HomeMy WebLinkAbout20B - AA - PENSION STABILITY FUNDCITY COUNCIL MEETING DATE:
DECEMBER 20, 2016
TITLE:
APPROPRIATION ADJUSTMENT TO
CONTRIBUTE TO THE CITY'S PENSION
STABILITY FUND
(STRATEGIC PLAN NO. 4, 1)
(SURPLUS ALLOCATION FUNDING)
CITY MANAGER
RECOMMENDED ACTION
CLERIC OF COUNCIL USE ONLY:
APPROVED
❑ As Recommended
❑ As Amended
❑ Ordinance on 1" Reading
❑ Ordinance on 2ntl Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
Approve an Appropriation Adjustment to appropriate $500,000 from Fund Balance, resulting from
Fiscal Year 2015-16 (General Fund), for the City's contribution to the Public Agency Retirement
Services account for the purpose of pre -funding pension obligations.
DISCUSSION
In 2012, the Government Accounting Standards Board (GASB) issued Statement No. 68,
Accounting and Financial Reporting for Pensions and to be reflected in the City's Financial
Statements as of June 30, 2015. Specifically, Cities are required to disclose their unfunded
pension obligations for their defined benefit plans (CaIPERS) within their Balance Sheet. The
City's unfunded pension obligations as of June 30, 2015 totaled approximately $417 million.
However, the City's overall net position approximated a positive $800 million after implementing
the unfunded pension liability as required by GASB 68.
On June 21, 2016, the City elected to establish a Pension Stability Reserve (Reserve) totaling
$500,000. The Reserve was established to offset and/or pre -fund the City's unfunded pension
obligations. Additionally, the funds were assigned and reflected in the City's Comprehensive
Annual Financial Report as of June 30, 2015.
During the establishment and related budget process for FY 2016-17 Budget, Staff identified
Assigned Programs for which the City may contribute an additional $500,000 to its Reserve.
Continued contribution to the Reserve allows for the City to implement its strategy in addressing
its unfunded pension obligations and set-aside funds in the event of continued increased in
CaIPERS Employer Contribution Rates.
20B-1
Appropriation Agreement to Contribute to
The City's Pension Stability Fund
December 20, 2016
Page 2
STRATEGIC PLAN ALIGNMENT
Approval of this item supports the City's effort to meet Goal #4 — City Financial Stability,
Objective #1 (maintain a stable, efficient and transparent financial environment).
FISCAL IMPACT
Approval of the Appropriation Adjustment will designate $500,000 from Fiscal Year 2015-16
General Fund ending fund balance to the following account:
Finance & Management Services (Management & Support Services) —
Pension Stability — 01110100-62303 in the amount of $500,000.
Currently, the City has elected to invoice and pay PARS (administration and investment
management fee) directly. Fees assessed and invoiced by PARS to the City are subject to
amount of funds (Plan Contributions) transferred by the City for an amount of $10,000 based on
the plan contribution assumptions. The fee will be budgeted and available in the Finance
Management and Support Services account (01110100-62300) as follows:
Fiscal Year
Amount
2016-17
$ 3,333
2017-18
$ 3,333
2018-19
$ 3,334
However, in future fiscal years the City will analyze plan assets to determine if investment gains
are sufficient to offset any incurred fees (Annual Asset Fee). Thus, the City would not be
invoiced and the Annual Asset fee will be paid directly from Plan Assets.
APPROVED AS TO FUNDS AND ACCOUNTS:
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Francisco Gutierrez
Executive Director
Finance and Management Services Agency
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20B-2