AgdaPkt 2019-10-14 Joint SA PFA - Laserfiche WebLink

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6.A. - Page 10 of 114 Due in large part to unduly optimistic assumptions Ca1PERS made in the past about long-term rates of return it could achieve, almost all of the Cities have large Unfunded Liabilities, with an average Funded Percentage of just 70.5 percent in FY 2016-17, well below the 80 percent "at risk" threshold. 10 Further, average annual pension payments by the Cities were projected to increase by 92.6 percent between FY 2017-18 and FY 2024-25. According to some financial experts, Ca1PERS' assumptions about ROI appear to remain optimistic, implying that future pension liabilities may be even larger than currently projected." The 2017-18 Grand Jury recommended that Cities develop long-term financial plans to address their pension liabilities and publish readily -accessible information on their websites about future pension costs and their long-term financial plans. The Grand Jury did not recommend what specific actions the Cities should take to plan for meeting their pension obligations but did outline a number of alternatives. Broadly, these fall into three categories: (1) reducing future pension payments to Ca1PERS by paying down the Unfunded Liabilities early, thereby saving interest costs; (2) managing future pension payments to Ca1PERS by methods such as contributions to a reserve, negotiating cost-sharing arrangements with employees, and keeping employee salary increases within the rate assumed by Ca1PERS; and (3) adapting to future pension payment increases by reducing municipal operating costs and/or seeking revenue enhancements. DISCUSSION Updated Pension Data from Cities' FY 2017-18 Financial Reports Appendix A to this report is an updated version of the Appendix A attached to the prior report. The updated Appendix A incorporates pension cost data from each City for FY 2017-18, the most recent year for which annual financial reports (usually referred to in this report as "CAFRs" for "Comprehensive Annual Financial Report" )12 from the Cities are available. This updated Appendix A provides data from each of the 20 Cities for the four-year period from FY 2014-15 through FY 2017-18. Data for FY 2017-18 in Appendix A show continued increases in (i) the Cities' pension contribution costs, averaging an increase of 15.2 percent over FY 2016-17, and (ii) the amount of the Cities' Unfunded Liabilities, averaging an increase of 14.2 percent over FY 2016-17. These increases are generally consistent with projections described in the prior report. 9 "Funded Percentage" is defined on page 3 of the prior report. 1° See discussion in prior report of "at risk" threshold (page 16). 11 See discussion of expert concerns that Ca1PERS' return on investment projections may be too optimistic at pages 8- 9 of the prior report. 12 The term "CAFR" is used in this report to refer, not only to "Comprehensive Annual Financial Reports," but also to "Basic Financial Statements" and "Annual Financial Reports." The audited annual financial reports for the Towns of Atherton, Colma, Portola Valley, and Woodside are referred to by them as either "Basic Financial Statements" or "Annual Financial Reports." 2018-2019 San Mateo County Civil Grand Jury 14