2022 10 05 FAC Special Meeting0aiAr(V
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GEM of the DESERT —
NOTICE AND CALL OF SPECIAL MEETING
OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION
TO THE MEMBERS OF THE LA QUINTA FINANCIAL ADVISORY
COMMISSION AND TO THE COMMISSION SECRETARY:
NOTICE IS HEREBY GIVEN that a Special Meeting of the La Quinta
Financial Advisory Commission is hereby called to be held on Wednesday,
October 5, 2022, starting at 4:00 p.m.; at La Quinta City Hall located at
78495 Calle Tampico, La Quinta, CA 92253 for the following purpose:
CONSENT CALENDAR
1. Approve Meeting Minutes Dated August 24, 2022
BUSINESS SESSION
1. Appoint two Financial Advisory Commissioners to Audit and Formulate the
Annual Measure G Sales Tax Oversight Compliance Report for Fiscal Year
2021/22
2. Appoint two Financial Advisory Commissioners to Review the City's
General Fund Balance and Reserves Policy
STUDY SESSION
1. Discuss the City's Outstanding Pension Obligations and the Financial
Advisory Commission Subcommittee Recommendations
DEPARTMENTAL REPORTS
1. Finance Department Current and Future Initiatives
Dated: September 29, 2022 /s/ W. Richard Mills
W. Richard Mills, Chairperson
Attest
1
Jessica Delgado, Management Assistant
DECLARATION OF POSTING
I, Jessica Delgado, Management Assistant, do hereby declare that the foregoing
notice for the La Quinta Financial Advisory Commission Special Meeting of
October 5, 2022, was posted on the outside entry to the Council Chamber at
78495 Calle Tampico, and on the bulletin boards at 51321 Avenida Bermudas
and 78630 Highway 111 on September 29, 2022.
Dated: September 29, 2022
Jessica D�Igado, Management Assistant
FINANCIAL ADVISORY COMMISSION Page 1 of 1 OCTOBER 5, 2022
SPECIAL MEETING
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Financial Advisory Commission agendas and staff
reports are now available on the City's web page:
www.laauintaca,gov
SPECIA1 MEETING
FINANCIAL ADVISORY COMMISSION
AGENDA
CITY HALL COUNCIL CHAMBER,
78495 Calle Tampico, La Quinta
WEDNESDAY, OCTOBER 5, 2022 AT 4:00 P.M.
Members of the public may listen to this meeting by tuning -in live via
https://laguinta.12milesout.com/video/live.
CALL TO ORDER
Roll Call: Commissioners: Anderson, Batavick, Dorsey, Luettjohann, Mast,
Way and Chair Mills
PLEDGE OF ALLEGIANCE
PUBLIC COMMENTS — INSTRUCTIONS
Members of the public wanting to address the Commission, either for a
specific agenda item or matters not on the agenda are requested to follow the
instructions listed below:
WRITTEN PUBLIC COMMENTS can be provided either in -person during the
meeting by submitting 15 copies to the Commission Secretary, it is requested
that this takes place prior to the beginning of the meeting; or can be emailed
in advance to ]Delgado@)LaQuintaCA.gov, no later than 2:00 p.m., on the day
of the meeting. Written public comments will be distributed to the Commission,
made public, and will be incorporated into the public record of the meeting,
but will not be read during the meeting unless, upon the request of the Chair,
a brief summary of public comments is asked to be reported.
If written public comments are emailed, the email subject line must clearly
state "Written Comments" and should include: 1) full name, 2) city of
residence, and 3) subject matter.
FINANCIAL ADVISORY COMMISSION AGENDA Page 1 of 4 OCTOBER 5, 2022
SPECi,._ , .--. _.—
VERBAL PUBLIC COMMENTS can be provided in -person during the meeting by
completing a ""Request to Speak" form and submitting it to the Commission
Secretary; it is requested that this takes place prior to the beginning of the
meeting. Please limit your comments to three (3) minutes (or approximately
350 words). Members of the public shall be called upon to speak by the Chair.
In accordance with City Council Resolution No. 2022-028, a one-time
additional speaker time donation of three (3) minutes per individual is
permitted; please note that the member of the public donating time must: 1)
submit this in writing to the Commission Secretary by completing a "Request
to Speak" form noting the name of the person to whom time is being donated
to, and 2) be present at the time the speaker provides verbal comments.
Verbal public comments are defined as comments provided in the speakers'
own voice and may not include video or sound recordings of the speaker or of
other individuals or entities, unless permitted by the Chair.
Public speakers may elect to use printed presentation materials to aid their
comments; 15 copies of such printed materials shall be provided to the
Commission Secretary to be disseminated to Commission, made public, and
incorporated into the public record of the meeting; it is requested that the
printed materials are provided prior to the beginning of the meeting. There
shall be no use of Chamber resources and technology to display visual or
audible presentations during public comments, unless permitted by the
Presiding Officer.
All writings or documents, including but not limited to emails and attachments
to emails, submitted to the City regarding any item(s) listed or not listed on
this agenda are public records. All information in such writings and documents
is subject to disclosure as being in the public domain and subject to search
and review by electronic means, including but not limited to the City's Internet
Web site and any other Internet Web -based platform or other Web -based form
of communication. All information in such writings and documents similarly is
subject to disclosure pursuant to the California Public Records Act
[Government Code § 6250 et seq.].
PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA
At this time, members of the public may address the Commission on any
matter not listed on the agenda pursuant to the "Public Comments -
Instructions" listed above. The Commission values your comments; however,
in accordance with State law, no action shall be taken on any item not
appearing on the agenda unless it is an emergency item authorized by the
Brown Act [Government Code § 54954.2(b)].
CONFIRMATION OF AGENDA
FINANCIAL ADVISORY COMMISSION AGENDA Page 2 of 4 OCTOBER 5, 2022
SPECIAL MEETING
ANNOUNCEMENTS, PRESENTATIONS AND WRITTEN COMMUNICATIONS
- None
CONSENT CALENDAR
NOTE: Consent Calendar items are routine in nature and can be approved by
one motion.
1. Approve Meeting Minutes Dated August 24, 2022
BUSINESS SESSION
1. Appoint two Financial Advisory Commissioners to Audit and Formulate
the Annual Measure G Sales Tax Oversight Compliance Report for Fiscal
Year 2021/22
2. Appoint two Financial Advisory Commissioners to Review the City's
General Fund Balance and Reserves Policy
STUDY SESSION
1. Discuss the City's Outstanding Pension Obligations and the Financial
Advisory Commission Subcommittee Recommendations
DEPARTMENTAL REPORTS
1. Finance Department Current and Future Initiatives
COMMISSIONERS' ITEMS
ADJOURNMENT
The next regular quarterly meeting of the La Quinta Financial Advisory
Commission will be held November 9, 2022, commencing at 4:00 p.m. at the
La Quinta City Hall Council Chamber, 78-495 Calle Tampico, La Quinta, CA
92253.
FINANCIAL ADVISORY COMMISSION AGENDA Page 3 of 4 OCTOBER 5, 2022
SPECIAL MEETIN,
DECLARATION OF POSTING
I, Jessica Delgado, Management Assistant, of the City of La Quinta, do hereby
declare that the foregoing Agenda for the Commission meeting was posted on
the City's website, near the entrance to the Council Chamber at 78-495 Calle
Tampico, and the bulletin boards at 78-630 Highway 111, and 51-321 Avenida
Bermudas, on September 29, 2022
DATED: September 29, 2022
Jessica�Delgado, Management Assistant
City of La Quinta, California
Public Notices
• The La Quinta City Hall Council Chamber is handicapped accessible. If
special equipment is needed for the hearing impaired, please contact the
Commission Secretary at (760) 777-71501 twenty-four (24) hours in
advance of the meeting and accommodations will be made.
• If background material is to be presented to the Commission during a
Commission meeting, please be advised that 15 copies of all documents,
exhibits, etc., must be supplied to the Commission Secretary for
distribution. It is requested that this takes place prior to the beginning of
the meeting.
FINANCIAL ADVISORY COMMISSION AGENDA Page 4 of 4 OCTOBER 5, 2022
SPECIAL MEETING
CONSENT CALENDAR ITEM NO. 1
FINANCIAL ADVISORY COMMISSION
SPECIAL MEETING
MINUTES
WEDNESDAY, AUGUST 24, 2022
CALL TO ORDER
A special meeting of the La Quinta Financial Advisory Commission (Commission)
was called to order at 4:00 p.m. by Chair Batavick.
This meeting provided teleconferencing accessibility pursuant to Executive Orders
N-60-20 and N-08-21 executed by the Governor of California, and subsequently
Assembly Bill 361 (AB 361, 2021), enacted in response to the state of emergency
relating to novel coronavirus disease 2019 (COVID-19) and enabling
teleconferencing accommodations by suspending or waiving specified provisions in
the Ralph M. Brown Act (Government Code § 54950 et seq.), and City Council
Resolution No. 2021-035, adopted by the City Council on September 28, 2021, and
reaffirmed on August 2, 2022, members of the public, the Financial Advisory
Commission, the City Manager, City Attorney, City Staff, and City Consultants may
participate in this special meeting by teleconference only.
PRESENT: Commissioners Anderson, Dorsey, Luettjohann, Mast, Mills, Way and
Chair Batavick
ABSENT: None
STAFF PRESENT: Finance Director Martinez, Financial Services Analyst Hallick,
Account Technician Batuta, and Deputy City Clerk McGinley
PLEDGE OF ALLEGIANCE
Commissioner Dorsey led the audience in the Pledge of Allegiance.
The Commission and staff shared a brief introduction of their background and
experiences.
PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA - None
CONFIRMATION OF AGENDA
Staff requested that Business Session Item No. 3 "Receive and File the Annual
Comprehensive Financial Report for the year ended June 30, 2021" be moved up
and considered first on the agenda. The Commission concurred.
FINANCIAL ADVISORY COMMISSION MINUTES Page 1 of 4 August 24, 2022
SPECIAL MEETING
BUSINESS SESSION - taken out of Agenda order
3. RECEIVE AND FILE THE ANNUAL COMPREHENSIVE FINANCIAL
REPORT (ACFR) FOR THE YEAR ENDED JUNE 30, 2021
Finance Director Martinez and CPA Partner Phillip White with Eide Bailly, LLC
auditing firm (EB) presented the staff report, which is on file in the Finance
Department.
Mr. White explained EB's audit purview and scope, and sections related to the
independent auditor report, found on page 1, of the ACFR.
The Commission, staff, and Mr. White discussed steps taken to strengthen internal
controls; details of the City's internal controls over financial reporting that was
identified for accounting entry adjustments referenced on page 1 in the ACFR
summary (Attachment 1); and the three levels of internal control deficiencies.
Further discussion followed regarding footnote 17 on pages 67-72 of the ACFR,
referencing Long -Term Debt and debt related to the former Redevelopment Agency
(RDA) of the City and Successor Agency debt noted in ACFR that is not a direct
obligation for the City.
Commissioner Mills suggested adding more detail to footnotes on long-term debt
related to RDA for a better understanding. Staff and Mr. White mention that a brief
history can be found in footnote 17 on page 67 of the ACFR, but can look at ways
to improve clarity. Commissioner Way inquired on a meeting with staff to review
the ACFR for a better understanding. Finance Director Martinez confirmed
coordinating a review in the future.
Motion - A motion was made and seconded by Commissioners Dorsey/Way to
receive and file the Annual Comprehensive Financial Report for the year ended
June 30, 2021, as submitted. Motion passed unanimously.
ANNOUNCEMENTS, PRESENTATIONS, AND WRITTEN COMMUNICATIONS -
None > > > taken out of Agenda order
CONSENT CALENDAR ITEMS
1. APPROVE MEETING MINUTES DATED JUNE 1, 2022
2. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED
APRIL 30, 2022
3. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED
MAY 31, 2022
4. RECEIVE AND FILE FOURTH QUARTER FISCAL YEAR 2021/22
TREASURY REPORTS FOR APRIL, MAY, AND JUNE 2022
FINANCIAL ADVISORY COMMISSION MINUTES Page 2 of 4 August 24, 2022
SPECIAL MEETING
Chair Bativick inquired about the non -general fund revenue listed under top five
revenue/income sources for May on page 2 of the staff report for Consent Calendar
Item No. 3. Financial Services Analyst Hallick explained the larger amount of
$12,931,361 is pertaining to the debt service payment mentioned in the discussion
regarding the ACFR.
Commissioner Mills noted he was not able to review the ACFR as he was out of
town and would not be able to vote on this item.
Motion - A motion was made and seconded by Commissioners Anderson/Way to
approve the Consent Calendar, as submitted. Motion passed: ayes - 6, noes - 0,
abstain - 1 (Mills).
BUSINESS SESSION - Continued
1. APPOINT A FINANCIAL ADVISORY COMMISSIONER CHAIRPERSON
AND VICE -CHAIRPERSON FOR FISCAL YEAR 2022/23
Finance Director Martinez and Financial Services Analyst Hallick presented the staff
report, which is on file in the Finance Department.
Commissioners Mills and Dorsey expressed their interest to serve on the
Commission as Chairperson and Vice -Chairperson for fiscal year 2022/23.
Motion - A motion was made and seconded by Commissioners Way/Anderson to
appoint Commissioners Mills and Dorsey as Chairperson and Vice -Chairperson,
respectively, for fiscal year 2022/23. Motion passed unanimously.
2. APPOINT TWO FINANCIAL ADVISORY COMMISSIONERS TO
REVIEW THE CITY'S OUTSTANDING PENSION OBLIGATION
Financial Services Analyst Hallick presented the staff report, which is on file in the
Finance Department.
The Commission and staff discussed timeline and review process for the City's
outstanding pension obligation. Commissioners Anderson and Dorsey expressed
interest to be on the subcommittee for review of the City's pension obligation.
Motion - A motion was made and seconded by Commissioners Mills/Mast to appoint
Commissioners Anderson and Dorsey to serve on the subcommittee for review of
the City's pension obligation. Motion passed unanimously.
STUDY SESSION - None
DEPARTMENTAL REPORTS
All reports are on file in the Finance Department.
FINANCIAL ADVISORY COMMISSION MINUTES Page 3 of 4 August 24, 2022
SPECIAL MEETING
1. FINANCE DEPARTMENT CURRENT AND FUTURE INITIATIVES
Finance Director Martinez mentioned an additional subcommittee will also be
requested for review of request for proposal (RFP) for auditing services at the
February 2023 Commission meeting. Commissioner Batavick asked if requesting
an RFP for auditing services was for best practice; Staff confirmed and noted the
RFP followed the City's established procurement process for services pursuant to
the City's adopted Purchasing Policy.
2. FIRST QUARTER 2022 (JANUARY-MARCH) SALES TAX UPDATE FOR
THE CITY OF LA QUINTA
The Commission and staff discussed sales activity growth for non -confidential
business types. Financial Services Analyst Hallick said she would reach out to the
City's consultant, HdL Coren & Cone, Inc. to see if more information on growth can
be provided and would share with the Commission. Further discussion followed
regarding sales tax revenue.
COMMISSIONERS' ITEMS
The Commission discussed Measure A, an initiative petition proposing to phase -out
and permanently ban non -hosted short-term vacation rentals (STVRs) in non-
exempt areas of the City by December 31, 2024, which qualified and will be on the
November 8, 2022 ballot. Staff said they would share with the Commission the
links to Council meetings where this item was discussed.
The Commission inquired when the City plans to do a citywide fee study. Staff
explained the City annually updates the City's Master Fee Schedule to reflect annual
Consumer Price Index (CPI) increases; and every five to seven years completes a
citywide comprehensive fee analysis to determine if fee adjustments are needed
to improve the correlation between the City's cost of providing services and the
fees imposed to recover those costs; and staff will provide additional information
on this matter to the Commission.
ADJOURNMENT
There being no further business, it was moved by Commissioners Way/Mast to
adjourn this meeting at 5:58 p.m. Motion passed unanimously
Respectfully submitted,
Jessica Delgado, Management Assistant
City of La Quinta, California
FINANCIAL ADVISORY COMMISSION MINUTES Page 4 of 4 August 24, 2022
SPECIAL MEETING
BUSINESS SESSION ITEM NO. 1
City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING: October 5, 2022
STAFF REPORT
AGENDA TITLE: APPOINT TWO FINANCIAL ADVISORY COMMISSIONERS TO
AUDIT AND FORMULATE THE ANNUAL MEASURE G SALES TAX OVERSIGHT
COMPLIANCE REPORT FOR FISCAL YEAR 2021/22
RECOMMENDATION
Appoint two Financial Advisory Commissioners to audit and formulate the
annual Measure G Compliance Report for Fiscal Year 2021/22.
EXECUTIVE SUMMARY
• Measure G, the one percent (1%) Transactions and Use Tax measure
was approved by voters at the November 8, 2016 General Election and
subsequently adopted by resolution on December 20, 2016 with an
effective date of April 1, 2017. Additional funds are subject to citizen
oversight.
• Staff recommends the Financial Advisory Commission (FAC) appoint two
Commissioners to serve on the sub -committee to verify revenue and
expenses associated with Measure G funds.
• The sub -committee shall prepare a report and present their findings to
the FAC on November 9, 2022, and to City Council on December 6,
2022.
BACKGROUND/ANALYSIS
The Measure was approved on November 8, 2016 and adopted by resolution
on December 20, 2016 with an effective date of April 1, 2017. Additional funds
generated by the Measure are subject to citizen oversight.
Starting in June 2017, Measure G funds have been received monthly. City staff
recommends appointing two Commissioners on the sub -committee. Staff and
the sub -committee shall present a report to FAC on November 9, 2022 for
discussion and confirmation prior to City Council review and approval on
December 7, 2022. Staff anticipates up to two, two-hour virtual meetings
during the next month.
The review will include the following:
1. A review of revenue received during fiscal year 2021/22
2. A review of approved use of funds for capital projects, reserves, and
contract services
3. A review of proposed future uses
4. A review of current funds available for appropriation
5. A review of the proposed FY 2021/22 financial statement balance and
disclosure
ALTERNATIVES
The subcommittee may be comprised of up to three commissioners.
Prepared by: Claudia Martinez, Interim Finance Director/City Treasurer
BUSINESS SESSION ITEM NO. 2
City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING: October 5, 2022
STAFF REPORT
AGENDA TITLE: APPOINT TWO FINANCIAL ADVISORY COMMISSIONERS TO
REVIEW THE CITY'S GENERAL FUND BALANCE AND RESERVES POLICY
RECOMMENDATION
Appoint two Financial Advisory Commissioners to review the City's General
Fund Balance and Reserves Policy.
EXECUTIVE SUMMARY
• The General Fund Balance and Reserves Policy (Policy) was adopted by
City Council in 2018.
• The Policy calls for periodic review to ensure reserve category targets
are appropriate to the City's financial position as well as the current
economic environment.
• The subcommittee shall present their initial findings to the FAC on
November 9, 2022.
BACKGROUND/ANALYSIS
During fiscal 2017/18, at the request of the City Council, the FAC conducted
a study of the City's reserves. The study included a review of the policy and
fundings in place at the time, a comparison to other jurisdictions, best
practices as recommended by the Government Accounting Standards Board
(GASB), potential revenue or expenditure volatility based on economic or
political conditions, mitigation risks including an insurance review, and
vulnerability of the City infrastructure to natural disasters.
After several months of study, the new policy was adopted by City Council on
May 15, 2018 establishing five reserve categories and assigning target values
for each. At the time, initial funding was allocated to each category, with
subsequent allocations made in fiscal years 2018/19, 2019/20, and 2020/21.
Despite having to utilize reserves during the economic downturn caused by
the COVID-19 pandemic, the City was able to reach fully funded status in fiscal
2020/21.
This subcommittee will review the current target funding levels for each
reserve category in the context of the current economic conditions as well as
potential future events and make recommendations for changes to funding
levels as needed.
ALTERNATIVES
The Policy calls for periodic review, therefore no alternative is recommended
at this time.
Prepared by: Rosemary Hallick, Financial Services Analyst
Reviewed by: Claudia Martinez, Finance Director/City Treasurer
City of La Quinta
STUDY SESSION ITEM NO. 1
FINANCIAL ADVISORY COMMISSION MEETING: October 5, 2022
STAFF REPORT
AGENDA TITLE: DISCUSS THE CTY'S OUTSTANDING PENSION OBLIGATIONS
AND THE FINANCIAL ADVISORY COMMISSION SUBCOMMITTEE
RECOMMENDATIONS
RECOMMENDATION
Discuss City's outstanding pension obligations and the Financial Advisory
Commission subcommittee recommendations.
EXECUTIVE SUMMARY
• As of June 30, 2021, the City's CalPERS Actuarial Report for the Classic
Plan reported unfunded liabilities of $10,258,228.
• As of June 30, 2022, the City's pension trust had a balance of
$10,137,888.
• Financial Advisory Commission (FAC) formed a subcommittee to review
the City's outstanding pension obligations and provide recommendations
for City Council's consideration.
FISCAL IMPACT
Accelerating payments to California Public Employees' Retirement System
(CaIPERS) could impact the General Fund budget, reserves, and/or pension
trust balances.
BACKGROUND/ANALYSIS
In 2020, the FAC appointed two Commissioners to review the City's outstanding
pension obligations. As a result of their findings, the FAC recommended, and
City Council agreed, to continue to pay down the City's unfunded liability as
fiscal conditions allowed. The City has made Additional Discretionary Payments
(ADPs) toward the unfunded liability of just over $1.0 million in fiscal 2020/21
and $2.5 million in fiscal 2021/22, with an additional $1.0 million budgeted in
2022/23. The FAC had requested that the pension funding be reviewed again
when the newest actuarial reports became available, which was August 2022.
Additional Discretionary Payments to CaIPERS
Fiscal Year
Classic Tier
Tier 2
PEPRA Tier
Total
2018/ 19
$ -
$
15,353
$
22,060
$
37,413
2019/20
$ -
$
20,000
$
10,000
$
30,000
2020/21
$ 1,000,000
$
6,419
$
57,345
$
1,063,764
2021 /22
$ 2,500,000
$
2,500,000
TOTAL
$ 3,500,000
$
41,772
$
89,405
$
3,631,177
On August 24, 2022, the FAC appointed Commissioners Anderson and Dorsey
to complete an updated study of the pension obligations. The subcommittee
met twice to review and discuss the following items:
• CalPERS overview and how pensions are funded
• Total Public Employee Retirement Fund (PERF) market value and
annualized returns
• Benefit tiers available at the City and current funding status of each
• Pension terminology
• Pension trust performance and fees
• How the assets in the pension trust can be applied to outstanding pension
obligations
• How extra payments to CalPERS are applied to outstanding pension
obligations
• CalPERS Actuarial Reports for the City's three pension tiers
The goal of this study session is to provide an overview of the subcommittee's
findings and recommendations as summarized in Attachment 1. Feedback from
this study session may be incorporated into the study, which will be brought
back to the FAC in November for recommendations to City Council.
RECOMMENDATIONS
• Send an ADP to CalPERS utilizing unassigned reserves.
• Send an ADP to CalPERS utilizing pension trust funds.
• Consider ongoing ADPs as fiscal conditions allow, based on market
conditions and future actuarial reports' unfunded liability balances.
ALTERNATIVES
Prepared by: Rosemary Hallick, Financial Services Analyst
Attachment: 1. Fiscal Year 2022/23 Pension Subcommittee Findings
ATTACHMENT 1
W Qa�&a
CALIFORNIA
Fiscal Year 2022/23 Pension Subcommittee Findings
summary of Financial Advisory Commission (FAQ Subcommittee
On August 24, 2022, the FAC appointed Commissioners Anderson and Dorsey
to review the City's outstanding pension obligations with the City's Financial
Services Analyst and the Finance Director. This report summarizes key
findings of the subcommittee.
The subcommittee reviewed and discussed the following items:
• CalPERS overview and how pensions are funded
• Total Public Employee Retirement Fund (PERF) market value and
annualized returns
• Benefit tiers available at the City of La Quinta (City) and current funding
status of each
• Pension terminology
• Pension trust performance and fees
• How the assets in the pension trust can be applied to outstanding
pension obligations
• How extra payments to CalPERS are applied to outstanding pension
obligations
• CalPERS Actuarial Reports for the City's three pension tiers
CaIPERS Public Employees' Retirement Fund (PERF)
CalPERS Investment and Pension Funding Facts at -a -Glance for fiscal year
2020/21 are included as Exhibit A. As of June 30, 2021, the funded status of
the CalPERS PERF is approximately 80%, with total assets of $477.3 billion.
Annual investment returns from 2012 to 2021 have been as high as 21.3%
and as low as 0.1%. Along with other factors, CalPERS uses long-term
investment returns to assist in their determination of the discount rate, which
is currently 6.8%
CalPERS pension dollars paid to retirees come from investment earnings as
well as employer and employee contributions to the fund, as illustrated below:
City of LA Quinta Pension Plans
The City of La Quinta has three active pension plans with CalPERS.
• Classic: This plan covers members who were first employed at the City
prior to January 1, 2013.
• Tier 2: Covers members who were Classic at another participating
agency but have since transferred to the City.
• PEPRA: The Public Employees Pension Reform Act that went into effect
January 1, 2013 covers members who first joined CalPERS after that
date.
Classic Tier
Tier 2
PEPRA Tier
Hire Date
On and before 12/31/2012
On and after 12/17/2012
On and after 1/1/2013
Benefit Formula
2.5% at age 55
2% at age 60
2% at age 62
Benefit Vesting Schedule
5 years of service
5 years of service
5 years of service
Benefit Payments
monthly for life
monthly for life
monthly for life
Retirement Age
50 and up
50 and up
52 and up
Required employee contribution rate
7.960%
6.930%
7.750%
Required employer contribution rate
14.060%
10.100%
7.680%
Number of Active Members*
22
7
58
Number of Retired Members*
118
2
0
* As of June 30, 2021 from CalPERS valuation reports.
CaIPERS Actuarial Reports
Actuarial reports are provided each year around August to each member
agency. The most recent reports, issued in August 2022 are for fiscal year
ending June 30, 2021. The City receives three reports, one for each pension
plan tier.
CalPERS actuarial reports include the following information:
• Employer unfunded accrued liability payment projections for five years
• Employer normal cost rates for bi-weekly payroll calculations
• Employee bi-weekly payroll contribution rate for the next two years
• Funded ratio of each pension tier
• Summarized amortization schedule for each tier's unfunded liability
• Amortization schedule alternatives when applicable
• Funding history
• Discount rate sensitivity analysis
• Hypothetical plan termination liability calculations
The most current reports reflect the plans' funded status as follows:
Classic Tier
Tier 2
PEPRA Tier
Entry Age Normal Accrued Liability
$54,300,788
$925,328
$2,912,438
Plan's Market Value of Assets
$44,042,560
$1,013,126
$3,184,276
Unfunded Accrued Liability
$10,258,228
-$87,798
-$271,838
Funded Ratio
81.10%
109.50%
109.30%
Pension Trust Performance and Uses
The City established a Section 115 pension trust in August 2019 in order to
set aside money for the City's pension obligation, with an initial contribution
of $6,540,000. An additional contribution of $3,640,000 was made in fiscal
year 2019/20. The pension trust balance as of June 30, 2022 was
$10,137,888.
PARS Trust Balance
512,000,000
511,500,000
511,000,000
510.500,000
S10,000,000
59,500,000
$9,000,000
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The Section 115 Trust addresses the City's pension obligations by
accumulating assets to reduce the net pension liability. However, in
accordance with generally accepted accounting principles, the assets in the
Section 115 Trust are not considered to have present service capacity as plan
assets and are therefore considered restricted assets of the City in the General
Fund rather than pension plan assets. The assets held in trust will be
considered pension plan assets at the time they are transferred out of the
Trust into the pension plan with CalPERS.
Investments are in a moderately conservative investment strategy which has
dual goals of current income and capital appreciation. A major portion of the
assets are committed to income producing securities; therefore, market
fluctuations are expected. The City also pays management fees for the pension
trust, which total $152,326 inception -to -date as of June 30, 2022.
Annualized returns for both the trust and the PERF are shown below:
Annualized Returns
As of June 30, 2021
PARS Trust CaIPERS
YTD 11.58% 21.30%
3-years 8.18% 10.70%
5-years 6.56% 10.30%
10- ears 5.73% 8.50%
Information about both plans can be found in Exhibits A (Investment &
Pension Funding Fact -at -a -Glance) and B (PARS Diversified Portfolio -
Moderately Conservative).
Additional Discretionary Payments to CalPERS
Additional contributions made directly to CalPERS can be applied to specific
tiers and amortization bases within tiers. The greatest interest rate savings
are derived from the agency choosing to apply additional payments to the
highest balance with the longest amortization period.
For the past several years, the City has been sending additional payments
from savings directly to CalPERS as follows:
waunionai uiscreiionary raymenis io t.airr-mo
Fiscal Year
Classic Tier
Tier 2
PEPRA Tier
Total
2018/19
$ -
$
15,353
$
22,060
$
37,413
2019/20
$ -
$
20,000
$
10,000
$
30,000
2020/21
$ 1,000,000
$
6,419
$
57,345
$
1,063,764
2021 /22
$ 2,500,000
$
2,500,000
TOTAL
$ 3,500,000
$
41,772
$
89,405
$
3,631,177
Recommendations
• Send an ADP to CalPERS utilizing unassigned reserves. Given the City's
current fiscal position, the subcommittee recommends using unassigned
reserves.
• Send an ADP to CalPERS utilizing pension trust funds. Given the higher
long-term investment returns and to save on investment management
fees, the subcommittee also recommends using pension trust funds.
• Consider ongoing ADP's as fiscal conditions allow, based on market
conditions and future actuarial reports' unfunded liability balances.
As of the currently available actuarial reports, the Classic Tier has an unfunded
liability of $10,258,228. Taking into consideration the current balance in the
pension trust, the market returns of both the trust and the PERF, and the fees
associated with retaining the money in the trust fund, the subcommittee
recommends using a portion of the trust funds to pay down the unfunded
liability. Along with recommended funding from unassigned reserves, the
committee is recommending the following three options for review:
Funding
Source
Total Unfunded
Unassigned
Liability Payment
Pension Trust
Reserves
Option 1 $10,258,228
$5,000,000
$5,258,228
Option 2 $7, 500, 000
$5,000,000
$2,500,000
Option 3 $5,000,000
$2,500,000
$2,500,000
As needed, additional payments could be included in the General Fund
budget for consideration each fiscal year. The subcommittee is aware that
based on current unfavorable economic conditions, the unfunded liability is
likely to continue to rise before the effect of the ADP's is recognized. As
economic conditions improve the funding picture will also improve, noting
the considerable lag time between actual events and the publishing of the
actuarial reports which delays visibility to those improvements.
A glossary of pension terminology is attached as Exhibit C.
2021
$477.3
21.3%
2020
$392.5
4.7%
2019
$372.6
6.7%
2018
$354.0
8.6%
2017
$326.4
11.2%
2016
$302.0
0.6%
2015
$301.9
2.4%
2014
$300.3
18.4%
2013
$257.9
13.2%
2012
$233.4
0.1%
Public Employees' Retirement Fund (PERF)
Time -weighted rate of return net of investment expenses
Annualized Investment Returns*
(for FYend 6130)
FY to date . . . . .
. . . . . . . . . . . . .
. 21.3%
3 years . . . . . . .
. . . . . . . . . . . . .
. 10.7%
5 years . . . . . . .
. . . . . . . . . . . . .
. 10.3%
10 years . . . . . .
. . . . . . . . . . . . .
. 8.5%
20 years . . . . . .
. . . . . . . . . . . . .
. 6.9%
30 years . . . . . .
. . . . . . . . . . . . .
. 8.4%
* Time -weighted rote of return net of investment expenses
EXHIBIT A
Investment & Pension Funding Facts at a Glance for Fiscal Year 2020-21
Investments (PERF*)
Total Fund Market Value & Fund Returns Total Fund Market Value 1988 - 2021
by Fiscal Year** (forFYend 6130) (for FYend 6130)
(in billions) (%) $477.3bil
1988 1994 2000 2007 2015 2021
Discount Rate Changes
2022-23* (State/School). . . .
. . . 7.0%
- 6.8%
2023-24* (PA) . . . . . . . .
. . . 7.0%
- 6.8%
2019-20* (State) ..............
7.25%
- 7.0%
2020-21* (School/PA). . . . .
. . .7.25%
- 7.0%
2018-19* (State) . . . . . . .
. . 7.375%
- 7.25%
2019-20* (School/PA). . . . .
. . 7.375%
- 7.25%
2017-18* (State). . . . . . . .
. . . 7.5%
- 7.375%
2018-19* (School/PA) . . . . .
. . . 7.5%
- 7.375%
* FYrequired contribution
Alik,. CaIPERS Ever effort has been made to verify the accuracy o the information, which is intended or general use only. 0 01-2022-1
Every fy yf f f g y0
Investments (cont'd)
Current Asset Allocation
51.4%
Public Equity
29.8%
Global Fixed Income
9.6%
Real Assets
8.3%
Private Equity
0.9%
Other:
2.5% Total Fund
(1.6%) Financing
& Liquidity
Asset Allocation
Current Strategic Asset
Allocation
Allocation
Public Equity
51.4%
50.0%
Global Fixed Income
29.8%
28.0%
Real Assets
9.6%
13.0%
Private Equity
8.3%
8.0%
Total Fund
2.5%
—
Financing & Liquidity
(1.6%)
1.0%
Facts at a Glance for Fiscal Year 2020-21
Investment & Pension Funding » 2
California Investments
W
12.3% $58.7billion
California investments
as
percentage of the
total fund
Fair Value
(in millions)
Total California Investments
$58,656
Public Equity*
$34,074
Global Fixed Income**
$8,980
Real Assets***
$13,150
Private Equity***
$2,452
Includes listed public equities corporate bonds.
" Fixed income also includes a portion of MBS & ABS, which have
significant geographical exposure to CA & MHLP.
As of March 31, 2021
Sustainable Investing
CAPERS actively engages with the companies we own to
protect the long-term sustainability of our investment.
From issues regarding environmental responsibility
to safe labor practices, we keep an open dialog with
company leaders and vote our proxies.
Number of companies where
131000+ CAPERS cast proxy votes in
2021 worldwide (calendar year)
Pension Funding
Funded Status of Retirement Plans by
Member Category
State
School PA
Total
2019-20
70.6% *
68.6%* 71.1%*
70.6%*
2018-19
70.0% *
68.5%* 70.8%*
70.2%*
2017-18
69.5% *
68.6%* 70.4%*
69.8%*
2016-17
65.8% *
68.7%* 69.5%*
68.0%*
2015-16
62.3%
67.8% 66.2%
68.3%
2014-15
69.4%
77.5% 74.5%
73.1%
2013-14
72.1%
82.0% 77.9%
76.3%
2012-13
66.1%
76.2% 70.5%
69.8%
2011-12
66.1%
75.4% 70.1%
69.6%
Based on a 7..0% discount rate and includes the terminated agency pool
and 1959 survivor benefit plan.
Contributions,10-Year Review (in thousands)
Employer Member Investment
Contributions Contributions & Other Income
2020-21
$20,034,757
$4,757,000
$88,059,909
2019-20
$22,039,561
$4,901,000
$18,516,994
2018-19
$15,612,678
$4,664,618
$22,969,664
2017-18
$19,917,796*
$4,415,129
$27,448,098
2016-17
$12,329,837
$4,214,578
$32,977,020
2015-16
10,892,489
4,015,754
1,548,442
2014-15
9,997,705
3,826,072
6,702,997
2013-14
8,777,602
3,775,038
45,598,044
2012-13
8,123,833
3,897,078
30,291,983
2011-12
7,772,913
3,598,437
(196,014)
Amount includes an additional $6 billion dollar contribution by the state.
Facts at a Glance for Fiscal Year 2020-21
Investment & Pension Funding » 3
Funded Status Total PERF
7 0.6% 800
82%
2019-20" 2020-21**
The PERF is the Public Employees' Retirement Fund.
This percentage includes the terminated agency pool
and the 7959 survivor benefit plan. Percentage based
on a 7.0% discount rate.
The 82% estimate is based on the 7% discount rate
as of 613012027. On 71112021, the risk mitigation event
was triggered due to the 21.3% investment return for
FY2020-21 and the 80% estimate is based on the
new 6.8% discount rate.
Total Employer Contributions
School districts and
Charter Schools
$3 billion / 15%
$20 b — State of California
$6 billion / 32%
Public agencies
$11 billion / 53%
Shared Responsibility
Every dollar paid to CRIERS retirees comes
from three sources*:
Investment earnings
604
CalPERS employers
294
CalPERS members
11d
Income over the last 20 years.
EXHIBIT B
IHIGHMARK`°
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WHY THE PARS DIVERSIFIED
MODERATELY CONSERVATIVE PORTFOLIO?
Comprehensive Investment Solution
HighMark® Capital Management, Inc.'s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above -average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index -based
securities, including exchange -traded funds. Both
investment options leverage HighMark's active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification - asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
INVESTMENT OBJECTIVE Efficient Frontier
To provide current income, with
capital appreciation as a �Capitallppredation
Balanced
secondary objective. The major Moderate
portion of the assets is
committed to income -producing 3 derately Conservative
securities. Market fluctuations ConservativeMo
should be expected
Risk (Standard Deviation)
ASSET ALLOCATION - MODERATELY CONSERVATIVE PORTFOLIO
Strategic Range Policy Tactical
j 20 - 40% 30% ` 32%
Fixed Income 50 - 80% 65% 67%
5%
ANNUALIZED TOTAL RETURNS Emross of beddednvestment Fund Fees)Management Fees, but Net of
HighMark Plus Composite (Active)
Index Plus Composite (Passive)
Current Quarter* �
3.67ocl
Current Quarter* � 3.25%
Blended Benchmark*,**
3.12%
Blended Benchmark*,** 3.12%
Year To Dat 3.97%
Year To Date* 3.50%
Blended Benchmark*,**
3.47%
Blended Benchmark*,** 3.47%
1 Year
14.19%
1 Year 11.58%
Blended Benchmark**
11.97%
Blended Benchmark** 11.97%
3 Year
8.62%
3 Year 8.18%
Blended Benchmark**
8.24%
Blended Benchmark** 8.24%
5 Year
5 Year 6.56%
Blended Benchmark**
6.78%
Blended Benchmark** 6.78%
10 Year
110 Year 5.73%
Blended Benchmark**
5.89%
Blended Benchmark** 5.89%
*Returns less than one year are not annualized.
**Breakdown for
Blended Benchmark: From 10/1/2012 -Present: 15.5% S&P500,
3% Russell Mid Cap, 4.5 % Russell 2000, 2% MSCI EM (net), 4 % MSCI EAFE (net), 49.25% BBG Barclays US Agg, 14% ICE BofA
1-3 Yr US Corp/Gov't, 1.75% ICE BofA US High Yield Master II,
1% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From 4/1/2007 -
9/30/2012: the blended benchmark was 25% S&P 500: 1.5% Russell
2000, 3.5% MSCI EAFE (net), 25% ICE BofA 1-3 Year
Corp./Govt, 40% BBG Barclays US Agg, 5% FTSE 1 Mth US T-Bill.
Prior to April 2007, the blended benchmark was 30% S&P 500,
25% ICE BofA 1-3Yr Corp/Gov, 40%
BBG Barclays US Agg, and
5% FTSE 1 Mth US T-Bill.
ANNUAL RETURNS
(Gross of Investment Management Fees, but Net of Embedded
Fund Fees)
HighMark Plus Composite
(Active)
Index Plus Composite (Passive)
2008
12008 -
2009
18.71 %
2009 11.92%
2010
10.467
2010 - 9.7
2011
1.75%
2011 3.24%
2012 M
10.880/2-
2012 8.24%
2013
7.30%
2013 6.78%
2014
4.4
2014 !=�5.40%
2015
0.32%
2015 -0.18%
2016
4.94%
2016 5.42%
2017
9.56%
2017 8.08%
2018
-2.60%
2018 ` dL -2.33%
2019
13.73%
2019 13.53%
2020
10.76%
2020
PORTFOLIO FACTS
HighMark Plus (Active)
Index Plus (Passive)
Composite Inception Date
08/2004
Composite Inception Date 05/2005
No of Holdings in Portfolio
20
No of Holdings in Portfolio 13
HOLDINGS
HighMark Plus (Active)
Columbia Contrarian Core 13
Vanguard Growth & Income Adm
Dodge & Cox Stock Fund
iShares S&P 500 Value ETF
Harbor Capital Appreciation - Retirement
T. Rowe Price Growth Stock - I
iShares Russell Mid -Cap ETF
Vanguard Real Estate ETF
Index Plus (Passive)
iShares Core S&P 500 ETF
iShares S&P 500 Value ETF
iShares S&P 500 Growth ETF
iShares Russell Mid -Cap ETF
Vanguard Real Estate ETF
iShares Russell 2000 Value ETF
iShares Russell 2000 Growth ETF
iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF
Victory RS Small Cap Growth - R6
DFA Large Cap International Portfolio
Dodge & Cox International Stock
MFS International Growth - R6
Hartford Schroders Emerging Markets Eq
Vanguard Short -Term Invest -Grade Adm
PIMCO High Yield Instl
PIMCO Total Return Fund - Inst
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
STYLE
Intl Stocks
Mid Cap 2.3
Large Cap Growtl
3.5
Large Cap Core
8.9
Short -Term B
11.7%
High y
Vanguard Short -Term Invest -Grade Adm
iShares Core U.S. Aggregate
Vanguard High -Yield Corp Adm
First American Government Obligations Z
Holdings are subject to change at the
discretion of the investment manager.
Large Cap Value Real Estate 1.0
Interm-Term Bond
53.2
The performance records shown represent a size -weighted composite of tax exempt accounts that meet the following
criteria: Accounts are managed by HighMark with full investment authority according to the PARS Moderately
Conservative active and passive objectives.
The adviser to the PARS portfolios is US Bank, and HighMark serves as sub -adviser to US Bank to manage these
portfolios. US Bank may charge clients as much as 0.60 % annual management fee based on a sliding scale. US Bank
pays HighMark 60 % of the annual management fee for assets sub -advised by HighMark under its sub -advisory
agreement with US Bank. The 0.36 % paid to HighMark, as well as other expenses that may be incurred in the
management of the portfolio, will reduce the portfolio's returns. Assuming an investment for five years, a 5 % annual total
return, and an annual sub -advisory fee rate of 0.36 % deducted from the assets at market at the end of each year, a $10
million initial value would grow to $12.53 million after fees (Net -of -Fees) and $12.76 million before fees (Gross -of -Fees).
Gross returns are presented before management and custodial fees but after all trading expenses and reflect the
reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it
may incur as a client. Additional information regarding the firm's policies and procedures for calculating and reporting
performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do
not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading
expenses. Returns are calculated based on trade -date accounting.
Blended benchmarks represent HighMark's strategic allocations between equity, fixed income, and cash and are
rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but
assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The
unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI
EAFE Index is a free float -adjusted market capitalization index designed to measure developed market equity
performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float -adjusted market
capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell
Midcap Index measures the performance of the mid -cap segment of the U.S. equity universe. The Russell 2000 Index
measures the performance of the small -cap segment of the U.S. equity universe. The ICE BofA US High Yield Master II
Index tracks the performance of below investment grade U.S. dollar -denominated corporate bonds publicly issued in the
U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged
Bloomberg Barclays U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole.
The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond performance of the ICE BofA U.S. Corporate
& Government Index, with a remaining term to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S.
Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark), an SEC -registered investment adviser, is a wholly owned subsidiary of
MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for -profit
and nonprofit organizations, public agencies, and public and private retirement plans. MUB, a subsidiary of MUFG
Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past
performance does not guarantee future results. Individual account management and construction will vary depending on
each client's investment needs and objectives. Investments employing HighMark strategies are NOT insured by the
FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or
any Bank affiliate, and MAY lose value, including possible loss of principal.
EXHIBIT C
Glossary of Pension Terms
Actuarial Accrued Liability: The total dollars needed as of the valuation date to fund all
benefits earned in the past for current members.
Actuarial Assumptions: Assumptions made about certain events that will affect pension costs.
Assumptions generally can be broken down into two categories: demographic and economic.
Demographic assumptions include such things as mortality, disability and retirement rates.
Economic assumptions include discount rate, salary growth, and inflation.
Actuarial Methods: Procedures employed by actuaries to achieve certain funding goals of a
pension plan. Actuarial methods include funding method, setting the length of time to fund the
Accrued Liability and determining the Value of Assets.
Actuarial Valuation: The determination, as of a valuation date, of the Normal Cost, Accrued
liability, and related actuarial present values for a pension plan. These valuations are performed
annually or when an employer is contemplating a change to their plan.
ALM: Asset -Liability Management. A review of the expected future cost of pension payments
and investment returns. Assets are reviewed through capital market assumptions, strategic
asset allocations, and risk. Liabilities are reviewed through demographic and economic trends
such as life expectancy, membership dynamics, salary growth, retirement trends, and inflation.
The most recent ALM cycle ended in November 2021 with the CalPERS board approving a new
discount rate of 6.8%
Amortization Bases: Separate payment schedules for different portions of the Unfunded
Liability. The total Unfunded Liability of a plan is segregated by a cause (base), and each such
base will be separately amortized and paid for over a specific period of time. Generally, in an
actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and/or gains and
losses.
Amortization Period: Number of years required to pay off an Amortization Base.
Capital Market Assumptions: estimates investment returns, volatilities, correlations, and
market constraints by asset segment.
Classic Member: A member who joined CalPERS prior to January 1, 2013 and who is not
defined as a new member under PEPRA (See definition of new member below). Funding formula
is 2.5% at 55
Discount Rate Assumption: the rate of interest used in calculating the accrued liabilities and
normal cost for employers, it represents the long-term assumed rate of return on investments
based on the portfolio allocation decided by the board. Also known as the Actuarial Interest
Rate
Entry Age: The earliest age at which a plan member begins to accrue benefits under a defined
benefit pension plan. In most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method: an actuarial method that allocates the present value of
projected benefits in a manner that produces a level annual cost over the earnings of an
individual between entry age and assumed retirement age (designed to fund a member's total
plan benefit over the course of his or her career). Costs allocated to the current fiscal year are
called normal costs. This method is designed to yield a rate expressed as a level percentage of
payroll.
Experience Study: A review of the demographics and economic assumptions that are used to
calculate the projected liabilities and required contributions. Looks at life expectancy, workforce
changes, inflation and payroll trends.
Fresh Start: When multiple amortization bases are collapsed to one base and amortized
together over a new funding period.
Funded Status: A measure of how well funded, or how "on track" a plan or risk pool is with
respect to assets versus accrued liabilities. A ratio greater than 100 percent means the plan or
risk pool has more assets than liabilities and a ratio less than 100 percent mean liabilities are
greater than assets.
GASB 68: The accounting standard governing a state or local governmental employer's
financial reporting for pensions.
Market Value of Assets (MVA): The value of a plan's assets in the open marketplace on a
specific date.
New Member (under PEPRA): A new member includes an individual who becomes a member
of a public retirement system for the first time on or after January 1, 2013, and who was not a
member of another public retirement system prior to that date, and who is not subject to
reciprocity with another retirement system. The PEPRA funding is 2% at 62.
Normal Cost: The annual cost of service accrual for the upcoming fiscal year for active
employees. The normal cost should be viewed as the long-term contribution rate.
POBs: Pension Obligation Bonds
Pension Actuary: A business professional that is authorized by the Society of Actuaries and
the American Academy of Actuaries to perform the calculations necessary to properly fund a
pension plan.
PEPRA: Public Employees' Pension Reform Act of 2013, passed to help curb rising pension
costs.
PERF: Public Employees Retirement Fund
Present Value of Benefits (PVB): The total dollars needed as of the valuation date to fund all
benefits earned in the past or expected to be earned in the future for current members.
Risk Mitigation Policy: seeks to reduce funding risk over time, by adjusting the discount rate
(as well as the expected investment returns and strategic asset allocation targets) if the
investment performance significantly outperforms the discount rate.
Strategic Asset Allocation: Percentage of total investments by asset class, including global
equity, fixed incomes, real assets, private equity, private debt, and liquidity.
Tier 2: The City has a second tier, for employees who started their government career at
another agency as a Classic member. The funding formula for Tier 2 is 2% at 60.
Unfunded Accrued Liability (UAL): When a plan or pool's Market Value of Assets is less than
its Accrued Liability, the difference is the plan or pool's Unfunded Accrued Liability (or unfunded
liability). If the unfunded liability is positive, the plan or pool will have to pay contributions
exceeding the Normal Cost.
DEPARTMENTAL REPORT ITEM NO. 1
City of La Quinta
FINANCIAL ADVISORY COMMISSION MEETING
DEPARTMENT REPORT
TO: Members of the Financial Advisory Commission
FROM. Claudia Martinez, Finance Director
DATE: October 5, 2022
SUBJECT: FINANCE DEPARTMENT CURRENT AND FUTURE INITIATIVES
In addition to items presented as staff reports, the Finance Department
would like to provide updates on the following matters.
AUDIT & FINANCIAL REPORTING
• Completed the Single Audit for federal funds for fiscal year
2020/21
• Citywide Comprehensive fiscal year 2021/22 audit will take place
from November 7t" through November 18tn
o Year-end entry and audit prep work is well underway
• Annual Street and Road Improvement Audit to be filed with the
State Controller's Office will take place the week of October 10tn
• Annual Measure A Local Streets and Roads Audit to be filed with
the Riverside County Transportation Commission will take place
the week of October 17tn
COMMITTEE UPDATES
• Annual Measure G Sales Tax Oversight Compliance Report for FY
2021/22
o Appointment of sub -committee
• Reserve Policy Update
o Appointment of sub -committee
It is important to note the items mentioned in this update are in addition
to the daily functions of the Finance Department, which include, but are
not limited to, staff report writing/review, payroll, accounts payable,
accounts receivable, revenue processing, journal entries, capital
accounting, project accounting, purchasing, investing, cash/treasury
management, bank reconciliations, budgeting, research and analysis,
staff training and development, and general financial support for all City
departments.
POWER POINTS
FINANCIAL
ADVISORY
COMMISSION
SPECIAL
MEETING
October 5, 2022
Financial Advisory Commissio
Special Meeting
10/05/2022
Financial Advisory Commission
10/05/2022
Study Session Item No. 1
Discuss the City's Outstanding Pension Obligations and the
Financial Advisory Subcommittee Recommendations
#m.
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CaIPERS at a Glance
• Largest pension fund in the nation
— $477.3 billion in assets (6/30/2021)
• 12.3%, or $58.7 billion in California
investments
• 2,892 employers - state, local
agencies, school districts
• Over 2 million members
How Retiree Benefits are Funded
604
294
114
CaIPERS
investment
CaIPERS
CAPERS
employers
members
- earnings
Benefit Tiers/Plan Types
• Classic: Employees hired on or before December
31, 2012.
— Benefit formula: 2.5% at 55
• PEPRA: Public Employees Pension Reform Act, all
employees hired on or after January 1, 2013.
— Benefit formula: 2% at 62
• Tier 2: The City offers a tier for Classic employees
coming from other agencies.
— Benefit formula: 2% at 60
10/05/2022
10/05/2022
10
10/05/2022
11
12
10/05/2022
13
14
The Financial Advisory Commission's
Next Regular Quarterly Meeting is on
November 9, 2022
a4 .
Y
CALF
4 t
COMMISSIONER
HANDOUTS
FAC
SPECIAL
MEETING
OCTOBERS 2022
FINANCIAL ADVISORY COMMISSION MEETING - OCTOBER 5, 2022 - HANDOUT BY
CHAIRPERSON MILLS - COMMISSIONER'S ITEM NO.1
FINANCE DEPARTMENT POTENTIAL
FUTURE INITIATIVES
PREPARED BY W. RICHARD MILLS OCTOBER 3, 2022
PRIOR PROJECTS:
1. 457 PLAN REVIEW
2. FIRE SERVICES REVISITED
3. SALES TAX CONSULTING RFP
4. PURCHASING POLICY
5. CASH HANDLING POLICY
UPCOMING ITEMS:
STAFF TO COORDINATE A REVIEW OF THE CITY'S ANNUAL COMPREHENSIVE FINANCIAL
REPORT (ACFR) IN RESPONSE TO COMMISSIONER WAY'S REQUEST ON AUGUST 24, 2022.
APPOINTMENT OF A SUBCOMMITTEE IN FEBRUARY 2023 TO REVIEW RFP FOR AUDITING
SERVICES.
STAFF WILL PROVIDE COMMISSION WITH ADDITIONAL INFORMATION ON CITY WIDE FEE
STUDY - REQUESTED ON AUGUST 24, 2022.
OTHER UPDATES:
MEETING BETWEEN CHAIR MILLS AND FINANCE DIRECTOR MARTINEZ ON SEPTEMBER
26, 2022 - A SUPPLEMENTAL REPORT FOR EASE OF UNDERSTANDING THE ACFR
MANAGEMENT DISCUSSION WILL BE CONSIDERED BY STAFF.