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HomeMy WebLinkAboutCity Council Resolution 1030 RESOLUTION NO. ] 030 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SARATOGA SUPPORTING AN INVESTIGATION AND ANALYSIS OF THE INVESTMENT POLICIES OF THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM IN AN EFFORT TO INCREASE RATE OF RETURN WHEREAS, the California Public Employees Retirement System membership, as of June 30, 1980, included 357,157 members who are employed by local public agencies; and WHEREAS, as of this date, no action has been taken by the PERS Board of Administration to indicate that a change in investment policies is imminent; and WHEREAS, short term investment vehicles continue to pay high interest rates, as they have for the past 30 months, with PERS failing to capitalize on these investment opportunities; WHEREAS, the 1980Annual Financial Report and Report of Operations, issued by the Public Employees Retirement System of the State of California for the fiscal period ended June 30, 1980, has revealed that the "Computed Rate of Return" on the entire $12.85 billion investment portfolio was 7~91%; and WHEREAS, the rate of inflation, as determined by the state composite California Consumer Price Index, as computed by the California State Industrial Relations Board, for the same 12-month period was 17.5% for all urban wage earners, and the interest crediting rate which member employers and employees were granted on their accumulated retirement earnings for the year ending June 30, 1980, was only 6%; and WHEREAS, the "Statement of Investment Objectives and Policy" of the California Public Employees Retirement System contains a section entitled, "Investment Objectives", which states the following: "1) to increase asset coverage of actuarial liabilities; 2) to maintain real dollar value of the assets (provide inflation coverage); and 3) to stabilize current em- ployer contribution rates." WHEREAS, the interest crediting rate was increased by PERS Board of Administration to 6.75%, effective July 1, 1980; and WHEREAS, Federal Treasury Notes, Federal T-Bills, Certificates of Deposit and Short Term Commercial Paper has been yielding interest rates ranging from 12% to 20% over the past 30 months, depending on the amount to be invested; and WHEREAS, 49% of the PERS $12.85 billion investment portfolio as of June 30, 1980, is placed in bonds, many of which are long term investments, some yielding as low as 4%; and WHEREAS, only 4.1% of the PERS investment portfolio, as of June 30, 1980, was placed in short term investments at a time when money market funds are earning up to 20% for large investments; and WHEREAS, public agency employers, depending on the Public Employee Re- tirement System (PERS) benefit level they have contracted for, coupled with their experience, expend from 8% to 12% of their annual operatiag budget on PERS employer contributions for employee retirement benefits; and WHEREAS, public agency employers, such as PERS member cities and counties, are experiencing continuous employer rate increases following periodic audits of the financial integrity of the PERS system; and WHEREAS, current PERS investment policies appear too rigid and unable to respond in a timely manner with a flexible and aggressive investment policy which can capitalize on rapidly changing money market investment opportunities; and WHEREAS, PERS' actuaries have estimated that a 1% increase in the PERS' Computed Rate of Return on its investment portfolio would probably offset a 13% increase in costs to PEPS Retirement System employers in California; and WHEREAS, the California Public Employees Retirement System (PERS) is not currently meeting the 2nd and 3rd objectives of its stated, "Investment Object- ives", which it has officially adopted as policy guidelines for the retirement system investment program; and WHEREAS, while it is recognized that the PERS Board of Administration has managed its investment portfolio in a prudent and effective manner in the past, that the League of California Cities take appropriate action to influence the PERS Board of Administration to change its investment 'strategy so that a significantly higher percentage of new revenue could be placed in Federal T-Bills, Certificates of Deposit, Bankers Acceptance and other performance investment vehicles with high yield when market conditions so justify, in a concerted effort to maximize earnings from investments; and WHEREAS, support should be given by the League of California Cities to the Investment Practices Sub-Committee of the Finance, Insurance and Commerce Committee, Assemblyman Louis J. Papan's Assembly Committee, which is conducting an investigation of the investment policies of the California Public Employees Retirement System in an effort to ensure that PERS maximizes its rate of return from investments; and NOW, THEREFORE, BE IT RESOLVED the City CoUnCil .6~ t~ City Of Saratoga does hereby encourage PERS member cities, member counties, individual members and public agency employee organizations to write letters to the PERS Board of Administration and to personally appear before the Board to demonstrate wide public agency and employee organization support for a full review of and change, as appropriate, of current investment policies; and believes The effort to maximize interest earnings from 'the PEPS investment port- folio will directly benefit PERS member cities and individual members of the California Public Employees Retirement System and, in so doing, will reduce the need for employer rate increases which would be funded from tax revenues. The above and foregoing resolution was regularly passed and adopted by the City Council of the City of Saratoga at a regular meeting on the 2nd day of September . ., 1981, by the following vote: AYES: Councilmembers Clevenger, Jensen, Mallory, Watson, Mayor Callon NOES: None ABSENT: None MAYOR ATTEST: