NHA ADVISORS, LLC - Laserfiche WebLink

Agenda Item No. 5b Agenda Report DATE: MARCH 18, 2025 TO: CITY COUNCIL FROM: ADMINISTRATIVE SERVICES – BUDGET & PROCUREMENT SUBJECT: ADOPTION OF RESOLUTION ESTABLISHING PENSION TRUST AND RESERVE USE POLICY STATEMENT OF ISSUE: Rising pension costs continue to place pressure on the City of Walnut Creek's budget, with projections indicating that costs will not begin to decline until 2034. To mitigate impacts, the City may strategically utilize the Pension Trust (Trust) to offset rising expenses. Given current forecasts, it is essential that the Trust lasts for at least 10 to 12 years to provide sustained budget relief during this period of peak costs. A clear policy framework will help ensure the Trust is used effectively, balancing short-term budget relief with long-term financial sustainability. RECOMMENDED ACTION: Accept the report and adopt the resolution establishing the Pension Trust and Reserve Use Policy, as recommended by the Finance Committee. DISCUSSION: The City has proactively implemented various cost management strategies to better manage rising pension costs, create resiliency to handle future pension cost volatility and stabilize costs at a lower level for the General Fund. The primary strategy being utilized by the City is a Section 115 Pension Trust, which consists of funds legally restricted for pension costs. On February 18, 2018, the City Council adopted a resolution to establish an irrevocable Section 115 Pension Trust. The goal of the Trust is to set aside monies to help soften the budget impact of large projected increases in pension costs over the next 10–12 years. Since the establishment of the Trust, the City has invested $19.9 million and has accumulated a balance of $28.7 million through a combination of cash contributions and investment earnings on that cash. The Trust has generated an annualized investment return of 5.87% since inception, Docusign Envelope ID: BB80A86F-2853-4F40-B02D-18F5B9DD615F