NOTICE OF SPECIAL MEETING AND AGENDA

pension reform is necessary if the City will be able to protect the long-term viability of a defined benefit program for employees. For him, it is not a question of whether we need pension reform, but how to design the reforms to be fair to employees who perform remarkably well and to taxpayers, many of whom have lost their jobs, 401 K's and homes. He emphasized that for him, the decision-making process has never questioned the quality of any employees. They are just as hard-working, conscientious, and dedicated. However, he does not believe as elected officials and representatives of the public, some of whom are employees of the City, have the luxury of being able to do whatever we want to do for employees. The Council cannot allow the emotional side of this debate, cannot allow political ideology and political alliances to drive the decision-making process. He believes that staffs recommendations to adopt the League's pension paper as amended to reflect a return to 2001 levels, along with establishment of specific goals and objectives will go a long way towards filling the gap. He voiced appreciation of staff for being willing to listen and react to his input. He also appreciates staffs willingness and response to input from members of the public. He thanked members of the public for providing input. Prior to moving forward, Councilmember Thorne said he agrees that the current volatility in the economy means the Council needs to be a lot more flexible with contracts and he believes they should be shorter contracts, perhaps one year in length. He pushed hard in the past to have a weighed salary and benefits cost as a percent of revenue goal. He has also pushed for one lower than the 70% reflected in the staff report. He has finally seen the data he has asked for which is a three-year running average of the historical data, which states it ranges anywhere from 64% on a three-year running average basis up to a recent average of 78% to 79%, which an average of about 70%. After looking at the numbers, he is willing to compromise at the 70% level and the 70% would have to be lower in most years in order not to hit a 70% cap. Even with all things rolled into the budget, we are still only reducing the percent of revenue by one percentage point. Next, he understands staffs argument that they try to make their budget equal to revenues. He wants to make sure the City is comparing dollars in and out the door and wants to look at what is in between. He suggested reviewing all expenditures in the General Fund and to look at the numbers in the major spending buckets within the General Fund and put some control around those levels. By shifting money from other areas and to the benefit and salary column, they need to be sure they are not over or under spending other major parts of the budget. He agrees with the goal related to the elimination of the negative amortization, but we need to make sure that the money is put aside in a special fund. Lastly, he does not like the 10% reduction in unfunded liability, as it is far too low. However, he also realizes that the State legislature has taken away almost all of the City's abilities and options that would give the City the ability to significant impact future liability, at least in the short term. The City will have to send a loud and clear voice to Sacramento in the State legislature that the City wants its local control back. In conclusion, he suggested a public review process made on all goals and objectives annually, which is part of the staff report. He thinks there should be a number of new performance measures that are not necessarily related to finance on the performance of other areas of City government, which will go a long way towards restoring confidence in government, and it will establish a clear line of accountability and responsibility for this Council. Councilmember Sullivan said he agrees that there needs to be some kind of framework and strategy. He thinks everybody agrees the City must deal with fiscal issues in the long-term, but he does not agree with everything in the League of Cities paper and some things he does not understand, and suggested adopting it as guidance and potentially strategies only. He was not sure he agreed with the three benchmarks and the 70% number, as the City is a "people business". He supports the idea of eliminating the negative amortization but that is in conflict with the 70% level, and he questioned where it would be made up from. He suggested looking at the three benchmarks as potential that are evaluated and adjusted over time as needed, and not as caps. City employees provide exemplary services and we cannot pretend they are just numbers. Vice Mayor Cook-Kallio agreed that this was the intent of seconding the motion, and Mayor Hosterman agreed, as well. Councilmember McGovern referred to the second benchmark which states, "Reduce the City's overall pension and other Post Employment Unfunded Liabilities by at least 10%." She asked if this is based on the premise that the unfunded liability will not grow during that time. Mr. Bartels said if scheduled payments are made, the unfunded liability will grow. Time value of money means the numbers grow, so he thinks there is an underlying premise that the unfunded liability will be larger. To reduce it by 10%, the City Council Minutes Page 12 of 18 August 16, 2011