Foster City is enjoying a general fund surplus of $6.8 million that city staff is recommending be spent on pension debt and infrastructure projects.
Fiscal year 2018-2019 is the second consecutive fiscal year the city is seeing a surplus and it’s again being attributed to revenue gains from property and hotel taxes as the economy remains strong and the hotel tax rate went from 9.5% to 11% at the start of 2019, according to a staff report.
Staff is recommending about half of the surplus, $3.5 million to be exact, be transferred to the pension stabilization fund and about $1.6 million be transferred to both the city capital improvement projects fund and the city facilities replacement fund. Those funds are dedicated to future capital projects and the maintenance and replacement of city facilities respectively.
The City Council will decide how to spend the surplus money at a future meeting, but devoting about half of it to pension debt was endorsed last month by the pension liability subcommittee, which is comprised of Mayor Catherine Mahanpour and Councilman Sam Hindi. The payment would be in addition to the annual payments the city is required to make to CalPERS each year.
This additional payment to CalPERS would fully pay off the “classic” public safety plan base, described as one layer of pension debt, and produce an estimated future savings of more than $5.3 million, according to the report.
The “classic” public safety plan base totals $7 million and half of it was paid off last year with general fund surplus money. Last year’s surplus, which came out to $7.58 million, was also spent on infrastructure, specifically the capital improvement and facility replacement funds.
“We recognized the city is fast approaching its 50th birthday and infrastructure needs are aplenty,” Finance Director Edmund Suen said at a meeting Jan. 21.
The city’s unfunded pension liability continues to grow and currently totals $82.3 million with a funded status of 70%. The subcommittee is exploring other ways of accelerating payments to CalPERS, including what’s called a 115 Trust and/or a “soft” re-amortization of the various pension plans, according to the report. It also plans to develop a pension funding policy sometime in the near future.
City officials are in the process of developing the budget for fiscal year 2020-2021, which begins July 1, 2020 and ends June 30, 2021. The budget won’t be officially adopted until June 15, but will be the subject of meetings each month before then, including a mid-year financial review Feb. 10, preliminary budget and five-year financial plan meeting May 11 and a budget hearing June 1.
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