ADMINISTRATIVE REPORT
MEETING DATE: March 26, 2025 AGENDA CATEGORY: Consent - Resolutions TO: Honorable Mayor and City Council
FROM: Randy McKeegan, Finance Director
DATE: March 14, 2025
SUBJECT: Resolution to update Investment Policy Statements for trusts managed by Public Agency Retirement Services (PARS)
RECOMMENDATION:
Staff recommends adoption of resolution
BACKGROUND:
In 2007 the City selected Public Agency Retirement Services (PARS) to manage is irrevocable trust designed to fund the Other Post -Employment Benefit (OPEB) retiree medical subsidy program. Since its inception, the trust has accumulated annual contributions and investment earnings resulting in a balance of $98.7 million. Based on the most recent actuarial report, the OPEB liability is at $108.8 million which puts the plan at over 90% funded.
In 2022 the City Council approved adding a separate trust to help manage the growing unfunded pension liability connected to the City’s pension plan through CalPERS. This trust, called a Pension Rate Stabilization Trust, allows the City to contribute funds to the same investment pool under PARS plans. In 2022, the City’s initial contribution was $4 million with contributions budgeted in 2024 and 2025 of $ 1.3 million and $1.5 million respectively. Included in the resolution to add this new trust was an approval of investment guidelines for both trusts administered by PARS.
The investment advisor for PARS was formally a company called Highmark Capital but the financial institution the company operated under (Union Bank) was acquired by US Bank. That resulted in a change in the financial advisor (in name only) to PFM Asset Management. Under that new institution, the investment policy documentation must be changed to remove references to Highmark Capital. In addition, there is a requirement to have a separate policy for each trust.
FISCAL IMPACT:
There is no additional fiscal impact with the approval of these policies. Trust balances will be invested based on the established risk tolerance previously established (moderately conservative).
COUNCIL GOAL:
Innovative and Efficient City Government
ATTACHMENTS:
1. Resolution
2. Investment Policy Statement – OPEB
3. Investment Policy Statement – 115 Pension Trust