F&I Reserve Discussion topics September 21, 2018

Reserves Table of Contents Reserve Discussions Timeline October 2017 F&I May 2018 F&I/Board Budget Review See Backup slides September 2018 – External Audit Recommendations Assets & Liabilities balances Where do we go from here?

F&I Reserve Discussion October 2017 F&I Recap Reviewed Reserve Policy adherence Verbal Auditor recommendation to reclassify Revisited Prior Budget Reserve model Discussed existing and Strategic Requirements PERS, Bonds, UDP renovation etc. Noted need to Reserve for long term build

F&I Reserve Discussion May 2018 F&I/Board Budget Review Presented Reserve standings Reviewed Assets, Liabilities and risk Noted Auditor recommendation for designating funds No Facility set aside funding in place Recommended $42M candidates for reserves See Budget slides

F&I Reserve Discussion September 2018 Audit Report Audit Recommendations Consider Lowering Idle Cash Bank Balances Consider Developing an Operating Reserve Policy Audit Actions Reclassified Investments from Current Assets to Other Long Term Considered Long Term since no plan in place CO guidelines recommend designation

Reserves Assets & Liabilities status Liabilities and Assets growing proportionately Enough assets to cover liability and Working Capital Mitigate interest rate on PERS balance Legacy employer contribution rate increasing No set aside for Facility Repair/Rebuild

Long Term Liabilities Trend Potential GASB 68 PERS Impact ongoing - 30 year pay down plan for unfunded liability moving to 20

Cash/Investment Balance Trend (With VEBA-Off Balance Sheet)

F&I Reserve Discussion Where do we go from here?

Cash Designation & Funding FROM FY2018/2019 BUDGET RESERVES Cash Designation & Funding

FROM FY2018/2019 Budget Reserve Planning FY 2018/2019 Budget Review FROM FY2018/2019 Budget Reserve Planning Per CSU Policy accommodations made for: Working Capital Annual Capital Replacement /Major Maintenance Adequate funds on hand for Midterm Support Planned Positive Cash Flow in FY2018/19 Assumes Minimal Capital investment plan Auditor recommendation for “Designating” funds for existing liabilities and future needs See Policy for Controller reporting requirements and thresholds. Working Capital targeted at 8% of expenses = $2.7M Reserve Funding Opportunities are: Beach Card – Student funds Alumni Center/Catering Kitchen Designate/Grow funds for early Bond payoff – 2 year assessment Pay down PERS Unfunded Liability Develop long term plan for UDP Renovation

FROM FY2018/2019 Budget Reserve Planning (Cont’d) FY 2018/2019 Budget Review FROM FY2018/2019 Budget Reserve Planning (Cont’d) PERS Unfunded Liability largest debt/risk Accrues Interest exceeding Operating ROI VEBA funding (Off Balance Sheet) Mitigates Long Term Retiree Medical Liability Assumes no additional investment No Facility set aside funding in place Need to start reserving and/or Designate Funds for long term rebuild PERS assumes 7% earnings. Net Contribution and Investment policy much lower. Reserve Funding Opportunities are: VEBA – 1 year or so funding continuum, turn over to TPA Alumni Center/Catering Kitchen Designate/Grow funds for early Bond payoff – 2 year assessment Pay down PERS Unfunded Liability Develop long term plan for UDP Renovation

FROME FY 2018/2019 Budget Reserve Matrix FY 2018/2019 Budget Review FROME FY 2018/2019 Budget Reserve Matrix Capital Actual = $441,676 Facilities Outlook = $380,226 Starbucks Short term = same Per Reserve Policy definitions/Requirements we’ve satisfied the need for Operating Statement items. -FY2017/2018 is done hence zero WC. $2.8M estimated for FY2018/19 as percentage of expense - Classic definition of Current Assets minus Current Liabilities Beach Club Deposits $350K$750K. Currently at $460K. Paying as we go for all: Facilities/Capital Replacement & Major Repair Funding accommodated through depreciation Vacation/Holiday payout - Unrestricted. Ongoing accrual/Pay-out Unemployment Insurance (UIT) held with CSURMA Post Medical current year premiums being paid through Operating Statement - Overall liability is being addressed through VEBA and future returns on investment. SMIF held at Wells Fargo already in a separate account – Not restricted or designated but isolated

FROM FY 2018/2019 Budget Reserve Funding Opportunities FY 2018/2019 Budget Review FROM FY 2018/2019 Budget Reserve Funding Opportunities All but Facilities are recorded on the Balance Sheet Provisioning and recognized various liabilities. Paying down on some: - Facilities Infrastructure pending - Vacation/Holiday is partially designated on the asset side in name only SRB Funding Payments – Finite pay down schedule Refunding save $500K in interest over the remaining 22 years. 10 year Bond Call again. VEBA assumes funding to initial commitment only – Future unfunded liability paid from VEBA investment returns Beach Club is ongoing projected average with holding increasing due to Flex $’s Liability is being addressed regularly. Could designate percentage of funds if balance increased dramatically. SMIF – No liability unless we run out of cash and need to call in the account

FROM FY2018/2019 Budget Reserve Designation FY 2018/2019 Budget Review FROM FY2018/2019 Budget Reserve Designation Recommend that monies be “Designated” as other assets in support of the following: $500,000 - SMIF Portfolio(Held with Wells Fargo) $500,000 – Beach Club Deposits (Student funds) $5,000,000 - PERS Unfunded Liability (or pay down) $3,000,000 – Outpost Bond $2,000,000 – Short Term Facility repair $1,000,000 – Alumni Center $30,000,00 – UDP Replacement

FROM FY2018/2019 Budget PERS Liability Reduction Current unfunded liability of $6.1M Annual payments increasing to $700K $360,853 – July 2018, $445,000 – July 2019 Current schedule incurs $7.6M in interest Discount rate of 7% CalPERS adopting a 20 year minimum schedule See CalPERS Bulletin and backup files Recommend to adopt a plan similar to VEBA $2M down, $1M/year for 3-5 years