14 - Laserfiche WebLink

Table 3 Projection of Required Annual Contribution (ARC) Net Annual Investment in Trust for Period 2009 throu h 2011 Projection of Required Annual Contribution (ARC) Net Annual Investment in Trust (in millions 000's omitted) 2008 -09 2009 -10 2010 -11 Non -Fire LPFD 5,196 4,636 4,787 2,548 2,213 2,285 Total ARC 7,744 6,849 7,072 Less Estimated Net Annual Annual Benefit Investment in Cost Trust 1,800 1,980 2,178 5,944 4,869 4,894 As with any actuarially based projection, numerous program variables can impact the overall result. As an example, fluctuations in interest rates, cost of benefits such as the increase in health premiums, and the number of new program participants can result in increased or decreased liabilities. Also, making a decision to fund OPEB requirement over a thirty rather then a twenty year period will increase the liability and annual ARC contributions. However, utilizing generally accepted actuarial standards, such as a thirty year funding period, yields an accurate risk assessment and clear estimate of OPEB costs. Based on the assumptions detailed above, staff has identified the pre- funding Scenario as the most appropriate upon which to determine program cost estimates and liabilities. The ARC shown in Table 3 for FY 2008 -09 will be slightly higher that the ARC for FY 2009 -10 and FY 2010 -11. This is because the 2006 actuarial valuation is being used for the FY 2008 -09 ARC and the 2008 valuation is being used for FY 2009 -10 and FY 2010 -11 ARC. Doing this will provide certainty in the ARC for the next two year budget cycle. The assumptions for the updated 2008 valuation included changes in the health premiums that were lower than expected which reduced the ARC for the next two year period. DISCUSSION As indicated above, staff identified the UAAL and the ARC which will serve as the basis for funding the post retirement benefit over time. Based on this, staff has spent considerable time analyzing various options for funding the ARC. Consistent with GASB standards, the following three options are generally available: Issue debt to fund the entire unfunded liability Continue pay -as- you -go practice Pre -fund the OPEB liability (e.g. making annual payments consistent with the ARC) While the issuance of debt could meet the City's UAAL, a debt issue of this type would be taxable, and therefore would not offer the low cost financing a public agency typically receives when issuing tax exempt debt. In addition, if the investments that bond proceeds were invested in did not perform as expected, increased contributions would Page 7 of 13