For City Council Meeting [April 27, 2021]
TO: Honorable Mayor and City Council
APPROVAL: Sean Grayson, Acting City Manager
FROM: Bob Chandler, Interim Finance Director
Title
Request City Council to 1) Adopt Resolution No. 7727 Authorizing the Establishment of a Section 115 Trust to be Used as a Rate Stabilization Fund for the City's Pension Obligations, and 2) Approve as to Form an Agreement for Administrative Services with the Public Agencies Retirement Services (PARS) for Section 115 Trust Administration and Investment Management Services.
(ACTION)
Body
BACKGROUND
The City Council previously adopted a retirement plan with CalPERS pursuant to the Public Employees' Retirement Law, commencing with Section 20000 of the Government Code of the State of California, as amended (the "Retirement Law"). The Retirement Law obligates the City to (1) make annual contributions to the System to fund pension benefits for its employees, (2) amortize the unfunded accrued actuarial liability with respect to such pension benefits, and (3) appropriate funds for the purposes described in (1) and (2). As such, the City is obligated to make certain payments to the CalPERS System with respect to its Pension Obligation under the Retirement Law and its CalPERS Contract.
The City's Unfunded Accrued Liability (the UAL) under its CalPERS retirement plan has seen a 42% increase over the last 7 years; from $94.2 million in 2014, to $133.6 million in 2021. And annual payments to amortize the UAL have grown to $9.9 million in 2020, with future year payments projected to grow to $15.2 million by 2030. For several years, the City Council has been working on finding appropriate solutions to address the UAL. There were recommendations from the Budget Advisory Committee in 2018/2019, and subsequently from the Pension Ad Hoc Committee in 2019. And in 2021, the City retained the services of NHA Advisors / Bayshore Consulting Group to serve as the City's Municipal Advisors for research and...
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