8F Consent 2009 0518 - Laserfiche WebLink

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Establishment of OPEB Trust OPEB Contribution for 2008-09 May 18, 2009 Since the trust is not yet in place it is not necessary to transfer the "pay as you go" element of approximately $900,000 to the OPEB Trust for 2008-09. This amount, for 2008-09, will be reimbursed, by the City, to retirees directly. However, the City's contribution for future costs (staff is recommending $500,000) should be made in 2008-09 to the newly established OPEB Trust prior to June 30, 2009. In earlier reports to Council, staff recommended that $1.5 million set aside in the Self Insurance Fund for the OPEB liability be used to help transition the City from a "pay as you go" basis to a prefunded basis. More specifically, staff is recommending that $500,000 be used per year for 2008-09, 2009-10 and 2010-11, (totaling $1.5 million) to supplement the ARC. Staff would note that the three $500,000 payments are not actuarially determined. Rather, they represent equal payments spread over three fiscal years to total the amount in the reserve, $1.5 million Supplementing the total contribution to the OPEB Trust over three years supports staff's recommendation far a three year `work out" plan for balancing the City's General Fund budget. At this point, staff would stress that the current actuarial valuation is almost two years old. Significant and widespread changes in the economy now challenge several assumptions in the valuation, most notably the discount or investment earnings assumption. Future actuarial valuations may vary significantly from the existing valuation, particularly for the UAAL and the ARC. Regardless, by using the $1.5 million in the Self Insurance Fund at the rate of $500,000 per year to supplement the current contribution, the City will make substantial progress towards funding the full ARC for those years. Previous City Council Action(s) ~ Establishment of OPEB Reserve in the Self Insurance Fund of $1.3 million in the 2005-06 City Budget. • Additional $1.2 million in the 2006-07 City Budget (total $2.5 million). Transfer of $1.0 million from OPEB Reserve to General Fund in the 2008-09 City Budget (remaining balance $1.5 million). City Council Committee Review and Action Finance Committee Meeting of July 29, 2008. Applicable General Plan Policy N/A Permits and/or Variances Granted N/A Environmental Review N/A