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File Number: 17-093 <br />possible as described below. <br />In August 2016, CalPERS acknowledged that its investment rate of return was below its <br />target, which resulted in an increase of $20 million of the City’s unfunded liability and an <br />increase in the ARC. <br />In December 2016, the CalPERS Board voted to reduce its expected rate of return from <br />7.5% to 7.0%. This reduction will increase the City’s unfunded liability and ARC. <br /> <br />DISCUSSION <br /> <br />Unfunded liabilities represent a cumulative challenge that has grown over many years. <br />The City has made this issue a priority and is working toward awareness, approaches and <br />strategies to diminish its scale and impact. The City Council also has taken the following <br />steps to lower the City’s unfunded liability: <br />·Employee labor contracts that require all employees to pay the full employee <br />share. <br />·100% payment of ARC starting in 2014. <br />·100% ARC payment plus $750,000 in FY 2015, $2,500,000 in FY 2016 and <br />$750,000 in FY 2017 <br />·In addition, the Council directed staff to take the following steps: <br />·Financial language to require payment of 100% of ARC. <br />·Adoption of a financial policy to utilize up to 50% of fiscal year carryover for PULL <br />Plan. <br />·Adoption of a financial policy to utilize up to 50% of General Fund land sales for <br />PULL Plan. <br />·Lower City Council goal from 20% reserves in emergency contingency fund to <br />16.7%, and utilize current excess to buy down city unfunded liability debt. <br />·Explore creation of a separate trust for the PULL Plan. <br /> <br />Failure to act would have the impact of a growing unfunded liability. This growing unfunded <br />liability will result in less funding available for projects, programs and services. A PULL <br />Plan is both a City Council and staff concern. Just as a household can elect to pay more <br />than its required monthly mortgage payment to reduce its long-term debt, so too is a PULL <br />Plan designed to minimize the financial burden borne by taxpayers. A PULL Plan should <br />also identify a stated financial target or goal. <br />The PARS trust account currently has a balance of approximately $7 million. The <br />recommended action would increase that balance to approximately $13,200,000. <br />Fiscal Impact <br />As noted above, the PULL Program calls for 50% of all General Fund carryover funds to be <br />committed to pay down unfunded pension and retirement liabilities. In Fiscal Year 2015-16, <br />a combination of strong economic conditions and certain one-time factors resulted in a <br />carry-over of approximately $12,400,000 at the close of the fiscal year. Accordingly, <br />$6,200,000 is available from the General Fund unrestricted reserve. Currently, this reserve, <br />Page 3 City of San Leandro Printed on 2/28/2017 <br />173