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John Bartel, Bartel Associates, gave a PowerPoint presentation and said there are differences between the police and fire plans, in that the police plan is in a risk pool and the fire plan is stand-alone. He presented a snapshot of demographic information for the fire plan and said in 1994, Pleasanton Fire was by itself before the LPFD was established and the department had a relatively low number of employees which has grown to 118. Councilmember McGovern questioned and confirmed that since 2009; approximately 4 positions have been lost due to freezing or elimination. Mr. Fialho explained that everyone included in this pension plan is segregated as fire employees, which include the Chief, Deputy Chiefs, and the Fire Marshal. Those numbers in the slide are employees represented by the union and this number includes those employees as well as 8 management positions. The City has implemented a number of freezes throughout the organization which is extended to the Pleasanton side of the fire organization, so the overall staffing count has decreased over the years. Councilmember McGovern asked if the number has been calibrated for 2011. Mr. Bartel said this will be shown in upcoming slides. CaIPERS has estimated what this number is, but they will not come out with the June 30, 2011 valuation until October 2012. Later this month, the City should get the 2010 information but there is a 2-year lag from the valuation date and when the contribution is affected and a 15-month lag from the valuation date and when information is gathered to when CaIPERS actually completes the report. Mr. Fialho pointed out that whether the City looks at this from an actuarial or market perspective, half of the perspective is Livermore's share of the plan and the other half is shared by the City of Pleasanton. Councilmember McGovern questioned and confirmed that in 2011 the City reached $157.8 million liability, and the actuarial unfunded liability will be about $38 million or a market unfunded liability of just over $50 million. Mr. Bartel stated that the market has improved since 2009, but there is still a large gap between that liability and the market value of assets. Mayor Hosterman referred to the Little Hoover Commission report and confirmed that this was the relationship between return on investment of 7.75% with the $240 billion statewide liability. Mr. Bartel said CaIPERS made a change in their asset smoothing method as part of the 2009 valuation that reduced the contribution rate from 38.1% to 31.9%. This change moved into the future more of the investment losses than they would have otherwise done, or deferred them to future years. The City will not have to pay for those if investment return is good. The City will have to pay for those gradually over time if investment return is other than good. The reason this is an important topic is that CaIPERS' deferral results in lower contribution rates but CaIPERS rates in the future are a function of what investment return will be and what contribution rate the City will make. Councilmember McGovern voiced concern because the debt is being passed onto future generations as well as that risk. CaIPERS has made some risky decisions and losses and the City is passing those losses into the future which means it could impact services in the long run if the smoothing does not work out. Mayor Hosterman felt the City needs to figure out how to start paying down this amount while staying in front of the fluctuating return over the coming years. Mr. Bartel said if the City can do this the calculations are not hard to do. It is getting to agreement and putting it into the budget. He has a small number of clients who take the position that they are not going to make that minimum payment which can make the City's budget smoother because you set it at a higher rate and only change it when something exciting happens, like a particularly downturn or particularly good upturn in the market. He actually thinks that from a budget standpoint, it is more painful but it is easier to do once it is in there because it is more stable. City Council Minutes Page 4 of 5 October 4, 2011