CITY COUNCIL WORKSHOP AGENDA PACKET

Page 12 of 16 reserve is alarmingly low, clearly indicating that other cities are better prepared to address emergencies and other unforeseen expenses. The City of Danville and the City of San Ramon reported $26.2 million and $26.1 million in unrestricted reserve in their General Fund, respectively. However, since both cities are not full-service cities as fire services for both Contra Costa cities are provided through a special district, their reserve levels are also strong compared to Pleasanton’s $38.6 million. The table below shows the percentages of Tri-Valley cities’ FY 2022/23 unrestricted General Fund reserve as a percentage of their FY 2022/23 actual expenditure, excluding transfers to other funds, as these transfers for some cities can be significant in some years or one-time in nature. Reserve calculation is not required for this type of expenditure. Pleasanton has the lowest reserve percentage compared to the other four cities. Please note that the City’s General Fund reserve policy requires the calculation be based on next year’s operating budget, and the Rainy Day Reserve and other program reserves, which will be spent down over time for capital needs, to be excluded from the calculation. Using the FY 2023/24 budget and excluding other reserves for calculation, the reserve is 20.0%. Pension and Retiree Medical Trust Funds Like some agencies, the City established Section 115 pension and retiree medical trust funds to mitigate costs and pay down its unfunded liabilities. At the end of FY 2022/23, the total market value of the pension trust assets was $46.3 million. Due to improvements in the market, the total market value was $51.1 million at the end of FY 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 (see the City Council Agenda at the link https://pleasantonca.portal.civicclerk.com/event/214/files/agenda/338), advising the City not to use the funds or minimum use of the funds. Without the pension trust funds, the City’s funded status is below state average. 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 Page 14 of 109