Item 15 - Early Direction for the Fiscal Year 2025-26 Budget

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Early Direction for the Fiscal Year 2025-26 Budget March 18, 2025 Page 5 Police Department's Special Events permit, which is only the fee to recoup the cost of the administrative process for issuing the permit. Staff seeks City Council concurrence regarding the recommended one-time allocation of $250,000 in FY 2025-26 for the improvements and establishing fees to generate revenue from the site. Future Pension Costs Set -Aside — Section 115 Trust In 2021, the City refinanced a portion of its debt to the California Public Employee Retirement System (CaIPERS), generating significant debt interest savings. After the refinancing, the City's payment obligations decreased. The City Council approved maintaining the existing budget of pension debt payments and depositing the savings in the City's Section 115 Trust for future pension costs. Staff has maintained this practice through the current year budget. Beginning in FY25-26, the City may not be able to deposit much more into the Trust. Therefore, based on a recommendation from the City Manager, the City Council has approved an additional deposit of $3 million in the current year ($2 million approved in December with "Year End Results" and $1 million approved on March 4 with "Midyear"). The Trust currently has a balance of $45.5 million. The City and its employees both contribute to the CalPERS pension system. CalPERS invests those contributions and makes pension payments to employees when they retire. CalPERS assumes they will have an investment return of 6.8% each year. When the CalPERS investment portfolio earns less than 6.8% each year, the City's liability to CalPERS increases. Recent CalPERS investment returns follow. FY14-15 2.4% FY15-16 0.6% FY16-17 11.2% FY17-18 8.6% FY18-19 6.7% FY19-20 4.7% FY20-21 21.3% FY21-22 -6.1 % FY22-23 5.8% FY23-24 9.3% The FY23-24 return in excess of the 6.8% assumption will not affect the City's contributions until FY26-27.