Apr 30 2012

Budget Advisory Committee Looks at New and Improved Sewer Plan

BAFPC is meeting every Tuesday –

The newly appointed members of the Budget Advisory Financial Planning Committee (BAFPC), Mary Geong, Steven Hollis, Chair Bill Hosler, Tom Lehrkind, and Tim Rood, gathered on April 24 to discuss benefits, the Sewer Fund and other financial planning matters.  Highlights of the meeting can be viewed below.  It included discussion of:

  • Possible New Sewer Plan:  Phase “5A”
  • Medical Retiree Benefit Costs – New Concerns
  • Benefit Cost Reduction Implementation

Five year projections will be discussed at the next BAFPC meeting on Tuesday, May 1, 6:00 pm in the Emergency Operations Center of the Piedmont Police Department on Highland Avenue.  All meetings of the BAFPC are open to public.  Those interested in listening to the BAFPC deliberations must be present at the meetings, as there will be no audio, video, KCOM broadcasts, or minutes of the committee proceedings.   Piedmont’s new Budget Advisory & Financial Planning Committee (BAFPC) will continue to discuss the City budget and fiscal issues every Tuesday night until the 2012-13 budget process is completed.  A Saturday budget workshop will be held on May 19th by the City Council, with BAFPC members in attendance.

Possible New Sewer Plan:  Phase “5A”

Fix all problem areas first:  The BAFPC and staff discussed a new plan for mains replacement designated “phase 5A”.  The newly designed phase would replace all remaining problem sewer lines throughout the city before proceeding with remaining phases.   It is anticipated this work will eliminate emergency repairs of $300,000 per year, while adding only $110,000 per year to debt service, making phase 5A affordable immediately with current sewer revenues.  No tax surcharge would be required.  Staff confirmed the problem sewer mains can be easily identified and the work would satisfy EPA requirements for mains replacement.  Phase 5A would include 14,500 linear feet of mains, half the usual 33,000 feet in a phase.

Eliminate upfront costs:  A Committee Member, Steve Hollis, suggested the City negotiate to pay for engineering contract work after its completion when State loan proceeds are received, rather than upfront.  This would eliminate the “liquidity” problem caused by phased work.

Sewer Fund status:  New EPA monitoring and reporting costs were noted by the BAFPC Chair Bill Hosler to be in the range of $100-200,000 per year, not $1 million per year.  With all new EPA costs and existing tax revenues, the Sewer Fund is currently projected to “break even” during the next 5 years.  A cash reserve balance of $1 million would be considered ideal, but it was pointed out that if a large unanticipated emergency repair should occur (i.e. in excess of the annual budgeted amount of $640,000), it could be paid by making a loan to the Sewer Fund from the General Fund reserve.  One major emergency sewer repair can cost as much as $300,000 per staff.  (The General Fund reserve has generally been close to $3 million.)  The City of Piedmont’s mains replacement program was described as “20 years ahead” of many other cities.

New tax surcharge proposal:  Grote stated a new proposed sewer tax surcharge may be placed on the ballot for voter consideration in 2014.  An amount was not specified.

Medical Retiree Benefit Costs – New Concerns

Five year vesting:  This lifetime heath benefit is awarded to any employee who works for the City for 5 years.  The BAFPC noted this represents a large hidden cost in the case of City employees who work for the City for only a short period, such as 5-6 years.  It increases total compensation to 3 or more times base salary.  The City Administrator pointed out there are few City employees in this position, perhaps only the new Fire Chief.

Lifetime vs age 65:  The City of Piedmont provides this health benefit to retired City employees for life, rather than until age 65.  Many entities (including the Piedmont Unified School District) offer this benefit only during the “gap” between retirement age and age 65, when the retiree becomes eligible for Medicare benefits.   Limiting the benefit to age 65 would limit the City’s liability substantially.  (For instance, the Piedmont School District recently reported on May 4, 2012  it has an unfunded liability of $5 million for its 280 employees, while the City of Piedmont is in the process of funding a $16 million unfunded liability for less than 100 employees.)  Staff believes that, under the City’s current medical retiree plan, the City’s contribution cost declines somewhat (e.g. by 40%) once the retiree reaches age 65.

Benefit Cost Reduction Implementation

City Employee Contracts:  Reducing medical benefit costs will be addressed in the “next round” of discussions.  The City Administrator has been focusing on lowering pension costs in the employee contracts currently being negotiated.  The “two-tier” pension system being implemented in current negotiations (where new hires receive a different plan than existing workers) will reduce City benefit costs in future years, as new employees replace current employees, but not immediately.

Cost Analysis of Free Use:  A Committee Member, Tim Rood, asked whether a cost analysis had been done on staff use of the City’s SchoolMate program at no charge.  Staff was unsure whether only some, or all, employees are offered use of the SchoolMates program at no charge.

Editors Note:  The meeting agenda for the May 1 meeting was not posted 48 hours prior to the meeting and therefore not available to publish with this article.  On April 30, the City Clerk posted a notice for the May 1 meeting including the following BAFPC agenda.

1.  Review and Discussion of Five-Year Revenue, Expenditure, and Capital Projections
2.  Discussion of Impacts of Preliminary Forecast on Capital Reserves and General Fund Balance
3.  Discussion of Next Steps for the Committee


One Response to “Budget Advisory Committee Looks at New and Improved Sewer Plan”

  1. As the truth rises to the surface, and much due to the fine PCA work, it is quite evident that several viable options were and are available that require no further taxation; these options were in place well before Measure A was put on the ballot. The existing sewer tax allows for complete EPA compliance and a measured replacement schedule that is consistent with the previous replacement pace. The 2011 MTRC was told by staff that the EPA was requiring accelerated replacement of the mainline sewers. This was and is not true, no such language exists in the now defining document, the 2011 Stipulated Order signed by City Administrator Grote Jan. 21, 2011.

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