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Oppose Bill that Jeopardizes Fiscal Stability of Cities in JPAs

April 10, 2018
Joint Powers Authorities, known as JPAs, are one of the most effective tools that help local agencies cost effectively deliver a wide range of services to their residents. 
But a bill heading to its first committee hearing would threaten not only cities’ ability to use JPAs but would also put hundreds of cities in JPAs over their constitutional debt limit by retroactively applying joint and several liability for all retirement related obligations to participating agencies.
The measure will be heard on Wednesday, April 18, in the Assembly Public Employees, Retirement and Social Security Committee — Cities should oppose AB 1912 (Rodriguez) before its hearing.
The League has joined forces with the California State Association of Counties (CSAC) and the California Special Districts Association (CSDA) to oppose AB 1912. Members of each organizations participate in a variety of JPAs to address service delivery challenges with creativity, self-reliance and innovation.
The collaboration through the thousands of JPAs in California enables local and state agencies to address public needs that cannot be occur as effectively by an individual agency. JPAs are formed to accomplish a wide range of services such as regional public improvements, local and statewide infrastructure, emergency communications, law enforcement, fire protection, emergency medical response and public financing. This tool may no longer be viable under AB 1912.
AB 1912 Places Heavy Burden on Cities
Cities will be alarmed by this bill because its provisions contain new unworkable requirements that would retroactively and prospectively apply joint and several liability for all retirement related obligations to any current or former member of a JPA throughout its existence. The obligations are extensive and include active employee normal pension costs, retiree unfunded accrued liabilities (UAL) as well as both active and retiree healthcare and other post-employment retirement benefits (OPEB).
According to the State Controller’s Office most recently available data, the unfunded liability of California’s 130 state and local government pension plans stand at $241.3 billion and $125 billon for retiree healthcare costs. These costs and their impact on local governments cannot be overstated.
By applying joint and several liability, cities debts would dramatically rise and in many cases will exceed a cities’ annual revenue without being approved by local voters. This is unconstitutional. California’s constitutional debt limit prohibits a local government from incurring indebtedness beyond its ability to repay the debt with revenues from the same fiscal year without two-thirds voter approval.
This bill also has significant implications for cities unfunded pension and OPEB liabilities. CalPERS contribution rates are increasing and are already straining city budgets. AB 1912 would make already high contributions even more staggering, threatening cities’ ability to deliver services and retain employees.
Next Steps
The League has prepared a sample letter cities can use to communicate why AB 1912 would make it much more difficult to address critical statewide issues and threaten the stability of cities.
Cities should submit their opposition letter before April 18 when it is heard in Assembly Public Employees, Retirement and Social Security Committee.
The sample letter, the League’s opposition letter and the full bill text can be found at www.cacities.org/billsearch by plugging AB 1912 into the search function.

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