Budget and Finance Commission
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AGENDA ITEM: 3.
David Gephart, Finance
PRESENTATION, DISCUSSION, AND POTENTIAL RECOMMENDATION ON PSPRS LIABILITY FUNDING OPTIONS
At this meeting, the Town PSPRS Consultants will present a new option requested by the Budget and Finance Commission at the March 9 meeting, while removing four of the six options presented on March 9 that were deemed less desirable from consideration. The new option includes a combination scenario involving a debt issuance, a significant one-time contribution from reserves, and a possible minimal additional annual contribution separate from the Annual Required Contribution that also meets policy funding targets and achieves objectives. Additionally, net present value calculations will be presented on the three suggested options.
BACKGROUND OR DETAILED INFORMATION:
At the March 9 Budget and Finance Commission Special Meeting, the Commission was presented with six different funding options by the Town's PSPRS consultants. Through discussion, it was determined that three of these options did not accomplish the objective of achieving 100% funding by 2036, while a fourth required too large of an up-front payment ($15 million) and jeopardized the Town's short-term financial flexibility. The Commission directed staff and its consultants to bring back two additional options for consideration at the March 16 regular meeting. These two options are the following: 1) a $5 million up-front payment from reserves, with an additional annual contribution in excess of the Annual Required Contribution (ARC) that achieves funding targets per policy; and 2) a combination scenario involving a pension obligation debt issuance, a significant one-time payment from reserves, and a potential annual payment in excess of the ARC that is minimized.
After discussion, it was decided that the $5 million up-front contribution plus a roughly $2 million annual contribution in addition to the ARC was not going to be either economically or politically sustainable through 2036. Thus, it will not be presented.
Given the above, the Town PSPRS consultants are proposing three options for Commission consideration:
$2.5 Million annual contribution in addition to the ARC
$10.0 Million one time contribution from reserves plus an additional $1.5 Million annual contribution over and above the ARC
A combination of a significant one-time contribution from reserves, a debt issuance, and a minimal annual contribution over and above the ARC
Present value calculations will be provided with each alternative.
I move to recommend Option(s) _, _, _ for Town Council consideration and approval at their April 7 Town Council meeting.
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