Title
Staff Report for Discussion on the Selection of a Service Provider and the Development of Investment Guidelines for the City's Section 115 Pension Trust
Staffreport
SUMMARY AND RECOMMENDATION
Staff recommends that the Finance Committee (Committee) review the draft Investment Guidelines Document and recommend investment strategies for the City's Section 115 Trust. Staff also recommends that the Committee review the proposal submitted by PARS.
BACKGROUND
At the April 12, 2021 Council meeting, the City Council directed staff to establish a Section 115 Pension Trust (Trust) to buy down the City's unfunded pension liability and stabilize costs in the long run. The Council directed staff to work with the Committee to finalize the selection of a service provider and develop an investment policy for the Trust.
Following the April meeting, PARS submitted a formal proposal to the City and HighMark provided the draft Investment Guidelines Document for the Moderately Conservative investment strategy. Both documents are attached to this staff report.
To recap, a Section 115 Trust offers the following benefits:
* Generate investment income to pay for future pension contributions;
* Flexibility to tailor the investment strategy to meet the City's objectives and risk tolerance;
* Potential to improve the City's bond rating; and
* Flexibility to access Trust assets to offset unexpected increases in pension costs or decreases in revenues due to economic downturns.
Establishing a Pension Trust will enhance investment returns in the long run and provide the City flexibility to withdraw funds from the Trust as needed. Government Code Section 53216 allows assets in a Pension Trust to be invested in any form or type of investment deemed prudent. Investment restrictions that apply to the City's pooled investments do not apply to the Pension Trust. For example, funds in a Pension Trust can be invested in both equity (stock and shares issued by a company) and fixed income ...
Click here for full text