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Finance and Management Services <br />https://www.santa-ana.org/finance <br />Item # {{item. Number}} <br />City of Santa Ana <br />20 Civic Center Plaza, Santa Ana, CA 92701 <br />Staff Report <br />June 6, 2023 <br />TOPIC: Approval to Pre -Pay the City's Safety & Miscellaneous Unfunded Actuarial <br />Obligations FY 2023-24 <br />AGENDA TITLE <br />Approve Prepayment for the City's Contribution to Both the CaIPERS Miscellaneous <br />and Safety Employee Pension Unfunded Liability for Fiscal Year (FY) 2023-24 <br />RECOMMENDED ACTION <br />1. Approve a $9,568,651 pre -payment for the City's annual Unfunded Actuarial <br />Liability to California Public Employees Retirement System (CaIPERS) — <br />Miscellaneous Plan for Fiscal Year 2023-24, to save $319,984. <br />2. Approve a $12,780,268 pre -payment for the City's annual Unfunded Actuarial <br />Liability to California Public Employees Retirement System (CaIPERS) — Safety <br />Plan for Fiscal Year 2023-24, to save $427,383. <br />DISCUSSION <br />EXECUTIVE SUMMARY <br />The City can choose to pay its obligation to CaIPERS in installments over the fiscal <br />year, or by July 31 to receive a discount. The City has prepaid its unfunded liability for <br />the past five years. Once again, the discounted pre -payments are included in the City's <br />proposed FY 2023-24 budget. If the City Council does not approve the <br />recommendation, the proposed budget will need to increase by $747,367. <br />In September 2021, the City issued $425.8 million of bonds to refinance approximately <br />75% of the City's pension obligation debt. The true cost of the bonds is 2.8%, resulting <br />in an estimated net present value savings of $138 million. The proceeds of these bonds <br />were used to reduce the net liability with CaIPERS. The proposed pre -payments for <br />Unfunded Actuarial Liability represents the remaining debt not refinanced. <br />DISCUSSION <br />The City provides a defined benefit pension plan to its employees, managed by <br />CaIPERS. As employees provide service and accrue service credit, the City incurs a <br />liability. Contributions from both the City and employees offset the liability. When the <br />contributions (plan assets) are less than the accrued liability, there is an unfunded <br />City Council 11 — 1 6/6/2023 <br />