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City hears pension liability briefing urging a volatility reserve and risk‑based policy
Summary
Consultant Dan Matzowitz told the Benicia City Council that investment returns drive much of the city's CalPERS costs and recommended building a volatility reserve (115 trust) and a risk‑based capital policy; councilmembers pressed staff on funded status, the $9 million trust target and the timeline for a formal policy.
The Benicia City Council received an informational presentation on the city’s pension liability and the implications of recent CalPERS experience.
Finance Director Jeff Schutte introduced Dan Matzowitz of GovInvest, who walked council through how investment returns and demographic assumptions influence employer costs. Matzowitz said investment income "really drives the cost and affordability of the plan," and explained the difference between normal cost and unfunded amortization payments that can spike when markets underperform.
Councilmembers asked about the city's funded status (reported at roughly 70%), whether state legislation could change local obligations and whether the city should prepay unfunded actuarial liabilities. Matzowitz characterized a 70% funded level as manageable but warned that a 50% funding ratio would be highly concerning; he recommended establishing a pension volatility reserve and suggested a $9 million target as roughly 3% of the city's aggregate accrued liability to provide short‑term liquidity for required CalPERS payments.
The presentation was information‑only; Matzowitz said he plans to return in spring or early summer with policy proposals that could include a minimum and maximum reserve range and a risk‑based capital approach to reduce budget volatility.
