HomeMy WebLinkAbout75A-3 - LIABILITY SAFETY PLANREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
JUNE 6, 2018
TITLE:
APPROVE PRE -PAYMENT FOR THE CITY'S
ANNUAL UNFUNDED ACTUARIAL
LIABILITY TO CALIFORNIA PUBLIC
RETIREMENT SYSTEM — SAFETY PLAN
FOR FY 2018-19
(STRATEGIC PLAN NO. 4,2D)
Cl"ANAGER
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
APPROVED
E] As Recommended
EI As Amended
[] Ordinance on 1 sl Reading
El Ordinance on 2nd Reading
[I Implementing Resolution
E] Set Public Hearing For
CONTINUED TO JUN 19 2016
FILE NUMBER
Approve the pre -payment for the City's annual Unfunded Actuarial Liability to California Public
Employees Retirement System (CalPERS) — Safety Plan for fiscal year 2018-19 in the amount of
$18,690,264.
DISCUSSION
Due to rising pension obligations, municipalities are tasked with identifying cost-effective
mechanisms in addressing retirement costs. An element identified was pre -paying the City's
annual Unfunded Actuarial Liability (UAL) obligations. The UAL amount is traditionally paid on a
monthly basis (12 payments) during the fiscal year. After discussion and confirmation between
City Staff and its CalPERS Actuary the following UAL amount(s) is owed for FY 2018-19:
Unfunded Actuarial Liability Annual Amount* Pre -Payment Amount" Savings
FY 2018-19 (Safety Plan)*** $19,367,208 $18,690,264 $676,944
* amount owed by the City if paid over twelve monthly payments
"amount is due by 713 1/18 per July 2017 CaIPERS Actuarial Valuation Report (Safety Plan)
'Safety Plan consists of unfunded actuarial obligations related to both the Police and Fire Department
CalPERS staff has confirmed if the City submits the pre -payment in the amount of $18,690,264
by July 31, 2018, the UAL obligation for FY 2018-19 will be met and would result in a savings of
$676,944. Specifically, the savings will be allocated in the proposed FY 2018-19 budget as
follows:
• Police Department Retirement Costs - $259,023
• Fire Department Retirement Costs - $240,977
• Investment Income (offset) - $176,944
75A-3-1
Approval to Pre -Pay the City's Safety Plan Unfunded Actuarial Obligations
June 5, 2018
Page 2
Funding the Pre-Paymen
As noted, CalPERS has afforded the City two alternatives (monthly or pre -payment) in satisfying
its UAL obligations related to the Safety Plan for FY 2018-19. As a means in funding the pre-
payment initiative, the City maintains sufficient available Cash to satisfy the proposed obligations
in addition to the normal and customary expenditures incurred by the City during the fiscal year.
However, as a result in making the pre -payment to CalPERS the City is projected to incur a
reduction in its Earnings on Investment in the amount of $176,944. The reduction in income is
offset by the savings projected to be realized by the City's General Fund in the amount of
$500,000.
Retirement Strategies
On December 2016, the City Council approved the establishment of the City's Pension Stability
fund in the amount of $500,000. The Fund was created to offset future increases in retirement
obligations. Pre -paying the UAL for the City's Safety Plan is an additional strategy
recommended to be implemented as a means to address rising CalPERS costs.
STRATEGIC PLAN ALIGNMENT
Approval of this item assists the City in meeting Goal #4 — City Financial Stability, Objective #2
(provide a reliable five-year financial forecast that ensures financial stability in accordance with
the strategic plan), Strategy D (conduct an assessment of the City's debt and refinancing options
to achieve savings).
FISCAL IMPACT
Pre -payment to CaIPERS:
The payment in the amount of $18,690,264 will be made during
FY 2018-19 (prior to July 31,
2018) as follows:
Accountinq Unit
Amount
PD -Field Operations (no. 01114420-61100) $9,597,149
FD -Fire Suppression & EMS (no. 01115330-61100) $9,093,115
Promected Savings:
Savings in the amount of $676,944 are projected to be incurred
and included in the proposed
fiscal year 2018-19 budget as follows:
Accounting Unit
Amount
PD -Field Operations (no. 01114420-61100)
$240,000
FD -Fire Suppression & EMS (no. 01115330-61100)
$260,000
Earnings of Investments (reduction) (01102002-58000)
$176,944
APPROVED AS TO FUNDS AND ACCOUNTS:
Francisco Gutierrez
Executive Director
Finance and Management Services Agency
SV
75A-3-2