1. F&I Reserve Discussion topics September 21, 2018

2. 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?

3. 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

4. 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

5. 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

6. 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

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

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

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

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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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