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Tustin council adopts midyear budget approach, keeps pension prepayment plan under review
Summary
The Tustin City Council approved staff'recommended midyear budget actions, endorsed finishing a planned pension prepayment this year while maintaining a baseline for future UAL payments, and approved CIP carryovers and a pilot community grant program administered with the Tustin Community Foundation.
The Tustin City Council on Tuesday approved staff recommendations to complete a pension prepayment this year and retain a baseline approach for future unfunded actuarial liability (UAL) payments, after a detailed midyear presentation from Finance Director Jennifer King and consultant Ira Samma of TrueComp.
King told the council the city's recurring operating budget is projected to be balanced for fiscal year 2025'26 and highlighted one'time revenues tied to land sales, including a recent Tustin Legacy transaction that generated about $42,000,000 and roughly $9,000,000 in backbone impact fees. She recommended staff finish the scheduled prepayment this year and return at regular budget reviews to reassess UAL status and additional pre-funding opportunities.
Samma summarized five options for addressing the city's CalPERS unfunded liability: continue the current $4 million-per-year approach; split $2 million to CalPERS and $2 million to a Section 115 pension trust; pay off the liability immediately; make two larger payments; or pause additional payments and make a lump-sum payment later. He cautioned that outcomes depend on investment returns and that paying CalPERS directly reduces future flexibility even as it delivers long'term savings.
Councilmembers pressed for clarity about reserve levels and the long'term fiscal picture. Councilmember Gallagher and others emphasized avoiding the use of one'time land sale proceeds for ongoing operations; Councilmember Nielsen said the city's new reserve position provides flexibility. Several members urged staff to present options for earmarking one'time funds for short'term community investments that could yield economic returns, such as Old Town commercial redevelopment or targeted investments in South Hangar programming.
The council also reviewed a proposed $50,000 pilot community grant program to be administered in partnership with the Tustin Community Foundation (TCF). Assistant City Manager Bernard said staff and TCF will develop guidelines collaboratively; staff expects an application period as early as March with awards announced in April, and a report back to council in June.
After deliberation the council approved staff'recommended budget option 2 (complete the prepayment this year and hold the baseline going forward) by a 5'00 roll call vote. Staff will return with annual UAL updates and additional details for any proposed earmarks of one'time land sale proceeds.
The council action also included approval of CIP carryovers and several midyear technical amendments to the fiscal 2025'26 budget.
