Atwater finance director reports modest Q1 sales-tax uptick, outlines pension/OPEB trust plan

Anna Nicholas, Atwater City finance director, told the Audit & Finance Committee on April 2 that calendar-year 2025 first-quarter sales-tax cash receipts rose 3.6% from the same quarter last year, but that the data do not currently justify changing the city's revenue forecast before the midyear review.

Nicholas said the city used a conservative-hybrid approach when budgeting sales-tax revenue for the general fund in FY25/26, setting a net estimate (after county and CDTFA administration charges) at $4,500,000. She said the public-safety transactions and use tax was budgeted at $5,200,000 and emphasized that the public-safety tax is destination-based and not subject to county sharing, so revenues depend on in-city retail activity such as car dealerships.

The finance director also reviewed the city's Section 115 combo trust, administered through PARS (Public Agency Retirement Services). She described the trust's purpose as funding other postemployment benefits (OPEB) and pension stabilization, and noted it is structured as an irrevocable trust whose earnings are tax-exempt. "The account balance is $616,660," Nicholas said, summarizing the presentation. She also said the initial contribution was $100,000 (June 2020), additional contributions since inception total $400,000, and net investment earnings have totaled $116,660. Nicholas added that no disbursements have been taken from the plan.

On long-term liabilities, Nicholas presented actuarial figures for both OPEB and pension obligations. She reported an estimated total OPEB liability of about $21 million and cited the pension valuation (measurement date 06/30/2023) showing an actuarial liability of $97.5 million with $30.8 million unfunded. Nicholas said employer contributions for FY24/25 ran about $3.35 million and that projections showed employer costs rising toward roughly $4.2 million by FY30/31.

Nicholas gave the actuarial service-cost estimate for OPEB in the presentation (the slides listed $1,200,000) and later referenced a service-cost figure that could be about $1,280,000 annually; she said those figures illustrate how liabilities can grow if multiple employees retire in a short period. For FY24/25 and FY25/26 the budget includes a planned contribution of $50,000 to each side of the trust (OPEB and pension), a total of $100,000, though she said the committee can revisit that funding level.

Nicholas also provided brief audit and finance updates: the city is in the process of selecting an external debt-collection vendor and will present a contract to the City Council once a vendor is chosen. She acknowledged ongoing problems with delayed audits and said adding a second accountant and implementing strategic-plan item 1.4 are intended to improve timely completion of required financial reports and audits.

Chair adjourned the meeting at 5:32 p.m. No members of the public offered general comments during the public-comment period.

Next steps: staff will return to the City Council with any external debt-collection agreement and the committee will review midyear sales-tax data and any proposed changes to trust contributions at a later meeting.