SIDE LETTER AMENDING THE 2012-2014 MEMORANDUM OF UNDERSTANDING BETWEEN THE CITY OF NEWPORT BEACH AND THE NEWPORT BEACH POLICE

MANAGEMENT ASSOCIATION

WHEREAS, on September 11, 2012, the City of Newport Beach (the "City") and the Newport Beach

Police Management Association (the "Association" and together with the City, the "Parties") executed a

memorandum of understanding (the "MOU") for the period of January 1, 2012 through December 31,

2014; and

WHEREAS, included in the MOU is a provision for the Association's members to share in the City's

costs of providing California Public Employment Retirement System (CaIPERS) benefits; and

WHEREAS, on November 25, 2012, the City adopted a Tier II benefit formula (3%@55) for anyone

hired after November 25,2012; and

WHEREAS, the MOU reflected the Parties' intent that Tier II employees would be included in the cost

share provisions agreed to in the MOU; and

WHEREAS, because the MOU preceded PEPRA, the MOU does not address the employees subject to

PEPRA ("Tier III") or the cost share provisions applicable to Tier III employees; and

WHEREAS, the Association and the City engaged in a meet and confer process to discuss Tier III

members participating in the MOU's cost share provisions and the payment by the employees of the

City's pension obligation; and

WHEREAS, the Association and City have reached agreement on an amendment to the 2012-2014 MOU

to increase contributions by Tier III members and increase the July 2013 cost-of-living adjustment from

1.3% to 2.0%, and now wish to memorialize this agreement in this Side Letter; and

WHEREAS, as part of this Side Letter, the Parties have agreed that the remaining terms of the MOU shall

remain in full force and effect except as set forth in this Side Letter.

NOW, THEREFORE, the City and the Association agree as follows:

Section 1: MOU Section 2.A.3 shall be modified to read as follows:

2. Effective September 7,2013, there shall be a base salary increase of two percent

(2%).

3. Effective the first payroll period commencing on or after July 1,2014, there shall be a base salary increase of not less than one percent (1 %), nor more than two percent (2%). The precise amount of the increase shall be determined with

reference to the percent increase in the Consumer Price Index (All Urban

Consumers) for the Los Angeles, Riverside, Orange County areas for the twelve

(12) consecutive months ending on March 31,2014. If there is either a decrease

in the CPI, no increase in the CPI or the increase is less than one percent (1 %),

the base salary increase shall be one percent (1 %). If the increase is greater than one percent (1 %), the base salary increase shall be in the same amount, but in no event, greater than two percent (2%).

Section 2: MOU Section 4.D.6 shall be modified to read as follows:

6. All employees hired following City Council adoption of negotiated contract amendment(s) with CalPERS to implement a Tier IL 39/o@55 retirement formula or Tier III, 2.79/o@57 retirement formula under the Public Employees Pension Reform Act (PEPRA) shall be subject to the following retirement benefits.

a. Tier II: For employees first hired by the City between November 24 and December 31, 2012, or hired on or after January 1, 2013, and are current members of the retirement system, as defined in PEPRA, the retirement formula shall be 3% @ 55 for Safety and calculated on the average 36 highest months' salary.

Tier III: For employees first hired by the City on or after January 1, 2013, and who do not meet the Tier II criteria, the retirement formula shall be 2.79/a@57 and calculated on the average 36 highest months' salary.

b. All such hirees shall individually pay 100% of the statutorily mandated member normal employee PERS contribution as follows: Safety Tier II employees shall contribute 9% and Tier III shall contribute 11.25%.

c. Unless specifically modified herein, said newly hired employees shall be subject to other then-existing City-PERS contract provisions.

Section 3: MOU Section 4.D.7 shall be modified to read as follows:

7. Provisions under PEPRA provide varying employee contribution rates by bargaining unit, classification, or benefit factor, within a cost share agreement. Effective the payroll period including September 7, 2013, or as soon thereafter as is reasonably possible, the City shall take action to amend its contract with PERS to provide for a Government Code Section 20516(a) authorized cost sharing by safety unit members in an amount that equals a total 12.8% employee contribution. For employees in Tiers I and IL the 20516(a) cost share contribution shall be 3.8% of compensation earnable. The 3.8% is in addition to the normal 9% Member Contribution. For employees in Tier III the cost share contribution shall be 1.55% of compensation earnable, which is in addition to the 11.25% Member Contribution. This cost sharing contribution shall be treated as normal member PERS contributions to the extent provided by statute.

The parties acknowledge that implementing the Government Code Section 20516(a)

PERS contract amendment as to all unit safety members is contingent upon the cost

sharing contribution being uniform with respect to all local police officers within the City

and/or in compliance with any and all other provisions as may be mandated by statute

2 PMA Side Letter to 2012-2014 MOU

and/or PERS. (Therefore, compliance with the requirement of uniform contribution with respect to all local police officers will require an agreement with the NBPMA which is in accord with the cost sharing agreement of the NBPMA.)

The parties acknowledge that compliance with the Government Code Section 20516(a) "uniform contribution" requirement within the classification of all local police officers is not a certainty and may not be possible at the time of adoption of this 2012-2014 MOD. The parties further acknowledge that implementation of a Government Code Section 20516(a) PERS contract amendment is contingent upon PERS determining that all conditions precedent to a Government Code Section 20516(a) contract amendment have been met.

Therefore, the parties acknowledge that implementing a Government Code Section 20516(a) PERS contract amendment as to unit safety members will entail the passage of an unspecified period of time and in fact, may not be approved by PERS. Therefore, the parties further agree that if a Government Code Section 20516(a) PERS contract amendment is not implemented, the parties shall, effective September 7, 2013, utilize Government Code Section 20516(f) to effectuate the three point eight percent (3.8%) safety member cost sharing contribution. Implementation of cost sharing pursuant to Government Code Section 20516(f) shall remain in full force and effect unless or until a Government Code Section 20516(a) contract amendment is approved by PERS. To the extent authorized by the IRS and/or Franchise Tax Board, Government Code Section 20516( f) cost sharing shall be implemented through pre-tax payroll deductions.

Finally, if for any reason unit safety member cost sharing is not authorized by either Government Code Section 20516(a) or (f), then effective concurrent with either disallowance by PERS of such cost sharing or a Superior Court judgment being rendered disallowing cost sharing pursuant to Government Code Section 20516(a) or (f), the above Section 2.A(f) three point eight percent (3.8%) base salary increase shall be immediately terminated and the parties shall reconvene the meet and confer process confined to the issue of a replacement for the three point eight percent (3.8%) cost sharing and three point eight percent (3.8%) base salary increase. Moreover, upon the termination of the three point eight percent (3.8%) base salary increase, the City shall simultaneously terminate any employee cost sharing pursuant to subparagraph 8 of this Section, unless and until such three point eight percent (3.8%) base salary increase is reinstated by subsequent mutual agreement of the parties.

Attached to this Memorandum of Understanding as Exhibit "B" is a March 1, 2012 letter from PERS Senior Pension Actuary, Kerry Worgan. Exhibit "B" is incorporated by reference into this MOU. Based upon the representations made in Exhibit "B", it is the agreement of the parties that unless and/or until modified pursuant to the meet and confer process or as mandated by law, these designated safety member cost sharing contributions shall continue until the August 26, 2020 "expiration date" designated in Exhibit "B" and shall then concurrently revert to the amount of two point one four two

3 PMA Side Letter to 2012-2014 MOD

percent (2.142%) on August 26, 2020, unless and/or until said amount IS modified pursuant to the meet and confer process and/or requirements of law.

Section 4: MOU Section 4.D.9 shall be modified to read as follows:

9. Percent of retirement funding amount to be paid by safety members.

The CalPERS safety retirement dejined benejit plan is funded by CalPERS mandated employer contributions based on a percentage of payroll (and statutorily mandated employee member contributions, as well.) The combined employer and member contribution percentages constitute the cost of funding for the safety retirement plan. Effective September 7, 2013, when added to the safety normal member contribution of 9% (Tiers I & II) or 11.25% (Tier III) of compensation, unit members who are safety employees shall befunding twenty-six point jive percent (26.5%) of the cost of the safety retirement plan. (The twenty-six point jive percent (26.5%) amount is the result of adding the nine percent (9%) normal member contribution to the three point eight percent (3.8%) employee payment of the employer cost of retirement funding described in section 4.D.7, pursuant to Government Code Section 20516. The safety member funding of twenty-six po int jive percent (26.5%) of the cost of the retirement plan shall remain in full force and effect on and after September 7, 2013, subject to the mandate that maintenance of the twenty-six point jive percent (26.5%) member funding of the retirement cost shall be limited to an increase or decrease in Government Code § 20516 employee cost sharing of two percent (2%). For example, maintenance of twenty-six point jive percent (26.5%) employee retirement funding rate shall result in a maximum Government Code § 20516 employee cost sharing of jive point eight percent (5.8%) and a minimum of one point eight percent (1.8%). In the event that compliance with the above twenty-six point jive percent (26.5%) member funding of retirement cost would result in a member funding an excess of any statutory or other legal limitations on such funding, each affected employee shall fund the maximum amount (not to exceed twenty­six point jive percent (26.5%) plus or minus two percent (2%)) allowed by statute or other legal authority.

Section 5: MOU Section S.E shall be eliminated in its entirety.

Signatures on the following page.

4 PMA Side Letter to 2012-2014 MOU

APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE

Date: tj / i /t-l

CITY OF NEWPORT BEACH, a California municipal corporation

Date: Y. 10 . 1 Y: I 7 i

By: n Aa~C.Harp City Attorney

&--- BQ~I Rush N. Hill, II Mayor

ATTEST: /

Date: ':/It / 1/ if By: (!U'&fYJ1--. F&z

Leilani 1. Brown A#~1Itb... City Clerk ~ ~\:.W~~».

NEWPORT BEACH POLICE MANAGEMENT ASSOCIATION

Date: ------------------

Steve Rasmussen, President

~

5 PMA Side Letter to 2012-2014 MOU

APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE

Oat" 'I LVii (

By:----!.:,.-='#==-__ ~~_=_~_=_-~ AMort C. Harp chy Attomey

ATTEST:

Datc: ______ _

By: ____ ___ ____ _

Leilani I. Brown City Clerk

NEWPORT BEACH POLICE MANAGEMENT ASSOCIATION

Date: 0 4- 107/1 If ~~~

Steve Rasmussen, President

5

CITY OF NEWPORT BEACH, a Califomia municipal corpomtion

Date: _______ _

By:. ___________ _

Rush N. Hill, If Mayor

PMA Side Letter Lo 2011-2014 MOU