Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Public Finance topic
No spam. Unsubscribe anytime.
City staff propose reserve-policy overhaul and Section 115 trust to shore up pension and OPEB funding
Summary
Finance Director Rebecca Campbell proposed retitling and redefining the city's reserve targets, creating an emergency/disaster reserve and contingency line, and moving $6.2 million (OPEB) and $3 million (pension) into a Section 115 trust to better match long-term liabilities; council asked for timing and audit updates and deferred final action.
Santa Maria's finance director presented a comprehensive proposal to restructure the city's general-fund reserves and create a Section 115 trust to pre-fund long-term liabilities during the April 7 council meeting.
Rebecca Campbell explained that staff's review of best practices and GFOA guidance led to several recommendations: retitling the economic stabilization reserve as the city's core general fund reserve (target ~16.7% of operating appropriations), establishing a local economic augmentation (LEAF) stabilization reserve target (10–15%), creating a new 5% emergency/catastrophic reserve, and adding a 1–5% budget contingency line item for unexpected annual costs.
Campbell recommended moving the $6.2 million in the city's OPEB reserve and $3 million from the pension reserve into an irrevocable Section 115 trust to achieve higher long-term returns and to legally isolate assets for those liabilities. She described Section 115 trusts as offering broader investment authority and potentially higher long-term returns (5–7% range in examples) compared with short-term government investment pools; staff modeled multi-year yield scenarios and potential liability reductions under GASB guidance.
Councilmembers asked procedural and fiscal questions: whether the 2024 audit was complete (Campbell said auditors were working on final items and staff expected to finish the 2024 audit by June 30), whether the $195.7 million pension liability estimate had changed (an updated actuarial report was expected in roughly two weeks), and the degree to which funds moved into a 115 trust would be restricted (Campbell said assets placed in a 115 trust are legally restricted to those long-term purposes).
Campbell and council discussed timing and the budget process. Staff recommended finalizing policy targets and returning with a separate resolution to open a Section 115 trust and a funding plan. Several council members said they preferred to resolve reserve targets in coordination with the pending budget discussions rather than adopt a final funding step immediately.
Next steps: staff will return with a funding mechanism proposal, the recommended language for the reserve policy, and a separate resolution to establish and fund a Section 115 trust if council directs staff to proceed.
