TO:
Honorable Mayor and Members of the City Council
THROUGH:
Mark Danaj, City Manager
FROM:
Bruce Moe, Finance Director
Henry Mitzner, Controller
SUBJECT:Title
Update on CalPERS Investment Results for Fiscal Year 2015-2016; Impacts to the City's Pension Contribution Rates and Economic Forecasts (Finance Director Moe).
RECEIVE REPORT
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council receive a report on CalPERS' Fiscal year 2015-2016 investment results and the impacts on the City's pension contribution forecasts and budget.
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FISCAL IMPLICATIONS:
Fiscal implications are described below.
BACKGROUND:
CalPERS reported its preliminary investment returns for FY 2015-2016 on July 18, 2016. The total return after expenses across all investment classes was 0.61%. This is below the actuarial assumed rate of return of 7.5%. Fiscal Year 2015-2016 results as well as prior years' results were as follows:
FY15/16 0.61%
FY14/15 2.4%
FY13/14 18.4%
FY12/13 12.5%
FY11/12 1.0%
FY10/11 20.7%
Historical annual performance (as of June 30, 2015) has been as follows:
Three Year Period 10.9%
Five Year Period 10.7%
Ten year Period 6.2%
Twenty Year Period 7.8%
Based on CalPERS' most recent results, the Mayor requested City Council hold a special study session to gather facts and understand possible implications of the 0.61% investment return, and to address the following questions:
1. What is the impact on our unfunded pension liability?
2. How does this impact our five year forecast?
3. If this creates a budgetary shortfall, where does the money come from?
4. What other impacts does, or might this, precipitate?
DISCUSSION:
CalPERS' return of 0.61% for Fiscal Year 2015-2016 falls below the 7.5% actuarially assumed rate of return. As such, it equates to underperformance of the goal by 6.89% for this particular fiscal year.
The CalPERS investment returns are a key factor in the emp...
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