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Councilmember McGovern asked if 2004 Proposition 1A allows the State to take 8% of property tax revenues each year for 2 years or for the 2 years combined. Mr. Culver explained that it authorizes the State to take $4.7 million twice in any 10 year period but that the first must be repaid, with interest, before it can take the second. There was no public comment on the item. MOTION: It was m/s by McGovern /Sullivan to adopt Resolution No. 09 -291 accepting the 3 Quarter Financial Status Report and amending the 2008 -09 Operating Budget. Motion passed by the following vote: Ayes: Councilmembers Cook Kallio, McGovern, Sullivan, Mayor Hosterman. Noes: None Absent: Councilmember Thorne 12(b). Adopt a resolution accepting the Midyear 2008 -09 Capital Improvement Program (CIP) Budget update and amending the FY 2008 -09 CIP Budget MOTION: It was m/s by Cook Kallio /Sullivan to adopt Resolution No. 09 -292 accepting the Midyear 2008 -09 Capital Improvement Program (CIP) Budget update and amending the FY 2008- 09 CIP Budget. Motion passed by the following vote: Ayes: Councilmembers Cook Kallio, McGovern, Sullivan, Mayor Hosterman. Noes: None Absent: Councilmember Thorne 13. Consideration of a Resolution establishing an irrevocable trust, related documents and an interim investment strategy, for the purpose of pre- funding retiree medical benefits Mr. Culver presented the staff report, reviewing retiree medical benefits, funding mechanisms, and State requirements. He explained that most agencies typically fund retirement benefits on a pay as you go basis; however, since 1990 Pleasanton has set aside funds for current employee retirement benefits as they are eamed. The recommendation is now to consider investing those pre- funded benefits to decrease the long -term unfunded liability. New accounting rules from the Governmental Accounting Standards Board (GASB) encourage the prefunding of Other Employee Pension Benefits (OPEBs) over the course of an employee's career. GASB 43 and GASB 45 are two statements that address trust fund accounting and reporting as well as financial reporting standards that require the measurement and reporting of any unfunded liability. Pleasanton is subject to GASB 45 beginning June 30, 2009. GASB requires an OPEB valuation to be performed by a certified actuary who will then, in concurrence with an auditor, set a discount rate that reflects the rate of expected eamings on assets. Conservative, low risk investments like the City currently utilizes typically consist of fixed income investments such as bonds and earn a 3-5% return. A diversified pension -like portfolio would earn 7 -8% and include a mix of stocks, bonds, mutual funds, and fixed income investments. The unfunded actuarial liability for Pleasanton could range from $125 million with a discount rate of 4% to $77 million with a discount rate of 7.75 Mr. Culver noted that while the higher discount rate is obviously preferable, it carries increased risks. He added that CaIPERS relies heavily on diversified investment income and YTD earnings for them are down 32.3% but the 15 year average earnings is 9% to 10 City Council Minutes Page 10 of 13 May 19, 2009