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REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...
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REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT ...

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  • 1. REQUEST FOR PROPOSAL FOR TRUST AND INVESTMENT MANAGEMENT SERVICES FOR SUPPLEMENTAL RETIREMENT FUNDING OBLIGATIONS City Treasurer Department CITY OF HUNTINGTON BEACH Released on June 26, 2008
  • 2. TRUST AND INVESTMENT MANAGEMENT SERVICES FOR SUPPLEMENTAL RETIREMENT FUNDING OBLIGATIONS REQUEST FOR PROPOSAL (“RFP”) 1. BACKGROUND The City of Huntington Beach is soliciting Request for Proposals (RFP) from qualified firms for investment management services and administration of participant balances. The City of Huntington Beach is an incorporated charter law city, which operates under the council/administration form of government. This organization is a full-service city with a General Fund budget of over $188 million and a total budget of over $330 million for Fiscal Year 2007-08. The City provides a supplemental retirement plan for all employees hired prior to December 27, 1997. It is a defined benefit plan that will pay the retiree an additional amount to his or her normal amount for life. The City’s contracts with employee bargaining associations establish the plan, and these associations must agree to any changes to the plan. The amount that is computed as a factor of an employee’s normal retirement allowance is computed at retirement and remains constant for his or her life. Of the 1,036 active employees reported on the September 30, 2007 data, only 546 were eligible for plan benefits. No separately prepared financial statements are prepared for this plan and it is not included in the financial report of any other pension plan. The assets used to pay these liabilities have not yet been set up in a legal trust. This supplemental retirement plan currently has approximately $22 million in assets, which are currently invested and pooled with operating funds. The actuarial valuation has determined that as of September 30, 2007, the AAL for post retirement benefits was $51,028,065. The City has prudently set aside approx. $22 million in reserves for this obligation. Using a discount rate of 7.75% and a 30 year amortization of the unfunded accrued liability, the City has determined what the actuarial required contribution (ARC) will be for the next 30 years. The City intends to fund the entire annual contribution to ensure this obligation remains a predictable and manageable expense, while allowing for a great amount of interest earnings to further offset the future retiree healthcare costs. The City intends to establish trusts for this plan, and this trust will allow the City to separate these investments from operating fund investments and invest in higher yielding investment vehicles. Investment of funds of this nature is entirely different than the investment of surplus cash. Although state law does not provide a list of authorized investments for these types of funds, fiduciary standards and practices with respect to pension investing are well established. It is widely understood by pension fiduciary experts that the primary duty of trustees is to manage funds in the exclusive interest of the beneficiaries, minimizing employer contributions is a secondary duty. Based on the longer investment horizon, short term risk is considered to be an acceptable trade-off in order to achieve a long-term rate of return sufficient to preserve or 1
  • 3. enhance the value of the assets relative to inflation. Investment in riskier assets, such as stocks, is expected to generate long-term returns that more than compensate for their additional market risk. The trust will be initially funded with approximately $22 million with the timing and entrance into the market to be determined as part of the proposal process. Ongoing contributions to the trust will consist of the actuarially determined required contribution and the disbursements from the trust will consist of the related benefit payments. 2. SCHEDULE OF EVENTS This request for proposal will be governed by the following schedule: Release of RFP June 26, 2008 Deadline for Written Questions July 7, 2008 Responses to Questions Posted on Web July 14, 2008 Proposals are Due July 22, 2008 Proposal Evaluation Completed August 22, 2008 Approval of Contract (tentative date) September 30, 2008 3. SCOPE OF WORK The selected firm will be required to perform the following: 1) Provide recommendations on the appropriate type and form of trust. Consultant may be requested to assist with the implementation of the irrevocable trust; however, this may be handled by an external law firm hired by the City. 2) Develop comprehensive Investment Objectives and Asset Allocation Guidelines and Performance Standards Guidelines given the nature of the funds and the longevity of the funds. Assist the City in developing an investment policy statement. 3) Perform discretionary portfolio management including investing and reinvesting funds in accordance with those objectives and guidelines and all applicable laws and regulations or assume complete responsibility for the investment of trust assets including determining asset allocation, portfolio structure, engaging appropriate investment managers or personnel, developing performance standards, monitoring investment performance against investment objectives and fees, and separately accounting for the assets of each plan in the trust and reporting at least annually to the City Treasurer or designated City Board. 4) Keep full and complete records of all transactions with regard to the funds and monitor performance and provide for periodic reports to the City. Provide necessary details as requested by City. 5) Render statements, portfolio analysis and performance comparisons quarterly or as agreed upon by City 6) Receive ongoing contributions into the Trust and process request for distributions annually from the Trust for benefits and payments of any administrative expenses attributable to the City plan. 2
  • 4. 7) Provide ongoing consultative services with respect to performance reporting of the investments and necessary adjustments to the Investment Objectives and Guidelines, as well as, training on particular aspects of the investment function. Using the information provided in Appendix A, the proposal should provide recommendations for trust options and an investment approach for the City of Huntington Beach including but not limited to: 1) A recommendation on the form and type of trust in compliance with the required governmental accounting standards. 2) A proposed investment strategy outline for the City of Huntington Beach given the time horizon, liquidity requirements, and nature of funds. 3) A proposed sample asset allocation of the portfolio and suggested performance benchmarks. 4) A forecast of the portfolio's expected level of return and projected risks. 5) Confirmation that you will acknowledge your role as a fiduciary with respect to the OPEB trust. 4. PROPOSAL FORMAT GUIDELINES Interested contractors are to provide the City of Huntington Beach with a thorough proposal using the following guidelines: Proposal should be typed and should contain no more than 20 typed pages using a 12-point font size, including transmittal letter and resumes of key people, but excluding Index/Table of Contents, tables, charts, and graphic exhibits. Each proposal will adhere to the following order and content of sections. Proposal should be straightforward, concise and provide “layman” explanations of technical terms that are used. Emphasis should be concentrated on conforming to the RFP instructions, responding to the RFP requirements, and on providing a complete and clear description of the offer. Proposals, which appear unrealistic in the terms of technical commitments, lack of technical competence or are indicative of failure to comprehend the complexity and risk of this contract, may be rejected. The following proposal sections are to be included in the proposer’s response: A. Vendor Application Form and Cover Letter Complete Appendix B, “Request for Proposal-Vendor Application Form” and attach this form to the cover letter. A cover letter, not to exceed three pages in length, should summarize key elements of the proposal. An individual authorized to bind the consultant must sign the letter. The letter must stipulate that the proposal price will be valid for a period of at least 180 days. Indicate the address and telephone number of the contractor’s office located nearest to Huntington Beach, California and the office from which the project will be managed. B. Background and Project Summary Section The Background and Project Summary Section has two parts: 1) Description of your organization’s background, 2) Description of your understanding of the City, the work to be done and the objectives to be accomplished. Refer to the Scope of Work section of this RFP. In addition, this Section should include the following: 3
  • 5. ♦ Provide information about your organization, date founded, organization chart including all professionals, company ownership and other business affiliations and the number of years your organization has provided investment management services and trustee services. ♦ Indicate whether there have been significant changes in your organization or if significant changes are expected ♦ Identify the type of accounts and returns currently being managed by your organization (e.g. government, pension, self insurance pools, and foundations). ♦ Identify any pending administrative proceedings, investigations and civil suits against your organization relating to your organization’s performance of its professional duties. ♦ List all litigation or proceedings to which your organization is a party and which would either (a) materially impair your ability to perform the services enumerated herein and for which this RFP was issued, or (b) if decided in an adverse manner, materially affect the financial condition of your organization. ♦ Describe any known or perceived actual or potential conflicts of interest with the City, its directors, officers, agents or employees. Please refer to Section 15, City Employees and Officials, of the Professional Services Agreement (Appendix C). C. Methodology Section Provide a detailed description of the approach and methodology to be used to accomplish the Scope of Work of this RFP. The Methodology Section should include: 1) An implementation plan that describes in detail (i) the methods, including controls by which your firm manages projects of the type sought by this RFP; (ii) methodology for soliciting and documenting views of internal and external stakeholders; (iii) and any other project management, implementation strategies or techniques that the respondent intends to employ in carrying out the work. These should include the following: a) List by sector distribution the market value of aggregate assets under management and/or under custody for your latest reporting period. b) Provide data on account/asset growth over the past three years including the number of account gained and the number of accounts lost. c) Describe the procedures you have in place to address the potential or actual credit downgrade of an issue and to disclose and advise a client of the situation. d) Describe your investment process, as you would apply it to the City’s portfolio including the primary strategies for adding value to the portfolio. e) Describe your process of credit risk management and your decision-making process in terms of structure, committees, membership, meeting frequency, responsibilities, integration of research ideas and portfolio management. f) Describe how you typically report performance and provide performance history for the past five years for current accounts comprised of securities with maturities, quality and sectors similar to those proposed for the City. List by sector distribution the market value of aggregate assets under management and/or under custody for your latest reporting period. 2) Detailed description of efforts your firm will undertake to achieve client satisfaction and to satisfy the requirements of the "Scope of Work" section. Describe your 4
  • 6. procedures to ensure that the portfolios comply with client investment objectives and policies. Describe and include samples of standard reporting available for client’s investment transactions and market valuations. Include a project schedule, identifying all tasks and deliverables to be performed, durations for each task, and overall time of completion. 3) Detailed description of specific tasks you will require from City staff. Explain what the respective roles of City staff and your staff would be to complete the tasks specified in the Scope of Work. D. Staffing Provide a list of individual(s) who will be working on this project and indicate the functions that each will perform including number of years at the appropriate organization. Include a resume for each designated individual. Identify which professional staff member will be the primary client contact for the City and discuss how often you are willing to meet with the City. Describe the compensation policies for investment professionals. E. Qualifications The information requested in this section should describe the qualifications of the organization(s), key staff and sub-contractors performing projects within the past five years that are similar in size and scope to demonstrate competence to perform these services. Information shall include: 1) Names of key staff that participated on named projects and their specific responsibilities with respect to this scope of work. 2) A summary of the your firm’s demonstrated capability, including length of time that your firm has provided the services being requested in this Request for Proposal. 3) Describe your experience with servicing public agency clients, and in particular, for services similar to those described in this RFP. 4) Describe the make up of your client base in terms of assets under management. Please segment assets as follows: ♦ $5 million or less ♦ $5 million to $25 million ♦ $25 million to $100 million ♦ $100 million to $500 million ♦ $500 million or more 5) Provide at least five local governmental agencies, preferably in California, that received similar services from your organization(s). The City of Huntington Beach reserves the right to contact any of the organizations or individuals listed. Information provided shall include: ♦ Client Name ♦ Project Description ♦ Project start and end dates ♦ Client project manager name, telephone number, and e-mail address . 5
  • 7. F. Fee Proposal 1) Provide the trustee administration fees and any investment or transactional fees. 2) Describe the investment management fees and how they are calculated and applied. 3) List all other fees, if any, for ongoing consultation and customized reporting. 4) If there is a minimum fee requirement for this plan, describe the basis for the minimum fee. 5) Describe any revenue sharing agreements you have with investment managers and/or sub-advisors. Include any 12b-1, service, distributor, or platform fees you derive from the investment managers and/or sub-advisors. 6) Describe any surrender, withdrawal or deferred sales charges within your products. Are any additional fees to be netted from fund performance? If yes, please describe. 7) Is there a termination fee or any other fees relating to the transfer of City’s assets? Upon notice of termination within 20 days, the City requires that the Consultant will transfer all of the City’s OPEB assets in the manner designated by the City with no hold back. 8) Provide an estimate of all costs for the first year using a first year balance of $20 million with monthly payments to 550 retirees with the detail provided for each cost item. 5. PROCESS FOR SUBMITTING PROPOSALS ♦ Content of Proposal The proposal must be submitted using the format as indicated in the proposal format guidelines. ♦ Preparation of Proposal Each proposal shall be prepared simply and economically, avoiding the use of elaborate promotional material beyond those sufficient to provide a complete, accurate and reliable presentation. ♦ Number of Proposals Submit five (5) copies of your proposal in sufficient detail to allow for thorough evaluation and comparative analysis. ♦ Submission of Proposals Complete written proposals must be submitted in sealed envelopes to: Janet Lockhart, Senior Administrative Analyst City of Huntington Beach Finance Department - Purchasing 2000 Main Street Huntington Beach, CA 92648-2702 RE: Trust and Investment Management Services/ Supplemental Retirement Funding Obligations and received no later than 4:00 p.m. (P.S.T) on July 22, 2008. Proposals will not be accepted after this deadline. Faxed or e-mailed proposals will not be accepted. 6
  • 8. ♦ Inquiries Questions about this RFP must be directed in writing, via e-mail to: Janet Lockhart, Senior Administrative Analyst jlockhart@surfcity-hb.org From the date that this RFP is issued until a firm is selected and the selection is announced, firms are not allowed to communicate for any reason with any City employee other than the contracting officer listed above regarding this RFP, except during the pre- proposal conference. The City reserves the right to reject any proposal for violation of this provision. No questions other than written will be accepted, and no response other than written will be binding upon the City. ♦ Conditions for Proposal Acceptance This RFP does not commit the City to award a contract or to pay any costs incurred for any services. The City, at its sole discretion, reserves the right to accept or reject any or all proposals received as a result of this RFP, to negotiate with any qualified source, or to cancel this RFP in part or in its entirety. All proposals will become the property of the City of Huntington Beach, USA. If any proprietary information is contained in the proposal, it should be clearly identified. 6. EVALUATION CRITERIA The City’s consultant evaluation and selection process is based upon Qualifications Based Selection (QBS) for professional services. The City of Huntington Beach may use some or all of the following criteria in its evaluation and comparison of proposals submitted. The criteria listed are not necessarily an all-inclusive list. The order in which they appear is not intended to indicate their relative importance: A. Compliance with RFP requirements B. Understanding of the project C. Recent experience in conducting similar scope, complexity, and magnitude for other public agencies. D. Educational background, work experience, and directly related consulting experiences E. Having a professional staff that has worked together and has successfully managed assets through various market conditions F. Fees Charged G. Responsiveness to Request for Proposal, Contract Terms and Insurance Requirements H. References The City may also contact and evaluate the proposer’s and subcontractor’s references; contact any proposer to clarify any response; contact any current users of a proposer’s services; solicit information from any available source concerning any aspect of a proposal; and seek and review any other information deemed pertinent to the evaluation process. The evaluation committee shall not be obligated to accept the lowest priced proposal, but shall make an award in the best interests of the City. After written proposals have been reviewed, discussions with prospective firms may or may not be required. If scheduled, the oral interview will be a question/answer format for the purpose of clarifying the intent of any portions of the proposal. The individual from your firm that will be directly responsible for carrying out the contract, if awarded, should be present at the oral interview. 7
  • 9. A Notification of Intent to Award may be sent to the vendor selected. Award is contingent upon the successful negotiation of final contract terms. Negotiations shall be confidential and not subject to disclosure to competing vendors unless an agreement is reached. If contract negotiations cannot be concluded successfully, the City may negotiate a contract with the next highest scoring vendor or withdraw the RFP. 7. STANDARD TERMS AND CONDITIONS ♦ Amendments The City reserves the right to amend this RFP prior to the proposal due date. All amendments and additional information will be posted to the Huntington Beach Procurement Registry, Huntington Beach - Official City Web Site - Business - Bids & RFP's; proposers should check this web page daily for new information. ♦ Cost for Preparing Proposal The cost for developing the proposal is the sole responsibility of the proposer. All proposals submitted become the property of the City. ♦ Contract Discussions Prior to award, the apparent successful firm may be required to enter into discussions with the City to resolve any contractual differences. These discussions are to be finalized and all exceptions resolved within one (1) week from notification. If no resolution is reached, the proposal may be rejected and discussions will be initiated with the second highest scoring firm. A sample agreement is linked to this Request for Proposal in the City web site. ♦ Confidentiality Requirements The staff members assigned to this project may be required to sign a departmental non- disclosure statement. Proposals are subject to the Freedom Information Act. The City cannot protect proprietary data submitted in proposals. ♦ Financial Information The City is concerned about proposers’ financial capability to perform, therefore, may ask you to provide sufficient data to allow for an evaluation of your firm’s financial capabilities. ♦ Insurance Requirements City Resolution 2007-3 requires that licensees, lessees, and vendors have an approved Certificate of Insurance (not a declaration or policy) on file with the City for the issuance of a permit or contract. Within ten (10) consecutive calendar days of award of contract, successful proposer must furnish the City with the Certificates of Insurance proving coverage as specified in Appendix C. Failure to furnish the required certificates within the time allowed will result in forfeiture of the Proposal Security. Please carefully review the Sample Agreement and Insurance Requirements before responding to the Request for Proposal enclosed herein. The terms of the agreement, including insurance requirements have been mandated by City Council and can be modified with Risk Manager and City Attorney approval. Your response to the Request 8
  • 10. for Proposal must indicate if you are unwilling or unable to execute the agreement as drafted as well as providing the insurance requirements. The City will consider this in determining responsiveness to the Request for Proposal. 9
  • 11. APPENDIX A
  • 12. Employee Benefits Consulting March 1, 2007 Mr. Robert Sedlak, Jr. City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Re: Postretirement Health Benefits – GASB 45 Actuarial Valuation Results as of September 30, 2006 Dear Robert: We are pleased to present results of the September 30, 2006 actuarial valuation update for the City of Huntington Beach Post-Retirement Health Benefits Plan (including Retiree Subsidy Medical Plan). The update is based on the full valuation completed as of September 30, 2005. The purpose of the update is to provide a preliminary estimate of the Annual Required Contribution (ARC) for budgeting purposes, assuming the City adopts GASB 45 for the fiscal year ending September 30, 2008. The actual ARC will be determined based on a valuation that will be performed as of September 30, 2007. Liabilities As requested by the City, results are shown using a 5.5% discount rate. In order to understand the impact of changing this assumption, we also show results using a 7.5% discount rate. The table below summarizes the liability results based on these two discount rates: 5.5% 7.5% 09/30/05 9/30/06 09/30/05 9/30/06 Present Value of Benefits (PVB) $34,792,000 $35,252,000 $27,531,000 $28,129,000 Actuarial Accrued Liability (AAL) $25,310,000 $26,229,000 $21,768,000 $22,627,000 Normal Cost $929,000 $980,000 $645,000 $693,000 Assets As of September 30, 2006, the City held $5.2 million in assets that are set aside for postretirement health benefits. As requested for budgeting purposes, this valuation illustrates two scenarios for the ARC ending September 30, 2008 – one that considers these assets as Plan assets and one that considers no Plan assets for purposes of determining the unfunded liabilities and annual costs. Aon Consulting & Insurance Services 707 Wilshire Boulevard • Suite 5700 • Los Angeles, California 90017 tel: 213.630.3200 • fax: 213.996-1762 • www.aon.com
  • 13. Mr. Robert Sedlak, Jr. City of Huntington Beach March 1, 2007 Page 2 Annual Required Contributions (ARC) Similar to the September 30, 2005 report, the tables below show the ARC results under the Aggregate and Entry Age Normal cost methods, based on both the 5.5% and 7.5% discount rates. The amounts shown are initial year ARC results assuming GASB 45 adoption for the fiscal year ending September 30, 2008. The first column assumes the assets currently set aside are considered plan assets (i.e., in an irrevocable trust) at October 1, 2007, the beginning of the fiscal year of adoption. The second column assumes the assets are not initially considered plan assets and will be utilized to pay the ARC and minimize the ongoing Net OPEB Obligation. With $5.4 million ARC – 5.5% Assets No Assets Aggregate Method $3,049,000 $3,598,000 Entry Age Normal Method 30 year amortization $2,118,000 $2,383,000 20 year amortization $2,484,000 $2,840,000 10 year amortization $3,603,000 $4,239,000 With $5.4 million ARC – 7.5% Assets No Assets Aggregate Method $2,596,000 $3,203,000 Entry Age Normal Method 30 year amortization $1,906,000 $2,247,000 20 year amortization $2,198,000 $2,627,000 10 year amortization $3,127,000 $3,836,000 As a reminder, the Entry Age Normal method with costs spread as a level percent of pay is used to determine the ARC for the CalPERS retirement plans. Assumptions This valuation update is based on the 2005 full valuation results with projections based on the assumptions used in that valuation. The asset value as of September 30, 2007 is assumed to be $5.4 million, which is based on the September 30, 2006 value of $5.2 million plus interest. * * * Employee Benefits Consulting
  • 14. Mr. Robert Sedlak, Jr. City of Huntington Beach March 1, 2007 Page 3 Please call me after you have a chance to review these results and let me know if you have any questions. Sincerely, Bradley J. Au Vice President J:ClientsCityHbchval2006RetMed06 Update GASB 45.doc Employee Benefits Consulting
  • 15. CITY OF HUNTINGTON BEACH POSTRETIREMENT HEALTH BENEFITS (INCLUDING RETIREE SUBSIDY MEDICAL PLAN) Actuarial Valuation Study Valuation Date: September 30, 2005 Date of Report: March 24, 2006
  • 16. Executive Summary Background The City of Huntington Beach provides retiree medical benefits for eligible retirees enrolled in City sponsored plans. Retirees must be employed by the City at retirement and have a minimum of ten (10) years of continuous service. The benefits are provided in the form of: Monthly City contributions toward the retiree’s premium until age 65, and Allowing pre-65 retirees to receive coverage at the active premium rates instead of normally higher retiree rates. City Contributions Under the City of Huntington Beach Retiree Medical Subsidy Plan, the City makes contributions for eligible retirees’ medical plan premiums when the retiree enrolls in a City sponsored health plan before age 65. The current monthly amount paid by the City ranges from $121 – $344, depending on the retiree’s years of service at retirement. The City provided amounts are detailed in the Summary of Plan Provisions. Implicit Subsidy The City allows retirees to receive coverage prior to age 65 by paying premiums that are developed by blending active and retiree costs. Since retirees are older and generally cost more than actives, the premium paid by the retiree is less than the “true cost” of coverage for retirees. For example, under the Blue Shield Safety PPO, the estimated “true cost” for a retiree age 62 is $930 per month, while the required premium is only $387 per month. This implicit subsidy is considered an obligation under the new GASB requirements. The implicit subsidy does not apply to post 65 benefits as premiums are based exclusively on retiree costs. It also does not apply to the CalPERS provided benefits as these premiums are considered “community rated” and, unlike the City’s other plan costs, do not vary due to demographic differences of the employer. The accounting rules do not require recognition of such implicit subsidization in the case of a “community rated” plan. In this case, as just one of many employers in the plan, City premiums are the same no matter how many City retirees are covered. These rates are dependent on the proportion of retirees from all employers in the plan. Therefore, if the proportion of retirees in the CalPERS plans from all employers were higher and resulted in higher blended premiums, the CalPERS rates would be higher. In such a case, future higher rates would result in higher City costs, but would not necessarily be fully recognized through the new retiree medical accounting standards. Prior Accounting Guidance Up until now, the City has reported obligations for the Retiree Medical Subsidy Plan under the guidance of GASB Statement No. 12. City of Huntington Beach Postretirement Health Benefits i 09/30/2005 Actuarial Valuation Report
  • 17. Executive Summary (cont.) GASB 45 In June 2004, the Governmental Accounting Standards Board (GASB) issued GASB Statement 45, which addresses accounting and financial reporting for Postemployment Benefits Other Than Pensions (OPEB). This statement replaces and significantly modifies prior guidance. GASB 45 is effective for Phase I governments for fiscal years beginning after December 15, 2006. Although adoption of the GASB guidance is not required immediately, there are several reasons an agency should review its OPEB obligations sooner rather than later, such as: Pre-funding alternatives – although funding is not required, an unfunded plan results in higher balance sheet liabilities and costs Bargaining issues – recognizing how the obligation will impact the collective bargaining process in the near and long term Bond rating – potential impact to the cost of debt due to unfunded liabilities The City has taken a responsible step in requesting this study. Understanding the obligations now provides the City more time to review ways to mitigate the standard’s impact before it becomes mandatory. The liabilities and annual costs for the City’s contribution promises to retirees are calculated in this actuarial valuation in accordance with GASB 45. Similar to most government entities, the City does not currently prefund or recognize OPEB liability as benefits are accrued. As this report shows, any required accrual determined on a GASB basis will be considerably higher than the amount on a pay-as-you-go basis. It is important to note that only current active and retired participants are valued in this actuarial study. Future new entrants or any projected growth in the City’s employee population are not considered. This actuarial valuation determines the liabilities and annual costs for benefits as if the City adopted GASB 45 for the fiscal year ending September 30, 2006. ARC Development GASB requires an Annual Required Contribution (ARC) to be developed each year based on the Plan’s assets and liabilities. Although GASB does not actually require prefunding, the portion of the ARC that is not funded each year accumulates as a liability on the City’s financial statements. The ARC can be developed under a variety of funding methods. This report shows results under two of the methods permitted – Aggregate and Entry Age Normal. We also show the ARC calculated using different amortization periods as a level percent of pay. City of Huntington Beach Postretirement Health Benefits ii 09/30/2005 Actuarial Valuation Report
  • 18. Executive Summary (cont.) Summary of Results Liabilities There are a few terms to understand related to the Plan’s liabilities. The Present Value of Benefits (PVB) represents the actuarial present value of all future benefits expected to be paid to current employees and retirees. The Actuarial Accrued Liability (AAL) is the portion of the PVB attributable to past service. The Normal Cost is the portion of the PVB that is allocated to the current plan year for active employees. Each liability is a present value calculated by using a selected discount rate. As requested by the City, results in this report are shown using a 5.5% discount rate. In order to understand the sensitivity of results to changing this assumption, we also show results based on a 7.5% discount rate. The table below summarizes the liability results based on these two discount rates as of September 30, 2005: 5.5% 7.5% Present Value of Benefits (PVB) $34,792,000 $27,531,000 Actuarial Accrued Liability $25,310,000 $21,768,000 (AAL) Normal Cost $929,000 $645,000 Note: The AAL and normal cost shown above were calculated by spreading costs over the participants’ working lifetimes as a level percentage of pay. The costs could also be spread as level dollar amounts, which would result in higher AAL and normal cost. As an explanation of the meaning of the discount rate, the PVB using a 7.5% discount rate implies that if the City invested $27,531,000 today in an interest bearing account that earns 7.5%, the liabilities would be fully funded. By comparison, if the interest bearing account were to only earn 5.5%, $34,792,000 would be required to fully fund the liability. Discount Rate Selection As illustrated above, the discount rate can have a considerable impact on the magnitude of the liabilities, with lower discount rates resulting in higher liabilities. As guidance in selecting an appropriate discount rate, GASB states that the discount rate should be based on the long-term yield of investments used to finance the benefits. For example, if the City were to pre-fund the obligations by contributing into a trust with a mix of asset classes, 7.5% might be an appropriate discount rate. However, for an unfunded plan or in the case where contributions are simply allocated to separate accounts, but still reside in general assets, it is more appropriate to consider the return on general City assets. The liabilities shown in the report are based on a 5.5% discount rate. City of Huntington Beach Postretirement Health Benefits iii 09/30/2005 Actuarial Valuation Report
  • 19. Executive Summary (cont.) If the City wanted to better understand the long term advantages and disadvantages to pre- funding in a trust, a study which projects cash flow, accrual amounts, and balance sheet obligations based on current and future participants should be performed. Assets As of September 30, 2005, the City held $4.8 million in assets that are set aside for postretirement health benefits. As requested, this valuation considers these as Plan assets for purposes of determining the unfunded liabilities and annual costs. Annual Required Contributions (ARC) As discussed above, the ARC can be developed using various methodologies. Selecting an appropriate method and amortization period for funding the liabilities is a balance between the City’s ability to pay costs immediately and the long-term cost of borrowing. The following table summarizes the ARC under the methodologies provided in the report based on both the 5.5% and 7.5% discount rates for the fiscal year ending September 30, 2006: 5.5% 7.5% Aggregate Method $2,814,000 $2,377,000 % of pay 4.0% 3.4% Entry Age Normal Method 30 year amortization $1,897,000 $1,656,000 % of pay 2.7% 2.4% 20 year amortization $2,224,000 $1,910,000 % of pay 3.2% 2.7% 10 year amortization $3,224,000 $2,720,000 % of pay 4.6% 3.9% These annual costs can be compared to the estimated pay-as-you-go funding amount of $1,415,000. The difference in the cost methods is the period over which past service liabilities are spread. The aggregate method spreads unfunded past service liabilities over the future working lifetimes of active participants while the entry age normal method spreads unfunded past service liabilities over the specified amortization period. It should be noted that the entry age normal method with costs spread as a level percent of pay is used to determine the ARC for CalPERS retirement plans. The results shown are developed by spreading costs as a level percent of payroll ($70.6 million), as compared to a level dollar amount. Funding as a percent of payroll reduces current costs but increases future costs as City payroll increases. Obviously, funding over a longer period reduces annual costs but extends the funding period. City of Huntington Beach Postretirement Health Benefits iv 09/30/2005 Actuarial Valuation Report
  • 20. Executive Summary (cont.) Sensitivity to Healthcare Trend The healthcare trend rate also has a significant effect on the amounts reported. To illustrate, increasing the healthcare trend rates by one percentage point each year would increase the accrual by approximately 10%-12%. Comparisons to Prior GASB 12 Valuation For the City of Huntington Beach, there are two primary differences between accounting under GASB 12 and the guidance under GASB 45. Financial Statement Liability Recognition – Under GASB 45, the portion of the ARC that is not funded each year accumulates as a liability on the City’s financial statements. GASB 12 only required disclosure of the actuarial obligations, but had no financial statement impact. Implicit Subsidy Recognition – Under GASB 45, the implicit subsidy described above must be recognized in the actuarial obligations. GASB 12 only required recognition of the flat dollar subsidy contributed by the City. In addition, the previous GASB 12 valuation assumed 100% of future eligible retirees elect coverage, while this GASB 45 valuation assumes 85% elect medical coverage. * * * The following report shows the details of results by participant status and benefits provided, based on a 5.5% discount rate. City of Huntington Beach Postretirement Health Benefits v 09/30/2005 Actuarial Valuation Report
  • 21. Table of Contents Exhibits Page I Actuarial Valuation Certificate................................................................. 1 II Plan Liabilities........................................................................................... 3 III Annual Required Contributions............................................................... 5 IV Projected Benefit Payments..................................................................... 6 V GASB Reporting and Disclosure Information ........................................ 7 VI Participant Information............................................................................. 8 VII Summary of Principal Plan Provisions ................................................. 10 VIII Actuarial Assumptions........................................................................... 12 City of Huntington Beach Postretirement Health Benefits 09/30/2005 Actuarial Valuation Report
  • 22. I Actuarial Valuation Certificate This report presents the results of the actuarial valuation for the City of Huntington Beach Postretirement Health Benefits as of September 30, 2005 for development of the Annual Required Contribution and disclosure items under Governmental Accounting Standards Board (GASB) Statement 45. This report was prepared using generally accepted actuarial practices and methods. The actuarial assumptions used in the calculations are individually reasonable and reasonable in aggregate. Aon Consulting did not audit the employee data and financial information used in this valuation. On the basis of our review of this data, we believe that the information is sufficiently complete and reliable, and that it is appropriate for the purposes intended. Actuarial computations under GASB 45 are for purposes of fulfilling employer accounting requirements. The calculations reported herein have been made on a basis consistent with our understanding of these accounting standards. Determinations for purposes other than meeting Employer financial accounting requirements may be different from these results. As required by GASB 45, this valuation assumes this will be an ongoing plan. However, this assumption does not imply any obligation by the employer to continue the plan. This report is intended for the sole use of the City of Huntington Beach. It is intended only to supply information for the City to comply with the stated purpose of the report and may not be appropriate for other business purposes. Reliance on information contained in this report by anyone for other than the intended purposes, puts the relying entity at risk of being misled because of confusion or failure to understand applicable assumptions, methodologies, or limitations of the report's conclusions. Accordingly, no person or entity, including the City of Huntington Beach should base any representations or warranties in any business agreement on any statements or conclusions contained in this report without the written consent of Aon Consulting. The actuaries whose signatures appear below are Members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. The actuaries are available to answer any questions with regard to the matters enumerated in this report. City of Huntington Beach Postretirement Health Benefits 1 09/30/2005 Actuarial Valuation Report
  • 23. I Actuarial Valuation Certificate (cont.) Aon’s relationship with the Plan and the Plan Sponsor is strictly professional. There are no aspects of the relationship that may impair or appear to impair the objectivity of our work. Respectfully submitted, Bradley J. Au, MAAA Barry K. Schwebs, MAAA Vice President Assistant Vice President Enrollment Number 05-5899 Enrollment Number 05-6339 Tele: (213) 996-1729 Tele: (213) 996-1758 brad_au@aon.com barry_schwebs@aon.com Aon Consulting 707 Wilshire Boulevard Suite 5700 Los Angeles, CA 90017 March 24, 2006 J:ClientsCityHbchval2005RetMedRpt2005_Retmed.doc City of Huntington Beach Postretirement Health Benefits 2 09/30/2005 Actuarial Valuation Report
  • 24. II Plan Liabilities The liabilities shown in this exhibit were calculated using a 5.5% discount rate as of the September 30, 2005 valuation date. They are utilized in the development of the Annual Required Contribution (ARC) under various alternatives shown in the following exhibit. While GASB 45 allows the development of the ARC under various funding cost methods, this report shows the ARC under the Aggregate and Entry Age Normal cost methods, which are based on the following PVB and AAL liabilities, respectively. The Present Value of Benefits (PVB) represents the actuarial present value of all benefits ever to be paid to current employees and retirees. The PVB follows: (amounts in thousands) Misc Fire Police Life Total PVB City Contribution Active $ 3,309 $ 1,674 $ 3,031 $ 149 $ 8,163 Retirees 1,794 1,264 1,776 35 4,869 Subtotal 5,103 2,938 4,807 184 13,032 Implicit Subsidy Active 7,185 9,607 0 0 16,792 Retirees 1,891 3,077 0 0 4,968 Subtotal 9,076 12,684 0 0 21,760 All Benefits Active 10,494 11,281 3,031 149 24,955 Retirees 3,685 4,341 1,776 35 9,837 Total PVB 14,179 15,622 4,807 184 34,792 PVB Per Particpant Active 18 93 12 11 25 Retirees $ 34 $ 74 $ 24 $ 35 $ 41 City of Huntington Beach Postretirement Health Benefits 3 09/30/2005 Actuarial Valuation Report
  • 25. II Plan Liabilities (cont.) The Actuarial Accrued Liability (AAL) is a portion of the PVB attributable to past service. For retirees and fully eligible active employees, the AAL is equal to the PVB. For other active employees, the AAL is the portion of the PVB deemed to be accrued to date. The Normal Cost is the portion of the PVB that is allocated to the current plan year for active employees. The AAL in this report is based on the Entry Age Normal cost method and has been developed by spreading costs as a level percentage of payroll. Spreading costs as a level percent of payroll results in lower AAL (i.e. past service liability) and higher normal cost (i.e. future service liability) than if costs are spread as a level amount. The AAL developed by spreading costs as a level percentage of payroll follows: (amounts in thousands) Misc Fire Police Life Total EAN AAL City Contribution Active $2,507 $1,045 $1,844 $112 $5,508 Retirees 1,794 1,264 1,776 35 4,869 Subtotal 4,301 2,309 3,620 147 10,377 Implicit Subsidy Active 4,743 5,222 0 0 9,965 Retirees 1,891 3,077 0 0 4,968 Subtotal 6,634 8,299 0 0 14,933 All Benefits Active 7,250 6,267 1,844 112 15,473 Retirees 3,685 4,341 1,776 35 9,837 Total AAL 10,935 10,608 3,620 147 25,310 AAL Per Participant Active 12 52 7 9 16 Retirees 34 74 24 35 41 Normal Cost City Contribution 93 63 132 4 292 Implicit Subsidy 245 392 0 0 637 Total Normal Cost 338 455 132 4 929 NC Per Active Participant $ 0.6 $ 3.8 $ 0.5 $ 0.3 $ 0.9 City of Huntington Beach Postretirement Health Benefits 4 09/30/2005 Actuarial Valuation Report
  • 26. III Annual Required Contributions The ARC amounts shown on this page are determined by amortizing future costs as a level percent of payroll. The level percent of payroll method will reduce current costs but increase future costs as City payroll increases over time. The ARC amounts shown assume payments are made on average in the middle of the year. The assets are allocated proportionately to the liability for illustration purposes. Aggregate Cost Method The Aggregate method is one of the more basic and easy to understand cost methods. Under this method, the ARC is the amount required to fund the unfunded PVB over the future working lifetime of active participants. (in thousands) Misc Fire Police Life Total PVB $14,179 $15,622 $4,807 $184 $34,792 Assets (allocated by PVB) 1,968 2,168 667 26 4,829 Unfunded PVB $12,211 $13,454 $4,140 $158 $29,963 ARC $1,147 $1,263 $389 $15 $2,814 Percent of Payroll 3.0% 11.9% 1.9% 1.3% 4.0% Entry Age Normal Cost Method The Entry Age Normal method is used to develop the City’s CalPERS pension costs. Under this method, the ARC is equal to the Normal Cost plus the amortization of the unfunded AAL over the selected period. (in thousands) Misc Fire Police Life Total AAL $10,935 $10,608 $3,620 $147 $25,310 Assets (allocated by AAL) 2,086 2,024 691 28 4,829 Unfunded AAL $8,849 $8,584 $2,929 $119 $20,481 Normal Cost 338 455 132 4 929 Percent of Payroll .9% 4.3% .6% .4% 1.3% ARC - 30 year amortization $755 $862 $271 $9 $1,897 Percent of Payroll 2.0% 8.1% 1.3% .8% 2.7% - 20 year amortization 896 999 318 11 2,224 Percent of Payroll 2.4% 9.4% 1.5% 1.0% 3.2% - 10 year amortization 1,328 1,418 461 17 3,224 Percent of Payroll 3.5% 13.3% 2.2% 1.5% 4.6% Note: 30 years is the longest period that GASB allows for amortizing unfunded liabilities. City of Huntington Beach Postretirement Health Benefits 5 09/30/2005 Actuarial Valuation Report
  • 27. IV Projected Benefit Payments The following table shows the estimated projected net City benefit payments based on the current plan provisions, current plan participants, and the valuation assumptions used in this report. The payments would be equivalent to funding the liabilities on a pay-as-you-go basis. Projected Distributions Year Ending City Implicit September 30 Contribution Subsidy Total 2006 $ 895,000 $ 520,000 $1,415,000 2007 899,000 590,000 1,489,000 2008 904,000 658,000 1,562,000 2009 898,000 719,000 1,617,000 2010 874,000 771,000 1,645,000 2011 871,000 892,000 1,763,000 2012 859,000 988,000 1,847,000 2013 860,000 1,105,000 1,965,000 2014 842,000 1,211,000 2,053,000 2015 840,000 1,323,000 2,163,000 2016 830,000 1,430,000 2,260,000 2017 824,000 1,598,000 2,422,000 2018 830,000 1,758,000 2,588,000 2019 822,000 1,819,000 2,641,000 2020 827,000 1,974,000 2,801,000 2021 827,000 2,099,000 2,926,000 2022 817,000 2,257,000 3,074,000 2023 792,000 2,312,000 3,104,000 2024 792,000 2,406,000 3,198,000 2025 792,000 2,522,000 3,314,000 2026 762,000 2,532,000 3,294,000 2027 719,000 2,517,000 3,236,000 2028 677,000 2,478,000 3,155,000 2029 618,000 2,347,000 2,965,000 2030 588,000 2,359,000 2,947,000 2031 547,000 2,329,000 2,876,000 2032 508,000 2,263,000 2,771,000 2033 483,000 2,235,000 2,718,000 2034 453,000 2,171,000 2,624,000 2035 415,000 2,060,000 2,475,000 City of Huntington Beach Postretirement Health Benefits 6 09/30/2005 Actuarial Valuation Report
  • 28. V GASB Reporting and Disclosure Information GASB 45 requires certain items to be disclosed in the footnotes to the City’s financial statements, including the following: Plan description o Name of plan and identification of the entity that administers plan o Brief description of the types of benefits Funding policy o Required contribution rates of plan members o Required contribution rates of employer In addition, the tables below show required supplementary information to be shown with three years of historical information in the City’s financial statements. Sample information is shown as if the City adopted GASB 45 for the current fiscal year and elected to use the entry age normal cost method with unfunded liabilities amortized over 30 years. Development of Net OPEB Obligation (NOO) and Annual OPEB Cost (000s omitted) Adjustment to Annual NOO Interest on the Annual Annual Fiscal Required Actual End Net OPEB Required OPEB Interest Salary Amortization Year Contributions Contribution of Year Obligation Contribution Cost Rate Scale Factor 05/06 $ 1,897 N/A N/A $ 0 $ 0 $1,897 5.5% 3.0% 21.7 Schedule of Funding Progress (000s omitted) Unfunded UAAL as a Actuarial Actuarial Actuarial Percent of Type of Actuarial Value of Accrued Accrued Funded Covered Covered Interest Salary Valuation Valuation Date Assets Liability Liability Ratio Payroll Payroll Rate Scale Actual 09/30/2005 $ $4,829 $ 25,310 $ 20,481 19.1% $70,570 29.0% 5.5% 3.0% Schedule of Employer Contributions (000s omitted) Fiscal Year Annual Actual Percentage Net Pension Ending: OPEB Costs Contribution Contribution Obligation 9/30/2006 $ 1,897 N/A N/A N/A City of Huntington Beach Postretirement Health Benefits 7 09/30/2005 Actuarial Valuation Report
  • 29. VI Participant Information These exhibit summaries contain participant demographic information. Active Employee Age/Service Distribution Years of Service Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 >35 Total <25 14 0 0 0 0 0 0 0 14 25-29 54 13 0 0 0 0 0 0 67 30-34 58 53 3 0 0 0 0 0 114 35-39 39 52 31 12 1 0 0 0 135 40-44 39 33 42 46 19 1 0 0 180 45-49 23 27 22 38 54 21 1 0 186 50-54 19 16 6 22 20 25 19 2 129 55-59 14 14 10 13 10 21 17 7 106 60-64 4 7 3 11 2 5 6 1 39 >65 0 1 0 3 4 2 0 0 10 Total 264 216 117 145 110 75 43 10 980 Participant Statistics Misc Fire Police Life Total Retirees Number of retirees 107 59 73 1 240 Number of retiree spouses 37 49 53 1 138 Average age of retirees 59.18 59.93 57.27 56.41 58.77 Actives Number of actives 598 121 248 13 980 Number of active spouses 308 95 179 12 594 Average age of actives 47.16 40.21 39.57 41.00 44.30 Average past service 13.14 12.32 11.25 12.99 12.56 Estimated payroll (in millions), $37.72 $10.63 $21.07 $1.15 $70.57 FYE 9/30/06 City of Huntington Beach Postretirement Health Benefits 8 09/30/2005 Actuarial Valuation Report
  • 30. VI Participant Information (cont.) Participation By Medical Plan The table below summarizes the number of current participants in each medical plan: Retirees Plan Misc Fire Police Life Total BlueShield High 38 38 BlueShield Low 21 21 BlueShield HMO 40 12 52 BlueShield Safety 40 40 Kaiser 3 1 4 BlueShield HMO (Safety) 11 11 PERS CHOICE 6 6 PORAC 2 4 55 1 62 Waived 3 3 6 Grand Total 107 59 73 1 240 Actives Plan Misc Fire Police Life Total Kaiser HMO 5 1 6 BlueShield HMO 247 29 276 BlueShield PPO 83 83 166 BlueShield Hi Opt 90/10 118 118 CalPERS 80/20 3 3 CalPERS HMO 45 1 46 CalPERS Kaiser 3 3 PORAC 6 176 12 194 Waived 145 2 21 168 Grand Total 598 121 248 13 980 City of Huntington Beach Postretirement Health Benefits 9 09/30/2005 Actuarial Valuation Report
  • 31. VII Summary of Principal Plan Provisions The following plan provisions are the basis for the calculations in this actuarial valuation. 1. Benefit Eligibility All employees that are guaranteed a retirement benefit allowance by CalPERS, provided they have a minimum of ten (10) years of continuous service with the City (or are granted an industrial disability retirement) and are employed by the City at the time of their retirement. 2. Benefits / Plans Covered The City generally provides retirees access to the same medical coverage as active participants. Prior to age 65, the retiree premiums are the same as active premiums and are developed by blending active and retiree costs. The actuarial assumptions exhibit provides details of the premiums and contributions. After age 65, retiree premiums are based exclusively on retiree costs. Retirees shall receive a maximum of the following monthly amounts for payment of medical premiums. Disabled retirees with less than ten (10) years of service shall receive the subsidy assuming they have ten (10) years of service. Years of Retirements on or After Service October 1, 1992 10 $ 121.00 11 136.00 12 151.00 13 166.00 14 181.00 15 196.00 16 211.00 17 226.00 18 241.00 19 256.00 20 271.00 21 286.00 22 300.00 23 315.00 24 330.00 25 or more 344.00 Payment of benefit shall continue until the retiree is eligible for Medicare coverage. Once a retiree is eligible for Medicare, coverage for dependents will continue until the earlier of age 65 or the expiration of 36 months of COBRA continuation coverage. City of Huntington Beach Postretirement Health Benefits 10 09/30/2005 Actuarial Valuation Report
  • 32. VII Summary of Principal Plan Provisions (cont.) 3. Dependent coverage Eligible spouses may elect coverage under the medical plans if they pay the required contribution. 4. Survivor coverage Once a retiree is eligible for Medicare, coverage for dependents will continue until the earlier of age 65 or the expiration of 36 months of COBRA continuation coverage. 5. Retiree contributions Retirees pay the portion of premiums not paid by the City. City of Huntington Beach Postretirement Health Benefits 11 09/30/2005 Actuarial Valuation Report
  • 33. VIII Actuarial Assumptions 1. Actuarial Cost Method The costs shown in the report were developed using two different funding methods: Under the Aggregate cost method, the ARC equals an amortization of the unfunded present value of future benefits, based on the following: Period equal to the average future working lifetime of active participants Level percentage of future payroll amounts The Entry Age Normal (EAN) cost method spreads plan costs for each participant from entry date (assuming the plan existed on the employee’s hire date) to the expected retirement date. Under the EAN cost method, the plan’s normal cost is developed as a level percentage of payroll spread over the participants’ working lifetime. The AAL is the cumulative value, on the valuation date, of prior service costs. For retirees, the AAL is the present value of all projected benefits. The ARC under this method equals the normal cost plus the amortization of the unfunded AAL based on the following: Specified amortization period (10, 20, or 30 years are shown) Level percentage of future payroll amounts The Plan costs are derived by making certain specific assumptions as to the rates of interest, mortality, turnover, and the like, which are assumed to hold for many years into the future. Actual experience may differ somewhat from the assumptions and the effect of such differences is spread over all periods. Due to these differences, the costs determined by the valuation must be regarded as estimates of the true Plan costs. 2. Discount Rate 5.5% - This is based on the assumption that benefits will be paid from general City assets earmarked for purposes of the City’s Retirement Subsidy Benefits, and not invested in a separate trust. 3. Payroll Increases 3.0% - This is the annual rate at which total payroll is expected to increase and is used in the cost method used to calculate the ARC as a level percent of payroll. City of Huntington Beach Postretirement Health Benefits 12 09/30/2005 Actuarial Valuation Report
  • 34. VIII Actuarial Assumptions (cont.) 4. Mortality Mortality rates developed in the 1997-2002 CalPERS Experience Study were used in the valuation. Sample rates are as follows: Pre-Retirement Post-Retirement Miscellaneous & Life Fire & Police All Groups Age Male Female Male Female Male Female 50 0.00156 0.00102 0.00179 0.00125 0.00245 0.00136 51 0.00167 0.00110 0.00191 0.00134 0.00276 0.00154 52 0.00179 0.00119 0.00204 0.00144 0.00317 0.00175 53 0.00192 0.00129 0.00217 0.00154 0.00356 0.00196 54 0.00206 0.00140 0.00232 0.00166 0.00390 0.00223 55 0.00221 0.00151 0.00248 0.00178 0.00429 0.00253 56 0.00237 0.00164 0.00264 0.00191 0.00465 0.00281 57 0.00255 0.00178 0.00283 0.00206 0.00504 0.00324 58 0.00273 0.00192 0.00302 0.00221 0.00564 0.00369 59 0.00293 0.00208 0.00322 0.00237 0.00645 0.00397 60 0.00314 0.00226 0.00344 0.00256 0.00721 0.00442 61 0.00337 0.00244 0.00368 0.00275 0.00862 0.00495 62 0.00362 0.00265 0.00393 0.00296 0.00971 0.00545 63 0.00388 0.00287 0.00420 0.00319 0.01043 0.00621 64 0.00416 0.00310 0.00449 0.00343 0.01161 0.00704 5. Turnover Turnover rates developed in the 1997-2002 CalPERS Experience Study were used in the valuation. The following sample rates are based on age and service: Public Agency - Miscellaneous & Life Entry Age Years of Service 20 25 30 35 40 45 0 0.1760 0.1691 0.1622 0.1553 0.1483 0.1414 1 0.1561 0.1492 0.1423 0.1353 0.1284 0.1215 2 0.1362 0.1293 0.1224 0.1154 0.1085 0.1016 3 0.1163 0.1094 0.1025 0.0955 0.0886 0.0817 4 0.0964 0.0895 0.0826 0.0756 0.0687 0.0618 5 0.0283 0.0257 0.0232 0.0206 0.0181 0.0155 10 0.0184 0.0161 0.0139 0.0117 0.0095 0.0073 15 0.0120 0.0102 0.0083 0.0064 0.0046 0.0027 20 0.0073 0.0057 0.0041 0.0025 0.0009 0.0002 25 0.0034 0.0022 0.0009 0.0002 0.0002 0.0002 30 0.0010 0.0002 0.0002 0.0002 0.0002 0.0002 City of Huntington Beach Postretirement Health Benefits 13 09/30/2005 Actuarial Valuation Report
  • 35. VIII Actuarial Assumptions (cont.) Public Agency - Fire & Police Fire Police Years of Attained Attained Age Attained Age Attained Service Age <50 >50 <50 Age >50 0 0.0947 0.0947 0.1299 0.1299 1 0.0739 0.0739 0.0816 0.0816 2 0.0531 0.0531 0.0348 0.0348 3 0.0323 0.0323 0.0331 0.0331 4 0.0290 0.0290 0.0314 0.0314 5 0.0257 0.0095 0.0297 0.0110 10 0.0090 0.0029 0.0213 0.0068 15 0.0079 0.0021 0.0129 0.0035 20 0.0069 0.0016 0.0097 0.0022 25 0.0057 0.0001 0.0082 0.0015 30 0.0054 0.0009 0.0076 0.0012 6. Disability Disability rates developed in the 1997-2002 CalPERS Experience Study were used in the valuation. Sample rates are as follows: Age Fire Police 30 0.0022 0.0058 40 0.0042 0.0116 50 0.0067 0.0175 60 0.0616 0.0601 City of Huntington Beach Postretirement Health Benefits 14 09/30/2005 Actuarial Valuation Report
  • 36. VIII Actuarial Assumptions (cont.) 7. Retirement Age Retirement rates developed in the 1997-2002 CalPERS Experience Study were used in the valuation. Sample rates are as follows: Miscellaneous 2% @ 55 Years of Service Attained Age 5 10 15 20 25 30 50 0.0145 0.0184 0.0224 0.0269 0.0307 0.0366 51 0.0106 0.0135 0.0164 0.0198 0.0226 0.0269 52 0.0114 0.0145 0.0176 0.0212 0.0241 0.0287 53 0.0150 0.0190 0.0231 0.0278 0.0318 0.0378 54 0.0199 0.0252 0.0307 0.0369 0.0421 0.0502 55 0.0475 0.0604 0.0734 0.0883 0.1008 0.1200 56 0.0395 0.0502 0.0611 0.0735 0.0838 0.0998 57 0.0427 0.0542 0.0659 0.0793 0.0905 0.1078 58 0.0473 0.0601 0.0730 0.0879 0.1003 0.1194 59 0.0510 0.0648 0.0788 0.0948 0.1082 0.1287 60 0.0715 0.0908 0.1104 0.1328 0.1516 0.1804 Fire 3% @ 50 Years of Service Attained Age 5 10 15 20 25 30 50 0.0341 0.0341 0.0341 0.0477 0.0679 0.0804 51 0.0463 0.0463 0.0463 0.0647 0.0922 0.1091 52 0.0693 0.0693 0.0693 0.0967 0.1377 0.1630 53 0.0835 0.0835 0.0835 0.1166 0.1661 0.1965 54 0.1025 0.1025 0.1025 0.1431 0.2038 0.2412 55 0.1265 0.1265 0.1265 0.1766 0.2516 0.2977 56 0.1210 0.1210 0.1210 0.1690 0.2407 0.2848 57 0.1010 0.1010 0.1010 0.1411 0.2010 0.2378 58 0.1184 0.1184 0.1184 0.1652 0.2354 0.2786 59 0.1002 0.1002 0.1002 0.1399 0.1993 0.2358 60 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 VIII Actuarial Assumptions (cont.) City of Huntington Beach Postretirement Health Benefits 15 09/30/2005 Actuarial Valuation Report
  • 37. Police 3% @ 50 Years of Service Attained Age 5 10 15 20 25 30 50 0.0435 0.0435 0.0435 0.0821 0.1208 0.1559 51 0.0385 0.0385 0.0385 0.0728 0.1071 0.1382 52 0.0614 0.0614 0.0614 0.1159 0.1705 0.2200 53 0.0689 0.0689 0.0689 0.1303 0.1916 0.2472 54 0.0710 0.0710 0.0710 0.1342 0.1974 0.2547 55 0.0898 0.0898 0.0898 0.1698 0.2497 0.3222 56 0.0687 0.0687 0.0687 0.1299 0.1910 0.2465 57 0.0803 0.0803 0.0803 0.1518 0.2232 0.2880 58 0.0791 0.0791 0.0791 0.1495 0.2198 0.2837 59 0.0820 0.0820 0.0820 0.1549 0.2279 0.2940 60 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 Life 3%@50 Years of Service Attained Age 5 10 15 20 25 30 50 0.0435 0.0435 0.0435 0.0821 0.1208 0.1559 51 0.0385 0.0385 0.0385 0.0728 0.1071 0.1382 52 0.0614 0.0614 0.0614 0.1159 0.1705 0.2200 53 0.0689 0.0689 0.0689 0.1303 0.1916 0.2472 54 0.0710 0.0710 0.0710 0.1342 0.1974 0.2547 55 0.0898 0.0898 0.0898 0.1698 0.2497 0.3222 56 0.0687 0.0687 0.0687 0.1299 0.1910 0.2465 57 0.0803 0.0803 0.0803 0.1518 0.2232 0.2880 58 0.0791 0.0791 0.0791 0.1495 0.2198 0.2837 59 0.0820 0.0820 0.0820 0.1549 0.2279 0.2940 60 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 City of Huntington Beach Postretirement Health Benefits 16 09/30/2005 Actuarial Valuation Report
  • 38. VIII Actuarial Assumptions (cont.) 8. Annual Medical Inflation (“Trend”) The medical trend rate represents the long-term expected growth of medical benefits paid by the plan, due to non-age-related factors such as general medical inflation, utilization, new technology, and the like. The following table sets forth the trend assumptions used for the valuation: Year Annual Rate 1 13.0% 2 12.0% 3 11.0% 4 10.0% 5 9.0% 6 8.0% 7 7.0% 8 6.0% 9+ 5.0% 9. Monthly Medical Costs & Plan Election Percentage The table below shows estimated active and retiree costs. The estimates were provided by carriers. Assumed Election % Plan Single Coverage at Retirement Miscellaneous Blue Shield-HMO $278 40% Blue Shield-High 410 40% Blue Shield-Low 361 20% Fire Blue Shield-HMO 303 25% Blue Shield-Safety 387 75% Police & Life Blue Shield HMO 358 20% PORAC 399 80% Underlying this estimate is the assumption that future retirees elect coverage, by plan, in the same proportion as current retirees. City of Huntington Beach Postretirement Health Benefits 17 09/30/2005 Actuarial Valuation Report
  • 39. VIII Actuarial Assumptions (cont.) 10. Base Year Claims The expected monthly claims for retirees not yet eligible for Medicare were developed from the costs shown above. The following are claims at sample ages: Miscellaneous Age BS-HMO BS-High BS-Low Male Female Male Female Male Female <30 $103.55 $186.38 $153.03 $275.45 $134.68 $242.43 30-34 $134.61 $207.09 $198.93 $306.05 $175.09 $269.37 35-39 $176.03 $227.80 $260.14 $336.66 $228.96 $296.31 40-44 $207.09 $248.51 $306.05 $367.26 $269.37 $323.24 45-49 $248.51 $310.64 $367.26 $459.08 $323.24 $404.05 50-54 $310.64 $331.35 $459.08 $489.68 $404.05 $430.99 55-59 $372.77 $362.41 $550.89 $535.59 $484.86 $471.40 60-64 $465.96 $393.48 $688.62 $581.50 $606.08 $511.80 Fire Age BS-HMO BS-Safety Male Female Male Female <30 $161.66 $290.99 $206.67 $372.00 30-34 $210.16 $323.33 $268.67 $413.34 35-39 $274.83 $355.66 $351.34 $454.67 40-44 $323.33 $387.99 $413.34 $496.00 45-49 $387.99 $484.99 $496.00 $620.01 50-54 $484.99 $517.32 $620.01 $661.34 55-59 $581.99 $565.82 $744.01 $723.34 60-64 $727.48 $614.32 $930.01 $785.34 CalPERS Health Plans (Fire, Police, & Life) The CalPERS health benefit costs are not assumed to vary by age as costs are considered to be “community rated”. Therefore, the costs at each age are equal to the premiums charged for each plan (e.g. Blue Shield HMO - $358, PORAC - $399). City of Huntington Beach Postretirement Health Benefits 18 09/30/2005 Actuarial Valuation Report
  • 40. VIII Actuarial Assumptions (cont.) 11. Monthly Retiree Contributions The assumed monthly retiree contributions were based on premiums paid by current retirees not yet eligible for Medicare less any City contributions on behalf of the retiree. 12. Participants Valued Only current active and retired participants are valued. No future entrants are considered in this valuation. 13. Plan Participation 85% of future eligible retirees are assumed to elect coverage. 14. Spouse Assumption Current marital status is used. Males are assumed to be three years older than their female spouses. 15. Participants Valued Only current active and retired participants are valued. No future entrants are considered in this valuation. City of Huntington Beach Postretirement Health Benefits 19 09/30/2005 Actuarial Valuation Report
  • 41. APPENDIX B
  • 42. TRUST & INVESTMENT MANAGEMENT SERVICES REQUEST FOR PROPOSAL VENDOR APPLICATION FORM TYPE OF APPLICANT: NEW CURRENT VENDOR Legal Contractual Name of Corporation: ______________________________________ Contact Person for Agreement: ____________________________________________________ Corporate Mailing Address: ________________________________________________ City, State and Zip Code: __________________________________________________ E-Mail Address: _________________________ Phone: ________________________ Fax: ________________________ Contact Person for Proposals: ______________________________________________________ Title:______________________________ E-Mail Address: ______________________ Business Telephone: _________________________ Business Fax: ________________ Is your business: (check one) NON PROFIT CORPORATION FOR PROFIT CORPORATION Is your business: (check one) CORPORATION LIMITED LIABILITY PARTNERSHIP INDIVIDUAL SOLE PROPRIETORSHIP PARTNERSHIP STATE/LOCAL GOVERNMENT AGENCY Names & Titles of Corporate Board Members (Also list Names & Titles of persons with written authorization/resolution to sign contracts) Names Title Phone ___________________________________ ________________ ___________________ ___________________________________ ________________ ___________________ 1 of 2
  • 43. ___________________________________ ________________ ___________________ ___________________________________ ________________ ___________________ ___________________________________ ________________ ___________________ ___________________________________ ________________ ___________________ Federal Tax Identification Number: __________________________________________ City of Huntington Beach Business License Number: _____________________________ (If none, you must obtain a Huntington Beach Business License upon award of contract.) Note: Governmental Agencies are exempt from this requirement. City of Huntington Beach Business License Expiration Date: __________________________ 2 of 2
  • 44. APPENDIX C
  • 45. PROFESSIONAL SERVICES CONTRACT BETWEEN THE CITY OF HUNTINGTON BEACH AND __________________________________ FOR ____________________________________________________ THIS AGREEMENT ("Agreement") is made and entered into by and between the City of Huntington Beach, a municipal corporation of the State of California, hereinafter referred to as "CITY, and ___________________________, a ______________________ hereinafter referred to as "CONSULTANT." WHEREAS, CITY desires to engage the services of a consultant to _______________________________________________________; and Pursuant to documentation on file in the office of the City Clerk, the provisions of the Huntington Beach Municipal Code, Chapter 3.03, relating to procurement of professional service contracts have been complied with; and CONSULTANT has been selected to perform these services, NOW, THEREFORE, it is agreed by CITY and CONSULTANT as follows: 1. SCOPE OF SERVICES CONSULTANT shall provide all services as described in Exhibit "A," which is attached hereto and incorporated into this Agreement by this reference. These services shall sometimes hereinafter be referred to as the "PROJECT." CONSULTANT hereby designates _______________________ who shall represent it and be its sole contact and agent in all consultations with CITY during the performance of this Agreement. agree/ surfnet/professional svcs mayor 1 12/07
  • 46. 2. CITY STAFF ASSISTANCE CITY shall assign a staff coordinator to work directly with CONSULTANT in the performance of this Agreement. 3. TERM; TIME OF PERFORMANCE Time is of the essence of this Agreement. The services of CONSULTANT are to commence on ____________________, 20____ (the "Commencement Date"). This Agreement shall automatically terminate three (3) years from the Commencement Date, unless extended or sooner terminated as provided herein. All tasks specified in Exhibit "A" shall be completed no later than ______________________ from the Commencement Date. The time for performance of the tasks identified in Exhibit "A" are generally to be shown in Exhibit "A." This schedule may be amended to benefit the PROJECT if mutually agreed to in writing by CITY and CONSULTANT. In the event the Commencement Date precedes the Effective Date, CONSULTANT shall be bound by all terms and conditions as provided herein. 4. COMPENSATION In consideration of the performance of the services described herein, CITY agrees to pay CONSULTANT on a time and materials basis at the rates specified in Exhibit "B," which is attached hereto and incorporated by reference into this Agreement, a fee, including all costs and expenses, not to exceed ______________________________ Dollars ($_____________________). 5. EXTRA WORK In the event CITY requires additional services not included in Exhibit "A" or changes in the scope of services described in Exhibit "A," CONSULTANT will undertake agree/ surfnet/professional svcs mayor 2 12/07
  • 47. such work only after receiving written authorization from CITY. Additional compensation for such extra work shall be allowed only if the prior written approval of CITY is obtained. 6. METHOD OF PAYMENT CONSULTANT shall be paid pursuant to the terms of Exhibit "B." 7. DISPOSITION OF PLANS, ESTIMATES AND OTHER DOCUMENTS CONSULTANT agrees that title to all materials prepared hereunder, including, without limitation, all original drawings, designs, reports, both field and office notices, calculations, computer code, language, data or programs, maps, memoranda, letters and other documents, shall belong to CITY, and CONSULTANT shall turn these materials over to CITY upon expiration or termination of this Agreement or upon PROJECT completion, whichever shall occur first. These materials may be used by CITY as it sees fit. 8. HOLD HARMLESS CONSULTANT hereby agrees to protect, defend, indemnify and hold harmless CITY, its officers, elected or appointed officials, employees, agents and volunteers from and against any and all claims, damages, losses, expenses, judgments, demands and defense costs (including, without limitation, costs and fees of litigation of every nature or liability of any kind or nature) arising out of or in connection with CONSULTANT's (or CONSULTANT's subcontractors, if any) negligent (or alleged negligent) performance of this Agreement or its failure to comply with any of its obligations contained in this Agreement by CONSULTANT, its officers, agents or employees except such loss or damage which was caused by the sole negligence or willful misconduct of CITY. CONSULTANT will conduct all defense at its sole cost and expense and CITY shall approve selection of CONSULTANT's counsel. This indemnity shall apply to all claims and liability regardless of whether any agree/ surfnet/professional svcs mayor 3 12/07
  • 48. insurance policies are applicable. The policy limits do not act as limitation upon the amount of indemnification to be provided by CONSULTANT. 9. PROFESSIONAL LIABILITY INSURANCE CONSULTANT shall obtain and furnish to CITY a professional liability insurance policy covering the work performed by it hereunder. This policy shall provide coverage for CONSULTANT’s professional liability in an amount not less than One Million Note: $10 million is required Dollars instead of $1 million occurrence and in the aggregate. The above-mentioned insurance ($1,000,000.00) per shall not contain a self-insured retention, "deductible" or any other similar form of limitation on the required coverage except with the express written consent of CITY. A claims-made policy shall be acceptable if the policy further provides that: A. The policy retroactive date coincides with or precedes the initiation of the scope of work (including subsequent policies purchased as renewals or replacements). B. CONSULTANT shall notify CITY of circumstances or incidents that might give rise to future claims. CONSULTANT will make every effort to maintain similar insurance during the required extended period of coverage following PROJECT completion. If insurance is terminated for any reason, CONSULTANT agrees to purchase an extended reporting provision of at least two (2) years to report claims arising from work performed in connection with this Agreement. If CONSULTANT fails or refuses to produce or maintain the insurance required by this section or fails or refuses to furnish the CITY with required proof that insurance has been procured and is in force and paid for, the CITY shall have the right, at the CITY’s election, to forthwith terminate this Agreement. Such termination shall not effect agree/ surfnet/professional svcs mayor 4 12/07
  • 49. Consultant’s right to be paid for its time and materials expended prior to notification of termination. CONSULTANT waives the right to receive compensation and agrees to indemnify the CITY for any work performed prior to approval of insurance by the CITY. 10. CERTIFICATE OF INSURANCE Prior to commencing performance of the work hereunder, CONSULTANT shall furnish to CITY a certificate of insurance subject to approval of the City Attorney evidencing the foregoing insurance coverage as required by this Agreement; the certificate shall: A. provide the name and policy number of each carrier and policy; B. state that the policy is currently in force; and C. shall promise that such policy shall not be suspended, voided or canceled by either party, reduced in coverage or in limits except after thirty (30) days’ prior written notice; however, ten (10) days’ prior written notice in the event of cancellation for nonpayment of premium. CONSULTANT shall maintain the foregoing insurance coverage in force until the work under this Agreement is fully completed and accepted by CITY. The requirement for carrying the foregoing insurance coverage shall not derogate from CONSULTANT's defense, hold harmless and indemnification obligations as set forth in this Agreement. CITY or its representative shall at all times have the right to demand the original or a copy of the policy of insurance. CONSULTANT shall pay, in a prompt and timely manner, the premiums on the insurance hereinabove required. 11. INDEPENDENT CONTRACTOR CONSULTANT is, and shall be, acting at all times in the performance of this Agreement as an independent contractor herein and not as an employee of CITY. agree/ surfnet/professional svcs mayor 5 12/07
  • 50. CONSULTANT shall secure at its own cost and expense, and be responsible for any and all payment of all taxes, social security, state disability insurance compensation, unemployment compensation and other payroll deductions for CONSULTANT and its officers, agents and employees and all business licenses, if any, in connection with the PROJECT and/or the services to be performed hereunder. 12. TERMINATION OF AGREEMENT All work required hereunder shall be performed in a good and workmanlike manner. CITY may terminate CONSULTANT's services hereunder at any time with or without cause, and whether or not the PROJECT is fully complete. Any termination of this Agreement by CITY shall be made in writing, notice of which shall be delivered to CONSULTANT as provided herein. In the event of termination, all finished and unfinished documents, exhibits, report, and evidence shall, at the option of CITY, become its property and shall be promptly delivered to it by CONSULTANT. 13. ASSIGNMENT AND DELEGATION This Agreement is a personal service contract and the work hereunder shall not be assigned, delegated or subcontracted by CONSULTANT to any other person or entity without the prior express written consent of CITY. If an assignment, delegation or subcontract is approved, all approved assignees, delegates and subconsultants must satisfy the insurance requirements as set forth in Sections 9 and 10 hereinabove. 14. COPYRIGHTS/PATENTS CITY shall own all rights to any patent or copyright on any work, item or material produced as a result of this Agreement. agree/ surfnet/professional svcs mayor 6 12/07
  • 51. 15. CITY EMPLOYEES AND OFFICIALS CONSULTANT shall employ no CITY official nor any regular CITY employee in the work performed pursuant to this Agreement. No officer or employee of CITY shall have any financial interest in this Agreement in violation of the applicable provisions of the California Government Code. 16. NOTICES Any notices, certificates, or other communications hereunder shall be given either by personal delivery to CONSULTANT's agent (as designated in Section 1 hereinabove) or to CITY as the situation shall warrant, or by enclosing the same in a sealed envelope, postage prepaid, and depositing the same in the United States Postal Service, to the addresses specified below. CITY and CONSULTANT may designate different addresses to which subsequent notices, certificates or other communications will be sent by notifying the other party via personal delivery, a reputable overnight carrier or U. S. certified mail-return receipt requested: TO CITY: TO CONSULTANT: City of Huntington Beach __________________________________ ATTN: ____________________________ __________________________________ 2000 Main Street __________________________________ Huntington Beach, CA 92648 __________________________________ __________________________________ 17. CONSENT When CITY's consent/approval is required under this Agreement, its consent/approval for one transaction or event shall not be deemed to be a consent/approval to any subsequent occurrence of the same or any other transaction or event. agree/ surfnet/professional svcs mayor 7 12/07
  • 52. 18. MODIFICATION No waiver or modification of any language in this Agreement shall be valid unless in writing and duly executed by both parties. 19. SECTION HEADINGS The titles, captions, section, paragraph and subject headings, and descriptive phrases at the beginning of the various sections in this Agreement are merely descriptive and are included solely for convenience of reference only and are not representative of matters included or excluded from such provisions, and do not interpret, define, limit or describe, or construe the intent of the parties or affect the construction or interpretation of any provision of this Agreement. 20. INTERPRETATION OF THIS AGREEMENT The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against any of the parties. If any provision of this Agreement is held by an arbitrator or court of competent jurisdiction to be unenforceable, void, illegal or invalid, such holding shall not invalidate or affect the remaining covenants and provisions of this Agreement. No covenant or provision shall be deemed dependent upon any other unless so expressly provided here. As used in this Agreement, the masculine or neuter gender and singular or plural number shall be deemed to include the other whenever the context so indicates or requires. Nothing contained herein shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provision contained herein and any present or future statute, law, ordinance or regulation contrary to which the parties have no right to contract, then the latter shall prevail, and the provision of this Agreement which is hereby affected shall be agree/ surfnet/professional svcs mayor 8 12/07
  • 53. curtailed and limited only to the extent necessary to bring it within the requirements of the law. 21. DUPLICATE ORIGINAL The original of this Agreement and one or more copies hereto have been prepared and signed in counterparts as duplicate originals, each of which so executed shall, irrespective of the date of its execution and delivery, be deemed an original. Each duplicate original shall be deemed an original instrument as against any party who has signed it. 22. IMMIGRATION CONSULTANT shall be responsible for full compliance with the immigration and naturalization laws of the United States and shall, in particular, comply with the provisions of the United States Code regarding employment verification. 23. LEGAL SERVICES SUBCONTRACTING PROHIBITED CONSULTANT and CITY agree that CITY is not liable for payment of any subcontractor work involving legal services, and that such legal services are expressly outside the scope of services contemplated hereunder. CONSULTANT understands that pursuant to Huntington Beach City Charter Section 309, the City Attorney is the exclusive legal counsel for CITY; and CITY shall not be liable for payment of any legal services expenses incurred by CONSULTANT. 24. ATTORNEY’S FEES In the event suit is brought by either party to construe, interpret and/or enforce the terms and/or provisions of this Agreement or to secure the performance hereof, each party shall bear its own attorney’s fees, such that the prevailing party shall not be entitled to recover its attorney's fees from the nonprevailing party. agree/ surfnet/professional svcs mayor 9 12/07
  • 54. 25. SURVIVAL Terms and conditions of this Agreement, which by their sense and context survive the expiration or termination of this Agreement, shall so survive. 26. GOVERNING LAW This Agreement shall be governed and construed in accordance with the laws of the State of California. 27. SIGNATORIES Each undersigned represents and warrants that its signature hereinbelow has the power, authority and right to bind their respective parties to each of the terms of this Agreement, and shall indemnify CITY fully for any injuries or damages to CITY in the event that such authority or power is not, in fact, held by the signatory or is withdrawn. CONSULTANT’s initials 28. ENTIRETY The parties acknowledge and agree that they are entering into this Agreement freely and voluntarily following extensive arm's length negotiation, and that each has had the opportunity to consult with legal counsel prior to executing this Agreement. The parties also acknowledge and agree that no representations, inducements, promises, agreements or warranties, oral or otherwise, have been made by that party or anyone acting on that party's behalf, which are not embodied in this Agreement, and that that party has not executed this Agreement in reliance on any representation, inducement, promise, agreement, warranty, fact or circumstance not expressly set forth in this Agreement. This Agreement, and the attached exhibits, contain the entire agreement between the parties respecting the subject matter of this Agreement, and supersede all prior understandings and agreements whether oral or in writing between the parties respecting the subject matter hereof. agree/ surfnet/professional svcs mayor 10 12/07
  • 55. 29. EFFECTIVE DATE IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by and through their authorized officers. This Agreement shall be effective on the date of its approval by the City Council. This Agreement shall expire when terminated as provided herein. CONSULTANT, CITY OF HUNTINGTON BEACH, a ____________________________________ municipal corporation of the State of COMPANY NAME California ____________________________________ ________________________________ Mayor By: _________________________________ print name City Clerk ITS: (circle one) Chairman/President/Vice President INITIATED AND APPROVED: AND ____________________________________ By: _________________________Director/Chief print name ITS: (circle one) Secretary/Chief Financial Officer/Asst. Secretary - Treasurer REVIEWED AND APPROVED: _________________________________ City Administrator APPROVED AS TO FORM: _________________________________ City Attorney agree/ surfnet/professional svcs mayor 11 12/07
  • 56. EXHIBIT "A" A. STATEMENT OF WORK: (Narrative of work to be performed) B. CONSULTANT'S DUTIES AND RESPONSIBILITIES: 1. 2. C. CITY'S DUTIES AND RESPONSIBILITIES: 1. 2. D. WORK PROGRAM/PROJECT SCHEDULE: EXHIBIT A
  • 57. EXHIBIT "B" Payment Schedule (Fixed Fee Payment) 1. CONSULTANT shall be entitled to monthly progress payments toward the fixed fee set forth herein in accordance with the following progress and payment schedules. 2. Delivery of work product: A copy of every memorandum, letter, report, calculation and other documentation prepared by CONSULTANT shall be submitted to CITY to demonstrate progress toward completion of tasks. In the event CITY rejects or has comments on any such product, CITY shall identify specific requirements for satisfactory completion. 3. CONSULTANT shall submit to CITY an invoice for each monthly progress payment due. Such invoice shall: A) Reference this Agreement; B) Describe the services performed; C) Show the total amount of the payment due; D) Include a certification by a principal member of CONSULTANT's firm that the work has been performed in accordance with the provisions of this Agreement; and E) For all payments include an estimate of the percentage of work completed. Upon submission of any such invoice, if CITY is satisfied that CONSULTANT is making satisfactory progress toward completion of tasks in accordance with this Agreement, CITY shall approve the invoice, in which event payment shall be made within thirty (30) days of receipt of the invoice by CITY. Such approval shall not be unreasonably withheld. If CITY does not approve an invoice, CITY shall notify CONSULTANT in writing of the reasons for non-approval and the schedule of performance set forth in Exhibit "A" may at the option of CITY be suspended until the parties agree that past performance by CONSULTANT is in, or has been brought into compliance, or until this Agreement has expired or is terminated as provided herein. 4. Any billings for extra work or additional services authorized in advance and in writing by CITY shall be invoiced separately to CITY. Such invoice shall contain all of the information required above, and in addition shall list the hours expended and hourly rate charged for such time. Such invoices shall be approved by CITY if the work performed is in accordance with the extra work or additional services requested, and if CITY is satisfied that the statement of hours worked and costs incurred is accurate. Such approval shall not be unreasonably withheld. Any dispute between the parties concerning payment of such an invoice shall be treated as separate and apart from the ongoing performance of the remainder of this Agreement. Exhibit B
  • 58. PROFESSIONAL SERVICES CONTRACT BETWEEN THE CITY OF HUNTINGTON BEACH AND __________________________________ FOR ____________________________________________________ Table of Contents 1 Scope of Services.....................................................................................................1 2 City Staff Assistance................................................................................................2 3 Term; Time of Performance.....................................................................................2 4 Compensation ..........................................................................................................2 5 Extra Work...............................................................................................................2 6 Method of Payment..................................................................................................3 7 Disposition of Plans, Estimates and Other Documents ...........................................3 8 Hold Harmless .........................................................................................................3 9 Professional Liability Insurance......................................................................…….4 10 Certificate of Insurance............................................................................................5 11 Independent Contractor............................................................................................6 12 Termination of Agreement.......................................................................................6 13 Assignment and Delegation ......................................................................................6 14 Copyrights/Patents ...................................................................................................7 15 City Employees and Officials ..................................................................................7 16 Notices……………………………………………………………………………..7 17 Consent ....................................................................................................................8 18 Modification.............................................................................................................8 19 Section Headings .....................................................................................................8 20 Interpretation of this Agreement..............................................................................8 21 Duplicate Original....................................................................................................9 22 Immigration...............................................................................................................9 23 Legal Services Subcontracting Prohibited ................................................................9 24 Attorney's Fees..........................................................................................................10 25 Survival .....................................................................................................................10 26 Governing Law .........................................................................................................10 27 Signatories.................................................................................................................10 28 Entirety......................................................................................................................10 29 Effective Date………………………………………………………………………11
  • 59. APPENDIX D
  • 60. INSURANCE REQUIREMENTS FOR PROFESSIONAL SERVICE CONTRACTORS PLEASE GIVE THESE INSURANCE REQUIREMENTS TO YOUR INSURANCE AGENT Huntington Beach City Council Resolution No. 2007-3 requires submittal of certificates of insurance evidencing the following minimum limits with a California admitted carrier with a current A.M. Best’s Rating of no less than A:VII : Minimum Limits of Insurance Errors and Omissions (Professional) liability: Minimum of $10,000,000 per occurrence and in the aggregate. Claims made policies are acceptable if the policy further provides that: 1. The policy retroactive date coincides with or precedes the professional services contractor’s start of work (including subsequent policies purchased as renewals or replacements). 2. The professional services contractor will make every effort to maintain similar insurance during the required extended period of coverage following project completion, including the requirement of adding all additional insureds. 3. If insurance is terminated for any reason, professional services contractor agrees to purchase an extended reporting provision of at least two (2) years to report claims arising from work performed in connection with this agreement or permit. 4. The reporting of circumstances or incidents that might give rise to future claims. Deductibles, Self-Insured Retentions, or Similar Forms of Coverage Limitations or Modifications Any deductibles, self-insured retentions or similar forms of coverage limitations or modifications, must be approved by the Risk Manager and City Attorney of the City of Huntington Beach. Description of Work to be Performed The staff contact and purpose of the evidence of coverage must be identified. g/attymisc/insurance requirements

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