AgdaPkt 2018-02-26 Joint SA PFA - Laserfiche WebLink

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7.A - Page 10 The key findings of the LCC report include: 1. City pension costs will dramatically increase to unsustainable levels 2. Rising pension costs will require cities over the next seven years to nearly double the percentage of their General Fund dollars they pay to CalPERS 3. Cities have few options to address growing pension liabilities The report noted that cities only have a few options under current law to address the fiscal challenges attributed to growing pension liabilities: 1. Use procedures and transparent bargaining to increase employee pension contributions 2. Create a Pension Rate Stabilization Program (Section 115 Trust) 3. Develop and implement a plan to pay down the City's Unfunded Actuarial Liability 4. Change service delivery methods and levels of certain public services 5. Consider local ballot measures to enhance revenues Notably, the City has already undertaken the first two approaches and is recommending the last three approaches as part of the Financial Sustainability Plan. The City implemented a second tier pension in 2011 even before the Public Employee Pension Reform Act (PEPRA) was enacted in 2013. As these newer formulas only apply to recent hires, there has been little immediate impact on the City's total pension costs. However, such changes will reduce future liabilities and costs over the long-term. The City has also negotiated cost-sharing agreements with each bargaining group to ensure current employees pay a greater proportion of pension costs. Employees contribute between 7.75 and 18.0 percent toward their pension benefits, depending on bargaining unit and pension tier. Although these cost-sharing agreements represent important commitments by City employees to help pay for their pension benefits and assist the City in paying the required annual payments to CalPERS, such arrangements do not provide any additional payment toward the City's unfunded liabilities. The unfunded liability is primarily related to retired or inactive (employees not currently employed by or retired from the City) employees: 61% of the unfunded liability for the miscellaneous plan (non -safety employees) is associated with retired or inactive employees, and 70% of the unfunded liability for the safety plan (safety employees) is associated with retired or inactive employees. In September 2017, the City Council approved establishing a Section 115 pension trust account with Public Agency Retirement Services (PARS) to pre -fund the City's pension obligations over time. An initial trust deposit of $10.5 million was made in January 2018, including $8.8 million from the General Fund and $1.7 million from other City funds, as some employees are budgeted in other funds, primarily the water and wastewater utilities. In addition to setting aside funds in the Trust, the Preliminary Five -Year Forecast includes additional direct payments to PERS beyond the annual amount owed.