SPECIAL MEETING NOTICE AND AGENDA

in mortality assumptions, changes in health benefits cost increase assumptions as well as any changes in the City's labor agreements related to retiree health benefits. CaIPERS OPEB Trust Fund has had earnings the past three fiscal years of between 1.8% to 18.4%which is significantly greater than the approximately 0.60%5 that the City has earned on its pooled funds. During the late 1990s through early 2000s, because of unusually high investment returns, CaIPERS did not require the City to make annual contributions to CaIPERS. The City conservatively put the amount they normally would have sent to CaIPERS into a special City Internal Services fund to use towards future retiree health benefits. There is currently a $25.7 million fund balance including an inter-fund loan receivable of$3.7 million. This fund is currently earning approximately 60 basis points through the City's pooled investments. Because these funds are sitting with the City and not deposited into the City's OPEB trust account at CaIPERS, the City's OPEB accrued liability excludes the$25.7 million in the City's special Retiree Health Care fund. However, OPEB actuarial reports and the City's annual CAFR identify the fund and its remaining balances. And, staff have regularly included the fund as reducing the City's accrued unfunded OPEB liability when presenting the City's accrued unfunded liability. Summary of Capital Funding Requirements The City's aging infrastructure (roads, bridges, parks, and sidewalks), buildings, and equipment require investments in order to keep them from failing or not functioning properly. In addition, the City wishes to expand its capital assets such as building new parks and additions to the City's transportation system. Prior to the Great Recession, the City allocated from the General Fund $4.5 million annually to the City's Repair and Replacement funds (R&R) and $5 million annually to the City's Capital Improvement Program (CIP)funds for a total of$9.5 million in General Fund monies to R&R and CIP efforts. During the Great Recession these amounts dropped to $3.8 million.To bring the funding back to pre-Great Recession levels, the City's FY 2015/16 and FY 2016/17 budgets propose increasing allocations to $7.5 million annually through the property and sales tax revenue growth. However, these allocations are$2 million less than the prior $9.5 million funding level staff hope to achieve. The City's average interest earnings has fluctuated over the years and has improved recently with increasing the amount the City invests in higher yielding federal notes and bonds and reducing the amount invested in money market funds.The City's interest earnings for the month ending 5/31/15 is 0.87%. Page 3 of 4