AgdaPkt 2020-02-24 Joint SA PFA - Laserfiche WebLink

Browse Search

8.A. - Page 17 of 72 The City's most recent actuarial report from the California Public Employees' Retirement System (Ca IPERS) indicates that the City has an unfunded pension liability of $264.5 million as of June 30, 2018, up from $242.0 million a year prior, an increase of 9.3 percent. Additionally, the City has a retiree health liability of $49.5 million. The City's total unfunded pension and retiree health liability is $314.0 million. A majority of the increase in the City's unfunded pension liability is due to the lowering of the CAPERS assumed rate of investment return (otherwise known as the discount rate) to 7.0 percent in FY 2018-19. CaIPERS modified its investment strategy to a more conservative approach to reduce the likelihood of investment volatility. This is needed to ensure there is cash on hand to pay benefits statewide and to reduce the chance the public agencies will have to fill large gaps when investment returns do not meet projections. CaIPERS has implemented a new actuarial valuation software system forthe June 30, 2018 valuation. With this new system, CaIPERS has refined and improved the calculation methodology. Any difference in liability between the old software and new software calculations is captured as a method change line item. For the June 30, 2018 valuation, this method change had a negative impact on the City's pension liability of $3.5 million. The City's unfunded pension liability is primarily related to retired or inactive (employees not currently employed by or retired from the City) employees: 52% of the unfunded liability for the miscellaneous plan (non -safety employees) is associated with retired or inactive employees, and 71% of the unfunded liability for the safety plan (safety employees) is associated with retired or inactive employees. The City is not unique in facing these pension challenges, and public agencies across the state, including school districts and state agencies, are facing increasing pension costs. The City began reforming pension benefits in 2011, and statewide pension reform occurred in 2013. Though these efforts provide long-term relief, they are not sufficient to fully fund promised benefits. Unfortunately, no statewide pension reform measures appear to be imminent. As a result, it is up to local government agencies to absorb steeply increasing contributions and to implement other strategies that will help place their pension plans on sound financial footing. On July 17, 2018, the San Mateo County Civil Grand Jury (Grand Jury) released a report entitled, Soaring City Pension Costs — Time for Hard Choices, regarding the increasing pension costs of the cities in San Mateo County. The report attempted to address what actions that all the cities in the County can take to meet current and future pension obligations. Redwood City is already undertaking most of these actions. On July 29, 2019, the Grand Jury issued a follow-up report entitled, Soaring City Pension Costs — Follow - Up on Grand Jury Report of 2017-2018. The objective of this report was to provide an update on the recommendations in the original report and to report on the actions taken by cities located in the County to manage their pension costs and make better information available to the public about the impact of pension costs on long-term financial plans. In this follow-up report, the City was commended for extending the General Fund Forecast from five years to ten years; adding comprehensive pension information to the City's public website; and making additional pension contribution payments to CaIPERS beyond the City's Annual Required Contribution, thus actually reducing the City's long-term pension contribution costs. Page 17 of 26 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 252