14 - CalPERS Annual Valuation Report Costa Mesa Sanitary District …an Independent Special District Protecting our community’s health and the environment by providing solid waste and sewer collection services. www.cmsdca.gov Memorandum To: Board of Directors Via: Scott Carroll, General Manager From: Marc Davis , Treasurer Date: February 27 , 2013 Subject: CalPERS Annual Valuation Report as of June 30, 2011 Summary Staff is in receipt of the CalPERS Annual Valuation Report as of June 30, 2011, which discloses an unfunded liability of $201,337 . Beginning with the fiscal year 2014 -15, the District will need to recognize this unfunded liability on its balance sheet in accordance with Governmental Accounting Standards Board (GASB) Statement Number 68. In advance of the effective date of this new standard, Staff is communicating options to the Board for consideration in possibly funding the unfunded liability. Staff Recommendation Direct Staff to continue to monitor the District’s unfunded liability with CalPERS. Analysis GASB 68 requires all government agencies to report any unfunded pension liabilities on its financial statements beginning with the fiscal year ending June 30, 2015. The GASB encourages early implementation of this new standard , but does not require it. According to the CalPERS Annual Valuation Report as of June 30, 2011, which is the most recent actuarial valuation available, the District’s unfunded pension liability is $201,337 . If the District were to implement GASB 68 toda y, this is the amount that would be recorded as a liability on its financial statements. To prepare for the implementation of GASB 68, there are several options the District has in addressing this unfunded liability.
Board of Directors February 27 , 2013 Page 2 of 3 Option 1 – Fund the liability in full . This would require the District to make a lump sum payment to CalPERS in the amount of $201,337. Staff does not support this option at this time since the District will not need to report its unfunded liability for 2 more fiscal years. At that time, t he District’s unfunded liability will be different due to actual activity of the District, as well as investment performance of CalPERS. Funding in advance of the implementation of GASB 68 could result in a superfunded plan. Option 2 – Set aside a rese rve amount this year and next year to slowly build up to the amount of the unfunded liability. Staff does not support this option at this time as the amount of unfunded liability will change over the next 2 fiscal years as described in Option 1. This cou ld also potentially result in diverting funds from other projects to fund the liability. Option 3 – Monitor the unfunded liability. This option would require the District to do nothing at this time, but monitor the unfunded liability over the next 2 fisc al years. At the end of this period, Staff would present options to the Board for consideration. Staff recommends this option as it does not require a current unnecessary outlay of cash. Additionally, the current unfunded liability amount is very small compared to what other government agencies may be facing upon implementation of GASB 68. It should be noted that GASB 68 does not require the unfunded liability to be funded. It merely requires a government agency to report the unfunded amount. For many government agencies, since the unfunded amount is so large, it may cause their net assets to appear as a negative amount. That will not be the case for the District. Once GASB 68 is implemented and the District records its unfunded liability, its financ ial position will not be significantly affected. Strategic Plan Element & Goal This item supports achieving Strategic Element No. 7 .0, Ensure the Short and Long -Term Fiscal Health of the District . Legal Review Legal review is not required. Financial Review According to the Annual Valuation Report from CalPERS as of June 30, 2011, the District’s unfunded pension liability is $201,337. There is no financial impact at this time.
Board of Directors February 27, 2013 Page 3 of 3 Public Notice Process Copies of this report are on file and will be in cluded with the entire agenda packet for the February 27 , 2013 Board of Directors regular meeting at District Headquarters (628 W. 19 th Street) and on the District’s website at www.cmsdca.gov . Alternative Actions 1. Refer the matter back to staff 2. Select Option 1 or Option 2