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<br />8e
<br />Page 67
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<br />requires the periodic reporting of information about actuarial accrued liabilities associated with
<br />these benefits and whether and to what extent progress is being made in funding the plan.
<br />
<br />In anticipation of, and in accordance with, Statement No. 45, the City engaged Bartel
<br />Associates to conduct an actuarial study to determine the City's liability with respect to post-
<br />employment medical benefits. According to the report, the City's unfunded actuarial accrued
<br />liability (based on a 4.25% discount rate) is, for Fiscal Year 2006-2007, $51,844,000.
<br />
<br />The actuarial study set forth a five-year projection of the City's obligation, which is
<br />summarized below:
<br />
<br />Unfunded Actuarial Liability
<br />Annual Required Contribution
<br />
<br />Estimated pay-as-you-go
<br />expense
<br />Estimated Annual Payroll
<br />
<br />Pay-as-you-go Expense as %
<br />of Payroll
<br />
<br />(1Jper actuarial valuation at 4.25% discount rate
<br />12Jper actuarial valuation at 4.25% discount rate and 30 year amortization
<br />
<br />2006-07
<br />$51,844,000111
<br />4,642,000121
<br />
<br />2007-08
<br />
<br />2008-09
<br />
<br />2009-1 0
<br />
<br />2010-11
<br />
<br />Will change with updated actuarial vaiuation
<br />$4,744,124 $4,848.495 $4,955,162 $5,069,130
<br />
<br />1,330,000 1,597,000
<br />
<br />1,916.400
<br />$49,392,933
<br />
<br />2,299,680
<br />
<br />$51,368,651
<br />4.48%
<br />
<br />2,759,616
<br />
<br />$53,423,397
<br />5.17%
<br />
<br />$45,534,882 $47,493,205
<br />
<br />2.92% 3.36%
<br />
<br />3.88%
<br />
<br />If the City only contributes the pay-as-you go cost as opposed to the annual required
<br />contribution, the net difference for that year will be added to the unfunded actuarial liability in
<br />the following year, further increasing the annual required contribution. The City Council has
<br />approved a plan to increase its annual contribution over the next five years in excess of the pay-
<br />as-you go costs in order to start addressing its unfunded actuarial accrued liability.
<br />Investments
<br />
<br />The City invests its funds, including funds of the Water Enterprise, in accordance with
<br />the City's Investment Policy, which is subject to review by the City Council. The purpose of the
<br />Investment Policy is to establish the investment objectives of safety, liquidity, and yield. The
<br />City's Investment Policy complies with the provisions of the California government Code,
<br />Sections 53600 through 53659 (the statutory authority governing investments for municipal
<br />governments in the State). The Director Finance provides monthly investment reports to the
<br />City Manager and City Council.
<br />
<br />As a means of limiting its exposure to fair value losses arising from rising interest rates,
<br />the City's Investment Policy provides that final maturities of securities cannot exceed three
<br />years. Specific maturities of Investments depend on liquidity needs. The City's Investment
<br />Policy provides that the City shall mitigate credit risk by investing in investment grade securities
<br />and diversify the investment portfolio so that failure of anyone issue does not unduly harm the
<br />City's capital base and cash flow.
<br />
<br />A-5
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