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9.A. - Page 18 of 21 As shown in the chart below, the City's required annual pension costs are expected to rise significantly to pay off the unfunded liability. In ten years, the City's annual CaIPERS payment is projected to be approximately $43.0 million, which is $12.8 million more than it is estimated to be in FY 2020-21 ($30.2 million), or a 42 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. In addition, the chart below does not include the impact of the anticipated CaIPERS investment rate of return of 0% for FY 2019-20. $50.0 $45.0 $40.0 $35.0 $ $30.0 $27.5 $25.0 $20.0 $15.0 $10.0 $5.0 Required Annual CalPERS Contributions (in millions) $430 $". $42.6 tA? a . O : '1. � 0 h 1 � 5 O ti ti � co 1 1b 1 OyO' OO O'yti Otis: O�0 0� Ory O,�fd 01�, O�0 O�0 0.50 0�1 0.5ti O�� 0,50 03h, 030 O,�'1' O�� J'l• J� J�' J�' J'b Jti J'L J'L J'Y J1• J1. J~ Jti Jti Jti J'1• J'L Jti Jti J'L ■ Miscellaneous Safety These estimated increased annual required contribution amounts will make it significantly more challenging to proceed with the City Council's priority to pay down pension liabilities within 18 years. Given the current uncertainties related to the COVID-19 pandemic, it is expected that this priority will need to be revisited once the total economic impact of COVID-19 is quantifiable. Timeframe for Pension Plans to be Fully Funded Full funding of future pension obligations is an important goal. The City Council has previously approved the following approach to achieving this goal: Making Sufficient Contributions to Fully Fund Pension Obligations within 18 Years (aspirational goal). This strategy was intended to fully fund the City's pension plans in FY 2036-37 instead of FY 2039-40. This could save the City approximately $38 million in interest payments. This strategy will need to be revisited in FY 2020-21 as the FY 2019-20 CaIPERS investment losses, and corresponding increase in employer payment obligations, are known. When coupled with a decline in revenues it may no longer be feasible to pursue an earlier date for funding the City's pension plans. Page 18 of 20 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 707