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Home My WebLink About12 - Side Letter Agreement with the Newport Beach City Employees Association Related to CaIPERS Pension DeductionsQ �EwPpRT CITY OF s NEWPORT BEACH `q44:09 City Council Staff Report September 23, 2025 Agenda Item No. 12 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Grace K. Leung, City Manager - 949-644-3001, gleung@newportbeachca.gov PREPARED BY: Tara Finnigan, Assistant City Manager / Acting Human Resources Director - 949-644-3035, tinnigan@newportbeachca.gov TITLE: Resolution No. 2025-63: Approving a Side Letter Agreement with the Newport Beach City Employees Association Related to CaIPERS Pension Deductions In November 2021, the City Council approved a memorandum of understanding (MOU) between the City of Newport Beach and the Newport Beach City Employees Association (NBCEA). The MOU expires December 31, 2025. At the City Council's direction, City and NBCEA representatives have been meeting to negotiate the terms and conditions of a new agreement. The negotiations are ongoing, but a Tentative Agreement has been reached regarding California Public Employee Retirement System (CaIPERS) pension contributions. Should the City Council adopt Resolution No. 2025-63, the NBCEA members' pension deductions would be reduced and brought into alignment with the City's other miscellaneous employee groups. RECOMMENDATIONS: 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; b) Adopt Resolution No. 2025-63, A Resolution of the City Council of the City of Newport Beach, California, Approving A Side Letter of Agreement Between the City of Newport Beach and the Newport Beach City Employees Association Related to CaIPERS Pension Deductions, and c) Approve Budget Amendment No. 26-027 to appropriate $283,181.03 in increased expenditures to various City division benefit accounts, funded from unappropriated balances of the General Fund and the Water Enterprise Fund. DISCUSSION: The CEA represents just under 100 miscellaneous positions in administrative support, finance, library services and recreational services occupations and is affiliated with the Laborers' International Union of North America (LIUNA). City staff members, CEA members, and the association's labor representatives, are engaged in ongoing negotiations over a successor MOU. A Tentative Agreement has been reached to reduce NBCEA members' CaIPERS pension retirement contributions. 12-1 Resolution No. 2025-63: Approving a Side Letter Agreement with the Newport Beach City Employees Association Related to CalPERS Pension Deductions September 23, 2025 Page 2 Under the MOU, employees contributed 13% of "pensionable" compensation toward their CalPERS pension costs. In September 2024, the City Council approved a temporary 1.5% reduction in NBCEA employees' CalPERS contributions. The reduction is due to sunset at the end of December 2025. The proposed side letter agreement between the City and NBCEA (Exhibit A to Attachment A), would align the association with other City miscellaneous groups in terms of members' retirement contributions. If approved, NBCEA members' retirement contributions would be as follows: Tiers I & II — 8% of compensation earnable Tier III — 8% of pensionable compensation or half the normal cost, whichever is higher Should the City Council adopt Resolution No. 2025-63, the changes would be implemented as soon as practicable. FISCAL IMPACT: The proposed budget amendment appropriates the estimated cost of implementing this side letter for the remainder of Fiscal Year 2025-26, totaling $283,181.03. Approximately 98% of the cost will be funded by the General Fund and 2% by the Water Enterprise Fund. The full annualized cost is estimated at $365,233, with costs in subsequent years to be addressed through the annual budget preparation process. 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). ATTACHMENTS: Attachment A — Resolution No. 2025-63 Attachment B — Budget Amendment No. 26-027 12-2 ATTACHMENT A RESOLUTION NO. 2025- 63 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, APPROVING A SIDE LETTER OF AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH AND THE NEWPORT BEACH CITY EMPLOYEES ASSOCIATION RELATED TO CALPERS PENSION DEDUCTIONS WHEREAS, the City Council of the City of Newport Beach ("City Council") previously adopted Resolution No. 2001-50, the "Employer -Employee Relations Resolution," pursuant to authority contained in the Meyers-Milias-Brown Act, Government Code 3500, et seq; WHEREAS, the City of Newport Beach ("City") promotes effective communication and collaborative working relationships with its employees to foster improved relations while balancing good management practices; WHEREAS, on November 16, 2021, the City Council adopted Resolution No. 2021-109 approving a Memorandum of Understanding ("Memorandum of Understanding") with the Newport Beach City Employees Association ("NBCEA"), a recognized organization, with a term of January 1, 2022, through December 31, 2025; and WHEREAS, the City Council desires to enter into a Side Letter of Agreement between the City and NBCEA to bring NBCEA in alignment with other miscellaneous groups related to CalPERS pension deductions as set forth in Exhibit A. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The City Council does hereby approve and authorize the Mayor to execute the Side Letter of Agreement attached hereto as Exhibit A, which is incorporated herein by this reference. The terms referenced in the attached Side Letter of Agreement shall prevail over any previously adopted terms within the Memoranda of Understanding that conflict herewith. Section 2: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. Section 3: 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 12-3 Resolution No. 2025- Page 2 of 2 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 4: 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. Section 5: 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 23rd day of September, 2025. Joe Stapleton Mayor ATTEST: Molly Perry Interim City Clerk APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE C. `1 CZ -- Aaron C. Harp City Attorney Attachment(s): Exhibit A: Side Letter of Agreement between the City and NBCEA 12-4 SIDE LETTER OF AGREEMENT BETWEEN CITY OF NEWPORT BEACH AND THE NEWPORT BEACH CITY EMPLOYEES ASSOCIATION This Side Letter of Agreement ("Agreement") is made and entered into this 23rd day of September 2025, by and between the City of Newport Beach ("City") and the Newport Beach City Employees Association ("Association") (collectively "Parties") with respect to the following: WHEREAS, the current Memorandum of Understanding ("MOU") between the Parties has a term of January 1, 2022, through December 31, 2025; WHEREAS, the Parties are currently engaged in ongoing negotiations over a successor MOU; WHEREAS, the Parties reached a Tentative Agreement ("TA") to reduce the employee contributions to CalPERS for retirement benefits provided in MOU Section 4.13.2 (Employee Contributions); WHEREAS, the Parties now wish to amend MOU Section 4.13.2 and implement the reduced employee contributions to CalPERS before the current MOU expires; WHEREAS, the Parties will continue negotiations over the successor MOU; and WHEREAS, this Agreement will not have the effect of an agreement, and will not be binding on either Party, until it is approved by the City Council. NOW, THEREFORE, it is mutually agreed between the Parties to amend MOU Section 4.13.2 as set forth below. Except as expressly modified herein, all other provisions, terms, and covenants set forth in the MOU shall remain unchanged and shall be in full force and effect. SECTION 4. FRINGE BENEFITS D. Retirement Benefit 2. Employee Contributions The Association has agreed to share in the rising cost of pension obligations. Under the terms of this MOU, unit members will contribute additional amounts toward the CalPERS retirement benefit depending on their tier, to the extent permissible by law. Should any provision be deemed invalid, the City and Association agree to meet for the purpose of renegotiating employee retirement contributions. Employee retirement contributions that are in addition to the normal CalPERS Member Contribution (of 7% or 8%) shall be calculated on base pay, special pays, and other pays normally reported as "PERSable" compensation and will be made on a pre-tax basis through 12-5 payroll deduction, to the extent allowable by law. It is recognized that these payments will not be reported to CalPERS as contributions toward either the Member or Employer rate, as provided under Government Code Section 20516(f). Tier I Employees - shall contribute a total employee contribution of eight percent (8%) (member contribution). Tier II Employees - shall contribute a total employee contribution of eight percent (8%) as follows: seven percent (7%) of compensation earnable (member contribution) and one percent (1 %) of compensation earnable as cost sharing per Government Code section 20516(f). Tier III Employees - The minimum statutory employee contribution for employees in Tier III is subject to the provisions of PEPRA and equals 50% of the "total normal cost". Tier III employees shall make an additional contribution of pensionable compensation toward retirement pursuant to Government Code Section 20516(f), such that the total employee contribution equals no less than eight percent (8%) of pensionable compensation (i.e., the greater of 8% of pensionable compensation or 50% of the "total normal cost"). The City contracts with Ca1PERS for the 4th Level 1959 Survivors Insurance Benefit, $500 Lump Sum Death Benefit, Sick Leave Credit, Military Service Credit, 2% Cost of Living Adjustment and the pre -retirement option settlement 2 death benefit (Government Code Section 21548). Signatures on the next page 12-6 Executed this23rdday of September 2025 FOR THE NEWPORT BEACH CITY EMPLOYEES ASSOCIATION: Mariah Stinson, NBCEA President FOR THE CITY OF NEWPORT BEACH: 1'E Joe Stapleton, Mayor of Newport Beach CITY OF NEWPORT BEACH APPROVED S�TO FORM: BY: Aaron C. Harp, City Attorney ATTEST: BY: Molly McLaughlin Perry, Interim City Clerk 12-7 ATTACHMENT B City of Newport Beach BUDGET AMENDMENT 2025-26 Department: Human Resources Requestor: Barbara Salvini ❑ CITY MANAGER'S APPROVAL ONLY O COUNCIL APPROVAL REQUIRED ONETIME: ❑Yes KNo City Clerk: Finance Director: Budget Manager: increase expenditure appropriations to fund the approved side letter Fund # 0 BA#: 26-027 Date Date q Date 9 with City Employees Association (CEA) for FY 2025- ❑ from existing budget appropriations ❑ from additional estimated revenues ❑� from unappropriated fund balance Subtotal Increase or Fund # Org Object Project Description Increase or (Decrease) 5 010 01010005 722001 CITY CLERK ADMIN - PENSION EE NORMAL COST MISC 425.41 010 01025005 722001 HUMAN RESOURCES - PENSION EE NORMAL COST MISC 119.82 010 01030005 722001 FINANCE ADMIN - PENSION EE NORMAL COST MISC 133.98 010 01030302 722001 FINANCIAL REPORTING - PENSION EE NORMAL COST MISC 518.46 010 01030304 722001 PURCHASING - PENSION EE NORMAL COST MISC 1,040.77 010 0103031 722001 REVENUE SERVICES - PENSION EE NORMAL COST MISC 1,953.50 010 01040005 722001 FIRE ADMINISTRATION - PENSION EE NORMAL COST MISC 264.28 010 01040404 722001 EMERGENCY MEDICAL SERVICES - PENSION EE NORMAL COST MISC 79.08 010 0104040S 722001 JUNIOR LIFEGUARDS - PENSION EE NORMAL COST MISC 136.58 010 01040406 722001 LIFEGUARD OPERATIONS - PENSION EE NORMAL COST MISC 198.19 010 01050005 722001 CDD ADMIN - PENSION EE NORMAL COST MISC 679.53 010 0105041 722001 INSPECTIONS - PENSION EE NORMAL COST MISC 134.26 010 0105042 722001 PLAN CHECKS/PERMITS - PENSION EE NORMAL COST MISC 134.26 010 01050501 722001 PLANNING - PENSION EE NORMAL COST MISC 268.60 010 01060005 722001 LIBRARY ADMIN - PENSION EE NORMAL COST MISC 1,364.44 010 0106021 722001 CDM BRANCH LIBRARY - PENSION EE NORMAL COST MISC 353.93 010 0106022 722001 MARINERS BRANCH LIBRARY - PENSION EE NORMAL COST MISC 1,301.69 010 0106023 722001 CENTRAL LIBRARY- PENSION EE NORMAL COST MISC 2,850.92 010 0106024 722001 BALBOA BRANCH LIBRARY - PENSION EE NORMAL COST MISC 291.95 010 01060601 722001 TECHNICAL PROCESSING - PENSION EE NORMAL COST MISC 538.64 010 01070005 722001 RECREATION ADMIN - PENSION EE NORMAL COST MISC 468.95 010 0107010 722001 PROGRAM SUPPORT - PENSION EE NORMAL COST MISC 1,657.66 010 0107012 722001 ADULT SPORTS - PENSION EE NORMAL COST MISC 165.41 010 0107014 722001 YOUTH PROGRAMS - PENSION EE NORMAL COST MISC 148.95 010 0107018 722001 PARK PATROL - PENSION EE NORMAL COST MISC 340.02 010 0107020 722001 NEWPORTCOASTCOMMUNITYCENTER- PENSIONEENORMALCOSTMISC 248.64 010 0107021 722001 COMMUNITY YOUTH CENTER - PENSION EE NORMAL COST MISC 139.61 010 0107022 722001 CIVIC CENTER RENTALS - PENSION EE NORMAL COST MISC 140.59 010 0107023 722001 MARINA PARK - PENSION EE NORMAL COST MISC 266.63 010 0107031 722001 OASIS - PENSION EE NORMAL COST MISC 1,101.59 010 0107032 722001 OASIS FITNESS CENTER - PENSION EE NORMAL COST MISC 176.86 010 0107033 722001 OASIS TRANSPORTATION - PENSION EE NORMAL COST MISC 371.07 010 01080005 722001 PUBLIC WORKS ADMIN - PENSION EE NORMAL COST MISC 962.81 701 7019052 722001 WATER SYSTEM SERVICE - PENSION EE NORMAL COST MISC 420.81 010 01010005 723002 CITY CLERK ADMIN - PENSION ER NORMAL COST MISC 423.48 010 01025005 723002 HUMAN RESOURCES - PENSION ER NORMAL COST MISC 162.43 010 01030005 723002 FINANCE ADMIN - PENSION ER NORMAL COST MISC 181.62 010 01030302 723002 FINANCIAL REPORTING - PENSION ER NORMAL COST MISC 702.85 010 01030304 723002 PURCHASING - PENSION ER NORMAL COST MISC 947.60 010 0103031 723002 REVENUE SERVICES - PENSION ER NORMAL COST MISC 2,078.11 010 01040005 723002 FIRE ADMINISTRATION - PENSION ER NORMAL COST MISC 358.27 010 01040404 723002 EMERGENCY MEDICAL SERVICES - PENSION ER NORMAL COST MISC 107.21 12-8 Fund # Org Object Project Description Increase or (Decrease) $ 010 01040405 723002 JUNIOR LIFEGUARDS - PENSION ER NORMAL COST MISC 18S.16 010 01040406 723002 LIFEGUARD OPERATIONS - PENSION ER NORMAL COST MISC 268.67 010 0105000S 723002 CDD ADMIN - PENSION ER NORMAL COST MISC 644.47 010 010S041 723002 INSPECTIONS - PENSION ER NORMAL COST MISC 105.73 010 0105042 723002 PLAN CHECKS/PERMITS - PENSION ER NORMAL COST MISC 105.73 010 01050501 723002 PLANNING - PENSION ER NORMAL COST MISC 364.13 010 01060005 723002 LIBRARY ADMIN - PENSION ER NORMAL COST MISC 1,667.31 010 0106021 723002 CDM BRANCH LIBRARY - PENSION ER NORMAL COST MISC 479.81 010 0106022 723002 MARINERS BRANCH LIBRARY - PENSION ER NORMAL COST MISC 1,246.82 010 0106023 723002 CENTRAL LIBRARY - PENSION ER NORMAL COST MISC 3,096.31 010 0106024 723002 BALBOA BRANCH LIBRARY- PENSION ER NORMAL COST MISC 229.90 010 01060601 723002 TECHNICAL PROCESSING - PENSION ER NORMAL COST MISC 500.15 010 01070005 723002 RECREATION ADMIN - PENSION ER NORMAL COST MISC 635.73 010 0107010 723002 PROGRAM SUPPORT- PENSION ER NORMAL COST MISC 1,925.81 010 0107012 723002 ADULT SPORTS - PENSION ER NORMAL COST MISC 224.24 010 0107014 723002 YOUTH PROGRAMS - PENSION ER NORMAL COST MISC 201.93 010 0107018 723002 PARK PATROL - PENSION ER NORMAL COST MISC 460.95 010 0107020 723002 NEWPORT COAST COMMUNITY CENTER - PENSION ER NORMAL COST MISC 195.80 010 0107021 723002 COMMUNITY YOUTH CENTER - PENSION ER NORMAL COST MISC 189.26 010 0107022 723002 CIVIC CENTER RENTALS - PENSION ER NORMAL COST MISC 190.60 010 0107023 723002 MARINA PARK - PENSION ER NORMAL COST MISC 361.46 010 0107031 723002 OASIS - PENSION ER NORMAL COST MISC 1,103.48 010 0107032 723002 OASIS FITNESS CENTER - PENSION ER NORMAL COST MISC 239.76 010 0107033 723002 OASIS TRANSPORTATION - PENSION ER NORMAL COST MISC 292.21 010 01080005 723002 PUBLIC WORKS ADMIN - PENSION ER NORMAL COST MISC 1,000.09 701 7019052 723002 WATER SYSTEM SERVICE - PENSION ER NORMAL COST MISC 446.45 010 01010005 724001 CITY CLERK ADMIN - PENSION EE CONTRIB MISC 5,060.22 010 01025005 724001 HUMAN RESOURCES - PENSION EE CONTRIB MISC 1,679.90 010 01030005 724001 FINANCE ADMIN - PENSION EE CONTRIB MISC 1,878.38 010 01030302 724001 FINANCIAL REPORTING - PENSION EE CONTRIB MISC 7,268.99 010 01030304 724001 PURCHASING - PENSION EE CONTRIB MISC 11,857.97 010 0103031 724001 REVENUE SERVICES - PENSION EE CONTRIB MISC 24,024.33 010 01040005 724001 FIRE ADMINISTRATION - PENSION EE CONTRIB MISC 3,546.29 010 01040404 724001 EMERGENCY MEDICAL SERVICES - PENSION EE CONTRIB MISC 1,108.74 010 01040405 724001 JUNIOR LIFEGUARDS - PENSION EE CONTRIB MISC 1,914.96 010 01040406 724001 LIFEGUARD OPERATIONS - PENSION EE CONTRIB MISC 2,778.67 010 01050005 724001 CDD ADMIN - PENSION EE CONTRIB MISC 7,894.24 010 0105041 724001 INSPECTIONS - PENSION EE CONTRIB MISC 1,432.25 010 0105042 724001 PLAN CHECKS/PERMITS - PENSION EE CONTRIB MISC 1,432.25 010 01050501 724001 PLANNING - PENSION EE CONTRIB MISC 3,765.89 010 01060005 724001 LIBRARY ADMIN - PENSION EE CONTRIB MISC 18,053.61 010 0106021 724001 CDM BRANCH LIBRARY- PENSION EE CONTRIB MISC 4,962.20 010 0106022 724001 MARINERS BRANCH LIBRARY - PENSION EE CONTRIB MISC 15,194.57 010 0106023 724001 CENTRAL LIBRARY- PENSION EE CONTRIB MISC 35,435.80 010 0106024 724001 BALBOA BRANCH LIBRARY - PENSION EE CONTRIB MISC 3,114.39 010 01060601 724001 TECHNICAL PROCESSING - PENSION EE CONTRIB MISC 6,194.39 010 01070005 724001 RECREATION ADMIN - PENSION EE CONTRIB MISC 6,574.78 010 0107010 724001 PROGRAM SUPPORT- PENSION EE CONTRIB MISC 21,344.45 010 0107012 724001 ADULT SPORTS - PENSION EE CONTRIB MISC 2,319.12 010 0107014 724001 YOUTH PROGRAMS - PENSION EE CONTRIB MISC 2,088.35 010 0107018 724001 PARK PATROL- PENSION EE CONTRIB MISC 4,767.23 010 0107020 724001 NEWPORTCOASTCOMMUNITYCENTER- PENSIONEECONTRIBMISC 2,652.39 010 0107021 724001 COMMUNITY YOUTH CENTER - PENSION EE CONTRIB MISC 1,957.35 010 0107022 724001 CIVIC CENTER RENTALS - PENSION EE CONTRIB MISC 1,971.17 010 0107023 724001 MARINA PARK - PENSION EE CONTRIB MISC 3,738.23 010 0107031 724001 OASIS - PENSION EE CONTRIB MISC 13,144.02 010 0107032 724001 OASIS FITNESS CENTER - PENSION EE CONTRIB MISC 2,479.65 010 0107033 724001 OASIS TRANSPORTATION - PENSION EE CONTRIB MISC 3,958.43 010 01080005 724001 PUBLIC WORKS ADMIN - PENSION EE CONTRIB MISC 11,698.33 701 7019052 724001 WATER SYSTEM SERVICE - PENSION EE CONTRIB MISC 5,168.06 S_..__.._.....___...................._................._._ _ Subtotal $ 283.181.03 Fund # Object Description Increase or (Decrease) $ 010 300000 GENERAL FUND - FUND BALANCE CONTROL (277,145.71) 701 300000 WATER ENTERPRISE FUND - FUND BALANCE CONTROL (6,035.32) Subtotal Fund Balance Change Required 12-9