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BACKGROUND
<br /> The City contracts with the California Public Employees Retirement System (CaIPERS)
<br /> for the City's Defined Benefit Retirement Plan for sworn Police employees (Police
<br /> Group). The City's current Defined Benefit Plan for the Police Group is a 3.0% @ 50
<br /> Plan, where a qualified employee may receive an annual retirement benefit equal to 3%
<br /> of their final compensation times the number of years of service at age 50. The City
<br /> funds these benefits on an annual basis according to actuarially determined contribution
<br /> rates for both the employee and the employer. The City's current employer rate is
<br /> 29.074% of employee salary, of which 9.98% of employee salary is attributable to the
<br /> "side fund" repayment.
<br /> In fiscal year 2003, California legislation mandated that all agencies with less than 100
<br /> active members be enrolled in a risk-sharing pool with all other agencies in the State
<br /> with similar benefit packages. The City's Police Group was the only City group that had
<br /> less than 100 active members; consequently the Police Group was put into a risk pool.
<br /> At the time of joining the risk pool, a Side Fund was created to account for the
<br /> difference between the funded status of the City's plan and the funded status of the risk
<br /> pool. CaIPERS then funded the Side Fund obligation on behalf of the City and in turn
<br /> the City must repay the obligation to CaIPERS. The outstanding amount was
<br /> $8,189,551 as of June 30, 2010. This obligation is being repaid over an approximately
<br /> twenty year period at an interest rate of 7.75%, which is the actuarially assumed rate of
<br /> return for the CaIPERS fund. As of July 1, 2011, the City has 10 years remaining to pay
<br /> on this obligation with a principal balance remaining of $7,840,284. This obligation is
<br /> referred to as a Side Fund Loan (Loan) and is currently being retired by adding 9.98%
<br /> of employee salary to the City's reported PERS payroll amounts for the Police Group.
<br /> Based upon recent CaIPERS' estimates of the City's payroll for the 2010/11FY the
<br /> additional Side Fund Loan payment for the 2010/11FY will be approximately $947,911.
<br /> Table 1 presents the estimated remaining annual payments for the outstanding Side
<br /> Fund Loan:
<br /> Table 1
<br /> POB 10 yrs Balance Payment *
<br /> 0 $8,189,552 $947,911
<br /> 1 $7,840,285 978,718
<br /> 2 $7,431,971 1,010,526
<br /> 3 $6,958,995 ' 1,043,368
<br /> 4 $6,415,274 1,077,277
<br /> 5 $5,794,215 1,112,288
<br /> 6 $5,088,681 1,148,438
<br /> 7 $4,290,944 1,185,762
<br /> 8 $3,392,639 1,224,299
<br /> 9 $2,384,713 1,264,089
<br /> 10 $1,257,370 $1,305,172
<br /> Total $11,349,938
<br /> * Total does not include current year payments of$947,911.
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