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Home My WebLink AboutE-03 APMA_Side_Letter2016CONSENT ITEM E-3 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: TROY BUTZLAFF, ICMA-CM, CITY MANAGER FROM: AMELIA AYALA, DIRECTOR HUMAN RESOURCES & RISK MANAGEMENT DATE: NOVEMBER 7, 2016 SUBJECT: APPROVE SIDE LETTER AGREEMENT BETWEEN THE CITY OF AZUSA AND THE AZUSA POLICE MANAGEMENT ASSOCIATION (APMA) SUMMARY: The City of Azusa and the Azusa Police Management Association (APMA) have been working in concert to research programs and methods to reduce the City’s unfunded liabilities. Through our collective efforts, two programs have been developed -- the Draw Down Program and the Unfunded Leave Bank Reduction Program (i.e. Special Pay Plan). The proposed action approves a Side Letter Agreement between the City APMA implementing both programs. RECOMMENDATION: Staff recommends that the City Council take the following action: 1) Approve a Side Letter of Agreement between the City of Azusa and the Azusa Police Management Association (APMA) implementing a Modification to the existing Draw Down Program and Creating a Unfunded Leave Bank Reduction Program. DISCUSSION: In 2010, the City and the APMA negotiated Section 10.6.10 of the Memorandum of Understanding (MOU) and the language pertaining to Mandatory Conversion Prior to Retirement was carried over to the current MOU. In 2010, both parties agreed that a 1,040 hour sick time balance was reasonable in case a member of the APMA suffered a significant illness or injury requiring extended time off for recovery. The parties also understood the need to address the future City unfunded liabilities caused by pending retirements. Section 10.6.10.2 of the MOU was agreed upon to allow AMPA members to begin drawing down sick time balances on a tax deferred basis to a minimum balance of 1,040 hours. APMA members are now required to reduce their sick leave balance each year within four (4) years of retirement age. The Draw Down is required until the leave balance reaches 1,040 hours. In an effort to further reduce the financial strain of large leave bank balances, the City and APMA have reached an agreement to modify the minimum balance APPROVED COUNCIL MEETING 11/7/2016 Approve Side Letter Agreement with APMA November 7, 2016 Page 2 requirement allowing APMA members who are 50 years of age and with 25 years of service with the City to draw down below the 1,040 hour balance. It is understood, that the goal of the “Draw Down” Program is to reduce the unfunded liability upon retirement of APMA members to a level as close to zero as allowed by law. Both parties recognize the need to address this issue over time to reduce financial burdens in one fiscal year in the event there are multiple retirements. APMA members who are of retirement age - 50 with 25 years of service with the City will not require a large minimum balance of accrued sick leave to bridge any gap to reach retirement eligibility in the event of significant illness or injury. On September 16, 2016, the City Council adopted Resolution 2016-C59 approving the City’s Unfunded Leave Bank Reduction Program for APMA members. The Special Pay Plan allows APMA Members to contribute unused bank hours into a retirement savings plan. This will be done by the members annually contributing 100% of all accrued unused sick leave, compensation time, and/or vacation leave bank in excess of caps to the Plan. The Special Pay Plan is an approved 401(a) Plan under the Internal Revenue Code. Implementation of the Special Pay Plan will help reduce the City’s liability and cash flow burden of having to pay out compensated absences when an employee separates from service. FISCAL IMPACT: The fiscal impact to the City will allow for better cash flow management since the accrued leave banks will be paid out gradually over several fiscal years instead of all at once. Additional cost savings will be realized because the accrued leave banks will be paid out using the salary rate in the same period the leave hours were earned, and it will not be paid out using a higher rate that includes future salary adjustments from a period where the hours were not earned. Prepared by: Fiscal Impact Reviewed by: Amelia Ayala Talika Johnson Director Human Resources & Risk Management Director of Finance Reviewed and Approved: Reviewed and Approved: Louie F. Lacasella Troy L. Butzlaff, ICMA-CM Management Analyst City Manager Attachments: 1) Side Letter Agreement between the City of Azusa and the Azusa Police Management Association (APMA) 1 SIDE LETTER AGREEMENT BETWEEN THE CITY OF AZUSA AND THE AZUSA POLICE MANAGEMENT ASSOCIATION (APMA) The City of Azusa (“City”) and the Azusa Police Management Association (“APMA”) have a Memorandum of Understanding (“MOU”) that commenced on July 1, 2016 and is set to continue through and including December 31, 2018. The Parties now wish to enter into this Side Letter Agreement to memorialize the following change and addition agreed to by both parties, which will be effective November 7, 2016: 1. Section 10.6.10.2 in the MOU shall be amended to read as follows: Employees shall “draw down” the maximum amount (of hours) possible on a tax deferred basis (based on then applicable law) each year until the balance (of accrued hours) reaches 1040 hours. APMA members who have reached 50 years of age, with 25 years of service with the City of Azusa may continue to “Draw Down” the maximum amount (of hours) possible on a tax deferred basis (based on then applicable law) below the 1040 hour balance. APMA may request this “Draw Down” at any time during the tax year so long as they meet the eligibility requirements described above and do not exceed an amount established by applicable laws. 2. Section 10.6.10.4 will be added to read as follows: Members of the APMA will participate in the Employer Sponsored 401(a) “Special Pay Plan” and are subject to the terms of the Special Pay Plan when they are five (5) years from their “normal” retirement age based on their respective CalPERS Public Safety Pension Formula as follows: 1. Age 45 for those APMA Members who are employed under the 3% @ 50 Public Safety Pension. 2. Age 50 for those APMA Members who are employed under the 3% @ 55 Public Safety Pension 3. Age 52 for those APMA Members who are employed under the 2.7% @ 55 Public Safety Pension. At no time will an APMA Member be required to forgo being paid as earned (cashed out) each pay period on their Vacation Time overage until the first day of their final month of employment with the City of Azusa. Once the Member participates in the Special Pay Plan as a “Participant in the Plan” pursuant to the above listed requirements, the member will be able to “draw down” their leave banks in the following order: 1. Sick Leave 2. Comp Leave 2 3. Vacation Leave (final month of employment for APMA Members) When eligible APMA Members become Participants in the Plan, participants must convert accumulated unused leave bank hours into the Special Pay Plan upon reaching their final month of employment prior to retirement. Upon separation from service, Participants in the Plan will be subject to a mandatory employer contribution of the employees’ remaining unused accumulated leave hours into the Special Pay Plan. The City of Azusa will cover the administrative cost of $20 dollars per participant per year and upon separation from service, the entire $20 dollars per year administrative cost will be borne by the employee. IN WITNESS WHEREOF, the parties hereto have executed this Side Letter Agreement as of the latest day and year below. Date: ____________________________ Date: ______________________________ CITY OF AZUSA AZUSA POLICE MANAGEMENT ASSOCIATION CITY OF AZUSA ____________________________________________________________ Troy L. Butzlaff, ICMA-CM, City Manager _____________________________________________________________ Amelia Ayala, Director of Human Resources & Risk Management _____________________________________________________________ Talika Johnson, Director of Finance AZUSA POLICE MANAGEMENT ASSOCIATION (APMA) _____________________________________________________________ Lieutenant, Rick Hayden, President _____________________________________________________________ Sergeant Robert Landeros, Treasurer