BILL ANALYSIS Ó
AB 1175
Page 1
Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 1175 (Bocanegra) - As Amended: March 21, 2013
SUBJECT : Public employee benefits: postemployment healthcare.
SUMMARY : Provides a process for administering the retirement
benefits of employees of the former redevelopment agency of the
City of Los Angeles. Specifically, this bill :
1)Requires the governing board of the designated local authority
(authority) for the former redevelopment agency of the City of
Los Angeles to identify an entity responsible for assuming the
obligation necessary to fully compensate for the
postretirement benefit costs of the former personnel of the
authority and the former redevelopment agency, if the
governing board acts to dissolve the authority.
2)Provides that the entity that assumes the responsibility shall
be considered the employer of the former personnel of the
authority and former redevelopment agency for the purpose of
making ongoing contributions for the premium payments.
3)Finds and declares the need for a special law to address this
issue because of the circumstances that established an
authority for the former redevelopment agency of the City of
Los Angeles and because of the unique contractual relationship
between the authority and CalPERS.
EXISTING LAW :
1)Provides that if no local agency elects to become the
successor agency for a dissolved redevelopment agency then an
authority will be immediately formed in the county of the
former redevelopment agency and vested with all of the powers
and duties of a successor agency.
2)Requires the Governor to appoint three residents of the county
to serve as the governing board of the authority.
3)Requires the authority to serve as successor agency until a
local agency elects to become the successor agency.
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4)Gives the members of the authority the immunities applicable
to public entities and public employees.
5)Requires the successor agency or authority to identify the
enforceable obligations of the former redevelopment agency.
6)Includes as enforceable obligations of the former
redevelopment agency: legally enforceable payments required in
connection with the agencies' employees, including, but not
limited to, pension payments, pension obligation debt service,
unemployment payments, or other obligations conferred through
a collective bargaining agreement.
FISCAL EFFECT : Unknown
COMMENTS :
1)As part of the dissolution process, local communities with
redevelopment agencies were required to establish a successor
agency that is responsible for identifying the enforceable
obligations or those debts of the former redevelopment agency
that need to be retired. In four jurisdictions - Los Angeles,
Merced, Stanislaus, and Ventura - no local agency agreed to
become the successor agency to the former redevelopment agency
and the Governor appointed an authority.
Successor agencies and authorities are required to submit a
list of recognized enforceable obligations to the Department
of Finance for approval. Over time, these obligations will be
repaid by property taxes collected and deposited by the county
auditor-controller into the Redevelopment Property Tax Trust
Fund. Included in the list of enforceable obligations are
legally enforceable payments required in connection with
agencies employees, including, but not limited to, pension
payments, pension obligations debt service, unemployment
payments or other obligations conferred through a collective
bargaining agreement. Health care benefits are not
specifically listed, but if they were part of the collective
bargaining agreement, they would be considered enforceable
obligations.
Once all of the debts of a former redevelopment agency have
been paid off then the successor agency and authority
terminate its existence. Health benefits negotiated under a
collective bargaining agreement would be enforceable
obligations and therefore the successor agency could not be
AB 1175
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dissolved if health benefits are still owed. However, the
author believes that once the designated authority no longer
has active employees and only retired employees, CalPERS will
be prevented from providing health care benefits to the
retirees of the former redevelopment agency.
In most cases the employees of the former redevelopment agency
were considered employees of the city or county and when the
redevelopment agency was dissolved, the city or county
continued to provide health care benefits to those employees
or retirees. In Los Angeles the redevelopment agency and the
City of Los Angeles had a Memorandum of Understanding (MOU)
that the city would provide health care benefits to the former
redevelopment agency. The city did not become the successor
agency and did not renew the MOU to provide health care
benefits to the former employees of the redevelopment agency.
The authority contracted with CalPERS to provide benefits to
the current employees of the authority and the retirees of the
redevelopment agency.
2)This bill requires the governing board of the designated local
authority for the former redevelopment agency of the City of
Los Angeles to identify an entity responsible for assuming the
obligation necessary to fully compensate for the
postretirement benefit costs
of the former personnel of the authority and the former
redevelopment agency, in the situation of the governing board
acting to dissolve the authority. The bill requires that the
entity that assumes the responsibility shall be considered the
employer of the former personnel of the authority.
This bill is sponsored by the American Federation of State,
County, and Municipal Employees (AFSCME).
3)According to the sponsor, "Los Angeles is in a unique
situation. The Los Angeles Redevelopment Agency is the only
designated local authority that contracts with CalPERS under
the Public Employees' Medical and Hospital Care Act (PEMHCA)
for employee and retiree health benefits. Because current law
requires agencies that contract with CalPERS for healthcare
benefits to have at least one active employee in order to
qualify as a public agency, CalPERS requires any exceptions to
the general provisions of the PEMHCA to specifically identify
the contracting agency eligible for the exception.
"Due to the circumstances that established a unique designated
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local authority for the former redevelopment agency of Los
Angeles that does not consist of the city or county, and the
unique contractual relationship between the designated local
authority and CalPERS,
AB 1175 is a critical next step necessary to finalize the
dissolution of redevelopment agencies."
The author notes that as the redevelopment dissolution process
reaches its conclusion, "It is imperative that California find
a solution to the question of earned retiree health care.
Although the agencies will no longer exist, the retirees who
served the public for decades are still eligible for the
health care coverage that was established as part of their
employment."
4)Support arguments: Supporters argue that this bill ensures
that retired employees of the Los Angeles Redevelopment Agency
continue to receive their already accrued retirement and
health benefits.
Opposition arguments: None.
5)This bill was heard in the Assembly Housing and Community
Development Committee on April 17, 2013 and passed on a 5-2
vote.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County, and Municipal Employees
[SPONSOR]
Opposition
None on file.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958