CITY COUNCIL AGENDA PACKET - Laserfiche WebLink

Page 2 of 3 years for CalPERS and 14 years for OPEB). For CalPERS Miscellaneous and Fire plans, this would facilitate the continued growth of their current 72.9% and 73.9% total funded ratios. • Any Supplemental Trust transfer that is used to pay the required CalPERS contributions will reduce the overall trust assets (CalPERS asset plus Supplemental Trust assets) from where the assets would have been, by the amount transferred. Each $10 million transferred to cover CalPERS required contributions reduces the total CalPERS funded ratio by approximately 1.3% ($10M/$742M). • Maintain budget flexibility with the Supplemental Trust for CalPERS. • Continue to secure benefits with trust assets and align costs for these benefits with employee services. However, this recommendation is made without considering other City budget demands and financial constraints. When overall City financial considerations are taken into account, Foster & Foster recognizes that alternative paths can be selected without drastically risking the benefit security of these plans. Possible approaches recommended by Foster & Foster include: • CalPERS o Base the Supplemental Trust withdrawal on the Scenario 1 approach presented below (assumes CalPERS will achieve their 6.8% long-term investment return), resulting in $4.1 million in FY 2025/26 budgetary relief. Using the Supplemental Trust in this way would be consistent with the purpose of using it to level out contributions. It is important, though, to keep in mind the projected trajectory of contributions, even if CalPERS meets their assumptions. Given this, the City might also consider taking 1/2 of the relief projected under Scenario 1, transferring approximately $2 million from the Supplemental Trust to CalPERS, and revisiting plan funding in the next year or two. • OPEB o The magnitude of the numbers is much smaller for OPEB (FY 2025/26 ADCs are $28.8 million for CalPERS and $3.8 million for OPEB) such that Foster & Foster recommends the City stay the course and continue with full ADC funding. o Details and analysis of the City’s unfunded pension and OPEB liabilities are provided in the attached Foster & Foster Actuarial Analysis (Attachment 1). EQUITY AND SUSTAINABILITY Financial analysis is an important tool to facilitate the City’s financial planning, health, and resiliency. Ensuring long-term fiscal sustainability allows the City to continue to provide programs and services to benefit the entire community, including vulnerable and underserved populations. OUTREACH This report is part of the City's overall comprehensive community engagement related to the current budget development process. The Budget Advisory Committee and the community have been informed of opportunities to provide input and further participate in shaping the City's upcoming two-year budget. City staff will similarly continue to be informed throughout the Page 44 of 56