SCOTT WAGNER,
INTERIM CHIEF FINANCIAL OFFICER
Long Range Financial Planning and Audit
Subcommittee
October 30, 2025
2 • The City’s Pension Plans
• Changes to Pensions/ City Actions
• Historical and Projected Costs
• The Challenge
• Potential Actions
• Update on OPEB – PEMHCA 115 trust
• Discussion/ Q&A
Presentation Overview
3 • Benefit formulas include years
of service, age and final
compensation to determine the
annual pension due to a retiree
• Employees are legally
protected from having their
benefit reduced after hire
The City’s Pension Plans
4 Example of how different formulas
impact pension benefit
Summary of Current Pension
Beneficiaries
The City’s Pension Plans
Plan
Retired
Employee
Count
Average
Annual
Benefit
Miscellaneous 1,360 38,052$
Police 322 69,658$
Fire 194 83,282$
Benefit Formula Age at
Hire
Years of
Service
Final
Compensation
Pension
Benefit
3.0% @ 50 25 25 100,000.00$ 75,000.00$
3.0% @ 55 25 25 100,000.00$ 62,500.00$
*2.7% @ 57 25 25 100,000.00$ 50,000.00$
Benefit Formula Age at
Hire
Years of
Service
Final
Compensation
Pension
Benefit
3.0% @60 30 30 100,000.00$ 90,000.00$
2.5% @55 30 30 100,000.00$ 75,000.00$
*2.0% @62 30 30 100,000.00$ 54,000.00$
*PEPRA
Public Safety (sworn)
Miscellaneous
5 The largest funding source of pensions is investments. This has a significant benefit, but it also carries risk which is assumed by the City.
The City’s Pension Plans
6 The City’s Pension Plans - CalPERS Returns
1 Year 5 Year 10 Year 20 Year 30 Year
Compund Annual Return 9.3% 6.6% 6.2% 6.7% 7.7%
History of CalPERS Compund Annual Rates of Return and Volatilites 7 • Employee Cost is the portion of the pension contribution paid directly by the employee out of their paycheck. It is based on % of pay. • Employer Normal Cost is the total cost the employer pays to CalPERS for the employee’s pension.
FY 2025-26 Employer Normal Cost Fire:
• Fire 18.6%
• Police 20.2%
• Misc. 11.6%
The City’s Pension Costs
8 • UAL Cost is the amount the employer must pay CalPERS annually toward pension debt. The debt is the gap between the pension fund’s obligations and the money currently in the account.
FY 2025-26 CalPERS UAL fixed payment:
• Fire $8,135,769
• Police $12,233,644
• Misc. $20,649,489
The City’s Pension Costs
9 The Challenge
10 History of UAL Payments
Estimate
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 Fire - UAL Payment 1,701,801 1,877,953 2,309,006 2,619,856 3,227,896 3,381,881 3,953,420 4,606,396 4,971,922 5,540,443 6,280,434 6,286,449 7,538,518 8,135,769 8,760,432 Police - UAL Payment 1,955,750 1,992,421 2,488,496 3,185,670 3,934,038 4,010,301 4,914,195 5,927,706 6,758,162 7,943,137 9,291,232 9,385,226 11,145,917 12,233,644 12,917,209 Miscellaneous - UAL Payment 3,213,620 3,623,800 4,476,264 5,732,656 6,999,819 7,935,880 10,044,070 12,285,383 13,373,050 15,537,431 17,487,919 16,260,188 19,120,027 20,649,489 22,191,127 11 History of UAL Payments
FY 2025-26 41,018,902 42,390,610 1,371,708 3.34% FY 2024-25 37,804,462 39,068,676 1,264,214 3.34% FY 2023-24 31,931,863 32,999,692 1,067,829 3.34% FY 2022-23 33,059,585 34,197,100 1,137,515 3.44% FY 2021-22 29,021,011 30,019,568 998,557 3.44% Difference from
Prepayment
Savings %
Actuarial AmountActual UAL
Payment
Last 5 Year Payment History of UAL Payments
Difference from
Prepayment
Savings $
12 • CalPERS amortization schedule will continue to increase much faster than City revenues burdening City services.
The Challenge
General Fund 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2033-34 2034-35 UAL Payment (in millions) $34.5 $34.9 $37.3 $36.7 $36.0 $33.3 $32.8 $30.4 $29.3 Scenario - Investment return earning 6.8%
13 The Challenge
Miscellaneous Police Fire Combined
Accrued Liability (AL) 934,596,567$ 421,924,875$ 313,886,433$ 1,670,407,875$ Market Value of Assets (MVA) 699,237,703$ 274,132,034$ 214,858,894$ 1,188,228,631$ UAL= AL-MVA 235,358,864$ 147,792,841$ 99,027,539$ 482,179,244$ Funded Ratio 74.8% 65.0% 68.5% 71.1%
Unfunded Accrued Liability (UAL) June 30, 2024 ALL FUNDS 14 Public Employee Pension Reform Act (PEPRA)
Reduced benefit formulas, created maximum compensation amounts and equal sharing of normal costs (increased employees contribution). Only for employees hired after 12/31/2012.
CalPERS Board Actions & Meeting New Accounting Standards Discount rate/expected return has been decreased from a high of 8.5% and is now at 6.8%. A 1% change equals approximately $200M in liability for Santa Rosa. The amortization of losses and assumption changes was changed from a rolling average methodology (50 years) to a 30-year fixed schedule. Recent actions shortened to a 20-year amortization.
Changes to Pensions
15 Employer Normal Cost
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 Fire - Employer Normal Cost 2,651,244 2,703,728 2,660,475 2,705,525 2,878,153 3,249,490 3,306,468 3,397,025 3,574,763 3,791,120 3,825,053 4,069,088 4,076,728 Police - Employer Normal Cost 3,924,314 3,693,473 3,812,642 3,956,655 4,374,297 4,911,847 5,311,657 5,078,704 4,975,796 5,245,538 5,144,908 5,211,187 5,461,284 Miscellaneous - Employer Normal Cost 7,174,441 7,082,049 7,491,082 7,556,424 7,924,703 8,634,514 8,911,464 8,778,617 8,653,285 9,141,525 8,929,703 9,280,074 9,033,458 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 Fire - Employer Normal Cost 16.4% 16.3% 16.5% 16.2% 16.9% 17.7% 18.6% 18.4% 18.1% 19.5% 18.7% 18.6% 18.0% Police - Employer Normal Cost 19.2% 18.7% 19.9% 19.4% 20.0% 21.1% 22.3% 21.4% 20.9% 22.0% 21.1% 20.2% 19.2% Miscellaneous - Employer Normal Cost 10.8% 11.0% 11.5% 11.1% 11.3% 11.7% 12.0% 11.7% 11.2% 12.3% 12.0% 11.6% 11.1% 16 • Projected savings from PEPRA though employer normal costs have not come to fruition
• Employer normal costs higher today versus 2014/15
• Result of lowered discount rate
• Future savings projections may or may not materialize • Likely offset through increased costs
Savings from PEPRA
17 Savings from PEPRA
18 • Through collective bargaining all employee groups pay more than their required contribution to CalPERS. These additional contributions range by bargaining unit and pension benefit formula.
• In FY20, the City made an additional payment of $4.2M to CalPERS which reduced future UAL payments.
• In FY22 the City created a section 115 trust to prefund pension obligations.
City Council funded $10M from General Fund Fiscal Stability Reserves to mitigate future pension expenses. Santa Rosa Water also funded $4.4M from Santa Rosa Water Operating Reserves.
City Actions
19 • Issuance of POBs
• Would require large decrease in interest rates
• Additional Discretionary Payments
• Would require available fund balance (reserves)
• Section 115 trust balance use
• Under study
• Alternative shortened schedules
• Under study
Potential City Actions
20 Adopted by City Council in April of 2024
$13 million deposited into trust
$19.5 million reduction in unfunded liability
0% funded to 69% funded, with plan to reach fully funded status $1.4 million in ongoing annual budgetary savings
PEMHCA – 115 Trust Update
21 PEMHCA – 115 Trust Update
22 PEMHCA – 115 Trust Update
23 PEMHCA – 115 Trust Update
24 Questions / Comments