city of vallejo - 050610 - comprehensive annual financial report

8/4/2019 City of Vallejo - 050610 - Comprehensive Annual Financial Report

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CITY OF VALLEJOComprehensive Annnal Financial Report

Notes to Financial StatementsFor the Year Ended June 30, 2009

I NOTE 12 - POST-EMPLOYMENT BENEFITSA. Post Retirement Health Benefits - City

The City has implemented the provisions of Governmental Accounting Standards Board Statement No.45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other ThanPensions. This Statement establishes unifonn financial reporting standards for employers providingpostemployment benefits (OPEB). The provisions of the statement are applied on a prospective basis.Employees and their dependents are eligible for post-retirement health benefits if they retire directly fromthe City under CalPers after attaining the age of 50 with five years of service or disability. The City paysthe retiree and eligible dependent premiums np to benefit level established for each employeeorganization. Significant benefit changes have been negotiated during the year ended June 30, 2009 andfurther changes have been subsequently negotiated or imposed.The following is a summary of benefits by employee group as of 2009June 30, 2009, along withsubsequent changes:

Employee GroupVallejo Police Officers Association

International Association ofFire Fighters

International Brotherhood ofElectrical WorkersConfidential, Administrative,Management, and ProfessionalEmployee AssociationUnrepresented Employees

Benefit atJune 30, 2009Up to 100% of KaiserBay Area PremiumUp to 100% of PlanElection

Up to 100% of KaiserBay Area PremiumUp to 80%of KaiserBay Area Premium

Up to 100% of PlanElection

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Changes Subsequent to June 30, 2009Contractual Imposed

Up to 75% of Kaiser BayArea Premium, if retiredprior to July 1, 2000Up to $300 per monthif retired on or afterJuly 1,2000

Up to $300 per month

Up to 75% of KaiserBay Area Premium


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CITY OF VALLEJOComprehensive Annnal Financial ReportNotes to Financial StatementsFor the Year Ended June 30, 2009

INOTE 12 - POST-EMPLOYMENT BENEFITS (Coutinned)Funding Policy and Actuarial AssumptionsThe City's policy is to fund these benefits on a pay-as-you-go basis. The annual required contribution(ARC) was determined as part of a June 30, 2009 actuarial valuation using the entry age normal actuarialcost method. This is a projected benefit cost method, which takes into account those benefits that areexpected to be earned in the future as well as those already accrued. The actuarial assumptions included(a) 4.5% investment rate of return, (b) 3.25% projected annual salary increase, and (c) 4.50% to 9.30%health inflation increases. The actuarial methods and assumptions used include techniques that smooththe effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets.Actuarial calculations reflect a long-term perspective and actuarial valuations involve estimates of thevalue of reported amounts and assumptions about the probability of events far into the future.Actuarially determined amounts are subject to revision at least biannually as results are compared to pastexpectations and new estimates are made about the future. The City's OPEB unfunded actuarial accruedliability amounted to $135.7 million and is being amortized as a level percentage of projected payrollusing a 30 year amortization period.The ARC and OPEB unfunded actuarial accrued liability have been computed based upon contractualbenefit obligations at June 30, 2009. As noted above, certain benefit reductions have been negotiated orimposed subsequent to June 30, 2009.

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CITY OF VALLEJOComprehensive Annual Financial Report

Notes to Financial StatementsFor the Year Ended June 30, 2009

INOTE 12 - POST-EMPLOYMENT BENEFITS (Continued)Generally accepted accounting principles pennit assets to be treated as OPEB assets and deducted fromthe Actuarial Accrued Liability when such assets are placed in an irrevocable trust or equivalentarrangement. During the fiscal year ended June 30, 2009, the City contributed $3,668,781 for pay-asyou-go premiums to the Plan. No assets have been placed in trust or otherwise set aside for thisobligation. As a result, the City has calculated and recorded the Net OPEB Obligation, representing thedifference between the ARC, amortization and contributions, as presented below:

Annual required contribution (ARC)Amortization on tbe Net OPEB LiabilityInterest on the Net OPEB LiabilityAdjustment to annual required contributionAnnual OPEB Cost

Contributions made:City portion of current year premiums paidContributions less tban tbe ARCNet OPEB Obligation at June 30, 2008Net OPEB Obligation at June 30, 2009

Retiree HealthBenefits InternalService Fund -GovernmentalActivities$9,749,000

(442,276)298,258(144,018)9,604,982

3,668,7815,936,2016,627,952

$12,564,153

The City's annual required contributions and actual contributions for the last two fiscal years are setforth below (in thousands):ofOPEB NetOPEB

Annual Actual Cost ObligationFiscal Year OPEB Cost Contribution Contributed (Asset)6/30/2008 $9,796,000 $3,168,048 32% $6,627,9526/30/2009 9,604,982 3,668,781 38% 12,564,153

The Schedule of Funding Progress presents trend information about whether the actuarial value of plan assetsis increasing or decreasing over time relative to the actuarial accrued liability for benefits. Trend data fromthe December 22,2009 actuarial study is presented below (in OOO's):OverfundedOverfunded (Underfunded)Entry Age (Underfunded) ActuarialActuarial Actuarial Actuarial Actuarial Liability asValuation Value of Accrued Accrued Funded Covered Percentage ofDate Assets Liability Liability Ratio Payroll Covered Payrol

6/30/2008 0 $135,400 (135,400) 0.00% $44,287 (305.7%)6/30/2009 0 135,665 (135,665) 0.00% 45,726 (296.7%)

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CITY OF VALLEJOComprehensive Annual Financial ReportNotes to Financial StatementsFo r the Year Ended June 30, 2009

INOTE 12 - POST-EMPLOYMENT BENEFITS (Continued)B. Post Retirement Health Benefits - VSFCD

1. Plan DescriptionThe District's defined benefit postemployment healthcare plan, Public Agency Post-Retirement Health CarePlan (the Plan), provides medical benefits to eligible retired employees and their beneficiaries. The PublicAgency Retirement System (PARS) administers the Plan, an agent mUltiple-employer trust arrangementestablished to provide economies of scale and efficiency of administration to public agencies that holdassets used to fund OPEB obligations. Plan benefits were established in accordance with Board policy andMemorandums of Understanding for respective employee groups, and may be amended by the Board ofTrustees. PARS provides an armual financial report for the aggregate Plan that may be obtained bycontacting PARS directly.2. Funding PolicyThe Plan is fully funded by employer contributions with no requirement for matching or otherwise prorata employee contributions. The District is required to contribute the annual required contribution(ARC), an amount actuarially determined in accordance with the parameters ofGASB Statement Number45 (GASB 45). The ARC represents a level of funding that, if paid on an ongoing basis, projects to coverthe normal cost each year and amortize unfunded actuarial liabilities, if any, over a period not to exceedthirty years. The ARC is subject to change with each actnarial valuation date performed no later thanevery three years.3. Annual OPEB CostThe District's annual OPEB expense (the ARC) and the amount paid for the fiscal year 2008-2009amounted $1,053,489 and $837,356, respectively. The District's annual OPEB cost, the percent paid,and the net OPEB obligation for the fiscal year 2008-2009 was as follows:

PARS Public ASpncX Post-Retirement Health,Care PlanFiscal Actuarial Annual Percent Inc (Dec) in NetOPEB NetOPEBYear Ended Valuation OPEB Contributions NetOPEB Obligation Obligation

June 30 Date Cost Paid Obligation Beg of Year End of Year2009 11112007 $1,053,489 79.5% $216,133 $252,490 $468,6232008 111/2007 1,053,489 76.0% 252,490 0 252,490

Note: Disclosure of annual OPEB cost, percent contributed, and net OPEB obligation is required for thecurrent fiscal year and each of the two preceding fiscal years. Three-year data is currently not availableand will be shown when three year data becomes available. The District's post-retirement health careplan was implemented prospectively for the fiscal years 2007-2008, the transition year. Accordingly,there was zero net OPEB obligation at transition.

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CITY OF VALLEJOComprehensive Annnal Financial ReportNotes to Financial StatementsFor the Year Ended Jnne 30, 2009

INOTE 12 - POST-EMPLOYMENT BENEFITS (Continned)4. Actuarial Methods and AssumptionsProjections of benefits for financial reporting purposes are based on the substantive plan as understoodby the employer and eligible Plan members, and includes the actuarial present value of all Plan benefitsallocated between the periods before and after the valuation date. The present value of Plan benefitsearned prior to the valuation date is called the actuarial liability. The present value of Plan benefits to beearned after the valuation date is called the present value of uture normal costs. Actuarial assumptionsinclude a 7.5% investment return, a medical trend rate beginning at II% declining to 5% after 10 years,and a 3.25% inflation rate. Actuarial methods may also include teclmiques that are designed to reduceshort-term volatility in actuarially accrued liabilities and actuarial assets, consistent with the long-termperspective of the calculations.The cost method for valuation of liabilities used for valuation of the District's Plan dated January 1,2007is the entry age normal method. Under the entry age normal actuarial cost method, an individual entryage normal cost ratio is detennined for each participant by taking the value of the participant's projectedfuture benefits and dividing it by the value of his expected future salary. This ratio for each participant isthen multiplied by the present value of the participant's future salary. The sum of the values of all activeparticipants is the Plan's present value of future normal costs. The excess of the present value of Planbenefits over the present value of future normal costs is the actuarial liability. The difference betweenthe actuarial liability and the value of the Plan assets is the unfunded actuarial liability.The unfunded actuarial liability is amortized over a period of 30 years from the valuation date (closedbasis) with payments increasing by a payroll growth assumption of 3.25% per annum. Payments areassumed to be made throughout the year. Subsequent gains and losses and benefit improvements will beamortized over the same remaining period.5. Funded Status and Funding ProgressActuar.ial valuations of an ongoing plan involve estimates of the value of reported amounts andassumptions about the probability of occurrence of events far into the future. Examples includeassumptions about investment return, future employment, mortality, and the healthcare cost trend.Amounts determined regarding the funded status of the Plan and annual required contributions aresubject to change when actual results are compared with past expectations together with new estimatesabout the future. Plan assets are stated at current market prices. The table below present funded statusinformation of the Plan for the current year, and is as follows:

Entry Age Unfunded UAALasaActuarial Actuarial Actuarial Liabilityl Annual Percent ofValuation Accrued Value of (Excess Funded Covered CoveredDate Liabili!;y Assets Assets2 Ratio Pa;trol1 Payroll111/2007 $10.418.127 $972,186 $9,445,941 9.3% $6,764,563 139.6%

Note: Three-year funding progress data is show as required supplementary information after the notes tofinancial statements.

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CITY OF VALLEJOComprehensive Annual Financial ReportNotes to Financial Statements

Fo r the YearEnded June 30, 2009INOTE 13 - NET ASSETS AND FUND BALANCES

A. Net Assets - Statement ofNet AssetsNet Assets is the excess of all the City's assets over all its liabilities, regardless of fund. Net Assets aredivided into three captions. These captions apply only to Net Assets, which is detennined only at theGovernment-wide level, and are described below:Invested in Capital Assets, net of related debt describes the portion of Net Assets which is represented bythe current net book value of the City's capital assets, less the outstanding balance of any debt issued tofinance these assets.Restricted describes the portion of Net Assets which is restricted as to use by the terms and conditions ofagreements with outside parties, governmental regulations, laws, or other restrictions which the City carmotunilaterally alter.Unrestricted describes the portion ofNet Assets which is not restricted to use.

B. Fund Balance - Governmental Funds Balance Sheet1. Reservations

Reserves are restrictions placed by outside entities, such as other governments, which restrict theexpenditures of the reserved funds to the purpose intended by the entity which provided the funds, ornon-current balances that do not represent available, spendable resources. At June 30, 2009, reservesincluded:Reserved for encumbrances represents the portion of fund balance set aside for open purchase orders.Reserved for materials, parts, supplies, prepaids, uotes and loans and advances are the portions offund balance set aside to indicate these items do not represent available, spendable resources eventhough they are a component of assets.Reserved for laud held for redevelopment is the carrying value of property held by the RedevelopmentAgency, which is reserved since it is not an available spendable resource.Reserved for debt service represents assets that are restricted pursuant to long-tenn debt agreements.The balance sheet also reports program restrictious which represent the balance of restricted fundsthat have been fonnally appropriated for future projects and the unappropriated portion that is availablefor future spending.

2. DesignationsDesignations reflect future spending plans or concerns about the availability of future resources.

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CITY OF VALLEJOComprehensive Annual FinancialReportNotes to Financial StatementsFor theYear Ended June 30, 2009

INOTE 13 - NET ASSETS AND FUND BALANCES (Continued)C Deficits

The funds below had fund deficits or net asset deficits at June 30, 2009:Proprietary Funds:MarinaGolf

TotalNon-Major Governmental Funds:Redevelopment Agency Debt Service Fund

TotalInternal Service Funds:

InsuranceRetiree Health BenefitsBankruptcy ClaimsTotal

D, Expenditures in Excess ofBudgetThe funds below had expenditures in excess of budgets:

General Fund:Community Development

Housing Authority FundNon-Major Funds:Special Revenue Funds

Mare Island CFD 2002Redevelopment Affordable Housing

$1,672,197854,218

$2,526,415

$4,373,599$4,373,599

$2,951,24712,564,1531,384,017

$16,899,417

$31,589

2,018,261

580,98944,740

Sufficient resources were available within the funds to finance these excesses.INOTE 14 - SELF-INSURANCE PROGRAM

The City of Vallejo manages risk by participating in the public entity risk pools described below and byretaining certain risks.Public entity risk pools are fonnally organized and separate entities established under the Joint Exercise ofPowers Act of the State of California. As separate legal entities, those entities exercise full powers andauthorities within the scope of the related Joint Powers Agreements including the preparation of annualbudgets, accountability for all funds, the power to make and execute contracts and the right to sue and besued. Each risk pool is governed by a board consisting of representatives from member municipalities.Each board controls the operations of the respective risk pool, including selection of management andapproval of operating budgets, independent ofany influence by members beyond their representation on thatboard. Obligations and liabilities of these risk pools are not the City's responsibility.

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city of vallejo - 050610 - comprehensive annual financial report

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