July 11, 2023
Finance Department
DATE: July 11, 2023
TO: Mayor Martinez and Members of the City Council
FROM:
Nickie Mastay, Deputy City Manager – Internal Services
Mubeen Qader, Deputy Director of Finance
Subject:
State Audit Corrective Action Plan, Pension Funding
Options, NHA Advisors
FINANCIAL IMPACT: No Fiscal Impact
PREVIOUS COUNCIL
ACTION:
May 2, 2023; May 16, 2023; June 27, 2023
STATEMENT OF THE
ISSUE:
NHA Advisors’ presentation on a comparative analysis on the pension funding options (115 Trust Account versus
Additional Discretionary Payments (ADP) directly to
CalPERS)
RECOMMENDED ACTION:
RECEIVE a presentation from NHA Advisors on a
comparative analysis between two pension funding
options, 115 Trust Account and Additional Discretionary Payment (ADP) to CalPERS – Finance Department
(Mubeen Qader 510-412-2077).
DISCUSSION:
On April 4, 2022, the City of Richmond was notified by the California State Auditor that it would be conducting an audit of the City as approved by the Joint Legislative Audit Committee on June 30, 2021. The State Auditor’s local audit program identifies and supports local government agencies that might be at high risk based upon analysis of the City’s audited financial statements. Richmond’s risk assessment was conducted in February 2021 based upon the City’s June 2020 financial statements.
AGENDA
REPORT
July 11, 2023
At the conclusion of the audit, the State Auditors formalized 11 recommendations that were presented to the City Council at the December 20, 2022, City Council meeting.
City staff incorporated the Auditor’s recommendation into a Corrective Action Plan.
The State Auditor’s recommendation number 4 on retirement-related costs states:
“To ensure that Richmond is able to fund its retirement-related costs, city staff should, by June 2023, propose to the city council a specific policy regarding funding of its pension trust fund for this purpose. Staff should report to the city council on estimated long-term savings from increasing its direct payments to Cal PERS compared to investing the same amounts in its pension trust fund. Staff members should use this information to inform their recommendations related to funding targets for the pension trust fund and should consider recommending that the council increase the city's payments directly to CalPERS.” (California State Audit, 2021-806)
On June 27, 2023, City Council approved a Pension Funding Policy with the following funding guidelines:
“The City shall place 10 percent of each year-end operating surplus (Total Actual Revenues minus Total Actual Expenditures, including Transfers In and Transfers Out) in the General Fund in excess of the City’s Cash Reserve Policy into the Trust.” (June 27, 2023, L.1, Annual Review and Adoption of Financial Policies for Fiscal Year 2022-23 and Fiscal Year 2023-24 (Cash Reserve, OPEB Funding, Pension Funding, RHA – City Administrative Services Agreement), Attachment 6).
The City Council also directed City staff to bring back a comparative analysis from the NHA Advisors regarding the two funding options.
115 Trust Account
Additional Discretionary Payment (ADP) directly to CalPERS
This agenda item is to present the City Council requested analysis from the NHA Advisors.
Next Steps
City staff will present to the City Council an OPEB Funding analysis in September 2023.
DOCUMENTS ATTACHED:
None