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Vacaville staff report improved pension investment returns but rising OPEB costs; council approves midyear budget actions and phone contract
Summary
Finance and HR presented midyear results showing CalPERS and PARS investment gains improved funded ratios, while retiree medical (OPEB) liabilities rose due to healthcare‑cost assumptions. Council approved $395,292 in midyear budget augmentations and authorized replacement of the city phone system.
City finance and human resources staff delivered a midyear fiscal update Feb. 24 that combined actuarial valuation highlights with requests for midyear budget adjustments.
Director of Finance reported the city’s CalPERS unfunded liability decreased and the funded ratio improved (CalPERS funded ratio up from ~65% to ~68% in the most recent published valuation) largely because investment returns exceeded actuarial assumptions. The city’s PARS supplemental pension results also improved; both factors contributed to a slight reduction in total long‑term pension liabilities.
By contrast, the city’s OPEB (retiree medical) unfunded liability increased due mainly to higher assumed future healthcare costs, even though 2025 investment returns for OPEB assets outperformed assumptions in the valuation. Staff said the 2026 Kaiser health premium increase is about 5.03% and that statewide averages were higher; OPEB discount rates and actuarial assumptions remain unchanged.
To address operational needs and risk, staff proposed several midyear augmentations totaling roughly $395,292 (general‑fund share about $328,698). Key items included a cloud‑based phone‑system replacement (first‑year cost about $325,166 with ongoing licensing), replacement of a failed traffic detection system at Merchant and Mason streets, legal costs to join federal litigation defending grant awards, a strategic transparency portal (ClearPoint) to publish performance measures, and a small reclassification in fire prevention to recover lost inspection revenue. Council approved the budget adjustments and authorized the city manager to execute the phone‑system contract.
Staff emphasized ongoing forecasting work: a conservative outlook removes the anticipated CFD revenue from the Lagoon Valley project until building permit thresholds are certain; sales‑tax and property‑tax trends will be revisited at the next quarterly update.
What happens next: phone‑system work will proceed under contract, staff will implement approved midyear augmentations and return during the regular budget cycle with additional details for the FY27 budget.
