City of Pleasanton Council Approves New Investment Strategy to Better Address Pension LiabilityCategories: California Developments,PARS In the News,Pension Rate Stabilization
Pleasanton Patch by News Desk, June 7, 2018
At the June 6th City Council meeting, the Council adopted its mid-term operating budget and Capital Improvement Program for fiscal year (FY) 2018/19, as well as approved a new investment strategy to better address the City’s CalPERS unfunded liability.
The approval of a new investment strategy for the City’s pension fund, was set up to address the unfunded liability from CalPERS, which is approximately $160 million. Based on recent CalPERS policy decisions, cities throughout the State are grappling with how to fund pension contributions that were to be covered by CalPERS investment earnings. To fully fund the City’s pension liabilities, annual pension contributions to CalPERS are anticipated to grow through FY 2029/30 and level off around FY 2046/47, at which time the City will have fully funded its obligations.
To help cover those increased pension contributions in future years and maintain more control over City investments, Council authorized the City to participate in what is known as a Section 115 Pension Trust, administered by Public Agency Retirement Services (PARS). The vote was to adopt specific investment strategies and withdrawal guidelines, and allocate the initial $28 million as follows: The annual PERS contribution of $6.7 million will be invested into the PARS Conservative passive portfolio and $21.3 million will be invested in a long-term portfolio that comprises 70 percent equities and 30 percent fixed income.
In 2017, the City realized 1.7 percent rate of return on its investments; the PARS portfolio of investments realized gains between 6.73 percent and 16.72 percent in the same year. “One of our guiding principles is the continued implementation of sustainable fiscal practices. This investment strategy will allow us to maintain core City services, while also ensure funds are available in the future to help pay off our long-term pension obligations,” said Pleasanton City Manager Nelson Fialho.