For City Council Meeting [August 14, 2018]
TO: Honorable Mayor and City Council
APPROVAL: Ahmad R. Ansari, Interim City Administrator
FROM: Robb R. Steel, Assistant CA/Development Services Director
Title
Request City Council to Establish an Ad Hoc Committee for the Purpose of Developing Implementation Strategy regarding the City's Unfunded Pension and Other Post-Employment Benefit (OPEB) Liabilities and to Review and Recommend Potential Revisions to the Reserve Policy.
(ACTION)
Body
BACKGROUND:
On July 24, 2017, the City Council received several presentations related to the City's budgetary challenges. Like many other cities in California, the growing obligations related to employee retirements present a significant financial burden of the City. According to one state report, Rialto had the highest pension burden of any city in San Bernardino County and the 13th highest in the State (pension payments as a % of payroll). According to Bartel & Associates, the City's annual payments to CalPERS will grow from $11.4 million in FY18 to $24.9 million in FY29, an increase of $13.5 million. This averages out to a $1 million increase each year for the next 11 years, consuming 25% or more of the City's projected revenue growth.
Employer contribution rates will increase from 35% of payroll to 50% of payroll for miscellaneous employees and from 50% to 80% of payroll for safety employees. Pension payments alone will grow from 16% of general fund revenues to 22% of general fund revenues, crowding out other essential services. The City's last reported unfunded pension liability is $126 million, and the OPEB liability adds another $25 million in unfunded obligations for total debt to the employees of $151 million. The City's pension obligations are currently 67% funded and its retiree medical care obligations are 37% funded. Experts in the field deem 80% funded as the minimally acceptable recommended funding level at any given point and time, and the City would ne...
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