HomeMy WebLinkAboutReso 20-2014RESOLUTION NO. 20-2014
CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA
A RESOLUTION AUTHORIZING THE MAYOR AND THE CITY
MANAGER TO EXECUTE DOCUMENTS RELATED TO
PARTICIPATING IN THE CALIFORNIA EMPLOYERS' RETIREE
BENEFIT TRUST (CERBT), INCLUDING SELECTION OF A
CERBT INVESTMENT STRATEGY OPTION; AMENDING THE
2013 -14 BENEFITS FUND OPERATING BUDGET; AND
DIRECTING THE FINANCE DIRECTOR TO MAKE PAYMENTS
TOTALING $13.5 MILLION INTO THAT TRUST
WHEREAS, the City of South San Francisco ( "City ") has, like many other municipalities in
California, a contractual liability for retiree health costs, also known as Other Post Employee
Benefits ( "OPEB "); and
WHEREAS, currently, the City has only been contributing to OPEB on a "pay as you go"
basis; and
WHEREAS, the City Council had previously authorized City staff, via Resolution 133 -2011,
to rely on the request for proposals process for professional services undertaken by the County of San
Mateo ( "County ") in order to select an OPEB Trust provider for the City; and
WHEREAS, the County conducted a selection process and selected the California
Employers' Retirement Benefit Trust administered by the California Public Employees' Retirement
System (Ca1PERS), also known as the Retiree Benefit Trust ( "CERBT "); and
WHEREAS, the City Council considered various funding strategies to pay off the City's
OPEB liabilities, including pay as you go, depositing City reserve funds into the Trust, and /or
contributing an additional annual amount to that Trust; and
WHEREAS, data from the actuarial firm Bartel Associates and additional analyses by City
staff using that data presented to the City Council have estimated that:
• the OPEB liability currently totals $86 million;
• by depositing thirteen million five hundred thousand dollars ($13,500,000) into a CERBT
Trust, the City of South San Francisco will realize approximately $37 million to $43
million in net present value savings and will have health care premium payments reduced
approximately 43 -45 years earlier than otherwise would happen through pay as you go; and
WHEREAS, the City Council hereby finds that it makes good financial and business sense to
pay down the OPEB liability on a shorter timeframe than would be possible if payments are limited
to pay as you; and
WHEREAS, the City Council also finds, after consultations between the City's investment
advisor, Chandler Asset Management, City staff, and the Budget Subcommittee of the City Council
that it is beneficial for City staff to begin depositing thirteen million five hundred thousand dollars
($13,500,000) into the Trust over a period of approximately one year so that the deposits will take
advantage of dollar cost averaging and therefore will not be adversely impacted by normal market
swings; and
WHEREAS, the City Council has also reviewed materials from staff that show that additional
contributions into the CERBT trust on an annual basis result in a net present value savings to
taxpayers over time.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San
Francisco that the City Council hereby approves Agreement and Election of the City of South San
Francisco to Prefund Other Post - Employment Benefits through the CERBT.
BE IT FURTHER RESOLVED that the Mayor and the City Manager and the City Clerk are
hereby authorized to execute the following documents on behalf of the City Council of the City of
South San Francisco in order to establish the CERBT:
1. CERBT Contract Agreement, attached hereto and included by reference as part of
this Resolution, "The Agreement and Election of the City of South San Francisco to
Prefund Other Post - Employment Benefits Through CalPERS " (Exhibit A to this
Resolution), and
2. Delegation of Authority to Request Disbursements (Exhibit B to this Resolution),
with the following City staff hereby delegated to request disbursements from the
Trust Fund in the future: the City Manager, Assistant City Manager, and /or Finance
Director.
BE IT FURTHER RESOLVED that the City Council elects to enroll the City in CERBT
investment strategy 1 as shown on Exhibit C -1 to this Resolution as the appropriate investment
vehicle for the placement of the City's deposits into CERBT and authorizes the City Manager and/or
his designee to execute the necessary documents to enroll in the investment strategy; and
BE IT FURTHER RESOLVED that the Finance Director is hereby authorized to make a total
of twenty seven (27) total deposits every two weeks into CERBT of $500,000 each, for a total
cumulative deposit of thirteen million five hundred thousand dollars ($13,500,000) (the "Deposits "),
beginning in approximately March 2014 and ending in approximately March 2015 depending on the
timing of final acceptance by Ca1PERS of the City's Trust documents and Ca1PERS timing ability to
accept the City's first deposit; and
BE IT FURTHER RESOLVED that the deposit schedule listed in Exhibit D is shown as an
example of the deposits only, and the schedule may be adjusted as described in the previous
paragraph and may be adjusted on an ongoing basis by up to five working days due to holidays,
staffing vacancies, or cash flow timing issues at the Finance Director's discretion in a manner
consistent with the intent of this resolution; and
BE IT FURTHER RESOLVED that additional deposits may be authorized by the City
Council during the budget process or via a budget amendment resolution; and
BE IT FURTHER RESOLVED that the Health and Benefits Fund Operating Budget is
hereby amended by thirteen million five hundred ($13,500,000), and Reserve balances in the Health
and Benefits Fund are hereby reduced by the same amount; and
BE IT FURTHER RESOLVED that the Mayor, City Manager, Assistant City Manager,
and/or Finance Director are hereby authorized to take any other required action consistent with
the intent of this resolution; and
BE IT FURTHER RESOLVED that the Council states it is in the City's interest to
prioritize funding for additional annual contributions into the CEBRT Trust as part of the budget
process, and staff is directed to make additional annual funding of at least $250,000 a priority in
the operating budget.
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 12'b day of
February, 2014 by the following vote:
AYES: Councilmembers Mark N Addiego Pradeep Gupta and Liza Normandy
Vice Mayor Richard A Garbarino and Ma o� r KgUI Matsumoto
NOES: None
ABSTAIN: None
ABSENT:
ATTEST: ' LbAAV-Kj
Anna Brown, Deputy City Clerk
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EXHIBIT A
CALIFORNIA EMPLOYERS' RETIREE BENEFIT TRUST PROGRAM ( "CERBT ")
AGREEMENT AND ELECTION
OF
Citq of South San Francisco
(NAME Of EMPLOYER)
TO PREFUND OTHER POST EMPLOYMENT
BENEFITS THROUGH CaIPERS
WHEREAS (1) Government Code Section 22940 establishes in the State Treasury the
Annuitants' Health Care Coverage Fund for the prefunding of health care coverage for
annuitants (Prefunding Plan); and
WHEREAS (2) The California Public Employees' Retirement System (Ca1PERS) Board
of Administration (Board) has sole and exclusive control and power over the
administration and investment of the Prefunding Plan (sometimes also referred to as
CERBT), the purposes of which include, but are not limited to (i) receiving contributions
from participating employers and establishing separate Employer Prefunding Accounts
in the Prefunding Plan for the performance of an essential governmental function (ii)
investing contributed amounts and income thereon, if any, in order to receive yield on
the funds and (iii) disbursing contributed amounts and income thereon, if any, to pay for
costs of administration of the Prefunding Plan and to pay for health care costs or other
post employment benefits in accordance with the terms of participating employers'
plans; and
WHEREAS (3) City of South San Francisco
(NAME OF EMPLOYER)
(Employer) desires to participate in the Prefunding Plan upon the terms and conditions
set by the Board and as set forth herein; and
WHEREAS (4) Employer may participate in the Prefunding Plan upon (i) approval by
the Board and (ii) filing a duly adopted and executed Agreement and Election to Prefund
Other Post Employment Benefits (Agreement) as provided in the terms and conditions
of the Agreement, and
WHEREAS (5) The Prefunding Plan is a trust fund that is intended to perform an
essential governmental function within the meaning of Section 115 of the Internal
Revenue Code as an agent multiple - employer plan as defined in Governmental
Accounting Standards Board (GASB) Statement No. 43 consisting of an aggregation of
single - employer plans, with pooled administrative and investment functions;
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EXHIBIT A
NOW, THEREFORE, BE IT RESOLVED THAT EMPLOYER HEREBY MAKES THE
FOLLOWING REPRESENTATION AND WARRANTY AND THAT THE BOARD AND
EMPLOYER AGREE TO THE FOLLOWING TERMS AND CONDITIONS:
A. Representation and Warranty
Employer represents and warrants that it is a political subdivision of the State of
California or an entity whose income is excluded from gross income under Section 115
(1) of the Internal Revenue Code.
B. Adoption and Approval of the Agreement; Effective Date; Amendment
(1) Employer's governing body shall elect to participate in the Prefunding Plan by
adopting this Agreement and filing with the CaIPERS Board a true and correct original
or certified copy of this Agreement as follows:
Filing by mail, send to: CaIPERS
Affiliate Program Services Division
CERBT (OPEB)
P.O. Box 1494
Sacramento, CA 95812 -1494
Filing in person, deliver to:
CaIPERS Mailroom
Affiliate Program Services Division
CERBT (OPEB)
400 Q Street
Sacramento, CA 95811
(2) Upon receipt of the executed Agreement, and after approval by the Board, the
Board shall fix an effective date and shall promptly notify Employer of the effective date
of the Agreement.
(3) The terms of this Agreement may be amended only in writing upon the agreement
of both CaIPERS and Employer, except as otherwise provided herein. Any such
amendment or modification to this Agreement shall be adopted and executed in the
same manner as required for the Agreement. Upon receipt of the executed amendment
or modification, the Board shall fix the effective date of the amendment or modification.
(4) The Board shall institute such procedures and processes as it deems necessary to
administer the Prefunding Plan, to carry out the purposes of this Agreement, and to
maintain the tax exempt status of the Prefunding Plan. Employer agrees to follow such
procedures and processes.
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EXHIBIT A
C. Other Post Employment Benefits (OPEB) Cost Reports and Employer Contributions
(1) Employer shall provide to the Board an OPEB cost report on the basis of the
actuarial assumptions and methods prescribed by the Board. Such report shall be for
the Board's use in financial reporting, and shall be prepared at least as often as the
minimum frequency required by GASB 43. This OPEB cost report may be prepared as
an actuarial valuation report or, if the employer is qualified under GASS 45 and 57, may
be prepared as an Alternative Measurement Method (AMM) report.
(a) Unless qualified under GASB 45 and 57 to provide an AMM report,
Employer shall provide to the Board an actuarial valuation report. Such
report shall be for the Board's use in financial reporting, and shall be
prepared at least as often as the minimum frequency required by GASB
43 and 57, and shall be:
1) prepared and signed by a Fellow or Associate of the Society of
Actuaries who is also a Member of the American Academy of
Actuaries or a person with equivalent qualifications acceptable to the
Board;
2) prepared in accordance with generally accepted actuarial practice and
GASB 43, 45 and 57; and,
3) provided to the Board prior to the Board's acceptance of contributions
for the valuation period or as otherwise required by the Board,
(b) If qualified under GASB 45 and 57, Employer may provide to the Board an
AMM report. Such report shall be for the Board's use in financial
reporting, shall be prepared at least as often as the minimum frequency
required by GASB 43 and 57, and shall be:
1) affirmed by Employer's external auditor, or by a Fellow or Associate
of the Society of Actuaries who is also a Member of the American
Academy of Actuaries or a person with equivalent qualifications
acceptable to the Board, to be consistent with the AMM process
described in GASB 45;
2) prepared in accordance with GASB 43, 45, and 57; and,
3) provided to the Board prior to the Board's acceptance of
contributions for the valuation period or as otherwise required by
the Board.
(2) The Board may reject any OPEB cost report submitted to it, but shall not
unreasonably do so. In the event that the Board determines, in its sole discretion, that
the OPEB cost report is not suitable for use in the Board's financial statements or if
Employer fails to provide a required OPEB cost report, the Board may obtain, at
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EXHIBIT
Employer's expense, an OPEB cost report that meets the Board's financial reporting
needs. The Board may recover from Employer the cost of obtaining such OPEB cost
report by billing and collecting from Employer or by deducting the amount from
Employer's account in the Prefunding Plan.
(3) Employer shall notify the Board of the amount and time of contributions which
contributions shall be made in the manner established by the Board.
(4) Employer contributions to the Prefunding Plan may be limited to the amount
necessary to fully fund Employer's actuarial present value of total projected benefits, as
supported by the OPEB cost report acceptable to the Board. As used throughout this
document, the meaning of the term "actuarial present value of total projected benefits"
is as defined in GASB Statement No. 45. If Employer's contribution causes its assets in
the Prefunding Plan to exceed the amount required to fully fund the actuarial present
value of total projected benefits, the Board may refuse to accept the contribution.
(5) No contributions are required. If an employer elects to contribute then the
contribution amount should not be less than $5000 or the employer's annual required
contribution (ARC), whichever amount is lower. Contributions can be made at any time
following the seventh day after the effective date of the Agreement provided that
Employer has first complied with the requirements of Paragraph C.
D. Administration of Accounts, Investments, Allocation of Income
(1) The Board has established the Prefunding Plan as an agent plan consisting of an
aggregation of single - employer plans, with pooled administrative and investment
functions, under the terms of which separate accounts will be maintained for each
employer so that Employer's assets will provide benefits only under employer's plan.
(2) All Employer contributions and assets attributable to Employer contributions shall be
separately accounted for in the Prefunding Plan (Employer's Prefunding Account).
(3) Employer's Prefunding Account assets may be aggregated with prefunding account
assets of other employers and may be co- invested by the Board in any asset classes
appropriate for a Section 115 Trust.
(4) The Board may deduct the costs of administration of the Prefunding Plan from the
investment income or Employer's Prefunding Account in a manner determined by the
Board.
(5) Investment income shall be allocated among employers and posted to Employer's
Prefunding Account as determined by the Board but no less frequently than annually.
(S) If Employer's assets in the Prefunding Plan exceed the amount required to fully fund
the actuarial present value of total projected benefits, the Board, in compliance with
applicable accounting and legal requirements, may return such excess to Employer.
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EXHIBIT A
E. Reports and Statements
(1) Employer shall submit with each contribution a contribution report in the form and
containing the information prescribed by the Board.
(2) The Board shall prepare and provide a statement of Employer's Prefunding Account
at least annually reflecting the balance in Employer's Prefunding Account, contributions
made during the period and income allocated during the period, and such other
information as the Board determines.
F. Disbursements
(1) Employer may receive disbursements not to exceed the annual premium and other
costs of post employment healthcare benefits and other post employment benefits as
defined in GASES 43.
(2) Employer shall notify CaEPERS in writing in the manner specified by CaIPERS of the
persons authorized to request disbursements from the Prefunding Plan on behalf of
Employer.
(3) Employer's request for disbursement shall be in writing signed by Employer's
authorized representative, in accordance with procedures established by the Board.
The Board may require that Employer certify or otherwise establish that the monies will
be used for the purposes of the Prefunding Plan.
(4) Requests for disbursements that satisfy the requirements of paragraphs (2) and (3)
will be processed monthly.
(5) CaIPERS shall not be liable for amounts disbursed in error if it has acted upon the
written instruction of an individual authorized by Employer to request disbursements. In
the event of any other erroneous disbursement, the extent of CaIPERS' liability shall be
the actual dollar amount of the disbursement, plus interest at the actual earnings rate
but not less than zero.
(G) No disbursement shall be made from the Prefunding Plan which exceeds the
balance in Employer's Prefunding Account.
G. Costs of Administration
Employer shall pay its share of the costs of administration of the Prefunding Plan, as
determined by the Board.
H. Termination of Employer Participation in Prefunding Plan
(1) The Board may terminate Employer's participation in the Prefunding Plan if:
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EXHIBIT A
(a) Employer gives written notice to the Board of its election to terminate;
(b) The Board finds that Employer fails to satisfy the terms and conditions of
this Agreement or of the Board's rules or regulations.
(2) If Employer's participation in the Prefunding Plan terminates for any of the foregoing
reasons, all assets in Employer's Prefunding Account shall remain in the Prefunding
Plan, except as otherwise provided below, and shall continue to be invested and accrue
income as provided in Paragraph D.
(3) After Employer's participation in the Prefunding Plan terminates, Employer may not
make contributions to the Prefunding Plan,
(4) After Employer's participation in the Prefunding Plan terminates, disbursements
from Employer's Prefunding Account may continue upon Employer's instruction or
otherwise in accordance with the terms of this Agreement.
(5) After the Employer's participation in the Prefunding Plan terminates, the governing
body of the Employer may request either:
(a) A trustee to trustee transfer of the assets in Employer's Prefunding
Account; provided that the Board shall have no obligation to make such
transfer unless the Board determines that the transfer will satisfy
applicable requirements of the Internal Revenue Code, other law and
accounting standards, and the Board's fiduciary duties. If the Board
determines that the transfer will satisfy these requirements, the Board
shall then have one hundred fifty (150) days from the date of such
determination to effect the transfer. The amount to be transferred shall be
the amount in the Employer's Prefunding Account as of the date of the
transfer (the "transfer date ") and shall include investment earnings up to
an investment earnings allocation date preceding the transfer date. In no
event shall the investment earnings allocation date precede the transfer
date by more than 150 days.
(b) A disbursement of the assets in Employer's Prefunding Account; provided
that the Board shall have no obligation to make such disbursement unless
the Board determines that, in compliance with the Internal Revenue Code,
other law and accounting standards, and the Board's fiduciary duties, all of
Employer's obligations for payment of post - employment health care
benefits and other post - employment benefits and reasonable
administrative costs of the Board have been satisfied. If the Board
determines that the disbursement will satisfy these requirements, the
Board shall then have one hundred fifty (150) days from the date of such
determination to effect the disbursement. The amount to be disbursed
shall be the amount in the Employer's Prefunding Account as of the date
of the disbursement (the "disbursement date ") and shall include
investment earnings up to an investment earnings allocation date
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EXHIBIT A
preceding the disbursement date. In no event shall the investment
earnings allocation date precede the disbursement date by more than 150
days.
(6) After Employer's participation in the Prefunding Plan terminates and at such time
that no assets remain in Employer's Prefunding Account, this Agreement shall
terminate.
(7) If, for any reason, the Board terminates the Prefunding Plan, the assets in
Employer's Prefunding Account shall be paid to Employer after retention of (i) amounts
sufficient to pay post employment health care benefits and other post employment
benefits to annuitants for current and future annuitants described by the employer's
current substantive plan (as defined in GASB 43), and (ii) amounts sufficient to pay
reasonable administrative costs of the Board.
(8) If Employer ceases to exist but Employer's Prefunding Plan continues to exist and if
no provision has been made by Employer for ongoing payments to pay post
employment health care benefits and other post employment benefits to annuitants for
current and future annuitants, the Board is authorized to and shall appoint a third party
administrator to carry out Employer's Prefunding Plan. Any and all costs associated
with such appointment shall be paid from the assets attributable to contributions by
Employer.
(9) If Employer should breach the representation and warranty set forth in Paragraph
A., the Board shall take whatever action it deems necessary to preserve the tax- exempt
status of the Prefunding Plan.
I. General Provisions
(1) Books and Records.
Employer shall keep accurate books and records connected with the performance of
this Agreement. Employer shall ensure that books and records of subcontractors,
suppliers, and other providers shall also be accurately maintained. Such books and
records shall be kept in a secure location at the Employer's office(s) and shall be
available for inspection and copying by CalPERS and its representatives.
(2) Audit.
(a) During and for three years after the term of this Agreement, Employer
shall permit the Bureau of State Audits, CalPERS, and its authorized
representatives, and such consultants and specialists as needed, at all
reasonable times during normal business hours to inspect and copy, at the
expense of CaIPERS, books and records of Employer relating to its
performance of this Agreement.
(b) Employer shall be subject to examination and audit by the Bureau of State
Audits, CaIPERS, and its authorized representatives, and such
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EXHIBIT A
consultants and specialists as needed, during the term of this Agreement
and for three years after final payment under this Agreement. Any
examination or audit shall be confined to those matters connected with the
performance of this Agreement, including, but not limited to, the costs of
administering this Agreement. Employer shall cooperate fully with the
Bureau of State Audits, CalPERS, and its authorized representatives, and
such consultants and specialists as needed, in connection with any
examination or audit. All adjustments, payments, and /or reimbursements
determined to be necessary by any examination or audit shall be made
promptly by the appropriate party.
(3) Notice.
(a) Any notice, approval, or other communication required or permitted under
this Agreement will be given in the English language and will be deemed
received as follows:
Personal delivery. When personally delivered to the recipient.
Notice is effective on delivery.
2. First Class Mail. When mailed first class to the last address of the
recipient known to the party giving notice. Notice is effective three
delivery days after deposit in a United States Postal Service office
or mailbox.
3. Certified mail. When mailed certified mail, return receipt requested.
Notice is effective on receipt, if delivery is confirmed by a return
receipt.
4. Overnight Delivery. When delivered by an overnight delivery
service, charges prepaid or charged to the sender's account, Notice
is effective on delivery, if delivery is confirmed by the delivery
service.
5. Telex or Facsimile Transmission. When sent by telex or fax to the
last telex or fax number of the recipient known to the party giving
notice. Notice is effective on receipt, provided that (i) a duplicate
copy of the notice is promptly given by first -class or certified mail or
by overnight delivery, or (ii) the receiving party delivers a written
confirmation of receipt. Any notice given by telex or fax shall be
deemed received on the next business day if it is received after
5:00 p.m. (recipient's time) or on a nonbusiness day.
6. E -mail transmission. When seat by e -mail using software that
provides unmodifiable proof (i) that the message was sent, (ii) that
the message was delivered to the recipient's information processing
system, and (iii) of the time and date the message was delivered to
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EXHIBIT A
the recipient along with a verifiable electronic record of the exact
content of the message sent.
Addresses for the purpose of giving notice are as shown in Paragraph B.(1) of this
Agreement.
(b) Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be notified
shall be deemed effective as of the first date that said notice was refused,
unclaimed, or deemed undeliverable by the postal authorities, messenger
or overnight delivery service.
(c) Any party may change its address, telex, fax number, or e-mail address by
giving the other parry notice of the change in any manner permitted by this
Agreement.
(d) Alf notices, requests, demands, amendments, modifications or other
communications under this Agreement shall be in writing. Notice shall be
sufficient for all such purposes if personally delivered, sent by first class,
registered or certified mail, return receipt requested, delivery by courier
with receipt of delivery, facsimile transmission with written confirmation of
receipt by recipient, or e-mail delivery with verifiable and unmodifiable
proof of content and time and date of sending by sender and delivery to
recipient. Notice is effective on confirmed receipt by recipient or 3
business days after sending, whichever is sooner.
(4) Modification
This Agreement may be supplemented, amended, or modified only by the mutual
agreement of the parties. No supplement, amendment, or modification of this
Agreement shall be binding unless it is in writing and signed by the party to be charged.
(5) Survival
All representations, warranties, and covenants contained in this Agreement, or in any
instrument, certificate, exhibit, or other writing intended by the parties to be a part of
their Agreement shall survive the termination of this Agreement until such time as all
amounts in Employer's Prefunding Account have been disbursed.
(6) Waiver
No waiver of a breach, failure of any condition, or any right or remedy contained in or
granted by the provisions of this Agreement shall be effective unless it is in writing and
signed by the party waiving the breach, failure, right, or remedy. No waiver of any
breach, failure, right, or remedy shall be deemed a waiver of any other breach, failure,
right, or remedy, whether or not similar, nor shall any waiver constitute a continuing
waiver unless the writing so specifies.
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EXHIBIT A
(7) Necessary Acts, Further Assurances
The parties shall at their own cost and expense execute and deliver such further
documents and instruments and shall take such other actions as may be reasonably
required or appropriate to evidence or carry out the intent and purposes of this
Agreement.
A majority vote of Employer's Governing Body at a public meeting held on the 12th
day of the month of February in the year 2014, authorized entering
into this Agreement.
Signature of the Presiding Officer:
Printed Name of the Presiding Officer: Karyl Matsumoto, Mayor
Name of Governing Body: City Council
Name of Employer: City of South San Francisco
Date: February 12, 2014
BOARD OF ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT
SYSTEM
BY
RAND ANDERSON
AFFILIATE PROGRAM SERVICES DIVISION
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
To be completed by CaIPERS
The effective date of this Agreement is:
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EXHIBIT B
DELEGATION OF AUTHORITY
I, TO REQUEST DISBURSEMENTS
Ca1PERS
RESOLUTION
OF THE
City Council
(GOVERNING
OF THE
City of South San Francisco
(NAME OF EMPLOYER)
The City Council delegates to the incumbents
(GOVERNING BODY)
in the positions of City Manager_ and
(TITLE)
Assistant City Manager and/or
rnTLE)
Finance Director authority to request on
(TITLE?
behalf of the Employer disbursements from the Other Post Employment Prefunding
Plan and to certify as to the purpose for which the disbursed funds will be used.
Title Mayor
Witness
Date
OPEB Delegation of Autho* (1113)
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EXHIBIT C -1
December 31, 2013
Objective
The objective of the CERBT Strategy 1 portfolio is to seek
returns that reflect the broad investment performance of the
financial markets through capital appreciation and investment
income. There is no guarantee that the portfolio will achieve its
investment objective.
Strategy
The CERBT Strategy 1 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 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 CERBT Strategy 2 and Strategy 3, this portfolio
consists of a higher percentage of equities than 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.
CaIPERS Board may change the list of approved asset
classes, in composition as well as targeted allocation
percentages and ranges at any time.
Assets Under Management
As of December 31, 2013, the aggregate total of assets under
management for all CERBT Strategies was
$3,192,870,806.
Composition
Asset Class Allocations and Benchmarks
The CERBT Strategy 1 portfolio consists of the following asset classes and
corresponding benchmarks:
Asset
Target
Target
Benchmark
0 fie
1
Range
Returns before expenses'
Global Equity
66%
±5%
MSCI All Country World Index
a\�QJwa \0
13.44%
4.12%
EMI net
Fixed Income
18 %4
} 5%
Barclays Capital Long Liability
9.26 ° /4
13.34%
3,64%
Index
Inflation- Linked Bonds
5%
°
* 2 �0
Barclays Capital Global: US
"ILBs"
TIPS Index
Real Estate Investment
8%
+2%
FTSE EPRAINAREIT
Trusts "REITs"
Developed Liquid index net
Commodities
3%
+ 2%
S &P GSCi Total Return Index
Portfolio Benchmark
The CERBT Strategy 1 benchmark is a composite of underlying asset class market
indices, 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 December 31, 2013. CaIPERS may overweight or underweight an
allocation to a particular asset class based on market, economic, or CaIPERS policy
considerations.
70.0
60.0
50.13
40.0
30.0
20.0
10.0
0.0
r
I
i
0 Target
__.__. ..._ Actual
CERBT
Strategy
1 Month
1 Performance
3 Months
Fiscal YTD
0 fie
f
5 Years*
Since Inception*
June 1, 2007
Returns before expenses'
1.20%
4.71%
10.83%
14.17%
a\�QJwa \0
13.44%
4.12%
Benchmark returns
1.00%
4.41%
10.48%
13.61%
CERBT
Strategy
1 Month
1 Performance
3 Months
Fiscal YTD
of .
1 Year 3 Years*
f
5 Years*
Since Inception*
June 1, 2007
Returns before expenses'
1.20%
4.71%
10.83%
14.17%
9.34%
13.44%
4.12%
Benchmark returns
1.00%
4.41%
10.48%
13.61%
9.26 ° /4
13.34%
3,64%
"Returns for periods greater than one year are annualized.
1 See the Expenses section of this document.
EXHIBIT C -1 P16
December 31, 2013
General Information
Information Accessibility
The CERBT Strategy 1 portfolio consists of assets managed internally
by CalPERS and /or external advisors. Since it is not a mutual fund, a
prospectus is not available nor is information available from a
newspaper source. This summary is designed to provide descriptive
information. CaIPERS provides a quarterly statement of the employer's
account and other information about the CERBT. For total market
value, detailed asset allocation, investment policy and current
performance information, including performance to the most recent
month -end, please visit our website at: www.calpers.ca.gov.
Portfolio Manager Information
The CaIPERS Investment Committee and Board of Administration
directs the investment strategy and investments of the CERBT. Under
that direction, CalPERS Investment staff manages fixed income,
inflation- linked bonds and commodities assets; and State Street Global
Advisors (SSgA) manages the global equity and real estate investment
trust assets.
Custodian and Record Keeper
State Street Bank serves as custodian for the CERBT. Northeast
Retirement Services serves as record keeper.
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. In addition, SSgA may charge administrative and other
expenses deducted directly from the Global Equity and REITs
commingled funds. CERBT's actual expenses may differ from the
amount currently being accrued due to factors such as changes in
average fund assets of market conditions. 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.
What Employers Own
Each employer choosing CERBT Strategy 1 owns a percentage of this
portfolio, which invests in pooled asset classes managed by CalPERS and /or
external advisors. Employers do not have direct ownership of the securities
in the portfolio.
Price
The value of the portfolio changes daily, based upon the market value of the
underlying securities. ,lust as prices of individual securities fluctuate, the
portfolio's value also changes with market conditions.
Principal Risks of the Portfolio
The CaIPERS CERBT Fund provides California government employers with
a trust through which they may prefund retiree medical costs and other post -
employment benefits. CERBT is not, however, a defined benefit plan. There
is no guarantee that the portfolio will achieve its investment objectives nor
provide sufficient funding to meet these employer obligations. Further,
CalPERS will not make up the difference between actual health care
premiums for payment of future benefits provided to retirees should CERBT
assets not be sufficient to cover future obligations.
An investment in the portfolio is not a bank deposit, and it is not insured nor
guaranteed by the Federal Deposit Insurance Corporation (FDIC), CaIPERS,
the State of California or any other government agency.
There are risks associated with investing, including possible loss of principal.
The portfolio's risk depends in part on the portfolio's asset class allocations
and the selection, weighting and risks of the underlying investments. For
more information about investment risks, please see the document entitled
"CERBT Principal Investment Risks" located at www.calpers.ca.gov.
Fund Performance
Performance data shown on page 1 represents past performance and is no
guarantee of future results. The investment return and principal value of an
investment will fluctuate so that an employer's units, when redeemed, may
be worth more or less than their original cost Current performance may be
higher or lower than historical performance data shown. For current
performance information, please visit www.calpers.ca.gov and follow the
links to California Employer Retirees' Benefit Trust,
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 allocations. Generally, equities carry more
risk than fixed income securities.
Asset Class Target Allocations Strategy
1
� Strategy 2 �
Strategy 3
Strategy 1
Global Equity
66 %
50%
32%
Less tunservattve More conservative
Fixed Income
18%
24%
42 %
fl
Ination- Linked Bonds
5 °/0
15%
15%
strategy 2
Real Estate Investment Trusts
8 °/°
8%
8%
Less conservative More conservative
Commodities
Strategy S
Less conservative More conservative
3%
3%
3%
P17
EXHIBIT G-2
December 31, 2013
Objective
The objective of the CERBT Strategy 2 portfolio is to seek
returns that reflect the broad investment performance of the
financial markets through capital appreciation and investment
income. There is no guarantee that the portfolio will achieve its
investment objective.
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.
CaIPERS Board may change the list of approved asset classes,
in composition as well as targeted allocation percentages and
ranges at any time.
Assets Under Management
As of December 31, 2013, the aggregate total of assets under
management for all CERBT Strategies was
$3,1 92,870,806.
Composition
Asset Class Allocations and Benchmarks
The CERBT Strategy 2 portfolio consists of the following asset classes and
corresponding benchmarks:
Asset Class
Target
Target
•
Fiscal YTD
of December 1
1 Year 3 Years` 5 Years'
Allocation
Range
-
Global Equity
50%
± 5%
MSCI All Country World Index
-
12.51%
Benchmark returns
IMI net
Fixed Income
24%
+ 5%
Barclays Capital Long Liability
-
12.28%
Index
Inflation- Linked Bonds
"ILBs"
15%
± 4%
Barclays Capital Global: US
TIPS Index
Real Estate Investment
"REITs"
8%
± 2%
FTSE EPRAINAREIT
Trusts
Develo ed Liquid Index (net)
Commodities
3%
± 2%
S &P GSCi Total Return Index
Portfolio Benchmark
The CERBT Strategy 2 benchmark is a composite of underlying asset class market
indices, 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 December 31, 2013. CalPERS may overweight or underweight an
allocation to a particular asset class based on market, economic, or CaIPERS policy
considerations.
60 T--- -
e
50 - - -
40 - — -.. _.......
i
30 f - -° -- - -- - -- --
20 -
16 ! -
�\ 1 Q
F
oa�QS far
4°
a Target
Actual
CERBT
Strategy
1 Month
3 Months
•
Fiscal YTD
of December 1
1 Year 3 Years` 5 Years'
Since Inception'
October 1, 2011
Returns before expenses'
0.77%
3.34%
8.11%
9.16%
-
-
12.51%
Benchmark returns
0.51%
3.00%
770%
8.48%
-
-
12.28%
'Returns for periods greater than one year are annualized.
'See the "Expenses" section of this document.
Pis
EXHIBIT C -2
December 31, 2013
General Information
Information Accessibility
The CERBT Strategy 2 portfolio consists of assets managed internally
by CalPERS and /or external advisors. Since it is not a mutual fund, a
prospectus is not available nor is information available from a
newspaper source. This summary is designed to provide descriptive
information. CaIPERS provides a quarterly statement of the employer's
account and other information about the CERBT. For total market
value, detailed asset allocation, investment policy and current
performance information, including performance to the most recent
month -end, please visit our website at: www.calpers.ca.gov.
Portfolio Manager Information
The CaIPERS Investment Committee and Board of Administration
directs the investment strategy and investments of the CERBT fund.
Under that direction, CaIPERS Investment Office staff manages fixed
income, inflation - linked bonds (ILBs), and commodities assets; and
State Street Global Advisors (SSgA) manages the global equity and
real estate investment trust assets.
Custodian and Record Keeper
State Street Bank serves as custodian for CERBT. Northeast
Retirement Services serves as record keeper.
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. In addition, SSgA may charge administrative and other
expenses deducted directly from the global equity and REITs
commingled funds. CERBT's actual expenses may differ from the
amount currently being accrued due to factors such as changes in
average fund assets or market conditions. 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.
What Employers Own
Each employer choosing CERBT Strategy 2 owns a percentage of this
portfolio, which invests in pooled asset classes managed by CalPERS and /or
external advisors. Employers do not have direct ownership of the securities in
the portfolio.
Price
The value of the portfolio changes daily, based upon the market value of the
underlying securities. Given that prices of individual securities fluctuate, the
portfolio's value also changes with market conditions.
Principal Risks of the Portfolio
The CaIPERS CERBT Fund provides California government employers with a
trust through which they may prefund retiree medical costs and other post -
employment benefits. CERBT is not, however, a defined benefit plan. There
is no guarantee that the portfolio will achieve its investment objectives nor
provide sufficient funding to meet these employer obligations. Further,
CalPERS will not make up the difference between actual health care
premiums for payment of future benefits provided to retirees should CERBT
assets not be sufficient to cover future obligations.
An investment in the portfolio is not a bank deposit, and it is not insured nor
guaranteed by the Federal Deposit Insurance Corporation (FDIC), CaIPERS,
the State of California or any other government agency.
There are risks associated with investing, including possible loss of principal.
The portfolio's risk depends in part on the portfolio's asset class allocations
and the selection, weighting and risks of the underlying investments. For
more information about risks, please see the document entitled "CERBT
Principal Investment Risks" located at www.calpers.ca.gov,
Fund Performance
Performance data shown on page 1 represents past performance and is no
guarantee of future results. The investment return and principal value of an
investment will fluctuate so that an employer's units, when redeemed, may be
worth more or less than their original cost. Current performance may be higher
or lower than historical performance data shown. For current performance
information, please visit www.calpers.ca.gov and follow the links to California
Employer Retirees' Benefit Trust.
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 allocations. Generally, equities carry more risk than
fixed income securities.
8%
Asset Class Target Allocations Strategy
I
Strategy 2
Strategy 3
Strategy t
Global Equity
66%
50%
32%
Less conservative More conservative
Fixed Income
18%
24%
42 %
Inflation- Linked Bonds
5%
15%
15%
Strategy 2
Less conservative More conservative
Real Estate investment Trusts
Strategy 3
Less conservative More conservative
8%
8%
8%
Commodities
3 °/°
3%
3%
Pl9
Exhibit D: CEBRT Deposit Schedule
Examples of
27 3/11/15 $ 500,000 1 $ 13,500,000
* The deposit dates are approximate and used for example.
approx.
Deposit
Deposit
Deposit
Cumulative
#
Dates *
Amt.
Deposits
1
3/12/14
$
500,000
$
500,000
2
3/26/14
$
500,000
$
1,000,000
3
4/9/14
$
500,000
$
1,500,000
4
4/23/14
$
500,000
$
2,000,000
5
5/7/14
$
500,000
$
2,500,000
6
5/21/14
$
500,000
$
3,000,000
7
6/4/14
$
500,000
$
3,500,000
8
6/18/14
$
500,000
$
4,000,000
9
7/2/14
$
500,000
$
4,500,000
10
7/16/14
$
500,000
$
5,000,000
11
7/30/14
$
500,000
$
5,500,000
12
8/13/14
$
500,000
$
6,000,000
13
8/27/14
$
500,000
$
6,500,000
14
9/10/14
$
500,000
$
7,000,000
15
9/24/14
$
500,000
$
7,500,000
16
10/8/14
$
500,000
$
8,000,000
17
10/22/14
$
500,000
$
8,500,000
18
11/5/14
$
500,000
$
9,000,000
19
11/19/14
$
500,000
$
9,500,000
20
12/3/14
$
500,000
$
10,000,000
21
12/17/14
$
500,000
$
10,500,000
22
12/31/14
$
500,000
$
11,000,000
23
1/14/15
$
500,000
$
11,500,000
24
1/28/15
$
500,000
$
12,000,000
25
2/11/15
$
500,000
$
12,500,000
26
2/25/15
$
500,000
$
13,000,000
27 3/11/15 $ 500,000 1 $ 13,500,000
* The deposit dates are approximate and used for example.
P20
o n
U �
oR�� Staff
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 CalPERS, 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 (CalPERS) 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 future contributions.
P21
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 staffto sign documents with
the California Public Employees' Retirement System (CaIPERS), 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 ofthe portfolio
invested in fixed income bonds, was not considered appropriate for a long 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:
1. 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 -$)
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 CalPERS 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.
P22
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 Study of City's OPEB Liability
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 CalPERS has done with the
City's retirement portfolio.
3. 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
P23
Staff Report
Subject: Study Session on OPEB
Page 4of5
example, $13.5 million would pay for 3 -4 years of health premiums, meaning a future
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 Go
Pay -Go Plus Initial
Only Trust De
(Current) only)
Total City payments $ 378,000 $ 283,000
over time (000's)
Number ofyears that
payments exceed 60 58
$2.0 million
Final year in which
payment exceeds $2.0 million 2073 2071
Initial Deposit Plus an
additional annual contribution of:
$0.25 Million $0.55 Million $1.0 Million
$ 174,000 $ 159,000 $ 139,000
28 26 22
2041 2039 2035
The Budget Subcommittee agreed that it makes sense for staffto invest the full $13.5 million set aside
for OPEB in the Ca1PERS Trust. It was agreed not to invest it all at once, but the question arose as to
how quickly the funds should be invested. Jayson Schmitt from Chandler stated that a three year
monthly investment window was too long, as that began to mirror an entire investment cycle (ups and
downs over three to five years); he also stated that the biggest risk was to not invest the dollars, as the
liability wouldn't begin to be paid down until the City starts contributing. Finally, the point was made
P24
Staff Report
Subject: Study Session on OPEB
Page 5 of 5
that once a decision is made, a twelve month investment plan ($.5 million every two weeks) was a
good period over which to ladder in the investment contributions.
CONCLUSION
Staff recommends that the Council:
1. Direct staff to return with a resolution to:
a. Formally select CalPERS' CERBT investment Strategy;
b. Direct staff to invest $13.5 million already set aside in equal payments to Ca1PERS
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.
Jim t ele
Fi e Director
F
Attachments:
Approved:
Steven T. Mattas
Interim City Manager
- 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)
JSISTM:ed