CITY COUNCIL REGULAR MEETING AGENDA PACKET

Page 10 of 14 Section 115 Pension Trust Fund The City Council has implemented proactive measures to pay down the City’s unfunded pension obligation. A pension trust was established, and funds in the trust account can only be used for pension contributions. Funds can be withdrawn during challenging times in accordance with the PARS Trust Withdrawal Policy adopted by the City Council in February 2020. At the end of fiscal year 2022/23, the total market value of the trust assets was $46.3 million. Due to improvements in the market, the total market value was $51.1 million at the end of fiscal year 2023/24. With changing market conditions, the investment balance is expected to fluctuate from time-to-time. Due to the General Fund structural deficit, the City Council requested an analysis on the use of trust funds to bridge the budget gap. The City engaged an actuarial consultant to conduct the analysis, and the consultant presented the results and recommendation to the City Council on May 21, 2024, advising the City not to use the funds or minimum use of the funds. As part of the analysis, the consultant projected the City’s pension costs over the next three decades using three scenarios, as shown in the chart below. Over the next 12 years, the City’s pension contributions are expected to remain high. If pension trust funds are used aggressively, the City will face significant challenges in meeting its obligations during the peak period (still years away) and sustaining City services and programs, as funds will not be available at that time. Below the chart is a table showing the General Fund pension contributions over the last eight years. The annual contribution increased from $11.7 million in fiscal year 2016/17 to $22.0 million in fiscal year 2023/24. The annual increase ranges from 3.8% to 13.6%. Agencies' Page 42 of 114