HomeMy WebLinkAbout10 CALPERS POLICE SIDE FUNDMEETING DATE: NOVEMBER 4, 2014
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: PAMELA ARENDS -KING. FINANCE DIRECTOR /CITY TREASURER
SUBJECT: ADOPT RESOLUTION NO. 14 -71 REVISING THE CITY'S GENERAL
FUND RESERVE AND SPECIAL FUND ACCOUNTS POLICIES AND
APPROVE THE PAY OFF OF THE CALPERS SAFETY PLAN SIDE FUND
SUMMARY:
During the Fiscal Year 2014 -15 budget process Council expressed the desire to reduce
outstanding pension obligations with CalPERS by paying off the safety plan side fund (side
fund). When the City of Tustin joined the safety risk pool with CaIPERS in 2003, a side fund
was created to account for the difference between the funded status of the pool and the
funded status of the City's plan. Per CalPERS, the current side fund balance is $4,348,779.
Payment to CalPERS of the side fund totaling $4,348,779 will eliminate the side fund and
save the City's General Fund approximately $5,321,803 over the next 5 years in employer
contributions to CalPERS. Savings in the current fiscal year to the General Fund would be
about $538,000 in reduced employer contributions. Total net savings after the payoff would
be approximately $973,024 over the next 5 years.
Resolution No. 14 -71 revises the City's General Fund reserve policy and Special Fund
Accounts policies by allowing proceeds from land held for resale in Fund 189 to be used for
any lawful City purposes. Funds to pay off the side fund will be used from Fund 189.
RECOMMENDATION:
It is recommended City Council take the following actions:
• Adopt Resolution No. 14 -71, a resolution of the City Council of the City of Tustin,
California, revising the City's General Fund reserve and Special Fund Accounts
policies.
• Authorize the appropriation of $4,348,779 from Fund 189 reserves.
• Approve the lump sum payment to CalPERS of $4,348,779 to be disbursed by
November 16, 2014, eliminating the safety side fund.
FISCAL IMPACT:
Pay off of the side fund will increase Fund 189 expenditures in Fiscal Year 2014 -15
$4,348,779. The lump sum payment will reduce General Fund expenditures, for Fiscal
Years 2014 -15 through 2019 -2020, a total of approximately $5,321,803. The lump sum
!
. AGENDA REPORT
Agenda Item 10
Reviewed:
'
City Manager
Finance Director 10
MEETING DATE: NOVEMBER 4, 2014
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: PAMELA ARENDS -KING. FINANCE DIRECTOR /CITY TREASURER
SUBJECT: ADOPT RESOLUTION NO. 14 -71 REVISING THE CITY'S GENERAL
FUND RESERVE AND SPECIAL FUND ACCOUNTS POLICIES AND
APPROVE THE PAY OFF OF THE CALPERS SAFETY PLAN SIDE FUND
SUMMARY:
During the Fiscal Year 2014 -15 budget process Council expressed the desire to reduce
outstanding pension obligations with CalPERS by paying off the safety plan side fund (side
fund). When the City of Tustin joined the safety risk pool with CaIPERS in 2003, a side fund
was created to account for the difference between the funded status of the pool and the
funded status of the City's plan. Per CalPERS, the current side fund balance is $4,348,779.
Payment to CalPERS of the side fund totaling $4,348,779 will eliminate the side fund and
save the City's General Fund approximately $5,321,803 over the next 5 years in employer
contributions to CalPERS. Savings in the current fiscal year to the General Fund would be
about $538,000 in reduced employer contributions. Total net savings after the payoff would
be approximately $973,024 over the next 5 years.
Resolution No. 14 -71 revises the City's General Fund reserve policy and Special Fund
Accounts policies by allowing proceeds from land held for resale in Fund 189 to be used for
any lawful City purposes. Funds to pay off the side fund will be used from Fund 189.
RECOMMENDATION:
It is recommended City Council take the following actions:
• Adopt Resolution No. 14 -71, a resolution of the City Council of the City of Tustin,
California, revising the City's General Fund reserve and Special Fund Accounts
policies.
• Authorize the appropriation of $4,348,779 from Fund 189 reserves.
• Approve the lump sum payment to CalPERS of $4,348,779 to be disbursed by
November 16, 2014, eliminating the safety side fund.
FISCAL IMPACT:
Pay off of the side fund will increase Fund 189 expenditures in Fiscal Year 2014 -15
$4,348,779. The lump sum payment will reduce General Fund expenditures, for Fiscal
Years 2014 -15 through 2019 -2020, a total of approximately $5,321,803. The lump sum
ADOPT RESOLUTION NO. 14 -71 REVISING THE CITY'S GENERAL FUND RESERVE AND SPECIAL FUND ACCOUNTS
POLICIES AND APPROVE THE PAY OFF OF THE CALPERS SAFETY PLAN SIDE FUND
November 4, 2014 Page 2 of 3
payment will reduce the employer contribution rate for the City's safety plan effective
11/17/2014 from 36.343% to 27.849 %, a reduction of 8.494 %. There are adequate funds in
Fund 189 to pay for the lump sum payment of $4,348,779, and maintain our current cash
flow needs. The City is earning an average rate of approximately 0.80% on investments
(weighted average yield as of September 30, 2014). The side fund is increased, on an
annual basis, at the actuarial investment return assumption rate, which is 7.5% of the side
fund debt. Paying off the side fund early will result in interest savings of approximately
6.7 %.
Projected Savings
FY
2015
$538,000
FY
2016
901,051
FY
2017
928,083
FY
2018
955,925
FY
2019
984,603
FY
2020
1,014,141
$5,321,803
Less: Lump Sum Payment 4,348,779
Savings in Excess of Lump Sum
Payment $973,024
CORRELATION TO THE STRATEGIC PLAN:
The lump sum payment to CalPERS to eliminate the safety side fund contributes to the
fulfillment of the City's Strategic Plan Goal C, Strategy #4, by instituting improvements that
will reduce the City's costs and making the best use of financial resources.
BACKGROUND:
As of 2003, CalPERS placed any plan with less than 100 active members in a risk pool to
minimize fluctuations in contribution rates by pooling assets and liabilities across
employers. Based on our employee population count, Tustin's safety plan is in a risk pool.
CalPERS creates side funds for all plans that are in a risk pool at the time the plan enters a
pool. The side fund is set up to separately account for the particular plan's assets and
liabilities, so if the plan had any unfunded liability at the time it joined the risk pool this would
be reflected in the side fund to separate it from the overall risk pool's assets and liabilities.
The side fund is set up to be amortized over time and paid down through a percentage
added to the employer contribution rate.
In October, staff obtained a payoff quote from the Senior Pension Actuary at the CalPERS
Actuarial Office. The lump sum payment to eliminate the side fund for the safety plan is
$4,348,779, which must be paid to CaIPERS by November 16, 2014.
Resolution No. 14 -71 allows the City to use land sale proceeds from Tustin Legacy because
it revises Resolution No. 12 -106 by stating funds received for backbone infrastructure will
ADOPT RESOLUTION NO. 14 -71 REVISING THE CITY'S GENERAL FUND RESERVE AND SPECIAL FUND ACCOUNTS POLICIES
AND APPROVE THE PAY OFF OF THE CALPERS SAFETY PLAN SIDE FUND
November 4, 2014
Page 3 of 3
be accounted for in Fund 187 and funds received from land sale proceeds will be accounted
for in Fund 189. Those funds may be used for any lawful purposes instead of just for uses
within Tustin Legacy.
Pamela Arends -King
Finance Director /City Treasurer
Attachments: Resolution No. 14 -71
RESOLUTION NO. 14 -71
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUSTIN, CALIFORNIA, REVISING THE CITY'S GENERAL
FUND RESERVE AND SPECIAL FUND ACCOUNTS
POLICIES
THE CITY COUNCIL OF THE CITY OF TUSTIN FINDS THAT:
WHEREAS, the City Council of the City of Tustin, California is charged with,the
oversight of City funds; and
WHEREAS, the City Council established a General Fund Reserve Policy and
Special Fund Accounts in Resolution No.12 -106; and
WHEREAS, the City Council wishes to continue implementation of those policies
as modified herein to strengthen the City of Tustin's financial flexibility and sustainability
for the future.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF TUSTIN THAT:
1. General Fund Reserve Policy. The City will maintain a reserve of 20% of the annual
General Fund expenditures. Only if the City Council declares a financial emergency
may the reserves be allowed to fall to less than 15 %.
2. Three Special Fund Accounts. The Three Special Fund Accounts shall be
maintained and utilized in accordance with the following:
a. Emergency Fund — Minimum $1 million
For use in a City Council declared emergency such as earthquake, flood or fire.
This fund would augment funds for City operational costs during and while
recovering from such emergencies. The City will endeavor to obtain
reimbursement of such emergency funds from the state or federal government,
or both.
b. Land Proceeds Fund
These funds are derived from land sales primarily in the Tustin Legacy Project;
however, these funds could be from any City owned property.
Proceeds from land sales within the Tustin Legacy Project area will be accounted
for with separate funds: (1) those funds received as contributions to the
Backbone Infrastructure program from each land sale will be deposited to Fund
187; and (2) the remaining funds and consideration received as purchase price
Resolution 14 -71
Page 1 of 3
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will be deposited to Fund 189. Funds in Fund 187 will be dedicated for uses in
the Legacy area consistent with the Backbone Infrastructure program, until such
time that the City has secured adequate funds necessary to develop the Tustin
Legacy backbone infrastructure and maintenance program. Fund 189 may be
used for any lawful City purposes.
Proceeds from land sales outside the Tustin Legacy Project area will be
deposited to Fund 189.
c. Special Capital Project Fund
The fund would provide for the financing of needed infrastructure where there is
currently no dedicated funding source, such as water funds or transportation
funds. These General Fund expenditures would include, but not be limited to:
technology upgrades, building construction /upgrades and park enhancements. It
is recommended that the Council allocate 25% of any fiscal year General Fund
surplus be dedicated to this fund.
3. Resolution No. 12 -106 is repealed in its entirety.
PASSED AND ADOPTED by the City Council of the City of Tustin at a regular
meeting on the 4th day of November, 2014.
ELWYN A. MURRAY
Mayor
ATTEST:
JEFFREY C. PARKER
City Clerk
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS
CITY OF TUSTIN )
I, Jeffrey Parker, City Clerk and ex- officio Clerk of the City Council of the City of Tustin,
California, do hereby certify that the whole number of the members of the City Council
of the City of Tustin is five; that the above and foregoing Resolution No. 14 -71 was duly
passed and adopted at a regular meeting of the Tustin City Council, held on the 4th day
of November, 2014, by the following vote:
COUNCILMEMBERS AYES:
Resolution 14 -71
Page 2 of 3
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COUNCILMEMBERS NOES:
COUNCILMEMBERS ABSTAINED:
COUNCILMEMBERS ABSENT:
JEFFREY C. PARKER
City Clerk
Resolution 14 -71
Page 3 of 3
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