WALNUT CREEK — After a year battling the findings of an audit by the state pension system, four Bay Area cities have all voted to dissolve a joint staffing agency that no longer has any staff.
On July 17, Walnut Creek became the final city to vote to dissolve the Local Government Services Authority, a joint powers authority formed by the cities of Dublin, Larkspur and Yountville in 2001. Walnut Creek joined it in 2011. The first three cities voted to dissolve the agency in June.
The dissolution comes on the heels of public fallout over a joint powers agency in Los Angeles that dissolved in 2014 after member cities backed out of funding its employees’ pensions. Assembly Bill 1912, which will be heard at the Senate Appropriations Committee on Monday, aims to transfer the responsibility for retirement payments to member cities and make them responsible if the agency terminates its contract with CalPERS.
Local Government Services was formed by the four cities to share the overhead costs of human resources, payroll and benefits when staffing for temporary projects, according to Walnut Creek’s staff report.
CalPERS, the state’s public employee retirement system, claimed Local Government Services was wrong to enroll its employees in the retirement system and that the public agencies the employees actually worked for should have shouldered the burden since they directed the work.
In 2017, the Transportation Authority of Marin went $584,000 in debt for the retirement benefits of nine people formerly considered employees of Local Government Services. CalPERS would not comment for this article, citing a pending appeal by Local Government Services, but told the Marin Independent Journal in 2017 that cost estimates for each agency’s retirement contributions take into account local demographics. Local Government Services is based in Carmel Valley.
Walnut Creek’s resolution to dissolve Local Government Services states that the city would not be responsible for any debt or liability remaining after the agency is dissolved.
“I feel confident we have no liability. For one, we never used the services of LGS,” said Fran Robustelli, assistant city manager of Walnut Creek and a board member of Local Government Services.
Walnut Creek joined the board of Regional Government Services for work on financial, planning and short-term projects. Regional Government Services was formed by the same cities and has the same executive director and board of directors.
“(With LGS) we were providing a platform for agencies to work together without having to duplicate everything,” said Richard Averett, executive director and chief financial officer for Local Government Services and Regional Government Services. “RGS’ focus was a little different than LGS, but both agencies were totally fee-supported. They didn’t get any tax revenue.”
Averett said Regional Government Services provided more consulting on projects and work and Local Government Services was set up for back office work, such as payroll.
One main difference between them was that Local Government Services had a contract with CalPERS for the retirement benefits of employees it hired for local agencies. Regional Government Services did not.
As part of its dissolution, Local Government Services transferred a majority of its employees’ pensions over to the public agencies they worked for. Approximately 14 employees worked for agencies that did not have a contract with CalPERS.
“At first CalPERS said they would unenroll 144 employees, but now it’s saying they will unenroll those dozen people and give you back the money and you figure out the pension benefits,” Robustelli said.
Joint Powers Agencies have come under increased scrutiny in recent years following the dissolution of LA Works, also known as East San Gabriel Valley Human Services, in 2014. That authority was formed by the cities of Azusa, Covina, Glendora and West Covina to provide job training and placement in San Gabriel Valley.
In April, the company’s CEO and three others were charged with embezzling government funds after an audit found the agency had altered public documents and overbilled Los Angeles County $1 million to meet performance measures, according to the San Gabriel Valley Tribune.
After the agency’s dissolution, the four cities stated they would not pay the remaining pension obligations, arguing that the contract was with the disbanded agency, not the cities themselves. In response, CalPERS slashed pensions for 200 workers, according to the Sacramento Bee.
“I think there’s some fallout from some JPAs that may not have complied with everything,” Averett said. “That’s what tarnished other JPAs — one or two that weren’t able to pay their (retirement) costs and defaulted and there is concern that because that one big default — LA Works — that JPAs were a risky proposition. It all cast a shadow on people and their perception of JPAs.”
