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Buellton Council approves $262,592 CalPERS payment to reduce pension liability
Summary
After a presentation from pension consultants, the Buellton City Council approved budgeting a $262,592 payment — including a $175,000 additional discretionary payment — aimed at lowering the city's CalPERS unfunded accrued liability.
The Buellton City Council voted unanimously on Jan. 23 to budget a $262,592 payment to CalPERS for fiscal year 2025–26, including a proposed $175,000 additional discretionary payment to reduce the city's unfunded accrued liability.
The vote followed a presentation by Derek Lee of GovInvest and finance director Chanel Zamora explaining the city's pension funding position, the role of investment returns and cost-of-living adjustments in driving liability, and options for reducing long-term costs. Lee said recent investment returns improved the city's funded percentage and that a recurring additional payment would materially lower the city's unfunded liability and future annual contributions.
Why it matters: Reducing the unfunded accrued liability (UAL) lowers the annual amortization payment the city must make to CalPERS and can save the city money over decades. The council's decision sets the budget direction for the next fiscal period and affects the city's long-term pension obligations.
In the presentation, Lee summarized pension basics — employer and employee contributions plus investment returns fund retiree benefits — and explained that CalPERS assumptions (notably the long-term investment return and wage growth) affect required contributions. He reported a 9.3% investment return for fiscal 2023–24 and noted the system's long-term assumed return of 6.8%. Lee modeled scenarios showing that the one-time additional contribution of $175,000 (part of the $262,592 total UAL payment the council approved) would lower the city's UAL by roughly $500,000 in the model and reduce projected annual payments by about $20,000 compared with not making that payment.
Council members asked how the city should hold funds (internal reserve vs. direct CalPERS payment) and whether a 115 pension trust made sense for Buellton. Lee and Zamora explained that direct payments to CalPERS compound the benefit of reducing UAL, and that for a city of Buellton's size the administrative costs of a 115 trust historically made it less attractive. Zamora clarified the recommended total UAL payment and that the increase would be budgeted across the general fund and enterprise funds (water and wastewater) per existing allocation methods.
The motion on the floor — to budget a $262,592 UAL payment for FY 2025–26 (this includes the staff-recommended $175,000 additional discretionary payment) — passed with these votes recorded: Mayor David Silva, Aye; Council Member Hornick, Aye; Council Member Sanchez, Aye; Vice Mayor Alicia Lewis, Aye.
Council and staff said the payment will be included in the biannual budget and that staff will return with implementation details as part of normal budget work. Finance staff and the consultant recommended continued monitoring of CalPERS assumptions (including any change to the investment return or wage-growth assumptions) and suggested a planned, consistent contribution approach as the most reliable way to manage UAL volatility.
Ending: The council directed staff to include the approved UAL payment in the FY 2025–26 budget and to continue regular monitoring and reporting on CalPERS valuations and related bargaining impacts.
