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THE CITY OF CITY COUNCIL AGENDA REPORT 12 PLEASANTONO June 16, 2015 Finance TITLE: APPROVE THE APPROPRIATION OF $12.5 MILLION FROM THE RETIREE MEDICAL RESERVE FUND AND $1.7 MILLION FROM THE FY 2014/15 GENERAL FUND YEAR-END SURPLUS FOR A TOTAL OF $14.2 MILLION TO PREFUND THE CITY'S CaIPERS AND RETIREE HEALTH (OPEB) LIABILITIES SUMMARY The City of Pleasanton's total unfunded pension-related liabilities (pension and retiree health or OPEB) are estimated to be $157.8 million' as of June 30, 2015. The City amortized repayment of these liabilities to trust funds held and invested by CaIPERS over approximately 30-years at annual interest rates of 7.5% to 7.61%. The City can reduce its annual payments to CaIPERS by reducing the amount of its unfunded liability. The proposed appropriation of $14.2 million combined with approximately $3.5 million included in the FY 2015/16 and FY 2016/17 budget for a total of $16.7 million to pre-pay pension related liabilities will result in saving a total of $37.5 million in payments to CaIPERS over the next 30 years. RECOMMENDATIONS Approve the proposed appropriation of $12.5 million from the Retiree Medical Reserve Fund and $1,708,218 from the General Fund's FY 2014/15 estimated year-end surplus to pre-fund the City's pension-related liabilities. Approve allocating the resulting savings from the City's reduced annual payments to CaIPERS to the City's Capital Improvement Program (CIP) reserves. FINANCIAL STATEMENT The City's Retiree Medical Reserve fund balance is currently $25.7 million including an inter-fund loan receivable of $3.7 million. Appropriating $12.5 million of that will reduce the fund balance to $13.2 million. The City's FY 2014/15 estimated year-end surplus is $2.9 million. The FY 2015/16 and FY 2016/17 budgets include $1.2 million from that surplus to fund CIP projects. Thus, the proposed appropriation of $1,708,218 to pre-fund the City's pension liabilities will fully utilize the FY 2014/15 estimated General Fund year-end surplus. CaIPERS pension liability is estimated as of 6/30/2015 and the OPEB unfunded liability is as of 6/30/13. Total liability excludes applying the City's$25.7 million Retiree Medical Reserve Fund.