CITY COUNCIL REGULAR MEETING AGENDA PACKET 3-17-26 (3)

Page 1 of 5 Item #14 CITY COUNCIL AGENDA REPORT March 17, 2026 Finance TITLE: RECEIVE A REPORT AND PRESENTATION ON THE CITY'S PENSION OBLIGATION MANAGEMENT STRATEGY AND ADOPT THE PENSION FUNDING POLICY SUMMARY This report and the attached presentation are provided to update the City Council on the City’s ongoing efforts to manage its pension obligations. City staff prepared these materials with assistance from NHA Advisors (NHA), the City’s municipal financial advisory firm. NHA was retained through a request for proposals (RFP) process in January 2026 to provide strategic and policy advisory services for this project. The strategies outlined in the proposed pension funding policy will help the City maintain fiscally responsible management practices and better manage rising pension costs. RECOMMENDATION 1. Receive a report and presentation on the City’s pension obligation management strategy. 2. Adopt the pension funding policy effective March 17, 2026. BACKGROUND The City participates in several pension plans administered by the California Public Employees Retirement System (CalPERS). These include agency multiple-employer defined pension plans for Miscellaneous and Fire Safety (covering the Pleasanton-Livermore Fire Department JPA) employees and a cost-sharing multiple-employer defined benefit pension plan for Police Safety employees. These plans include classic and non-classic tiers, with classic members receiving more generous benefits. The City has been proactive in implementing approaches to pay down pension liabilities. In addition to the assets held by CalPERS for the plans discussed above, the City established the Section 115 Pension Supplemental Trust to set aside funds and earn greater returns than the investment pool. These assets are intended to stabilize pension costs in future years. The City’s pension expenses have substantially increased since the Great Recession (around 2007), primarily due to CalPERS investment losses and various changes in CalPERS policies related to calculating pension liabilities. The most significant of these changes is the reduced discount rate (the assumed rate of return CalPERS expects to earn on its investments). In January 2017, CalPERS adopted a policy reducing the CalPERS discount rate from 7.5 percent in FY 2017/18 to 7.0 percent in fiscal year (FY) 2020/21, and then 6.8 percent in FY 2021/22. Prior to the Great Recession, when the classic plan benefit levels were established Page 189 of 242