Comprehensive Annual Financial Report - City of Santa Monica

CITY OF SANTA MONICA, CALIFORNIA
Notes to Basic Financial Statements, Continued
For the fiscal year ended June 30, 2008
actuarial assumptions included (a) 7.75% investment rate of return (net of administrative expenses); (b)
projected salary increases that vary by duration of service ranging from 3.25% to 14.45% for
miscellaneous members, from 3.25% to 11.15% for safety members, and (c) 3.25% cost-of-living
adjustment. Both (a) and (b) include an inflation component of 3.00%. The actuarial value of the
Plan’s assets was determined using a technique that smoothes the effect of short-term volatility in the
market value of investments by computing an expected value of assets along with the actual market
value of assets. The Plan’s unfunded accrued liability (or excess assets) is being amortized as a level
percentage of projected payrolls on a closed basis over a period not to exceed twenty years.
Three-Year Trend Information for the Annual Pension Cost Funding for the Plan (Unaudited)
Fiscal year ended
June 30
Annual pension cost
(APC)
Percentage of APC
contributed
Net pension
obligation
2008 $ 24,767,790 100 % —
2007 20,719,971 100 —
2006 20,236,173 100 —
Pension Funding Information
As of June 30, 2007, the date of the latest actuarial valuation, the City’s under funded liability was
$133,291,543. This under funded liability was primarily the result of a decline in the value of the plan
assets, less than anticipated investment returns by CalPERS and an increase in benefits for Public Safety
employees. The City has addressed the under funded liability through additional contributions, as
determined by CalPERS, in excess of the amount required to fund the current normal cost liability.
Maintaining this funding schedule CalPERS has estimated that the under funded balance will be
amortized over 15 years. Prior to the fiscal year ended June 30, 2002, the City’s pension plan had been
over funded for ten years.
For miscellaneous members, the plan was 84.4% funded. The actuarial accrued liability for benefits was
$465,717,963 and the actuarial value of assets was $393,225,061, resulting in an unfunded actuarial
accrued liability (UAAL) of $72,492,902. The covered payroll (annual payroll of active employees
covered by the plan) was $101,760,156, and the ratio of the UAAL to the covered payroll was 71%.
For fire safety members, the plan was 87.8% funded. The actuarial accrued liability for benefits was
$133,025,994 and the actuarial value of assets was $116,798,098, resulting in an unfunded actuarial
accrued liability (UAAL) of $16,227,896. The covered payroll (annual payroll of active employees
covered by the plan) was $11,951,375, and the ratio of the UAAL to the covered payroll was 133%.
For police safety members, the plan was 81.1% funded. The actuarial accrued liability for benefits was
$235,335,746 and the actuarial value of assets was $190,765,001, resulting in an unfunded actuarial
accrued liability (UAAL) of $44,570,745. The covered payroll (annual payroll of active employees
covered by the plan) was $22,730,402, and the ratio of the UAAL to the covered payroll was 191%.
The schedule of funding progress, presented as RSI following the notes to the financial statements,
presents multiyear trend information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liability for benefits.
78