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8.A. - Page 19 of 72 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 CAPERS' Projected Contributions During 10 -Year Forecast (in thousands) $37,916 $39,636 $40,183 $35,968 $33,220 $30,207 $27,737 $43,402 $45,494 $40,003 $41,629 FY 2019- FY 2020- FY 2021- FY 2022- FY 2023- FY 2024- FY 2025- FY 2026- FY 2027- FY 2028- FY 2029- 20 21 22 23 24 25 26 27 28 29 30 Safety ■ Miscellaneous Accelerating payments toward unfunded liabilities allows the City to realize interest savings over time, much like making additional payments on a home mortgage. During the FY 2019-20 budget adoption process, the City Council adopted an ambitious pension plan funding strategy to make higher additional annual contributions (beyond the budgeted $1.5 million to the Section 115 trust account and CAPERS) directly to CalPERS over the next 18 years to accelerate the payoff period. This approach is estimated to save the City approximately $38 million in interest payments and allow the City to fully fund pensions approximately three years earlier. The City Council acknowledged that adopting this strategy would be a challenge, given that it would require greater contributions, even though the annual budget projections indicate a potential deficit for most of the next 18 years. Adopting this goal requires an even stronger commitment to significant revenue increases and cost reductions. The accelerated 18 -year payoff strategy will be revisited as annual contribution projections change and may be altered in future years. With this strategy, the City's pension plans are projected to be fully funded in FY 2036-37 instead of FY 2039-40. This could save the City approximately $38 million in interest payments. This is an estimate only, and the City's interest savings could vary significantly year to year depending on when and how much of the Section 115 Pension Trust proceeds are used. At this time, it is likely the City will need to use pension trust proceeds in 10 years, when the City's annual contribution payments are $17.8 million more than what they are today. In Fiscal Years 2022-23 through 2024-25, the City does not have any estimated additional payments, as certain existing amortization bases will be paid off (amortization bases consist of pension plan Page 19 of 26 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 254