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CITY OF PLEASANTON NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2022 Note 10: Net Position/Fund Balances (Continued) c.Deficit Fund Balances and Deficit Net Position At June 30, 2022, the following funds had a deficit fund balance or deficit net position: •Employee Benefits Internal Service Fund $106,158,538 •Retiree Insurance Reserve Internal Service Fund $25,251,064 The Employee Benefits Internal Service Fund finished FY 2021/22 with a net position deficit of $106,158,538 as shown in the Internal Service Funds Combining Statement of Fund Net Position. This net position deficit is primarily due to the recording of the net pension liability required by GASB Statement No. 68, Accounting and Financial Reporting for Pensions. The City will continue to make the required contributions each year based on the 30 year CalPERS payment amortization schedule. As described in Note 11a Funding Policy, in March 2018, the City established a Section 115 Pension Trust (Section 115 Trust) with an initial contribution of $28.0 million. The fair value of the Section 115 Trust at June 30, 2022, was $43.3 million. The City intends to use the Section 115 Trust to help make future pension contributions under the following conditions: o Annual CalPERS employer pension contribution rate increase (in dollars) is greater than the growth rate of the City’s General Fund. o The General Fund has a structural deficit that needs to be addressed (i.e. non-discretionary expenditures exceed revenues). o General Fund reserves have been used and need to be replenished in order to maintain a reserve equal to 20 percent of General Fund expenditures. o Paying off specific pension liabilities that will result in interest savings greater than interest earnings on the Section 115 Trust. The Retiree Insurance Reserve Internal Service Fund finished FY 2021/22 with a net position deficit of $25,251,064 as shown in the Internal Service Funds Combining Statement of Fund Net Position. This net position deficit is primarily due to the recording of the net OPEB liability as a result of the implementation of GASB Statement No. 75, Accounting and Financial Reporting for Post-employment Benefits Other Than Pensions. As described in Note 12b Funding Policy, in April of 2011, the City established an OPEB irrevocable Trust (OPEB Trust). The City has been annually contributing to the OPEB Trust to pre-fund the City’s amortized 30-year unfunded OPEB liability. As of June 30, 2022, the OPEB Trust had a balance of $82.0 million. The City will use the OPEB Trust to fund future OPEB benefit payments. 94