COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Controller's Office

DATE:

April 23, 2002

BOARD MEETING DATE:

May 7, 2002

TO:

Honorable Board of Supervisors

FROM:

Tom Huening, Controller

SUBJECT:

Prepayment of Employer Share of Retirement Contribution

Information Update

The Board of Supervisors last year enacted Resolution #C3481 which authorizes the County Controller, in consultation with the County Manager, to prepay the County's annual contribution to the retirement fund. Our prepayment in FY2002/2003 will yield an estimated savings of $500,000.

Background

For the past two fiscal years (FYs 2000/2001 and 2001/2002), the Board has authorized the Controller to make an advance payment of the entire County's estimated annual contribution to the employees retirement fund (SamCERA). The benefit of this prepayment resulted in over $300,000 in savings to the County's General Fund in FY 2000/01 and is anticipated to be more than $400,000 in savings for FY 2001/2002. Since these General Fund savings are unrestricted, they are allocated at the discretion of the Board of Supervisors. In past years, the Board of Supervisors has used these funds to keep the financially strapped Belle Haven Clinic open to the community.

Discussion

In the spirit of collaboration and the practice of sound money management, the Controller, in consultation with the County Manager, the Treasurer, and SamCERA, has determined that the County will earn an estimated $500,000 in savings by prepaying the 2002/2003 retirement contribution. This is possible because SamCERA is generally able to invest in higher yielding assets than the County Treasury. Treasury investment practices are legally proscribed and very conservative. By prepaying the retirement contribution this year, we will capitalize on that difference. The difference between SamCERA's actuarial estimated yield and the Treasurer's estimated yield, discounted to present dollars, represents a net financial benefit to the County. However, this is only true when the actuary's estimated yield for the retirement fund is greater than the estimated yield of the County's treasury. Hence the need for an annual review and authorization.

Vision Alignment

The prepayment of County's share of retirement Contribution keeps the commitment of responsive, effective, collaborative government and advances Vision Goal number 22: County and local governments effectively communicate, collaborate and develop strategic approaches to issues affecting the entire County. This collaborative effort strengthens the County's financial base and its ability to provide services and programs for residents.

Fiscal Impact

There is no change in Net County Cost. The General Fund will save an estimated $500,000.