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8.A. - Page 18 of 72 As part of the follow-up report, the Grand Jury recommended that each City compile three years of historical data and ten years of estimated data that includes pension costs, percent of General Fund, and liability data. This information is contained in Attachment 2. The City Council has taken a proactive and strategic approach to addressing the City's pension liabilities. The City implemented a second-tier pension formula in 2011 even before the statewide 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 8.0 and 18.0 percent of their salary 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. 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. Subsequent deposits totaling $11.65 million, all from the General Fund, have been made through December 2019. As of December 2019, the Section 115 pension trust account was valued at over $23 million. The Preliminary Ten -Year General Fund Forecast includes General Fund contributions towards the City's pension liability beyond the required annual payment, including additional direct annual payments to CalPERS of $400,000, and annual contributions of $1.1 million to the City's Section 115 pension trust account through FY 2022-23. Trust proceeds, including investment earnings, will be used in future years to help pay for increased annual pension costs. Increasing the funds invested in the trust, and maintaining those funds over a longer timeframe, will provide greater resources to pay the City's pension costs in the future. The Preliminary Ten -Year Forecast does include an increase in the number of Full Time Equivalent (FTE) positions, as described below. It should also be noted that benefit costs associated with new and existing staff, coupled with liabilities associated with retirees, are expected to increase significantly over the next ten fiscal years. As shown in the chart below, the City's annual pension costs are expected to rise significantly over the next decade to pay off the unfunded liability. In ten years, the City's annual CalPERS payment is projected to be approximately $45.5 million, which is $17.8 million more than it is today, or a 64 percent increase. Notably, these estimates are at a 50 percent confidence level, meaning that there is a 50 percent chance they could be higher or lower. Page 18 of 26 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 253