1. 1 City of Fremont

2. 2 Budget Development Strategies 1.Reduction in Overall Employee Compensation Expenses 2.Transition to Alternative Service Delivery Models 3.Reduction or Elimination of Services to the Community 4.Revenue Enhancements

3. Average Employee Cost 3

4. 4 CalPERS Rate History Public Safety Employees -- Projected based on PERS Achieving 7.75% (Could increase to 49% with poor returns)

5. 5 CalPERS Rate History Miscellaneous Employees -- Projected based on PERS Achieving 7.75% (Could increase to 30% with poor returns)

6. 66 CalPERS Rates 2009/102010/112011/12 Public Safety 29.7%30.0%36.5% Change from previous year +$1.6 million Miscellaneous 18.6%18.4%22.9% Change from previous year +$1.9 million Total Change = $3.5 million

7. 7 Labor Negotiation Parameters (Multi-Year Agreements) Short -term Compensation reduction equivalent to a 4.25% salary reduction –Option to pay via PERS Cost Sharing of Employer Rate Long -term 2 nd Tier Retiree Medical for new hires 2 nd Tier Retirement for new hires –Safety = 3% @ 55, 36 month calculation –Misc. = 2% @ 60, 36 month calculation and 2% COLA

8. 8 Council Adopted Labor Relations Policy 1.All labor negotiations will be conducted by designated representatives at the bargaining table. All City representatives operate upon the direction of the City Council. 2.No individual Council member will individually negotiate with any bargaining group member. 3.City representatives commit to keeping the Council fully informed and advising them of all substantive proposals. 4.Each Council member shall inform the City Manager at their earliest convenience and publicly disclose in open session any communications he or she may have had with any City bargaining group member(s) that has any reference to the negotiations. 5.Consistent with Government Code section 54963, confidentiality of closed session discussions will be maintained.

9. 9 Cost Sharing Employer Rate Government Code 20516 Section 20516 permits the City to share the cost of optional benefits provided to employees under its PERS contract via: –PERS contract amendment (section a) –MOU deduction outside of the PERS contract (section f)

10. 10 CalPERS Contract Amendment Cons Constraint (max amount of cost sharing) based on enhancement (varies by agency) Timing required to implement Lack of flexibility Requires vote of impacted employees - Requires all units agree to same amount of cost sharing (employer rate) - Option for “fixed” amount or “up to” amount - Must adopt 414(h)(2) Council Resolution Pros Employee funds remain employees’ Clarity with tax liability

11. 11 MOU Deduction Process: –Reach agreement with labor association(s) –Must have 414(h)(2) Council Resolution –Recommend Tax Attorney Opinion Letter Cons Funds are treated as employer contribution, thus employee would not be eligible to receive if they take refund prior to retirement Tax liability – no IRS letter ruling on “pre-tax” contribution Pro Immediate implementation Flexibility – can amend the amount as quickly as payroll can implement and allows for varying amount of cost sharing by labor association

12. 12 Fremont Labor Relations Results All labor associations have settled –7 of 9 labor associations elected PERS cost sharing option 2 of 7 labor associations via PERS Contract Amendment (Fire) Other 5 labor groups cost sharing amount vary –2 of 9 elected salary reduction 4 of 9 required mediation from State Mediation and Conciliation Authority

13. 13 Fremont 2 nd Retirement Benefit Actuary Estimated City Savings (000’s) $ 1,6480 $ 682 $ - $ 682Year 2021/22 $ 1,4790 $ 609 $ - $ 609Year 2020/21 $ 1,3110 $ 535 $ - $ 535Year 2019/20 $ 1,1470 $ 462 $ - $ 462Year 2018/19 $ 9910 $ 388 $ - $ 388Year 2017/18 $ 8350 $ 320 $ - $ 320Year 2016/17 $ 6840 $ 254 $ - $ 254Year 2015/16 $ 5390 $ 193 $ - $ 193Year 2014/15 $ 3970 $ 137 $ - $ 137Year 2013/14 $ 2620 $ 85 $ - $ 85Year 2012/13 $ 1280 $ 41 $ - $ 41Year 2011/12 TotalEmployeeEmployerTotalEmployeeEmployerYear Savings 2% @ 60 (Misc)Savings 3% @ 55 (Safety) Year 2022 Total Savings= $2,330

14. 14 Fremont Lessons Learned Openly adopt labor negotiation strategies Research options prior to negotiations Provide justifying budget information to unions Help employees understand benefits of cost sharing retirement costs –Pre-tax deduction –Public perception / participation with cost of retirement –Aligned with pension reform efforts Consider hiring outside labor negotiators Consider consulting tax attorney (if cost sharing via MOU)

15. Contact Details Brian Stott Human Resources Director 510-494-4664 bstott@fremont.gov 15