HomeMy WebLinkAboutJanuary 11Finance and Investment Committee Special Meeting
Town of Los Altos Hills - January 11, 2022
Members present Nate Blair, Allan Epstein, Cheryl Evans, Susan Mason, Medha Rishi, Roddy Sloss
and Chris Welborn
Members absent:Chris Nam and Kjell Karlsson
Associate members Frank Lloyd, Present; Jim Lai, Absent
Council present:George Tyson, Mayor; Linda Swan, Vice Mayor
Staff present:Peter Pirnejad, City Manager; Sarina Revillar, Administrative Services Director;
Oscar Antillon, Public Works Director; Sofia Mangalam, Planning and
Building Director, Sara Robustelli, Community Services Supervisor;
Deborah Padovan, City Clerk and Cody Einfalt, Management Analyst.
Public present: Jon Paulsen, Sedgwick – General Manager, PLAN JPA; Rick Simonson, Vice
President of HF&H, a consulting engineering firm.
Ms. Rishi called the meeting to order at 4 pm and noted that the meeting minutes were not agenized and therefore will
be presented for review in the February meeting.
Liability and Property Insurance Review – Jon Paulsen
Mr. Paulsen introduced himself and asked what matters he should address. Mr. Sloss asked that he address four
recommendations included in a report prepared by Mr. Sloss (distributed to members before the meeting) based on his
review of the Town’s Liability and Workers Compensation insurance during calendar 2021. Mr. Paulsen agreed and
began with the first recommendation requesting a review of Mr. Sloss’ work supporting a recommendation for the
town to select a $100,000 liability insurance deductible instead of the current $25,000 deductible. After a brief
discussion of the details, Mr. Paulsen said he would request that the responsible actuary perform the review and report
back to him. Next year’s liability insurance proposal is due shortly and Mr. Paulsen stated the proposal presented will
include options for $25,000, $50,000, and $100,000 deductible limits.
The second recommendation requests clarification of the PLAN JPA’s policy if 1) a member agency has a loss in
excess of the insured amount and that loss remains with the responsible agency which is documented in the PLAN JPA
annual Memorandum On Coverage, Section 6,C,1. 2) What happens if Plan JPA runs out of funds to pay claims? That
occurred about 12 years ago, and the members (Board) voted on if, whether and how much they should self-assess.
The third recommendation requested clarification of the procedures used by PLAN JPA to address the safety and
assurance Excess and Reinsurers are able to fulfill their responsibilities to fund claims. Mr. Paulsen stated the basic
tool used is the AM Best rating and Mr. Sloss noted that rating was not reliable in the 2008 financial crisis, to which
Mr. Paulsen replied that AM Best’s ratings have proven trustworthy over the years and are still widely upon.
The fourth recommendation related to the Workers Compensation Premium calculation was deferred to a later meeting
in the interest of time by the Chairperson.
Continued.
January 11, 2022 FIC Minutes continued page 2.
Sewer Connect Fee Study, and Sewer Fund Fund Financial Projections and Fee Analysis - Oscar Antillon
Mr. Antillon presented slides in the meeting indicating he plans to discuss Sewer Connect and Rate studies, the Sewer
Maintenance Contract, the Adobe Creek Study and Lease vs Purchase of Town Vehicles. Since the later topic was not
on the meeting Agenda, it will be presented at another time. Regarding the Sewer Maintenance Contract the options
are to extend the existing vendor contract or solicit proposals from other vendors. Mr. Antillon is satisfied with the
work being done by the incumbent. A decision on how to proceed has not yet been made and guidance from the
Council will be requested at the next Council meeting. The Adobe Creek Study will be updated when the results of
inspection work performed in December 2021 are received. A new Sewer Rate Study performed by HF&H is awaiting
Council authorization and is expected to be available for FIC review in its February 7, 2022 meeting.
Sewer Connect Fee Study, and Sewer Fund Financial Projections and Fee Analysis - Oscar Antillon
Mr. Antillon presented slides in the meeting indicating he plans to discuss Sewer Connect and Rate studies, the Sewer
Maintenance Contract, the Adobe Creek Study and Lease vs Purchase of Town Vehicles. Since the later topic was not
on the meeting Agenda, it will be presented at another time. Regarding the Sewer Maintenance Contract the options
are to extend the existing vendor contract or solicit proposals from other vendors. Mr. Antillon is satisfied with the
work being done by the incumbent. A decision on how to proceed has not yet been made and guidance from the
Council will be requested at the next Council meeting. The Adobe Creek Study will be updated when the results of
inspection work performed in December 2021 are received. A new Sewer Rate Study performed by HF&H is awaiting
Council authorization and is expected to be available for FIC review in its February 7, 2022 meeting.
The Sewer Connect Fee study is being performed by HF&H who presently calculate a current value i.e. replacement
cost of $22.3 million for Sewer assets and 1988 sewer connections resulting in a new connection fee billing of
$11,236. This fee does not include: 1) Sewer Treatment Plant upgrades that are (will be) financed with bonds the
annual payments on which are and will be included in the annual billing to the Sewer District by Palo Alto. Mr.
Antillon’s expressed his view that this cost should be billed annually to existing users as opposed to including some or
all of it in the Connect Fee. 2) It does not include replacement cost for smaller (6 inch) sewer pipes serving only a
portion of the user base. The Sewer Connect Fee includes the cost of “sewer mains” i.e. typically 8-inch or larger
pipes that serve a substantial portion (1/3 was example given) of the users. Mr. Epstein noted the Town uses both 8
inch and 6-inch mains and therefore some “mains” may not be included in the study. Mr. Epstein inquired whether
sewer treatment plant costs are typically included in Connect Fee calculations. Mr. Simonson said they were if the
cost information is based on hard data. Mr. Epstein noted that historical plant upgrade costs billed by Palo Alto are
reported separately in monthly billings. The Sewer District historical practice has been for 1) affected users to finance
additions to the existing system offset by contributions paid by new users who benefit from the addition, and 2) for the
Sewer System to manage and finance maintenance of all the sewer pipes on public property. Mr. Antillon offered to
report back on this matter at the February 7, 2022 FIC meeting. Mr. Epstein proposed that the $11,236 Connect Fee be
implemented immediately as it is approximately 40% larger than the existing connect fee. Committee members voting
are in favor of Mr. Epstein’s proposal. Mr. Antillon indicated he would recommend this to Council.
Employee Enhancements – Sarina Revillar
Ms. Revillar referred to power point slides presented in the meeting and supporting material distributed to meeting
attendees before the meeting noting topics and supporting data contributors, Koff & Associates analysis of
compensation and benefits analysis, and MacLeod Watts (actuaries) analysis of employee retiree medical plans, and
change recommendations by Staff to Council. Addition of a 401a retirement savings plan with an employer match up
to a maximum of 4% of salary was presented supported by Staff analysis. The power point slides presented and
compared existing and proposed (by staff) benefits. In summary four categories of new benefits were described; 1)
salary range and cost of living enhancements; 2) an increase in maximum annual vacation hours that can be carried
over; 3) a retiree health plan benefit enhancement for Tier 2 employees in the current retiree health plan; and 4) a new
401a retirement savings benefit providing for an employer match of up to 4% of salary. Ms. Rishi noted that she
reviewed and made suggestions to the material presented. Mr. Blair requested Ms. Rishi to review her understanding
Continued.
January 11, 2022 FIC Minutes page 3.
of the inputs driving the staff recommendations, which she did noting that her input was that the Town meet
competitor Town salary and vacation benefits and that staff believed exceeding competitor benefits for retiree health
and savings plan benefits would increase retention. Mr. Blair suggested that given the recent escalation of CPI rates a
more stable CPI rate be considered and that a limitation be included that to the extent future Governmental legislation
provides earlier retiree medical benefits that the proposed plan be adjusted accordingly. Mr. Epstein asked, and Ms.
Revillar confirmed that Koff & Associates proposed adjustments to both limit and increase salary ranges were being
applied prospectively. Mr. Epstein asked whether enhanced medical benefits were being proposed due to competition,
and Ms. Revilla stated that enhancements were intended to attract and retain employees with extensive government
experience and exceed the competition. Mr. Epstein suggested that the cost of each of the recommended changes be
estimated so the total is known and the cost/benefit of each can be evaluated by the Council in their deliberations.
FIC annual report to Council – Medha Rishi
Ms. Rishi stated that Ms. Mason and she presented the FIC report to Council with only one question from Councilman
Mok who inquired as to when the FIC would next consider the duration of investments due to rising interest rates and
Ms. Mason indicated that would be taken up in the FIC’s February meeting.
Council Matters of Interest – None.
Questions from the floor – None
Next meeting date - February 7, 2021
Topics are mid-year Budget Review, Quarterly Investment Report and Update from Oscar Antillon on the Sewer Rate
Proposal.
Ms. Rishi excused herself from the meeting at approximately 6:05 pm and Co-Chair Mason continued the meeting.
Further Comments by attendees on materials presented:
Ms. Padovan commented she thought the OPEB enhancement being proposed by Staff would help attract and retain
employees with extensive government experience,
Mr. Blair suggested that proposed OPEB benefit enhancement when presented to Council stress that it is targeted at
potential new hires with government experience who are believed to be difficult for the Town to attract.
Mr. Sloss noted that when the OPEB plan was originally adopted it served as a disincentive to remain employed at the
Town as demonstrated by a senior employee who left to take another position that allowed the former employee to
exchange the medical benefit at the new position for cash as the Town was obliged to pay for medical benefits under
the newly adopted OPEB Plan. The Town subsequently amended the OPEB plan to preclude this from happening in
the future.
Mr. Lloyd commented based on the Town’s low vehicle mileage, consideration be given to buying instead of leasing
replacement vehicles. He also stated that in his experience the amount of additional vacation being proposed are
exceptional compared to private sector practices. Further questions and comments from Mr. Lloyd, Mr. Epstein and
Ms. Evans suggested that Ms. Revillar clarify that the proposed vacation increase of 40 hours is in the total amount of
vacation hours that may be accrued and that it does not affect how much vacation benefit is earned each year Ms.
Revillar confirmed that it was the maximum accrued vacation allowance that was being proposed to be changed. Mr.
Tyson noted that the amount of vacation accrued is a policy decision that should be made by the City Manager and
Council.
Adjournment: As there were no further comments, the meeting adjourned at 6:12 pm.
Respectfully submitted: Roddy Sloss, Committee Secretary ///
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