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The city of Pleasanton’s independent actuary will be presenting their most recent analysis report on the city’s pension and retirement trust fund to the City Council on Tuesday along with possible scenarios where the city could use some of that money for “budgetary relief.”
Even though the staff report states that the city would ideally not like to draw from its pension trust fund, the “city’s current overall budget situation may reasonably lead to an alternative path without drastically risking the benefits of the plans.”
In 2018, the city established its Section 115 Pension Trust in 2018 in order to address its unfunded retiree medical and pension liabilities, which exceeds $200 million.
The trust fund “enables the city to set aside funds and earn greater returns than the city’s General Fund,” the March 4 staff report states.
“These assets are set aside to stabilize pension costs in future years,” the report reads.
According to the city, the total market value for the trust fund at the end of the 2023-24 fiscal year was $51.1 million — the trust fund also serves as a “buffer for rising pension costs, and has been prudently managed to avoid depleting funds prematurely.”
Last year, one of the top critiques made by opponents of the failed half-cent increase sales tax measure — Measure PP — was that the city should have looked at possibly drawing from that fund in order to address the ongoing budget challenges, which include a projected $10 million deficit every year for the next few years.
According to the city’s website, financial advisors — including an actuarial consultant — previously recommended that the city “refrain from using these funds in the near term to bridge the budget deficit,” because doing so could “hinder the City’s ability to meet future pension obligations.”
And while Tuesday’s presentation from Foster & Foster Actuaries and Consultants will provide several reasons why the city should ideally not draw from the fund, the consultants will also provide alternate pathways that do include withdrawing as much as $4.1 million from its CalPERS supplemental trust fund during the 2025-26 fiscal year.
According to the staff report, the council could go with this path “without drastically risking the benefit security of these plans.”
“Using the supplemental trust in this way would be consistent with the purpose of using it to level out contributions,” according to the staff report. “It is important, though, to keep in mind the projected trajectory of contributions, even if CalPERS meets their assumptions.”
Another scenario shows the city transferring about $2 million from the supplemental trust to CalPERS and revisiting plan funding in the next year or two.
The City Council meeting is scheduled to begin at 7 p.m. Tuesday (March 4). The full agenda can be accessed here.
In other business:
* During a closed session meeting, the council will be discussing potential litigation in regards to the city’s sixth Housing Element, which is being called out by a Bay Area coalition for allegedly not being compliant with state law.
According to a Nov. 27, 2023 letter from Farella Braun + Martel — a law firm based in San Francisco — the Housing Action Coalition is planning on taking action against Pleasanton’s 2023-31 Housing Element, which the City Council adopted that same year. The coalition, also based in San Francisco, advocates for more housing at all levels of affordability, according to its website.
The housing document, which outlines zones in the city designated for housing, had previously been deemed non-compliant before staff addressed several concerns to gain state approval.
In the Housing Action Coalition’s notice, the group states that the city’s Housing Element violates a couple of government code sections and that the document’s inventory of housing sites specifically “lists sites with existing uses that create an obstacle to residential development.”
“The city’s methodology did not take these impediments into account and did not engage in a proper consideration of other required statutory factors,” the 2023 letter states. “With respect to sites claimed to accommodate the lower income categories of the RHNA, the City Council’s findings were not supported by substantial evidence that the existing use was likely to discontinue during the planning period.”
That’s why the 2023 letter requests that the city adopt a new Housing Element that complies with state law — the letter also stipulates that the coalition’s action “will also request an award of costs and attorney’s fees.”
Tuesday’s closed session report for the 4 p.m. meeting does not include additional information as to the potential litigation.
* During the regular council meeting, city staff will be presenting an overview of the city’s General Fund Baseline Budget projection that will be used for framing budget development for fiscal years 2025-26 and 2026-27 along with the city’s preliminary 10-year Financial Forecast.
This item was previously continued from the Feb. 20 council meeting.
According to the staff report, the baseline budget represents the “extension of the current year’s service levels and budget.”
“The baseline budget will be further refined, considering input from the City Council, the Budget Advisory Committee, the community and the final proposals submitted by City departments, to develop a proposed (fiscal year) 2025-2027 City budget which, along with an updated long-term forecast, will be presented to the City Council in May 2025,” according to the staff report.
Staff will also go over the two forecast scenarios they have developed given the current economic climate.
Some of the key fiscal assumptions used to develop the city’s forecast include property and sales tax increases (especially with the recent opening of the new Costco in town), operating revenue increases and salary and benefit increases.
According to the staff report, the first scenario “assumes the city’s revenues will continue to grow at a measured pace, with the local economy experiencing no major downturn during the 10-year period,” while the second scenario assumes a recession in 2027 that will impact the city’s major revenue categories.
In the recession scenario, staff said sales tax revenue is expected to decrease by 5% in 2027 and 2% the following year while other taxes will decrease by 2% between 2027 and 2029
“The city’s expenditures are expected to continue outpacing revenues for the next several years due to rising operating costs and revenue limitations,” according to the staff report. “Based on the underlying assumptions, the baseline scenario forecast projects annual deficits of $10.4 million to $16.9 million.”
* The council will be holding a public hearing about a resolution that declares weeds, dirt rubbish and refuse on or in front of specific properties as public nuisances.
The item also includes setting a formal public hearing for April 15 “regarding the abatement of these nuisances and order the abatement thereof by May 31, 2025.”
“Staff will begin notifying property owners upon adoption of the resolution,” according to the staff report. “Abatement not completed by property owners prior to May 31, 2025, will be subject to enforcement by the City’s contractor.”
* During a special workshop meeting at 5 p.m., the council will be looking to accept a financial plan analysis of the city’s Water Enterprise Fund, which staff say is the first step in a three-step process for determining potential future water rate increases.
“This report presents the analysis results based on which three primary scenarios were developed: stabilize, enhance, and accelerate,” according to the staff report. “Staff, and the Pleasanton Water Advisory Group, recommend the City Council accept the financial analysis findings and approve the enhanced scenario as the preferred approach for the 2026-2029 water rate study.”
Keeping the full value of the OPEB trust intact for as long as possible provides maximum benefit to the city’s finances. “Alternative paths” really just means for the city to use these funds earlier than is necessary.
The 115 trust was never intended to be a savings account. Previous council members who established the trust have confirmed this. Use the trust as intended to help offset pension costs by prudently drawing upon it.