributions. The Authority shall maintain records of all fire prevention and suppression equipment, medical equipment, and associated property and assets contributed by each Member Agency and by the Authority, including any staff resources contributed to the Authority.
10.10 Audit. The records and accounts of the Authority shall be audited annually by an independent certified public accountant and copies of such audit reports shall be filed with the State and each Member Agency pursuant to the requirements of Section 6505 through 6505.6 of the Government Code. The audit shall conform to generally accepted auditing standards. Such report shall be filed within 12 months after the end of the fiscal year or years under examination, and no later than fifteen (15) days after receipt of such audit reports by the Authority.
10.11 Expenditures. The Board shall establish and comply with a system and procedure for the review and approval of Authority expenditures and claims and the drawing and signing of Authority warrants or checks. All expenditures shall be consistent with the approved budget, except as otherwise determined by the Board.
11. Debts, Liabilities, Obligations. Subject to all applicable laws, including but not limited to Government Code section 6508.1, all debts, liabilities, and obligations of the Authority shall be those of the Authority, and do not constitute debts, liabilities, or obligations of any one or more of the Member Agencies. The responsibilities and obligations of each Member Agency to this Agreement shall be solely as provided in this Agreement, or as provided in supplemental agreements or amendments as shall be executed by the Member Agencies. As required by law, the Member Agencies are liable for CalPERS liability of the Authority as follows:
11.1 The Authority shall use the City of Arroyo Grande’s CalPERS contract for Employees of the Authority.
11.2 If a Member Agency withdraws from the Authority, the withdrawing Member Agency shall be liable for, and upon demand shall promptly pay, its share of the existing and/or contingent liabilities of the Agency as of the effective date of the withdrawal. The withdrawing Member Agency’s share of liabilities shall bear the same relationship to the whole as its annual contribution for the operation of the Authority bears to the whole of all annual contributions.
11.3 If a Member Agency withdraws from the Authority, but the Authority does not dissolve or terminate, and the Authority has established a plan of periodically paying down part of its unfunded accrued pension liability (“UAPL”) debt to CalPERS, the withdrawing Member Agency shall continue to be liable, and to promptly pay thereafter to Authority upon being billed, its share of the Authority’s UAPL based upon its prior years of membership. The withdrawn Member Agency’s share of such UAPL expense shall be the determined according to the same formula used by the Authority to allocate such costs during the final year of the withdrawing Member Agency’s membership.
11.4 The withdrawing Member Agency shall also be liable for any additional Authority expenses as of the effective date of the withdrawal that exclusively benefit the 65501.00001\41161259.18
withdrawing Member Agency as well as 100% of any early termination fees that accrue due to the withdrawal of the Member Agency.
11.5 Until such time that the Authority utilizes a different contract approved by its Board, if the City of Arroyo Grande dissolves, terminates, or ends its contractual relationship with CalPERS(“the triggering events”), Government Code sections 6508.1 and 6508.2 will require all existing Member Agencies, and certain past Member Agencies, to each assume individual financial responsibility for its proportionate share of the UAPL then in effect. By joining Authority, each Member Agency promises and represents that upon occurrence of a triggering event: (i) it will undertake this obligation when requested by either CalPERS or the Authority; and (ii) that unless the Board determines differently, the proportionate share each Member Agency will assume shall be based upon the same formula used to determine each Member Agency’s share of the Authority’s last periodic UAPL payment to CalPERS in the year prior to the triggering event.
11.6 Prior to Execution. The debts, liabilities and obligations of each Member Agency in existence or accrued as of the full execution of this Agreement shall remain the debts, liabilities and obligations of that Member Agency and shall not be assumed by or transferred to the Authority. After the execution of this Agreement by both Member Agencies, however, any existing debt, liability or obligation of the Member Agencies may be expressly approved or accepted by the Authority by a formal written action of the Board.
11.7 Fire Engines 2 and 3, Equipment Lease Payments. Notwithstanding any other provisions of this Agreement to the contrary, the Parties mutually agree and understand that as a result of any dissociation, withdrawal or termination of this Agreement by a withdrawing member agency, that withdrawing member agency will not be obligated for future payment lease obligations for Engines 2 and 3 that remain in the custody, control, and possession of the Authority.
12. Indemnity and Hold Harmless; Insurance.
12.1 Indemnification of Member Agencies. The Authority shall indemnify, defend and hold harmless the Board of Directors, the individual Member Agencies, and their members, officers, directors, employees and agents from and against any and all liability, loss, damages, expenses, costs (including, without limitations, costs and fees of litigation or arbitration) of every nature, arising out of any act or omission related to this Agreement, any individual Member Agency, or their members, officers, directors, employees and agents.
12.2 Indemnification for Prior/Separate Acts. Each Member Agency (Indemnifying Member Agency) shall defend, indemnify and hold harmless the Authority, each Director, the other Member Agency, and the Authority and each Member Agency’s respective Council or governing board members, officers, agents and employees, from any and all claims, losses, damages, costs, injuries and liabilities of every kind, including attorney’s fees and expert’s fees, arising directly or indirectly from the Indemnifying Member Agency’s acts or omissions occurring prior to the effective date of the Authority’s initial Effective Date of June 7, 2010, or that otherwise occur outside the scope of this Agreement. 65501.00001\41161259.18
12.3 Insurance. The Authority shall acquire insurance protection as is necessary to protect the interests of the Authority and the Member Agencies. The premiums for insurance acquired by the Authority, as well as any anticipated funds necessary to pay for self-insured retentions and deductibles for insurance, shall be determined based upon actuarial studies and included in the budget. Any adjustments to the budget to pay for insurance premiums, selfinsured retentions, and deductibles shall be prepared by the Management Committee for presentation to the Board of Directors for consideration and approval.
12.4 Survival. These defense, indemnification, and hold harmless obligations shall survive and continue in full force and effect after withdrawal of any Member Agency from this Agreement or termination of this Agreement for any reason with respect to any negligent acts, errors or omissions that occurred before the date of such withdrawal or termination.
13. Termination.
13.1 Termination.
(a) When there are only two Member Agencies in the Authority, either Member Agency may unilaterally terminate the Agreement with an effective termination date of June 30 of any Fiscal Year, provided that written notice is provided to, and received by, the Authority and the other Member Agency by the terminating Member Agency no later than June 30 of the prior Fiscal Year, as expressed by vote of the governing body of the terminating Member Agency. Any terminating Member Agency shall be obligated to pay that Member Agency’s contributions for the Fiscal Year ending on the effective date of termination. (b) The Member Agencies may all jointly agree by written consent to terminate the Agreement, as expressed by resolution of the governing boards of all Member Agencies (passed by vote of the membership of the governing body of each Member Agency).
Such termination shall provide for adequate time to wind-up the affairs of the Authority and distribute any assets pursuant to this Agreement. The Member Agencies shall be obligated to pay their contributions until the effective date of termination.
13.2 Disposition of Member Agencies’ Property Upon Termination. Any property that was acquired by either Member Agency prior to entering this Agreement, and that is required either by this Agreement or by any subsequent act or Agreement to remain the property of the Member Agency, shall be returned to the Member Agency upon termination of this Agreement.
Exhibit C lists the separate property of the Member Agencies, but a Member Agency may prove that it, and not the Authority, owns certain property by providing documentation establishing such ownership. If property is not listed in Exhibit C, and no documentation establishes ownership of that property, the property will be presumed to be owned by the Authority.
13.3 Disposition of Authority Property Upon Termination. Upon termination of this Agreement, the assets and property of the Authority shall be distributed as follows:
(a) First, if either Member Agency is in default of its obligation to pay or advance any amounts due to Authority pursuant to this Agreement, then any funds or assets of 65501.00001\41161259.18
the defaulting Member Agency shall be applied to the Authority in satisfaction of any such delinquency.
(b) Second, any other funds on hand shall be used to liquidate and wind-up the affairs of the Authority.
(c) Third, any surplus funds on hand remaining after satisfaction of subsections (a) and (b) above shall then be returned to the Member Agencies in proportion to their proportional financial contributions made to the Authority. (d) Fourth, any property acquired by either Member Agency prior to entering this Agreement shall be returned to the Member Agency which owned the property at the Formation Date; provided, however, that if any such property has been substantially improved, repaired or modified by Authority funds, it shall be distributed pursuant to subsection (e) below. (e) Fifth, any remaining property and assets shall be divided and distributed amongst the Member Agencies pursuant to separate agreement of the Member Agencies entered into at that time. If such subsequent agreement is not successfully negotiated and agreed to within a reasonable period of time, then the remaining property and assets shall be sold and the net proceeds from any sale shall be distributed among the Member Agencies in proportion to their financial and equipment contributions made to the Authority during the operation of this Agreement and any ancillary agreements.
14. Conflict Resolution. The Member Agencies agree that any and all disputes, claims or controversies between the Member Agencies arising out of or relating to performance of this Agreement, shall be resolved pursuant to the conflict resolution provisions as follows:
14.1 The Member Agencies shall first meet and attempt in good faith to negotiate and resolve any dispute arising out of or relating to this Agreement, subject to subsequent approval of any such resolution by the respective governing boards. The Member Agencies may, in each Member Agency’s respective discretion, appoint either an alternative representative of the governing body or an ad hoc committee constituting less than a quorum of the governing body to meet and attempt in good faith to negotiate and resolve any dispute arising out of or relating to this Agreement, subject to subsequent approval of any such resolution by the respective governing boards.
14.2 If the matter is not resolved by negotiation pursuant to Section 14.1 above, then the Member Agencies agree that the matter shall be submitted to mediation within a reasonable period of time after receipt of a written request from one Member Agency to the other Member Agency requesting such mediation. The Member Agencies shall cooperate with one another in selecting a mediator and in scheduling the mediation proceedings. Should the Member Agencies be unable to agree upon a mediator, they shall agree upon a mediation service and shall have that service select a mediator for them. The Member Agencies agree that they shall participate in the mediation in good faith and that they will share equally in the costs of mediation. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the Member Agencies, their agents, employees, experts and attorneys, and by the mediator or any employees of the mediator, are confidential, privileged and inadmissible for any 65501.00001\41161259.18
purpose, including impeachment, in any litigation or other proceeding involving the Member Agencies, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation.
14.3 If the matter is not resolved by negotiation pursuant to Section 14.1 above, or by subsequent mediation pursuant to Section 14.2 above, then the Member Agencies may submit the matter to binding or non-binding arbitration, but only if both Member Agencies agree to submit the particular controversy to arbitration. Neither Member Agency shall have a right to submit any controversy to arbitration without the other Member Agency’s consent.
15. New Members.
15.1 Addition of New Members. The Authority may set the terms and conditions for admitting new members (a “New Member Agency”) that it deems appropriate either by amendment to this Agreement or the Bylaws. New members may only be admitted with unanimous approval of the Board and the governing bodies of each Member Agency. Approved new Members shall execute a copy of this Agreement, as amended, and shall thereafter be subject to all terms and conditions contained herein.
15.2 Construction. The terms of this Agreement shall be construed so as to apply to new Members the same as to the initial Member Agencies to the Agreement. New Members shall have the rights and obligations accorded to “Members” or “Member Agencies (whether singular or plural) under this Agreement.
15.3 Cost Share. Prior to the acceptance of any New Member Agency, the proposed New Member Agency shall pay an amount, as determined by the Board, for the proposed New Member Agency’s fair share of any start-up costs or other initial investments incurred by the Authority to admit the New Member Agency.
15.4 Funding of Services. The Authority shall not provide any fire protection or related services within a New Member Agency’s geographic area unless and until the New Member Agency deposits sufficient funds to cover the estimated costs of services for a period of time as determined by the Board, to be not less than six (6) months.
16. Withdrawal. Notwithstanding any other provision of this Agreement, any Member Agency may withdraw from the Authority by providing the Authority with written notice of its intent to withdraw consistent with Section 13.1 of this Agreement, Termination. This includes providing written notice no later than June 30 of any Fiscal Year, a continuing obligation to pay that Member Agency’s contributions for the Fiscal Year ending on the effective date of termination, and following Section 13.1.b. for the procedure where the Members Agency may jointly agree by written consent on the withdrawal of a Member Agency. A withdrawal from the Authority constitutes a withdrawal of that Member Agency’s representatives from the Board of Directors.
17. Effect of Withdrawal. The withdrawal of a Member Agency shall not terminate its responsibility to contribute its share of any obligation incurred by the Authority, including amounts determined by the Board for (1) liabilities and claims accrued during the time the agency was a Member Agency or (2) budgeted expenses for the Fiscal Year in which notice of 65501.00001\41161259.18
intent to withdraw is given. Except as the withdrawing Member Agency may agree, in writing, with the Board, the withdrawing Member Agency shall automatically relinquish all rights as a Member Agency under this Agreement, on the effective date of the withdrawal. Upon termination of this Agreement, a Member Agency that has withdrawn will be treated like all other Member Agencies for purposes of disbursement of Authority assets, unless otherwise agreed in writing and the remaining Member Agencies of the Authority can maintain the name “Five Cities Fire Authority.”
18. Conflict of Interest Code. The Authority adopts as it Conflict of Interest Code the Fair Political Practices Commission Model Conflict of Interest Code with appropriate substitution regarding references to the Board and Authority officers.
19. General Provisions.
19.1 Integration. This Agreement constitutes the sole, final, complete, exclusive and integrated expression and statement of the terms of this contract among the Member Agencies concerning the subject matter addressed herein, and supersedes all prior negotiations, representations or agreements, either oral or written, that may be related to the subject matter of this Agreement, except those other documents that are expressly referenced in this Agreement.
19.2 Headings. The section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
19.3 Consents. Whenever any consent and/or approval is required under this Agreement from any Member Agency, said consent and/or approval shall not be unreasonably withheld.
19.4 Construction and Interpretation. It is agreed and acknowledged by the Member Agencies that this Agreement has been arrived at through negotiation, and that each Member Agency has had a full and fair opportunity to revise the terms of this Agreement. Consequently, the normal rule of construction that any ambiguities are to be resolved against the drafting Member Agency shall not apply in construing or interpreting this Agreement.
19.5 Waiver. The waiver at any time by any Member Agency of its rights with respect to a default or other matter arising in connection with this Agreement shall not be deemed a waiver with respect to any subsequent default or matter.
19.6 Remedies Not Exclusive. The remedies provided in this Agreement are cumulative and not exclusive, and are in addition to any other remedies that may be provided by law or equity. The exercise by either Member Agency of any remedy under this Agreement shall be without prejudice to the enforcement of any other remedy.
19.7 Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall not render the other provisions unenforceable, invalid or illegal.
19.8 Successors and Assigns. Except as otherwise provided by law, the rights and duties of the Member Agencies under this Agreement shall not be assigned or delegated without 65501.00001\41161259.18
the prior written consent of the other Member Agency. Any attempt to assign or delegate such rights or duties in contravention of this Agreement shall be null and void. Any approved assignment or delegation shall be consistent with the terms of any contracts, resolutions, indemnities and other obligations of the Authority then in effect, and may be subject to such additional reasonable conditions of approval imposed by the Member Agency approving the assignment or delegation.
19.9 No Third Member Agency Beneficiaries. This Agreement shall not be construed to create any third party beneficiaries. This Agreement is for the sole benefit of the Member Agencies, and their permitted successors, transferees and assignees, and no other person or entity shall be entitled to rely upon or receive any benefit from this Agreement or any of its terms.
19.10 Amendment. This Agreement may be modified or amended only by a subsequent written agreement approved by the governing board of each Member Agency and executed by both Member Agencies pursuant to the terms and conditions of this Agreement.
19.11 Governing Law and Venue. Except as otherwise required by law, this Agreement shall be interpreted, governed by, and construed under the laws of the State of California. The County of San Luis Obispo shall be the venue for any litigation concerning the enforcement or construction of this Agreement.
19.12 Attorney Fees. In the event any legal action is brought to enforce or construe this Agreement, the prevailing party shall be entitled to an award of reasonable attorney fees, expert witness and consulting fees, litigation costs and costs of suit.
19.13 Notice. Any notice, demand, invoice or other communication required or permitted to be given under this Agreement shall be in writing and either served personally or sent by prepaid, first class U.S. mail to the City Clerk and City Attorney of each Member Agency.
Any notice or other communication served by personal delivery shall be deemed received when actually delivered. Any notice or other communication shall be deemed as received three days after deposit in United States mail, postage prepaid, return receipt requested.
19.14 Counterparts. This Agreement may be executed by the Member Agencies in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. [signature page follows]
65501.00001\41161259.18
IN WITNESS WHEREOF, the Member Agencies hereto have executed this Joint Exercise of Powers Agreement as of the date last executed as set forth below.
CITY OF GROVER BEACH
By
Mayor,
Dated
ATTEST:
By
City Clerk
APPROVED AS TO FORM:
City Attorney
CITY OF ARROYO GRANDE
By
Mayor
Dated
ATTEST:
By
City Clerk
APPROVED AS TO FORM:
City Attorney
65501.00001\41215817.1
EXHIBIT A
ADMINISTRATIVE SERVICES
Administrative services shall be provided to the Authority by the Members as follows:
1. Personnel. All personnel working for the Authority will be employed by the City of Arroyo Grande. Personnel, benefits, payroll, and workers compensation matters shall be administered by Arroyo Grande subject to a written agreement between the Authority and the City of Arroyo Grande. The City of Arroyo Grande shall assign all fire service employees on a full-time basis to carry out the functions of this Agreement.
Furthermore, under such written agreement, the City of Arroyo Grande will assign all of its responsibilities of the appointment, promotion, management, training, supervision, evaluation, discipline, and termination of employees as well as labor negotiations with represented employees to the Authority under the Authority’s chain of command and decision making process.
2. Finance. The City of Arroyo Grande shall provide financial services. Financial services shall include the provision of payroll, accounts payable, and accounts receivable services, as well as, any financial reporting and auditing services that may be required.
3. Information Technology. The City of Arroyo Grande shall provide information technology services. Information Technology shall include monitoring and maintaining the company computer systems, installation and configuration of hardware and software, and solving technical issues as they arise.
4. Indirect Contribution. Payment for the services as described in Exhibit A shall be the responsibility of the Member providing the services as referenced in Exhibit A. The payment for such services by said agencies shall be recognized as an indirect contribution made by the respective agency. All indirect contributions shall be recognized in the Authority's budget as a contribution from the respective agency and shall be deducted from the contributing agency's proportional allocation of costs for the operation of the Authority.
Attachment 1 - 2
65501.00001\41215817.1
EXHIBIT B
FUNDING FORMULA
Effective July 1, 2023, each Member Agency shall pay for the ongoing costs of the Five Cities Fire Authority according to the following formula to be calculated annually when the budget is prepared:
1. 58% of the total costs shall be paid by the City of Arroyo Grande;
2. 42% of the total costs shall be paid by the City of Grover Beach.
Any revenue received by the Authority, such as through a contract for service, reimbursements received for strike team deployment or automatic aid, grant funding, or fees for service, shall reduce the total costs that are then allocated to the Member Agencies according to the above formula.
The funding formula contained herein shall be reevaluated by the Member Agencies at least every two years, prior to the Member Agencies’ biennial budget adoption. 65501.00001\41215817.1
EXHIBIT C
INVENTORY OF SEPARATE PROPERTY OF THE
MEMBER AGENCIES
The following inventory of each Member Agency will become the property and responsibility of the Authority, including but not limited to maintenance, insurance, and replacement:
Arroyo Grande Grover Beach
Engine 6691 – 2007 Pierce Type I Engine Bauer Air-Fill Compressor – GB Station Rescue 6652 – 1996 E-One Rescue
Utility 6632 – 1995 Ford F-250 Pick-Up
65501.00001\41215817.1
EXHIBIT D
The following map identifies the service areas of the Member Agencies for the JPA.
Contractual services provided to areas outside of these Member Agencies are not depicted on this map.
Attachment 2 - 2
65501.00100\41328557.11
1 AGREEMENT TO PROVIDE FIRE SERVICES
BETWEEN THE FIVE CITIES FIRE AUTHORITY AND
OCEANO COMMUNITY SERVICES DISTRICT
THIS AGREEMENT is made and entered into this ____ day of June 2023, (“Effective Date”) by and between the Five Cities Fire Authority ("FCFA"), a California Joint Powers Authority as authorized under Government Code Sections 6500 et. seq., and Oceano Community Services District ("Oceano"), a County of San Luis Obispo Community Services District (collectively referred to as "the Parties").
RECITALS
WHEREAS, the Parties are public entities organized and operating under the laws of the State of California; and
WHEREAS, the Parties have the authority to perform fire protection activities, certain emergency medical services and other related activities for their respective agencies, including those described within Exhibit “B” (collectively, “FCFA Services”); and
WHEREAS, since June 7, 2010, Oceano has been a member agency of the Five Cities Fire Authority along with the Cities of Grover Beach and Arroyo Grande; and
WHEREAS, FCFA’s Joint Exercise of Powers Agreement was amended by the Parties to terminate Oceano’s participation as a member agency in FCFA commencing July 1, 2023; and
WHEREAS, the Parties desire for FCFA to continue supplying fire and emergency medical services to Oceano for a temporary period of time consistent with the terms and conditions of this Agreement; and
WHEREAS, Oceano remains subject to all “Wind Down Period” obligations set forth within the Five Cities Fire Authority Amended and Restated Joint Powers Authority Agreement, and specifically Section 5 of the Third Amendment to the FCFA Joint Powers Agreement incorporated herein as Exhibit “C”, Oceano’s withdrawal from the FCFA shall not absolve Oceano from any Liabilities, defined to include but not limited to pension/CalPERS, accrued fringe benefits, and other liabilities incurred arising out of Oceano’s participation in the FCFA since the time the FCFA was created on June 7, 2010 through the date of Oceano’s withdrawal from the FCFA on June 30, 2023; and
WHEREAS, this agreement is entered into pursuant to Government Code § 54981 and § 55632.
Attachment 2 - 1
65501.00100\41328557.11
2 AGREEMENT
NOW, THEREFORE, the above “WHEREAS” provisions are incorporated herein with the same force and effect as any other term and condition of this Agreement and for and in consideration of the mutual advantages to be derived therefrom, and in consideration of the mutual covenants herein contained, it is agreed by and between the Parties hereto as follows:
ARTICLE I
PROVISION OF SERVICES
1.1 Scope of Services. FCFA shall provide Fire and Emergency Medical Services within the jurisdictional area of Oceano. See jurisdictional map entitled Exhibit “A” incorporated by reference herein as if set out in full. "Fire and Emergency Medical Services" shall mean those services identified in Exhibit “B”.
1.2 Fire Chief. FCFA's Fire Chief or his/her designee shall be immediately available for response and management of emergency incidents as necessary to provide incident command and coordination functions within the jurisdictional boundaries of Oceano over the term of this Agreement.
1.3 Staffing. FCFA shall provide, in its sole discretion, sufficient staffing personnel, meeting minimum federal and state-mandated training requirements for their respective classifications and responsibilities, to provide Fire Services, pursuant to this Agreement, to Oceano for the term of this Agreement. The staff shall consist of personnel assigned at the sole discretion of FCFA but at least one member of every shift shall be qualified as an Emergency Medical Technician.
ARTICLE II
PAYMENT FOR SERVICES
2.1 Compensation for Services. Oceano shall compensate FCFA for all Fire and Emergency Medical Services performed under this Agreement in a fixed amount of One Million One Hundred Fifty Thousand Dollars ($1,150,000.00). Oceano shall pay, on a quarterly basis (every three months from the effective date of this Agreement) the sum of Two Hundred Eighty-Seven Thousand Five Hundred Dollars and Zero Cents ($287,500) for the Fire, Emergency Medical Services and any related FCFA Activities provided by FCFA. In the event the Fire, Emergency Medical Services and any related FCFA Activities are extended in accordance with Section 5.2, the compensation that FCFA will be willing to accept will be no less than the actual cost of service, in the amount or formula determined by FCFA that is presented to the County of San Luis Obispo for purposes of evidencing Oceano’s proportionate 65501.00100\41328557.11
3 share of the actual cost of service, which will be incorporated in this Agreement as a new Exhibit “D” during the sixty (60) day meet and confer period described in Section 5.2 below. FCFA shall submit quarterly invoices to Oceano for the quarterly payment amount. Payments are to be made within thirty (30) days of FCFA mailed invoice to Oceano, and any non-payment in excess of sixty (60) days from the date of FCFA’s mailed invoice shall be considered a default under this Agreement and shall accrue an additional ten (10) percent charge as described herein.
ARTICLE Ill
PROPERTY USED FOR FIRE SERVICES
3.1 Fire Station. FCFA will utilize the Fire Stations number 1 and 2 located respectively at 140 Traffic Way, Arroyo Grande and 701 Rockaway Ave. Grover Beach, California, as its primary locations for the provision of Fire, Emergency Medical Services and FCFA Activities contemplated by this Agreement. Oceano retains fee title to the Fire Station number 3, but hereby grants FCFA an unrestricted license for full use of the apparatus bay at Station number 3, located at 1655 Front Street, Oceano for general storage purposes in furtherance of this Agreement. Oceano shall also make available for FCFA training and storage, the well site no. 8 property located on South 13th Street. FCFA’s use of Station number 3 and well site no. 8 shall not be subject to any rental or other cost and shall be part of the consideration paid by Oceano for Fire, Emergency Medical Services and FCFA Activities rendered by FCFA to Oceano. Oceano agrees to maintain the Fire Station number 3 and well site no. 8, in a safe, habitable, and serviceable condition at all times.
(a) Nothing herein shall in any way limit Oceano's right to grant concurrent use of the Fire Station number 3 to any other party, that does not unreasonably interfere with FCFA’s use of the apparatus bay for storage. FCFA shall not unreasonably interfere with the use of the Fire Station for any other purposes by Oceano.
(b) If Oceano grants rights to a third party for concurrent use of the Fire Station number 3, Oceano shall take all reasonable steps to ensure that the third party does not interfere with the use of the Fire Station for FCFA storage purposes and shall provide FCFA at least ten (10) days advanced notice of the use granted to a third party.
(c) In addition to the license granted in Section 3.1 above and subsections (a) and (b), Oceano shall further grant full operational use of Fire Station No. 3 for emergency medical services and fire suppression including all fire suppression equipment, fire engines, housing and administrative services necessary to operate the fire station from the Effective Date of this Agreement to June 30, 2023.
65501.00100\41328557.11
4 3.2 Maintenance and Replacement. FCFA, consistent with the Amended and Restated Joint Exercise of Powers Agreement, dated ______, 2023, shall bear all costs to maintain, repair and replace all facilities, vehicles, equipment and apparatus owned by FCFA and designated for use in the Fire, Emergency Medical Services and FCFA Activities.
ARTICLE IV
RELATIONS OF PARTIES
4.1 Special Relationship. The Parties will agree this Agreement does not create a “special relationship” as the term is defined by Federal or California law, between Oceano or any other agency, or between the Parties’ officials, officers, employees, or successors or with any third party as a result of this Agreement.
Oceano does not participate nor is a member of FCFA and retains no rights or title in the FCFA Joint Powers Authority after June 30, 2023. Notwithstanding the foregoing, nothing within this Agreement absolves Oceano from obligations and/or CalPERS pension liabilities incurred and owed to FCFA, under the Five Cities Fire Authority Joint Exercise of Powers Agreement, over the time period Oceano was a member agency.
ARTICLE V
TERM OF AGREEMENT
5.1 Term. The term of this Agreement shall commence on the earlier of July 1, 2023 or the date on which both Parties have fully executed this Agreement, through June 30, 2024 (‘’Initial term”).
5.2 Renewal or Extension of Agreement. The Term of this Agreement may be extended upon mutual agreement of both Parties. Upon written notice of either Party, at ninety (90) days before the end of the Initial Term, the Parties shall meet and confer for a period of up to sixty (60) days regarding extending the term of the Agreement and the terms and conditions of the extension. If agreement cannot be reached regarding extension or renewal, the Agreement shall terminate with no further obligations of either Party at the end of the Initial Term. If the Agreement is extended by the Parties (the “Extended Term”), notwithstanding any other provisions of this Agreement, the Parties anticipate that the term for the Extended Term will be on a month-to-month basis commencing upon the end of the Initial Term.
5.3 Termination. During the initial term, if either Party seeks to terminate this Agreement, the notice to terminate shall be in writing and shall be at least one hundred twenty (120) days before the planned termination date. If Oceano is not current on all payments owed and is in default under this Agreement FCFA may terminate this 65501.00100\41328557.11
5 Agreement immediately. If during the initial term, LAFCO makes a final determination as to Oceano's application for divestiture of fire services, and the decision of LAFCO would by operation of law or by lawful conditions imposed by LAFCO as part of their decision, preclude Oceano from participating as a Party to this Agreement or restrict their ability to enforce this Agreement, this Agreement shall terminate. Nothing within this section shall absolve Oceano of the obligation to pay for any and all FCFA services rendered under this Agreement prior to termination resulting from LAFCO'S decision causing termination or a Party initiated termination.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
6.1 Mutual Indemnification.
(a) To the fullest extent permitted by law, each Party (the “Indemnifying Party”) shall indemnify, defend and hold harmless the other party, in proportion to fault, against any and all liability for claims, demands, fines, penalties, expenses, losses, causes of action, costs or judgments·(direct, indirect, incidental or consequential damages) involving bodily injury, personal injury, death, property damage or other costs and expenses (including reasonable attorneys' fees, court costs and expenses) arising or resulting from: 1) the acts or omissions of the Indemnifying Party’s own officers, agents, employees or representatives carried out pursuant to the obligations of this Agreement; (b) any negligent, reckless or intentionally wrongful act or omission to act by the Indemnifying Party; and (c) violations of law by the Indemnifying Party.
(b) Notwithstanding the foregoing Sections 6.l (a) Oceano shall remain liable for its own real and personal property damage (including, without limitation, autos, equipment, and apparatus), since it is retaining ownership of, insurable interests therein, and insurance on its real and personal property. (c) Except for any duties either Party owes to the other pursuant to the provisions of this Agreement, nothing in this Agreement shall be construed to waive any legal protections or immunities available to the Parties under state or federal law.
(d) Accordingly, the Parties hereby expressly agree to waive the pro rata risk allocation contained in California Government Code Section 895.6.
6.2 Mutual Indemnification Obligations Survive Termination. As to activities· occurring or being carried out in performance of this Agreement and during the term of this Agreement, the obligations created by Section 6.1 shall survive termination of this Agreement.
6.3 Immunity Preservation. Nothing in this Agreement shall be read as 65501.00100\41328557.11
6 waiving or limiting any defense to claims of liability otherwise available to fire personnel, and/or public employees, such as the defense of qualified immunity. Nothing in this Agreement shall be read as intending to create or creating a higher duty of care on the part of either Oceano or FCFA, or their officers, than would otherwise exist under existing law and the involved Party's own policies, practices, and procedures.
6.4 Public Liability and Property Insurance.
(a) Each Party shall maintain in effect, at its own cost and expense, the following insurance coverage provided either through a bona fide program of self-insurance, commercial insurance policies, or any combination thereof:
i. Commercial general liability or public liability with minimum limits of $1,000,000.00 per occurrence.
ii. Auto liability including owned, leased, non-owned,
and hired automobiles, with a combined single limit of not less than $1,000,000.00 per occurrence.
iii. If a Party employs others in the performance of this Agreement, that Party shall maintain Workers' Compensation in accordance with California Labor Code section 3700 with a minimum of $1,000,000 per occurrence for employer's liability, for the duration of time that such workers are employed.
(b) All insurance required by this Agreement shall:
i. Be placed (1) with companies admitted to transact
insurance business in the State of California and with a current A.M. Best rating of no less than A:VI or with carriers with a current A.M. Best rating of no less than A:VII; or (2) disclosed self insurance with limits acceptable to the other Party. ii. Provide that each Party's insurance is primary and
non-contributing insurance to any insurance or self-insurance maintained by the other Party and that the insurance of the other Party shall not be called upon to contribute to a loss covered by a Party's insurance.
(c) Each Party shall file certificates of insurance with the other Party evidencing that the required insurance is in effect within thirty (30) days after the effective date of this Agreement.
6.5 Workers Compensation.
65501.00100\41328557.11
7 (a) FCFA shall provide Oceano an endorsement that its Workers Compensation insurer waives the right of subrogation against Oceano, its officers, officials, employees, and volunteers for all claims on or after the effective start date of this Agreement during the tenure of said Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 Amendments to Agreement. No part of this Agreement shall be altered or amended except by written amendment and mutual consent of both Parties.
7.2 Assignment. The rights and obligations of the Parties under this Agreement are not assignable and shall not be delegated without the prior written approval of the other Party.
7.3 Dispute Resolution. The Parties recognize that this Agreement cannot represent a complete expression of all issues which may arise during the performance of the Agreement. Accordingly, FCFA and Oceano agree to meet and confer in good faith over any issue not expressly described herein. (a) It is the Parties' intention to avoid the cost of litigation and to resolve any issues that may arise amicably if possible. To that end, the Parties agree through the City Managers of Arroyo Grande and Grover Beach and the Oceano General Manager to meet within ten (10) business days of a request made by the other party in writing to discuss any issues and attempt to resolve the dispute. If the dispute is not resolved after that meeting, the Parties agree to participate in a mediation to resolve the dispute within 30 calendar days of the meeting or as soon thereafter as possible. The mediator will be chosen by mutual agreement of the Parties. The costs of mediation will be borne by the Parties equally. Any agreement reached during the mediation will be binding on the Parties during the remaining term of the Agreement. No party may initiate litigation prior to the conclusion of mediation. In any action brought under this Agreement, the prevailing Party shall be entitled to recover its actual costs and reasonable attorney fees in an amount not to exceed ten thousand dollars ($10,000.00).
7.4 Exhibits. The following Exhibits are attached hereto and incorporated as if fully set forth herein:
Exhibit “A”: Oceano Jurisdiction Map
Exhibit “B”: Scope of Fire and Emergency Medical Services 65501.00100\41328557.11
8 Exhibit “C”: Third Amended Joint Powers Agreement of the FCFA
7.5 Notices. All notices required or permitted hereunder shall be deemed sufficiently given if delivered by hand, electronic mail, or by United States mail, postage prepaid, addressed to the Parties at the addresses set forth below or to such other address as may, from time to time, be designated in writing.
To Oceano:
General Manager
1655 Front St.
Oceano, CA. 93445
To FCFA:
Fire Chief
140 Traffic Way
Arroyo Grande, CA 93420
7.6 Governing Law. Agreement shall be governed by the laws of the state of California with venue being the Superior Court of the County of San Luis Obispo.
7.7 Third Party Beneficiary. The Agreement is only for the benefit of the Parties to the Agreement and shall not be construed or deemed to operate as an agreement for the benefit of any third party or parties and no third parties shall have any right of action or obtain any right of benefits or position of any kind for any reason whatsoever.
7.8 Default and Delinquency. If Oceano defaults in its obligation to pay or advance any amounts due pursuant to this Agreement after such amounts have become delinquent, Oceano shall be liable to the FCFA for interest on any unpaid amount at the rate of 10%, or the maximum rate allowed by law if it is less than 10%, until the overdue invoice amount is paid in full.
7.9 Waiver. The waiver at any time by any Party of its rights with respect to a default or other matter arising in connection with this Agreement shall not be deemed a waiver with respect to any subsequent default or matter.
7.10 Remedies Not Exclusive. The remedies provided in this Agreement are cumulative and not exclusive, and are in addition to any other remedies that may be provided by law or equity. The exercise by any Party of any remedy under this Agreement shall be without prejudice to the enforcement of any other remedy.
7.11 Severability. The invalidity, illegality or unenforceability of any 65501.00100\41328557.11
9 provision of this Agreement shall not render the other provisions unenforceable, invalid or illegal.
7.12 Counterparts. This Agreement may be executed by the Member Agencies in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the Parties execute this agreement hereto on the day and the year first written above.
65501.00100\41328557.11
10 FIRE CITIES FIRE AUTHORITY
By
Authority Chair
Dated
ATTEST:
By
Authority Clerk
APPROVED AS TO FORM:
Authority Attorney
OCEANO COMMUNITY SERVICES DISTRICT
By
President
Dated
ATTEST:
By
District Clerk
APPROVED AS TO FORM:
District Counsel
65501.00100\41328557.11
11 EXHIBIT “A”
OCEANO JURISDICTION MAP
65501.00100
\41328557.11
12 65501.00100\41328557.11
13 EXHIBIT “B”
SCOPE OF SERVICE
Scope of Services
FCFA shall provide the following services while this Agreement is in effect:
1. Administration. Provide administrative responsibility and support for all fire, emergency and non-emergency services in the Oceano Community Services District (“Oceano”).
Administration of fire services shall include the following:
a. Adequate supervision and staffing,
b. Program planning;
c. Delivery and documentation of all federal and state-mandated firefighter training;
d. Coordination of procurement of all operational supplies, services, and equipment;
e. Representation at Oceano Board meetings as deemed necessary by the Oceano General Manager and agreed to by the FCFA Fire Chief; f. Transparency with Oceano in management decisions affecting fire service delivery.
2. Incident Response. Delivery of all fire protection and emergency services within the jurisdictional limits of Oceano Community Services District, including responding to calls for fire suppression, emergency medical response (Basic Life Support services), rescue services, hazardous materials, and all other emergency and non-emergency calls for service as received and dispatched to the FCFA. A Chief Officer, or acting Chief Fire Officer, shall respond to all major incidents as determined by the Fire Chief.
3. Fire Safety Inspections/Enforcement. Enforce code provisions related to fire services, including but not limited to weed abatement and fireworks, and hazardous material releases. Review of all development and building plans to ensure compliance with applicable fire and life safety codes and regulations, as well as inspection of fire protection and fire alarm systems for compliance with applicable codes and standards.
To the maximum extent feasible, inspection shall be performed during standard duty hours.
4. Investigations. Investigate all fires to establish origin and cause and coordinate with the Oceano Community Services District on criminal investigations and prosecutions resulting therefrom. Provide fire investigation reports. 65501.00100\41328557.11
14 5. Training. Maintain a continuous training program that corresponds to federal, state and local mandates, as well as evolving industry best practices and developments in emerging fire suppression and fire prevention techniques. 6, Emergency Management. FCFA, through its Fire Chief, or his/her designee, shall be responsible for the coordination and communication with the County of San Luis Obispo Office of Emergency Services . Pursuant to existing agreements, FCFA will coordinate with other agencies regarding mutual aid services to Oceano Community Services District. FCFA will also respond to requests for mutual aid or assistance-by-hire by other agencies pursuant to the California Statewide Mutual Aid Agreement or the California Fire Assistance Agreement.
65501.00100\41328557.11
15 EXHIBIT “C”
THIRD AMENDED JOINT POWERS AGREEMENT OF THE FCFA
65501.00100\41300388.5
OCEANO COMMUNITY SERVICE DISTRICT’S ONGOING CAL PERS
LIABILITIES AND RESPONSIBILITIES FOLLOWING WITHDRAWAL FROM THE
FIVE CITIES FIRE AUTHORITY JOINT EXERCISE OF POWERS AGREEMENT This AGREEMENT (“Agreement”) is dated this __ day of ____, 2023, for reference purposes only, and is entered into by and between the Five Cities Fire Authority (“FCFA”), and the Oceano Community Services District (“Oceano”), which are hereinafter referred to as “Party” or collectively as “Parties.” This Agreement memorializes Oceano’s ongoing share of unfunded CalPERS liabilities, including but not limited pension/CalPERS, accrued fringe benefits, and other liabilities incurred from Oceano’s participation in the Five Cities Fire Authority, prior to June 30, 2023 (“Liabilities”).
RECITALS
A. On June 7, 2010, the cities of Arroyo Grande and Grover Beach, and Oceano, desirous of improving the quality and level of fire suppression and emergency medical service delivery within their communities through the sharing of resources and expertise, entered into a Joint Powers Authority Agreement (the “JPA”) and have operated as Five Cities Fire Authority pursuant to the terms and conditions in that agreement since that time as JPA member agencies.
That JPA, and its First, Second and Third Amendments, are incorporated herein and attached as Exhibit “A” (collectively, “JPA and its Amendments”).
B. The obligations contained within Exhibit “A” remain binding on each of the Parties, including Oceano’s Liabilities, incurred over the time period during which each Party serves or has served as a JPA member agency.
C. Under that JPA and its Amendments, the Parties have shared fire services, allowing for cost savings and operational efficiencies in providing fire services to the public.
D. Oceano has served as a member agency of the JPA since the inception of the FCFA on June 7, 2010, but is exiting the JPA on June 30, 2023 due to mutually adopted provisions by each Party under the JPA.
E. Specifically, and pursuant to Section 4 of the Third Amendment to the JPA, Oceano was required to place a special sales tax measure on the 2022 primary ballot, that would enable Oceano to be able to fund its proportionate share of costs owed to the FCFA.
F. As that 2022 Oceano ballot measure failed, and Oceano is unable to fund its proportionate share of its costs owed to the FCFA, by the terms of the Third Amendment to the JPA, incorporated herein as Exhibit “A,” the JPA subsequently entered into a “Wind Down Period,” with certain ongoing obligations and Liabilities owed by Oceano before an automatic withdrawal from the FCFA on June 30, 2023.
G. The Parties have now determined this Agreement is necessary to set out the continued FCFA obligations owed by Oceano under the “Wind Down Period” incorporated by Exhibit “A,” and to set forth a process by which those Oceano Liabilities will be paid in full.
Attachment 3 - 1
65501.00100\41300388.5
H. The Parties agree that all proportionate Oceano Liabilities, as well as all debts and obligations owed by Oceano to the FCFA, shall remain in effect until paid in full.
NOW, THEREFORE, for and in consideration of the mutual covenants and conditions hereinafter stated the Parties agree as follows:
1. Recitals. The recitals above are true and correct and are hereby incorporated into the terms of this Agreement as though fully set forth herein.
2. Term. The term of this Agreement shall commence as of the date the governing boards of all Parties have fully executed this Agreement and shall continue until terminated automatically upon the date Oceano has paid all proportionate Liabilities, as well as all debts and obligations owed by Oceano to the FCFA, as set herein.
3. Oceano’s Financial Obligations.
3.1 Nothing within this Agreement modifies Oceano’s obligations under the Five Cities Fire Authority Joint Powers Authority Agreement, as amended, in particular the Third Amendment included as Exhibit “A.”
3.2 Oceano remains subject to all “Wind Down Period” obligations set forth within the JPA and its Amendments, incorporated as Exhibit “A.” Specifically, under Section 5 of the Third Amendment to the JPA, Oceano’s withdrawal from the FCFA shall not absolve Oceano from any Liabilities arising out of Oceano’s participation in the JPA since the time the FCFA was created on June 7, 2010 through the date of Oceano’s withdrawal from the JPA on June 30, 2023 (“Effective Date Range for Liabilities”).
3.3 Oceano warrants and agrees to pay any and all Liabilities arising out of its participation in the JPA over the Effective Date Range for Liabilities. Oceano warrants and agrees to the FCFA’s use of the City of Arroyo Grande’s CalPERS contract for employees of the FCFA, effective since the inception of the JPA.
3.4 Oceano’s share of Liabilities shall bear the same proportionate relationship to the whole as its annual contribution for the operation of the FCFA as set forth in Exhibit “A” over the Effective Date Range for Liabilities. Oceano’s share of such Unfunded Accrued Pension Liability (“UAPL”) expenses shall be determined according to the same formula used by the FCFA to allocate such costs during the final year of the withdrawing Oceano’s membership. (a) Oceano’s share of Liabilities shall be reduced by (i) Oceano’s proportionate share of the FCFA fund balance as of June 30, 2023, and (ii) Oceano’s proportionate ownership share of FCFA physical assets as of June 30, 2023, which equals Two Hundred Seventy-Eight Thousand One Hundred Nine Dollars ($278,109). The amount of Oceano’s proportionate share of the FCFA fund balance as of June 30, 2023, will be determined by the FCFA Treasurer based on the audited financial report for Fiscal Year 2022-23.
3.5 Actuary Report. The Parties shall agree and rely on an Actuary Report utilized by the FCFA to determine Oceano’s share of Liabilities. Specifically, the Parties agree to rely on any Actuary Report commissioned by the FCFA that methodically determines all CalPERS- 65501.00100\41300388.5
designated liabilities, commissioned in response to Arroyo Grande’s CalPERS contract, to determine the Liabilities owed by Oceano to FCFA. Attached as Exhibit “B” is Foster & Foster’s Five Cities Fire Authority CalPERS Miscellaneous and Safety Plans Unfunded Liability Analysis (“Preliminary Actuary Report”) reflecting the Parties share of Liabilities for FCFA through June 30, 2021. That Preliminary Actuary Report is presented as an example. At that time FCFA completes an Actuary Report that reflects Oceano’s proportionate share of Liabilities over the Effective Date Range for Liabilities, through June 30, 2023 (“Final Actuary Report”), that Final Actuary Report will be attached, replacing the Preliminary Actuary Report, and incorporated herein as a revised Exhibit “B.” Any Final Actuary Report shall be used to determine Oceano’s owed amount over the Effective Date Range for Liabilities and shall be binding on the Parties for purposes of Oceano’s required payment of Liabilities under Section
3.6. The Final Actuary Report may be revised from time to time based on any updated transmittal of FCFA’s CalPERS liabilities over the Effective Date Range for Liabilities. At the time a Final Actuary Report is revised as commissioned by FCFA, those revisions shall automatically be incorporated by reference as Exhibit “B.” (a) The Parties consent and agree with the formula, calculations used and Oceano’s agreed upon shares attributed to services rendered over the Effective Date Range for Liabilities, as set forth in the Actuary Report that shall be attached and incorporated herein as Exhibit “B,” and will be similar in analysis to the Preliminary Actuary Report. (b) The Parties consent and agree that Oceano’s Liabilities shall be calculated using the same assumptions used by CalPERS to calculate UAPL for contracting agencies with active contracts unless Oceano elects to pay its share of liabilities on a lump sum basis, in which case, the assumption used shall be the assumptions used by CalPERS to calculate UAPL for contracting agencies on a terminated basis.
3.6 Payment Options. Oceano’s Liabilities are due and payable to the FCFA based on one of the following two payment options, which ensures full recovery for any and all proportionate Oceano Liabilities incurred prior to June 30, 2023. Failure to meet the obligations set forth in this Section 3.5 herein constitutes a default by Oceano. (a) Lump Sum. Upon execution by the Parties of this Agreement, Oceano may issue a lump sum invoice payment for the Total Cost of Liabilities owed to the FCFA, as set forth under Section 3.3 above and subject to any Final Actuary Report incorporated as Exhibit “B,” within 180 days of Parties’ receipt of the Actuary Report that will be accepted by the Parties by the terms described herein.
(b) Annual Payment. Upon execution by the Parties of this Agreement, Oceano may initiate an annual payment for the Total Cost of Liabilities, due and payable via invoice within sixty (60) days of receipt of a FCFA invoice evidencing applicable CalPERS liabilities for any portion of the Effective Date Range of Liabilities, based on the applicable Final Actuary Report incorporated as Exhibit “B. Should Oceano initiate annual payments, Oceano reserves the right to make a future lump sum payment for the remaining Total Cost of Liabilities owed to the FCFA based on an Actuary Report agreeable to all Parties, due and payable via invoice within sixty (60) days of receipt of a FCFA invoice. 65501.00100\41300388.5
3.7 Default and Delinquency. If Oceano defaults in its obligation to pay or advance any amounts due pursuant to this Agreement after such amounts have become delinquent, Oceano shall be liable to the FCFA for interest on any unpaid amount at the rate of 10% per annum, or the maximum rate allowed by law if it is less than 10% per annum, until the overdue invoice amount is paid in full.
4. Indemnification. The Parties shall indemnify, defend and hold harmless the other Parties’ members, officers, directors, employees and agents from and against any and all liability, loss, damages, expenses, costs (including, without limitations, costs and fees of litigation or arbitration) of every nature, arising out of any act or omission related to this Agreement.
5. Conflict Resolution. The Parties agree that any and all disputes, claims or controversies between the Parties arising out of or relating to performance of this Agreement, shall be resolved pursuant to the conflict resolution provisions as follows:
5.1 The Parties shall first meet and attempt in good faith to negotiate and resolve any dispute arising out of or relating to this Agreement, subject to subsequent approval of any such resolution by the respective governing boards of the Parties.
5.2 If the matter cannot be resolved, then the Parties agree that the matter shall be submitted to mediation within a reasonable period of time after receipt of a written request from one Party requesting such mediation. The Parties shall cooperate with one another in selecting a mediator and in scheduling the mediation proceedings. Should the Parties be unable to agree upon a mediator, they shall agree upon a mediation service and shall have that service select a mediator for them. The Parties agree that they shall participate in the mediation in good faith and that they will share equally in the costs of mediation. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the Parties, their agents, employees, experts and attorneys, and by the mediator or any employees of the mediator, are confidential, privileged and inadmissible for any purpose, including impeachment, in any litigation or other proceeding involving the Parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation.
5.3 If the matter is not resolved by negotiation, then the Parties may submit the matter to binding or non-binding arbitration, but only if the Parties agree to submit the particular controversy to arbitration. No Party shall have a right to submit any controversy to arbitration without the other Parties’ consent.
6. General Provisions.
6.1 Construction and Interpretation. It is agreed and acknowledged by the Parties that this Agreement has been arrived at through negotiation, and that each Party has had a full and fair opportunity to revise the terms of this Agreement. Consequently, the normal rule of construction that any ambiguities are to be resolved against the drafting Party shall not apply in construing or interpreting this Agreement.
65501.00100\41300388.5
6.2 Waiver. The waiver at any time by any Party of its rights with respect to a default or other matter arising in connection with this Agreement shall not be deemed a waiver with respect to any subsequent default or matter.
6.3 Remedies Not Exclusive. The remedies provided in this Agreement are cumulative and not exclusive, and are in addition to any other remedies that may be provided by law or equity. The exercise by any Party of any remedy under this Agreement shall be without prejudice to the enforcement of any other remedy.
6.4 Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall not render the other provisions unenforceable, invalid or illegal.
6.5 Successors and Assigns. Except as otherwise provided by law, the rights and duties of the Parties under this Agreement shall not be assigned or delegated without the prior written consent of the other Parties. Any attempt to assign or delegate such rights or duties in contravention of this Agreement shall be null and void.
6.6 No Third Member Agency Beneficiaries. This Agreement shall not be construed to create any third party beneficiaries. This Agreement is for the sole benefit of the Parties, and their permitted successors, transferees and assignees, and no other person or entity shall be entitled to rely upon or receive any benefit from this Agreement or any of its terms.
6.7 Amendment. This Agreement may be modified or amended only by a subsequent written agreement approved by the governing board of each Party, and executed by each Party pursuant to the terms and conditions of this Agreement.
6.8 Governing Law and Venue. Except as otherwise required by law, this Agreement shall be interpreted, governed by, and construed under the laws of the State of California. The County of San Luis Obispo shall be the venue for any litigation concerning the enforcement or construction of this Agreement.
6.9 Attorney Fees. In the event any legal action is brought to enforce or construe this Agreement, the prevailing party shall be entitled to an award of reasonable attorney fees, expert witness and consulting fees, litigation costs and costs of suit.
6.10 Notice. Any notice, demand, invoice or other communication required or permitted to be given under this Agreement shall be in writing and either served personally or sent by prepaid, first class U.S. mail to the Agency Clerk and Agency Attorney of each Party.
Any notice or other communication served by personal delivery shall be deemed received when actually delivered. Any notice or other communication shall be deemed as received three days after deposit in United States mail, postage prepaid, return receipt requested.
6.11 Counterparts. This Agreement may be executed by the Member Agencies in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 65501.00100\41300388.5
Exhibits:
1. Exhibit “A” – Five Cities Fire Authorities Joint Powers Authority Agreement and Amendments
2. Exhibit “B” – Actuary Report of Five Cities Fire Authority Unfunded Accrued Pension Liability
[signature page follows]
65501.00100\41300388.5
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date last executed as set forth below.
FIRE CITIES FIRE AUTHORITY
By
Authority Chair
Dated
ATTEST:
By
Authority Clerk
APPROVED AS TO FORM:
Authority Attorney
City Attorney
65501.00100\41300388.5
OCEANO COMMUNITY SERVICES DISTRICT
By
President
Dated
ATTEST:
By
District Clerk
APPROVED AS TO FORM:
District Counsel
65501.00100\41300388.5
Exhibit “A” – Five Cities Fire Authorities Joint Powers Authority Agreement and Amendments
65501.00100\41300388.5
Exhibit “B” – Actuary Report of Five Cities Fire Authority Unfunded Accrued Pension Liability
Attachment 3 - 2
Five Cities Fire Authority
CalPERS Miscellaneous and Safety Plans
Unfunded Liability Analysis
Fiscal Years 2021/22 and 2022/23
Draft for Discussion
Foster & Foster, Inc.
January 5, 2023
Attachment 3 - 3
411 Borel Avenue, Suite 620 San Mateo, CA 94402 ꞏ (650) 377-1600 ꞏ www.foster-foster.com
ACTUARIAL CERTIFICATION
This report presents our analysis of the actuarial liability for benefits provided to employees of Five Cities Fire Authority’s (“FCFA”) under CalPERS Miscellaneous and Safety Plans (“Plans”) maintained by the City of Arroyo Grande (“City”).
The purpose of this analysis is to determine the Unfunded Actuarial Accrued Liability as of June 30, 2021 that is attributable to FCFA, and the portion attributable to the City. This report contains actuarial calculations for the purpose of assisting the Five Cities Fire Authority management.
The calculations are not appropriate for any other purposes.
Future calculations may differ significantly if the Plans’ experience differs from our assumptions or if there are changes in plan design, actuarial methods or actuarial assumptions. The project scope did not include an analysis of this potential variation.
The calculations are based on census data and plan provisions provided by the City of Arroyo Grande and CalPERS June 30, 2013 through 2021 actuarial valuation reports and on our understanding of the benefit provisions, actuarial reports and benefit summaries prepared by CalPERS, and on the methodology detailed in this report. Alternative methods could produce different results. The project scope did not include alternate analyses.
As a member of the American Academy of Actuaries meeting the Academy Qualification Standards, I certify the actuarial results and opinions herein.
Respectfully submitted,
Mary Elizabeth Redding, FSA, MAAA, EA
Senior Consulting Actuary
Foster & Foster, Inc.
January 5, 2023
TABLE OF CONTENTS
SECTION PAGE
1. Summary of Results 3
2. Purpose and Methodology 4
3. Fire Safety Classic Tier UAAL Analysis 7
4. Miscellaneous Classic Tier 1 UAAL Analysis 8
5. Safety Fire PEPRA UAAL Analysis 9
6. Plan Termination Analysis 10
7. Employer Contribution Analysis 12
8. Data Summary 15
9. Actuarial Assumptions 16
10. Summary of CalPERS Benefit 17
11. Detail of Fire Safety Tier 1 UAAL Allocation 18
12. Definitions 21
SECTION 1
SUMMARY OF RESULTS
CalPERS Unfunded Liability Analysis Page 3
Summary
Our calculations have determined that the CalPERS Unfunded Actuarial Liability attributable to FCFA employees is $176,223 at June 30, 2021 on the ongoing basis used by CalPERS to calculate required contributions.
If the Plans had been terminated June 30, 2021 or if FCFA had withdrawn from the CalPERS system on that date, the estimated unfunded termination liability owed to CalPERS for FCFA members would have been approximately $8.0 million.
Our calculations also determined that since FCFA’s inception through June 30, 2022, without adjustment for interest, FCFA has paid $982,169, to CalPERS for benefits attributable to the City of Arroyo Grande, and the City has paid $94,768 for benefits attributable to FCFA service. The net of these two amounts, without considering interest, is $887,401.
FCFA Unfunded CalPERS Liability at June 30, 2021
The report details the calculation of FCFA’s CalPERS unfunded actuarial accrued liability as of June 30, 2021 and presents the calculation methodologies used. Following is a summary of our calculation results.
FCFA - CalPERS Unfunded Actuarial Liability
June 30, 2021
Ongoing Basis, 6.8% Discount Rate
Fire Safety
Classic Tier
Fire Safety
PEPRA
Miscellaneous
Classic Tier 1 Total
Actuarial Accrued
Liability (AAL) $7,305,908 $ 602,691 $ 310,095 $ 8,218,694 Allocated Assets 7,161,156 645,706 235,609 8,042,471
Unfunded AAL
(UAAL) $ 144,752 $ (43,015) $ 74,486 $ 176,223
Sample Plan Termination Basis, 2.25% Discount Rate
Unfunded AAL
(UAAL) $ 7,268,114 $ 397,800 $ 323,414 $ 7,989,328
.
SECTION 2
PURPOSE AND METHODOLOGY
CalPERS Unfunded Liability Analysis Page 4
The purpose of this study is to (1) determine the unfunded actuarial accrued liability (“UAAL”) for the CalPERS pension benefits for current and past employees and retirees of the Five Cities Fire Authority (“FCFA”) and (2) determine the amount of any CalPERS contributions paid by the City or FCFA that should have been paid by the other party.
Since the CalPERS Fire Safety Classic and the Miscellaneous Classic tiers have members with service for the City of Arroyo Grande (“City”) and FCFA, this study involves allocating the UAAL of those tiers between the City and FCFA Background
FCFA was formed in July 2010 as a Joint Powers Authority between the Cities of Arroyo Grande and Grover Beach, and the Oceano Community Services District (“Oceano CSD”). FCFA became the employer for fire safety personnel previously employed by its member agencies. The City of Grover Beach and Oceano CSD retained the CalPERS liabilities for past service of their employees. No new CalPERS plan was created for FCFA and instead all FCFA employees have been covered under the City of Arroyo Grande’s CalPERS pension plans. As a result, the City’s CalPERS plans include liabilities for employees and retirees of the City and of FCFA. We understand that since it was formed, FCFA has paid the full costs of the City’s Fire Safety CalPERS plans and the City has paid the full costs of the Miscellaneous plans.
Actuarial Accrued Liability (AAL)
The City’s Fire Safety Classic tier (3.0%@55) has members with both City and FCFA service. Members of the PEPRA Fire Safety tier (2.7%@57) have entirely FCFA service.
We calculated the actuarial accrued liability (AAL) for each person in the Fire Safety Classic tier, mirroring CalPERS actuarial valuation methods and assumptions. Our valuation came within 2% of CalPERS’ published results. We allocated the difference for each status group among members of that status group based on our calculated AAL.
Because CalPERS pension benefits are earned for each year of service, we next allocated each member’s AAL between the City and FCFA based on each member’s past service.
The AAL was then totaled for the City and FCFA.
Since inception of FCFA, there has been one non-Safety FCFA position filled by employees who are members of the City’s Classic Miscellaneous plan. We estimated the AAL for the current employee based on an actuarial valuation of their benefits following CalPERS actuarial methods and assumptions. We did not replicate the CalPERS valuation for the entire tier, as we did for the Safety group.
SECTION 2
PURPOSE AND METHODOLOGY
CalPERS Unfunded Liability Analysis Page 5
Unfunded Actuarial Accrued Liability (UAAL) and Assets
Because the plans are in CalPERS risk pool, the plans’ normal cost is not equal to the sum of the individually calculated normal costs; instead, it is calculated by CalPERS on a pooled basis and is the same for all plans in the risk pool with the same benefit formula.
The UAAL is not calculated directly for plans in the CalPERS risk pool, and plan assets are also not recorded and maintained separately for each risk pool plan. Instead, beginning with the June 30, 2013 actuarial valuations, CalPERS has allocated actuarial and investment gains and losses to each plan to determine the each plans’ UAAL, and then assigned assets to each plan as the difference between the AAL and the UAAL. We followed CalPERS procedures, detailed in Section 11 of this report, to allocate the Fire Safety Classic UAAL between the City and FCFA.
AAL Allocation Methodology – Fire Safety Classic Tier
To determine the AAL for the City and FCFA at each year, we began with CalPERS 6/30/2011 actuarial valuations. We projected the AAL forward as follows:
The 6/30/2011 AAL was allocated entirely to the City. It was projected forward taking into account interest, benefits paid and the impact of actuarial assumption changes.
FCFA had no initial AAL. Its AAL was projected forward from 6/30/2011 taking into account interest, benefits paid, the impact of actuarial assumption changes plus the entire plan normal cost
Benefit payments in each year were determined by beginning with retirees as of June 30, 2019 and projecting their benefits backward and forward, taking into account retirement dates and actual cost of living adjustments, and then pro-rating the benefits between the City and FCFA based on service at retirement. Differences between the projected total AAL of City and FCFA and CalPERS published AAL in each year were allocated between City and FCFA using our professional judgement, in general, reflecting the reduction in the number of initial retirees in the first few years, and the inherent difference between normal costs calculated on a pooled basis and the plan members’ actual AAL.
Based on census data as of June 30, 2019, 2020, and 2021 and CalPERS actuarial methods and assumptions, we performed actuarial valuations as of June 30, 2019, 2020, and 2021 and allocated the resulting AAL between City and FCFA based on each members’ service to each valuation date.
SECTION 2
PURPOSE AND METHODOLOGY
CalPERS Unfunded Liability Analysis Page 6
UAAL Allocation Methodology – Fire Safety Classic Tier
Beginning from June 30, 2013, the Fire Safety Classic Tier UAAL at each valuation date was allocated between the City and FCFA following CalPERS methodology detailed in Section 11, based on the AAL for each group at each valuation date and on the outstanding amounts of previously allocated UAAL. In our opinion, this produces the same results as would have occurred if the plan had been split between groups at inception.
UAAL Allocation Methodology – Fire Safety PEPRA Tier
Since all members of this plan are FCFA employees, no allocation is needed.
UAAL Allocation Methodology – Miscellaneous Classic Tier 1 Because our calculated AAL for the current FCFA employee in the Miscellaneous Classic Tier 1 plan is less than 1% of the total plan AAL, we believe that projection of historical AALs and then following CalPERS risk pool UAAL allocation methodology would likely not produce accurate results. Instead, we assumed FCFA’s portion of the plan was the same percentage funded as the total plan.
Estimated Plan Termination UAAL
The actuarial liabilities and contributions calculated in CalPERS funding valuations are on an ongoing plan basis. This means that employees will continue earning benefits in the future, new agency employees will become CalPERS members, and CalPERS can adjust required future contributions as needed to fund those benefits.
When a public agency leaves CalPERS (“terminates”), CalPERS agrees to pay all accrued benefits for all plan members, whether currently active, terminated, or retired.
CalPERS also agrees that following termination, the agency will not be obligated to make any future payments to CalPERS. Therefore, CalPERS changes the basis used to calculate the actuarial liabilities to ensure that it has sufficient funds to pay benefits under any circumstances. In particular, liabilities are increased to allow for future mortality improvement and are calculated using a discount rate estimated as the yield on 20-year Treasury bonds.
To illustrate the UAAL on a plan termination basis, we have estimated the liability using the higher of the two termination discount rates in CalPERS June 30, 2021 actuarial valuation report, 2.25%, as well as a recent 20 year Treasury bond yield, 4.38% as of October 28, 2022.1
1 https://home.treasury.gov/resource-center/data-chart-center/interestrates/TextView?type=daily_treasury_long_term_rate&field_tdr_date_value_month=202210 SECTION 3
FIRE SAFETY CLASSIC TIER UAAL ANALYSIS
CalPERS Unfunded Liability Analysis Page 7
As described above, we performed an actuarial valuation as of June 30, 2021 to determine the actuarial accrued liability (AAL) attributable to the City and to FCFA. The AAL was allocated to the City or FCFA based on the member’s period of service for each entity.
The allocated assets at June 30, 2021 were determined by following CalPERS current risk pool methodology beginning with its inception as of June 30, 2013. Details of the calculation are in section 11.
A breakdown of our actuarial valuation results for the Fire Safety Classic tier by status as of June 30, 2021 is as follows:
Fire Safety Classic Tier UAAL
June 30, 2021
City FCFA Total
AAL:
Active employees $ 679,691 10% $ 6,097,006 90% $ 6,776,697 Inactives 583,427 51% 550,477 49% 1,133,904
Retirees 2,305,272 78% 658,425 22% 2,963,698
Total 3,568,391 33% 7,305,908 67% 10,874,299
Allocated assets 2,720,564 7,161,156 9,881,720
UAAL 847,827 144,752 992,579
We note that the FCFA portion of the plan has a higher funded ratio (98%) than the City’s portion (76%). This result is expected. The FCFA portion of the plan began with all employees treated as new hires on July 1, 2010, and all past service and retiree benefit liabilities, as well as the unfunded liability remaining from asset losses incurred during the 2008-2009 Great Recession, remaining with the City. Given this “clean slate” beginning, the FCFA plan was able to maintain a funded status at close to 100% by paying each year’s normal costs. This result is similar to most CalPERS PEPRA plans, which cover only new employees hired in 2013 or later.
SECTION 4
MISCELLANEOUS CLASSIC TIER 1 UAAL ANALYSIS
CalPERS Unfunded Liability Analysis Page 8
The following table shows the allocation of the UAAL for Miscellaneous Classic Tier 1 at June 30, 2021. The actuarial accrued liability for the current Miscellaneous FCFA employee was calculated from our actuarial valuation as of June 30, 2021. We have ignored any possible AAL for previous Miscellaneous employees who worked only a short time for FCFA.
Miscellaneous Classic Tier 1 UAAL
June 30, 2021
FCFA
Employee City Total
Actuarial Accrued Liability $ 310,095* $ 43,948,774 $ 44,258,869 Percent of total 0.70% 99.30% 100.00%
Assets allocated in proportion to AAL 235,609 33,392,126 33,627,735 UAAL allocated in proportion to AAL 74,486 10,556,648 10,631,134 Funded status 76.0% 76.0% 76.0%
* Calculated by Foster & Foster
SECTION 5
FIRE SAFETY PEPRA UAAL ANALYSIS
CalPERS Unfunded Liability Analysis Page 9
Since all members of the Fire Safety PEPRA plan are and have always been FCFA employees, no allocation is required and the entire actuarial liability is allocated to FCFA.
Fire Safety PEPRA UAAL
June 30, 2021
Total
Actuarial Accrued Liability $ 602,691
Assets 645,706
UAAL/(Overfunded AAL) (43,015)
Funded status 107.1%
SECTION 6
PLAN TERMINATION ANALYSIS
CalPERS Unfunded Liability Analysis Page 10
The following tables present details of our estimation of FCFA’s liability on a plan termination basis. This represents the actuarial liability on the basis CalPERS would use if an agency were leaving CalPERS. In that situation, CalPERS would retain the obligation to make all future payments of benefits accrued to date, and CalPERS would invest the plan assets very conservatively as the terminating agency would have no obligation to make any future payments to CalPERS.
The June 30, 2021 termination basis shown below is the lower of the two liability options (based on the higher of the two discount rates) presented as an estimate in CalPERS valuation report. It includes a 5% liability load for contingencies.
We understand that interest rates in general have risen since June 30, 2021. 4.38% is a recent 20 year Treasury bond rate: it is an estimate of the rate that could actually be used for termination. However, the AAL is as of June 30, 2021 and has not been increased for benefit accruals or other changes since then.
To estimate FCFA’s termination liability for each plan, we allocated the published termination liability for the entire plan on the Ongoing Plan Basis AALs, allocated between FCFA and the City as described earlier in this report. This is a reasonable estimate for illustrative purposes. However, an actual calculation would likely show a higher percentage increase between the ongoing and termination basis for the FCFA portion of the plan than would the City’s portion of the plan. This is because much of the liabilities in the City’s portion of the plan are for retirees, and, due to their shorter life expectancies, their liabilities are less impacted by a change in the discount rate.
Fire Safety Classic Tier
Ongoing Plan
Basis at
June 30, 2021
Termination
Basis at
June 30, 2021
Estimated June 30, 2021
Termination Liability at
Recent Treasury Rate
Discount Rate 6.8% 2.25% 4.38%
Total AAL $10,874,299 $21,476,892 $16,513,480
FCFA AAL 7,305,908 14,429,270 11,094,597
FCFA Assets 7,161,156 7,161,156
FCFA UAAL 144,752 7,268,114
SECTION 6
PLAN TERMINATION ANALYSIS
CalPERS Unfunded Liability Analysis Page 11
Miscellaneous Classic Tier 1
Ongoing Plan
Basis at June
30, 2021
Termination
Basis at
June 30, 2021
Estimated June 30, 2021
Termination Liability at
Recent Treasury Rate
Discount Rate 6.8% 2.25% 4.38%
Total AAL $44,258,869 $79,787,584 $64,191,410
FCFA AAL 310,095 559,023 449,340
FCFA Assets 235,609 235,609
FCFA UAAL 74,486 323,414
Fire Safety PEPRA
Ongoing Plan
Basis at
June 30, 2021
Termination
Basis at
June 30, 2021
Estimated June 30, 2021
Termination Liability at
Recent Treasury Rate
Discount Rate 6.8% 2.25% 4.38%
FCFA AAL $ 602,691 $ 1,043,506 $ 837,146
FCFA Assets 645,706 645,706
FCFA UAAL (43,015) 397,800
Total FCFA Termination Basis Estimated Unfunded Liability Ongoing Plan
Basis at
June 30, 2021
Termination
Basis at
June 30, 2021
Discount Rate 6.8% 2.25%
Fire Safety Classic $ 144,752 $ 7,268,114
Miscellaneous Classic 74,486 323,414
Fire Safety PEPRA (43,015) 397,800
Total Estimated UAAL 176,223 7,989,328
SECTION 7
EMPLOYER CONTRIBUTION ANALYSIS
CalPERS Unfunded Liability Analysis Page 12
Fire Safety Classic Tier Since FCFA’s inception, all of the active employees in this tier have been FCFA employees. Therefore, the normal cost should have been, and was, paid by FCFA. However, the City retained the liability for benefits earned for service with the City before FCFA’s inception and so both the City and FCFA should pay a portion of the UAAL payment. Below, we have allocated the UAAL payment for each payment year beginning with FY 2015-16 in accordance with the allocation of the outstanding UAAL bases for the year, as described previously and detailed in Section 11. The required UAAL payment in fiscal years 2010-11, 2011-12, and 2012-13 were based on the actuarial valuations as of June 30, 2008, 2009, and 2010 respectively. Since FCFA did not exist at those dates, the entire UAAL payment related to service for the City. We calculated the UAAL payment as the total CalPERS payment reported in FCFA’s financial statements minus the employer and employer-paid member normal costs for each year. The UAAL payment for FY 2013-14 was based on the June 30, 2011 actuarial valuation. Any FCFA UAAL would have been minimal and we have estimated it as $0. No amortization base schedule is available for fiscal year 2014-15, which is based on the June 30, 2012 actuarial valuation. That information was not provided by CalPERS prior to its methodology change at June 30, 2013. We have allocated the UAAL payment for FY 2014-15 in proportion to the allocated AAL on the associated June 30, 2012 valuation date. Schedule of Allocated Fire Safety Classic Tier UAAL Payments Valuation Date 6/30/08 6/30/09 6/30/10 6/30/11 6/30/12 6/30/13 6/30/14 6/30/15 6/30/16 6/30/17 6/30/18 6/30/19 Payment Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Total City $57,451 $89,161 $145,532 $101,196 $113,017 $40,827 $46,730 $54,803 $65,912 $78,412 $88,209 $100,919 $982,169 FCFA 0 0 0 0 13,745 11,037 12,470 15,550 22,122 29,352 38,701 52,016 194,993 Total 57,451 89,161 145,532 101,196 126,762 51,864 59,200 70,353 88,034 107,764 126,910 152,935 1,177,162 In total, we calculate, without considering timing or interest, that between July 1, 2010 and June 30, 2022, FCFA has paid $982,169 in CalPERS Fire Safety Classic costs that should have been paid by the City.
SECTION 7
EMPLOYER CONTRIBUTION ANALYSIS
CalPERS Unfunded Liability Analysis Page 13
Miscellaneous Classic Tier 1 Since FCFA’s inception, FCFA has had one position filled sequentially by employees who are members of the City’s Miscellaneous Classic (Tier 1 and Tier 2) plans. The current employee has filled that position since FY2013-14. The normal cost for these employees should have been paid by FCFA. However, the City retained the liability for benefits earned for service with the City, so both the City and FCFA should pay a portion of the UAAL payment. Normal cost for each year is calculated as covered FCFA earnings multiplied by the Tier 1 or Tier 2 employer normal cost rate for the year. We have included the required employer normal cost only. If the City also pays the required member contribution for these Classic Miscellaneous employees, the normal cost shown below would approximately double. Rather than replicating CalPERS actuarial valuation for all Miscellaneous Classic members, we calculated the AAL for the current employee. For simplicity, since the current Miscellaneous employee has 0.70% of the Miscellaneous Classic Tier 1 AAL as of June 30, 2021, we allocated 0.70% of the 2023-242 fiscal year’s $1,072,588 UAAL payment to FCFA, or $7,508.
For past years, we believe no significant Miscellaneous UAAL would have been present until the June 30, 2015 actuarial valuation, and no UAAL payment would have been due until the 2017-18 fiscal year. The payment would have been very small in the first year and grown over the 7 years to the $7,508 for FY 2023-24. Because these amounts are small, we have used a straight-line interpolation to estimate the UAAL payments for fiscal years 2017-18 through 2021-22. In total, we calculate, without considering timing or interest, that between July 1, 2010 and June 30, 2022, the City has paid $94,768 in CalPERS Miscellaneous costs that should have been paid by FCFA. 2 CalPERS’ June 30, 2021 actuarial valuation calculated the UAAL payments due in fiscal year 2023-24.
SECTION 7
EMPLOYER CONTRIBUTION ANALYSIS
CalPERS Unfunded Liability Analysis Page 14
Schedule of Allocated Miscellaneous Classic Tier 1 CalPERS Payments Valuation Date 6/30/08 6/30/09 6/30/10 6/30/11 6/30/12 6/30/13 6/30/14 6/30/15 6/30/16 6/30/17 6/30/18 6/30/19 Payment Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 TotalTier 1 Employer Normal Cost Rate 9.061% 9.319% 9.387% 9.665% 9.462% 9.671% 10.069% 10.110% 10.609% 11.432% 12.361% 12.200% Tier 2 Employer Normal Cost Rate N/A N/A 7.720% 8.052% N/A N/A N/A N/A N/A N/A N/A N/A FCFA Normal Cost $5,398 $5,982 $4,083 $2,829 $5,727 $6,396 $6,479 $6,724 $7,702 $8,317 $8,993 $10,042 $78,673 Allocated portion of UAAL payment - - - - 1,073 2,146 3,219 4,292 5,365 16,095 Total FCFA Miscellaneous Classic Tier 1 Cost 5,398 5,982 4,083 2,829 5,727 6,396 6,479 7,797 9,848 11,536 13,285 15,407 94,768 Summary – Net Difference In total for both the Miscellaneous and Safety plans, we calculate, without considering timing or interest, that between July 1, 2010 and June 30, 2022, FCFA has paid $887,401 in CalPERS Miscellaneous and Safety costs that should have been paid by the City.
SECTION 8
DATA SUMMARY
CalPERS Unfunded Liability Analysis Page 15
CalPERS Fire Safety Classic Tier Participants - June 30, 2021 All Service
with
City
Both City
and FCFA
Service
All Service
with
FCFA
Total
Actives
Count n/a 3 13 16
Average Age n/a 51.3 46.4 49.3
Average Service n/a 14.6 7.4 10.8
Inactives
(Transferred or
separated)
Count 4 2 6 12
Average Age 49.1 41.1 45.2 45.8
Retirees
Counts 4 3 1 8
Average Age 80.7 68.4 57.3 71.2
SECTION 9
ACTUARIAL ASSUMPTIONS
CalPERS Unfunded Liability Analysis Page 16
June 30, 2021 Actuarial Valuation for Fire Safety Classic Tier Valuation Date June 30, 2021
Discount Rate 6.8%, same as CalPERS 6/30/21 valuation Pay Increases Aggregate: 2.80% annually
Merit: CalPERS 1997-2019 Experience Study
Retirement, Mortality,
Termination, Disability
Rates from CalPERS 1997-2019 Experience Study
All Other Same as in 6/30/2021 CalPERS actuarial valuation Census Data Provided by City of Arroyo Grande
Pension reports downloaded by City from MyCalPERS
CalPERS OPEB database downloaded by City from MyCalPERS Census files contain earnings and employment history for FCFA Fire Safety employees and current information for Fire Safety retirees.
Cost Method and
Actuarial Liability
Entry Age Normal cost method
Pension Actuarial Accrued Liability (AAL) calculated on all City + FCFA service for active employees and on the pension benefit retirees are receiving for service
Future Employees None considered in study - closed group SECTION 10
SUMMARY OF CALPERS BENEFITS
CalPERS Unfunded Liability Analysis Page 17
Summary of CalPERS Benefits
Eligibility Service or Disability retirement under CalPERS Service Retirement
Benefit
Fire Safety Classic Tier:
3% @55
1-year FAC (Final Average Compensation)
Miscellaneous Classic Tier 1:
2.5% @55
1-year FAC
Miscellaneous Classic Tier 2:
2.0% @55
3-year FAC
Fire Safety PEPRA Tier:
2.7% @57
3-year FAC
Normal Benefit
Form
Single life annuity
Statutory Member
Contributions
Fire Safety Classic: 9% of pay
Miscellaneous Classic Tier 1: 8%
Miscellaneous Classic Tier 2: 7%
Fire Safety PEPRA: 13% for FY 2022-23, 13.75% for
FY 2023-24
Employer Paid
Member
Contributions,
Employee
Cost Sharing
None
COLA Up to 2% per year
SECTION 11
DETAIL OF FIRE SAFETY CLASSIC TIER UAAL ALLOCATION
CalPERS Unfunded Liability Analysis Page 18
The UAAL is not calculated directly for plans in the CalPERS risk pool, and plan assets are also not recorded and maintained separately for each risk pool plan. Instead, CalPERS uses the following procedure, which we followed in this study for purposes of splitting the Fire Safety Classic tier. CalPERS began the above methodology beginning with the June 30, 2013 actuarial valuations.
1. The plan’s AAL is calculated at the valuation date
2. The plan’s projected UAAL balance is calculated as of the valuation date equal to the balance of the previous year’s amortization bases remaining at the valuation date.
3. The AAL is calculated for the risk pool
4. The projected UAAL balance for all plans in the risk pool is totaled
5. The investment (gain) or loss for the risk pool for the year ending on the valuation date is calculated, reduced by any amounts needed to offset risk mitigation
6. The non-investment (gain) or loss for the risk pool for the year ending on the valuation date is calculated
7. The plan is allocated a share of the risk pool’s investment (gain) or loss in proportion to the difference between the plan’s AAL and its projected UAAL (item (2) above): [(1) - (2)] ÷ [(3) - (4)] × (5)
8. The plan is allocated a share of the risk pool’s non- investment (gain) or loss in proportion to the AAL: [(1) ÷ (3)] × (6)
9. Any increase in the risk pool’s AAL due to actuarial assumption or method changes, risk mitigation, and risk mitigation offsets are calculated
10. The plan is allocated a share of the risk pool’s change in assumptions or method, risk mitigation, and risk mitigation offset UAAL in proportion to the AAL:
[(1) ÷ (3)] × (9)
11. The plan’s UAAL at the valuation date is the sum of the projected UAAL plus additional allocated UAL amounts: (2) + (7) + (8) + (10)
12. The plans share of the risk pool assets at the valuation date is the plan’s AAL less its allocated UAAL: (1) – (11)
SECTION 11
DETAIL OF FIRE SAFETY CLASSIC TIER UAAL ALLOCATION
CalPERS Unfunded Liability Analysis Page 19
Valuation date 6/30/2011 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 Discount rate 7.50% 7.50% 7.50% 7.50% 7.50% 7.375% 7.25% 7.00% 7.00% 7.00% 6.80% Counts (Total Plan) (CalPERS reports)Active employees 16 17 21 21 17 17 15 15 16 16 16 Transferred 4 4 6 6 8 7 9 8 9 9 9 Separated 1 1 2 2 5 6 5 5 3 3 3 Retired 6 5 4 4 4 4 6 7 8 8 8 Actuarial Accrued Liability Allocated City AAL 2,942,938 2,933,663 2,891,099 3,019,230 2,785,225 2,943,477 3,088,902 3,246,904 3,418,715 3,449,310 3,568,391 Allocated FCFA AAL - 356,794 781,626 1,432,538 2,002,429 2,786,799 3,616,082 4,680,862 5,488,356 6,225,397 7,305,908 Total AAL (CalPERS reports) 2,942,938 3,290,457 3,672,725 4,451,768 4,787,654 5,730,276 6,704,984 7,927,766 8,907,071 9,674,707 10,874,299 New UAAL Amounts at each valuation date from CalPERS reports: Plan's unamortized balance of previous UAAL bases 886,322 716,195 959,726 1,364,859 1,366,426 1,661,053 1,765,570 1,983,320 Plan's share of investment (gain) -323,343 211,293 316,121 -182,517 -64,840 35,276 181,875 -962,770 Plan's share of other (gain) 3,954 -743 -48,572 4,232 27,859 37,569 28,813 -40,832 Plan's share of assumption (gain) 210,805 0 87,694 123,856 217,538 57,539 Plan's share of method/risk mitigation (gain) 51,149 262,638 Plan's risk mitigation offset -307,316 SECTION 11
DETAIL OF FIRE SAFETY CLASSIC TIER UAAL ALLOCATION
CalPERS Unfunded Liability Analysis Page 20
Valuation date 6/30/2011 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021Determination of UAAL and Assets at each valuation date City AAL% 78.718% 67.821% 58.175% 51.367% 46.069% 40.956% 38.382% 35.653% 32.815% FCFA AAL% 21.282% 32.179% 41.825% 48.633% 53.931% 59.044% 61.618% 64.347% 67.185% City basis for investment gain allocation3 2,321,534 2,201,139 2,223,881 2,177,252 2,326,490 2,378,377 2,380,522 2,446,467 FCFA basis for investment gain allocation 1,243,912 1,870,321 2,546,668 3,162,873 4,234,851 4,867,641 5,528,615 6,444,512 City Investment Gain% 0.000% 65.112% 54.063% 46.617% 40.772% 35.458% 32.823% 30.098% 27.516% FCFA Investment Gain% 0.000% 34.888% 45.937% 53.383% 59.228% 64.542% 67.177% 69.902% 72.484% City share of previous UAAL bases - 697,696 584,085 719,596 911,650 920,414 1,040,338 1,068,788 1,121,924 FCFA share of previous UAAL bases - 188,626 132,109 240,131 453,209 446,011 620,715 696,782 861,396 City share of new UAAL bases 734,453 (64,884) 113,798 167,462 (15,406) 98,463 25,998 65,014 (274,097) FCFA share of new UAAL bases 198,564 (43,700) 96,752 187,781 (39,023) 133,243 46,847 145,674 (716,644) Total UAAL (CalPERS reports) 933,017 777,738 926,744 1,314,970 1,310,430 1,598,131 1,733,898 1,976,258 992,579 SummaryCity AAL 2,891,099 3,019,230 2,785,225 2,943,477 3,088,902 3,246,904 3,418,715 3,449,310 3,568,391 City Assets 2,156,646 2,386,418 2,087,341 2,056,419 2,192,659 2,228,027 2,352,378 2,315,508 2,720,564 City UAAL 734,453 632,812 697,884 887,058 896,243 1,018,877 1,066,337 1,133,802 847,827 FCFA AAL 781,626 1,432,538 2,002,429 2,786,799 3,616,082 4,680,862 5,488,356 6,225,397 7,305,908 FCFA Assets 583,062 1,287,612 1,773,569 2,358,887 3,201,895 4,101,608 4,820,795 5,382,941 7,161,156 FCFA UAAL 198,564 144,926 228,860 427,912 414,187 579,254 667,561 842,456 144,752 3 Plan’s AAL minus Plan's unamortized balance of previous UAAL bases SECTION 12
DEFINITIONS
CalPERS Unfunded Liability Analysis Page 21
Present Value of Benefits (PVB): An actuarial valuation begins with participant data (including active employees, former employees not in payment status, participants and beneficiaries in payment status) at the valuation date. Using this data and actuarial assumptions, the actuary projects future benefit payments. The assumptions model, among other things, when people will retire, terminate, die or become disabled, as well as what future benefits might be, depending on such things as future salary increases and cost of living. Those future benefit payments are discounted, using expected future investment return and the likelihood of receiving a benefit, back to the valuation date. This discounted present value is the plan's present value of benefits. It represents the amount the plan needs as of the valuation date to pay all future benefits – if all assumptions are met and no future contributions (employee or employer) are made.
Normal Cost (NC): The Present Value of Benefits is not funded immediately upon an employee’s hire. Instead it is treated as deferred compensation and funded over an employee’s working career. The Normal Cost represents the portion of the present value of benefits allocated to, or expected to be earned (on an actuarial, not actual, basis) in the coming year. The Normal Cost is paid by employees and the employer each year as a percentage of PERSable payroll.
Actuarial Accrued Liability (AAL): This represents the portion of the present value of benefits that participants have earned (on an actuarial, not actual, basis) through the valuation date, or allocated are considered to be allocated to periods of past service. This includes the full PVB for retirees and inactive participants, and a portion of the PVB for current active employees.
Plan Assets: This includes funds that have been accumulated in CalPERS’ trust fund so they can pay plan benefits and expenses. Amounts are attributable to contributions made by employees and the employer, and to past investment earnings. Unfunded Actuarial Accrued Liability (UAAL): If all actuarial assumptions had always been exactly met, the accumulated plan assets would equal the actuarial accrued liability. The difference between the actuarial accrued liability and plan assets is the UAAL. It represents the amount of the actuarial accrued liability that must still be funded.
Every year, during the actuarial valuation, the plan actuary calculates the increase or decrease in the UAAL from several sources including investment return and experience different than expected, and plan changes. Each of these is a new UAAL layer which is amortized – paid off over time by additional employer contributions.
The total UAAL amortization payment is paid monthly as a separate portion of the employer contribution.
Approved
Budget
Adjusted
Budget
Baker Tilly A-4
Estimate
Proposed
Budget
2020-21 2021-22 2022-23 2022-23 2023-24 2023-24
Beginning Fund Balance $ 1,005,267 $ 1,387,744 $ 1,324,318 $ 1,324,318 $ 1,143,000 $ 1,124,939 $ (18,061) Revenues 6,789,777 6,572,902 5,849,718 7,010,580 8,475,000 8,413,610 (61,390) Expenditures:
Salaries & Benefits 5,254,729 5,546,681 5,522,800 5,645,100 6,801,000 6,801,000 - Services & Supplies 905,228 975,437 1,089,075 1,183,775 1,272,000 1,527,143 255,143 Equipment Replacement 146,147 13,013 100,000 227,187 204,000 264,000 60,000 Debt Service 101,197 101,197 153,897 153,897 464,000 153,893 (310,107) Total Expenditures 6,407,300 6,636,328 6,865,772 7,209,959 8,741,000 8,746,036 5,036 Change in Fund Balance 382,477 (63,426) (1,016,054) (199,379) (266,000) (332,426) Ending Fund Balance $ 1,387,744 $ 1,324,318 $ 308,264 $ 1,124,939 $ 877,000 $ 792,513
10.03% 9.06%
Variance Baker
Tilly vs Proposed
Better/(Worse)
ACTUALS
FIVE CITIES FIRE AUTHORITY
For the Fiscal Year Ending June 30, 2024
Attachment 4