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CITY OF PLEASANTON, CALIFORNIA <br /> <br />17 | eidebailly.com <br />NO. RECOMMENDATION DISCUSSION <br />4 <br />The City should develop a plan to <br />draw down its pension and OPEB <br />trust funds for pension and OPEB <br />costs, as appropriate, and <br />incorporate those drawdowns into <br />the baseline scenario of the financial <br />forecast. <br />The ultimate purpose of the funds set aside in the City’s pension and <br />OPEB trusts is to fund long-term pension and OPEB costs. As the City’s <br />plans mature, drawing down these funds to offset pension and OPEB <br />costs is appropriate. As a component of the City’s broader long-term <br />financial planning process, we recommend that the City evaluate an <br />appropriate, measured approach to utilizing these funds to offset <br />pension and OPEB costs as part of its baseline financial forecast. <br /> <br />This approach should be informed by an analysis generating a long-term <br />plan to draw the funds down in consultation with the City’s actuarial <br />consultants. It is worth noting that the period of time over which it is <br />appropriate to gradually draw down on these funds will likely well <br />exceed the ten-year period covered by the financial forecast. As these <br />funds are currently and significantly exceeded by the City’s unfunded <br />liabilities, continued focus on utilizing these funds only for funding long- <br />term pension and OPEB costs related to the City’s unfunded liabilities is <br />appropriate. <br />5 <br />Once the City’s infrastructure <br />funding plan, and any other funding <br />plans, are complete the City should <br />revise its reserve policy to reflect <br />Internal Service Fund reserve <br />minimum balances based on a cash <br />flow analysis of future needs. <br />It is recommended that the reserve policy relative to the Internal Service <br />Funds be reassessed to incorporate a funding policy based on needs <br />rather than minimum balances. Infrastructure, facility, vehicle, and <br />equipment replacement needs are not linear in nature, and significant <br />peaks and valleys to funding needs will occur over the lifecycle of these <br />assets. It is therefore critical to assess the long-term funding needs <br />across a multi-year period to ensure that funds on hand will be adequate <br />in years where needs are greater. <br /> <br />Note: We do not anticipate that this policy change will result in the <br />availability of resources currently contained in these funds for other <br />purposes. <br />6 <br />Once the City’s infrastructure <br />funding plan, and any other funding <br />plans, are complete the City should <br />develop a presentation illustrating <br />these needs across infrastructure, <br />facilities, vehicles, and equipment. <br />As a best practice, funding plans for infrastructure, facilities, vehicles, <br />and equipment should be comprehensive and regularly updated, <br />presenting future needs by year to illustrate the seasonality of the <br />related cash flows. We recommend that the City prepare a single <br />analysis and presentation illustrating, at a high level, all of these needs <br />so that the City Council and the public can effectively appreciate and <br />evaluate the sizable long-term budgetary requirements associated with <br />fully funding these needs. <br /> <br /> <br /> <br /> <br /> <br />Page 26 of 33