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HomeMy WebLinkAboutCC RESO 2021-113I RESOLUTION NO. 2021 —113 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY, CALIFORNIA, ADOPTING CITY COUNCIL POLICY #202 ENTITLED "PENSION FUNDING POLICY" WHEREAS„ it has been the practice of the City Council of the City of National City ("City") to annually make all of the actuarially determined contributions to the California Public Employee Retirement System ("CaIPERS") for both its Safety and Miscellaneous pension plans; and WHEREAS, the cost to make the annual actuarially determined contributions continues to rise; and WHEREAS, on October 20, 2020, the City Council directed the City Manager to proceed with the court validation process required to position the City to issue Pension Obligation Bonds ("POBs"); and WHEREAS, an additional step in the process of issuing POBs is to have in place a pension funding policy; and WHEREAS, the City Council wishes to memorialize in the form of a Council Policy both past and future practices and strategies for meeting the City's pension funding obligations; and WHEREAS, the City Council has reviewed the proposed City Council Policy #202 entitled "Pension Funding Policy" attached hereto as Exhibit A; and WHEREAS, the City Council directs City staff to prepare for the issuance of POBs in Fall 2021 if the guidelines defined in Section 6 of the "Pension Funding Policy" are achieved. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF NATIONAL CITY, CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE, AND ORDER AS FOLLOWS: Section 1: Adopts the proposed City Council Policy #202, "Pension Funding Policy." Section 2: Directs City staff to prepare for the issuance of POBs in Fall 2021 if the guidelines defined in Section 6 of the "Pension Funding Policy" are achieved Section 3: The City Clerk shall certify the passage and adoption of this Resolution and enter it into the book of original Resolutions. 11/ Resolution No. 2021 —113 Page Two PASSED and ADOPTED this 7th day of September, 2021. A ejandra Sotelo-Solis, Mayor ATTEST: Luz Molin.', City Clerk APPROVED AS TO FORM: Charles E. Bell Jr., �f' Attorney Passed and adopted by the City Council of the City of National City, California, on September 7, 2021, by the following vote, to -wit: Ayes: Sotelo-Solis, Rodriguez, Bush, Morrison, Rios. Nays: None. Absent: None. Abstain: None. AUTHENTICATED BY: ALEJANDRA SOTELO-SOLIS BY: Mayor of the City of National City, California LUZ MOLINA City Clerk of the City of National City, California Shelley Chapel, C, Depu y, City Clerk I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 2021-113 of the City of National City, California, passed and adopted by the City Council of said City on September 7, 2021. Luz Molina, €ity Clerk CITY COUNCIL POLICY CITY OF NATIONAL CITY TITLE: Pension Funding Policy POLICY #202 ADOPTED: September 7, 2021 AMENDED: Purpose The purpose of this policy is to define how the City's pension funding obligations will be met. As part of its overall compensation plan, the City provides a defined benefit pension benefit to its employees. This benefit is administered by the California Public Employees Retirement System (CaIPERS) and funded through contributions from the City and its employees and from investment earnings on those contributions. The CaIPERS Board of Administration, under the California Public Employees' Retirement Law (PERL), is responsible for the administration and investment of the funds it receives and determines the amounts contributed by each of the governmental entities that participate in CaIPERS. The PERL sets employee contribution rates. The City has two separate plans with CaIPERS, one for Safety employees (the Safety Plan) and one for all other employees (the Miscellaneous Plan). Policy It is the policy of the City to fulfill its obligation to its residents and employees to maintain fiscally responsible management practices and to its employees to ensure that promised retirement benefits are funded. To that end, the City will meet its pension funding obligations as follows: 1. Actuarially Determined Contributions: Each fiscal year, the City will contribute to CaIPERS the amount determined by CaIPERS actuaries to be the minimum required employer contribution for that year. The minimum contribution consists of two components, normal cost and unfunded accrued liability (UAL). The normal cost is expressed as a rate that is applied to pensionable payroll costs and reflects the cost of pension benefits earned by employees in the current fiscal year. The UAL payment is a fiat dollar amount that represents a portion of the cost of past benefits earned by employees, but for which, because of deviations in actual experience and changes in assumptions about investment performance, the normal cost rates established for those prior years has been determined to be insufficient to provide the promised retirement benefit. The CaIPERS actuaries recalculate the total UAL each year and an updated multi -year amortization schedule is provided to show the projected annual minimum payments. 2. Annual UAL Prepayment: CaIPERS offers the option to make monthly payments on the UAL or prepay the entire annual amount at a discounted level by the end of July. The City will prepay its annual obligation each year to achieve budgetary savings. 3. Section 115 Pension Trust: The City will maintain a pension stabilization fund in the form of a Section 115 Pension Trust. The targeted funding level for this fund is defined in City Council Policy 201, Maintenance of Reserve Funds. Assets in the Section 115 Pension Trust may be used only for pension related costs and at the direction of the City Council. Once the targeted funding level is reached, the earnings on the assets in the Trust may CITY COUNCIL POLICY CITY OF NATIONAL CITY TITLE: Pension Funding Policy POLICY #202 ADOPTED: September 7, 2021 AMENDED: be applied to offset a portion of the City's annual pension contributions to CaIPERS or make additional discretionary payments to CaIPERS. 4. Targeted Funding Level: The City's goal is to achieve and maintain a funded status for each of its plans of between 80% and 100%. A funded status of 100% signifies that the City's pension assets with CafPERS match its accrued liabilities. 5. Additional Discretionary Payments: CalPERS allows member agencies to make additional discretionary payments at any time and in any amount, which would serve to reduce the UAL and future required contributions. The City will consider this option in the context of its annual evaluation of reserve levels and budgetary requirements. 6. Pension Obligation Bonds (POBs): POBs are a tool that can be used to provide an additional discretionary payment to CaIPERS upon the determination that the cost to borrow the funds for the payment is less than continuing to make the projected prescribed UAL payments at the current discount rate. If the City issues POBs, the following guidelines will apply: a. Expert advice and analysis by actuaries and municipal advisors will be utilized to quantify the risk of CaIPERS investment underperformance, including discount rate reductions, stock market crashes, or sustained investment underperformance, and the threshold at which the City would be worse off issuing POBs versus not. b. The interest rate on the POBs shall be at feast 2.5% fess than the current Ca(PERS discount rate. c. The final maturity date on the POBs will be no more than the then current term of the UAL. d. The POBs structure will contain an early call provision. Related Policy References Council Policy #201: Maintenance of Reserves Prior Policy Amendments None