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Agenda Item 28.

City Council Meeting

Meeting Date:	06/18/2019
FROM:	Bill Gallardo

Subject:

Authorize Contribution to the City's Section 115 Trust Fund through Public Agency Retirement Services (PARS) for Post-Employment Pension Obligations Costs in the amount of $756,800 from City Enterprise Funds (Fund 410, Fund 420, Fund 430 and Fund 460)

RECOMMENDATION

Authorize Contribution.

BACKGROUND/DISCUSSION

At the February 5, 2019 and May 21, 2019 meetings, the City Council and staff discussed the option of contributing additional funding to the City's Section 115 Trust Fund through Public Agency Retirement Services (PARS) from the City's Enterprise Funds.

The City's Section 115 Trust Fund with PARS was established in November 2015 to assist the City in “pre-funding” their pension obligations in an irrevocable trust account. The benefits include the following:

City maintains oversight of investment management and control over the risk tolerance level of the portfolio;
Assets held in the trust allows for greater investment flexibility and risk diversification compared to the City’s General Fund investments;
Assets could be accessed to offset unexpected rate increases (rate stabilization);
Potential to improve an agency's bond rating;
Flexibility to access trust assets at any time as long as it is used to pay employer's pension obligation; and
The City can also pre-fund retiree health care (OPEB) liabilities within the same program.

The City Council approved an initial contribution of $6 million with the City's General Fund reserves and currently has a book value of $7,185,502 as of April 30, 2019. No additional contributions have been made since the establishment of this trust.

Staff is recommending City Council authorize a contribution of $756,800 from reserves of City Enterprise Funds as follows prior to the end of the current fiscal year (June 30, 2019):

FUND	AMOUNT*
Urban Runoff Fund (410)	$17,800
Water Utility Fund (420)	$380,000
Sewer Utility Fund (430)	$139,000
IT External Support (460)	$220,000
TOTAL	$756,800

*The amounts calculated are based upon the funds percentage of the annual pension obligation amount of $11.9 million including any employee cost sharing.

This action addresses the City Council's top priorities to "Continue to pay down unfunded pension liability" as well as addresses the City's Fiscal Policies Statement to "Continue to work toward and maintain one years amount of pension obligation costs within the City's Section 115 Trust Account for Post-Employment Benefits".

FISCAL IMPACT/SUMMARY

As of 4/30/19, the current book value for the City's Section 115 Trust Fund was $7,185,502, plus the additional contribution of $756,800 would bring the balance to $7,942,302. This balance represents 66% of the annual pension obligation costs for FY 2019-20. The proposed $756,800 contribution will be included in the next round of proposed quarterly budget adjustments for FY 2018-19.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager
Prepared by: Alicia Brenner, Senior Fiscal Analyst
Concurrence: Cindy Russell, Administrative Services Director