Item 25 - Public Hearing - Fiscal Year 2025-26 City Budget

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In 2021, the City issued bonds to refinance a portion of its pension debt. At the time, the annual budget for pension costs was approximately $54 million. As part of the refinancing, the City Council approved a plan to maintain this budgeted amount. Because the refinancing reduced the City's required pension payments, the savings, which reflect the difference between the lower required payments and the $54 million budget, have been set aside to help offset anticipated future increases in pension costs. The City has a plan to partially offset future pension debt costs with contributions to the pension stabilization account, an irrevocable Section 115 Trust. In FY24-25, the City contributed an additional $3 million to the account, bringing the annual deposit total to $14.95 million. For FY25-26, another $1 million will be contributed. The account balance is approximately $49.1 million. As reflected in the table below, CalPERS has exceeded expected investment returns in both FY23-24 and FY24-25. While this won’t have any fiscal impact on the FY25-26 budget, it will result in lower pension liability costs in both FY26-27 and FY27-28. Fiscal Year Actual Assumption 2022-23 5.80% 6.80% 2023-24 9.30%6.80% 2024-25*11.60% 6.80% *CalPERS preliminary investment return for FY2024-25 9