Santa Rosa leans toward ‘fresh start’ pension plan using 115 trust to smooth CalPERS costs

City finance staff and pension advisers told the Council on April 21 that Santa Rosa faces an unfunded accrued liability (UAL) with CalPERS of roughly $482 million and outlined three options to reduce near‑term budget volatility.

Mike Meyer of NHA Associates summarized the mechanics: CalPERS payments consist of the normal cost (ongoing benefit accrual) plus an amortized UAL. “The city's debt with CalPERS right now is 482 million,” Meyer said, noting that the general‑fund portion is about $331 million and that recent CalPERS investment volatility has accelerated employer payment increases.

Options analyzed: staff modeled three viable strategies:

- Option 1 (recommended): request a CalPERS “fresh start” payment schedule that levels current UAL payments into a single, level amortization and phase withdrawals from the city’s Section 115 trust over roughly 9–10 years. Staff estimate this option would avoid about $37 million in budgetary costs between 2027 and 2034 and reduce the city’s total lifetime pension payments by roughly $36.6 million in the current analysis.

- Option 2: rely primarily on the 115 trust without a fresh start; staff estimate roughly $30 million in near‑term cost avoidance but faster depletion of trust assets.

- Option 3 (ADP / clearedup paydown of selected amortization layers): liquidate 115 trust assets to pay selected UAL layers now; modeled savings were similar to option 2 but would exhaust the trust quickly and reduce future flexibility.

Policy goals and tradeoffs: staff framed their recommendation against five objectives: increase predictability, lower total paid, accelerate UAL paydown, maintain local control over funds, and maximize short‑term cost avoidance. Option 1 scored highest on those objectives in staff analysis because it spreads payments, keeps trust assets invested longer, and can retire the UAL several years earlier than the current schedule.

Council response: multiple council members praised the analysis and expressed informal support for Option 1. Scott Wagner said staff would return with an amended contract and implementation details; council emphasized the need for a policy to replenish or protect the 115 trust in the future so weathering future CalPERS volatility remains possible.

What didn’t happen: no final, binding contract amendment was approved at the meeting. Council gave direction to proceed to the next step of drafting required documents for Council review.

Why this matters: pension UAL payments are projected to materially increase Santa Rosa’s CalPERS bill over the coming decade; staff said the proposed package would provide both short‑term budget relief and a more predictable long‑term payment profile if adopted.