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THE CITY OF 1 2 <br /> pLEASANTON CITY COUNCIL AGENDA REPORT <br /> June 5, 2018 <br /> Finance <br /> TITLE: APPROVE INVESTMENT STRATEGIES AND WITHDRAWAL POLICY <br /> GUIDELINES FOR THE CITY'S SECTION 115 PARS PENSION <br /> TRUST FUND AND ALLOCATE THE INITIAL $28 MILLION <br /> INVESTMENT <br /> SUMMARY <br /> The City's CaIPERS unfunded liability is currently approximately $160 million. Based on <br /> CaIPERS Board recent policy decisions, the City's unfunded pension liability and annual <br /> pension contributions are expected to grow through FY 2029/30 and then somewhat <br /> level off through FY 2046/47 when the City's unfunded pension liability is expected to be <br /> fully funded. To help the City fund its growing pension contributions while maintaining <br /> control over its investments, on March 6, 2018, City Council authorized the City's <br /> participation in a Section 115 Pension Trust administered by PARS (PARS Trust). To <br /> complete the process with PARS, City Council needs to adopt investment strategies <br /> and allocate the initial investment. In addition, staff is recommending withdrawal policy <br /> guidelines to ensure there will be sufficient funds in the PARS Trust to help the City fund <br /> increased pension contributions until such time as the City's unfunded CaIPERS liability <br /> has been fully funded. <br /> AUDIT/FINANCE COMMITTEE RECOMMENDATION <br /> The Audit/Finance Committee (Committee) met on May 2, 2018 to review proposed <br /> PARS Trust investment strategies and withdrawal policy guidelines and recommended <br /> staff prepare an item for City Council consideration. <br /> RECOMMENDATION <br /> Staff recommends that the City Council (1) approve the investment strategy to invest <br /> the City's annual Normal PERS contribution ($6.7 million in FY 2018/19) in the PARS <br /> Conservative passive portfolio and the investing the $21.3 million initial long-term <br /> investment in a custom active portfolio that comprises 70 percent equities and 30 <br /> percent fixed income, (2) allocate $28 million to the PARS Trust, and (3) adopt the <br /> attached PARS Trust Withdrawal Policy Guidelines. <br /> FINANCIAL STATEMENT <br /> The PARS Section 115 Trust investment strategies that staff is proposing the City adopt <br /> yielded 6.73 percent gross of fees for the Conservative portfolio and approximately <br /> 16.09 percent gross of fees for the custom active portfolio that includes 70 percent <br /> equities and 30 percent fixed income in 2017. The City's investment rate of return <br /> during that same period was 1.14 percent. Thus, the City should, on average, exceed its <br />