Payson council hears detailed PSPRS briefing as town seeks to reduce pension shortfall

Clark Partridge, an executive consultant with the Public Safety Personnel Retirement System (PSPRS), walked Payson Common Council members through the actuarial valuation and how the system's unfunded actuarial accrued liability is calculated.

"The money comes from contributions and from investment returns on those assets," Partridge said, summarizing the basic pension funding equation and the role of actuarial assumptions in projecting benefit cash flows.

Partridge explained that actuaries estimate the present value of future benefits, split that amount into the portion already earned (the actuarial accrued liability) and the part to be earned in the future (normal cost), then compare the accrued liability to plan assets. If assets lag liabilities, an unfunded portion is amortized over a set period.

Why it matters: Payson's police plan funded ratio rose from about 50.8% to 54.4% in the most recent valuation, Partridge said. He credited a mix of investment returns that tracked the actuarial assumption (7.2%), an additional town contribution in fiscal 2024 of $600,000 (split $450,000 police/$150,000 fire), and smoothing of investment gains and losses.

Town staff and several council members pressed on the sources of the extra contribution and how the local transaction privilege tax (the so-called 0.88 cent portion) is applied. "The town had selected a 20-year amortization period" for the original liability created under earlier pension reforms, Partridge said, and recent actuarial gains, salary patterns and plan changes have been layered into shorter, 15-year amortization schedules for new liabilities.

Sheila (town finance staff) clarified the town's practice: the council has, as part of recent budgets, adopted an annual additional contribution (most recently $600,000 total) beyond the formal actuarial required employer contribution; $450,000 of that was applied to police and $150,000 to fire. She said the 0.88 portion of the town's transaction privilege tax is not sufficient on its own to fund the additional payment and is only a partial revenue source.

Councilmembers asked whether salary increases, recruitment of higher-paid transfers and the way hires change average wage history were materially increasing the liability. Partridge said those employer-level pay decisions do increase the actuarial liability because retirement calculations are tied to members' average salary histories. "If you give them a pay increase that increases their average salary over their career, that creates liability the town will carry," he said.

Partridge also described PSPRS's investment smoothing (seven years for gains and losses) and the effect of the employer's choice of amortization period on the annual unfunded amortization payment. He noted that, nationally, some employers chose financing or additional up-front payments to accelerate paydown, which can improve funded status faster but requires operating resources.

Nut graf — why readers should care: Payson is part of a common, statewide issue: public-safety pensions that lost actuarial footing in the past and are being addressed by a mix of higher employer contributions, occasional one-time payments and investment returns. The town's choices on extra annual payments, salary-setting and how to allocate local sales-tax revenue affect property taxpayers, services and the town's long-term budget.

What council said and next steps: Councilmembers asked staff for clearer reports tying the 0.88 TPT proceeds to pension payments in budget documents and for multi-year scenarios showing how different additional-contribution levels change the funded ratio. Partridge said the actuary recalculates contributions each year, and the town's elected leaders can elect policy choices — extra annual payments, financing, or different amortization periods — that alter the pace of paydown.

Ending — practical takeaways: The presentation left the council with concrete follow-ups: staff will provide a recent history of 0.88 revenues and an illustration of multi-year funding scenarios, and the actuarial team will be available for additional briefings as staff refines budget proposals.