2023 Pension
Liability Analysis
March 12, 2024
Municipal Advisory | Pension Optimization | Revenue Generation | Quantitative Strategies City of Cotati – UAL Update with 2023 Results 03/12/2024 2 CalPERS UAL Refunding Overview
• Jan 2022 – City closed on Pension Obligation and Street Improvement Loans • The closing took place right before an unprecedented run up in interest rates • Loan proceeds provided funds (incl. freed up reserves) to pay down CalPERS UAL by $6,000,000
• Dec 2022 – CalPERS finalized 2022 investment loss of 7% • Aug 2023 – CalPERS published 06/30/2022 Actuarial Report • Aug 2023 – CalPERS announced 2023 estimated investment gain of 5.8% (below 6.8% discount rate)
City of Cotati – UAL Update with 2023 Results 03/12/2024 3 06/30/2022 Pension Plans Overview
Source: 06/30/2022
CalPERS Actuarial
Reports
Pension Plan
Total
Accrued
Liability
Market
Value of
Assets
Unfunded
Accrued
Liability
%
Funded
Miscellaneous $20,866,492 $17,601,734 $3,264,758 84.4%
Safety $17,143,006 $14,320,714 $2,822,292 83.5%
Safety 2nd Tier $1,144,633 $1,010,579 $134,054 88.3%
Misc 2nd Tier $1,398,134 $1,220,879 $177,255 87.3%
PEPRA Safety $1,417,454 $1,223,616 $193,838 86.3%
PEPRA Misc $1,246,688 $1,088,227 $158,461 87.3%
TOTAL $43,216,407 $36,465,749 $6,750,658 84.4%
City of Cotati – UAL Update with 2023 Results 03/12/2024 4 2023 Funded Level Estimate (Rounded)
All 2023 numbers are
estimates and may vary
Source: 06/30/2022
CalPERS Actuarial
Reports
Description Misc Plan Safety Plan Total
Market Value of Assets
2022 Balance $17,602,000 $14,321,000 $31,923,000
Normal Cost Contribution $142,000 $67,000 $209,000
UAL Payment $219,000 $191,000 $410,000
Investment Gain / (Loss) $1,021,000 $831,000 $1,852,000 Benefit Payments ($1,210,000) ($1,010,000) ($2,220,000) Estimated 2023 Balance $17,774,000 $14,400,000 $32,174,000 Unfunded Accrued Liability
2022 Balance $3,265,000 $2,822,000 $6,087,000
UAL Payment ($219,000) ($191,000) ($410,000)
Interest $222,000 $192,000 $414,000
Investment (Gain) / Loss $176,000 $143,000 $319,000
Estimated 2023 Balance $3,444,000 $2,966,000 $6,410,000 Pension Plan 2023 Funded Level 83.8% 82.9% 83.4%
City of Cotati – UAL Update with 2023 Results 03/12/2024 5 2022 UAL + POB Amortization Schedule
Historical Payments
Sources: 06/30/2022
CalPERS Actuarial
Reports and Loan
Amortization Schedules
UAL and Debt Service
Payments only – no
normal cost
City of Cotati – UAL Update with 2023 Results 03/12/2024 6 2023 CalPERS Performance
• Estimated investment gain of 5.8% (Aug 2023)
• Funding shortfall of 1% (after discount rate)
• FY2024 results are too early to tell
Add’l UAL is estimated based on CalPERS preliminary
returns (5.8% gain) and does not include any other
possible adjustments. Actual UAL change may vary.
Pension Plan Estimated 2023
Add'l UAL
Miscellaneous $176,000
Safety $143,000
Safety 2nd Tier $10,000
Misc 2nd Tier $12,000
PEPRA Safety $12,000
PEPRA Misc $11,000
TOTAL $364,000
City of Cotati – UAL Update with 2023 Results 03/12/2024 7 2023 Investment Impact Estimate
Historical Payments
Sources: 06/30/2022
CalPERS Actuarial
Reports, Loan
Amortization Schedules,
CalPERS, and UAL
estimates
UAL and Debt Service
Payments only – no
normal cost
Safety & Misc Tier 1 only
Estimated add’l UAL
interest ≈ $385K
City of Cotati – UAL Update with 2023 Results 03/12/2024 8 UAL Policy Implementation Strategies:
Eliminate Negative Amortization
• Additional Discretionary Payments to cover FY2023-24 interest on new UAL:
• ≈ $335,500 – pay in March / April 2024 for 2023 UAL interest • ≈ $360,000 – pay in July 2024 for 2023 and 2024 UAL interest • Convert from ramp-up to level UAL amortization for 2022 and 2023 bases • ≈ $254,600 and $185,000 – ADPs in July 2024 and 2025 to achieve level amortization • Estimated cash flow savings of ≈ $860,000
City of Cotati – UAL Update with 2023 Results 03/12/2024 9 Proposed ADP Impact
Description FYE 2024 FYE 2025 FYE 2026 [3]
Min Requirement Payments
Pension Refunding Loans $477,766 $477,769 $477,772
Required UAL [1] $363,769 $476,789 $519,954
Subtotal: Required Payments $841,535 $954,558 $997,726
Additional Discretionary Payments
2022 UAL Interest $335,463 $335,463 $0
2022 UAL Reamortization $0 $254,579 $163,346
2023 UAL Interest [2] $0 $24,752 $24,752
2023 UAL Reamortization [2] $0 $0 $21,824
Subtotal: ADPs $335,463 $614,794 $188,098
Total UAL Payments $1,176,999 $1,569,352 $1,185,824
[1] Includes all six pension plans.
[2] Payments related to 2023 UAL are estimates.
[3] FYE 2026 payments will be impacted by 2024 CalPERS performance.
City of Cotati – UAL Update with 2023 Results 03/12/2024 10 UAL Policy Implementation Strategies:
90% Funded Level Target
• Estimated FYE 2023 Funded Level – 83.4%
• Proposed FYE 2024 ADP estimated to increase funded level to 84.1% • Estimated gap to 90% - $2.25M
• Proposed FYE 2025 ADP will help reduce gap further
03/12/2024 11
Questions?
Dmitry Semenov
Ridgeline Municipal Strategies, LLC
(916) 250-1590
[email protected]
RidgelineMuni.com