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9.A. - Page 14 of 21 Service Funds, limiting equipment and vehicle replacement, a pause on capital funding from utility users' tax (UUT) revenues, and temporary service reductions could be recommended to the City Council in the fall if this scenario seems to be realistic at that point. If a "U" shaped recession occurs, longer-term and more impactful strategies would be necessary. This could include service reductions, consolidation of City functions, and implementation of program efficiencies, as well as use of partial use of reserves. If an "L" shaped recession occurs, long-term transformation strategies would need to be implemented. Even with use of reserves, workforce reductions, permanent service transformations, and consolidation of city functions or contracts with other local agencies would most likely occur as a result of this scenario. Because we expect the recession will result in operating deficits for many years, the City will need to explore a wide range of strategies. The Financial Sustainability Plan adopted in FY 2017-18 identified numerous operating cost reductions and revenue enhancement approaches. Several of those strategies were implemented and others may be revisited this fall. Additionally, the City Council, staff, and community partners will need to continue to work together to align resources with evolving community needs. Maintaining the City's long-term fiscal stability requires meaningful action and a proactive approach to addressing the City's projected deficit and long-term liabilities through both revenue increases and expenditure reductions over time. As more information is available in coming months, staff will return to the City Council in October with updated projections and proposed modifications to the FY 2020-21 budget. Pension Challenges The City's most recent actuarial report from the California Public Employees' Retirement System 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, and a retiree health liability of $49.5 million. The City's total unfunded pension and retiree health liability is $314.0 million. The City's overall funded status for its pension plans is 64.7 percent, down from 65.1 percent the prior fiscal year. CaIPERS Unfunded Actuarial Accrued Liability (millions) Page 14 of 20 . �JL City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 703 Miscellaneous Plan Safety Plan 6/30/18 6/30/18 Actuarial Accrued Liability $345.0 $403.4 Market Value of Assets $231.4 $252.5 Unfunded AAL $113.6 $150.9 FM_ 06" Page 14 of 20 . �JL City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 703