HomeMy WebLinkAboutAGENDA REPORT 2011 0119 CC REG ITEM 10F ITEM 10.F.
MOORPARK CITY COUNCIL
AGENDA REPORT -T!0,N:
TO: Honorable City Council -
FROM: Ron Ahlers, Finance Director 6Zj
DATE: December 29, 2010 (City Council Meeting of January 19, 2011)
SUBJECT: Consider Resolution Amending the Fiscal Year 2010/11 Budget to
Appropriate Funding for Other Post-Employment Benefits (OPEB)
Unfunded Liability of $103,000 in Compliance with Governmental
Accounting Standards Board (GASB) Statement No. 45
BACKGROUND
In June 2004, the Governmental Accounting Standards Board issued Statement No. 45
(GASB 45), the accounting standards for Other Post-Employment Benefits (OPEB).
This statement governs pubic employer accounting of any benefits, other than pensions,
promised by an employer to their employees into retirement. The purpose of GASB 45
is to provide better financial information and to ensure that the costs related to providing
employees with Other Post-Employment Benefits are accounted for over the working
careers of plan members. Implementation dates for GASB 45 are based on the size of
the government as measured by fiscal year 1998/1999 annual revenues. The City of
Moorpark is a phase 2 Government with annual revenues of $10 million to $100 million.
As such, the City was required to implement the new standard as of June 30, 2009;
which we did.
DISCUSSION
GASB 45 requires public employers to report the cost of providing these other post-
employment benefits as well as information on any unfunded liability. During fiscal year
2008/09 the City contracted with Bartel & Associates (Bartel), an actuary firm, to
calculate our unfunded liability and annual "normal cost" expense under OPEB. As of
June 30, 2008, the City's unfunded liability was $364,000 and the annual "normal cost"
was $31,000. On September 3, 2008, the City Council decided to establish an
irrevocable trust with CalPERS under their California Employer's Retiree Benefit Trust
program (CERBT). CalPERS accepted the City of Moorpark's application into CEBRT
and the City made the contribution for the unfunded liability of $364,000 in November
2008. The City has paid the "normal cost" of $31,000 annually,- as of June 30, 2009 and
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Honorable City Council
January 19, 2011
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June 30, 2010. These three contributions were deposited into the CERBT and earned
an investment return of $98,000. Therefore, the market value of assets in the fund is
$525,000, as of June 30, 2010. The actuarial value of assets is $487,000. The market
value of assets is greater than the actuarial value of assets because the actuarial value
of assets recognizes investment returns and losses over a number of years in order to
smooth out the volatility of returns from the investment markets.
GASB 45 requires that the City perform an actuarial study every two years. The City
contracted with Bartel as our actuary for the June 30, 2010 valuation. The June 30,
2010 actuarial lists our Actuarial Accrued Liability at $590,000; Actuarial Value of Assets
at $487,000; which computes to an unfunded liability of $103,000. The main cause for
the unfunded liability is a change of assumptions adopted by the CalPERS Board of
Directors this past year. The City's normal cost decreased slightly to $26,000 for June
30, 2011 and $25,000 for June 30, 2012.
Future Considerations
CalPERS is reviewing their investment rate of return of 7.75% and it is widely expected
that this rate will be reduced to 7.5% or lower. This action will increase the City's
unfunded liability.
CalPERS may offer two optional investment funds for the CERBT. Both of these new
funds would yield lower returns than the current 7.75%, but with less volatility.
Expected date for participants to enroll in these investment funds is June 30, 2011. If
the City selected a lower investment return then our unfunded liability will increase.
GASB 57 is now in effect and this will require the City to perform an actuarial study as of
June 30, 2011 and then every two years afterwards. Given the above two paragraphs,
it is highly probable that the City will have an unfunded liability again after the June 30,
2011 actuarial. If we do, the City will report the unfunded liability to City Council and
request an appropriation to fully pay it off.
FISCAL IMPACT
The FY 2010/11 Budget appropriation of $103,000 will pay for the unfunded liability of
OPEB as of June 30, 2010. This amount is appropriated from the General Fund
reserve.
STAFF RECOMMENDATION (Roll Call Vote)
Adopt Resolution No. 2011 - ., amending the FY 2010/11 budget to appropriate
$103,000 to pay off the OPEB unfunded liability.
Attachment: Resolution
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Attachment
RESOLUTION NO. 2011 -
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
MOORPARK, CALIFORNIA, AMENDING THE FISCAL YEAR
2010/11 BUDGET TO APPROVE CERTAIN
APPROPRIATIONS REQUIRED TO FUND OTHER POST-
EMPLOYMENT BENEFITS (OPEB) AS DEFINED HEREIN
WHEREAS, on June 16, 2010, the City Council adopted the Budget for fiscal year
2010111; and
WHEREAS, on January 19, 2011, a staff report has been presented to the City
Council summarizing the actuarial study relating to (OPEB) in compliance with
Government Accounting Standards Board Statement No. 45 (GASB 45); and
WHEREAS, said staff report has been presented to the City Council providing the
cost of accrued and unfunded liability as of June 30, 2010 of$103,000; and
WHEREAS, the same staff report has been presented to the City Council
recommending the pre-funding of the unfunded liability of $103,000 into an irrevocable
trust managed by CalPERS under their California Employers' Retiree Benefit Trust
(CERBT); and
WHEREAS, on January 19, 2011 a staff report has been presented to the City
Council requesting an aggregate appropriation increase of $103,000 in the General Fund
for the pre-funding of the $103,000 unfunded liability; and
WHEREAS, Exhibit "A", attached hereto and made a part hereof, describes said
budget amendments and its resultant impacts to the budget line item(s).
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MOORPARK DOES
HEREBY RESOLVE AS FOLLOWS:
SECTION 1. That a Budget Amendment in the aggregate increase of $103,000,
as more particularly described in Exhibit "A", is hereby approved.
SECTION 2. The City Clerk shall certify to the adoption of this resolution and
shall cause a certified resolution to be filed in the book of original resolutions.
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Resolution #2011-
Page 2
PASSED AND ADOPTED this 19th day of January, 2011.
Janice S. Parvin, Mayor
ATTEST:
Maureen Benson, City Clerk
Attachment: Exhibit 'A': Budget Appropriation
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Exhibit A
Budget Amendment to
General Fund for Other Post
Employment Benefits (OPEB) Payments
FY 2010/11
A. Fund Allocation
Fund Account Amount
1000 General Fund 1000-5500 $103,000
Total $103,000
B. Distribution of Appropriation to Expenditure Accounts
Account Number Current Revision Amended
Budget Budget
1000-9030 $0 $103,000 $103,000
Total $103,000
Finance Approval:
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