ANALYSIS
Like many other Cities, City of Patterson was impacted by COVID-19 pandemic since March 2020. Cost cutting measures were adopted for FY 2020-2021 in the amount of $1.3 million. The set-aside Pension and OPEB reserves remained intact throughout the pandemic. As the City of Patterson continues to bring in new residential and commercial developments, both property taxes and sales tax have increased at an unexpected rate. The City of Patterson is fortunate to see significant increase in sales tax in the fiscal year 2020-2021, a combined effect of growth in developments and the change in sales tax reporting of one of the top sales tax producers. Based on the sales tax exceptional performance, there are available funds that could be channeled to increase the Pension and OPEB reserve. Hence, staff developed Pension Funding Policy see (“Exhibit A”).
The proposed Pension Funding Policy would:
• Outline goals to get pensions 90% funded by 2025 and 95% funded by 2028. • Stabilize future pension outlays from General Fund by setting aside money in Section 115 Pension Trust.
Upon adoption of the Pension Funding Policy, City staff would like to move the Pension and OPEB reserve amount $1.5 million to the Pension Section 115 Trust Fund administered by PARS.
In March 2022, City staff will also bring an OPEB Funding Policy to City Council for review and adoption.
The amount to be invested in OPEB Section 115 Trust Fund administered by PARS will be determined from the available General Fund unassigned reserve balance and the Sales Tax performance based on fiscal year 2020-2021 audited numbers.
FISCAL IMPACT
There is no direct fiscal impact associated with the adoption of the proposed Pension Funding Policy. We would expect some future savings for the City due to the difference in investment income on the money in the Section 115 Pension Trust, as opposed to returns on internal reserves.