1. Public Safety Personnel Retirement System (PSPRS): An Overview and Discussion of Recommendations to Reduce Costs Town Council Meeting May 20, 2015

2. Purpose of Presentation 1.Review PSPRS and the League’s Pension Task Force 2.Discuss the Town’s and MCSO’s PSPRS Plan Information 3.Discuss Task Force Recommendations to Reduce Costs 2

3. Purpose of Presentation 1.Review PSPRS and the League’s Pension Task Force 2.Discuss the Town’s and MCSO’s PSPRS Plan Information 3.Discuss Task Force Recommendations to Reduce Costs 3

4. PSPRS Overview 256 Employer (Individual) Plans – ~32,000 Actives / Retirees Same Benefits for All Plans Financial Condition Varies by Plan – $6.6B Total Underfunded ER Contribution Rate Varies By Plan EE Contribution Rates are Fixed by AZ Law at 11.65% (as of 7/1/15) 4

5. League’s Task Force Formed in June 2014 Partnership with ACMA and GFOAz 15 Members Review all aspects of PSPRS, identify areas of improvement, and reform recommendations 5

6. Task Force Approach Phase 1 Information and Education Phase 2 Employer Recommended Practices – Manage Your Plan – Unfunded Liability is Debt Phase 3 Yardstick: Characteristics of a Well-Designed Plan – Released May 15 6

7. Purpose of Presentation 1.Review PSPRS and the League’s Pension Task Force 2.Discuss the Town’s and MCSO’s PSPRS Plan Information 3.Discuss Task Force Recommendations to Reduce Costs 7

8. Fire’s Census 8 Number Annual Amount Normal Retirements0$0 Disability Retirements1$40,526 Surviving Spouse1$88,702 Total Retirees2$129,228 Active Employees32 Average Age37 Years of Service6

9. Town’s Fire Statistics (FY 15-16) EE Contribution Rate11.65% ER Contribution Amount$451,394k ER Contribution per Employee$14,106 ER Contribution Rate15.72% ER Contribution Amount as a % of EMS Revenues6% Unfunded Liability (Debt) at 6/30/14$1.5M Percent Funded at 6/30/1465% 9

10. Fire’s Unfunded Liability (Debt) History Assets vs. Liabilities 10

11. FY 15-16 Fire Contribution Rates and Amounts (17%, $65K Increase) RateAmount Normal Cost10.62%$304,949 Unfunded Liabilities*4.74%$136,107 Healthcare0.36%$10,337 Total Contribution15.72%$451,394 11 *Represents 31% of the Contribution Rate and Amount. Note: The Town receives ~$80k annually from a statewide 2% tax on property insurance policy premiums. The tax is allocated to each entity based on assessed value.

12. FY 15-16 MCSO Contribution Rates and Amounts* (11%, $110K Increase) RateAmount Normal Cost13.29%$382,719 Unfunded Liabilities**24.49%$705,251 Healthcare1.88%$54,139 Total Contribution39.66%$1,142,109 12 * One year lag in rates per contract. FY 16-17 rate = 48.83% (23% increase). ** Represents 65% of the Contribution Rate and Amount.

13. Fire and MCSO Combined: FY 15-16 FireMCSOTotal Normal Cost$304,949$382,719$687,668 Unfunded Liability$136,107$705,251$841,358 Healthcare$10,337$54,139$64,477 Total Contribution$451,394$1,142,109$1,593,503 Contribution Rates15.72%39.66% % of EMS Revenues6%15%20% Per Employee$14,106$28,553 13

14. Purpose of Presentation 1.Review PSPRS and the League’s Pension Task Force 2.Discuss the Town’s and MCSO’s PSPRS Plan Information 3.Discuss Task Force Recommendations to Reduce Costs 14

15. Task Force Recommendations to Reduce Costs 1.Create a Pension Funding Policy 2.Prepay Annual Contributions to Increase Interest Income 3.Payoff Unfunded Liability (Debt) Earlier 15

16. Recommendation #1: Create a Pension Funding Policy 16 Policy Objectives – Funded Status Goal of 100% – Ensures Intergenerational Equity of Payment

17. Recommendation #2: Prepay Contributions to Increase Interest Income 17 Pay ~450K July 1 st (vs. ~$26K every two weeks with payroll) Additional Interest: $15K – PSPRS Interest Rate: 7.85% – Town Interest Rate: ~1% Note: MCSO is planning on as well at $20.5M which will reduce the Town’s costs in the future.

18. Recommendation #3: Payoff $1.5M Unfunded Liability (Debt) Earlier 18 6/30/146/30/38 Total Cost: $3.8M $2.3M Interest at 7.85%

19. Recommendation #3: Payoff $1.5M Unfunded Liability (Debt) Earlier (concluded) Remit $1.5M prior to 6/30/15 – Improve 6/30/15 Funded Status – Will Reduce Annual Contribution by ~$136K beginning in FY 16-17 – Eliminates Intergenerational Transfers of Cost to Future Taxpayers 19

20. Staff Recommendations June 3 Council Meeting 1.Adopt Pension Funding Policy 2.Approve $1.5M Budget Adjustment to Payoff $1.5M Unfunded Liability by June 30, 2015 20

21. Questions and Comments 21