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Sedona PSPRS board reviews actuarial report as city moves to pay down unfunded liability
Summary
At its June 6 meeting the Sedona PSPRS local board heard a review of the PSPRS actuarial valuation as of June 30, 2023, showing a roughly $3.8 million unfunded liability (79% funded) for tiers 1 and 2; staff said an extra $1.2 million payment and other contributions are expected to reduce employer rates.
At its June 6 meeting, the Sedona Public Safety Personnel Retirement System (PSPRS) local board reviewed the 06/30/2023 actuarial valuation presented by Renee from the city's financial services department and discussed plans to pay down the unfunded liability.
Renee said the report shows estimated liabilities of $18,100,000 and assets of $14,300,000 for tiers 1 and 2, leaving an unfunded liability of about $3,800,000 and a funded status near 79 percent. "This is the PSPRS actuarial report as of 06/30/2023," she said, and explained the figures reflect a mix of asset performance, lower payroll growth and higher-than-expected salary increases.
The presenter said tier 3 is fully funded, reporting liabilities of $110,900,000 and assets of $119,100,000 (about 107 percent funded). She told the board the additional interest earned on the city's extra contribution for FY23 was $38,554.21 and described recent assumption changes: the board reduced the assumed earnings rate and lowered payroll growth assumptions to 2 percent.
Renee also described how assumption and accounting choices affect reported metrics. "If market value was used for tiers 1 and 2, the funded status would only be 70.77 percent instead of 78.8 percent, and the FY25 contribution rate would be 36.61 percent instead of 35.28 percent," she said, noting the actuarial report used a smoothing method.
Board members and staff said the Sedona City Council is committed to paying down the unfunded liability this year. The presenter said an additional contribution of $140,000 was planned to reduce the unamortized liability and that the city had made an extra payment of $1,200,000. She added the city hopes to receive council approval for the payment at a June council meeting and that, if the payment is made before the end of the month, employer contribution rates would fall further in FY26.
Why it matters: the funded status and amortization schedule determine employer contribution rates the city must budget. The board noted the improvements should reduce future rate pressure if the council finalizes the planned payment.
The board did not take a policy vote on the valuation itself; staff said they will include the presentation in the official packet and follow up with the clerk's office. The board expected to see the council action on the payment at the next council meeting and will monitor effects on FY25 and FY26 contribution rates.
