In the last few years issues involving the interpretation of federal tax statutes and regulations as they apply to employee benefits have become increasing more complex.  Among the issues that the City Attorney�s Office, the Financial Services Department, and the Management Services Department have dealt with include the use of deferred compensation funds to pay for PERS �Airtime�, the use of pre-tax salary to fund certain employee benefits, the definition of normal retirement age for the 457 deferred compensation programs, the use of accrued leaves to fund deferred compensation fund �catch-ups�, and the impact of some of the City�s compensation on PERS retirement.

Unfortunately the City Attorney�s Office, the Financial Services Department, and the Management Services Department lacked the required level of special expertise to deal with these more complex tax and benefit issues.  The potential liability for an erroneous opinion could be substantial.  For these reasons the three departments are requesting that the City Council approve the legal services agreement with the law firm of Reish Luftman Reicher & Cohen.

The Reish firm specializes in tax planning and employee benefits.  The firm represents both private and public sector clients, including the City of Anaheim.  During our interview with firm partners Fred Reish and Bruce Ashton we were very impressed with the depth of their knowledge on the issues facing the City and with their desire to be of assistance to the City.

The firm will charge the City a blended rate (an average of the partner�s and associate�s rates) of $350 an hour, which we believe is competitive for this area of legal specialty.

Fiscal Impact

Funds to pay for the services of the special counsel on tax and employee benefit issues

will come from Account Number 001.ND000.3004.0000 (General Fund Unappropriated Fund Balance) and be appropriated to 0001.CA01A.62055.0000 (Outside Legal Services).  We are requesting that the City Council approve the appropriation of these funds.

Recommendation

The City Attorney�s Office, the Financial Services Department, and the Management Services Department recommend that the City Council approve the legal services agreement between the City of Burbank and the law firm of Reish Luftman Reicher & Cohen to act as special counsel to the City Attorney�s Office on tax and employee benefit issues and the budget amendment appropriating funds for the special tax counsel.

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