HomeMy WebLinkAbout03.d. HandoutOctober 27. 2023
Utilization of FY
2022-23
Variance Funds
Finance Committee
Philip R. Leiber,
Deputy General Manager,
Administration
and
Kevin Mizuno, Finance Manager
1
Objectives
Consider past guidance on use of
variances from PFM (Financial
Advisor)
Review variances from close of FY
2022-23
Review alternatives and direct
available funds towards optimal use
Provide direction on additional trust
contribution already included in FY
2023-24 budget
2
Item 3.d.
(Handout)
Attachment 3
November 10, 2016 Workshop
Financial Alternatives for Excess Reserves
PFM's Review of Excess PFM's Recommendation and
Fund Alternatives: Direction Given by the Board:
1.
Pay down CCCERA unfunded
pension liabilities (UAAL) (done)
2.
Pay down other post -employment
benefits (OPEB) unfunded
liabilities and shorten amortization
period from 22 to 18 years (done)
3.
Set up and fund IRS Sec 115
Pension Prefunding Trust (done)
4.
Allocate to CIB program
5.
Use to cover 0% rate increase FY
2017-18
3
Allocate all currently available dollars to
reduce pension UAAL and OPEB liability.
$2.5M budgeted in FY 2016-17
toward OPEB Trust (done Feb. 2017
by unanimous vote)
$3.359M initial funding of Pension
Prefunding Trust using FY 2015-16
budget variances (done Aug. 2017
by majority vote)
Budget Variances to Address:
• Total budgetary variance of $18.2 million attributable
to the following sub funds:
• $5.8 million - O&M Fund favorable
• Both expenditure and revenue variances
• $12.0 million - Sewer Construction Fund favorable
• Revenue variances (excludes expenditure variances
attributable to timing of project spending to be carried
forward)
• $0.4 million - Self -Insurance Fund favorable
• Both expenditure and revenue variances.
4
4
3
2
Potential Variance Uses
A. For O&M, retain in O&M reserve
B. For Sewer Construction, leave variance in Sewer Construction
Reserve
If favorable, to reduce future debt or rate increases
If negative, offset with reduced spending or increased revenue/debt
proceeds
C. Contribute to Rate Stabilization Reserve Account
D. Restore Self -Insurance Fund to targeted balance for FY 2023-24
(after higher expenses anticipated this year)
E. Contribute to OPEB or Pension Prefunding Trusts
Make contribution directly to pension administrator (CCCERA) for
any new UAAL
5
I
Recommended Allocations
($ Millions)
A.
B.
C.
D.
E.
E. F.
_
Pension
Recommended
O&M
SC-CIB
Rate
Self
OPEB
Prefunding CCCERA
Reserve
Reserve
Stabilization
Insurance
Trust
Trust Trust
Allocation of Funds:
Total
Reserve Acct
Year -End Variances
r
Operating
$5.8
$2.1
$0.5
$1.6
$1.6
:�
Capital
P
.
120
120
.
Self -Insurance
0.4
0.4
may.
Total
$18.2
$2.1
$12.0
$0.9
$1.6
$1.6-
1
Budgeted
2023-24UAALLiabilities
$1.0
-
6/30/23 Funding Status
Fully More
than Fully
No Target
Fully
95.4%
99.0%
Funded
Funded
Established
Funded
*Funding status derived from CCCERA's 12/31/22 actuarial valuation.
I
6
Reserve
Status
Rate
i
($ millions)
Stabilization
O&M
Reserve Acct
Reserve
SC-CIB
( including
Pension Assets in
. r
Total t"12
O&M
Reserve
Self
O&M and
OPEB Prefundin 9 CCCERA
}
Variance Bud er
50%CIB
Insurance
Capital)
Trust 19 Trust M
Reserves as of 6/30/23 *
$43.0
$137.8
$9.1(5)
$7.46
$81.3 $ - $492.7
Policy Required Level
37.6
43.2
9_0
-
-
Difference
5.4(4)
94.6(3)
0.1
Proposed Reallocations (3.7) - 0.5 1 - 1 1.6 2.6
Balances After Reallocations LIU 13Z. $9.6 7.4 $82.4 2.6 4 2.7
* Reserve balances per pre -audit financial statements and external sources as applicable.
(1) OPEB trust reported a balance of $78.5 million as of September 30, 2023, most current balance known immediately
prior to the presentation of this position paper to the Board
(2) Actuarial value of assets per 12/31/22 CCCERA valuation.
(3) Balance is higher than the policy required level due to unspent CIB carryforwards (total authorized spending less
actual spending)
(4) Higher balance at 6/30/23 will be reduced over the course of FY 2023-24 through a lower allocation of SSC (consistent
with adopted budget) so that the 6/30/24 balance meets the policy targeted level.
(5) Exceeds $9.0 million reserve requirement. Given $0.4 million in additional legal expenses anticipated for FY 2023-24,
additional $0.5 million allocation will be used to absorb unanticipated budget increases.
7
History of OPEB
($ Millions)
Actuarial Value of Assets
%
Per Bartel 2-year Valuation
Assets0)
Funded0)
7/1/2012
$22.5
22.4%
7/1/2014
33.7
32.4%
7/1/2016
43.8
44.0%
7/1/2018
59.4
56.3%
CaIPERS
Medical Transition
7/1/2019
65.9(2)
82.9%(3)
7/1/2020
69.8
82.0%
7/1/2021
$84.6(2)
96.9%(4)
7/1/2022
$80.3
96.3%
7/1/2023
$81.3(2)
95.4%(4)
(1) Source is Bartel OPEB biennial actuarial report, unless specified otherwise
(2) Market value of assets per PARS OPEB Trust statements as assets for specified year not available in biennial funding valuation.
Accordingly actuarial smoothing was not utilized.
(3) Calculated using PARS OPEB Trust statements and revised 7/1/18 AAL per 2/8/19 Bartel letter preceding transition to CalPERS
healthcare. Bartel did not provide a revised AAL estimate as of 7/1/19 reflecting figures from the transition to CalPERS healthcare
(4) Not actuarially smoothed. Calculated internally using market value of assets per trust statements and projected UAAL per biennial
OPEB "funding" valuations.
F
8
7
M
History of Additional UAAL Payments
($ Millions)
FY
2013-14
2014-15
2015-16
2016-17
2017-I8
2017-I8
2017-I8
2018-19
2019-20
2020-21
2021-22
2022-23
9
Pension
CCCERA
Prefunding
Date of Payment
Trust
Trust
OPEBTrust
Dec 2013
$5.0
Dec 2014
5.0
Dec 2015
2.5
Feb 2017
$2.5
Aug 2017
$3.4
Various
2.5
Various
2.0
Various
2.5
Various
1.25
1.25
Various
$70.8
(12.8)
Various
1.25
2.6
1.60
Various
Subtotal
$83.3
$2.6 *
$9.1
Total Source of Funds
Budgeted
Budgeted
$95.0
Budgeted -Board Decision
Funded by FY 2015-16 variances
Budgeted -Board Decision r,j.
Funded by FY 2016-17 variances
Budgeted -Board Decision
Budgeted $1.25M to OPEB Trust,and $L25M
Variance from FY 2018-19 to Pension 1
Prefunding Trust
Payoff of Pension UAAL (included earnings of
$3.65 M)
Budgeted $1.25M to OPEBTrust
Prior year variance allocated, plus direction
on $1 M already budgeted in FY 2023-24
9
Recommendation on Variance
Funds
Direct staff to utilize the FY 2022-23 variances as follows:
Funding Source and Use
A. Retain O&M budgetary variance in reserves increasing amount of
$2.1 million
SSC directed to sewer construction fund as assumed in the adopted
budget for FY 23-24.
B. Contribute O&M budgetary variance to OPEB Trust
$1.6 million
C. Contribution O&M budgetary variance to Pension Prefunding Trust
$1.6 million
D.Transfer O&M budgetary variance to Self -Insurance Fund
$0.5 million
'
E. Retain minor Sewer Construction revenue and spending variance in
$12.0 million
reserves, which remain above policy required levels.
F. Retain favorable Self -Insurance Fund budgetary variances in reserves
$0.4 million
consistent with FY 2023-24 adopted budget
Total
$18.2 million
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4
679
Questions?
11
0