Consideration and Adoption of Resolution No. 2018-24:  A Resolution of the City Council of the City of Flagstaff, Arizona to request an increase amortization period for the Public Safety Personnel Retirement System for the Police retirement plan.  

The City of Flagstaff (City) contributes to the Public Safety Personnel Retirement Plan for Police (PSPRS-Police) and Fire (PSPRS-Fire).  The CIty is required to make minimum contributions to these plans based on actuarial assumptions that are calculated annually.  The unfunded liability is required to be funded during a closed amortization period.  Recent legislation allows cities to increase the amortization period up to 30 years.  This effectively reduces the minimum contribution required by the City.  At the April Budget Retreat, Council provided direction to request an increase to the amortization period to the PSPRS Board.  The purpose of the change in the amortization period is to allow capacity in the General Fund to provide a 3% merit police sworn officer.  The City is not required to increase the amortization period on all plans.  This resolution request to change the amortization period for PSPRS-Police only to a 30 year period.

Fiscal Year	Amortization Period	Employer Minimum Contribution Rate-Police
2018	20 Years	54.73%
2019	20 Years	59.28%
2019	30 Years-Proposed	47.34%

While this resolution will change the minimum contributions, the City intends to pay excess contributions going forward.  The minimum contribution will be $4.00 million. The City Manager's fiscal year 2019 proposed budget had PSPRS-Police contributions of $4.97 million.  The change in amortization period reduces the minimum requirement by approximately $970,000.  Staff will only reduce the PSPRS-Police budgeted amount by the funding necessary for a 3% merit for sworn officer and pay the remaining about to the PSPRS-Police retirement plan as excess contributions.

The City will be developing and adopting a Pension Funding Policy during the fiscal year 2019.  The current fiscal policy is to pay the City's PSPRS contributions based on the budgeted amount or actual minimum required contribution, whichever is greater.  Generally, the budgeted amount is greater than actual calculations in the fiscal year.

Council Goal:
PERSONNEL: Attract and retain quality staff. Objective- Ensure adequate Public Safety staffing levels

Team Flagstaff Strategic Plan:
Invest in our people: Provide competitive compensation

Regional Plan:
Goal PF.3. Provide high-quality emergency response and public safety services including law enforcement, fire, medical, and ambulance transport service.

During the April Budget Retreat, Council provided staff direction to bring a resolution forward to change the amortization period.

• Approve the Resolution as submitted.
• Amend the Resolution for a shorter amortization period.  Pros: Unfunded liability may be paid down sooner.  Cons: This is a one-time election to change the amortization period.
• Amend the Resolution to included PSPRS-Fire.  Pros: Provides additional capacity in the General Fund.  Cons: Extends the pay down of the unfunded liability for the PSPRS-Fire plan.
• Do not approve the Resolution. Pros: Maintains a shorter period to pay down unfunded liability.  Cons: Requires the city to make the higher contribution.  Eliminates the ability to provide merit increases for sworn police officers.

The opportunity to increase the amortization period for paying the unfunded liability on PSPRS is a one-time request.  The City could not elect to change the amortization once approved by the PSPRS Board. 

The City will be allowed to make excess contributions above the minimums calculated by the annual actuarial calculations.

The Council could choose to increase the amortization period for PSPRS-Fire on the same resolution.  The table below demonstrates the current minimum contribution rates.  
 

Fiscal Year	Amortization Period	Employer Minimum Contribution Rate-Fire
2018	20 Years	75.11%
2019	20 Years-Proposed	84.17%
2019	30 Years	66.85%

A change to a 30 year amortization period would provide approximately $1.0 million of capacity in the General Fund.  The staff does not recommend changing the PSPRS-Fire amortization period this year.

Involve: The budget retreats were open for the public to attend and comment on considerations for the fiscal year 2019 budget adoption.