HomeMy WebLinkAboutR-98-0563J-98-595
6/2/98 RESOLUTION NO. 9 87 6 3
A RESOLUTION, WITH ATTACHMENT, AUTHORIZING
THE CITY MANAGER TO ENTER INTO A MEMORANDUM
OF UNDERSTANDING, IN SUBSTANTIALLY THE
ATTACHED FORM, BETWEEN THE CITY OF MIAMI, THE
AMERICAN FEDERATION OF STATE, COUNTY, AND
MUNICIPAL EMPLOYEES, LOCAL 1907, THE CITY
INDEPENDENT GROUP UNION, AND THE CITY OF
MIAMI RETIREES ASSOCIATION, TO MODIFY THE
AMENDED FINAL ORDER IN LEONARD r, _ GATES, ET-
AL- V _ CCTTV OF MIAMI, CIRCUIT COURT CASE NO:
77-9491 CA (04); TO INCREASE THE RETIREMENT
BENEFIT MULTIPLIER, TO DELETE THE LONGEVITY
SUPPLEMENT, TO MODIFY THE COST -OF -LIVING
ADJUSTMENTS; TO REDEFINE THE FUNDING
MECHANISMS AND THE ASSET VALUATION METHODS;
AND TO RESOLVE AMORTIZATION ISSUES BY
ELIMINATING THE GATES SCHEDULE "B" PAYMENTS
EFFECTIVE FROM FISCAL YEAR 1998-99 TO END,
UPON THE TERMS AND CONDITIONS SET FORTH IN
THE ATTACHED MEMORANDUM OF UNDERSTANDING.
WHEREAS, the City of Miami, the American Federation of
State, County, and Municipal Employees, Local 1907, the City
Independent Group Union and the City of Miami Retired Employee
Association have entered into negotiations to modify certain
provisions of the Amended Final Judgment in Leonard L_ Gates, et_
al_ v_ City of Miami, Circuit Court Case No: 77-9491 CA (04) as
related to the General Employees' and Sanitation Employees'
Retirement Trust; and
WHEREAS, it is advantageous for the City of Miami to approve
the attached Memorandum of Understanding with the American
arracHMENr (s)
' CONTAINED
MY CONIIMMON
METING Og
J U N 0 9 1998
98 003
Federation of State, County, and Municipal Employees, Local 1907,
the City Independent Group Union, and the City of Miami Retired
Employee Association, the effect of which will be the elimination
of a $144 million dollar liability over the next ten years and
the stabilization of annual pension costs;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE
CITY OF MIAMI, FLORIDA:
Section 1. The recitals and findings contained in the
Preamble to this Resolution are hereby adopted by reference
thereto and incorporated herein as if fully set forth in this
Section.
Section 2. The American Federation of State, County and
Municipal Employees, Local 1907, the City Independent Group
Union, the City of Miami Retired Employee Association and the
City will endorse and present to the Circuit Court a joint motion
for modification of the Final Judgment in Leonard L_ GatesF et al
v_ City of Miami, Circuit Court Case No: 77-9491 CA (04).
Section 3. The retirement benefit allowance will be
increased to three (3) percent of the members average final
compensation multiplied by years of creditable service for
service retirement, rule of 70 retirement, early service
retirement as provided under Section 40-255 (b) (3) (c) (1), and
vested right to retirement which takes place on or after
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98- 563
October 1, 1998. The retirement benefit allowance will be
increased to three (3) percent of ninety (90) percent of the
member's average final compensation multiplied by years of
creditable service for ordinary disability retirement on or after
October 1, 1998, provided such retirement allowance exceeds 30
percent of the member's average final compensation; otherwise, a
retirement allowance for ordinary disability retirement will be
equal to 3 percent of 90 percent of the member's average final
compensation, multiplied by the number of years which would be
creditable to the member were the member's service to continue
until attainment of the member's normal retirement age, provided
further that the resulting retirement allowance does not exceed
thirty (30) percent of the member's average final compensation
upon retirement.
Section 4. The longevity supplement specified in Section
40-255 (a) (4) c.2 of the City of Miami Code shall cease to be
available.
Section 5. Effective October 1, 1998 retirees in the
General Employees Retirement Trust will be granted a minimum COLA
benefit of $54.00 per year and a maximum COLA benefit increase of
$400.00 per year after the retiree's first anniversary of
retirement has been reached. The COLA percentage will be
increased for retirees to four (4) percent of the total yearly
retirement allowance to be paid on a monthly basis. The
cumulative COLA benefit on a quarterly basis will be eliminated.
98- 563
Section 6. The actuarial methodology for evaluating
assets shall be changed to moving market value averaged over
three years, beginning September 30, 1997. (As of
October 1, 1997, market value shall be used; as of
October 1, 1998, a two-year moving average shall be used; as of
October 1, 1999 and thereafter, the three year moving average
shall be used.) Whereby each year the actuarial asset value
starting with the market value as of October 1, 1997, will be
projected forward at the valuation date based on actual
contributions and benefit payments at the assumed interest
assumption.
Section 7. The modified aggregate entry age normal cost
method will be applied for costs as of October 1, 1998, and each
October 1st thereafter based upon demographic and asset data as
of the previous October 1st, adjusted for interest from that date
to reflect payment timing.
Section 8. As of October 1, 1997 any unfunded actuarial
accrued liability in excess of the market value of assets at that
date shall be amortized over thirty (30) years as a level dollar
amounts.
Section 9. The City Manager is hereby authorized to
enter into a Memorandum of Understanding, in a form acceptable to
the City Attorney, between the City of Miami, the American
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98- 56
Federation of State, County and Municipal Employees, Local 1907,
the City Independent Group Union, and the City of Miami Retired
Employee Association upon the terms and conditions set forth in
the attached Memorandum of Understanding.
Section 10. This Resolution shall become effective
immediately upon its adoption.
PASSED AND ADOPTED this 9th day of
June , 1998.
JOE CAROLLO, MAYOR
in accordance with Miami Code Sec. 2-36, since the Mayor did not indicate avwvd of
this legislation by signing it in the designated place provided, said now
becomes effective with the elapse of ten (10) day from the date of Go iss;,Lra Eii:�jcn
ATTEST: regarding same, without the Mayorta
oeman. City Clerk
WALTER J. FOEMAN, CITY CLERK
PREPARED AND APPROVED BY:t�
LINDA RICE CHA
AS S I STANT---CTTY
AP
mis:csk:LRC
CORRECTNESS:
5
98 r- 563
MORANDUM OF UNDERSTANL G
AMENDMENT TO GATES SETTLEMENT
It is hereby agreed that the American Federation of State, County and Municipal
Employees ("AFSCME"), Local 1907, the City Independent Group Union ("CIGU"), and the
City of Miami ("City") shall enter into this Memorandum of Understanding to modify the
funding section of the Gates Settlement; to modify the cost -of -living adjustments ("COLA'); to
redefine the funding mechanisms, the asset valuation methods; to modify the pension benefit
multiplier; and to resolve amortization issues by retirement of the Gates Settlement Schedule B
payments effective from Fiscal Year 1998-99 actuarial valuation report of the General
Employees' and Sanitation Employees' Trust ("GESE').
PENSION MODIFICATIONS:
Modification in Gates v. City of Miami
The AFSCME, CIGU, City of Miami Retirees Association, and the City will endorse and
present to the Circuit Court a joint motion for modification of Final Judgment in Gates v. City of
Miami.
Retirement Benefit Multiplier (Section 40-255 (a) (3); (b) (2) b c 1 ; (d) 2; (e) (2) b)
A member exercising service retirement, rule of 70 retirement; early service retirement as
provided under Section 40-255 (b) (3) (c) (1), or vested right to retirement, on or after October 1,
1998, shall be entitled to receive a retirement allowance equal to 3 percent of the member's
average final compensation multiplied by years of creditable service, which amount shall be paid
yearly in monthly installments. Upon retirement on or after October 1, 1998, for ordinary
disability, a member shall commence receipt immediately a retirement allowance equal to 3
percent of 90 percent of the member's average final compensation multiplied by yearof
creditable service, which amount shall be paid yearly in monthly installments, provided such
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98 -- 563
retirement allowance ex(. , 30 percent of the member's average ...,al compensation; otherwise,
a retirement allowance equal to 3 percent of 90 percent of the member's average final
compensation, multiplied by the number of years which would be creditable to the member were
the member's service to continue until the attainment of the member's normal retirement age,
providiWd further that the resulting retirement allowance does not exceed 30 percent of the
member's average final compensation.
Longevity Supplement (Section 40-255 (a) (4) c. 2)
Effective October 1, 1998--the longevity supplement specified in Section 40-255 (a) (4)
c.2 of the City of Miami Code shall cease to be available.
COLA Benefit (Section 40-256)
Effective October 1, 1998 there shall be a minimum COLA benefit of $54.00 per year
and a maximum COLA benefit increase of $400.00 per year, provided the retiree's first
anniversary of retirement has been reached. The COLA percentage will be increased to 4% of
total benefits and the cumulative COLA benefit on a quarterly basis will be -eliminated. The
COLA benefit will be paid on a monthly basis.
Asset Valuation Method
The actuarial methodology for evaluating assets shall be changed to moving market value
averaged over three years, beginning September 30, 1997. (As of October 1, 1997, market value
shall be used; as of October 1, 1998, a two-year moving average shall be used; as of October 1,
1999, and thereafter, the three-year moving average shall be used.) Whereby a year the
r
actuarial asset value starting with the market value as of October 1, 1997 will be projected
forward at the valuation date based on actual contributions and benefit payments at the assumed
interest assumption. This projected actuarial value is then compared to the market value of assets
at the valuation date. One third of the difference plus prior deferrals is added to the projected
actuarial asset value to equal the actuarial asset value. Two thirds of the difference between
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98- 563
projected actuarial and .et asset value is deferred to each o...ie next two years as future
adjustments to the actuarial asset value. The result cannot be greater than 120% of market value
or less than 80% of market value.
C'nat Methnd
The modified aggregate entry age normal cost method will be applied for costs as of
October 1, 1998, and each October I' thereafter, based on demographic and asset data as of the
previous October 1', adjusted for interest from that date to reflect payment timing. This
modification method will determine the annual normal cost based on the present value of future
normal costs spread as - a level percent of pay. The present value of future normal cost will be
based on the present value of all benefits less present value future employee contribution less the
greater of the actuarial accrued liability or actuarial asset value. However, under no
circumstances will the total cost be determined to be less than zero.
Amortization Resolution
As of October 1, 1997 any unfunded actuarial accrued liability in excess of the market
value of assets at that date shall be amortized over 30 years as a level dollar amount.
After October 1, 1997, the following amortization periods will be applied all as level
dollar amounts.
Amortization Period
Sources of Change in Unfunded Liability
Benefit improvement for Active 30 years
Benefit improvement for retirees 15 years
Actuarial gain/loss 15 years
Change in assumption 20 years
To the extent the actuarial accrued liability plus normal cost is less than the actuarial asset
value plus - present -value. -futwo-omployee- coutributionsr all prior amortization bases are
considered fully funded.
3 98 - 563.
Agreement Contingencies
This agreement is contingent upon: (1) ratification by the City Commission; (2)
ratification by union membership (AFSCME and CIGU) of this Memorandum of Understanding,
pursuant to the legal requirements for collective bargaining; (3) ratification by the CIGU union
membership of the October 1, 1997 - September 30, 2000, labor agreement and the AFSCME
union membership of the October 1, 1998 - September 30, 2001, labor agreement; (4) ratification
by the Board of Trustees of GESE; (5) approval by the State of Florida -Division of Retirement
as to the legal requirements for f coding; and (6) modification of the Final Judgment in Gates v.
City of Miami by the Circuit Court to conform to the terms of this agreement after notice to the
class of retired employees and hearing.
AGREED to this day of :. 1998, by and between the
respective parties through an authorized representative or representatives of the Associations and
by the City Manager.
ClYi Charlie Cox, President
AFSCME, Local 1907
Q -1
Norman Charles, President
CIGU
i
Louis Johnson, President
City Miami Retirees Association
R. Sue Weller, Labor Relations Officer
City of Miami
Jose Garcia -Pedrosa
City Manager
10 Date
Date
Date
Date
Date
4 9` 56
CITY OF WVI , FLORIDA
TO: Honorable Mayor Joe Carollo and DATE: May 18,1998 FILE!
Members of the City Commission
suajecr : Resettlement and Modification
of Gates V. City of Miami
Flom: Donald H. Warshaw REFERENCES:
City Manager
ENCLOSURES;
REC0.N MENDA:f1QN
It is recommended that the City Commission approve the auachcd Resolµtion ratifying a
Memorandum of Undemanding between the American Federation of State, County, and
Municipal employees (AFSCME), Local 1907 and the City ludepeudent Group Union. (CIGU) to
modify the funding section of the Crates Settlement; modify the cost -of -living adjustments
(COLA); redefine the funding mechanisms and tlic as:nl -valuation methods; modify the pension
benefit multiplier; and to resolve amortization issues by retirement of the Gates Settlement
Schedule B payments eiJfecEive from Fibv.,d Yriu 1999-99 as reflected in the actuarial valuation
report of the General Employees' and Sanitation Employees' Trust (GESE).
BACKGROUND
On May 17, 1998, the American Federation of State, County, and Municipal, (AFSCME), Local
1907 and (he City Iudepend.cnt Croup Union (CIGU1 entered into an agreement to modify certain
provisions of the Judgment in Crates v. City of Miami as related to the General Employees' and
Sanitaduu Employees' Retirement Trust (OF -SE) through a Memorandum of Understanding.
The cf mt of these modifications upon the City's financial condition will be the elimination of a
$ 144 million dollar unfunded liability over the next 10 years and the stabilization of annual
pciusion costs.
In general, the provisions of the Judgment which were modified as a res»lt of the collective
bargaining process are as follows:
• increase the retirement benefit multiplier,
• improve the cost-of-livims adjustments;
• redefine the asset valuation method,
redefine the actuarial cost method,
• redefine certain amortization levels, and
+ eliminate the Gates Settlement Sched7,IP R payments
98- 563
Increase in the Retirement Benefit Multiplier
Effective October 1, 1998, the retirement benefit multiplier w-Ul equal 3% of the member's
average final compensation multiplied by years of creditable service. The 3% retirement benefit
multiplier will apply to members exercising service retirement, rule of 70 retirement, and
ordinary disability retirement As a result of the increase in the retirement benefit multiplier,
certain longevity supplements will be eliminated. The cost of the revised benefit multiplier will
be S3.2 million dollars which will be reflected in the 1999-2000 actuarial valuation report.
Improve the Cost -of -Living Adjustments (COLA:)
Effective October 1, 1998, the COLA percentage will be increased to 411/o of the total benefits not
to exceed a maximum COLA benefit increase of $400 per year_ The cumulative COLA benefit
on a quarterly basis will be eliminated. The cost of the enhanced COLA benefit will be $3.4
million dollars -vvbich will be reflected in the 1999-2000 actuarial valuation report.
Redefine the Asset Valuation Method
s.
The valuation of the GESE Trust's assets have been changed to initiate a new moving market
value averaged over three years begin September 30, 1997. Whereby each year the actuarial
asset value starting with the market value as of October 1, 1998 will be projected forward at the
valuation date based on actual contributions and benefit payments at the assumed interest
assumption.
Redefine the Actuarial Cost Method
The modified aggregate entry age normal cost method will be applied for costs as of October 1,
1998, and each October 1' thereafter, based on demographic and asset data as of the previous
September 30d, adjusted for interest from that date to reflect payment timing.
Redefine Certain Amortization Levels
As of October 1, 1997. any unfunded actuarial acc rued liability "Lu cxucss of the I=kct value of
assets at that date shall be amortized over 30 years as a level dollar amount and as of October 1,
1997, certain amonrization periods will be applied us level dollar amounts. To the extent the
actuarial accrued liability plus normal cost is less tbm the actuarial asset value plus present value
future employee contributions, all prior w urtizatim bases will be considered fully funded.
Ehnalnation of the Schedule B payincxats
As a result of ltia afosemeutioned modifications, the burdensome schedule of fzrture payments to
reduce the unfunded liability which increase at the rate of 5% per year will be eliminated as well
as the associated $144 million dollar Gates unfounded liability. The October 1, 1997, GESE
98- 563
actuarial valuation report will be revised to reflect a City contribution of zero dollars which
results in a savings of $12.7 million dollars for Fiscal Year 1999-99. A copy of Schedule B of
the Gates Settlement is attached.
One of the prerequisites by AFSCI E and CIGU to the Gates Settlement renegotiation was the
negotiation of a new collective -bargaining contract with each union_ The City and CIOU, were
able to reach agreement on a new contract to replace the one that expired on September 30,1997.
The new CIGU contract will rum for three years from October 1, 1997 to September 30, 2000.
The City and Al~SCW were able to reach agreement on a new contract to replace the one
expiring this coming September 30'. The new AFSCME contract will run for three years
beginning October 1, 1998 to September 30, 2001. Attached is a summary of the substantive
changes of the new agreements. The labor agreements are subject to ratification by the
respective union membership and will be presented for City Commission ratification at the .tune
9, 1998 commission meeting.
The Memorandum of Understanding will be subject to approval of the Board of Trustees of the
GESE Trust, approval by the Florida State Division of Retirement, and modification of the
Judgment in Gates Y. _City of Miami by the Circuit Court after notice to the class of retired '
employees.
JGP:I�OGL,
c: R. Sue R,eller, Labor Relations Officer
98- 563
Dipak Parekh
TO Budget Director
Jose Garcia -Pedrosa
CITY OF MIAMI, FLORIDA
INTER -OFFICE MEMORANDUM
May 26, 1998
DATE: FILE
SUBJECT:
Gates Renegotiation
FROM: REFERENCES:
City Manager
ENCLOSURES:
Please review the attached documentation, contact the Labor Relations Officer or any of
the persons who have reviewed this matter (Bob Nachlinger, Jose Rodriguez of KPMG,
or the City's Actuary Ken Kent) and provide me at your earliest convenience with an
analysis and any comments that you may have concerning the budgetary implications of
the renegotiation of the Gates' settlement with AFSCME AND CIGU. It is my
intention to include your report in the next agenda, which will be distributed in advance
of the normal five day rule.
Thank you.
JGP:rr
encls.
c: Christina Cuervo, Assistant City Manager
Joe Pinon, Assistant City Manager
Sue Weller, Labor Relations Officer
98- 563
CITY OF MIAMI, FLORIDA
INTER -OFFICE MEMORANDUM
Honorable Mayor and May 22, 1998
TO GATE : FILE
City Commissioners
SUBJECT:
Renegotiation of
Gates Settlement
FROM: Jose Garcia -Pedrosa REFERENCES: With AFSCME and CIGU
City Manager
ENCLOSURES:
As I indicated to you in my memorandum of May 18th, announcing the captioned
matter, I requested separate analyses and reports from our Financial Consultant,
Robert J. Nachlinger, C.P.A.; from our actuary, Ken Kent of William M. Mercer in
Washington, D.C.; and from our outside auditors, KPMG Peat Marwick.
Attached please find those three reports.
This matter appears on your Agenda for Tuesday, but I have been advised by
the Mayor's office that the Mayor wishes to have this item taken up at your June
9th meeting instead of on Tuesday.
Thank you.
JGP:rr
encls.
c: Joe Pinon, Assistant City Manager
Christina Cuervo, Assistant City Manager
Sue Weller, Labor Relations Officer
Dipak Parekh, Budget Director
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98- 563
I 1 1 J : K 15"LOF 1 NANCE TEL _�C: V808 p02
r,
May 21,1998
Jose Garcia -Pedrosa
Miatni City Mansear
P. a. Box 330709
Mimi, F1 33233-0708
Re: Gates Can Settlement
AFSCME and CIGU contracts
Dear Jose:
you have ask me to review and analyze the Gates Case Settlement with AFSCME and
CIOU along wide the labor contracts with these two unions. It has been my pleasure to do
so and my analysis is presented below.
The settlement of the liability of the City to the General Employees and Sanitation
Employees Retirement Sy@tem (" OESF) resulting from the litigation known as the Gates
Can eliminates the requirement of $144,700,000 in payments over the next ten years.
This smoa,tnt is partially offset by the increase in benefits of $3,244,000 annually for the
increase to the 3% benefit rate and $3,420,000 for the increase in the annual Cult of
Living Allowance ("COLA") The difference in these two stems of payuCnts over the
next ten years results in a savings of $84,724,W0 to the City. The present value of these
savings is $96,500,941 for the Gates Case payments and $58,150,611 for the difference
in costs.
The S58,150,611 is the minimum savings that will result from this settlement_ Since the
City will benefit firm the w4uacial gains in the GESE plan, if salaries do not increase
more tfisn 6% and muings on the assets we in excess of 8.1 s/n, there will be gains which
will result in additional savings to the City. The amount of the potential savings could
egwd the savings of $144,700,000 or a present value of $96,500,941 of the Oates Case
paynus►ts.
The reason for the likely amount of the savings to be much higher than the net difference
in the payments is because of the effect of this change on the actuarial valuation of the
GENE plan. By using the market value of the assets, the plan becomes overfunded by $5
million. This means that if no new employees are added and the salaries go up at a rate of
6% annually and the fimd earns 8.1 % annually, there is $5 milliuu wore than enough
already available to fund existing anticipated benefits for curmat employecs without the
City adding any additional money to the plan. Sinw the proposed labor agreements call
for COLA wage increases of 0'/% 20A, atal 2% respectively over the next three yearn,
there will be signif cant actuarial gains in the coat side of the pe"nn system.
Additionally, the stock mud bond markets have already produced a dniNe digit return for
the pandoa system in the first six months which will also produce actuarial gains for the
plats. The cost reductions resulting from these gains should be added to the $84,724,000
1 98- 563
-cc- vo r R 1 1 r : Lb 1 V : " I5 i LW I NRNr-E TEL NO: 4808 P03
E
(present value W,150.611) in cost differences in arriving at the true savings to the City
t as a r ilt of this settlement.
As to tba labor agrements with AFSCME and CIOU, the negotiated COLA agreement of
4% over the next three years is significant in that it is in agreement with the projections in
to FIVE YEAR RECOVERY PLAN for the City. Additionally, it is significant because
other local labor agreements that I have sea recently negotiated W for COLA incavasoa
of up to 13% over the seine time period. The provision in the coo aweemcnt which
allows the Ulty to outsource collection of garbaw is a major accompliahmcat for the
Uty's ablllty to provide s VkW 6u rWidWb In the most cost effective manner.
In suuurmy, the combination of the settlement of the Grates Cage liability and the
wgotiaettion of dwso three years agreements with AFSCME and CTM t have provided the
City with the ability to control its labor costs PA significantly reduce retirement costs.
This is an aeec®plisbmmt that wilt drmnatieally imprm the City's Snaneial recovery. I
would wggew that this ikon be communicated as soon as approved to both
MoMdy's Investor Services and the Standard and Poor's Corp. as both of these agencies
raised concerns about the future negotiations with the City's unionized employees. This
evert may be wough, along wide all of the other progress that you have accomplished,
for Ow rating agencies to restore the investment grads to the City's bonded debt.
Sincerely;
& 7. Nachlb*a
Consultewt to the City
1 98- 563
r uI . r r< i 1 r : ro 1 L : h'M ; UW 1 PIHM-L TEL NO: #9W PO4
City of Miami
T Actuai and Present value ftvhps Comparison
Required Galles
Coat of
Difference
Present Value
Present Value
i�
MMS ISOR
Ghanaas
In
Oates po me it
Diftbrenoe in Cost
1998
12,700,000
12,700,000
90,600,941
68,160,611
1000
13,300,000
8,084,000
818381000
84,762,580
48,402,230
2000
14,000.000
6,054,000
7,336.000
73.371,040
40,723.451
2001
14,700,000
6,664,000
Q,036,000
02,286,203
29,305,029
2002
15,400.000
8,684,000
6,736,000
51,523,190
29,031,171
2003
18,200,000
5,054,000
d,bm,UUU
41,090,507
23.113,045
2004
17,000,000
0,004,000
10,336,000
30,935,301
17,137,025
2005
17,900,000
8,884,000
11,236,000
21,093,099
11.145,013
2008
18,800.000
6.064,000
12,136,000
11,483.824
5.119.332
2007
4, 700,000
6,664,000
-1.964.000
2,156,954
(901,331)
144,700,000 59,978.000 84,724,000
f:
i
r.
} City of Miami
Eftot of Chan6ss on Actuarial Valuation
Gen" Employees and Sanitation Employees Retirement b'ystsm
Proso t Vslas of Aawnwkftd Bensltls $376.000.000
Pnl+ w* Value of Future BenefRs 181
Row t Yaks of Current Employees Benefits - Current 8 Future 556,000,000
Low
Present Value of Futuro Emplayse Contributions 58.00D.000
PAgdmd Gb Funding 600,000,000
AOtAft Value of Assets bKow
C
Unfunded Usb ft of ft City (5,000,
. A.
,'1 1 98- 563
L- t ( , I' a" v v lv—m i a« r cX • JUJµ 101711.
may 22 326 lb : C4 P. 02/03
w+LLIA M.
Via Fox
May 22, 1998
Mr. lose Garda•Pednm
City Manager
City of Miami
PO Box 330708
Miami, n 33233-0708
Dear Mr. Garda• -Pedrosa:
I rend the teams of the Meawmadwm of Undenundins, communicated a couple of
cbatiges to chrlt�y Drs tortes to sue �iVella �d beliuwe u this tone it -presema the
objective: of the City and City employees covered by the plan and pat► to the
Gates setden e"
The coat estimates for the two benefits provided in the Memorsadutri of: -
' RePucinB the two tier bone& accrual rare with 3% .
• Enhuwfng COU bandb to a 4% incrum In bone& per year to a maldmum
ware dit tmbnAd based on rise Octobw 11,1997 va2uatbn. Tbass ba2aft b"c an
esdmted cost of sPps+oa lnwWp s7,000,= and wdt not be Raelized until the
October 2,1998 Vsluatioa At.d3at tim aW=i COW WE also reflect what to date
are favamble investment retw= and iower taw hcgwcted (vakadon assumes 6%
salary scale) salary bwreases. . -
Here for clariflcatbn, Is a suu=wy of fire $nsadal impact to the City of this
Mamomad= as I uadessd-ad It.
Item aw stead CAA (COW NO �swesse
Before Memorandum Sepdamber 30,1999 6 23.073,3M --
Septembw 30, 2000 13,690 945 —
After Memorandum September N, 19" f 0 3 CiS,07y,90ttj .
September 30, 2000 i 6,669.w 3 (7,026.845)
w„lieen M, a+w►ur, tnaomormo "tone 202 7S0 SM
one t, uMIS Centre PRX W2 n1 04"
1120 20M straw. NW
sukc m
WmtA,ngton. DC -V=
�f.
9, 87 563.
... ,„ —'. r aA•JVJN1V17111 may tl "� 1b:C4 P.03/03
W L !AM M.
MEK...._--...-- -_—
Mr. lose Garcia -Pedrosa
May 22. 7 M
Page 2
The :�lemoran►dutn Also addresses dismissing the required Payment Schedule B and
imPlaa�enting a Aaw fundLng nw&od and wxvtW saw valuation method to
identify du City's future financial responsibility to maintaining a sound retirement
system.
'The financial impact on the retirement system due to the agreement on zaoss-oho-
board percentage k=caara of 0-2-2% will, I aasum, Ix hiftgmted with the
merit kwoevity step increases. Overall, if these pay components are Im than 6%
Qmually, the s+adnmww spsam will a dos that wilt grzduatly reduce
pure oast. ,
I cannot Address the financial impact of privxtlsadon of soM waste opeationa.
However, these axe some issues that sbauld be end regitditsg b for
Brost City employees that am afl�etzed by this inu aloe. if only current vemed
benefits Are seccued or 9 all bene8ts'eatned to date of prlvat3=ti= an v+estied, the ,
waded woos of the systiem is Dada sa altevv for these pa:ddoes �
benefits to be payable when they 01heca+lse eligible to retire vigb=
hAving to purrimae amp. _
In broader t�e�arxs, the ac d= %rood. to under the Maaoonduaz of Underst�aading
returns die CWs flasneW t"Poolu ty to Awd bewflts under the Gamal
0y �A��d ' Retirementftawn to A i7t30L+C ��pl�,�At
oppnmLeh
Sincerely,
Kensteth A. Kent, FSA, FCA
KAKxk
MrCzx&IY=
q$- 563
CITY OF MIAMI, FLORIDA
INTER -OFFICE MEMORANDUM
TO:
Jose Garcia -Pedrosa
City Manager
4tADipak M. Parekh, DirectorFRonn: Office of Budget and Manage alysis
DATE:
May 29, 1998
SUBJECT:
Re -negotiation of Gates Case
and New Labor Contracts
REFERENCES: Memos dated May 26, 1998
ENCLOSURES: Four
FILE :
Please refer to your two memorandums dated May 26, 1998 in which you requested analyses and my
comments on the Gates Case settlement re -negotiation and the draft of the collective bargaining agreements
with the American Federation of State, County and Municipal Employees (AFSCME) Local 1907 and City
Independent Group Union (CIGU).
I have reviewed the proposed agreements and my comments are noted below.
As you are aware, the liability of the Gates Case settlement, as of October 1, 1998, stands at $144.7 million in
payments over the next ten years. The savings associated with the re -negotiation of the Gates Case
settlement have been partially offset by the increase in the pension multiplier to 3% at a cost of $3.244 million
annually and other additional increases that amount to $3.420 million annually, plus interest, for a yearly total of
$6,857,256.
The City shall save $66,177,132 over the next ten years, or in present value (PV) terms, a savings of
$48,483,715. Please note that the savings associated with the Gates Case settlement are tied together with
the costs of the collective bargaining agreements for AFSCME and CIGU.
The pension and negotiated labor costs, as well as the projected savings for the next ten years, are noted
below:
Gates Case Incremental AFSCME CIGU Savings
Settlement Pension Cost 10 year Cost 10 Year Cost Difference
Cost $144,700,000 (61,715,304) (15,517,807) (1,289,757) $66,177,132
Present Value $101,338,743 (41,669,536) (10,298,380) (887,112) $48,483,715
Our assumptions are based on the continuance of present day trends. The City's Pension plan is a Defined
Benefits Plan, which means that the investment risk rests with the City of Miami. The City's Pension Plans and
the City have benefited from extraordinary earnings realized on invested pension assets. As long as earnings
on pension assets remain high, there will be the possibility of gains that could result in additional savings to the
City that cannot be currently quantified.
The financial impact of other parts of the Labor Agreement could result in future savings to the City and its
residents. The Solid Waste privatization clause adds flexibility to the City's long range operational plan and
allows for the optimal solid waste collection option to be selected at the end of the CIGU contract.
Please see the attached enclosures for additional details.
DP/af
98- 563
Savings Analysis
of the
Re -negotiated Gates Case and New Labor Contracts
Description Actual Cost Present Value
Gates Case $ 144,700,000 $ 101,338,743
Less:
Additional Pension Costs3
AFSCME Costs4
CIGU Costs5
Total Costs
Savings
(61,715,304)
(15,517,807)
(41,669, 536)
(10,298,380)
(1,289,757) (887,112)
$ (78,522,868) $ (52,855,028)
$ 66,177,132 $ 48,483,715
% of Savings over Gates Case 45.73% 47.84%
Assumptions:
Present Value Calculation based upon a rate of 7% - Rate used by GESE Actuarial
2 Based upon Schedule B, with final payment ending in Fiscal Year 2008
3 Increase in Benefit rate to 3% , COLA increases and quarterly contibution payable at interest rate of 2.9%
4 AFSCME Contract Summary costs over Gates Schedule to FY'2008
5 CIGU Contract Summary costs over Gates Schedule to FY'2008
9 8 - r GO
City of Miami General Employees'
and Sanitation Employees'
Retirement Trust
Actuarial Valuation Report
as of
October 1, 1997
i
B W), ISULTA NTS
98 - 563
SCHEDULE OF AMORTIZATION PAYMENTS
TABLE 111b
Schedule B of Attachment E
Final Judgment (5/23/85) in the case of Gates v. City of Miami
Fiscal Year Scheduled
Beginning Amortization Present Value of
October 1 Payment Remaining Payments
1997
$12,100,000
$105,499,854
1998
$12,700,000
$101,338,743
1999
$13,300,000
$96,210,503
2000
$14,000,000
$90,036,795
2001
$14,700,000
$82,627,925
2002
$15,400,000
$73,883,844
2003
$16,200,000
$63,696,400
2004
$17,000,000
$51,843,667
2005
$17,900,000
$38,190,757
2006
$18,800,000
$22,486,843
2007
$4,700,000
$4,565,792
2008
$0
$0
City of Miami General Employees' and
Sanitation Employees' Retirement Trust
Page 8
98- 563
r ax : )UZA1o1:111-� May 22 ' 98 14 : 34 P. 01/01
Pe,.� Marwick LLP
One IIWyn/ Tower Telephone 306 US =0 Telefax 305 67105"
Suite 2900
2 South Biscayne Boulevard
Mhml, FL33V
. 4
May 22, 1999 ->
.V
I& Joss Garcia -Pedrosa, City Mmager
City of Miami
444 SW 2nd Avenue, l Oth Floor
Miami, Florida 33130
Dear Mr. Garcia -Pedrosa:
At your request we have read the terms in the Memorancill= ofUndemtandais
Amendma"t to Gates Settles (tba ".Memoraadnaa'). The proposed pension
modification pertaining to the geneW employees and sedtation employees' retirement
trust asset vahmon and cyst notbod as defined in the Mem+or n&= appear to be
reasonable aerial am mnptioas. Than moons appearto be consistent with the
provisions of Chou l Amounting bta KUmd Board StatmneO No. 25, Blna nckI
Rsporttngfor deled barwftpansio'n pAvu and rote &jcloaartsfor dined contribution
ptam.
If we cen provide you with flnrher assistance on this or any otter matters, plea= do not
hesitate to call me at (305) 789-26D8.
Very UVIY Yom)
KPMG Peat Marwick LLP
Jose' R. R.odngL=
Partner
EELUk9wo" ww[rarwsaw
s
AFSCME Local 1907 Contract Costing Summary
Across the board
$
39,207,289
$
- $
796,261
$ 1,608,735
$
2,404,996
Overtime
$
1,220,891
$
- $
27,296
$
55,147
$
82,443
Banked compensation time
$
236,642
$
- $
4,827
$
9,752
$
14,579
Shift differential
$
82,391
$
- $
-
$
-
$
-
Working out of class
$
46,045
$
- $
919
$
1,857
$
2,776
Longevity's.
-
10 year
$
68,108
$
- $
1,814
$
1,260
$
4,888
year
$
$
- $
-
$
-
$
-
95 year
$
113,230
$
- $
1,945
$
2,232
$
6,122
16 year
$
46,832
$
- $
1,558
$
1,017
$
4,132
20 year
$
79,105_
$
- $
1,178
$
1,735
$
4,090
21 year
$
25,201
$
2,027 $
2,876
$
4,108
$
9,011
Step Increase
_ year
$
-
$
- $
-
$
-
$
-
_ year
$
-
$
- $
-
$
-
$
-
_ year
$
-
$
- $
-
$
-
$
-
- year
$
-
$
- $
-
$
-
$
-
_ year
$
-
$
- $
-
$
-
$
-
_ year
$
-
$
- $
-
$
-
$
-
Other pay
$
_
Sick leave bonus
$
2,600
$
2,500 $
2,500
$
2,500
$
7,500
Emergency vacation pay
$
116,272
$
- $
2,372
$
2,419
$
4,791
Retirement
$
_
Incentive
$
32,677
$
- $
600
$
612
$
1,212
Insurance
Life
$
262,426
$
- $
-
$
-
$
-
Single HMO Medical Only
$
114,264 '
$
- $
-
$
-
$
_
Single HMO Medical & Dental
$
615,850
$
- $
-
$
_
$
-
Family HMO Medical Only
$
19,627 ;
$
- $
-
$
-
$
-
ALR
Office of Labor Relations Reviewed by the
5/29/98 Page 1 Office of Budget and Management Analysis
I
P0
s
AFSCME Local 1907 Contract Costing Summary
Family HMO Medical & dental
$
1,897,043 $
Single PRO Medical Only
$
31,640 ' $
Single PPO Medical & Dental
$
464,897 $
Family PPO Medical Only
$
34,137 $
Family PPO Medical & Dental,
$-
623,650 $
Uniforms and Personal equipment
Safety shoes
$
9,000 $
Shirts
$
27,000 $
Pants
$
$
Caps
$
$
Safety belts
$
- $
Cold weather jacket
$
$
Rubber Boots
$
$
Tool Allowance
$
- $
Plus items
Communication Oper. Train.
$
9,480 $
Revenue Incentive Pay
$
9,599 " $
Garage On Call
$
13,062 $
Tuition Reimbursement
$
3,000 $
Sub Total
FICA
Total
ALR
Office of Labor Relations
5/29198
821 $
1,994
$
3,191
$
6,007
- $
192
$
384
$
576
- $
221
$
446
$
666
15,000 $
15,000
$
15,000
$
45,000
$ 45,410,659 $ 20,348 $ 861,553 $ 1,710,394 $ 2,598,790
$ 3,473,686 $ 409 $ 64,761 $ 129,698 $ 195,365
$ 48,881,345 $ 5,757 $ 911,314 $ 1,825,092 $ 2,749,155
Page 2
Reviewed by the
Office of Budget and Management Analysis
A
CIGU Costing Summary
Across the board
$
6,787,560 $
Overtime
$
318,992 $
Banked compensation time
$
19,330 $
Shift differential
$
17,680 $
Working out of class
$
4,678 $
Longevity's
10 year
$
72,738 $
..._ year
$
15 year
$
51340 $
— year
$
20 year
$
21,616 $
�.. year
$
$
Step Increase
_ year
$
_ $
year
$
$
_ year
$
$
_ year
$
$
_ year
$
$
year
$,
$
Other pay
Wage bonus
$
101,600 $
Sick leave bonus
$
5125 $
Sick leave conversion payoff
$
17,122 $
Emergency vacation pay
$
49998 $
Vehicular accidents
$
7,576 $
Retirement
Incentive
$
8,169 $
ALR
Office of Labor Relations
5/29/98
1
$ 83,684 $ 118,872 $ 286,240
- $
4,825
$
6,226
$
15,876
- $
392
$
400
$
1,185
- $
71
$
97
$
239
- $
1,020
$
1,040
$
2,060
Subject to the approval of the Office of Budget and Management Analysis
I
CIGU Costing Summary
Life
$
48,964
, $
- $
-
$ -
$
-
80% Supplemental WIC _
$
74,744
$
- $
(6,129)
$ -
$
(12,258)
Single Medical & Dental
$
113,781
$
- $
(10,354)
$ -
$
(20,709)
Family Medical & Dental
$
546,176
$
- $
(15,126)
$ -
$
(30,252)
Single Medical Only
$
-
$
- $
-
$ -
$
-
Family Medical Only
$ ;,
$
- $
_
$ -
$
_
Holidays
8 Hours
$;
60,310
$
- $
-
$ -
$
-
10 Hours
$ ,
21,108
$
- $
-
$ -
$
-
20 Hours
$
234,386
, $
- $
-
$ -
$
_
Time pool
$
_
Hours
$
41,120
$
- $
-
$ -
$
-
Uniforms and Personal equipment
Safety shoes
$
19,314
$
- $
-
$ _
$
_
Shirts
$
8,404
$
- $
-
$ -
$
-
Pants
$
8,989
$
- $
-
$ -
$
-
Caps
$
3,370
$
- $
-
$ -
$
-
Safety belts
$
3,611
$
- $
-
$ -
$
-
Cold weather jacket
$
7,866
$
- $
-
$ -
$
_
Rubber Boots
$
$
_ $
_
$ -
$
_
Pius items
Bin route
$
27,408
$
- $
-
$ -
$
-
Temporary Laborer
$
-
$
_ $
_
$ _
$
_
Tuition Reimbursement
$
-
$
- $
3,000
$ 3,000
$
6,000
Sub Total
$
7,702,973
$
- $
61,384
$ 129,635
$
248,382
FICA
Total
ALR
Office of Labor Relations
5/29/98
$ 589,277 $ - $ 4,466 $ 9,688 $ 18,542
$ 8,292,251 $ - $ 62,850 $ 136,323 $ 260,924
2 Subject to the approval of the Office of Budget and Management Analysis