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Walnut Creek adopts pension trust use policy to smooth expected CalPERS cost increases
Summary
Council adopted a policy to guide selective use of the city’s Section 115 pension trust to mitigate rising CalPERS payments over the coming decade while preserving flexibility and requiring year-end assessment of need.
The Walnut Creek City Council on March 18 adopted a policy guiding withdrawals from a Section 115 pension trust established with prior council action. The council voted unanimously to accept staff and consultant advice and adopt the proposed Pension Trust and Reserve Use Policy.
Kirsten Lacasse, administrative services director, told the council the presentation followed the city’s 10-year general fund forecast and work with NHA Advisors. Mike Meyer of NHA explained that Walnut Creek faces a rising unfunded accrued liability (UAL) with CalPERS — about $155 million at the time of the presentation — and that CalPERS payment schedules create a “mountain peak” of higher employer payments over the next decade. Meyer said the city’s Section 115 trust currently holds roughly $29 million and that the trust offers flexibility, different investment options than general reserves and the ability to smooth CalPERS payments during high-cost years.
The policy adopted by the council establishes several guiding principles: withdrawals are intended for deficit years to maintain existing service levels (not to expand ongoing services); withdrawals must be based on documented financial need and use the lesser of (a) budgeted withdrawals or (b) actual year-end needs; the city should prioritize not relying on one-time funds for ongoing costs; general fund surpluses may be deposited into the trust; continue prepaying CalPERS when cost-effective; and staff should aim to use the trust in a way that helps pension costs decline systemically so the trust lasts through the expected peak years (staff recommended preserving resources through roughly FY 2034).
Council members emphasized prudence and that the trust was created precisely to be available in years when pension-related cost increases would otherwise force material service reductions. Council member Francois called the trust “a prudent decision” and said predecessors’ actions to seed the trust had placed the city in a stronger position. The policy will be implemented annually; staff and the finance committee will review trust withdrawals and coordinate investment strategy with the city’s investment advisors.
The council approved the resolution establishing the policy by roll call vote: Mayor Cindy Darling, Mayor Pro Tem Wilk, Council members Silva, Divini and Francois all voted aye.
