City Council Meeting - FINAL

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Meeting Date: 06/01/2021  
From: Rick Tadder, Management Services Director

Consideration and Adoption of Resolution No. 2021-24:  A resolution of the Flagstaff City Council adopting the City of Flagstaff Public Safety Personnel Retirement System Pension Funding Policy; delegating authority; and establishing an effective date.
1) Read Resolution No. 2021-24 by title only
2) City Clerk reads Resolution No. 2021-24 by title only (if approved above)
3) Adopt Resolution No. 2021-24
Executive Summary:
The Flagstaff City Council is required to annually adopt a pension funding policy for its funding of the Public Safety Personnel Retirement System ("PSPRS") on or before July 1 pursuant to a new law, Arizona Revised Statutes Section 38-863.01. The policy will also need to be posted on the City's website and updated annually.
Financial Impact:
Council will be adopting the Fiscal Year 2021-22 budget on June 15, 2021, which includes funding for the public safety pension plans as outlined in the pension funding policy.  The FY 2021-22 budget includes pension contributions of $1,069,401 for Fire pension and $980,537 for Police pension.
Policy Impact:
The intent of this policy is to clearly communicate the Council’s pension funding objectives, its commitment to our employees, and the sound financial management of the City, and to comply with Arizona Revised Statutes Section 38-863.01.
Connection to PBB Key Community Priorities/Objectives & Regional Plan:
City Council Goals:
Personnel: Attract and retain quality staff: Evaluate ways to pay down unfunded pension liabilities in a quicker manner.
Regional Plan:
Goal PF.3. Provide high-quality emergency response and public safety services including law enforcement, fire, medical, and ambulance transport service.
Has There Been Previous Council Decision on This:
On June 2, 2020, City Council adopted the PSPRS Pension Funding Policy for FY 2020-21.
During the April 22&23, 2021 Budget Retreat, City Council discussed the pension funding policy.
Options and Alternatives:
  • Adopt the Public Safety Personnel Retirement System Funding Policy as presented.
  • Adopt the Public Safety Personnel Retirement System Funding Policy with amendments.
The City of Flagstaff has two separate pension plans for the City’s public safety staff. While all the PSPRS plans are managed by the State, each plan within PSPRS stands alone by the City and employee group. The two plans for the City are the PSPRS-Fire and the PSPRS-Police. The City and its employees are responsible for the contributions and the City is solely responsible for liabilities of these plans.

The pension funding policy outlines several measures the City is taking to maintaining funding ratios above 100% in our PSPRS plans, including:
  • Make the City's annual estimated contribution based on the City budget near the beginning of each fiscal year to allow PSPRS to invest those contributions earlier for enhanced potential investment earnings.  This allows the pension system to earn investment income at a higher rate than the City.  
  • Make City contributions for public safety employees participating in the Deferred Retirement Option Plan (DROP), even though the City is not required to do so.  This allows for a stable level of budgeting versus annual changes as employees on DROP increase and decrease.  This will provide an additional $155,000 one-time funding in FY 2021-2022.
  • Budget and pay the Normal Cost of the pension plans.  This is required by the pension plan.
  • Maintain these policies until we reach 105% funding status.  A funding status over 100% is important as it allows us to be in a better position when there are market and actuarial changes.  

During the April Council Budget Retreat, Council approved staff's recommendation for the pension funding policy. 
Community Involvement:
Inform: The pension funding policy will inform our community of the policy decisions made by the Council to address the PSPRS unfunded pension liability.

Involve: The community was invited to the annual budget retreats and is able to provide comments.
Res. 2021-24
PSPRS Pension Funding Policy


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