HomeMy WebLinkAbout81-159 - ResolutionsRESOLUTION NO. 81-159
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
RANCHO CUCAMONGA, CALIFORNIA, SUPPORTING AN
INDEPENDENT ANALYSIS OF THE INVESTMENT POLICIES
OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT
SYSTEM IN AN EFFORT TO INCREASE THE RATE OF RETURN.
WHEREAS, the 1980 Annual 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, revealed that the "Computed Rate of Return"
on the entire $12.85 billion PERS investment portfolio was 7.91%; and
WHEREAS, the rate of inflation, as determined by the State com-
posite 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 ended June 30,
1980, was only 6%; 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, the "Statement of-Investment Objectives and Policies" of
the California Public Employees~ Retirement System contains a section entitled
"Investment Objectives," which states the following:
"1. To increase asset coverage of actuar=al liabilities 2, To maintain real dollar value of the assets (provide
inflation coverage);
3. To stabilize current employer contribution rates."; and
WHEREAS, PERS~ actuarials 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 PERS retirement system employers in California; and
WHEREAS, public agency employers, depending on the Public Employees'
Retirement System (PERS) benefit level they have contracted for, coupled with
their experience, expend from 8% to 12% of their annual operating 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 to capitalize on rapidly changing money market investment opportunities,
such as Federal Treasury Notes, Federal T-Bills, Certificates of DePosit, and
short-term commercial paper which has been yielding interest rates ranging from
14% to 20% over the past 30 months; and
WHEREAS, the City of Rancho Cucamonga hereby declares its support
for adoption of the resolution to be considered by the League cf California
Cities member agencies at its annual conference in San Francisco to be held in
October, 1981, addressing all of the above issues.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Rancho Cucamonga that it hereby expresses its support and concurs in the
adoption of a resolution wherein:
1. It is recognized that while the PERS' Board of Administration
has managed its investment portfolio in a prudent and effective manner in the
past, the League of California Cities now supports action to influence the PERS'
Board of Administration to change its investment strategy so that a significantly
higher percentage of new revenue may be placed in Federal T-Bills, Certificates
of Deposit, Bank~r~ Acceptance, and other performance investment vehicles
Resolution No. 81-159
Page 2
with a high yield when market conditions so justify, in a concerted effort to
maximize earnings from investments; and
2. The League of California Cities supports action to influence
the PERS' Board of Administration to examine investment decisions in view of
current market conditions; and
3. Encouragement be ~iven to PERS member cities, member
counties, individual members, and public agency employee organizations to write
letters to the PERS' Board of Adminsitration 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
4. The effort to maximize interest earnings from the PERS
investment portfolio 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.
PASSED, APPROVED, and ADOPTED this 7th day of October, 1981.
AYES: Frost, Mikels, Palombo, Bridge, and Schlossero
NOES: None
ABSENT: None
ATTEST:
Lauren M. Wasserman, City Clerk
' Philli~'D. Schlosser, Maygr