HomeMy WebLinkAbout03 - To Terminate the Joint Exercise of Powers Agreement and Dissolve the Joint Powers Employee Benefit Authority Effective at the End of Fiscal Year 2020-21, June 30, 2021Q �EwPpRT
O
c —
'9
TO:
FROM:
CITY OF
NEWPORT BEACH
City Council Staff Report
November 24, 2020
Agenda Item No. 3
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
Grace K. Leung, City Manager - 949-644-3001,
gleung@newportbeachca.gov
Barbara J. Salvini, Human Resources Director - 949-644-3259,
bsalvini@newportbeachca.gov
PREPARED BY: Barbara J. Salvini, Human Resources Director,
bsalvini@newportbeachca.gov
PHONE: 949-644-3259
TITLE: Resolution No. 2020-97: To Terminate the Joint Exercise of Powers
Agreement and Dissolve the Joint Powers Employee Benefit
Authority Effective at the End of Fiscal Year 2020-21, June 30, 2021
ABSTRACT:
In 1987, the cities of Costa Mesa and Newport Beach entered into a Joint Exercise of
Powers Agreement (Agreement) to create the Joint Powers Employee Benefit Authority
(JPEBA). In 1988, the JPEBA established a Medical Premium Retirement Benefit Plan
(the Plan). The purpose of the Plan was to foster employee retention and morale by
providing participants with the ability to defer compensation to fund post-retirement
medical coverage premium costs. The City of Garden Grove joined as a member of the
JPEBA in 1991 and participated in the Plan as well. Due to regulatory changes in the
Internal Revenue Code, the City closed contributions to the Plan effective January 1, 2005
and grandfathered any amounts deferred, earned or invested on or before December 31,
2004. Presently, all Plan funds have been paid to the Plan participants and there are no
Plan assets held by the City. The cities of Newport Beach, Costa Mesa and Garden Grove
all wish to officially terminate the Agreement and dissolve the JPEBA effective June 30,
2021. Pursuant to the terms of the 1987 JPEBA Agreement, a resolution must be passed
to terminate the Agreement and dissolve the JPEBA.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Adopt Resolution No. 2020-97, A Resolution of the City Council of the City of Newport
Beach, California, to Terminate the Joint Exercise of Powers Agreement and Dissolve
the Joint Powers Employee Benefit Authority Effective at the End of Fiscal Year 2020-
21, June 30, 2021.
3-1
Resolution No. 2020-97: To Terminate the Joint Exercise of Powers Agreement and
Dissolve the Joint Powers Employee Benefit Authority Effective at the
End of Fiscal Year 2020-21, June 30, 2021
November 24, 2020
Page 2
FUNDING REQUIREMENTS:
There is no fiscal impact related to this item.
DISCUSSION:
On November 23, 1987, the City Council approved Resolution 87-167 which authorized
the City to enter into a Joint Exercise of Powers Agreement (Agreement) with the City of
Costa Mesa to create a Joint Powers Employee Benefit Authority (JPEBA). Effective
January 1, 1988, the JPEBA established the Medical Premium Retirement Benefit Plan
(the Plan), the purpose of which was to promote employee retention and morale by
providing the ability to defer compensation to a fund which would be accessed by
employees after they retired to cover post-retirement medical coverage premium costs.
On June 18, 1991 the City of Garden Grove joined JPEBA and also participated in the
Plan.
Section 409A was added to the Internal Revenue Code effective January 1, 2005,
imposing new regulations on nonqualified deferred compensation after December 31,
2004. Based on these regulatory changes, the City closed contributions to the Plan
effective January 1, 2005 and permissibly grandfathered any amounts deferred, earned
or invested on or before December 31, 2004 under the law applicable to deferred
compensation before the enactment of 409A. Presently, all the grandfathered amounts
have been distributed to the Plan participants and there are no Plan assets held by the
City.
Section 17.01 of the Agreement sets forth the procedure for terminating the Agreement
in pertinent part as follows:
The governing bodies of the Members may determine that the public
interest will not be served by the continuance of this Agreement. If
within any one hundred twenty (120) day period the governing bodies
of three quarters (3/4) or more of the Members adopt a Resolution of
Termination, then this Agreement shall be terminated effective at the
end of the fiscal year specified by such Parties at the time of voting....
The governing bodies of the Cities of Costa Mesa and Garden Grove will be presented
with resolutions for termination of the Agreement on December 8, 2020 and December
15, 2020 respectively. Due to the fact there are no more Plan assets and the other
members of the JPEBA will formally be terminating the Agreement, it is recommended
the City Council adopt the attached Resolution to formally terminate the Agreement and
dissolve the Authority effective at the end of Fiscal Year 2020-21 on June 30, 2021.
3-2
Resolution No. 2020-97: To Terminate the Joint Exercise of Powers Agreement and
Dissolve the Joint Powers Employee Benefit Authority Effective at the
End of Fiscal Year 2020-21, June 30, 2021
November 24, 2020
Page 3
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A — Resolution No. 2020-97
3-3
ATTACHMENT A
RESOLUTION NO. 2020- 97
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, TO TERMINATE
THE JOINT EXERCISE OF POWERS AGREEMENT AND
DISSOLVE THE JOINT POWERS EMPLOYEE BENEFIT
AUTHORITY EFFECTIVE AT THE END OF FISCAL YEAR
2020-21, JUNE 30, 2021
WHEREAS, in November 1987, the City Council of the City of Costa Mesa and the
City Council of the City of Newport Beach adopted resolutions (Resolution Nos. 87-107
and 87-167, respectively) authorizing them to execute a Joint Exercise of Powers
Agreement ("Agreement") creating the Joint Powers Employee Benefit Authority
("JPEBA") to establish, manage, operate and maintain employee benefit programs;
WHEREAS, effective January 1, 1988, the JPEBA established the Medical
Premium Retirement Benefit Plan (the "Plan"), the purpose of which was to promote
retention and employee morale by providing the ability to defer compensation to fund
post-retirement medical coverage premium costs;
WHEREAS, on June 18, 1991, the City Council of the City of Garden Grove
adopted Resolution No. 7380-91, authorizing the addition of the City of Garden Grove as
a party to the Agreement including participation in the Plan;
WHEREAS, effective January 1, 2005, Section 409A was added to the United
States Internal Revenue Code of 1986 and imposed new regulations on nonqualified
deferred compensation plans after December 31, 2004; and
WHEREAS, effective January 1, 2005, the Plan was bifurcated as follows: with all
amounts deferred, earned and invested on or before December 31, 2004 being
grandfathered ("Grandfathered Amounts") under the law applicable to deferred
compensation before the enactment of Section 409A, and all amounts deferred, earned
and invested after December 31, 2004, regulated under Section 409A ("409A Amounts");
WHEREAS, the cities of Newport Beach and Costa Mesa discontinued further
contributions to the Plan effective January 1, 2005, with the City of Garden Grove ceasing
future contributions to the Plan effective December 31, 2006;
WHEREAS, the City of Newport Beach distributed final reimbursements (assets)
to participants in March 2007, and with no further carryforward balance, the Plan fund
closed;
WHEREAS, Section 17.01 of the Agreement provides that the governing bodies
of the JPEBA members may determine that the public interest will not be served by
continuance of the Agreement;
3-4
Resolution No. 2020 -
Page 2 of 3
WHEREAS, Section 17.01 further provides that if the governing bodies of at least
three-quarters (3/4) of the JPEBA members adopt a Resolution of Termination within any
120 -day period, then the Agreement shall be terminated at the end of the fiscal year,
defined by the Agreement as ending on June 30 of each year;
WHEREAS, the Newport Beach City Council has determined that the public
interest will not be served by continuing the Agreement and desires to adopt this
resolution to terminate the Agreement and dissolve the JPEBA; and
WHEREAS, the governing authorities for the Cities of Garden Grove and Costa
Mesa will be presented with similar resolutions to terminate the Agreement on December
8, 2020 and December 15, 2020, respectively.
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
Section 1: That the Agreement should be terminated and the JPEBA dissolved
effective at the end of Fiscal Year 2020-2021, June 30, 2021.
Section 2: The City Manager or her designee is authorized to take all steps
necessary to dissolve the JPEBA, including but not limited to execution of any and all
documents required to dissolve the JPEBA.
Section 3: The recitals provided in this resolution are true and correct and are
incorporated into the operative part of this resolution.
Section 4: If any section, subsection, sentence, clause or phrase of this
resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not
affect the validity or constitutionality of the remaining portions of this resolution. The City
Council hereby declares that it would have passed this resolution, and each section,
subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 5: The City Council finds the adoption of this resolution is not subject to
the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the
activity will not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378)
of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3,
because it has no potential for resulting in physical change to the environment, directly or
indirectly.
3-5
Resolution No. 2020 -
Page 3 of 3
Section 6: This resolution shall take effect immediately upon its adoption by the
City Council, and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 24th day of November 2020.
Will O'Neill
Mayor
Leilani 1. Brown
City Clerk
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Aaron C. Harp
City Attorney
3-6