City of Simi Valley
Staff Report
September 21, 2026
To: City Council
From: Department of Administrative Services
Carolyn Johnson, Administrative Services Director
Subject: Approval of a budget appropriation in the amount of $5,572,561 from the Retirement Investment Fund, to be used for an additional discretionary payment toward the City’s CalPERS unfunded accrued liability
Staff Recommendation
Staff recommends the full fund balance amount of $5,572,561 be appropriated from the Retirement Investment Fund (Fund 121) to be used for an additional discretionary payment (ADP) toward the City’s CalPERS unfunded accrued liability (UAL).
Background
On April 25, 2022, the City Council approved a Year -End General Fund - Fund Balance Policy (Attachment A) which distributes budget surpluses into specific categories at specific percentages. The City’s FY2026- 27 Adopted Budget identifies a FY2024- 25 surplus of $10,754,324 along with approval for the distribution into the predetermined funds. $5,377,162 was transferred into both the Retirement Investment Fund and the Infrastructure Investment Fund.
The Fund Balance Policy allows for surplus money that would normally flow to the Contingency Fund to be distributed equally between the Infrastructure Investment Fund and the Retirement Investment Fund if the Contingency Fund reaches the $2 million balance. The Contingency Fund currently has a balance of $2 million; therefore, the surplus funds were split evenly between the other two funds. There is no request for the use of the funds in the Infrastructure Investment Fund at this time.
Discussion
Staff is requesting City Council approval of the full fund balance from the Retirement Investment Fund (Fund 121) to be used for an ADP toward the City’s CalPERS UAL. The annual savings, of which the amount is not yet known, will be realized in the City’s FY2027-28 annual payments.
The resulting ADP is expected to lower the City’s annual CalPERS payment by hundreds of thousands of dollars and will also reduce the interest the City will pay. While the City could invest the funds into a 115 Trust account to be used in the future, the impact of a $5.5 million ADP payment will provide immediate and long-term benefits.
Agenda Item No.
Consent (3)
In December 2022, the City made a $3.2 million ADP utilizing b udget surplus funds in accordance with City Policy. This payment resulted in a FY2023-24 payment savings of $1,080,743. In December 2023, the City made another ADP of $4.5 million using surplus funds from the prior year, resulting in savings of $731,000 for the FY2024- 25 payments.
In May 2025, the City made another ADP of $4.6 million, resulting in savings of $658,470 for the FY2025- 26 payments. In October 2025, the City Council elected to pause the Fund Balance Policy and not to make an ADP for that one fiscal year only. The total amount of the ADP payments that the City has made over the past four years is $12,364,600.
Financial Impact
This action has no direct impact on the City’s General Fund . However, $5,572,561 will be appropriated from the Retirement Investment Fund, helping reduce the City’s CalPERS UAL.
City Council Priority
This item supports the C ity Council’s Fiscal Stability Pillar of Excellence by m anaging debt effectively and ensuring the City's long-term financial health.
Suggested Motion
I move to approve the full fund balance amount of $5,572,561, to be appropriated from the Retirement Investment Fund (Fund 121), to be used for an additional discretionary payment toward the City’s CalPERS unfunded accrued liability.
Summary
On April 25, 2022, the City Council approved a Fund Balance Policy which distributes budget surpluses into specific categories at specific percentages. The City’s FY2026-27 Adopted Budget identifies a FY2024- 25 surplus of $10,754,324 along with approval f or the distribution into the predetermined funds. $5,377,162 was transferred into both the Retirement Investment Fund and the Infrastructure Investment Fund.
Staff recommends the full fund balance amount of $5,572,561 be appropriated from the Retirement Investment Fund to be used for an ADP towards the City’s CalPERS UAL. No request is being made to use funds from the Infrastructure Investment Fund at this time.
Prepared by: Carolyn Johnson, Administrative Services Director Attachments
Attachment A – Year-End General Fund - Fund Balance Policy 2 Attachment A
Year End General Fund – Fund Balance Policy
Fund Balance – General Fund Policy
Per existing
policy, the City will maintain a General Fund bala nce comprised of the Prudent Reserve, Assigned General Fund balance, and Unassigned General Fund balance. The Prudent Reserve will maintain a balance equal to 17% of General Fund budgeted expenditures for emergencies and catastrophic events. The Assigned Balance is restricted for financial purposes such as encumbrances, prio r obligations, long-term receivables, and special funds. T he Unassigned Balance is a co mpilation of funds that are generally available for use.
Year End General Fund Surplus Policy
At t
he close of each fiscal year, if three criteria are met, the reallocation of surplus dollars will be allowed. The three criteria that have to be met are:
1) There is a General Fund surplus savings in the most recent fiscal year closed, 2) The 17% prudent reserve is fully funded in the most recent fiscal year closed, and
3) The unassigned fund balance exceeds 30% of operating expenditures in the most recent fiscal year closed.
If the above three criteria are met, the prior year end surplus funds will considered for reallocation when developing the subsequent Proposed Budget. T he prior year surplus funds will be considered for reallocation into Assigned Balance s after the 17% Prudent Reserve and 30% Unassigned minimums are maintained in the Propo sed Budget (the net remaining surplus funds) as follows:
a. 40% shall be deposited into an Unfunded Pension/Retiree Medi cal Benefit Obligations Fund to be used for it ems such as but not limited to Additional Discretionary Payments or a 115 Trust to reduce the City’s Unfunded Accrued Liability and Other Post-Employment Benefits (OPEB).
b. 40% shall be deposited into an Infrastructure Fund to be used for any one-time capital needs including but not limited to: roads, equipment replacement, storm drain, buildings, and deferred maintenance.
c. 20% shall be deposited into a Contingency Fund to allow for one-time expenditure needs that were unanticipated or are related to the identified fiscal issues. This fund will have a maximum balance of $2 million.
The City Manager, or designee, will evaluate the application of the funds within the above allocated Fund Balances to propose the highest valued use to th e City Council for consideration and appropriation.
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