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Payson council is briefed on PSPRS unfunded liability; staff to explore accelerating payments and financing options
Summary
Town finance staff told the Payson Common Council on April 1 that the PSPRS unfunded liability is roughly $19 million and that projected required PSPRS payments could rise to about $5.1 million in FY26, prompting council interest in options to accelerate pay-downs.
Town finance staff and the town manager reviewed Payson—s Public Safety Personnel Retirement System (PSPRS) unfunded liability and current funding policy at the April 1 work study and discussed options to reduce the balance more quickly.
Numbers presented - Present-value OPEB and other actuarial figures were discussed elsewhere in the session; for PSPRS the presentation showed a funded ratio near 59.7% and an unfunded liability in the range of about $19 million (present value at the time of the meeting). Staff reported town PSPRS payments in recent years of roughly $2.5M (2021), $3.0M (2022), $3.2M (2023), and about $3.7M (2024). - Staff projected the PSPRS required contribution for FY26 at approximately $5.1M based on current actuarial assumptions and budgeted salary/position estimates; that figure does not include the town—s separate annual lump-sum payment that has previously been made to reduce the unfunded balance (the town had been adding a $600,000 supplemental payment in recent years under its funding policy).
Background and policy - The town discussed a voter-authorized (and subsequently revised) local transaction-privilege-tax step intended in prior years in part to help fund PSPRS obligations; council members recalled that a previously adopted 10-year sunset on a local increase was later repealed and that the town—s funding policy has been to direct supplemental payments to reduce the unfunded liability.
Options staff presented and council reaction - Options to reduce the unfunded liability faster included: (1) making additional lump-sum payments from available fund balance, (2) paying PSPRS-calculated contributions for vacant positions (the town sometimes budgets but does not pay the PSPRS contribution for unfilled slots), (3) contributing on behalf of members participating in DROP (deferred-retirement-option programs), and (4) exploring low-cost borrowing (bond or loan) in periods with favorable rates to buy down the unfunded balance. - Several council members expressed support for accelerating payments and for exploring a one-time financing approach if market rates are favorable. Staff said they would include higher supplemental payment scenarios in the FY26 budget materials and that they would explore whether a financing transaction (bond/loan) would be advantageous when rates are attractive.
Why it matters: PSPRS costs are a growing component of Payson—s personnel budget; projected annual payments rising into the multiple millions could crowd out other priorities. Accelerating pay-downs requires trade-offs against other capital and operational needs.
Next steps: Staff will present scenarios showing the budgetary impact of larger supplemental payments, calculate the cost and benefits of applying year-end fund balance to PSPRS, and report on financing options and timing for council consideration during the FY26 budget process.
