1. City of Prescott
One Approach to PSPRS

2. Prescott’s Numbers

3. Contribution Rates

4. PSPRS Contributions

5. Discussions with Council
Started discussing the issue as part of the budget process in FY 2006.
PSPRS became an increased part of our strategic planning process starting in FY
Council workshops started in FY 2015
Council formed a sub-committee in FY 2017

6. The First Election
Council put a 0.55% dedicated sales tax on the August 25, 2015 primary ballot.
In addition to the PSPRS tax, Council put two other sales tax issues on the ballot.
Dedicated road tax increase from 0.75% to 1%
Open space acquisition and maintenance tax 0.08%
Most Council members were in favor of the PSPRS tax but did not do any campaigning.
A local watch dog group and one Mayoral candidate were against the tax and did campaign.
All public information meetings had to be done by City staff.
PSPRS dedicated tax failed 44% to 56%

7. After Election
Mid-year budget cuts were done, reducing many service levels.
Reduction of library hours
Fire station rolling brownouts
Police services reduction
Elimination of special events
Continued working with League and State Legislature on PSPRS reform.
Worked with Council on other options to bring PSPRS liability down.
Council formed sub-committee to work on solutions in FY 2017.

8. Areas Explored by Sub-Committee
Business tax
Increase property tax
Increase City utility rates
Bankruptcy
Municipal income tax
Get out of PSPRS
Borrowing
Dedicated sales tax
Reduce spending and alternative service delivery
Use fund balance reserves
Selling unneeded property
Continue to work with State for further reform and relief of unfunded liability

9. Areas Moved Forward by Sub-Committee
Dedicated sales tax
Reduce spending and alternative service delivery
Use fund balance reserves
Selling unneeded property
Continue to work with State for further reform

10. The Second Election
Council put a 0.75% dedicated sales tax on the August 29, 2017 primary ballot.
No other tax issues were on the ballot
All Council members were in favor of the measure except the Mayor.
Two Council members aggressively campaigned for the proposition with the political action committee (PAC) they formed.
Council and PAC did all public meetings, staff provided information as requested.
A local watch dog group, Reason Foundation, seated Mayor, one Mayoral candidate, and both State Representatives were against the tax and campaigned aggressively.
PSPRS dedicated tax passed 54% to 46%

11. Since the Election
Council moved forward and re-established Library hours that were cut.
Sent money from the sale of unneeded properties to PSPRS.
Sent $11 million of unassigned fund balance from the General Fund to PSPRS.
Continued to keep the public informed of actions taken and changes happening at PSPRS

12. Gilbert PSPRS
Case Study

13. Gilbert Public Safety
PSPRS Participation
~250 Sworn
~200 Sworn

14. ? Gilbert’s Unfunded Liability Historical Perspective $36m $39m $60m
2014
2015
2016
2017

15. Rate Increases (Tier 1 and 2)
$3m increased cost in FY2018
24.36%
33.69%
2017 Police
2018 Police
15.33%
23.49%
2017 Fire
2018 Fire

16. Gilbert Decisions To manage costs Rate Increases UL Amortization
Keep 20 years instead of extending to 30 years
Budget ongoing funds for additional contributions
Buydown Ratio
Hall/Parker Refunds
Use same ratio between police and fire as current Unfunded Liability
Paid upfront, in addition to the regular contributions

17. Four Policies/Practices To reduce PSPRS Unfunded Liability1
Send all contributions July 1 2
Remit budgeted amount, EE&ER 3
Additional $2m ongoing 4
Under/Over from prior year

18. Gilbert Results
$17k Interest Earnings

19. Gilbert Results
$17k Interest Earnings

20. Gilbert Results
$17k Interest Earnings

21. Gilbert Results
$17k Interest Earnings

22. Gilbert Results
$1.7m Interest Earnings
$17k Interest Earnings

23. Gilbert Results
$1.3m vs $11.9m paid toward UL

24. Pay Off the Unfunded Liability by 2021
Buydown Goal
Pay Off the Unfunded Liability by 2021

25. Questions?
Kelly Pfost
Budget Director

26. What Are Cities Doing to Address Their PSPRS Costs
What Are Cities Doing to Address Their PSPRS Costs? Scott McCarty, Chair – League of Arizona Cities and Towns Pension Reform Task Force Finance Director, Town of Queen Creek
GFOAz Budget Forum
November 2, 2017

27. Taxpayer Perspective A Taxpayer Pays for PSPRS Numerous Times
Police / Sheriff (via Local Taxes)
Fire / Fire District (via Local Taxes)
County Jail (via County Taxes)
State Agencies (i.e. DPS via the Gas Tax, Income Taxes, Sales Taxes)

28. FY 18-19 Actuarial Valuations
Contribution Rates and Unfunded Liabilities Will Mostly Likely Increase – Why?
$551M of Unrecognized Investment Losses Exist and Remain to be Smoothed
7-Year Smoothing Period
Hopefully Will Be Offset by FY Investment Returns

29. FY 18-19 Actuarial Valuations (concluded)
Board Adopted New Mortality Tables
People Are Living Longer so the Number of Years a Pension Is Paid Will Increase
Estimated Impact
3 Percentage Point Increase to Normal Cost
2 Percentage Point Increase to Unfunded Liability

30. What Can You Do to Address Your PSPRS Costs?

31. Additional Interest Earned
What Can You Do?
Prepay Your Annual Contribution on July 1st to Earn Additional Interest Income
# of Plans
Amount Paid 7/1
Additional Interest Earned
FY 15-16 47
$363M
$480K*
FY 16-17 37
$421M
$11.6M**
*0.6% Investment Return
** ~12% Investment Return as of May 31, 2017

32. What Can You Do? (concluded)
Pay Down Your Unfunded Liability Faster
Do Not Take the Credit for the 2% Fire Insurance Premium Tax Against Your Annual Payment (Fire Plans Only)
Re-Direct Tier 3 Savings to Your Tiers 1 and 2 Unfunded Liability

33. Tier 3 Phoenix PD Example: Less Cost
Current System
Tier 3
Normal Cost
18%
10%
Unfunded Liability
50% 0%
Total
68%
ER Cost (on $50K Salary)
$34K
$5K
Savings per New Hire
$29K

34. Employer Actions: Queen Creek
Background
$1.5M Unfunded Fire Pension Liability
Action
Adopted Pension Funding Policy
Unfunded Liability Paid Off Annually

35. Employer Actions: City of Globe
Background
Unfunded Liability (Police and Fire):$12M
Funded Status: Fire 39%, Police 37%
ER Contribution Rate: Fire 61%, Police 63%
Action
Council Approved 0.3% Dedicated PSPRS Sales Tax Increase (to 2.3% Local Rate)
Sunsets When Paid Off
$1M One-Time Payment from Savings

36. Employer Actions: Coconino County
Background
Unfunded Liability: $30M
Funded Status: 25%
ER Contribution Rate: 62%
Action
$10M One-Time Payment from Jail District
$25M Savings
$15 ROI

37. Employer Actions: Paradise Valley
Background
Unfunded Liability: $22M
Funded Status: 32%
ER Contribution Rate: 67%
Action
$1M One-Time Payment in FY 15-16
$5M One-Time Payment in FY 16-17

38. Discussion and Questions