WEDNESDAY, MARCH 2, 2006
A. CALL TO ORDER/ROLL CALL
President Scott Tye called a Workshop Meeting of the Board of Directors of the Stinson Beach County Water
District to order at 5:30 p.m. on Wednesday, March 2, 2006, at the District Office located at 3785 Shoreline
Highway in Stinson Beach, California.
Scott Tye, President
John Gilbert, Director
Joe Veit, Director
Elizabeth Sapanai, Vice President
Jim Zell, Director
Richard Dinges, General Manager/Secretary to the Board
Toby Bisson, Employee Representative
B. PUBLIC EXPRESSION
C. MANAGER'S REPORT
Mr. Dinges stated that FEMA had contacted the District to schedule a walk-through of the District and that Mr.
Allan Richards of Stetson Engineers would be submitting a damage report to the District. Mr. Dinges
distributed the Draft Urban Water Management Plan to the Board Members.
D. SETTING OF AGENDA
The agenda was adopted as presented by Board consensus.
E. GENERAL BUSINESS
Presentation by Mr. Ray Lane of CalPERS Regarding the District Retirement Plan: Mr. Ray Lane stated
that he would be addressing the 19 questions which had been submitted to him by the District. Mr. Lane
addressed the District's fluctuating contribution rate. Mr. Lane stated that the current crisis with the State
contribution was reflected in the increase from 160 million to 2.6 billion in two to three years and clarified that
the contribution is volatile and is tied with the Stock Market. He further stated that the retirement plan is a
defined benefit plan which means that the retiree receives a monthly payment for the rest of their lives based
on a formula which includes the compensation at retirement, the number of years of service, and how old they
are at retirement. A District employee would receive 2% multiplied by the number of years of service
multiplied by the compensation. The compensation is calculated at the average of the highest (not last) 36
Mr. Lane listed variables which contribute to actuarial model calculations and stated that the current earning
assumption is 7 3/4 % and the current Cost of Living assumption is 3%. Director Veit questioned why the
contribution rate was reduced for a five year period when it must have been obvious to the PERS actuarial
that those rates would dramatically increase. Mr. Lane answered that the pension mathematics is based on a
normal cost and an amortization factor related to how well funded the plan is, which is balanced according to
the positive or negative liability for the year. When there is a surplus (negative liability) the contribution rate is
low or negligible.
Mr. Lane further stated that from Fiscal 1995 through 2000 there had been double digit asset earnings, that
PERS had assumed an 8 1/4% asset earnings, and that there was a 15% loss in Fiscal 2001. Mr. Lane stated
that a Rate Stabilization Program was in place to mitigate these contribution fluctuations and that the rolling
ten year average is about 8%. Director Veit stated that the District has concerns because, unlike other
Districts in the pool, it has projected little to no increase in the number of employees. Director Veit further
stated that the District does not benefit by being in the pool and may even possibly be penalized while
participating in the pool. Mr. Lane clarified that two things happened when the District became part of the
pool, the contribution rate was increased and PERS changed their assumptions including the interest rates,
mortality rates, cost of living rates and retirement rates and that the assumptions will be re-evaluated and
changed every five years. Mr. Lane stated that there are no separate accounts for the pooled entities and that
if the District's employees are younger than other pooled Districts, the current normal costs for the District will
be higher than the average in the pool, but those costs will be lowered over the next five years to the pools
normal cost. Director Veit asked where the 2% increase per year of the retirement benefits that the District
contributes will go. Mr. Lane stated that the contribution rate is the same for all pool members excepting the
un-funded liability at the time that you join the plan.
Treasurer Boucke asked how the District's unfunded accrued liability increased from $105,584, to $270,520 in
one year (Fiscal 02 to Fiscal 03), which was the year prior to entering the pool. Mr. Lane explained that when
the District entered the pool it carried the frozen liability with it. Mr. Lane explained that the unfunded accrued
liability is the difference between the assets and the liabilities and only the liabilities changed because of the
changing assumptions so that the difference is leveraged, ie the liabilities themselves went up 6% (actuarial
assumptions and methods over total accrued liability) but the unfunded liability doubled because of the
Treasurer Boucke asked how changing from 2% @ 60 to 2% @ 55 affected the District. Mr. Lane responded
that the accrued liability would have been less if the District had stayed at 2% at 60, but the calculated
increase due to the assumption change would have probably still remained at 6% of that reduced number.
Director Veit stated that the District had absorbed a "triple-whammy" because three events took place at the
same time; the District changed to 2% @ 55 based on a misleading surplus, the PERS asset earnings made
a steep dive, and PERS changed their assumptions.
Mr. Lane stated that although the asset earnings had increased in 2004 and 2005, the contribution rates
would not be lowered just because there had been two good years and that this was part of the Rate
Stabilization Program. Treasurer Boucke stated that not only would the contribution rate not be lowered it
would actually be increased from 12.986% to 13.092% in Fiscal 06-07. Mr. Lane responded that the small
increase was due to an actuarial calculation due to a difference in the value of the actuarial value of assets
and the market value of assets and that a "smoothing out" process was taking place due to three years of
Mr. Lane clarified that the District could terminate the retirement plan by stopping payments for current
employees (not retirees) and paying PERS the amount owed at the date of termination (currently
approximately slightly more than $300,000.). Mr. Lane clarified that the District can not leave the pool and that
the District, as a public agency, can not offer a defined contribution plan due to State law. Mr. Lane stated that
the District could offer a lesser plan to new hires through a "Tier 2 Plan" which can alter the amount of
employee contribution that the District would pay or not pay, but would not reduce the District's costs for a
long time. Mr. Lane clarified that District costs are directly affected by a retiree and if someone becomes
disabled, but that there is a two year lag. Mr. Lane stated that if a retiree buys out their plan, the liability will be
applied but that the payments that the retiree makes (asset) will be applied as they are paid on a yearly basis
for four years. Mr. Lane stated that the employee can cash out only for the 7% employee contribution when
they leave the District.
Mr. Lane clarified that the District can not "buy out" the plan because the State wants to ensure that the
members will receive the benefits that they were promised. Mr. Lane explained the reciprocity program stating
that if retirees from the District go to work at another State agency with PERS, the District's liability will reflect
their current salary (at the time of final retirement) for the number of years that they worked for the District.
Mr. Lane stated that the District can not reverse back to a lesser benefit, as an example after the District went
from 2% @t 60 to 2% @t 55, it can not revert back to 2% @ 60.
Mr. Lane stated that a "side fund" had been created by PERS to counter act pool participants, some of which
had a surplus and some of which had a deficit, in order to level the playing ground.
Mr. Lane stated that he was unsure if a Board member could take the health benefit plan with them when they
retire from the Board. Mr. Lane stated that beginning in the Fiscal year ending in 2010, the District would pay
$100.00 per month for retired employees who take the health plan with them in retirement. Director Veit
stated that the District would have to create some kind of funding plan, which would not be considered
accrued surplus, in order to set aside funds for this health benefit cost. Treasurer Boucke stated that the next
big financial concern would be the health benefit costs. Mr. Lane agreed.
Mr. Lane stated that overall PERS membership was still increasing because the perception is that PERS is
big enough to protect itself. Mr. Lane further reviewed the District's required contribution information as
outlined in the handouts. Mr. Lane stated that the employer contribution rate would remain fairly steady at
13% since PERS was at ground zero, unless there was a 20% loss in assets which would then increase the
contribution rate, or a 20% gain which would reduce the contribution rate. Mr. Lane stated that the District
could lower the contribution rate by paying $325,000. to pay off the side fund and that it could be partially or
wholly paid off at any time. Mr. Lane discussed the historical changes affecting the market place. The Board
thanked Mr. Lane for presenting this information.
F. COMMITTEE REPORTS
Motion to adjourn made by Director Veit, seconded by Director Gilbert, meeting adjourned at 7:25 p.m. by