Lindsay to consider letter opposing AB 1912

Harmon said it conflicts with the California Constitution

The Lindsay City Council will consider Tuesday authorizing City Manager Bill Zigler to send a letter to Assemblymember Freddie Rodriguez opposing Assembly Bill (AB) 1912.

City Finance Director Bret Harmon said local governments have a long history of addressing service delivery challenges with creativity, self-reliance and innovation. Unique local challenges and limited resources, he said, continue to fuel innovative efforts to obtain expertise and provide high quality services.

Harmon said Joint Powers Authorities (JPAS) play a vital role in promoting regional and, in some cases, statewide collaboration in addressing public needs that cannot be effectively achieved by each local government agency acting on its own. These activities, he said, include regional public improvements, local and statewide infrastructure for water and roadways, emergency communications systems, law enforcement, fire protection, emergency medical services, and public financing, among others.

Harmon said JPAS would no longer be a viable tool should AB 1912 become law.

As amended, Harmon said AB 1912 places substantial burdens and new unworkable requirements on local and state agencies. He said it applies retroactive as well as prospective joint and several liabilities for all retirement related obligations to any current or former member of a JPA since inception.

Such obligations, Harmon said, 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 (OPEBS). Harmon said these costs cannot be overstated.

Additionally, Harmon said AB 1912 would mandate that a public retirement system, like California Public Retirement System (CALPERS), 37 Act System, or a citybased retirement systems file suit against all

local or state agencies that have ever been a member of a terminated JPA for all retirement related obligations. Harmon said it also prohibits any retirement system from approving a new JPA without a contract containing express joint and several liability provisions.

“This would keep the City of Lindsay from participating in any new JPA’S, even if that JPA would be vital to the city’s continued operations,” Harmon said.

Harmon added that the provisions set forth in AB 1912 create constitutional, fiscal, and operational challenges, which he said would effectively eliminate the ability for local and state agencies to create or maintain the use of most JPA’S.

Harmon said AB 1912 conflicts with the California Constitution in a number of ways.

The first, he said, is through debt issuance without voter approval.

Harmon said the California constitutional

debt limit prohibits an agency from incurring indebtedness beyond the agency’s ability to pay the debt back from revenues received in the same fiscal year without the approval of twothirds of its voters.

Harmon said another way AB 1912 conflicts with the California Constitution is through gift of public funds. He said retroactively incurring debts of another agency violates an article of the California Constitution, which he said prohibits

an agency from giving or lending public funds to any person, public or private entity.

Harmon said the measure would hold all agencies of a JPA accountable for the investment shortfalls, future discount rate reductions, and other assumptions changes made by the retirement agencies even if the agencies are able to pay the lump sum amount of the current unfunded liability from the JPA.

Harmon said AB 1912 gives exclusive authority to a retirement agency to unilaterally assign liabilities to all current and former agencies of a JPA. This vague and ambiguous direction, he said, demonstrates a fundamental misunderstanding of the formation, management and purpose of a JPA, which he said will inevitability lead to a perpetual cycle of protracted and costly litigation contesting the retirement agency’s discretion of proportional liability.

Harmon said even though AB 1912 is an honorable attempt to ensure JPA employees who participate in an employee retirement system do not lose retirement benefits if the JPA fails, he noted that it goes about it in a way that jeopardizes other agencies and violates the California Constitution.

Harmon said the impact is primarily in the future. He said AB 1912 will unlikely be able to participate in new JPA’S in the future, and noted that the city uses a JPA for its insurance and risk coverage and its medical benefits.