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File Number: 21-359 <br />·Flexibility to access Trust assets to offset unexpected increases in pension costs or <br />decreases in revenues due to economic downturns. <br />Establishing a Pension Trust will enhance investment returns in the long run and provide the City <br />flexibility to withdraw funds from the Trust as needed. California Government Code Section <br />53216 allows assets in a Pension Trust to be invested in any form or type of investment deemed <br />prudent. Investment restrictions that apply to the City’s pooled investments do not apply to the <br />Pension Trust. For example, funds in a Pension Trust can be invested in both equity (stock and <br />shares issued by a company) and fixed income (investments that pay investors fixed interest or <br />dividend payments); assets can be invested in a time horizon that is longer than five years. The <br />City’s pooled investments cannot be invested in equity and are limited to five-year maturity unless <br />otherwise approved by the City Council. <br />The City established its OPEB Trust with PARS in 2009 and the City selected a Moderately <br />Conservative investment strategy for the portfolio. Today the OPEB Trust has accumulated over <br />$21 million in assets and the City’s retiree medical plan is 81% funded. <br />DISCUSSION <br />Investment Guidelines <br />Overview and Key Investment Elements <br />As stated in the Investment Guidelines Document, the purpose of the document is to: <br />·Facilitate the process of ongoing communication between the City, PARS and HighMark; <br />·Confirm the Plan’s investment goals and objectives and management policies applicable <br />to the investment portfolio that will be identified by the City; <br />·Provide a framework to construct a well-diversified asset mix that can potentially be <br />expected to meet the account’s short- and long-term needs that is consistent with the <br />account’s investment objectives, liquidity considerations and risk tolerance; <br />·Identify any unique considerations that may restrict or limit the investment discretion of its <br />designated investment managers; and <br />·Help maintain a long-term perspective when market volatility is caused by short-term <br />market movements. <br />The following key elements should be considered when selecting an investment strategy for the <br />Trust. <br />·Investment Time Horizon <br />·Anticipated Cash Flow <br />·Investment Objective <br />·Risk Tolerance <br />Staff recommends that the City Council’s goal should be to accumulate funds in the Plan to cover <br />increases in pension costs and relieve pressure on the General Fund in future years. The <br />objective will be to maximize investment return while ensuring cash is available to cover pension <br />contributions. Withdrawals from the Trust are not expected in the next seven to eight years. <br />Investment Strategies <br />The PARS Section115 Trust Program offers several investment strategies as presented in <br />Page 2 City of San Leandro Printed on 6/4/2021 <br />182