City Council
259 N. Wilma Avenue
Ripon, CA 95366
MEMO
To: Honorable City Council
From: Lisa Roos, City Clerk & Finance Director
Date: 09/13/2022
Subject: Investment Policy for 115 Trust with Highmark Capital Management RECOMMENDED ACTION:
This resolution adopts and authorizes the Mayor to sign the Investment Guidelines Document for the City of Ripon’s 115 Trust Plan with PARS. This “investment policy” is written by HighMark Capital Management who is the investment advisor for Trustee of our Plan, US Bank.
BACKGROUND:
Staff presented the Pension Rate Stabilization Program to the City Council at the May 10, 2022 City Council meeting and recommended to move forward with PARS to administer this Section 115 Trust. Below is a summary of the benefits of a 115 Trust Plan:
It is a tax-exempt investment vehicle authorized by the IRS to prefund government expenses, such as retirement plan benefits.
Assets held within the trust are designated as irrevocable, meaning that the assets must be used to fund the City’s defined benefit retirement plan obligations. Monies placed within the trust may be invested according to rules governing the trust, which are different than the investment rules the City is required to follow for the City’s pooled investments such as LAIF and Bank of New York. Because of the rules associated with the trust, in theory, the funds placed within a trust can earn a higher rate of return than if the City invested the funds.
Funds placed within the trust can remain within the trust until such time that the City chooses to draw on its assets to pay an annual benefit obligation (e.g., reimburse Normal Cost or UAL payment to CalPERS).
The following steps were outlined as the steps to take in order to get the Trust established and monies deposited.
1. June 2022 City Council Meeting: Approve resolution appointing a Plan Administrator (usually the City Administrator) and authorizing the mayor to execute the contract with PARS. Completed: June 14, 2022
2. June 2022 – October 2022: PARS will assist staff in surveying the Council for input to help establish the Investment Policy. Completed: July/August 2022
3. October 2022 City Council Meeting: Adopt an Investment Policy for the Section 115 Trust, including risk tolerance, investment amount, and how the Section 115 Trust is to be used to fund CalPERS obligations.
4. November 2022: Establish the Section 115 Trust and deposit funds.
DISCUSSION/ANALYSIS:
Based upon the results of the survey of the City Council in July/August 2022, Staff’s recommendation for the investment guidelines for the Section 115 Trust to be as follows:
1) Investment Strategy to be Moderate.
2) Initial investment in 2022 of $972,998, which includes all of the CalPERS reserves as of 7/1/2021. In addition, annual savings from refunding Redevelopment bonds, ranging from $53,000-$161,000, will be deposited into the Program until 2026-27, for a total investment of $1,805,822 over the next 5 years.
3) Earnings in the account will be rolled over each year. 4) Funds in the Program will be used when there is a deficit in the City’s General Fund with City Council concurrence, or as directed by the City Council. This will be the first line of funding in a deficit situation. The amount to be transferred from the 115 Trust will be no more than the greater of the costs of the Unfunded Accrued Liability (UAL) and Normal Cost (NC) for that fiscal year or the amount of the deficit1. 5) Investment strategy will be reviewed by the City Council every 3 years; however, updates will be given to the City Council annually.
These recommendations have been written into the standard Investment Guidelines Document by HighMark Capital Management.
FISCAL IMPACT:
None at this time.
Attachments:
1. City of Ripon IGD Moderate Aug 2022
1 If the annual deficit is more than the UAL and NC for the fiscal year, the City Council may use the 115 Trust to reimburse past UAL and NC payments that were previously paid by the General Fund.
RESOLUTION NO. 22-39
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
RIPON ADOPTING THE INVESTMENT GUIDELINES
DOCUMENT FOR THE CITY OF RIPON'S EMPLOYEE
BENEFITS FUND PENSION PLAN WITH HIGHMARK
CAPITAL MANAGEMENT
WHEREAS, Resolution 22-21 passed by the City Council on June 14, 2022, adopted the PARS Public Agencies Post-Employment Benefits Trust, appointed the City Administrator as the Plan Administrator, and authorized the Plan Administrator to execute PARS documents on behalf of the City in order to maintain the City’s participation in and compliance of the Plan; and WHEREAS, on June 14, 2022 the City of Ripon entered into an Agreement for administrative services with Public Agency Retirement Services (PARS) to administer the City of Ripon’s Pension Rate Stabilization Program (Section 115 Trust); and WHEREAS, the City Council desires to adopt an investment policy for the Section 115 Trust, including risk tolerance, investment amount, and how the Section 115 Trust principal and earnings is to be used to fund CalPERS obligations.
NOW THEREFORE, BE IT RESOLVED THAT:
1. The City Council does hereby adopt the above Recitals as true, and adopts them herein.
2. The City Council hereby adopts the Investment Guidelines Document, as attached hereto in Exhibit “A” and authorizes the Mayor to sign this Document.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Ripon this 13th day of September, 2022, by the following vote:
RESULT: ADOPTED AS AMENDED [UNANIMOUS]
MOVER: Michael Restuccia, Vice Mayor
SECONDER:Gary Barton, Council Member
AYES: Uecker, Restuccia, Zuber, de Graaf, Barton
THE CITY OF RIPON,
A Municipal Corporation
By ________________________________
DEAN UECKER, Mayor
ATTEST:
By: ___________________________
LISA ROOS, City Clerk