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Pension Debt Cost Savings Update <br />February 15, 2022 <br />Page 3 <br />Strategy <br />Accumulating money in the Section 115 Trust will enable the City to pay for spikes in <br />future debt service and reduce the budget in 2029 and 2039 to coincide with Measure X <br />revenue decreases. <br />The illustrative example below includes the following assumptions. <br />• The budget to fund pension debt predictably increases by 3 percent per year. <br />• The City deposits or withdraws any difference between the stable budget amount <br />and the fluctuating pension debt payments. <br />• The Section 115 Trust earns 4.2 percent per year, based on the 10-year <br />performance for the PARS Trust conservative investment strategy at June 30, <br />2021. <br />• The budget for pension debt decreases by $18 million in 2029 and $36 million in <br />2039, in conjunction with future Measure X revenue decreases. <br />$80,000,000 <br />$70,000,000 <br />$60,000,000 <br />$50,000,000 <br />$40,000,000 <br />$30,000,000 <br />$20,000,000 <br />$10,000,000 <br />5- <br />Pension Debt Obligations vs Illustrative Budget <br />O Bond Debt Service OEstimated CAPERS Payments -Illustrative Budget <br />r m m o N N in a � o r m m o ti N <br />O O O O O O O O O O O O O O O O <br />N N N N N N N N N N N N N N N N <br />In this illustrative example, the City is able to reduce its pension debt budget each time <br />Measure X revenue decreases and still afford pension debt payments through 2042. <br />Even if the City's debt to CalPERS continues to grow with unfavorable plan performance, <br />this strategy still enables the City to have a predictable budget for pension debt. The City <br />City Council 11 —3 2/15/2022 <br />