DATE: March 16, 2026
TO: Mayor and Members of the City Council
President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
VIA: Stefan Chatwin, City/District Manager
FROM: Nate Cruz, Finance Director
SUBJECT: $20 MILLION ADDITIONAL DISCRETIONARY PAYMENT TO CALPERS
RECOMMENDATION
It is recommended that the City Council and District Board approve the supplemental appropriation of $20,000,000 to fund an Additional Discretionary Payment to CalPERS, including (a) $18,459,000 from the General Fund Reserve, (b) $687,000 from the Water Enterprise Fund Balance, and (c) $854,000 from the Wastewater Enterprise Fund Balance.
EXECUTIVE SUMMARY
At the February 10, 2026 City Council retreat, staff reported on the current pension liability (technically referred to by CalPERS as the Unfunded Accrued Liability, or “UAL”) of $101 million and recommended making a $20 million payment to reduce that UAL as well as the CalPERS required annual payments to reduce UAL. The payment will reduce future UAL payments by $35.4 million over the next 18 years, resulting in net savings of $15.4 million.
BACKGROUND/ANALYSIS
On May 17, 2021, subsequent to a recommendation by the Pension Liability Committee, the Council approved an Additional Discretionary Payment to CalPERS of $7.5 million in order to reduce the City’s UAL and associated annual payments. At the time of the payment, the UAL was $81.1 million. Due primarily to major portfolio losses in 2022, and
despite the $7.5 million additional payment, the City’s UAL was most recently valued at $101 million.
Although CalPERS requires annual payments that are intended to reduce the UAL over time, those required payments are based on a number of assumptions regarding retirement age, mortality, and investment performance over long time periods. Variances between assumptions and actuals have historically increased the UAL and the associated annual payments such that the annual payments in FY 2025-26 totaled $9.8 million.
The proposed $20 million Additional Discretionary Payment will directly reduce the City’s overall UAL, and result in reductions in the required annual payments by $35.4 million over the next 18 years1.
FISCAL IMPACT
The fiscal impact of the proposed supplemental appropriation and Additional Discretionary Payment is $20,000,000 in FY 2025-26, funded by supplemental appropriation of (a) $18,459,000 from the General Fund Reserve, (b) $687,000 from the Water Enterprise Fund, and (c) $854,000 from the Wastewater Enterprise Fund. The payment will reduce future UAL payments by $35.4 million over the next 18 years, resulting in net savings of $15.4 million. After the payment, the estimated year end fund balance is $52.8 million, or 78.3% of next year’s estimated expenditures (for details, see the Second Quarter Financial Update from the March 16 Council meeting).
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
ATTACHMENTS
Attachment 1 - City Resolution
Attachment 2 - EMID Resolution
1 Savings begin in FY 2026-27 at $1.2 million, then increase to $1.6 million in FY 2027-28, and stabilize at $2.0 million per year for FY 2028-29 through FY 2043-44.