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HomeMy WebLinkAbout2014-01-15 e-packetSPECIAL MEETING n CITY COUNCIL OF THE `�LtFO� CITY OF SOUTH SAN FRANCISCO P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, California 94083 Meeting to be held at: CITY HALL CONFERENCE ROOM 400 GRAND AVENUE SOUTH SAN FRANCISCO, CA WEDNESDAY, JANUARY 15, 2014 6:30 P.M. NOTICE IS HEREBY GIVEN, pursuant to Section 54956 of the Government Code of the State of California, the City Council of the City of South San Francisco will hold a Special Meeting on Wednesday, the 15'h day of January, 2014, at 6:30 p.m., in the City Hall Conference Room, 400 Grand Avenue, South San Francisco, California. Purpose of the meeting: 1. Call to Order. 2. Roll Call. 3. Public Comments — comments are limited to items on the Special Meeting Agenda. 4. Agenda Review. 5. Study Session: Overview of proposed three year sewer rate increase plan and approval of a resolution authorizing an application to the State Water Resources Control Board for a Clean Water State Revolving Fund loan for improvements to the Water Quality Control Plant. 6. Study Session: Updating the City Council on the most recent actuarial study of the City's Other Post - Employment Benefits (OPEB). 7. Adjournment. Anna Brown, Deputy City Cleric DATE: January 15, 2014 TO:' Honorable Mayor and City Council FROM: Brian McMinn, Director of Public Works /City Engineer Jim Steele, Director of Finance SUBJECT: OVERVIEW OF PROPOSED THREE YEAR SEWER RATE INCREASE PLAN AND APPROVAL OF A RESOLUTION AUTHORIZING AN APPLICATION TO THE STATE WATER RESOURCES CONTROL BOARD FOR A CLEAN WATER STATE REVOLVING FUND LOAN FOR IMPROVEMENTS TO THE WATER QUALITY CONTROL PLANT RECOMMENDATION It is recommended that the City Council review and discuss the proposed new sewer service rates for Fiscal Years (FY) 2014 -15 through 2016 -17, provide direction so staff can prepare the necessary noticing for a public hearing in compliance with Proposition 218, and approve a resolution authorizing an application to the State Water Resources Control Board for a Clean Water State Revolving Fund loan. BACKGROUND/DISCUS SION In April 2009, in accordance with the requirements of Proposition. 218, the City notified, by mail, the owners of property in South San Francisco of rate increases for sewer service for the FY 2009- 2010, and annual increases of up to 10% in FY 2010 -11, up to 5% in FY 2011 -12 and no increases in FY 2012 -13 through FY 2013 -14. The notice explained that the rate increases were needed to finance capital improvements for the City's Water Quality Control Plant (WQCP) and sanitary sewer system. The City Council approved that rate plan in June 24, 2009. Since the City Council approved the current sewer rate plan, the City has used Sewer Fund revenues to fund the following Capital Improvement Plan (CIP) projects: ➢ Design and environmental review of a solar photovoltaic system at the WQCP ➢ Design and environmental review of projects to minimize blending during wet weather ➢ Design of the rebuilding of three digesters ➢ Replacement of a blower to reduce energy consumption at the WQCP ➢ Upgrading computerized maintenance system software at the WQCP and the sewer collection system ➢ Replacing backup generator at the WQCP (to be completed in Summer 2014) ➢ Upgrading pump stations east of 101 ➢ Repair of the WQCP outfall line Staff Report Subject: OVERVIEW OF PROPOSED THREE YEAR SEWER RATE INCREASE PLAN AND APPROVAL OF A RESOLUTION AUTHORIZING AN APPLICATION TO THE STATE WATER RESOURCES CONTROL BOARD FOR A STATE REVOLVING FUND LOAN FOR IMPROVEMENTS TO THE WATER QUALITY CONTROL PLANT Page 2 of 4 The improvements at the WQCP have allowed the plant to reliably treat up to 13 million gallons of wastewater per day and the improvements to the collection system and pump stations have eliminated improper waste discharges to meet state requirements contained in the City's National Pollutant Elimination Discharge System ( NPDES) permit. In addition to those improvements, the sewer rates funded improvements to the City's maintenance and monitoring of the condition of the sewer collection system, which allowed the City to meet the requirements for early termination of the Baykeeper consent decree. The City has applied and is waiting for a new NPDES permit from the State Water Resources Control Board (SWRCB), which will establish new criteria for operation of the WQCP for the next five years. The City anticipates receipt of a new permit by April 2014. Although staff anticipates that the SWRCB will require the City to complete large capital projects under the new permit, the specific improvements and associated construction deadlines that will be required are not known at this time. Rate Recommendations Staff forecasts approximately $32 million worth of capital improvements will be required over the next three years: ➢ Minimize Blending construction as part of the new NPDES permit ($16 million) ➢ Rebuilding Three Digesters ($7.5 million) Additional Blower Replacement ($500,000) ➢ Sewer Collection System Rehab ($1.5 million) Pump 4 Force Main Design ($300,000) ➢ Completion of Backup Generator Replacement ($1.2 million) ➢ WQCP Upgrade Projects as required by new NPDES permit ($5 million) Staff is still refining this estimate of capital improvement and cash flow needs, but we currently estimate that an overall revenue increase of approximately 5% will be required in FY 2014 -15, and that no additional increases will be needed in the subsequent two years of this three year rate and capital planning period. Staff is simultaneously working with our sewer rate consultant, Bartle Wells, to adjust the sewer rates to reflect the fact that multi - family units generate a lower per writ volume of effluent than single - family units. This issue was discussed in detail during the last rate adjustment period in 2008, and was the focus of some public comments at that time. As mentioned above, staff estimates an overall revenue increase of 5 % would be sufficient to fund the operating and capital expenses over the next three years. To achieve an overall rate increase of 5% while adjusting for the lower volume of effluent from multi- family units, single- family rates may need to increase slightly more than 8% over the three year rate period. Multi- family rates would decrease 3% in Staff Report Subject: OVERVIEW OF PROPOSED THREE YEAR SEWER RATE INCREASE PLAN AND APPROVAL OF A RESOLUTION AUTHORIZING AN APPLICATION TO THE STATE WATER RESOURCES CONTROL BOARD FOR A STATE REVOLVING FUND LOAN FOR IMPROVEMENTS TO THE WATER QUALITY CONTROL PLANT Page 3 of 4 year one. The 8% increase for single - family rates can be accomplished with 4% increases in the first two years or perhaps 5 %o in year one and 3% in the second year. While staff does not anticipate that any additional rate increases will be required in this three -year period, we recommend that the rate proposal identify a 2% rate increase for the third year (FY 2016 -17) to account for uncertainty about the revenue that would be generated following the rate adjustments between single - family and multi - family units. This would allow the City to adjust the rates by up to 2% on all users in the third year, if necessary. The preliminary rate plan is provided in Attachment 1. Bartle Wells will also prepare a survey of residential sewer service charges by agencies throughout San Mateo County. Their findings will be presented when the conceptual rate plan is brought back to City Council for approval. With the proposed changes, staff anticipates that South San Francisco's residential sewer service charges will still be below the average for the county. After refining the rate and revenue estimates, staff will present a final rate recommendation to the City Council in March 2014 for its conceptual approval, prior to initiating the Proposition 218 public outreach and education effort. The timeline and process presented below is designed to comply with the requirements of Proposition 218: ➢ March 2014 — City Council conceptual approval of rate plan ➢ April 2014 — Public information meeting on the rate plan ➢ April 2014 — Mail rate increase notices to all residential and business customers ➢ May 2014 — City Clerk receives any protest notices ➢ June 2014 — Public hearing and tabulation of protest notices ➢ June 2014 — City Council final approval of rate plan ➢ July 2014 — New rates take effect ➢ July 2014 — Update County property /parcel database Clean Water State Revolving Fund Loan As presented to City Council in the FY 2013 -14 C1P, staff intends to finance the projects to minimize blending and rebuild the three digesters through a combination of sewer fees and a Clean Water State Revolving Fund ( CWRRF) loan from the SWRCB. Together, the projects are estimated to cost a total of $28 million over the next four years. Staff recommends financing these projects with $13 million of sewer fund revenues and reserves and a CWRSF low interest loan of up to $15 million. Staff Report Subject: OVERVIEW OF PROPOSED THREE YEAR SEWER RATE INCREASE PLAN AND APPROVAL OF A RESOLUTION AUTHORIZING AN APPLICATION TO THE STATE WATER RESOURCES CONTROL BOARD FOR A STATE REVOLVING FUND LOAN FOR IMPROVEMENTS TO THE WATER QUALITY CONTROL PLANT Page 4 of 4 Using a CWSRF loan to finance sewer capital projects is financially advantageous to the City for several reasons. The CWSRF program provides loans for water quality improvement projects, with low interest rates set at approximately 2 %. In addition to favorable Ioan terms, CWSRF financing will help maintain equalized cash flow and reserve levels in the Sewer Enterprise Fund, which allows the City to stabilize sewer rates over time. Without the loans, fluctuating capital improvement project expenses could cause the City to dramatically increase sewer rates to pay for large capital projects and reduce sewer rates once the projects are complete. In order to apply for the CWSRF loan, staff recommends that the City Council approve the attached resolution. The resolution authorizes the City to apply for the CWSRF loan, but does not obligate the City to enter into a loan agreement. The SWRCB requires this resolution in order for the City to apply for a CWSRF loan. If the City Council adopts the resolution authorizing the application to the CWSRF, staff will present additional resolutions to the City Council in April that will be needed to complete the CWSRF loan application packet. CONCLUSION City staff has updated the estimated cost of improvements to the City's sewer system after taking into consideration ongoing operational costs, new State requirements in the latest NPDES permit, and new CIP projects. Based on this evaluation and an estimate of Sewer Fund revenues, staff recommends that the City initiate a new three -year rate plan for FY 2014 -15 through FY 2016 -17. Furthermore, staff recommends that the City Council adopt a resolution authorizing the City's application for a Clean Water State Revolving Fund loan, which will help finance needed CIP projects at the Water Quality Control Plant. By: ffriaWmcminn Director of Public Works /City Engineer By: Jim teele Director of Finance 4. Approved: ��//�t/� (66tj Steven T. Mattas City Manager Attachments: Resolution Authorizing Application for a Clean Water State Revolving Fund Loan Proposed Sanitary Sewer Rate Increase Projected Residential Rate Payer Survey Sewer Service Charges San Mateo County 2221538.1 RESOLUTION NO. CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SOUTH SAN FRANCISCO AUTHORIZING AN APPLICATION FOR FINANCIAL ASSISTANCE FROM THE STATE WATER RESOURCES CONTROL BOARD FOR IMPROVEMENTS TO THE WATER QUALITY CONTROL PLANT AND AUTHORIZING THE CITY MANAGER TO NEGOTIATE, EXECUTE, AND IMPLEMENT A FINANCIAL ASSISTANCE AGREEMENT WITH THE STATE WATER RESOURCES CONTROL BOARD ON BEHALF OF THE CITY OF SOUTH SAN FRANCISCO WHEREAS, the City of South San Francisco ( "City ") City Council reviewed a multi -year rate plan ( "rate plan ") and capital improvement plan ( "capital plan ") for the Water Quality Control Plant ( "Plant ") at a City Council study session on ; and WHEREAS, the capital plan presented in the study session identifies important capital improvements to increase Plant reliability and backup capabilities, and to comply with National Pollutant Discharge Elimination System ( "NPDES ") requirements including the following Plant Improvements (the "Project "): - Digester replacement and rehabilitation; -Wet weather and blending minimization and mitigation improvements to comply with NPDES requirements; and - Additional capital improvements necessary to comply with environmental requirements for the regional discharge permit, as may be required over this rate plan time period; and WHEREAS, the State of California Water Resources Control Board provides a loan program to fund capital improvements for the Plant and related work at cost effective interest rates; and WHEREAS, the City Council will formally approve a rate plan at a public meeting in March or April of 2014; the revenues generated by the new rates will fund the loan repayments for the capital improvements; and WHEREAS, the City will provide public notice of the public meeting and will comply with all public information requirements to ensure that the public and the sewer ratepayers are adequately informed about the rate plan. NOW THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco as follows: -1- The City Manager (the "Authorized Representative ") or his/her designee is hereby authorized and directed to sign and file, for and on behalf of the City of South San Francisco, a Financial Assistance Application for a financing agreement from the State Water Resources Control Board for the planning, design, and construction of Plant Improvements (the "Project "). The Authorized Representative, or his/her designee, is designated to provide the assurances, certifications, and commitments required for the financial assistance application, including executing a financial assistance agreement from the State Water Resources Control Board and any amendments or changes thereto. The Authorized Representative, or his /her designee, is designated to represent the City of South San Francisco in carrying out the City's responsibilities under the financing agreement, including certifying disbursement requests on behalf of the City and compliance with applicable state and federal laws. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a regular meeting held on the day of 2014 by the following vote: &VA1I3 NOES: ABSTAIN: ABSENT: 2221294.1 -2- ATTEST: City Clerk N V El l"r i r-I O N y LL s 0 in r. 1 �-i O N m CL L 3 a� a ■E W L C .E ate^' W L a n N N O N f�J W -0 U J -[f LU N CU dJ N N t7J � O OJ L L1 U W Q U Q U U d O O O O W O W O W O . O n O O fG CO 4� N 4- N +- +J N Lr) O Ln O Ln O O Z Z Z Z LL Z) M LA LU (U � � N CL) N N QJ a) d 00 p CD o O in o a o O L M V) m L fz N OJ Q7 QJ O QJ W U a) L a Q, U Q U 0 U O O O D 0 v Ln d LLr) m � Lfl 4f i tr 4j*)- LL IRt M a fl o �' � w w LU O L CL. Q Q O O O tri- rz > LL -0 � m 'u �+ 4l sn y co p[ L Or' L a7 r y 01 E C D i O tw M PROJECTED RESIDENTIAL RATE PAYER SURVEY SEWER SERVICE CHARGES SAN MATEO COUNTY (AS OF APRIL 2014) TREATING 84 UNITS OF WATER PER YEAR AGENCY COSTS IN FY 13114 MONTARA SANITARY DIST. $2,914 HILLSBOROUGH $1,774* BURLINGAME DILLS $1,595* PACIFICA $993 MILLBRAE $913 HALF MOON BAY $862 BRISBANE $824 MENLO PARK $820* SAN BRUNO $818 BURLINGAME $770 REDWOOD CITY $695* SAN CARLOS 5637* BELMONT $630 SOUTH SAN FRANCISCO $575* FOSTER CITY $553* SAN MATEO $530 EAST PALO ALTO $520* DALY CITY $442 EL GRANADA SANITARY $402* AVG. (ALL) $909 AVG. (LESS TOP THREE) $687 AVG. (LESS TOP 3 $724 AND LOWER 2) *Flat charge per year not tied to individual water consumption. Other listed rates are annual estimates based on homeowners "average" monthly domestic water consumption charges that can vary from year to year, household to household. (1 unit equals 748 gallons - so it has been calculated off of 84 units for average annual consumption.) -4- a U o c'�tIFOR�� Staff Report DATE: January 15, 2014 TO: Honorable Mayor and City Council FROM: Jim Steele, Finance Director SUBJECT: STUDY SESSION UPDATING THE CITY COUNCIL ON THE MOST RECENT ACTUARIAL STUDY OF THE CITY'S OTHER POST - EMPLOYMENT BENEFITS (OPEB) RECOMMENDATION It is recommended that the City Council review the information in this staff report and direct staff to come back with a formal resolution which would take the next steps in funding the City's retiree health liability, known as Other Post- Employment Benefits (OPEB). BACKGROUND/DISCUSSION OPEB refers to the cost of funding lifetime retiree health premiums for employees who retire from the City with at least five years of City service completed. Unlike CaIPERS, where the City sets aside dollars each pay period to cover, with expected investment earnings, the future retirement costs of employees, the City only pays for current year's retiree health premiums. It has set aside no dollars in a formal Trust fund that qualifies those funds to be invested at higher investment returns. As a result, the OPEB liability grows annually. At a Budget Subcommittee meeting on December 16, 2013, the following topics were discussed with the Subcommittee (Vice Mayor Garbarino and Councilmember Addiego) with regards to the City's OPEB liability: 1. Selection of one of three offered investment options available to employers participating in the California Public Employees' Retirement System's (Ca1PERS) California Employers' Retiree Benefit Trust Program ( "CERBT "). A decision on this item is needed so that the City can deposit, at a minimum, the $197,600 in funds made available from the former Redevelopment Agency (RDA) Property Tax Fund (RPTTF), as authorized by the former RDA Oversight Board and approved by the State Department of Finance. 2. The updated actuarial study by Bartel Associates of the City's OPEB liability showing a total OPEB liability of $86 million. 3. Investment of the dollars already set aside in the City's non- General Fund Reserves into the CERBT trust and fixture contributions. Staff Report Subject: Study Session on OPEB Page 2 of 5 Each topic is discussed in more depth below. Selection of an Investment Strategy with CalPERS On September 11, 2013, the City Council passed a resolution authorizing staff to sign documents with the California Public Employees' Retirement System (CalPERS), to join the California Employers' Retiree Benefit Trust Program ( "CERBT "). CERBT offers three investment options /strategies, and one option must be selected in order to deposit funds into the CERBT Trust. Staff is returning to Council because there is a policy decision to be made on which investment option will be selected, for which the full Council's input is requested, with a recommendation below. There are three investment options available for the investment with CERBT, and CalPERS requires that each entity select only one investment option. Those three options were reviewed in more detail with the Budget Subcommittee in December, at which time the City Treasurer and the City's investment advisor, Chandler Asset Management, also participated. All parties at the meeting expressed consensus that CERBT Strategies 1 and 2 (shown in more detail on attachment pages 1 -8 to this report) would be appropriate, and would match the overall time long term horizon to pay down the OPEB liabilities (longer than 20 years). Strategy 3, with a much higher percentage of the portfolio invested in fixed income bonds, was not considered appropriate for along term investment, as it is too conservative a mix of investments for a long term investment horizon. The two appropriate investment strategies reviewed by the Subcommittee are as follows: CERBT Strategy 1, which most closely replicates the investments CalPERS already makes on behalf of the City's retirement payments. It is designed to return 7.61% annually over time, and is comprised 213 with stocks. 85% of the roughly 350 agencies that currently invest in CERBT have selected this option. 2. CERBT Strategy 2, which is made up of 50% stocks, and is designed to return. 7.06% annually overtime. 10% of the roughly 350 agencies that currently invest in CERBT have selected this option. Strategy 3, which is not recommended, is made up of only 31.6% stocks. Only 5% of the roughly 350 agencies that currently invest in CERBT have selected this option. This option is expected to return 6.39% annually. All three options are shown in more detail on the first set of attachments (pages 1 -8) to this staff report. After discussion in December, the Budget Subcommittee agreed that CalPERS Strategy 1 would be the best choice, since it is closest to the Ca1PERS retirement fund investments, and to the longer time horizon. Strategy 2 would be acceptable, but as Jayson Schmitt from Chandler Asset Management stated at the meeting, Strategy 1's investment options are most closely aligned with actuarial assumptions about earnings over the longer term. With Council concurrence, staff will return to the City Council with a resolution directing staff to select Strategy 1. Staff Report Subject: Study Session on OPEB Page 3 of 5 Related to this, the Oversight Board of the former Redevelopment Agency and the State Department of Finance have formally approved the use of former Redevelopment Agency property taxes to pay for that portion of the OPEB liability associated with services provided by staff supporting the former Redevelopment Agency. For this current Redevelopment Property Tax Trust Fund ( RPTTF) period, a total of $197,600 has been provided from RPTTF funds to the City for deposit. The deposit cannot be made until an investment option is selected. Updated Actuarial Stud of Ci 's OPEB Liabilit In December 2013, the City's actuary, Bartel Associates, updated the City's OPEB liability report (pages 9 -40) as required by governmental accounting rules. The City's OPEB liability was calculated to be $86 million as of June 30, 2012 (page 22 of attachments). As staff has reported previously, because we are currently only funding retiree health premiums on a "pay as you go" basis, our OPEB liability is growing at a much faster rate than City revenues in general or other employee costs. That is because by only funding "pay as you go ", we are in a situation similar to making only the minimum payments on a large credit card bill, meaning the outstanding principal balance grows each year due to the much higher interest costs associated with that credit card liability. In the case of OPEB, because health costs increase at a high rate compared to City revenues, those liabilities accelerate over time if all that is funded is "pay as you go ". That is, until we begin to pay that obligation down, similar to what we fund for retirement costs, a growing percentage of the City's General Fund budget will go towards OPEB. Two options to consider are the initial investment into the CERBT from funds the City has already set aside, and recurring investments over and above "pay as you go ". Investment of the $13.5 million already_ set aside into CERBT As the Council will recall, a total of $12.5 million had been set aside through June 30, 2013 both through the budget process and from year -end savings over the past several years. Those funds are segregated from the General Fund but Council is not prevented from redeploying those funds to another purpose. An additional $1.0 million has been budgeted in 2013 -14 as well, for a total of $13.5 million on hand by June 30, 2014. The power of paying down the OPEB liability is demonstrated in data and charts (pages 41 -42) that Bartel modeled for us showing various payment scenarios: 1. Current "pay as you go" funding only would be the most expensive, costing the City a total of $378 million, with required payments not falling below $2.0 million until 2073); 2. Investing the already set aside funds in the CERBT Trust but continuing "pay as you go" would save $95 million over time compared to "pay as you go" Option 1 above. An OPEB Trust is expected to earn 7.61% earnings over time, much like Ca1PERS has done with the City's retirement portfolio. Placing funds in the CERBT Trust would dedicate them exclusively to retiree medical payments and the funds could not be used for any other purpose. If a future Council wished to access the funds due to economic or budget constraints or changed Council priorities, they could only use funds already deposited to pay for subsequent retiree health premiums. For Staff Report Subject: Study Session on OPEB Page 4of5 example, $13.5 million would pay for 3 -4 years of health premiums, meaning a fixture Council decision to access these funds would take 3 -4 years to fully draw them down. Note that options a, b, and c below assume an additional annual contribution towards the Trust: 3a: Adding $250,000 annually to the Trust would save in excess of $200 million over time compared to Option 1; 3b: Adding $500,000 annually to the Trust would save $218 million over time compared to Option 1; and 3c: Adding $1.0 million annually to the Trust would save $239 million over time compared to Option 1. Charts showing the impact of these strategies are included after the staff report (pages 41 -42). As demonstrated below the greatest savings, relative to the additional impact on the budget, seems to be from the initial deposit plus an annual contribution of $250,000: Pay as you Goff Pay -Go Plus Initial Only Trust Deposit (Current) only I Total City payments $ 378,000 $ 283,000 over time (000's) Number of years that payments exceed 60 58 $2.0 million Final year in which payment exceeds $2.0 million 2073 2071 Deposit Plus an additional annual contribution of: 1$0.25 Million $0.5 Million $LO Million $ 174,000 $ 159,000 $ 139,000 28 26 22 2041 2039 2035 The Budget Subcommittee agreed that it makes sense for staff to invest the full $13.5 million set aside for OPEB in the CalPERS Trust. It was agreed not to invest it all at once, but the question arose as to how quickly the funds should be invested. Jayson Schmitt from Chandler stated that a three year monthly investment window was too long, as that began to mirror an entire investment cycle (ups and downs over three to five years); he also stated that the biggest risk was to not invest the dollars, as the liability wouldn't begin to be paid down until the City starts contributing. Finally, the point was made Staff Report Subject: Study Session on OPEB Page 5 of 5 that once a decision is made, a twelve month investment plan (S.5 million every two weeks) was a good period over which to ladder in the investment contributions. NOWW71iN [O]Oi Staff recommends that the Council: 1. Direct staff to return with a resolution to: a. Formally select Ca1PERS' CERBT investment Strategy; b. Direct staff to invest $13.5 million already set aside in equal payments to CalPERS every two weeks until the $13.5 million is fully invested over approximately one year; and 2. Continue to consider prioritizing an ongoing annual funding of OPEB in the 2014 -15 budget of $250,000. jBy: Approved: !Fi t ele Steven T. Mattas e Director ' Interim City Manager Attachments: - CERBT Asset Allocation Strategies (Pages 1 -2) - CERBT Investment Strategies 1 -3 (Pages 3 -8) - Bartel Associates June 30, 2012 GASB 45 Actuarial Valuation (Pages 9 -40) - Charts from Bartel Associates (Pages 41 -42) Js /STM:ed 6ERBT Asset Allocation Strategies All CERBT asset allocation strategies share the same public market asset classes • Allocation strategies differ only to the extent to which they participate in each of the asset classes — Unitized fund structure allows multiple participants to participate in an asset allocation strategy . Uses Annual General Inflation Rate Assumption of 3,0% P1 Strategy 1 Strategy 2 Strategy 3 Expected Long Term Rate of Return* o 7.61 /o 0 T.06 /0 6.39% Standard Deviation of Expected Returns 11,73% 9.46% 7.27% All CERBT asset allocation strategies share the same public market asset classes • Allocation strategies differ only to the extent to which they participate in each of the asset classes — Unitized fund structure allows multiple participants to participate in an asset allocation strategy . Uses Annual General Inflation Rate Assumption of 3,0% P1 0 CENT Asset Allocation Strategies Asset Classification Strategy 1 Strategy 2 Strategy 3 Global Equity 66.0% 50.1% 31.6% U.S. Nominal Bonds 18.0% 23.9% 42.4% Global Real Estate (REIT) 8.0% 8.0% 8.0% Inflation Linked Bonds 5.0% 15.0% 15.0% Commodities 3.0% 3.0% 3.0% Pa CERBT Strategy 1 Objective The objective of the CERBT Strategy 1 portfolio is to seek favorable returns that reflect the broad investment performance of the financial markets through capital appreciation and through investment income. There is no guarantee that the portfolio will achieve its investment objectives. Strategy The CERBT Strategy 1 portfolio is invested in various asset classes in percentages approved by the CalPERS Board. The specific percentages of portfolio assets allocated to each asset class are shown under "Composition ". Generally, equities are intended to help build the value of the employer's portfolio over the long term while bonds are intended to help provide income and stability of principal. Also, strategies invested in a higher percentage of equities seek higher investment returns (but assume more risk) compared with strategies invested in a higher percentage of bonds. Compared with other asset allocation strategies, this portfolio consists of a higher percentage of equities to bonds and other assets. Historically, equities have displayed greater price volatility and therefore this portfolio may experience greater fluctuation of value. Employers that seek higher investment returns, and are able to accept greater risk and tolerate more fluctuation in returns, may wish to consider this portfolio. Information Provided in Lieu of Prospectus The CERBT Strategy 1 portfolio consists of assets managed internally by CalPERS. Because it is not a mutual fund, a prospectus is not available. This summary is designed to provide descriptive information. Assets Under Management As of January 31, 2013, the aggregate total of assets under management for all CERBT Strategies was $2,497,966,711. JAW, Composition Asset Class Allocations and Benchmarks The CERBT Strategy 1 portfolio may consist of the following asset class target allocations and corresponding benchmarks: Asset Class Benchmark Global Equity MSCI All Country World Index IMI U.S. Fixed Income CalPERS Custom Long Liability Treasury Inflation- Protected Securities (TIPS) CaIPERS TIPS Real Estate Investment Trusts (REITs) ETSE EPRAINAREIT Developed Liquid index Commodities S &P GSCI Total Return Index Portfolio Benchmark The CERBT Strategy 1 benchmark is a composite of underlying asset class market indexes, each assigned the target weight for the asset class it represents. Target vs. Actual Asset Class Allocations The following chart shows policy target allocations compared with actual asset allocations as of January 31, 2013. CaIPERS may overweight or underweight an allocation to a particular asset class based on market, economic, or CalPERS Policy considerations. 70 60 sa 40 ri 30 20 -- ■Target 10 Actual 0 a a`I � ���e5 Gar Gin CERBT Strategy 1 Performance as of January 31, 2013 1 Month 3 Months Fiscal YTD 1 Year 3 Years* 5 Years* Since Inception* June 1, 2007 Returns before expenses' °la 3.17 5,94 11.96 13.83 11.21 4,04 2.95 CERBT Strategy 1 Benchmark 3.15 5.97 11.91 13.78 11.31 4.12 2.47 *Returns for periods greater than one year are annualized. 'See the "Expenses" sectron of this document. Performance data shown represents past investment performance and is no guarantee of future results. The investment return and principal value of the portfolio will fluctuate so that an employers' account balance in the portfolio may be worth more or less than the amount invested. Curre nt performance may be lower or higher than the performance data shown above. P3 CERBT Strategy 1 General Information What Employers Own Each employer owns a percentage of the CERBT Strategy 1 portfolio, which invests in pooled asset classes managed by CaIPERS. Employers do not have direct ownership of the securities in the portfolio. Information Accessibility Since the portfolio is not a mutual fund, information is not available from a newspaper source. Instead, CaiPERS provides a quarterly statement of the employer's account. For current performance information, including performance to the most recent month -end, investment policy, and detailed asset allocation, please visit our website at: www.calpers.ca.gov. Price The value of the portfolio changes daily, based upon the market value of the underlying securities. Just as prices of individual securities fluctuate, the portfolio's value changes with market conditions. Expenses CERBT is a self - funded trust in which participating employers pay for all administrative and investment expenses. Expenses reduce the gross investment return by the fee amount. The larger the fee, the greater the reduction of investment return. Currently, CERBT expenses are accrued at an annual rate of 0.15% and charged daily to employer accounts. CERBT's actual expenses may differ from the amount currently being accrued due to factors such as changes in average fund assets or actual expenses. The expense accrual rate may change without notice in order to reflect changes in average portfolio assets or in expense amounts. The CaIPERS Board annually reviews the operating expenses and changes may be made as appropriate. Even if the portfolio loses money during a period, the fee is still charged. Portfolio Manager Information The portfolio is managed by CaIPERS Investment Office staff as directed by the CalPERS Investment Committee and Board of Administration. A*%, Principal Risks of the Portfolio An investment in the portfolio is not a bank deposit, and it is not insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. It is possible to lose money by investing in this portfolio. The portfolio's risk depends in part on the portfolio's asset class allocations and the selection, weighting and risks of the underlying investments. Some major risks associated with investing in equities, fixed income and other assets include: • Allocation Risk: The portfolio's ability to achieve its investment objectives depends in part on the managers' skill in determining the Portfolios' sector allocations and in selecting and weighting the underlying investments. The managers' evaluations and assumptions regarding asset classes and underlying investments may differ from actual market conditions. • Market Risk: The value of the portfolio will go up and dawn based on the performance of the underlying investments in which it invests. The value of the underlying investments will, in tum, fluctuate based on the performance of the securities owned and other factors generally affecting the securities market. . Interest Rate Risk: Generally, when interest rates rise, the value of an underlying investment's fixed income securities will decline. The opposite is true when interest rates decline. • Credit Risk: The value of an underlying investment's fixed income securities will be adversely affected by any erosion in the ability of issuers of these securities to make timely interest and principal payments. Foreign Risk: Some of the underlying investments are in foreign securities, which are generally riskier than U.S. securities. As a result, the portfolio is subject to foreign risk, meaning that political events (such as civil unrest, national elections, and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters occurring in a country where the portfolio invests could cause the portfolio's investments in that country to experience losses. + Principal Loss: Employers own a percentage of the CERBT Strategy 1 portfolio (expressed as "units"). At any given time, the value of an employer's units may be worth less than the price paid for them. CERBT Strategy Risk Levels CaiPERS offers employers the choice of one of three investment strategies. Risk levels among strategies vary, depending upon the target asset class aliocations. Generally, equities carry more risk than fixed income securities. Asset Class Target Allaca#ions Strategy 1 Strategy 2 Strategy 3 T Global Equity 5% 15 °/° 15% REITs 8% 8 °/0 Strategy 1 Commodities 3 °/° 3 °� T Strategy 2 r Strategy 3 P4 66% 32% U.S Fixed Income 18 °/° 24 °/° 42% TIPS 5% 15 °/° 15% REITs 8% 8 °/0 8% Commodities 3 °/° 3 °� 3% P4 CERBT Strategy 2 Objective The objective of the CERBT Strategy 2 portfolio is to seek favorable returns that reflect the broad investment performance of the financial markets through capital appreciation and through investment income. There is no guarantee that the portfolio will achieve its investment objectives. Strategy The CERBT Strategy 2 portfolio is invested in various asset classes in percentages approved by the CalPERS Board. The specific percentages of portfolio assets allocated to each asset class are shown under "Composition'. Generally, equities are intended to help build the value of the employer's portfolio over the long term while bonds are intended to help provide income and stability of principal. Also, strategies invested in a higher percentage of equities seek higher investment returns (but assume more risk) compared with strategies invested in a higher percentage of bonds. Compared with other asset allocation strategies, this portfolio consists of a moderate allocation of equities, bonds, and other assets. Historically, funds with a higher percentage of equities have displayed greater price volatility. Therefore, this portfolio may experience comparatively less fluctuation of value compared to CERBT Strategy 1 but more fluctuation of value compared to CERBT Strategy 3. Employers that seek a moderate approach to investing may wish to consider this portfolio. Information Provided in Lieu of Prospectus The CERBT Strategy 2 portfolio consists of assets managed internally by CalPERS. Because it is not a mutual fund, a prospectus is not available. This summary is designed to provide descriptive information, Assets Under Management As of January 31, 2013, the aggregate total of assets under management for all CERBT Strategies was $2,497,966,711. /j,,. ( aiPhRu Composition Asset Class Allocations and Benchmarks The CERBT Strategy 2 portfolio may consist of the failowing asset class target allocations and corresponding benchmarks: Asset Class Benchmark Global Equity U.S. Fixed Income MSCI Ali Country World Index IMI CalPERS Custom Long LiaNity, Treasury Inflation- Protected Securities (TIPS) CaIPERS TIPS Real Estate Investment Trusts (REITs) FTSE EPRAINAREIT Developed Liquid Index Commodities S &P GSCI Total Return Index Portfolio Benchmark The CERBT Strategy 2 benchmark is a composite of underlying asset class market indexes, each assigned the target weight for the asset class it represents. Target vs. Actual Asset Class Allocations The following chart shows policy target allocations compared with actual asset allocations as of January 31, 2013. CalPERS may overweight or underweight an allocation to a particular asset class based on market, economic, or CalPERS policy considerations. so i 50 — 40 — - -- 30 -- a 20 10 or — 4�y5 Gad cP s Target Actual CERBT Strategy 2 Performance as of January 31, 2013 1 Month 3 Months Fiscal YTp 7TTear 3 Years' S Years` Since Inception' October 1, 2p11 Returns before '(%) 2.28 4.60 10.28 11.86 -' -- 16,18 expenses CERBT Strategy 2 Benchmark 2.24 4.56 10,11 11,69 -- 16.27 'Returns for periods greater than one year are annualized. 'See the 'Expenses" section of this document. Performance data shown represents past investment performance and is no guarantee of future results. The investment return and principal value of the portfolio will fluctuate so that an employers' account balance in the portfolio may be worth more or less than the amount invested, Current performance may be lower or higher than the performance data shown above. P5 CERBT Strategy 2 General Information What Employers Own Each employer owns a percentage of the CERBT Strategy 2 portfolio, which invests in pooled asset classes managed by CaIPERS. Employers do not have direct ownership of the securities in the portfolio. Information Accessibility Since the portfolio is not a mutual fund, information is not available from a newspaper source. Instead, CaIPERS provides a quarterly statement of the employer's account. For current performance information, including performance to the most recent month -end, investment policy, and detailed asset allocation, please visit our website at: www.caipers.ca.gov. Price The value of the portfolio changes daily, based upon the market value of the underlying secuddes. Just as prices of individual securities fluctuate, the portfolio's value changes with market conditions. Expenses CERBT is a self- funded trust in which participating employers pay for alf administrative and investment expenses. Expenses reduce the gross investment return by the fee amount. The larger the fee; the greater the reduction of investment return. Currently, CERBT expenses are accrued at an annual rate of 0.15% and charged dally to employer accounts. CERBT's actual expenses may differ from the amount currently being accrued due to factors such as changes in average fund assets or actual expenses. The expense accrual rate may change without notice in order to reflect changes in average fund assets or in expense amount. The CaIPERS Board annually reviews the operating expenses and changes may be made as appropriate. Even if the portfolio loses money during a period, the fee is still charged. Portfolio Manager Information The portfolio is managed by CaIPERS Investment Office staff as directed by the CaIPERS Investment Committee and Board of Administration. 44" ( A PE RS Principal Risks of the Portfolio An investment in the portfolio is not a bank deposit, and it is not insured nor guaranteed by the Federai Deposit Insurance Corporation (FDIC) or any other government agency. It is possible to lose money by investing in this portfolio. The portfolio's risk depends in part on the portfolio's asset class allocations and the selection, weighting and risks of the underlying investments. Some major risks associated with investing in equities, fixed income and other assets include: a Allocation Risk: The portfolio's ability to achieve its investment objectives depends in part on the managers' skill in determining the portfolios' sector allocations and in selecting and weighting the underlying investments. The managers' evaluations and assumptions regarding asset classes and underlying investments may differ from actual market conditions. a Market Risk: The value of the portfolio will go up and down based on the performance of the underlying investments in which it invests. The value of the underlying investments will, in turn, fluctuate based on the performance of the securities owned and other factors generally affecting the securities market. a Interest Rate Risk: Generally, when interest rates rise, the value of an underlying investment's fixed income securities will decline. The opposite is true when interest rates decline. a Credit Risk The value of an underlying investment's fixed income securities will be adversely affected by any erosion in the ability of issuers of these securities to make timely interest and principal payments. a Foreign Risk: Some of the underlying investments are in foreign securities, which are generally riskier than U.S. securities. As a result, the portfolio is subject to foreign risk, meaning that political events (such as civil unrest, national elections, and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters occurring in a country where the portfolio invests could cause the portfolio's investments in that country to experience losses. e Principal Loss: Employers own a percentage of the CERBT Strategy 2 portfolio (expressed as "units"). At any given time, the value of an employer's units may be worth less than the price paid for them. CERBT Strategy Risk Levels CalPERS offers employers the choice of one of three investment strategies. Risk levels among strategies vary, depending upon the target asset class allocations. Generally, equities carry more risk than fixed income securities. Asset Class Target Allocations Strategy t Strategy 2 Strategy 3 Global Equity 6B °o 50% 32% % U.S Fixed Income 18% 24% rategy 4 42% TIPS 5% 15 °/n 15% REITs 8 °/° 8% $% Strategy 2+ Commodities 3% Str ategy 3 P6 CERBT Strategy 3 Objective The objective of the CERBT Strategy 3 portfolio is to seek favorable returns that reflect the broad investment performance of the financial markets through capital appreciation and through investment income. There is no guarantee that the portfolio will achieve its investment objectives, Strategy The CERBT Strategy 3 portfolio is invested in various asset classes in percentages approved by the CaIPERS Board. The specific percentages of portfolio assets allocated to each asset class are shown under "Composition ". Generally, equities are intended to help build the value of the employer's portfolio over the song term while bonds are intended to help provide income and stability of principal. Also, strategies invested in a higher percentage of equities seek higher investment returns (but assume more risk) compared with strategies invested in a higher percentage of bonds. Compared with other asset allocation strategies, this portfolio consists of a lower percentage of equities to bonds and other assets. Historically, funds with a lower percentage of equities have displayed less price volatility and therefore this portfolio may experience Tess fluctuation of value. Employers that seek greater stability of value, in exchange for possible lower investment returns, may wish to consider this portfolio. Information Provided in Lieu of Prospectus The CERBT Strategy 3 portfolio consists of assets managed internally by CalPERS, Because it is not a mutual fund, a prospectus is not available. This summary is designed to provide descriptive information. Assets Under Management As of January 31, 2013, the aggregate total of assets under management for all CERBT Strategies was $2,497,965,711. 41ah CaIIILkN Composition Asset Class Allocations and Benchmarks The CERBT Strategy 3 portfolio may consist of the following asset class target allocations and corresponding benchmarks: Asset Class Global Equity Benchmark MSCI All Country World Index IMI US. Fixed Income CaIPERS Custom i_ong liability Treasury Inflation- Protected Securities (TIPS) CaIPERS TIPS index Real Estate Investment Trusts (REITs) FTSE EPRAINAREIT Developed Liquid Index Commodities S &P GSC Total Return Index Portfolio Benchmark The CERBT Strategy 3 benchmark is a composite of underlying asset class market Indexes, each assigned the target weight for the asset class it represents. Target vs. Actual Asset Class Allocations The following chart shows policy target aliocations compared with actual asset allocations as of January 31, 2013. CalPERS may overweight or underweight an allocation to a particular asset class based on market, economic, or CalPERS policy considerations. 50 _ 44 a— L sa U N — — ■Target 10 Actual p y5. *Cash component refects large contribution received at quarter end that was subsequently invested consistent with asset class target allocations. CERBT Strategy 3 Performance as of January 31, 2013 1 Month 3 Months Fiscal YTb 1 Year 3 Years* 5 Years* Since Inception" Janua 1, 2012 Returns before expenses' (%) 1,05 2.60 7.57 9.52 -- 11.84 CERBT Strategy 3 ----] Benchmark 1.11 2.67 7.36 9.43 -- 11.95 "Returns for periods greater than one year are annualized. 'Seethe "Expenses" section of this document. Performance data shown represents past investment performance and is no guarantee of future results. The investment return and p0cipat value of the ponfolio will fluctuate so that an employers' account balance in the portfolio may be worth more or less than the amount invested. Current performance may be lower or higher than the performance data shown above. P7 CERBT Strategy 3 General Information What Employers Own Each employer owns a percentage of the CERBT Strategy 3 portfolio, which invests in pooled asset classes managed by CaIPERS. Employers do not have direct ownership of the securities in the portfolio. Information Accessibility Since the portfolio is not a mutual fund, information is not available from a newspaper source. Instead, CalPERS provides a quarterly statement of the employer's account. For current performance information, including performance to the most recent month -end, investment policy, and detailed asset allocation, please visit our website at www,calpers,ca.gov. Price The value of the portfolio changes daily, based upon the market value of the underlying securities. Just as prices of individual securities fluctuate, the portfolio's value changes with market conditions. Expenses CERBT is a self - funded trust in which participating employers pay for all administrative and investment expenses. Expenses reduce the gross investment return by the fee amount. The larger the fee, the greater the reduction of investment return. Currently, CERBT expenses are accrued at an annual rate of 015% and charged daily to employer accounts CERBT's actual expenses may differ from the amount currently being accrued due to factors such as changes in average fund assets or actual expenses. The expense accrual rate may change without notice in order to reflect changes in average fund assets or in expense amount. The CaIPERS Board annualfy reviews the operating expenses and changes may be made as appropriate. Even if the portfolio loses money during a period, the fee is still charged. Portfolio Manager Information The portfolio is managed by CalPERS Investment Office staff as directed by the CaIPERS Investment Committee and Board of Administration, IO•, CAPERS Principal Risks of the Portfolio An investment in the portfolio is not a bank deposit, and it is not insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. It is possible to lose money by investing in this portfolio. The portfolio's risk depends in part on the portfolio's asset class allocations and the selection, weighting and risks of the underlying investments. Some major risks associated with investing in equities, fixed income and other assets include: a Allocation Risk: The portfolio's ability to achieve its investment objectives depends in part on the managers' skill in determining the portfolios' sector allocations and in selecting and weighting the underlying investments. The managers' evaluations and assumptions regarding asset classes and underlying investments may differ from actual market conditions. a Market Risk: The value of the portfolio will go up and down based on the performance of the underlying investments in which it invests, The value of the underlying investments will, in turn, fluctuate based on the performance of the securities owned and other factors generally affecting the securities market. a Interest Rate Risk: Genera €ly, when interest rates rise, the value of an underlying investment's fixed income securities will decline. The opposite is true when interest rates decline. * Credit Risk: The value of an underlying investment's fixed income securities will be adversely affected by any erosion in the ability of issuers of these securities to make timely interest and principal payments. a Foreign Risk: Some of the underlying investments are in foreign securities, which are generally riskier than U.S, securities, As a result, the portfolio is subject to foreign risk, meaning that political events (such as civil unrest, national elections, and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters occurring in a country where the portfolio invests could cause the portfolio's investments in that country to experience losses. • Principal Loss. Employers own a percentage of the CERBT Strategy 3 portfolio (expressed as "units'). At any given time, the value of an employer's units may be worth less than the price paid for them. CERBT Strategy Risk Levels CalPERS offers employers the choice of one of three investment strategies. Risk levels among strategies vary, depending upon the target asset class allocations. Generally, equities carry more risk than fixed income securities. Asset Class Target Allocation Strategy 1 Strategy 2 Strategy 3 ' Global Equity 66% 50 °/0 32 °/0 U.S Fixed Income 1$% 24 °/0 ra egy 42 °fo TIPS 5 °/0 15 °/0 15% Strategy 2 Strategy $ P8 REITs $% $ °lo $ °I° Commodities 3 °/° 3 °l0 3% P8 M1r NFEW CITY OF SOUTH SAN FRANCISCO RETIREE HEALTHCARE PLAN i June 30, 2012 GASB 45 Actuarial Valuation Presented by John Bartel Doug Pryor Prepared by Matthew Childs, Actuarial Analyst Michelle Shen, Actuarial Analyst Bartel Associates, LLC December 5, 2013 Contents Topic page Benefit Summary 1 Data Summary 3 Actuarial Assumptions Highlights 5 Results 9 Bartel Associates GASB 45 Database 29 Actuarial Certification 31 Exhibits Premiums E- 1 Participant Statistics E- 5 Actuarial Assumptions E-25 Actuarial Methods E-27 Definitions E-29 o:lclientkity of south san frenciscolprojoctslopeb\2012 vallreportslba scsfci 13 -12 -05 opeb 12 -06-30 final results.docx P9 BENEFIT SUMMARY 1 E ■ Eligibility ■ Hired < 4/25/20101 ■ Retire directly from City and elect coverage: • Age 50 and 5 years CalPERS service or • Disability retirement ■ Medical Benefit ■ City pays single premium up to largest HMO single premium ■ City pays premium and reimburses Medicare Part B For employees hired on or after 4125110: • no OPEB benefit (cannot participate in City medical plans at retirement); 1.5% base salary to Retirement Savings Account (defined contribution plan not GASB 45, not included in valuation). a Part -time employee benefits provided on a pro -rated basis as a percentage of premiums. s Since there is no Blue Shield HMO Medicare rate, cap for Medicare- eligible retirees based on Blue Shield PPO premium. (B/P December 5, 2013 1 I BENEFIT SUMMARY • Surviving Spouse Benefit 2012113 Cap 2013114 Ca Pre -65 Blue Shield $ 957.75 $ 978.15 Post -65 2012113 • Medicare Eligible Blue Shield 466.28 51291 • Not Medicare Eligible (Kaiser) 1,519.94 1,598.85 ■ City pays premium and reimburses Medicare Part B For employees hired on or after 4125110: • no OPEB benefit (cannot participate in City medical plans at retirement); 1.5% base salary to Retirement Savings Account (defined contribution plan not GASB 45, not included in valuation). a Part -time employee benefits provided on a pro -rated basis as a percentage of premiums. s Since there is no Blue Shield HMO Medicare rate, cap for Medicare- eligible retirees based on Blue Shield PPO premium. (B/P December 5, 2013 1 I BENEFIT SUMMARY • Surviving Spouse Benefit ■ Participation with premium payment ■ AFSCME, Local 1569, Mid - Management, IAFF • surviving souses covered 2 months following death of retiree • Other OPEB ■ No City -paid contribution for dental, vision, or life • Pay -as- you -go Costs Fiscal Year Pay -Go 2012113 $ 2,226,149 2011112 2,296,182 2010111 1,969,522 2009/10 1,890,570 2008/09 1,899,208 2007108 1,681,755 S ! BA1,December 5, 2013 e P1a DATA SUMMARY Actives Excludes 27 and 42 actives hired after 4125110 (B . December 5, 2013 in 6130110 and 6130112 valuations, respectively. DATA SUMMARY _._ Retirees 111/06 6130108 6130110 6130112 • Participants • Miscellaneous 255 269 232 207 • Safety 142 143 142 134 • Tota14 397 412 374 341 • Average • Age 43.5 43.5 43.9 45.1 • City Service 10.8 10.8 11.4 13.0 • Salary $ 73,600 $ 77,200 $ 90,100 $ 92,200 • Total Salary (000'x) 29,220 31,787 33,687 31,431 Excludes 27 and 42 actives hired after 4125110 (B . December 5, 2013 in 6130110 and 6130112 valuations, respectively. DATA SUMMARY _._ Retirees BAgxbl 1 F December 5, 2013 4 P11 1 /1106 6130108 6130110 6/30112 • Participants • Miscellaneous 126 134 144 159 • Safety 106 116 126 130 • Total 232 250 270 289 • Average • Age 67.1 66.3 66.5 66.9 • Service Retirement Age Miscellaneous 59.8 59.8 59.3 58.7 Safety n/a 54.8 54.9 54.7 BAgxbl 1 F December 5, 2013 4 P11 ACTUARIAL ASSUMPTIONS HIGHLIGHTS June 30, 2410 Valuation June 30, 2012 Valuation ■ Valuation Date ■June 30, 2010 ■June 30, 2012 ■ 2010111 & 2011112 ■ 2012113 & 2013/14 ■ Funding Policy ■Pay -go ■Same ■ Discount Rate ■ 4.5% -Not pre - funded ■ 4.0% - No pre- funding currentl scheduled ADecember 5, 2013 5 ACTUARIAL ASSUMPTIONS HIGHLIGHTS June 30, 2010 Valuation June 30, 2012 Valuation • Healthcare Increase from Prior Year Increase from Prior Year ■Full medical trend Trend Non - Medicare Medicare Year All Plans All Plans Non - Medicare Medicare Year All Plans All Plans impact similar t© current 2010111 Actual Premiums 2010/11 n/a retirees 2011112 9.5% 10.0% 2011 /12 Actual Premiums 2012/13 9.0% 9.4% 2012/13 Actual Premiums 2013/14 8.5% 8.9% 2013/14 Actual Premiums 2014/15 8.0% 8.3% 2014115 8.0% 8.3% 2015/16 7.5% 7.8% 2015/16 7.5% 7.8% 2016117 7.0% 7.2% 2016117 7.0% 7.2% 2017118 6.5% 6.7% 2017118 6.5% 6.7% 2018119 6.0% 6.1% 2018119 6.0% 6.1% 2019/20 5.5% 5.6% 2019120 5.5% 5.6% 2020/21+ 5.0% 5.0% 2020121+ 5.0% 5.0% • Medicare Part 6 �� er 5, 2013 6 Decemb P12 ■Full medical trend ■Same B Increase ■Future retirees means test impact similar t© current retirees P12 P13 ACTUARIAL ASSUMPTIONS HIGHLIGHTS June 30, 2010 Valuation June 30, 2012 Valuation • Retirements ■ CalPERS 1997 -2007 ■ Ca1PERS 1997 -2007 Experience Study Experience Study: Misc Police Fire Misc Police Fire Benefit 2.7 % @55 3 % @50 3 %° @50 Benefit 2.7 % @55 3 % @50 3 % @50 ERA 57.8 54.0 54.5 ERA 57.8 54.0 54.9 • Mortality, ■ CaIPERS 1997 -2007 ■ Ca1PERS 1997 -2007 Withdrawal, & Experience Study Experience Study Disability ■ Fully- generational Scale AA mortality improvement applied to post-retirement mortality • Participation at ■Currently covered: 100% ■Same Retirement ■Not currently covered: 95% s The City contracts for Miscellaneous 2 %@60 and Safety 3 %a 55 for those hired after April 25, 2010, but these employees are not eligible for retiree medical included in this valuation. (B � / 1 December 5, 2013 7 ACTUARIAL ASSUMPTIONS HIGHLIGHTS This page intentionally blank Bit B December 5, 2013 8 P13 RESULTS Actuarial Obligations (amounts in 0001s) (B ADecember 5, 2013 9 RESULTS Actuarial Accrued Liabili (amounts in 000's) $100,000 7 ---- -- $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 1 /l /06 ❑ Retiree pay -go i � B/ 1 December 5, 2013 6/30/08 6130/10 ❑ Retiree AAL less pay -go 10 6/30/12 ❑ Active AAL r P14 1/1/06 6/30/08 6/30/10 6/30/12 • Present Value of Benefits • Actives $ 42,525 $ 61,539 $ 82,234 $ 85,228 • Retirees 20,897 32,362 440 _44,380 • Total 63,422 93,902 126,317 129,608 • Actuarial Accrued Liability • Actives 20,899 27,123 38,101 41,626 • Retirees 20,897 32,362 44,083 44,380 • Total 41,796 59,485 82,184 86,006 • Actuarial Value of Assets - - _ _ • Unfunded Liability 41,796 59,485 82,184 86,006 • Normal Cost 1,880 3,337 4,477 4,418 • Expected Pay -Go Cost 1,164 1,677 2,112 2,279 (B ADecember 5, 2013 9 RESULTS Actuarial Accrued Liabili (amounts in 000's) $100,000 7 ---- -- $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 1 /l /06 ❑ Retiree pay -go i � B/ 1 December 5, 2013 6/30/08 6130/10 ❑ Retiree AAL less pay -go 10 6/30/12 ❑ Active AAL r P14 PIS RESULTS Annual Re uired Contribution ARC (amounts in 000'x) December 5, 2013 13 RESULTS Annual Required Contribution (ARC) (amounts in 000's) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 6/30/10 Valuation 6/30/12 Valuation 2010/11 2011/12 2012/13 2013/14 ■ARC - S 10111 • Normal Cost $ 4,477 $ 4,331 $ 4,418 $ 4,263 • UAAL Amortization _ 5,881 6,649 _6.,289 7,012 • Total ARC 10,358 10,981 10,708 11,275 • Projected Payroll 33,687 32,797 31,431 30,514 • ARC - % • Normal Cost 13.3% 13.2% 14.1% 14.0% • UAAL Amortization 17.5% 20.3% 20.0% 23.0% • Total ARC 30.7% 33.5% 34.1% 37.0% December 5, 2013 13 RESULTS Annual Required Contribution (ARC) (amounts in 000's) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 - 10111 11/12 12/13 13114 L Normal Cost $4,477 $4,331 $4,418 $4,263 M Amortization 5,881 6,649 6,289 7,012 ARC 10,358 10,980 10,708 11,275 u j � {^4 snii� �/ 1 ` December 5, 2013 14 P16 P17 I RESULTS Estimated Net OPEB Obligation (NOO) (amounts in 000's) Adjustment included for understated benefit payments in prior fiscal year. B December 5, 2013 17 RESULTS 10 -Year Proiection _Illustration (amounts in 000's) El Fiscal CAM Estimated 2008/09 2009110 2010 /11 2011112 2012113 2013114 NOO • NOO at Beg. of Year $ - $ 3,891 $ 8,154 $ 16,151 $24,259 $ 31,262 • Annual OPEB Cost $ 9,299 $ 2,226 $ - $ 2,226 2013114 31,262 • ARC 5,790 6,273 10,358 10,981 10,708 11,275 • Interest on NOO - 175 367 727 926 1,250 • Adjustment for NOO - _ 2�) 759 (1,527) (2,405 ) 6 (2,884) 9,229 • Annual OPEB Cost 5,790 6,154 9,966 10,181 9,642 • Contributions 10,085 3,557 - 3,557 2018/19 65,332 • Benefit Payments 1,899 1,891 1,970 2,073 2,226 2,526 • Trust Pre - Funding - - - - 2020/21 78,057 • Total Contribution 1,899 1 1,891 1,970 2,073 2,226 2,526 • NOO at End of Year 1 3,891 1 8,154 16,151 24,259 31,262 38,377 Adjustment included for understated benefit payments in prior fiscal year. B December 5, 2013 17 RESULTS 10 -Year Proiection _Illustration (amounts in 000's) El Fiscal Begin Year Annual OPEB Cost Contribution Benefit Pre- Total Year NOO ARC AOC Pmts Fund Contrib 2012/13 $ 24,259 $ 10,708 $ 9,299 $ 2,226 $ - $ 2,226 2013114 31,262 11,275 9,642 2,526 - 2,526 2014/15 38,377 11,864 9,764 2,806 - 2,806 2015116 45,335 12,455. 9,852 3,061 - 3,061 2016/17 52,125 13,117 9,969 3,291 - 3,291 2017/18 58,804 13,824 10,085 3,557 - 3,557 2018/19 65,332 14,577 10,193 3,776 - 3,776 2019/20 71,749 15,390 10,298 3,990 - 3,990 2020/21 78,057 16,272 10,399 4,206 - 4,206 2021/22 84,250 1 17,234 10,495 4,396 - 4,396 I/ 1 December 5, 2013 18 0 Fiscal Begin Year RESULTS Annual OPEB Cost Contribution Benefit Pre- Total Discount Rate Sensitivity .Tune 30, 2012 (amounts in 0001s) AOC Plants Fund Contrib 7.25% with $ 24,259 $ 7,342 $ 6,395 $ 2,226 $ 5,115 $11.5 Mill. 2013/14 23,312 ■ Discount Rate 4.00% 7.25% In Assets 7,248 2014115 ■ Present Value of Benefits $ 129,608 $ 69,848 $ 69,848 4,345 7,151 ■ Funded Status 21,207 7,038 5,870 6,289 • Actuarial Accrued Liability 86,006 53,803 53,803 7,342 6,235 • Actuarial Value of Assets - - 11,500 6,865 5,521 • Unfunded Actuarial Accrued Liability 86,006 53,803 42,303 17,442 6,780 ■ 2012113 ARC - $ 3,776 3,004 6,780 2019/20 16,001 • Nor�n.al Cost 4,418 2,164 2,164 6,697 2020121 • UAAL Amortizatior�7 6,615 4,958 4,206 2,409 6,615 2021/22 12,798 6,535 4,758 4,396 2,139 6,535 Approximate 20 -year amortization. �A ` December 5, 2013 19 RESULTS Full Pre-Funding 10 -Year Projection Illustration (amounts in 000's) December 5, 2013 20 Fiscal Begin Year Annual OPEB Cost Contribution Benefit Pre- Total Year NOO ARC AOC Plants Fund Contrib 2012113 $ 24,259 $ 7,342 $ 6,395 $ 2,226 $ 5,115 $ 7,342 2013/14 23,312 7,248 6,232 2,526 4,722 7,248 2014115 22,296 7,151 6,062 2,806 4,345 7,151 2015/16 21,207 7,038 5,870 6,289 5178 4,071 • Total 10,708 7,342 6,235 ■ 2012113 ARC - % 34.1% 23.4% 19.8% Fiscal Begin Year Annual OPEB Cost Contribution Benefit Pre- Total Year NOO ARC AOC Plants Fund Contrib 2012113 $ 24,259 $ 7,342 $ 6,395 $ 2,226 $ 5,115 $ 7,342 2013/14 23,312 7,248 6,232 2,526 4,722 7,248 2014115 22,296 7,151 6,062 2,806 4,345 7,151 2015/16 21,207 7,038 5,870 3,061 3,977 7,038 2016117 20,039 6,950 5,697 3,291 3,659 6,950 2017118 18,786 6,865 5,521 3,557 3,308 6,865 2018/19 17,442 6,780 5,339 3,776 3,004 6,780 2019/20 16,001 6,697 5,151 3,990 2,707 6,697 2020121 14,455 6,615 4,958 4,206 2,409 6,615 2021/22 12,798 6,535 4,758 4,396 2,139 6,535 P19 i RESULTS Alternative Funding Scenarios ■ Assumed contributions • Scenario #1: $1 million plus pay -go each year • Scenario #2: $2 million plus pay -go each year • Scenario #3: $3 million plus pay -go each year ■ Each scenario • 7.25% discount rate ➢ Actual discount rate depends on trust selected ➢ 4% discount rate would apply to portion of ARC not funded • $11.5 million in initial assets • Once UAAL paid off, contribute normal cost annually J 1 December 5, 2013 BA'December 5, 2013 21 RESULTS This page intentionally blank 22 • 1r� �J P21 RESULTS J Proiected UAAL_ $60,000 $50,000 $40,000 $30,000 $20,000 S1 0,000 $0 9 2013 2018 2023 2028 2033 2038 2043 2048 2053 1 — Scenario #1 — Scenario #2 -Scenario #3 f i B/1 December 5, 2013 23 RESULTS 1 1' 1 Pro*ected Contributions $10,000 -- $8,000 I $6,000 ' f / � l $4,000 i $2,000 $a 2013 2018 2023 2028 2033 2038 2043 2048 2053 --*-- Benefit Payments — Scenario #1 — Scenario #2 -- •Scenario #3 December 5, 2013 24 1 P21 J 9 � 1 1 1' 1 P21 P22 P23 P24 BARTEL ASSOCIATES GASB 45 DATABASE BartelASSOCtates GASH 45 QPEB Database Normal Cost & Annual Requ €red Contribution 40, 3 ^ ]G?i c C s` 1?' I.[I9celloneous Saten \C ARC _1C ARC 95th Pelcentlle 19.5?0 $6.046 21.60.5 42.6 °'a Stir Percentile 10.7% 20.4% 12.7% 26.9% 1MI Percentile 4.945 9.3% 5.545 10.7% 2M Percemile 2.2:5 3.9% R64b 4.9?5 mh Percentile 1.0% 1.SS/0 I .4•h 2.1 °,b Pei-cent of Pay 14.545 34.74b 13.6% 33.4% Percentile 864.0 94h 77Se 8645 Discount Rate = 4.00 %, Average Amortization Period x 20.2 Years (B A 29 December 5, 2013 BARTEL ASSOCIATES GASB 45 DATABASE BartclAssoclates GASB 45 DPEB Database ActuarialActrued Liability SGGl, 3GG' k S C 1CG ° cpe 4!i Ntiseellaneous Safe w 9Sih Percentile 418% 46996 75th Percentile 23t45 299% SAth Percentile 108°6 139°.6 25th Percentr7e 394 31% M Pemenrile 13010 239s Percent of Par 27649 271% Percentile 8240 70go Discannt Rwe = 4.0095 BAr December 5, 2013 30 P24 ACTUARIAL CERTIFICATION This report presents the City of South San Francisco Retiree Healthcare Plan ( "Plan ") June 30, 2012 actuarial valuation. The purpose of this valuation is to: • Determine the Governmental Accounting Standards Board Statement Nos. 43 and 45 June 30, 2012 Benefit Obligations, • Determine the Plan's June 30, 2012 Funded Status, and • Calculate the 2012/13 and 2013114 Annual Required Contributions. The report provides information intended for reporting under GASB 43 and 45, but may not be appropriate for other purposes. Information provided in this report may be useful to the City for the Plan's financial management. Future valuations may differ significantly if the Plan's experience differs from our assumptions or if there are changes in Plan design, actuarial methods, or actuarial assumptions. The project scope did not include an analysis of this potential variation. The valuation is based on Plan provisions and participant data provided by the City as summarized in this report, which we relied on and did not audit. We reviewed the participant data for reasonableness. To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted actuarial principles and practices. Additionally, in our opinion, actuarial methods and assumptions comply with GASB 43 and 45. As members of the American Academy of Actuaries meeting the Academy Qualification Standards, we certify the actuarial results and opinions herein. Respectfully submitted, qt �- John E. Bartel, ASA, MAAA, FCA President Bartel Associates, LLC December 5, 2013 -v� Doug Pryor, ASA, EA, MAAA Vice President Bartel Associates, LLC December 5, 2013 rB December 5, 2013 31 ACTUARIAL CERTIFICATION This page intentionally blank �J �A December 5, 2013 32 P26 PREMIUMS Retiree Premium Rates" (Medicare Eligible) Plan 2011112 2012113 2013114 Single 2 -Party Single 2 -Party Single 2 -Party Blue Shield $ 466.29 $ 932.56 $ 466.28 $ 932.54 $ 512.91 $1,025.79 Blue Shield PPO HDHP 380.17 760.32 380.17 760.32 418.19 836.35 Kaiser Senior Adv. 381.30 762.60 372.62 745.24 370.20 740.40 Kaiser No Medicare 1,405.65 2,811.30 1,51994 3,039.88 13,197.70 1.33 Plan 2012 2013 Medicare Part B $ 99.90 $ 104.90 12 Effective July ] through June 34. *December 5, 2013 E -3 I PREMIUMS Active Premium Rates Single Coverage C Plan 2012/13 2013114 Est. Avg. Claims Cost Factor Active Early Retiree Ratio Active Early Retiree Ratio Blue Shield HMO $747.87 $ 957.75 1.28 $735.45 $ 978.15 1.33 1.26 Blue Shield PPO 937.64 1,162.99 1.24 898.27 1,194.70 1.33 1.40 Blue Shield PPO HDHP 764.46 948.19 754.43 1,003.39 Kaiser 539.11 719.36 1.33 543.72 724.99 1.33 1.39 B/ i December 5, 2013 E -4 P27 P28 PARTICIPANT STATISTICS Retiree Participant Statistics June 30, 2012 B/ 1 ' December 5, 2013 &7 L- PARTICIPANT STATISTICS I Retiree Participant Statistics June 30, 2010 0 Miscellaneous Safety Total • Count • Service Retirees 155 90 245 • Disabled Retirees 4 40 44 • Total 159 130 289 • Average Age • Service Retirees 68.6 66.5 67,8 • Disabled Retirees 62.5 61.5 61.6 • Total 68.4 64.9 66.9 • Average Retirement Age • Service Retirees 58.7 54.7 57.2 • Disabled Retirees 43.3 45.1 44.9 • Total 58.3 51.8 55.3 B/ 1 ' December 5, 2013 &7 L- PARTICIPANT STATISTICS I Retiree Participant Statistics June 30, 2010 0 BA, December 5, 2013 &8 C I P29 Miscellaneous Safety Total • Count • Service Retirees 140 86 226 • Disabled Retirees 4 40 44 • Total 144 126 270 • Average Age • Service Retirees 69.3 65.2 67.8 • Disabled Retirees 60.5 60.3 60.3 • Total 69.1 63.6 66.5 • Average Retirement Age • Service Retirees 59.3 54.9 57.6 • Disabled Retirees 43.3 45.1 45.0 • Total 58.9 51.8 55.6 BA, December 5, 2013 &8 C I P29 P30 P3l P32 P33 60 50 40 30 z 20 10 0 PARTICIPANT STATISTICS Active Aim Distribution Miscellaneous 06/30/10 Valuation ■6/30/12 Valuation --------- --- - - - --- ------`------------ ----------- It-]-- A ------ <25 25 -29 30 -34 35 -39 40 -44 45 -49 50 -54 55 -59 60 -64 >65 Age BA' December S, 2013 E -17 PARTICIPANT STATISTICS Active Service Distribution Miscellaneous bu 70 60 50 a 40 z 30 20 10 0 13 6/30/10 Valuation 06130/12 Valuation ---- ------------------------------ 0 -4 5 -9 10 -14 15 -19 20 -24 >25 Service B/1 December 5, 2013 E -18 P34 PARTICIPANT STATISTICS Active A Distribution Safety 40 30 20 z 10 0 6130110 Valuation ---------- - - - - --- ___�------- - - - - -- 12 Valuation ---- -- 6& � ma <25 25 -29 30 -34 35 -39 40 -44 45 -49 50 -54 55 -59 60 -64 >65 Age BA"December 5, 2013 E-19 PARTICIPANT STATISTICS Active Service Distribute gn Safety 50 40 30 8 a Z 20 10 0 136130/10 Valuation -------------- - - - - -- -------------- 26130/12 Valuation - - -- -- - - -- -------------- 0 -4 5 -9 4 ADecember 5, 2013 10 -14 15 -19 20 -24 >25 Service E -20 40 P35 PARTICIPANT STATISTICS Retirees Medical Plan Coverage by Aze Miscellaneous y�Y 5 � BA P December 5, 2013 E -21 PARTICIPANT STATISTICS Retiree Distribution Miscellaneous 40 30 F 20 z 10 m ❑ 6130/10 Valuation ■ 6130/12 Valuation --------------- - - - - IF a------------------ - - - - -- T------ -- - - -9 �-1 � -.l � --1 � --------- --- -- - - - - I a6wm �= m= m= a= ���. -50 50 -54 55 -59 60 -64 65 -69 70 -74 75 -79 80 -84 >85 Age B'A � December 5, 2013 E -22 0 P36 Medical Coverage Age Single 2 -Party Family Total Under 50 - - 1 1 50 -54 5 1 - 6 55 -59 19 5 - 24 60 -64 28 5 - 33 65 -69 20 12 - 32 70 -74 17 7 - 24 75 -79 14 4 - 18 80 -84 9 5 - 14 85 & Over 5 2 - 7 Total 117 41 1 159 Average Age 68.0 70.0 49.8 68.4 y�Y 5 � BA P December 5, 2013 E -21 PARTICIPANT STATISTICS Retiree Distribution Miscellaneous 40 30 F 20 z 10 m ❑ 6130/10 Valuation ■ 6130/12 Valuation --------------- - - - - IF a------------------ - - - - -- T------ -- - - -9 �-1 � -.l � --1 � --------- --- -- - - - - I a6wm �= m= m= a= ���. -50 50 -54 55 -59 60 -64 65 -69 70 -74 75 -79 80 -84 >85 Age B'A � December 5, 2013 E -22 0 P36 P37 PARTICIPANT STATISTICS Retirees Medical Plan Coverage by A e 50 -54 Safety 1 5 15 55 -59 Medical Coverage 2 1 Single 60 -64 2 -Party Family 2 Total 65 -69 Age 9 - Under 50 7 6 9 - 16 7 4 8 - 12 80 -84 2 2 - 4 85 &Over 4 3 - � Total 81 40 9 130 Average Age 62.9 70.8 57.0 64.9 B A � December 5, 2013 E -23 PARTICIPANT STATISTICS Retiree Age Dkiribution Safety 35 30 ----- - - - - -- ------------ - - - - -- 06/30/10 Valuation _ E6/30/12 /12 Valuation 25 ----- - - - - -- ------------- - - - - -- - - 20 ----- - - - - -- - - - -- ----------------------- Z15 - - - -- - - -- --- �-------- - - - - -- 10 - - - - -- - - -- - -- ----- - - - - -- 5 -- - -- -- -- - -- - - - - -- 0 ril <50 50 -54 55 -59 60 -64 65 -69 70 -74 75 -79 80 -84 >85 Age 5 December 5, 2013 E -24 P37 - 50 -54 R 1 5 15 55 -59 I9 2 1 22 60 -64 15 6 2 23 65 -69 15 9 - 24 70 -74 6 9 1 16 75 -79 4 8 - 12 80 -84 2 2 - 4 85 &Over 4 3 - � Total 81 40 9 130 Average Age 62.9 70.8 57.0 64.9 P37 P38 P39 ACTUARIAL METHODS Method June 30, 20I0 Valuation June 30, 2Q12 Valuation • Plan Assets ■ None ■Same • Cost Method ■Entry Age Normal ■Same • Amortization ■Level Percent of Payroll ■Same Method • Amortization ■ 6130110 unfunded liability ■ 6/30110 unfunded liability Periods amortized as a level dollar amortized as a level dollar amount over 28 years from amount over 26 years from 6!30110 6130112 ■ Gains /losses, assumption ■Gains /losses, assumption changes, and plan changes changes, and plan changes amortized as level dollar amortized as level dollar amounts over 15 years amounts over 15 years ■ Maximum 30 years combined ■Maximum 30 -year combined amortization period eriod ADecember 5, 2013 E -27 ACTUARIAL METHODS ■ Implied Subsidy ■ Participating retirees paying active rates vs. actual cost ■ Kaiser example: $1,000 -- - - - - - -- $750 {i $500 It x � t $250 5_ 30 35 40 — �AGn•e Pmmivm 539 539 539 E 53 60 539 43 SU 539 �- 8a+h• Rel Premium —�- Average Claim 327 378 436 719 719 719 504 582 672 7T7 Age ■ <65 retiree premiums 33% higher than active premiums ■ No implied subsidy for retirees (B A December 2013 5, E -2$ P39 DEFINITIONS Present Value of Projected Benefits (PVPB) Without Assets With Assets Currew Normal Cast IfAsuts 00616 Pafaaded A.AL Comet Normal Cost ■ PVPB - Present Value of all Projected Benefits • Discounted value, at measurement date (valuation date) of all future expected benefit payments • Expected benefit payments based on various actuarial assumptions ADecember 5, 2013 E -29 DEFINITIONS • AAL - Actuarial Accrued Liability / Actuarial Obligation • Discounted value at measurement date (valuation date) of benefits "earned" through measurement date based on actuarial cost method • Portion of PVPB "earned" at measurement • NC - Normal Cost • VaIue of benefits "earned" during current year • Portion of PVPB allocated to current year ■ Actuarial Cost Method Determines how benefits are "earned" or allocated to each year of service Has no effect on PVPB • Has significant effect on Actuarial Obligations and Normal Cost ■ Pay -As- You -Go Cost (PayGo) • Cash Subsidy: Actual cash benefit payments to retirees • Implied Subsidy: Difference between cost of retiree benefits and retiree premiums • PayGo is the expected retiree benefit payments for the year while Normal Cost is the expense for benefits accrued by active employees during the year B1 � December 5, 2013 E -30 P40 (s1,600s) OPEB Liability & Payment Scenarios $ 10,000 $8,000 $6,000 $4,000 $2,000 $0 2013 2018 2023 2028 2033 2038 2043 2048 2053 Pay -Go + $0.25 Million — Pay -Go + $0.5 Million --- Pay -Go + $1 Million — - Pay -Go + Initial Trust Only -4— Pay -Go P41 ($1,000S) Total OPEB Payments over Time $400,000 and Number of Years Before 60 Years Payments will drop below $2 Million Pay >$2M P42