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REPORT <br />To the Honorable Mayor and City Council <br />From the City Manager <br /> <br />September 25, 2017 <br /> <br />SUBJECT <br />Contract and funding of a Public Agency Post-Employment Benefits Section 115 Trust <br />Account with Public Agency Retirement Services (PARS) <br /> <br />RECOMMENDATION <br />1. Adopt a “Resolution of the City Council of the City of Redwood City Approving <br />the Adoption of the Public Agencies Post-Employment Benefits Trust <br />Administered by Public Agency Retirement Services (PARS)"; <br />2. Approve an initial deposit to the Trust of $8.8 million; <br />3. Appoint the City Manager, or her successor or designee, as the City’s Plan <br />Administrator for the Trust Program; <br />4. Approve and authorize the City Manager to execute an “Agreement for <br />Professional Services” between PARS and the City of Redwood City to <br />administer the Trust; and <br />5. Approve and authorize the City Manager, or her designee, to invest the Trust <br />funds in the “Moderately Conservative” portfolio <br /> <br />BACKGROUND <br />The City has two pension plans with the California Public Employees’ Retirement <br />System (CalPERS): one to fund pensions for miscellaneous (non-safety) employees <br />and one to fund pensions for safety employees such as sworn fire and police personnel. <br />For FY 2016-17, the City contributed $19.6 million to both CalPERS pension plans: $8.1 <br />million, or 26.3 percent of payroll, for the Miscellaneous Plan; and $11.5 million, or 42.9 <br />percent of payroll, for the Safety Plan. The General Fund’s share of the total is <br />approximately $15.4 million, or 78.5 percent. Other City funds, such as the Sewer and <br />Water Funds, contribute the remaining 21.5 percent. <br /> <br />As of June 30, 2015 (the latest actuarial valuation from CalPERS), the City’s Unfunded <br />Actuarial Accrued Liability (UAAL) for the Miscellaneous Plan was $84.2 million, and <br />$110.0 million for the Safety Plan, totaling $194.2 million. The total unfunded liability is <br />projected to grow to $255.0 million as of the June 30, 2017 actuarial valuation. <br /> <br />The City’s unfunded liability reflects two primary factors: pension commitments made to <br />now-retired employees under inaccurate assumptions, and decisions by CalPERS to <br />amortize investment losses over a long period of time. Assumptions that turned out to <br />be inaccurate include lower-than-anticipated investment returns, longer-than-anticipated <br />6.3.A. - Page 1