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.

Directors present:
Scott Tye, President
John Gilbert, Director
Joe Veit, Director

Directors absent:
Elizabeth Sapanai, Vice President
Jim Zell, Director

Treasurer present:
Barbara Boucke

Staff present:
Richard Dinges, General Manager/Secretary to the Board
Toby Bisson, Employee Representative




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.


The agenda was adopted as presented by Board consensus.


  1. 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 month period.
    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 assumption changes.
    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 market losses.
    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.




Motion to adjourn made by Director Veit, seconded by Director Gilbert, meeting adjourned at 7:25 p.m. by unanimous vote.

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