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HomeMy WebLinkAboutFinance Committee Agenda - November 17, 2014 CITY OF NEWPORT BEACH FINANCE COMMITTEE AGENDA Newport Coast Conference Room, Bay 2E - 100 Civic Center Drive, Newport Beach CA 92660 November 17, 2014 - 3:00 PM Finance Committee Members: Mike Henn, Council Member, Chair Keith Curry, Council Member Tony Petros, Council Member Staff Members: Dave Kiff, City Manager Dan Matusiewicz, Finance Director Steve Montano, Deputy Finance Director (1)CALL MEETING TO ORDER (2)ROLL CALL (3)PUBLIC COMMENTS Public comments are invited on agenda and non-agenda items generally considered to be within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments to 3 minutes. Before speaking, we invite, but do not require, you to state your name for the record. The Finance Committee has the discretion to extend or shorten the speakers' time limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all speakers. As a courtesy, please turn cell phones off or set them in the silent mode. (4)APPROVAL OF MINUTES Approval of the July 21, 2014, Finance Committee meeting minutes. (5)CURRENT BUSINESS A.Wastewater Rate Study Results Summary: The Municipal Operations Department retained the consulting services of HF&H to prepare a wastewater and recycled water rate study. The purpose of this presentation is to review the results of the wastewater rate portion of the study and propose the adoption of an appropriate wastewater rate. B.Preliminary FY 2013-14 Year-End Update Summary: Staff will present preliminary financial results of year ending June 30, 2014. C.Facilities Financial Planning (FFP) Summary: Staff will review the latest draft iteration of the Facilities Financial Planning Tool for Finance Committee review and comment. D.CalPERS Pension Plan Update and Analysis of Payment Alternatives Summary: Staff will review the most significant changes since the last actuarial valuation. Staff will also review an analysis of alternative payment options to accelerate the pay-down of the City’s unfunded pension liability and request a Finance Committee recommendation to bring forth to City Council. E.Enterprise Resource Planning Software Implementation (ERP) Update Summary: Staff will provide the Committee with a progress report on the Enterprise Resource Plan project to receive and file. (6)FINANCE COMMITTEE ANNOUNCEMENTS OR MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) (7) ADJOURNMENT This Finance Committee is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the Finance Committee's agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be allowed to comment on agenda items before the Finance Committee and items not on the agenda but are within the subject matter jurisdiction of the Finance Committee. The Finance Committee may limit public comments to a reasonable amount of time, generally three (3) minutes per person. It is the intention of the City of Newport Beach to comply with the Americans with Disabilities Act ("ADA") in all respects. If, as an attendee or a participant at this meeting, you will need special assistance beyond what is normally provided, the City of Newport Beach will attempt to accommodate you in every reasonable manner. If requested, this agenda will be made available in appropriate alternative formats to persons with a disability, as required by Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Sec. 12132), and the federal rules and regulations adopted in implementation thereof. Please contact the City Clerk's Office at least forty-eight (48) hours prior to the meeting to inform us of your particular needs and to determine if accommodation is feasible at (949) 644-3005 or cityclerk@newportbeachca.gov . All documents distributed for this meeting are available in the administration office of the Finance Department 1 of 3 CITY OF NEWPORT BEACH CITY COUNCIL FINANCE COMMITTEE JULY 21, 2014 MEETING MINUTES 1. CALL TO ORDER The meeting was called to order at 4:00 p.m. in the Newport Coast Conference Room, Bay 2E, 100 Civic Center Drive, Newport Beach, California 92660. 2. ROLL CALL Present: Council Member Keith Curry (Chair) and Council Member Tony Petros Excused: Council Member Mike Henn Staff Present: City Manager Dave Kiff, Finance Director Dan Matusiewicz, Deputy Finance Director Steve Montano, Accounting Manager Rukshana Virany, Accountant Cory Pearson, and Administrative Coordinator Tammie Frederickson Members of the Public: Jim Mosher and Carl Cassidy Outside Entities: David Witthohn and Gay Eichhoff, Cutwater Asset Management 3. PUBLIC COMMENTS Mr. Mosher asked when the final budget would be available on the City’s website; if the Finance Department has reviewed certain fiscal impact estimates; and informed the Committee that he attended a Chamber of Commerce meeting in which the Orange County CEO stated that the County of Orange only receives $.06 out of every property tax dollar. Mr. Mosher asked where the other $.94 goes and how much does the City of Newport Beach receive. Discussion ensued. 4. APPROVAL OF MINUTES Council Member Petros moved, and Council Member Curry seconded the approval of the April 29, 2014, Finance Committee meeting minutes. The Committee voted all ayes to approve the minutes. 5. CURRENT BUSINESS A. Annual Investment Policy Review (F-1) Mr. Matusiewicz said the annual review has been conducted. They consulted the investments and at this time staff is not proposing any change to the investment policy. Council Member Curry added that the policy is reviewed every year because State Legislature makes law changes that need to be updated. B. Annual Investment Performance Review Mr. Matusiewicz introduced David Witthohn and Gay Eichhoff from Cutwater Asset Management. Mr. Witthohn provided a brief presentation to describe the market conditions and strategies his firm is employing, the portfolio performance, and the risk analysis undertaken (PowerPoint attached). Mr. Petros asked how benchmarks are selected, why we use the ones we do, and if there is uniformity among other agencies. Mr. Matusiewicz said that last year he considered investing assets for a longer duration; however, decided not to invest for a longer duration due to the associated risk. Committee members agreed it is prudent to continue with the one-to-three All documents distributed for this meeting are available in the administration office of the Finance Department 2 of 3 treasury and one-to-three corporate/government benchmarks. Mr. Wittholm said most other agencies use a one-to-three year Gov-Corp benchmark. C. Council Reserve Policy (F-2) Review Mr. Matusiewicz said this item is continued from the two prior meetings; March 24 and April 29. Staff was given specific direction to look at reserves that were established via a revenue set- aside and which among them might be managed more efficiently through the equipment internal service fund. Staff proposed two phases for implementing changes. Phase One changes were fairly easy and were proposed to the City Council on June 10. With respect to Phase Two changes, these are more complicated requiring both legal analysis as well as some rewrites to the Municipal Code. Mr. Henn requested some more information and informed the committee he met with Mr. Matusiewicz and Ms. Brandt, Community Development Director. Mr. Henn was in favor of sun-setting the parking revenue set-asides for Neighborhood Enhancements A, B and off-street parking. He indicated that there is the potential for the creation of some parking management districts in conjunction with BVAC recommendations. Council Member Curry suggested Mr. Matusiewicz work with Council Member Henn and bring it back to Council. The whole point of this exercise is to simplify and potentially reduce the reserves for things we might not have reserves for. If we’re going to spend the money on projects, we should identify them. Mr. Cassidy inquired as to why the Finance Committee wouldn’t be reviewing the fiscal impact analysis that’s being done on the Land Use Element. Mr. Matusiewicz said that they do consult with each other on topics that would have a mutual impact. Discussion ensued. D. CalPERS Unfunded Liability Review and Pension Primer Mr. Matusiewicz said the Finance Committee asked staff to work on a pension primer and Mr. Montano created the draft document. Mr. Kiff said it’s a work in progress and staff welcomes feedback. Staff is working to make a complex subject more reader friendly. Council Member Curry made the following comments and asked staff to make the following clearer in the document: the document should not use technical terms in order to be reader friendly, the City’s unfunded liability can swing greatly as the result of the investment returns on the City’s pension assets; most of the unfunded liability is attributable to former employees; the pension plan valuation is two years in arrears and consequently does not reflect current market conditions; and that the use of per capita ratios to measure pension funding progress is not useful due to the varying nature of revenue and service attributes of cities. Council Member Petros asked Mr. Kiff to consider presenting this information to the City Council for a receive and file, in addition to posting it on the City’s webpage. Council Member Petros said he appreciates that it’s a work in progress. Mr. Kiff said he would continue to work with Council Member Curry on the document. E. ERP Milestone Review Mr. Montano provided an update to the Committee. The Committee members had no discussion on this item. It was designated as receive and file. F. Review of Latest Post Employment Retiree Insurance Actuarial Valuation (AKA OPEB) Mr. Matusiewicz said OPEB requested some additional time to review the actuarial and because it’s their first time reviewing it, we granted them the additional time. All documents distributed for this meeting are available in the administration office of the Finance Department 3 of 3 6. FINANCE COMMITTEE ANNOUNCEMENTS OR MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) No other items were discussed. 7. ADJOURNMENT The Finance Committee adjourned at 4:53 p.m. Filed with these minutes are copies of all material distributed at the meeting. Attest: Keith Curry Date Finance Committee Chair CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5A November 17, 2014 TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE FROM: Municipal Operations Department George Murdoch, Acting Municipal Operations Director (949) 718-3401, gmurdoch@newportbeachca.gov SUBJECT: Wastewater Rate Study Results SUMMARY: The Municipal Operations Department retained the consulting services of H F & H Consultants, LLC (“HF&H”) to prepare a wastewater and recycled water rate study. The purpose of this presentation is to review the results of the wastewater rate portion of the study and propose the adoption of an appropriate wastewater rate. RECOMMENDED ACTION: 1. Review the results of the wastewater rate portion of the study and propose the adoption of an appropriate wastewater rate and; 2. Move the item to City Council for discussion and direction to adopt recommended rates. DISCUSSION: Background: The Municipal Operations Department operates and maintains approximately 197 miles of wastewater sewer mains, 4.7 miles of force mains, 4,922 manholes and cleanouts, 25,525 sewer laterals, and 21 sewer lift stations. Operations, maintenance and repair activities include: Sewer line cleaning, root removal, manhole maintenance and repair, lift station operation and maintenance, sewer line video inspection, as well as sewer lateral maintenance, repair and replacement. Funding for maintenance and replacement activities is collected from rate payers through the Municipal Services bill. Salaries, maintenance, operations, and internal service charges are estimated to be approximately $3.5 million for FY 14-15. Capital 1 INTENTIONALLY BLANK PAGE 2 Wastewater Rate Study November 17, 2014 Page 2 Improvement Projects (CIP) is based upon the Wastewater Master Plan which was last updated in 2009. The Wastewater Master Plan sets $500,000 per year for CIP, increasing to $1,000,000 per year to replace aging infrastructure over a 30 year period. The estimated revenue for FY 14-15 is approximately $3.5 million. City Council Policy F-2 sets the wastewater enterprise reserve level at 50% of the operations budget which is about $1.5 million. Wastewater rates were last raised in 2006 going from $0.30/HCF to $0.35/HCF. With the increase in outsourced services, reduced staff, and the amount of capital replacement projects, rates have not been increased in almost nine years. Rate Study: In 2013, the City entered into an agreement with HF&H to conduct a Wastewater and Recycled Water Rate Study, the first priority being to identify the recycled water rates. The recycled rates were adopted by City Council on June 10, 2014 lowering the overall cost to our customers by 50%. The next phase of the study was to address the wastewater rates. Attachment “A” is a draft report that includes details of the proposed wastewater rates. Current wastewater revenues provide adequate funding for operations. Ending reserves are approximately $900,000. This is short of the minimum reserve balance. To fund capital improvement, reserve funds would need to be used. This trend will deplete reserves by 2017 as shown below. Currently the wastewater rates include a fixed fee, sewer use charge and two additional surcharges of $2.00/month for each additional dwelling unit and $10.00/month for Reserves without Rate Increase Reserves with Rate Increase Target Balance(Operations + Capital) Minimum Balance(Operations) $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Pr o j e c t e c d F u n d B a l a n c e s ( i n M i l l i o n s ) 3 Wastewater Rate Study November 17, 2014 Page 3 customers with two-inch or larger water meters. The proposed rate structure eliminates these surcharges and adds the costs to the monthly fixed charge. The proposed rates include:  Fixed charge - a monthly sewer service charge based on size of water connection.  Sewer use charge - a monthly charge for all customers based on water use. How do we compare? The study compared the proposed wastewater rates to those of our neighboring agencies. Current Revised Structure Structure FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 10% 8% 8% 3% 3% Monthly Sewer Use Charge 5/8" or 3/4"$4.50 $5.97 $6.56 $7.09 $7.65 $7.88 $8.12 1"$4.50 $5.97 $6.56 $7.09 $7.65 $7.88 $8.12 1 1/2"$4.50 $6.56 $7.22 $7.80 $8.42 $8.67 $8.93 2" $14.50 $8.95 $9.84 $10.63 $11.48 $11.83 $12.18 2 1/2" $14.50 $9.54 $10.50 $11.34 $12.25 $12.61 $12.99 3" $14.50 $10.14 $11.16 $12.05 $13.01 $13.40 $13.80 4" $14.50 $11.93 $13.12 $14.17 $15.31 $15.77 $16.24 6" $14.50 $13.42 $14.76 $15.95 $17.22 $17.74 $18.27 8"$14.50 $14.91 $16.41 $17.72 $19.13 $19.71 $20.30 10"$14.50 $19.09 $21.00 $22.68 $24.49 $25.23 $25.98 Monthly Sewer Use Charge (Sewer Only Customers) Rate per Account $6.25 $9.71 $10.68 $11.53 $12.46 $12.83 $13.21 Consumption Charge Rate per HCF $0.35 $0.35 $0.39 $0.42 $0.45 $0.46 $0.48 Sewer Surcharges Multi Unit surcharge (per DU)$2.00 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1: The surcharge has been incorporated into the Monthly Sewer Use Charge under the revised structure 4 5 November 17, 2014 - DRAFT HF&H Consultants, LLC CITY OF NEWPORT BEACH Sewer and Recycled Water Rate Study CITY OF NEWPORT BEACH 592 Superior Avenue Newport Beach, CA 92663 SEWER AND RECYCLED WATER RATE STUDY November 17, 2014 HF&H CONSULTANTS, LLC 201 North Civic Drive, Suite 230 Walnut Creek, CA 94596 © HF&H CONSULTANTS, LLC All rights reserved. This document is printed on 100% recycled, post-consumer content paper Managing Tomorrow’s Resources Today 201 N. Civic Drive, Suite 230 Robert D. Hilton, CMC Walnut Creek, California 94596 John W. Farnkopf, PE Telephone: 925/977-6950 Laith B. Ezzet, CMC Fax: 925/977-6955 Richard J. Simonson, CMC www.hfh-consultants.com Marva M. Sheehan, CPA Robert C. Hilton, CMC November 17, 2014 Mr. George Murdoch Utilities General Manager City of Newport Beach 592 Superior Avenue Newport Beach, CA 92663 Subject: Sewer and Recycled Water Rate Study Dear Mr. Murdoch: HF&H Consultants, LLC, is pleased to submit this Sewer and Recycled Water Rate Study to the City of Newport Beach (City). The report summarizes the analysis that was conducted to develop the recommended rates. A copy of the rate model is included in the appendix. The City has demonstrated leadership in improving rate payer equity during a time when costs are increasing in compliance with regulatory mandates. It has been a privilege to assist the City with this step forward. Very truly yours, HF&H CONSULTANTS, LLC John W. Farnkopf, P.E. Senior Vice President City of Newport Beach Sewer and Recycled Water Rate Study Table of Contents November 17, 2014 Page i HF&H Consultants, LLC TABLE OF CONTENTS 1. EXECUTIVE SUMMARY ................................................................................. 1 Findings And Recommmendations ......................................................................... 1 Sewer ............................................................................................................ 1 Recycled Water ............................................................................................... 3 2. INTRODUCTION ........................................................................................... 4 Study Purpose ..................................................................................................... 4 Rate Making Objectives ........................................................................................ 4 Background ......................................................................................................... 4 Sewer ............................................................................................................ 4 Recycled Water ............................................................................................... 4 3. SEWER PROJECTED REVENUE INCREASES .................................................. 6 Revenue Requirements......................................................................................... 6 Salaries .......................................................................................................... 6 Benefits .......................................................................................................... 6 Operations & Maintenance ............................................................................... 6 Internal Services Allocation .............................................................................. 7 Operating Reserve Expense ............................................................................. 7 Capital Reserve Expense .................................................................................. 7 Miscellaneous ................................................................................................. 7 Revenue Increases ............................................................................................... 8 Fund Balance ....................................................................................................... 8 Minimum Fund Balance ................................................................................... 9 Target Fund Balance ....................................................................................... 9 4. SEWER RATE DESIGN ................................................................................. 10 Current Rate Structure ....................................................................................... 10 Proposed Rate Structure ..................................................................................... 10 Current and Proposed Customer Bill Comparisons ................................................ 13 Comparison with Neighboring agencies ............................................................... 13 5. RECYCLED WATER PROJECTED REVENUE INCREASES .............................. 15 Revenue Requirements....................................................................................... 15 Operating Expenses ...................................................................................... 15 Purchased Recycled Water ............................................................................. 15 Pump Station Operating and Maintenance ...................................................... 15 Depreciation ................................................................................................. 16 6. RECYCLED WATER RATE DESIGN ............................................................... 17 Current Rate Structure ....................................................................................... 17 Proposed Rate Structure ..................................................................................... 17 City of Newport Beach Sewer and Recycled Water Rate Study Table of Contents November 17, 2014 Page ii HF&H Consultants, LLC Customer Bill Comparisons ................................................................................. 20 APPENDIX A. SEWER AND RECYCLED WATER RATE MODEL TABLE OF FIGURES Figure 1-1. Sewer Revenue Increases ....................................................................... 1 Figure 1-2. Current and Proposed Sewer Rates ........................................................... 2 Figure 1-2. Current and Proposed Recycled Water Rates ............................................. 3 Figure 3-1. Annual Revenue Requirement Components .............................................. 6 Figure 3-2. Capital Projects ....................................................................................... 7 Figure 3-3. Projected Revenue Increases ................................................................... 8 Figure 3-4. Fund Balance With and Without Rate Increases ........................................ 9 Figure 4-1. Fixed and Variable Revenue .................................................................... 10 Figure 4-2. Calculation of Monthly Fixed Charges ...................................................... 11 Figure 4-3. Calculation of Sewer Consumption Charge ............................................... 11 Figure 4-4. Five Year Sewer Rate Projections ............................................................ 12 Figure 4-5. Customer Bill Comparison ....................................................................... 13 Figure 4-6. Neighboring Agency Comparison ............................................................. 14 Figure 5-1. Revenue Requirement Projections ........................................................... 15 Figure 6-1. FY 2014-15 Revenue Requirement by Cost Category ................................ 18 Figure 6-2. Calculation of Monthly Fixed Charges ...................................................... 19 Figure 6-3. Calculation of Commodity and Pump Station Charges ............................... 19 Figure 6-4. Five Year Recycled Water Rate Projections .............................................. 20 ACRONYMS CIP Capital Improvement Plan EDU Equivalent Dwelling Unit; an average single-family residential customer EMU Equivalent meter unit FY Fiscal Year GPD Gallons Per Day HCF or CCF Hundred Cubic Feet of metered water; 748 gallons; a cube of water 4.6 feet on edge I&I Inflow and Infiltration; stormwater runoff that enters collection systems through surface or subsurface connections, cracks, or other openings O&M Operations and Maintenance OCSD Orange County Sanitary District OCWD Orange County Water District PAYGo Pay-As-You-Go, in reference to funding capital improvements from cash rather than from borrowed sources of revenue SFR Single Family Residential City of Newport Beach Sewer and Recycled Water Rate Study Table of Contents November 17, 2014 Page iii HF&H Consultants, LLC ACKNOWLEDGEMENTS City Council Rush Hill, II, Mayor Edward Selich, Mayor Pro Tem Michael Henn, Council Member Tony Petros, Council Member Leslie Daigle, Council Member Nancy Gardner, Council Member Keith Curry, Council Member City Staff George Murdoch, Utilities General Manager Dan Matusiewicz, Deputy Finance Director Rachell Wilfert, Management Assistant HF&H Consultants, LLC John Farnkopf, Sr. Vice President Rick Simonson, Vice President Sima Mostafaei, Senior Associate City of Newport Beach Sewer and Recycled Water Rate Study Table of Contents November 17, 2014 Page iv HF&H Consultants, LLC SEWER AND RECYCLED WATER RATE STUDY This page intentionally left blank City of Newport Beach Sewer and Recycled Water Rate Study 1. Executive Summary November 17, 2014 Page 1 HF&H Consultants, LLC 1. EXECUTIVE SUMMARY This report summarizes the analysis of the City’s sewer and recycled water rates. The analysis represents a collaborative effort of the City’s Staff and consulting team. HF&H prepared the financial plan model using the City’s FY 2014-15 adopted operating budget. FINDINGS AND RECOMMMENDATIONS Sewer 1. Key Assumptions. Rates were set to generate revenue sufficient to fund the City’s collection system expenses, local capital improvements funded from cash, and to maintain the City’s reserves. 2. Revenue Projections. The revenue projections are shown in Figure 1-1 beginning with FY 2014-15. The increases enable the City to address collection and pump station improvement projects that were identified in the City’s Sewer Master Plan. With these increases, the City will be able to fund an average of $1,000,000 per year over the next five years. By the end of the fifth year, the rates will enable the City to continue to fund $1,500,000 per year on a pay-as-you-go cash basis without issuing debt. Figure 1-1. Sewer Revenue Increases FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Increase in Revenue from Rates 10%8%8%4%4% Revenue from Current Rates**$3,389,036 $3,389,036 $3,389,036 $3,389,036 $3,389,036 Revenue from Rate Increases FY14-15 (effective 1/1/15)$169,452 $338,904 $338,904 $338,904 $338,904 FY15-16 (effective 7/1/15)$298,235 $298,235 $298,235 $298,235 FY16-17 (effective 7/1/16)$322,094 $322,094 $322,094 FY17-18 (effective 7/1/17)$173,931 $173,931 FY18-19 (effective 7/1/18)$180,888 Subtotal - Revenue Increases $169,452 $637,139 $959,233 $1,133,163 $1,314,051 Total Rate Revenue $3,558,487 $4,026,174 $4,348,268 $4,522,199 $4,703,087 Net Revenue Requirements $3,558,487 $4,026,174 $4,348,268 $4,522,199 $4,703,087 Surplus/(Deficit) after Increase $0 $0 $0 $0 $0 **Includes bad debt allowance of 0.4% of existing revenue 3. Rate Design. The City’s current sewer customers pay the sum of the following: a fixed monthly sewer use charge that is the same for all customers and a commodity charge based on metered water use during the monthly period. In City of Newport Beach Sewer and Recycled Water Rate Study 1. Executive Summary November 17, 2014 Page 2 HF&H Consultants, LLC addition, for meters 2-inch or larger, a $10.00 monthly surcharge is assessed, and for connections servicing two or more dwelling units on the same connection, a $2.00 per unit per month surcharge is assessed for any additional dwelling units. We recommend combining the two surcharges into the monthly use charge, and maintaining the commodity charge. Under the revised rate structure, customers will pay the sum of only two charges: a monthly sewer use charge, graduated based on the capacity of the connection, and the commodity charge. 4. Projected Rates. Figure 1-2 shows the sewer rates that are needed to cover the projected revenue requirements, and compares the revised structure to the current structure. In the revised rate structure, the service charges were graduated using an EMU multiplier that was based on the ratio of $4.50 to $14.50 (the current rate ratio), the effect of which is to increase the service charges for the larger services. The revised rate structure maintains the consumption charge, but includes the larger meter and additional dwelling unit surcharges as part of the monthly sewer use charge. Figure 1-2. Current and Proposed Sewer Rates Current Revised Structure Structure FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 10%8%8%3%3% Monthly Sewer Use Charge 5/8" or 3/4"$4.50 $5.97 $6.56 $7.09 $7.65 $7.88 $8.12 1"$4.50 $5.97 $6.56 $7.09 $7.65 $7.88 $8.12 1 1/2"$4.50 $6.56 $7.22 $7.80 $8.42 $8.67 $8.93 2" $14.50 $8.95 $9.84 $10.63 $11.48 $11.83 $12.18 2 1/2" $14.50 $9.54 $10.50 $11.34 $12.25 $12.61 $12.99 3" $14.50 $10.14 $11.16 $12.05 $13.01 $13.40 $13.80 4" $14.50 $11.93 $13.12 $14.17 $15.31 $15.77 $16.24 6" $14.50 $13.42 $14.76 $15.95 $17.22 $17.74 $18.27 8"$14.50 $14.91 $16.41 $17.72 $19.13 $19.71 $20.30 10"$14.50 $19.09 $21.00 $22.68 $24.49 $25.23 $25.98 Monthly Sewer Use Charge (Sewer Only Customers) Rate per Account $6.25 $9.71 $10.68 $11.53 $12.46 $12.83 $13.21 Consumption Charge Rate per HCF $0.35 $0.35 $0.39 $0.42 $0.45 $0.46 $0.48 Sewer Surcharges Multi Unit surcharge $2.00 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1: The surcharge has been incorporated into the Monthly Sewer Use Charge under the revised structure City of Newport Beach Sewer and Recycled Water Rate Study 1. Executive Summary November 17, 2014 Page 3 HF&H Consultants, LLC Recycled Water 1. Key Assumptions. Rates were set to generate revenue sufficient to fund the City’s recycled water system’s operations and maintenance expense, the cost of purchasing recycled water from OCWD, and capital replacement expense related to pump stations and meters. 2. Rate Design. The City’s current recycled water customers pay the sum of two charges: a monthly fixed charge that is based on the size of the connection, and a commodity charge based on metered water use during the monthly period. The commodity charge is based on 80% of the potable water rate. We recommend unlinking the recycled water rate from the potable water rate and aligning the recycled fixed and commodity charges with the fixed costs and the cost of purchased water from OCWD, respectively. In addition to the fixed and commodity charges, pump station users will be charged a pump station charge based on the cost to operate and maintain the stations and convey recycled water. 3. Projected Rates. The rate projections are shown in Figure 1-2. Figure 1-2. Current and Proposed Recycled Water Rates Current FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 2%2%2%2% Monthly Service Charge 5/8" or 3/4"$13.82 $18.91 $19.29 $19.68 $20.07 $20.47 1"$23.03 $31.53 $32.16 $32.80 $33.46 $34.13 1 1/2"$46.06 $63.05 $64.32 $65.60 $66.91 $68.25 2" $73.70 $100.88 $102.90 $104.95 $107.05 $109.19 3" $138.18 $189.15 $192.94 $196.80 $200.73 $204.75 4" $230.30 $315.25 $321.56 $327.99 $334.55 $341.24 6" $460.61 $630.50 $643.11 $655.98 $669.10 $682.48 8"$736.98 $1,008.81 $1,028.99 $1,049.57 $1,070.56 $1,091.97 Monthly Commodity Charge Rate per HCF $2.46 $0.86 $0.87 $0.89 $0.91 $0.93 Monthly Pump Station Charge Rate per HCF none $0.36 $0.37 $0.38 $0.38 $0.39 City of Newport Beach Sewer and Recycled Water Rate Study 2. Introduction November 17, 2014 Page 4 HF&H Consultants, LLC 2. INTRODUCTION STUDY PURPOSE The purpose of this study is to update the City’s rates to ensure that they generate sufficient revenue and that the rate structures for sewer and recycled water reflect the City’s current rate-making objectives. The study was commissioned by the City to evaluate the effect of certain rate structure modifications in response to input from its customers. RATE MAKING OBJECTIVES The City’s current rate-making objectives include the following: • Provide revenue sufficiency and financial stability to cover the projected capital and O&M costs of providing recycled water and funding the City’s Sewer fund. • Meet the City’s operations and capital funds reserve targets for the sewer enterprise fund. • Rates should reflect equity of costs in proportion to the level of service. • Provide for efficient administration and execution of utility billing. • Minimize “rate shock” overall and to any specific customer class. • Rates should be clear and understandable to the customers. • The rates must comply with Proposition 218 and applicable State codes. BACKGROUND Sewer The City provides sewer service to approximately 64,465 customers. The City’s existing sewer collection system consists of a network of forcemain and gravity sewers. This system is composed of approximately 197 miles of mainline gravity pipes, 4.7 miles of forcemains with 4,922 manholes and cleanouts, and 25,525 sewer laterals with an approximate length of 121 miles in the public-rights-of-way. The City’s service area lies within the OCSD who is responsible for treating the City’s sewer. The City also owns and operates 21 pump stations in various areas which lift sewer from the lower areas and several island communities for treatment at OCSD’s treatment plant. Recycled Water The City currently has five recycled water customers totaling 14 water connections. The customers include Big Canyon and Newport Beach Country Club golf courses; East Bluff School, Our Lady Queen of Angels School, and the City which uses recycled water for irrigation of medians and parks. In 1991, the City entered into an agreement with OCWD for the distribution and sale of Green Acres Project water. The agreement stipulates the rules and regulations for the City of Newport Beach Sewer and Recycled Water Rate Study 2. Introduction November 17, 2014 Page 5 HF&H Consultants, LLC City to provide recycled water. Included in this agreement is the stipulation that recycled water rates may not exceed 80% of the potable water rate. The agreement term is for 25 years with five 5-year automatic extensions, with an estimated ending term year of 2041. The City subsequently entered into “End User Agreements” for the sale of recycled water to large customers in 1996 for a 10-year term. These agreements, now expired, included provisions that OCWD and the City would provide funding to modify golf courses and construct pump stations to facilitate the use of recycled water. However, in 2011, the City and the Big Canyon Country Club entered into an agreement that provided for the delivery and sale of recycled water, and a pump station license agreement. City of Newport Beach Sewer and Recycled Water Rate Study 3. Sewer Projected Revenue Increases November 17, 2014 Page 6 HF&H Consultants, LLC 3. SEWER PROJECTED REVENUE INCREASES REVENUE REQUIREMENTS Rate analysis begins by determining the revenue requirements that must be met by rates. For purposes of this study, a ten-year rate projection period was developed using a spreadsheet model (see Appendix A). However, only the first five years are shown in Figure 3-1 for rate-setting purposes. Figure 3-1 summarizes the major categories comprised in the revenue requirements, indicating the annual change. Figure 3-1. Annual Revenue Requirement Components FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Salaries 1,052,980$ 1,084,569$ 1,117,106$ 1,150,620$ 1,185,138$ Benefits 563,517 591,693 609,444 627,727 646,559 Operations & Maintenance 915,891 908,338 924,052 940,038 956,301 Internal Services Allocation 621,424 632,175 643,111 654,237 665,555 Operating Reserve Expense 371,675 275,828 270,403 114,834 214,190 Capital Expense - 500,000 750,000 1,000,000 1,000,000 Miscellaneous Costs 33,000 33,571 34,152 34,743 35,344 Total Revenue Requirement 3,558,487$ 4,026,174$ 4,348,268$ 4,522,199$ 4,703,087$ Annual Change 13%8%4%4% Salaries This cost category includes regular and overtime pay and is projected to increase gradually at about 3% per year during the projection period. No staff headcount increases are anticipated; the cost trend is driven primarily by cost of living adjustments set in labor agreements. Benefits This cost category includes health, dental, and vision as well as Other Post-Employment (OPEB) and Public Employment (PERS) retirement benefits. During the projection period these costs are projected to increase at about 5% per year. The cost trend is driven primarily by increases in health care benefit costs set in labor agreements. Operations & Maintenance This cost category includes non-personnel related operating and maintenance expenses, such as electrical utility costs, fuel, and non-capital materials and equipment. During the projection period, these costs are expected to increase gradually at about 1.73% per year, based on the five-year historical average of inflation for the Los Angeles area. City of Newport Beach Sewer and Recycled Water Rate Study 3. Sewer Projected Revenue Increases November 17, 2014 Page 7 HF&H Consultants, LLC Internal Services Allocation The City has historically transferred funds from the Sewer Enterprise Fund to the General Fund as reimbursement for governmental costs incurred by the General Fund on behalf of the Enterprise. Much of this funding reimburses the General Fund for salaries, equipment, and program costs associated with general services. During the projection period, these costs are expected to increase gradually at about 1.73% per year, based on the five-year historical average of inflation for the Los Angeles area. Operating Reserve Expense The City transfers rate revenue to its Operating Reserve during the projection period to smooth out the annual revenue requirements and meet the minimum fund balance requirement. Please refer to the section titled ‘minimum fund balance’ in this report for further discussion of the fund policy. Capital Expense The City’s 30-year capital improvement program planned expenditures are summarized in Figure 3-2. Figure 3-2. Capital Projects CIP Project Description Project Cost Collection System Capacity Improvements $1,281,391 Collection System Condition Improvements $16,648,060 Pump Station Improvements $11,088,000 Total $29,017,451 The City plans to fund these capital improvements with cash from rate revenue. To accomplish this goal, the program is phased based upon the implementation cost of the facilities, and the quantity of work the City can reasonably administer each year. The programmed rate increases over the next five years provide the City approximately $1 million annually with which to fund projects. At the end of five years, the City will be able to fund approximately $1.5 million with the additional revenue generated from the recommended rate increases. Miscellaneous Costs This cost category includes non-capital office and shop equipment. During the projection period, these costs are expected to increase gradually at about 1.73% per year, based on the five-year historical average of inflation for the Los Angeles area. City of Newport Beach Sewer and Recycled Water Rate Study 3. Sewer Projected Revenue Increases November 17, 2014 Page 8 HF&H Consultants, LLC REVENUE INCREASES Revenue increases were derived to fund the revenue requirements. Estimating current rate revenue took into account 23,104 currently active meters whose flow equaled 4,746,732 HCF. We also included the annual surcharge revenue for meters 2” or larger, as well as the surcharge for multiple dwelling units serviced by the same meter. The resulting rate revenue for FY 2014-15, prior to rate increases, but net of 0.4% of bad debt, was estimated at $3,389,036. Based on this estimate, annual revenue increases were projected as shown in Figure 3-3. Figure 3-3. Projected Revenue Increases FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Increase in Revenue from Rates 10%8%8%4%4% Revenue from Current Rates**$3,389,036 $3,389,036 $3,389,036 $3,389,036 $3,389,036 Revenue from Rate Increases FY14-15 (effective 1/1/15)$169,452 $338,904 $338,904 $338,904 $338,904 FY15-16 (effective 7/1/15)$298,235 $298,235 $298,235 $298,235 FY16-17 (effective 7/1/16)$322,094 $322,094 $322,094 FY17-18 (effective 7/1/17)$173,931 $173,931 FY18-19 (effective 7/1/18)$180,888 Subtotal - Revenue Increases $169,452 $637,139 $959,233 $1,133,163 $1,314,051 Total Rate Revenue $3,558,487 $4,026,174 $4,348,268 $4,522,199 $4,703,087 Net Revenue Requirements $3,558,487 $4,026,174 $4,348,268 $4,522,199 $4,703,087 Surplus/(Deficit) after Increase $0 $0 $0 $0 $0 **Includes bad debt allowance of 0.4% of existing revenue FUND BALANCE The FY 2013-14 year-end fund balance is projected to be $2,885,000, which is very close to the target balance for operations and capital of $2,923,000. Figure 3-4 shows the fund balance dipping in FY 2014-15 but climbing back toward the target balance by FY 2016- 17 and meeting the target by FY 2018-19, based on the projected revenue increases. Fluctuations in annual flow will affect revenue generation and the resulting fund balance. The City is advised to carefully monitor the fund balance in the event of downward fluctuations in flow. City of Newport Beach Sewer and Recycled Water Rate Study 3. Sewer Projected Revenue Increases November 17, 2014 Page 9 HF&H Consultants, LLC Figure 3-4. Fund Balance With and Without Rate Increases Reserves without Rate Increase Reserves with Rate Increase Target Balance(Operations + Capital) Minimum Balance(Operations) $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Pr o j e c t e c d F u n d B a l a n c e s ( i n M i l l i o n s ) Minimum Fund Balance The minimum balance (red line) is the balance that is required to meet the City’s operating expenses during the year. If this minimum balance were maintained, the Sewer Fund should be able to fund its monthly cash flow over this extended period without relying on the General Fund for a short-term loan. When the Operations Reserve balance is below the minimum balance, the likelihood increases that temporary funding from the General Fund will be required to meet cash flow needs. The City’s reserve policy dictates that the minimum Operations Reserve balance be set equal to 50% of annual O&M expenses. Target Fund Balance The proposed revenue increases move the fund balance (solid green line) upward toward the target balance (blue line). The target balance is the sum of the minimum balance for operations (red line) plus an allowance for capital projects. This allowance provides liquidity to fund construction for projects on a pay-as-you-go basis. With adequate capital reserves, the City is able to pay construction contractors without encroaching on the Operations Reserve. The allowance is based on the average annual budgeted capital improvement projects. City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 10 HF&H Consultants, LLC 4. SEWER RATE DESIGN CURRENT RATE STRUCTURE The City currently has 23,104 active accounts who pay the sum of two charges every month for Sewer service: a basic service charge of $4.50 per account plus a sewer consumption charge of $0.35 per HCF based on metered water use during the billing period. In addition to the charges specified above, customers with a water service connection of 2”or greater pay a $10.00 monthly surcharge. Moreover, customers with more than one dwelling unit that is serviced by the same connection pay a surcharge of $2.00 for each additional dwelling unit. Lastly, the City’s 485 sewer customers who do not purchase potable water from the City are charged $6.25 per account per month. PROPOSED RATE STRUCTURE The proposed rate structure is based on the revenue generated by the current rate structure and categorizes the revenue into two categories: fixed revenue and variable revenue. Fixed revenue is considered fixed because it does not vary based on flow, while variable costs vary because they are based on the amount of water purchased, or sewage produced and therefore, are solely comprised of the sewer consumption charge. For the purpose of rate design, the sewer use charge for customers who do not purchase water from the City was analyzed separately. Figure 4-1 presents the breakdown of the current revenue by revenue category: Figure 4-1. Fixed and Variable Revenue Fixed Revenue Sewer Use Charge (per account)$1,247,616 Surcharge (2" meters or greater)$78,720 Surcharge (per additional DU)$378,492 Total Annual Fixed Revenue $1,704,828 Variable Revenue Consumption Charge (per HCF)$1,661,356 Total Annual Variable Revenue $1,661,356 Subtotal $3,366,184 Sewer Use Charge (per account)*$36,375 Grand Total**$3,402,559 **Gross revenues; does not account for bad debt Current Revenue *Sewer Revenue from customers who do not purchase potable water from the City of Newport Beach City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 11 HF&H Consultants, LLC In order to determine the monthly charge by size of connection, we first converted the number of active meters to equivalent meter units (EMU) as shown in Figure 4-2. The EMU multiplier by meter size is the same multipliers used to determine the fixed charge by meter size for the current sewer rates; in other words, it is the ratio between $4.50 to $14.50, or 1 to 3.2. The monthly charge for an EMU of 1.00 is derived by dividing the total fixed revenue of $1,704,828 by the total number of EMUs, or 23,815. This quotient was then divided by 12 to convert from an annual charge of $71.59 to a monthly charge of $5.97. The service charges were then graduated using the EMU multipliers, the effect of which is to increase the service charges for the larger services. Note the total annual revenue of $1,704,828 from fixed charges in Figure 4-2 is equal to the total annual fixed revenue presented in Figure 4-1. Figure 4-2. Calculation of Monthly Fixed Charges Meter Size Total Active Accounts EMU Multiplier Total EMUs Monthly Service Charge Total Annual Fixed Revenue a b a*b c a*c*12 5/8" or 3/4"15,357 1.00 15,357 $5.97 $1,099,342 1"6,276 1.00 6,276 $5.97 $449,272 1 1/2"364 1.10 400 $6.56 $28,663 2" 886 1.50 1,329 $8.95 $95,137 2 1/2"1 1.60 2 $9.54 $115 3" 34 1.70 58 $10.14 $4,138 4" 119 2.00 238 $11.93 $17,037 6" 54 2.25 122 $13.42 $8,698 8"11 2.50 28 $14.91 $1,969 10"2 3.20 6 $19.09 $458 23,104 23,815 $1,704,828 The sewer consumption charge was derived using the monthly meter readings in HCF for all customers. Figure 4-3 presents the derivation of the proposed sewer consumption charges. Figure 4-3. Calculation of Sewer Consumption Charge Cost Category Current Revenue Usage (HCF) Charge per HCF Variable Revenue $1,661,356 4,746,732 $0.35 For sewer customers who do not purchase potable water from the City, and therefore, do not have a proxy for their sewer flows, an average flow per account was derived by using water use per single family residential account. The 10.69 HCF average use was City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 12 HF&H Consultants, LLC determined using customer billing data and dividing total single family consumption by the number of single family accounts. Next, using the revised rate structure, the $9.71 charge shown in Figure 3-4 represents the average single family bill per month. It was calculated as the monthly sewer use charge of $5.97 per account plus the product of the $0.35 consumption charge times 10.69 HCF. Using the fixed and variable rates as calculated in Figure 4-2 and Figure 4-3, a five-year rate plan was prepared based on the City’s Sewer revenue requirements as presented in Figure 3-1. The rates included in the 5-year plan reflect annual rate increases starting in Year 1 to keep pace with the increase in the revenue requirements. The proposed 5-year rate plan is shown in Figure 4-4. Figure 4-4. Five Year Sewer Rate Projections Current Revised Structure Structure FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 10%8%8%4%4% Monthly Sewer Use Charge 5/8" or 3/4"$4.50 $5.97 $6.56 $7.09 $7.65 $7.96 $8.28 1"$4.50 $5.97 $6.56 $7.09 $7.65 $7.96 $8.28 1 1/2"$4.50 $6.56 $7.22 $7.80 $8.42 $8.76 $9.11 2" $14.50 $8.95 $9.84 $10.63 $11.48 $11.94 $12.42 2 1/2" $14.50 $9.54 $10.50 $11.34 $12.25 $12.74 $13.25 3" $14.50 $10.14 $11.16 $12.05 $13.01 $13.53 $14.07 4" $14.50 $11.93 $13.12 $14.17 $15.31 $15.92 $16.56 6" $14.50 $13.42 $14.76 $15.95 $17.22 $17.91 $18.63 8"$14.50 $14.91 $16.41 $17.72 $19.13 $19.90 $20.70 10"$14.50 $19.09 $21.00 $22.68 $24.49 $25.47 $26.49 Monthly Sewer Use Charge (Sewer Only Customers) Rate per Account $6.25 $9.71 $10.68 $11.53 $12.46 $12.95 $13.47 Consumption Charge Rate per HCF $0.35 $0.35 $0.39 $0.42 $0.45 $0.47 $0.49 Sewer Surcharges Multi Unit surcharge $2.00 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1: The surcharge has been incorporated into the Monthly Sewer Use Charge under the revised structure City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 13 HF&H Consultants, LLC CURRENT AND PROPOSED CUSTOMER BILL COMPARISONS Figure 4-5 presents a comparison of monthly customer bills using the current rate structure and the recommended revised rate structure. The rates used to calculate the revised bills are the FY 2014-15 charges presented in Figure 4-4. It is notable that current customers who are subjected to the multiple dwelling $2.00 monthly surcharge will experience a decrease in their monthly bill. This occurs based on the revisions to the monthly sewer use charge. The graduated rates, based on meter capacity, better reflect associated flow assumed per dwelling unit, and its equivalent. Figure 4-5. Customer Bill Comparison Customer Name Meter Size Number of Dwelling Units Average Monthly Flow (HCF) Current Monthly Bill FY 14-15 Monthly Bill Difference ($) Single Family Residential (low flow)5/8" - 1"1 2 5.20$ 7.20$ $2.00 Single Family Residential (avg flow)5/8" - 1"1 11 8.35$ 10.60$ $2.25 Single Family Residential (high flow)5/8" - 1"1 16 10.10$ 12.49$ $2.39 Multi Family Residential 3"55 243 209.55$ 102.81$ ($106.74) Commercial 4"1 595 224.75$ 237.80$ $13.05 Commercial 8"141 2,074 1,022.40$ 800.08$ ($222.32) Commercial 2"1 64 36.90$ 33.86$ ($3.04) Commercial 6"1 1,584 568.90$ 613.25$ $44.35 COMPARISON WITH NEIGHBORING AGENCIES Based on available sources, Figure 4-6 shows the recent charges for sewer service among similar Orange County agencies, specifically ones that charge a fixed monthly use charge coupled with a flow-based commodity charge. Larger agencies tend to have lower rates because they can take advantage of economies of scale and have a larger base of customers over which to distribute fixed costs. Figure 4-6 indicates that the City’s current and proposed sewer rates track the trend line along with its neighbors (identified with red diamonds in Figure 4-6). City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 14 HF&H Consultants, LLC Figure 4-6. Neighboring Agency Comparison Newport Beach -Current Newport Beach -Proposed Buena Park Fullerton Seal Beach Garden Grove SD Costa Mesa SDLa Habra Huntington Beach Irvine Ranch WD $0 $5 $10 $15 $20 $25 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 Population of Service Area Mo n t h l y B i l l City of Newport Beach Sewer and Recycled Water Rate Study 5. Recycled water Projected Revenue Increases November 17, 2014 Page 15 HF&H Consultants, LLC 5. RECYCLED WATER PROJECTED REVENUE INCREASES REVENUE REQUIREMENTS The City’s FY 2013-14 revenue requirement served as the basis for determining the revenue requirement projections through FY 2018-19. Figure 5-1 summarizes the sources and assumptions for the data as well as the projected expenditure trends: Figure 5-1. Revenue Requirement Projections FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Operating Costs 40,488$ 41,188$ 41,901$ 42,626$ 43,363$ 44,114$ Purchased Recycled Water 167,598 173,417 179,438 182,810 186,245 189,745 Pump Station Operating & Maintenance 39,408 47,218 48,104 49,007 49,927 50,864 Depreciation 17,500 17,543 17,587 17,632 17,678 17,724 Total Revenue Requirement 264,994$ 279,366$ 287,030$ 292,075$ 297,213$ 302,446$ Annual Change 5%3%2%2%2% Operating Expenses This cost category includes administration and overhead expenses that are calculated as 10% of the total recycled water revenue requirement and 1% of the budgeted general fund overhead charged to the water fund, respectively. During the projection period, the City’s operating expenses are projected to increase gradually at about 1.73% per year, based on the five-year historical average of general inflation for the Los Angeles area. Purchased Recycled Water This cost category for FY 13-14 was based on the actual water purchases in FY 12-13 multiplied by the cost of purchased water from OCWD of $360 per acre foot. During the projection period, the City’s purchased water costs are projected to increase gradually at about 1.88% per year, based on the five-year historical average of OCWD purchased water charges per acre foot. Pump Station Operating and Maintenance This cost category for FY 13-14 was based on the actual cost of inspections, scheduled and corrective maintenance, source changeovers and pump station rehabilitation and maintenance as provided by the city. During the projection period, the City’s pump station operating and maintenance costs are expected to increase gradually at about 1.73% per year, based on the five-year historical average of general inflation for the Los Angeles area. City of Newport Beach Sewer and Recycled Water Rate Study 5. Recycled water Projected Revenue Increases November 17, 2014 Page 16 HF&H Consultants, LLC Depreciation This cost category includes replacement costs for pump station facilities and water meters. The annual pump station facility replacement cost was based on $600,000 in construction costs, amortized over 40 years. The annual meter replacement cost was based on the American Water Works Association’s standard cost of $259 per meter per year, amortized over 15 years. During the projection period, the City’s pump station facility replacement costs are held constant at $15,000 per year, while the meter replacement costs are projected to increase gradually at about 1.73% per year, based on the five-year historical average of inflation for the Los Angeles area. City of Newport Beach Sewer and Recycled Water Rate Study 6. Recycled Water Rate Design November 17, 2014 Page 17 HF&H Consultants, LLC 6. RECYCLED WATER RATE DESIGN CURRENT RATE STRUCTURE The City currently has five recycled water customers totaling 14 connections. These customers pay the sum of two charges every month for water service: a basic service charge based on the size of the service connection plus a commodity charge based on metered water use during the billing period. In 1991, the City entered into an agreement with OCWD for the distribution and sale of recycled water. The agreement stipulated that the recycled water rate may not exceed 80% of the potable water rate. It is the City’s current practice to charge customers 80% of the potable water rate based on that agreement. PROPOSED RATE STRUCTURE Under the new rate structure, the recycled water rates will no longer be linked to 80% of the potable water rates. The proposed rate structure is based on the FY 2014-15 revenue requirement, and categorizes the expenses into three categories: fixed costs, variable costs and pump station-related costs. Fixed costs are considered fixed because they do not vary based on flow, and include the annual cost of meter reading and replacement, as well as administrative and overhead. Variable costs vary because they are based on the amount of water purchased, and therefore, are solely comprised of the annual cost of purchased water from OCWD. Pump station-related costs are comprised of inspections, maintenance, and rehabilitation & replacement that are directly related to the pump stations. Figure 6-1 presents the breakdown of the FY 2014-15 revenue requirement by cost category: City of Newport Beach Sewer and Recycled Water Rate Study 6. Recycled Water Rate Design November 17, 2014 Page 18 HF&H Consultants, LLC Figure 6-1. FY 2014-15 Revenue Requirement by Cost Category Fixed Costs Administration $25,433 Overhead $12,208 Meter Reading $1,514 Meter replacement $2,543 Other agency fees $2,035 Total Fixed Costs $43,732 Variable Costs Purchased Water $173,417 Total Variable Costs $173,417 Pump Station Costs Inspections $7,021 Maintenance $13,109 Rehab & Replacement $42,087 Total Pump Station Costs $62,218 Total Revenue Requirement $279,366 FY2014-15 In order to determine the monthly charge by size of connection, we first converted the number of active meters to equivalent meter units (EMU) as shown in Figure 3-2. The EMU multiplier by meter size is the same multipliers used to determine the fixed charge by meter size for potable water rates. The monthly charge for an EMU of 1.00 is derived by dividing the total fixed costs of $43,732 by the total number of EMUs or 192.70. This quotient was then divided by 12 to convert from an annual charge of $226.94 to a monthly charge of $18.91. The service charges were then graduated using the EMU multipliers, the effect of which is to increase the service charges for the larger services. Note the total annual revenue of $43.732 from fixed charges in Figure 6-2 is equal to the total fixed costs presented in Figure 6-1. City of Newport Beach Sewer and Recycled Water Rate Study 6. Recycled Water Rate Design November 17, 2014 Page 19 HF&H Consultants, LLC Figure 6-2. Calculation of Monthly Fixed Charges Meter Size Total Active Accounts EMU Multiplier Total EMUs Monthly Service Charge FY 14-15 Annual Revenue a b a*b c a*c*12 5/8" or 3/4"0 1.00 0 $18.91 $0 1"0 1.67 0 $31.53 $0 1 1/2"0 3.33 0 $63.05 $0 2" 8 5.33 42.67 $100.88 $9,684 3" 3 10.00 30.01 $189.15 $6,810 4" 0 16.67 0 $315.25 $0 6" 2 33.34 66.68 $630.50 $15,132 8"1 53.34 53.34 $1,008.81 $12,106 14 192.70 $43,732 The commodity and pump station charges were derived using the FY 2012-13 monthly meter readings in HCF for all customers, and FY 2012-13 monthly meter readings for pump station customers in HCF, respectively. Figure 6-3 presents the derivation of the proposed commodity and pump station charges for FY 2014-15: Figure 6-3. Calculation of Commodity and Pump Station Charges Cost Category FY14-15 Costs FY12-13 Usage (HCF) FY14-15 Charge per HCF Variable Costs $173,417 202,793 $0.86 Pump Station Costs $62,218 172,426 $0.36 Using the FY 2014-15 rates as calculated in Figure 6-2 and Figure 6-3, a five-year rate plan was prepared based on the City’s recycled water revenue requirements as presented in Figure 5-1. The rates included in the five-year plan reflect 2% annual rate increases across the board starting in Year 2 to keep pace with the increase in the revenue requirements. The proposed five-year rate plan is shown in Figure 6-4. City of Newport Beach Sewer and Recycled Water Rate Study 6. Recycled Water Rate Design November 17, 2014 Page 20 HF&H Consultants, LLC Figure 6-4. Five Year Recycled Water Rate Projections Current FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 2%2%2%2% Monthly Service Charge 5/8" or 3/4"$13.82 $18.91 $19.29 $19.68 $20.07 $20.47 1"$23.03 $31.53 $32.16 $32.80 $33.46 $34.13 1 1/2"$46.06 $63.05 $64.32 $65.60 $66.91 $68.25 2" $73.70 $100.88 $102.90 $104.95 $107.05 $109.19 3" $138.18 $189.15 $192.94 $196.80 $200.73 $204.75 4" $230.30 $315.25 $321.56 $327.99 $334.55 $341.24 6" $460.61 $630.50 $643.11 $655.98 $669.10 $682.48 8"$736.98 $1,008.81 $1,028.99 $1,049.57 $1,070.56 $1,091.97 Monthly Commodity Charge Rate per HCF $2.46 $0.86 $0.87 $0.89 $0.91 $0.93 Monthly Pump Station Charge Rate per HCF none $0.36 $0.37 $0.38 $0.38 $0.39 CUSTOMER BILL COMPARISONS Figure 6-5 presents a comparison of monthly customer bills using the current rate structure and the recommended revised rate structure. The rates used to calculate the revised bills are the Year 1 charges presented in Figure 6-4. It is notable that all current recycled water customers will experience no less than a 44% bill decrease with the recommended structure change. Figure 6-5. Customer Bill Comparison Customer Name Meter Size Average Monthly Flow (HCF) Current Monthly Bill Revised Monthly Bill Difference ($) Difference (%) Newport Beach Country Club 6"6,650 $16,820 $8,717 ($8,103)-48% Our Lady Queen of Angels 2"151 $446 $230 ($215)-48% Big Canyon Country Club 8"5,256 $13,668 $5,504 ($8,164)-60% Big Canyon Country Club 6"2,463 $6,518 $3,625 ($2,894)-44% Eastbluff School 3"321 $928 $464 ($464)-50% APPENDIX A. SEWER AND RECYLED WATER RATE MODEL HF&H Consultants, LLC 201 N. Civic Drive, Suite 230 Walnut Creek, CA 94596 November 17, 2014 - DRAFT HF&H Consultants, LLC CITY OF NEWPORT BEACH Sewer and Recycled Water Rate Study Item No. 5A1 Wastewater Rates Study Results Additional Materials Received November 17, 2014 CITY OF NEWPORT BEACH 592 Superior Avenue Newport Beach, CA 92663 SEWER AND RECYCLED WATER RATE STUDY November 17, 2014 HF&H CONSULTANTS, LLC 201 North Civic Drive, Suite 230 Walnut Creek, CA 94596 © HF&H CONSULTANTS, LLC All rights reserved. This document is printed on 100% recycled, post-consumer content paper Managing Tomorrow’s Resources Today 201 N. Civic Drive, Suite 230 Robert D. Hilton, CMC Walnut Creek, California 94596 John W. Farnkopf, PE Telephone: 925/977-6950 Laith B. Ezzet, CMC Fax: 925/977-6955 Richard J. Simonson, CMC www.hfh-consultants.com Marva M. Sheehan, CPA Robert C. Hilton, CMC November 17, 2014 Mr. George Murdoch Utilities General Manager City of Newport Beach 592 Superior Avenue Newport Beach, CA 92663 Subject: Sewer and Recycled Water Rate Study Dear Mr. Murdoch: HF&H Consultants, LLC, is pleased to submit this Sewer and Recycled Water Rate Study to the City of Newport Beach (City). The report summarizes the analysis that was conducted to develop the recommended rates. A copy of the rate model is included in the appendix. The City has demonstrated leadership in improving rate payer equity during a time when costs are increasing in compliance with regulatory mandates. It has been a privilege to assist the City with this step forward. Very truly yours, HF&H CONSULTANTS, LLC John W. Farnkopf, P.E. Senior Vice President City of Newport Beach Sewer and Recycled Water Rate Study Table of Contents November 17, 2014 Page i HF&H Consultants, LLC TABLE OF CONTENTS 1. EXECUTIVE SUMMARY ................................................................................ 1  Findings And Recommmendations ....................................................................... 1  Sewer .......................................................................................................... 1  Recycled Water ............................................................................................. 3  2. INTRODUCTION .......................................................................................... 4  Study Purpose ................................................................................................... 4  Rate Making Objectives ...................................................................................... 4  Background ....................................................................................................... 4  Sewer .......................................................................................................... 4  Recycled Water ............................................................................................. 4  3. SEWER PROJECTED REVENUE INCREASES .................................................. 6  Revenue Requirements ...................................................................................... 6  Salaries ........................................................................................................ 6  Benefits ....................................................................................................... 6  Operations & Maintenance ............................................................................. 6  Internal Services Allocation ............................................................................ 7  Operating Reserve Expense ........................................................................... 7  Capital Reserve Expense ................................................................................ 7  Miscellaneous ............................................................................................... 7  Revenue Increases ............................................................................................. 8  Fund Balance ..................................................................................................... 8  Minimum Fund Balance ................................................................................. 9  Target Fund Balance ..................................................................................... 9  4. SEWER RATE DESIGN ................................................................................ 10  Current Rate Structure ..................................................................................... 10  Proposed Rate Structure ................................................................................... 10  Current and Proposed Customer Bill Comparisons ............................................... 13  Comparison with Neighboring agencies .............................................................. 13  5. RECYCLED WATER PROJECTED REVENUE INCREASES .............................. 15  Revenue Requirements .................................................................................... 15  Operating Expenses .................................................................................... 15  Purchased Recycled Water ........................................................................... 15  Pump Station Operating and Maintenance ..................................................... 15  Depreciation ............................................................................................... 16  6. RECYCLED WATER RATE DESIGN .............................................................. 17  Current Rate Structure ..................................................................................... 17  Proposed Rate Structure ................................................................................... 17  City of Newport Beach Sewer and Recycled Water Rate Study Table of Contents November 17, 2014 Page ii HF&H Consultants, LLC Customer Bill Comparisons ............................................................................... 20  APPENDIX A. SEWER AND RECYCLED WATER RATE MODEL TABLE OF FIGURES Figure 1-1. Sewer Revenue Increases ...................................................................... 1  Figure 1-2. Current and Proposed Sewer Rates ......................................................... 2  Figure 1-2. Current and Proposed Recycled Water Rates ............................................ 3  Figure 3-1. Annual Revenue Requirement Components ............................................. 6  Figure 3-2. Capital Projects ..................................................................................... 7  Figure 3-3. Projected Revenue Increases ................................................................. 8  Figure 3-4. Fund Balance With and Without Rate Increases ....................................... 9  Figure 4-1. Fixed and Variable Revenue .................................................................. 10  Figure 4-2. Calculation of Monthly Fixed Charges ..................................................... 11  Figure 4-3. Calculation of Sewer Consumption Charge ............................................. 11  Figure 4-4. Five Year Sewer Rate Projections .......................................................... 12  Figure 4-5. Customer Bill Comparison ..................................................................... 13  Figure 4-6. Neighboring Agency Comparison ........................................................... 14  Figure 5-1. Revenue Requirement Projections ......................................................... 15  Figure 6-1. FY 2014-15 Revenue Requirement by Cost Category ............................... 18  Figure 6-2. Calculation of Monthly Fixed Charges ..................................................... 19  Figure 6-3. Calculation of Commodity and Pump Station Charges .............................. 19  Figure 6-4. Five Year Recycled Water Rate Projections ............................................. 20  ACRONYMS CIP Capital Improvement Plan EDU Equivalent Dwelling Unit; an average single-family residential customer EMU Equivalent meter unit FY Fiscal Year GPD Gallons Per Day HCF or CCF Hundred Cubic Feet of metered water; 748 gallons; a cube of water 4.6 feet on edge I&I Inflow and Infiltration; stormwater runoff that enters collection systems through surface or subsurface connections, cracks, or other openings O&M Operations and Maintenance OCSD Orange County Sanitary District OCWD Orange County Water District PAYGo Pay-As-You-Go, in reference to funding capital improvements from cash rather than from borrowed sources of revenue SFR Single Family Residential City of Newport Beach Sewer and Recycled Water Rate Study Table of Contents November 17, 2014 Page iii HF&H Consultants, LLC ACKNOWLEDGEMENTS City Council Rush Hill, II, Mayor Edward Selich, Mayor Pro Tem Michael Henn, Council Member Tony Petros, Council Member Leslie Daigle, Council Member Nancy Gardner, Council Member Keith Curry, Council Member City Staff George Murdoch, Utilities General Manager Dan Matusiewicz, Deputy Finance Director Rachell Wilfert, Management Assistant HF&H Consultants, LLC John Farnkopf, Sr. Vice President Rick Simonson, Vice President Sima Mostafaei, Senior Associate City of Newport Beach Sewer and Recycled Water Rate Study Table of Contents November 17, 2014 Page iv HF&H Consultants, LLC SEWER AND RECYCLED WATER RATE STUDY This page intentionally left blank City of Newport Beach Sewer and Recycled Water Rate Study 1. Executive Summary November 17, 2014 Page 1 HF&H Consultants, LLC 1. EXECUTIVE SUMMARY This report summarizes the analysis of the City’s sewer and recycled water rates. The analysis represents a collaborative effort of the City’s Staff and consulting team. HF&H prepared the financial plan model using the City’s FY 2014-15 adopted operating budget. FINDINGS AND RECOMMMENDATIONS Sewer 1. Key Assumptions. Rates were set to generate revenue sufficient to fund the City’s collection system expenses, local capital improvements funded from cash, and to maintain the City’s reserves. 2. Revenue Projections. The revenue projections are shown in Figure 1-1 beginning with FY 2014-15. The increases enable the City to address collection and pump station improvement projects that were identified in the City’s Sewer Master Plan. With these increases, the City will be able to fund an average of $1,000,000 per year over the next five years. By the end of the fifth year, the rates will enable the City to continue to fund $1,500,000 per year on a pay-as-you-go cash basis without issuing debt. Figure 1-1. Sewer Revenue Increases FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Increase in Revenue from Rates 10% 8% 8% 4% 4% Revenue from Current Rates** $3,389,036 $3,389,036 $3,389,036 $3,389,036 $3,389,036 Revenue from Rate Increases FY14-15 (effective 1/1/15) $169,452 $338,904 $338,904 $338,904 $338,904 FY15-16 (effective 7/1/15) $298,235 $298,235 $298,235 $298,235 FY16-17 (effective 7/1/16) $322,094 $322,094 $322,094 FY17-18 (effective 7/1/17) $173,931 $173,931 FY18-19 (effective 7/1/18) $180,888 Subtotal - Revenue Increases $169,452 $637,139 $959,233 $1,133,163 $1,314,051 Total Rate Revenue $3,558,487 $4,026,174 $4,348,268 $4,522,199 $4,703,087 Net Revenue Requirements $3,558,487 $4,026,174 $4,348,268 $4,522,199 $4,703,087 Surplus/(Deficit) after Increase $0 $0 $0 $0 $0 **Includes bad debt allowance of 0.4% of existing revenue 3. Rate Design. The City’s current sewer customers pay the sum of the following: a fixed monthly sewer use charge that is the same for all customers and a commodity charge based on metered water use during the monthly period. In City of Newport Beach Sewer and Recycled Water Rate Study 1. Executive Summary November 17, 2014 Page 2 HF&H Consultants, LLC addition, for meters 2-inch or larger, a $10.00 monthly surcharge is assessed, and for connections servicing two or more dwelling units on the same connection, a $2.00 per unit per month surcharge is assessed for any additional dwelling units. We recommend combining the two surcharges into the monthly use charge, and maintaining the commodity charge. Under the revised rate structure, customers will pay the sum of only two charges: a monthly sewer use charge, graduated based on the capacity of the connection, and the commodity charge. 4. Projected Rates. Figure 1-2 shows the sewer rates that are needed to cover the projected revenue requirements, and compares the revised structure to the current structure. In the revised rate structure, the service charges were graduated using an EMU multiplier that was based on the ratio of $4.50 to $14.50 (the current rate ratio), the effect of which is to increase the service charges for the larger services. The revised rate structure maintains the consumption charge, but includes the larger meter and additional dwelling unit surcharges as part of the monthly sewer use charge. Figure 1-2. Current and Proposed Sewer Rates Current Revised Structure Structure FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 10% 8% 8% 4% 4% Monthly Sewer Use Charge 5/8" or 3/4" $4.50 $5.97 $6.56 $7.09 $7.65 $7.96 $8.28 1" $4.50 $5.97 $6.56 $7.09 $7.65 $7.96 $8.28 1 1/2" $4.50 $6.56 $7.22 $7.80 $8.42 $8.76 $9.11 2" $14.50 $8.95 $9.84 $10.63 $11.48 $11.94 $12.42 2 1/2" $14.50 $9.54 $10.50 $11.34 $12.25 $12.74 $13.25 3" $14.50 $10.14 $11.16 $12.05 $13.01 $13.53 $14.07 4" $14.50 $11.93 $13.12 $14.17 $15.31 $15.92 $16.56 6" $14.50 $13.42 $14.76 $15.95 $17.22 $17.91 $18.63 8" $14.50 $14.91 $16.41 $17.72 $19.13 $19.90 $20.70 10" $14.50 $19.09 $21.00 $22.68 $24.49 $25.47 $26.49 Monthly Sewer Use Charge (Sewer Only Customers) Rate per Account $6.25 $9.71 $10.68 $11.53 $12.46 $12.95 $13.47 Consumption Charge Rate per HCF $0.35 $0.35 $0.39 $0.42 $0.45 $0.47 $0.49 Sewer Surcharges Multi Unit surcharge $2.00 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1: The surcharge has been incorporated into the Monthly Sewer Use Charge under the revised structure City of Newport Beach Sewer and Recycled Water Rate Study 1. Executive Summary November 17, 2014 Page 3 HF&H Consultants, LLC Recycled Water 1. Key Assumptions. Rates were set to generate revenue sufficient to fund the City’s recycled water system’s operations and maintenance expense, the cost of purchasing recycled water from OCWD, and capital replacement expense related to pump stations and meters. 2. Rate Design. The City’s current recycled water customers pay the sum of two charges: a monthly fixed charge that is based on the size of the connection, and a commodity charge based on metered water use during the monthly period. The commodity charge is based on 80% of the potable water rate. We recommend unlinking the recycled water rate from the potable water rate and aligning the recycled fixed and commodity charges with the fixed costs and the cost of purchased water from OCWD, respectively. In addition to the fixed and commodity charges, pump station users will be charged a pump station charge based on the cost to operate and maintain the stations and convey recycled water. 3. Projected Rates. The rate projections are shown in Figure 1-2. Figure 1-2. Current and Proposed Recycled Water Rates Current FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 2% 2% 2% 2% Monthly Service Charge 5/8" or 3/4" $13.82 $18.91 $19.29 $19.68 $20.07 $20.47 1" $23.03 $31.53 $32.16 $32.80 $33.46 $34.13 1 1/2" $46.06 $63.05 $64.32 $65.60 $66.91 $68.25 2" $73.70 $100.88 $102.90 $104.95 $107.05 $109.19 3" $138.18 $189.15 $192.94 $196.80 $200.73 $204.75 4" $230.30 $315.25 $321.56 $327.99 $334.55 $341.24 6" $460.61 $630.50 $643.11 $655.98 $669.10 $682.48 8" $736.98 $1,008.81 $1,028.99 $1,049.57 $1,070.56 $1,091.97 Monthly Commodity Charge Rate per HCF $2.46 $0.86 $0.87 $0.89 $0.91 $0.93 Monthly Pump Station Charge Rate per HCF none $0.36 $0.37 $0.38 $0.38 $0.39 City of Newport Beach Sewer and Recycled Water Rate Study 2. Introduction November 17, 2014 Page 4 HF&H Consultants, LLC 2. INTRODUCTION STUDY PURPOSE The purpose of this study is to update the City’s rates to ensure that they generate sufficient revenue and that the rate structures for sewer and recycled water reflect the City’s current rate-making objectives. The study was commissioned by the City to evaluate the effect of certain rate structure modifications in response to input from its customers. RATE MAKING OBJECTIVES The City’s current rate-making objectives include the following:  Provide revenue sufficiency and financial stability to cover the projected capital and O&M costs of providing recycled water and funding the City’s Sewer fund.  Meet the City’s operations and capital funds reserve targets for the sewer enterprise fund.  Rates should reflect equity of costs in proportion to the level of service.  Provide for efficient administration and execution of utility billing.  Minimize “rate shock” overall and to any specific customer class.  Rates should be clear and understandable to the customers.  The rates must comply with Proposition 218 and applicable State codes. BACKGROUND Sewer The City provides sewer service to approximately 64,465 customers. The City’s existing sewer collection system consists of a network of forcemain and gravity sewers. This system is composed of approximately 197 miles of mainline gravity pipes, 4.7 miles of forcemains with 4,922 manholes and cleanouts, and 25,525 sewer laterals with an approximate length of 121 miles in the public-rights-of-way. The City’s service area lies within the OCSD who is responsible for treating the City’s sewer. The City also owns and operates 21 pump stations in various areas which lift sewer from the lower areas and several island communities for treatment at OCSD’s treatment plant. Recycled Water The City currently has five recycled water customers totaling 14 water connections. The customers include Big Canyon and Newport Beach Country Club golf courses; East Bluff School, Our Lady Queen of Angels School, and the City which uses recycled water for irrigation of medians and parks. In 1991, the City entered into an agreement with OCWD for the distribution and sale of Green Acres Project water. The agreement stipulates the rules and regulations for the City of Newport Beach Sewer and Recycled Water Rate Study 2. Introduction November 17, 2014 Page 5 HF&H Consultants, LLC City to provide recycled water. Included in this agreement is the stipulation that recycled water rates may not exceed 80% of the potable water rate. The agreement term is for 25 years with five 5-year automatic extensions, with an estimated ending term year of 2041. The City subsequently entered into “End User Agreements” for the sale of recycled water to large customers in 1996 for a 10-year term. These agreements, now expired, included provisions that OCWD and the City would provide funding to modify golf courses and construct pump stations to facilitate the use of recycled water. However, in 2011, the City and the Big Canyon Country Club entered into an agreement that provided for the delivery and sale of recycled water, and a pump station license agreement. City of Newport Beach Sewer and Recycled Water Rate Study 3. Sewer Projected Revenue Increases November 17, 2014 Page 6 HF&H Consultants, LLC 3. SEWER PROJECTED REVENUE INCREASES REVENUE REQUIREMENTS Rate analysis begins by determining the revenue requirements that must be met by rates. For purposes of this study, a ten-year rate projection period was developed using a spreadsheet model (see Appendix A). However, only the first five years are shown in Figure 3-1 for rate-setting purposes. Figure 3-1 summarizes the major categories comprised in the revenue requirements, indicating the annual change. Figure 3-1. Annual Revenue Requirement Components FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Salaries 1,052,980$ 1,084,569$ 1,117,106$ 1,150,620$ 1,185,138$ Benefits 563,517 591,693 609,444 627,727 646,559 Operations & Maintenance 915,891 908,338 924,052 940,038 956,301 Internal Services Allocation 621,424 632,175 643,111 654,237 665,555 Operating Reserve Expense 371,675 275,828 270,403 114,834 214,190 Capital Expense - 500,000 750,000 1,000,000 1,000,000 Miscellaneous Costs 33,000 33,571 34,152 34,743 35,344 Total Revenue Requirement 3,558,487$ 4,026,174$ 4,348,268$ 4,522,199$ 4,703,087$ Annual Change 13% 8% 4% 4% Salaries This cost category includes regular and overtime pay and is projected to increase gradually at about 3% per year during the projection period. No staff headcount increases are anticipated; the cost trend is driven primarily by cost of living adjustments set in labor agreements. Benefits This cost category includes health, dental, and vision as well as Other Post-Employment (OPEB) and Public Employment (PERS) retirement benefits. During the projection period these costs are projected to increase at about 5% per year. The cost trend is driven primarily by increases in health care benefit costs set in labor agreements. Operations & Maintenance This cost category includes non-personnel related operating and maintenance expenses, such as electrical utility costs, fuel, and non-capital materials and equipment. During the projection period, these costs are expected to increase gradually at about 1.73% per year, based on the five-year historical average of inflation for the Los Angeles area. City of Newport Beach Sewer and Recycled Water Rate Study 3. Sewer Projected Revenue Increases November 17, 2014 Page 7 HF&H Consultants, LLC Internal Services Allocation The City has historically transferred funds from the Sewer Enterprise Fund to the General Fund as reimbursement for governmental costs incurred by the General Fund on behalf of the Enterprise. Much of this funding reimburses the General Fund for salaries, equipment, and program costs associated with general services. During the projection period, these costs are expected to increase gradually at about 1.73% per year, based on the five-year historical average of inflation for the Los Angeles area. Operating Reserve Expense The City transfers rate revenue to its Operating Reserve during the projection period to smooth out the annual revenue requirements and meet the minimum fund balance requirement. Please refer to the section titled ‘minimum fund balance’ in this report for further discussion of the fund policy. Capital Expense The City’s 30-year capital improvement program planned expenditures are summarized in Figure 3-2. Figure 3-2. Capital Projects CIP Project Description Project Cost Collection System Capacity Improvements $1,281,391 Collection System Condition Improvements $16,648,060 Pump Station Improvements $11,088,000 Total $29,017,451 The City plans to fund these capital improvements with cash from rate revenue. To accomplish this goal, the program is phased based upon the implementation cost of the facilities, and the quantity of work the City can reasonably administer each year. The programmed rate increases over the next five years provide the City approximately $1 million annually with which to fund projects. At the end of five years, the City will be able to fund approximately $1.5 million with the additional revenue generated from the recommended rate increases. Miscellaneous Costs This cost category includes non-capital office and shop equipment. During the projection period, these costs are expected to increase gradually at about 1.73% per year, based on the five-year historical average of inflation for the Los Angeles area. City of Newport Beach Sewer and Recycled Water Rate Study 3. Sewer Projected Revenue Increases November 17, 2014 Page 8 HF&H Consultants, LLC REVENUE INCREASES Revenue increases were derived to fund the revenue requirements. Estimating current rate revenue took into account 23,104 currently active meters whose flow equaled 4,746,732 HCF. We also included the annual surcharge revenue for meters 2” or larger, as well as the surcharge for multiple dwelling units serviced by the same meter. The resulting rate revenue for FY 2014-15, prior to rate increases, but net of 0.4% of bad debt, was estimated at $3,389,036. Based on this estimate, annual revenue increases were projected as shown in Figure 3-3. Figure 3-3. Projected Revenue Increases FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Increase in Revenue from Rates 10% 8% 8% 4% 4% Revenue from Current Rates** $3,389,036 $3,389,036 $3,389,036 $3,389,036 $3,389,036 Revenue from Rate Increases FY14-15 (effective 1/1/15) $169,452 $338,904 $338,904 $338,904 $338,904 FY15-16 (effective 7/1/15) $298,235 $298,235 $298,235 $298,235 FY16-17 (effective 7/1/16) $322,094 $322,094 $322,094 FY17-18 (effective 7/1/17) $173,931 $173,931 FY18-19 (effective 7/1/18) $180,888 Subtotal - Revenue Increases $169,452 $637,139 $959,233 $1,133,163 $1,314,051 Total Rate Revenue $3,558,487 $4,026,174 $4,348,268 $4,522,199 $4,703,087 Net Revenue Requirements $3,558,487 $4,026,174 $4,348,268 $4,522,199 $4,703,087 Surplus/(Deficit) after Increase $0 $0 $0 $0 $0 **Includes bad debt allowance of 0.4% of existing revenue FUND BALANCE The FY 2013-14 year-end fund balance is projected to be $2,885,000, which is very close to the target balance for operations and capital of $2,923,000. Figure 3-4 shows the fund balance dipping in FY 2014-15 but climbing back toward the target balance by FY 2016- 17 and meeting the target by FY 2018-19, based on the projected revenue increases. Fluctuations in annual flow will affect revenue generation and the resulting fund balance. The City is advised to carefully monitor the fund balance in the event of downward fluctuations in flow. City of Newport Beach Sewer and Recycled Water Rate Study 3. Sewer Projected Revenue Increases November 17, 2014 Page 9 HF&H Consultants, LLC Figure 3-4. Fund Balance With and Without Rate Increases Reserves without Rate Increase Reserves with Rate Increase Target Balance(Operations + Capital) Minimum Balance(Operations) $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Pr o j e c t e c d F u n d B a l a n c e s ( i n M i l l i o n s ) Minimum Fund Balance The minimum balance (red line) is the balance that is required to meet the City’s operating expenses during the year. If this minimum balance were maintained, the Sewer Fund should be able to fund its monthly cash flow over this extended period without relying on the General Fund for a short-term loan. When the Operations Reserve balance is below the minimum balance, the likelihood increases that temporary funding from the General Fund will be required to meet cash flow needs. The City’s reserve policy dictates that the minimum Operations Reserve balance be set equal to 50% of annual O&M expenses. Target Fund Balance The proposed revenue increases move the fund balance (solid green line) upward toward the target balance (blue line). The target balance is the sum of the minimum balance for operations (red line) plus an allowance for capital projects. This allowance provides liquidity to fund construction for projects on a pay-as-you-go basis. With adequate capital reserves, the City is able to pay construction contractors without encroaching on the Operations Reserve. The allowance is based on the average annual budgeted capital improvement projects. City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 10 HF&H Consultants, LLC 4. SEWER RATE DESIGN CURRENT RATE STRUCTURE The City currently has 23,104 active accounts who pay the sum of two charges every month for Sewer service: a basic service charge of $4.50 per account plus a sewer consumption charge of $0.35 per HCF based on metered water use during the billing period. In addition to the charges specified above, customers with a water service connection of 2”or greater pay a $10.00 monthly surcharge. Moreover, customers with more than one dwelling unit that is serviced by the same connection pay a surcharge of $2.00 for each additional dwelling unit. Lastly, the City’s 485 sewer customers who do not purchase potable water from the City are charged $6.25 per account per month. PROPOSED RATE STRUCTURE The proposed rate structure is based on the revenue generated by the current rate structure and categorizes the revenue into two categories: fixed revenue and variable revenue. Fixed revenue is considered fixed because it does not vary based on flow, while variable costs vary because they are based on the amount of water purchased, or sewage produced and therefore, are solely comprised of the sewer consumption charge. For the purpose of rate design, the sewer use charge for customers who do not purchase water from the City was analyzed separately. Figure 4-1 presents the breakdown of the current revenue by revenue category: Figure 4-1. Fixed and Variable Revenue Fixed Revenue Sewer Use Charge (per account) $1,247,616 Surcharge (2" meters or greater) $78,720 Surcharge (per additional DU) $378,492 Total Annual Fixed Revenue $1,704,828 Variable Revenue Consumption Charge (per HCF) $1,661,356 Total Annual Variable Revenue $1,661,356 Subtotal $3,366,184 Sewer Use Charge (per account)* $36,375 Grand Total** $3,402,559 **Gross revenues; does not account for bad debt Current Revenue *Sewer Revenue from customers who do not purchase potable water from the City of Newport Beach City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 11 HF&H Consultants, LLC In order to determine the monthly charge by size of connection, we first converted the number of active meters to equivalent meter units (EMU) as shown in Figure 4-2. The EMU multiplier by meter size is the same multipliers used to determine the fixed charge by meter size for the current sewer rates; in other words, it is the ratio between $4.50 to $14.50, or 1 to 3.2. The monthly charge for an EMU of 1.00 is derived by dividing the total fixed revenue of $1,704,828 by the total number of EMUs, or 23,815. This quotient was then divided by 12 to convert from an annual charge of $71.59 to a monthly charge of $5.97. The service charges were then graduated using the EMU multipliers, the effect of which is to increase the service charges for the larger services. Note the total annual revenue of $1,704,828 from fixed charges in Figure 4-2 is equal to the total annual fixed revenue presented in Figure 4-1. Figure 4-2. Calculation of Monthly Fixed Charges Meter Size Total Active Accounts EMU Multiplier Total EMUs Monthly Service Charge Total Annual Fixed Revenue a b a*b c a*c*12 5/8" or 3/4" 15,357 1.00 15,357 $5.97 $1,099,342 1" 6,276 1.00 6,276 $5.97 $449,272 1 1/2" 364 1.10 400 $6.56 $28,663 2" 886 1.50 1,329 $8.95 $95,137 2 1/2" 1 1.60 2 $9.54 $115 3" 34 1.70 58 $10.14 $4,138 4" 119 2.00 238 $11.93 $17,037 6" 54 2.25 122 $13.42 $8,698 8" 11 2.50 28 $14.91 $1,969 10" 2 3.20 6 $19.09 $458 23,104 23,815 $1,704,828 The sewer consumption charge was derived using the monthly meter readings in HCF for all customers. Figure 4-3 presents the derivation of the proposed sewer consumption charges. Figure 4-3. Calculation of Sewer Consumption Charge Cost Category Current Revenue Usage (HCF) Charge per HCF Variable Revenue $1,661,356 4,746,732 $0.35 For sewer customers who do not purchase potable water from the City, and therefore, do not have a proxy for their sewer flows, an average flow per account was derived by using water use per single family residential account. The 10.69 HCF average use was City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 12 HF&H Consultants, LLC determined using customer billing data and dividing total single family consumption by the number of single family accounts. Next, using the revised rate structure, the $9.71 charge shown in Figure 3-4 represents the average single family bill per month. It was calculated as the monthly sewer use charge of $5.97 per account plus the product of the $0.35 consumption charge times 10.69 HCF. Using the fixed and variable rates as calculated in Figure 4-2 and Figure 4-3, a five-year rate plan was prepared based on the City’s Sewer revenue requirements as presented in Figure 3-1. The rates included in the 5-year plan reflect annual rate increases starting in Year 1 to keep pace with the increase in the revenue requirements. The proposed 5-year rate plan is shown in Figure 4-4. Figure 4-4. Five Year Sewer Rate Projections Current Revised Structure Structure FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 10% 8% 8% 4% 4% Monthly Sewer Use Charge 5/8" or 3/4" $4.50 $5.97 $6.56 $7.09 $7.65 $7.96 $8.28 1" $4.50 $5.97 $6.56 $7.09 $7.65 $7.96 $8.28 1 1/2" $4.50 $6.56 $7.22 $7.80 $8.42 $8.76 $9.11 2" $14.50 $8.95 $9.84 $10.63 $11.48 $11.94 $12.42 2 1/2" $14.50 $9.54 $10.50 $11.34 $12.25 $12.74 $13.25 3" $14.50 $10.14 $11.16 $12.05 $13.01 $13.53 $14.07 4" $14.50 $11.93 $13.12 $14.17 $15.31 $15.92 $16.56 6" $14.50 $13.42 $14.76 $15.95 $17.22 $17.91 $18.63 8" $14.50 $14.91 $16.41 $17.72 $19.13 $19.90 $20.70 10" $14.50 $19.09 $21.00 $22.68 $24.49 $25.47 $26.49 Monthly Sewer Use Charge (Sewer Only Customers) Rate per Account $6.25 $9.71 $10.68 $11.53 $12.46 $12.95 $13.47 Consumption Charge Rate per HCF $0.35 $0.35 $0.39 $0.42 $0.45 $0.47 $0.49 Sewer Surcharges Multi Unit surcharge $2.00 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1: The surcharge has been incorporated into the Monthly Sewer Use Charge under the revised structure City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 13 HF&H Consultants, LLC CURRENT AND PROPOSED CUSTOMER BILL COMPARISONS Figure 4-5 presents a comparison of monthly customer bills using the current rate structure and the recommended revised rate structure. The rates used to calculate the revised bills are the FY 2014-15 charges presented in Figure 4-4. It is notable that current customers who are subjected to the multiple dwelling $2.00 monthly surcharge will experience a decrease in their monthly bill. This occurs based on the revisions to the monthly sewer use charge. The graduated rates, based on meter capacity, better reflect associated flow assumed per dwelling unit, and its equivalent. Figure 4-5. Customer Bill Comparison Customer Name Meter Size Number of Dwelling Units Average Monthly Flow (HCF) Current Monthly Bill FY 14-15 Monthly Bill Difference ($) Single Family Residential (low flow) 5/8" - 1" 1 2 5.20$ 7.20$ $2.00 Single Family Residential (avg flow) 5/8" - 1" 1 11 8.35$ 10.60$ $2.25 Single Family Residential (high flow) 5/8" - 1" 1 16 10.10$ 12.49$ $2.39 Multi Family Residential 3" 55 243 209.55$ 102.81$ ($106.74) Commercial 4" 1 595 224.75$ 237.80$ $13.05 Commercial 8" 141 2,074 1,022.40$ 800.08$ ($222.32) Commercial 2" 1 64 36.90$ 33.86$ ($3.04) Commercial 6" 1 1,584 568.90$ 613.25$ $44.35 COMPARISON WITH NEIGHBORING AGENCIES Based on available sources, Figure 4-6 shows the recent charges for sewer service among similar Orange County agencies, specifically ones that charge a fixed monthly use charge coupled with a flow-based commodity charge. Larger agencies tend to have lower rates because they can take advantage of economies of scale and have a larger base of customers over which to distribute fixed costs. Figure 4-6 indicates that the City’s current and proposed sewer rates track the trend line along with its neighbors (identified with red diamonds in Figure 4-6). City of Newport Beach Sewer and Recycled Water Rate Study 4. Sewer Rate Design November 17, 2014 Page 14 HF&H Consultants, LLC Figure 4-6. Neighboring Agency Comparison Newport Beach ‐Current Newport Beach ‐Proposed  Buena Park Fullerton Seal Beach Garden Grove SD Costa Mesa SDLa Habra Huntington Beach Irvine Ranch WD $0  $5  $10  $15  $20  $25  0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000  Population of Service Area Mo n t h l y  Bi l l City of Newport Beach Sewer and Recycled Water Rate Study 5. Recycled water Projected Revenue Increases November 17, 2014 Page 15 HF&H Consultants, LLC 5. RECYCLED WATER PROJECTED REVENUE INCREASES REVENUE REQUIREMENTS The City’s FY 2013-14 revenue requirement served as the basis for determining the revenue requirement projections through FY 2018-19. Figure 5-1 summarizes the sources and assumptions for the data as well as the projected expenditure trends: Figure 5-1. Revenue Requirement Projections FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Operating Costs 40,488$ 41,188$ 41,901$ 42,626$ 43,363$ 44,114$ Purchased Recycled Water 167,598 173,417 179,438 182,810 186,245 189,745 Pump Station Operating & Maintenance 39,408 47,218 48,104 49,007 49,927 50,864 Depreciation 17,500 17,543 17,587 17,632 17,678 17,724 Total Revenue Requirement 264,994$ 279,366$ 287,030$ 292,075$ 297,213$ 302,446$ Annual Change 5% 3% 2% 2% 2% Operating Expenses This cost category includes administration and overhead expenses that are calculated as 10% of the total recycled water revenue requirement and 1% of the budgeted general fund overhead charged to the water fund, respectively. During the projection period, the City’s operating expenses are projected to increase gradually at about 1.73% per year, based on the five-year historical average of general inflation for the Los Angeles area. Purchased Recycled Water This cost category for FY 13-14 was based on the actual water purchases in FY 12-13 multiplied by the cost of purchased water from OCWD of $360 per acre foot. During the projection period, the City’s purchased water costs are projected to increase gradually at about 1.88% per year, based on the five-year historical average of OCWD purchased water charges per acre foot. Pump Station Operating and Maintenance This cost category for FY 13-14 was based on the actual cost of inspections, scheduled and corrective maintenance, source changeovers and pump station rehabilitation and maintenance as provided by the city. During the projection period, the City’s pump station operating and maintenance costs are expected to increase gradually at about 1.73% per year, based on the five-year historical average of general inflation for the Los Angeles area. City of Newport Beach Sewer and Recycled Water Rate Study 5. Recycled water Projected Revenue Increases November 17, 2014 Page 16 HF&H Consultants, LLC Depreciation This cost category includes replacement costs for pump station facilities and water meters. The annual pump station facility replacement cost was based on $600,000 in construction costs, amortized over 40 years. The annual meter replacement cost was based on the American Water Works Association’s standard cost of $259 per meter per year, amortized over 15 years. During the projection period, the City’s pump station facility replacement costs are held constant at $15,000 per year, while the meter replacement costs are projected to increase gradually at about 1.73% per year, based on the five-year historical average of inflation for the Los Angeles area. City of Newport Beach Sewer and Recycled Water Rate Study 6. Recycled Water Rate Design November 17, 2014 Page 17 HF&H Consultants, LLC 6. RECYCLED WATER RATE DESIGN CURRENT RATE STRUCTURE The City currently has five recycled water customers totaling 14 connections. These customers pay the sum of two charges every month for water service: a basic service charge based on the size of the service connection plus a commodity charge based on metered water use during the billing period. In 1991, the City entered into an agreement with OCWD for the distribution and sale of recycled water. The agreement stipulated that the recycled water rate may not exceed 80% of the potable water rate. It is the City’s current practice to charge customers 80% of the potable water rate based on that agreement. PROPOSED RATE STRUCTURE Under the new rate structure, the recycled water rates will no longer be linked to 80% of the potable water rates. The proposed rate structure is based on the FY 2014-15 revenue requirement, and categorizes the expenses into three categories: fixed costs, variable costs and pump station-related costs. Fixed costs are considered fixed because they do not vary based on flow, and include the annual cost of meter reading and replacement, as well as administrative and overhead. Variable costs vary because they are based on the amount of water purchased, and therefore, are solely comprised of the annual cost of purchased water from OCWD. Pump station-related costs are comprised of inspections, maintenance, and rehabilitation & replacement that are directly related to the pump stations. Figure 6-1 presents the breakdown of the FY 2014-15 revenue requirement by cost category: City of Newport Beach Sewer and Recycled Water Rate Study 6. Recycled Water Rate Design November 17, 2014 Page 18 HF&H Consultants, LLC Figure 6-1. FY 2014-15 Revenue Requirement by Cost Category Fixed Costs Administration $25,433 Overhead $12,208 Meter Reading $1,514 Meter replacement $2,543 Other agency fees $2,035 Total Fixed Costs $43,732 Variable Costs Purchased Water $173,417 Total Variable Costs $173,417 Pump Station Costs Inspections $7,021 Maintenance $13,109 Rehab & Replacement $42,087 Total Pump Station Costs $62,218 Total Revenue Requirement $279,366 FY2014-15 In order to determine the monthly charge by size of connection, we first converted the number of active meters to equivalent meter units (EMU) as shown in Figure 3-2. The EMU multiplier by meter size is the same multipliers used to determine the fixed charge by meter size for potable water rates. The monthly charge for an EMU of 1.00 is derived by dividing the total fixed costs of $43,732 by the total number of EMUs or 192.70. This quotient was then divided by 12 to convert from an annual charge of $226.94 to a monthly charge of $18.91. The service charges were then graduated using the EMU multipliers, the effect of which is to increase the service charges for the larger services. Note the total annual revenue of $43.732 from fixed charges in Figure 6-2 is equal to the total fixed costs presented in Figure 6-1. City of Newport Beach Sewer and Recycled Water Rate Study 6. Recycled Water Rate Design November 17, 2014 Page 19 HF&H Consultants, LLC Figure 6-2. Calculation of Monthly Fixed Charges Meter Size Total Active Accounts EMU Multiplier Total EMUs Monthly Service Charge FY 14-15 Annual Revenue a b a*b c a*c*12 5/8" or 3/4" 0 1.00 0 $18.91 $0 1" 0 1.67 0 $31.53 $0 1 1/2" 0 3.33 0 $63.05 $0 2" 8 5.33 42.67 $100.88 $9,684 3" 3 10.00 30.01 $189.15 $6,810 4" 0 16.67 0 $315.25 $0 6" 2 33.34 66.68 $630.50 $15,132 8" 1 53.34 53.34 $1,008.81 $12,106 14 192.70 $43,732 The commodity and pump station charges were derived using the FY 2012-13 monthly meter readings in HCF for all customers, and FY 2012-13 monthly meter readings for pump station customers in HCF, respectively. Figure 6-3 presents the derivation of the proposed commodity and pump station charges for FY 2014-15: Figure 6-3. Calculation of Commodity and Pump Station Charges Cost Category FY14-15 Costs FY12-13 Usage (HCF) FY14-15 Charge per HCF Variable Costs $173,417 202,793 $0.86 Pump Station Costs $62,218 172,426 $0.36 Using the FY 2014-15 rates as calculated in Figure 6-2 and Figure 6-3, a five-year rate plan was prepared based on the City’s recycled water revenue requirements as presented in Figure 5-1. The rates included in the five-year plan reflect 2% annual rate increases across the board starting in Year 2 to keep pace with the increase in the revenue requirements. The proposed five-year rate plan is shown in Figure 6-4. City of Newport Beach Sewer and Recycled Water Rate Study 6. Recycled Water Rate Design November 17, 2014 Page 20 HF&H Consultants, LLC Figure 6-4. Five Year Recycled Water Rate Projections Current FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Annual Rate Increases 2% 2% 2% 2% Monthly Service Charge 5/8" or 3/4" $13.82 $18.91 $19.29 $19.68 $20.07 $20.47 1" $23.03 $31.53 $32.16 $32.80 $33.46 $34.13 1 1/2" $46.06 $63.05 $64.32 $65.60 $66.91 $68.25 2" $73.70 $100.88 $102.90 $104.95 $107.05 $109.19 3" $138.18 $189.15 $192.94 $196.80 $200.73 $204.75 4" $230.30 $315.25 $321.56 $327.99 $334.55 $341.24 6" $460.61 $630.50 $643.11 $655.98 $669.10 $682.48 8" $736.98 $1,008.81 $1,028.99 $1,049.57 $1,070.56 $1,091.97 Monthly Commodity Charge Rate per HCF $2.46 $0.86 $0.87 $0.89 $0.91 $0.93 Monthly Pump Station Charge Rate per HCF none $0.36 $0.37 $0.38 $0.38 $0.39 CUSTOMER BILL COMPARISONS Figure 6-5 presents a comparison of monthly customer bills using the current rate structure and the recommended revised rate structure. The rates used to calculate the revised bills are the Year 1 charges presented in Figure 6-4. It is notable that all current recycled water customers will experience no less than a 44% bill decrease with the recommended structure change. Figure 6-5. Customer Bill Comparison Customer Name Meter Size Average Monthly Flow (HCF) Current Monthly Bill Revised Monthly Bill Difference ($) Difference (%) Newport Beach Country Club 6" 6,650 $16,820 $8,717 ($8,103)-48% Our Lady Queen of Angels 2" 151 $446 $230 ($215)-48% Big Canyon Country Club 8" 5,256 $13,668 $5,504 ($8,164)-60% Big Canyon Country Club 6" 2,463 $6,518 $3,625 ($2,894)-44% Eastbluff School 3" 321 $928 $464 ($464)-50% APPENDIX A. SEWER AND RECYLED WATER RATE MODEL 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 AB C D E F G H I J K L M N O Ci t y o f N e w p o r t B e a c h Se w e r R a t e S t u d y Ta b l e 1 A . S u m m a r y Fis c a l Y e a r : FY 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 Re v e n u e I n c r e a s e s - S e w e r 1 0 . 0 % 8 . 0 % 8 . 0% 4 . 0 % 4 . 0 % 2 . 0 % 2 . 0% 2 . 0 % 2 . 0 % 2 . 0 % Cu m u l a t i v e I n c r e a s e 10 . 0 % 1 8 . 8 % 2 8 . 3 % 3 3 . 4 % 3 8 . 8 % 4 1 . 5% 4 4 . 4 % 4 7 . 3 % 5 0 . 2 % 5 3 . 2 % FY 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 1,6 1 6 , 4 9 7 $ 1 , 6 7 6 , 2 6 2 $ 1 , 7 2 6 , 5 5 0 $ 1 , 7 7 8 , 3 4 7 $ 1 , 8 3 1 , 6 9 7 $ 1 , 8 8 6 , 6 4 8 $ 1 , 9 4 3 , 2 4 7 $ 2 , 0 0 1 , 5 4 5 $ 2 , 0 6 1 , 5 9 1 $ 2 , 1 2 3 , 4 3 9 $ 91 5 , 8 9 1 9 0 8 , 3 3 8 9 2 4 , 0 5 2 9 4 0 , 0 3 8 9 5 6 , 3 0 1 9 7 2 , 8 4 5 9 8 9 , 6 7 5 1 , 0 0 6 , 7 9 7 1 , 0 2 4 , 2 1 4 1 , 0 4 1 , 9 3 3 33 , 0 0 0 3 3 , 5 7 1 3 4 , 1 5 2 3 4 , 7 4 3 3 5 , 3 4 4 3 5 , 9 5 5 3 6 , 5 7 7 3 7 , 2 1 0 3 7 , 8 5 4 3 8 , 5 0 8 In t e r n a l S e r v i c e A l l o c a t i o n 62 1 , 4 2 4 6 3 2 , 1 7 5 6 4 3 , 1 1 1 6 5 4 , 2 3 7 6 6 5 , 5 5 5 6 7 7 , 0 6 9 6 8 8 , 7 8 3 7 0 0 , 6 9 9 7 1 2 , 8 2 1 7 2 5 , 1 5 3 $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Se w e r O p e r a t i n g R e s e r v e E x p e n s e $3 7 1 , 6 7 5 $ 2 7 5 , 8 2 8 $ 2 7 0 , 4 0 3 $ 1 1 4 , 8 3 4 $ 2 1 4 , 1 9 0 $ 2 2 4 , 63 1 $ 2 3 4 , 8 0 9 $ 2 4 4 , 7 0 4 $ 2 5 4 , 2 9 3 $ 2 6 3 , 5 5 5 $0 $ 5 0 0 , 0 0 0 $ 7 5 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 00 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 00 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 3,5 5 8 , 4 8 7 $ 4 , 0 2 6 , 1 7 4 $ 4 , 3 4 8 , 2 6 8 $ 4 , 5 2 2 , 1 9 9 $ 4 , 7 0 3 , 0 8 7 $ 4 , 7 9 7 , 1 4 8 $ 4 , 8 9 3 , 0 9 1 $ 4 , 9 9 0 , 9 5 4 $ 5 , 0 9 0 , 7 7 3 $ 5 , 1 9 2 , 5 8 8 $ An n u a l i n c r e a s e 1 3 . 1 % 8 . 0 % 4 . 0 % 4. 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % Pr o j e c t e d St o r m D r a i n C a p i t a l Se w e r C a p i t a l R e s e r v e E x p e n s e An n u a l R e v e n u e R e q u i r e m e n t Sa l a r i e s & B e n e f i t s Op e r a t i n g C o s t s Mis c e l l a n e o u s St o r m D r a i n O p e r a t i n g Re s e r v e s w i t h R a t e In c r e a s e Ta r g e t B a l a n c e (O p e r a t i o n s + C a p i t a l ) Mi n i m u m B a l a n c e (O p e r a t i o n s ) $0 . 0 0 $0 . 5 0 $1 . 0 0 $1 . 5 0 $2 . 0 0 $2 . 5 0 $3 . 0 0 $3 . 5 0 $4 . 0 0 $4 . 5 0 FY 2 0 1 3 - 1 4 F Y 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 20 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 P r o j e c t e c d F u n d B a l a n c e s ( i n M i l l i o n s ) Ye a r E n d F u n d B a l a n c e s - F u n d s 5 3 0 a n d 5 4 0 HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 1 o f 1 4 Newport Beach Sewer 10.28.2014 1A. Summary 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 AB C D E F G H I J K L M N Cit y o f N e w p o r t B e a c h Se w e r R a t e S t u d y Ta b l e 1 B . G e n e r a l Pr o j e c t e d FY 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 S o u r c e N o t e s Fa c t o r s a. In t e r e s t o n R e s e r v e B a l a n c e 0 . 7 5 % 0 . 7 5 % 0 . 7 5 % 0 . 7 5 % 0 . 7 5 % 0 . 7 5 % 0 . 7 5 % 0 . 7 5 % 0 . 7 5 % 0 . 7 5 % C i t y E s t i m a t e T o T a b l e 4 b. Ge n e r a l i n f l a t i o n P e r B u d g e t 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % U S S t a t i s t i c s , L A A r e a 5 - y e a r a v e r a g e T o T a b l e 2 c. Pe r s o n n e l I n c r e a s e s P e r B u d g e t 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % E s t i m a t e T o T a b l e 2 d. Be n e f i t s c o s t i n c r e a s e s P e r B u d g e t 5 . 0 % 5 . 0 % 5 . 0 % 5 . 0 % 5 . 0 % 5 . 0 % 5 . 0 % 5 . 0 % 5 . 0 % E s t i m a t e T o T a b l e 2 e. Pe r c e n t o f B a d D e b t 0 . 4 % 0 . 4 % 0 . 4 % 0 . 4 % 0 . 4 % 0 . 4 % 0 . 4 % 0 . 4 % 0 . 4 % 0 . 4 % B a s e d o n C i t y ' s F u n d W o r k s h e e t T o T a b l e 3 A , 3 B f. Uti l i t i e s I n c r e a s e s P e r B u d g e t 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % 1 . 7 3 % g. Pc t . i n c r e a s e i n S e w e r A c c o u n t s 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % T o T a b l e 3 A h. Pc t . i n c r e a s e i n W a t e r C o n s u m p t i o n ( f o r f l o w c h a r g e ) 2 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % T o T a b l e 2 , 8 i. Pe r c e n t a g e i n c r e a s e i n R e c y c l e d W a t e r U s e 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % T o T a b l e 2 , 3 B j. Co n s t r u c t i o n c o s t i n f l a t i o n P e r B u d g e t 2 . 0 0 % 2 . 0 0 % 2 . 0 0 % 2 . 0 0 % 2 . 0 0 % 2 . 0 0 % 2 . 0 0 % 2 . 0 0 % 2 . 0 0 % C i t y E s t i m a t e T o T a b l e 2 B , 5 k. Pe r c e n t i n c r e a s e i n p u r c h a s e d r e c y c l e d w a t e r r a t e 1 . 5 8 % 3 . 4 7 % 1 . 8 8 % 1 . 8 8 % 1 . 8 8 % 1 . 8 8 % 1 . 8 8 % 1 . 8 8 % 1 . 8 8 % 1 . 8 8 % O C W D $ / A F 5 - y e a r A v e r a g e T o T able 2B Re s e r v e P o l i c i e s Op e r a t i o n s F u n d Pu r p o s e W o r k i n g c a p i t a l f o r O & M c a s h f l o w d u r i n g t h e y e a r . Fu n d i n g p r i o r i t y H i g h e s t . I f n o t m a i n t a i n e d , i n t e r f u n d l o a n s a r e n e e d e d . Mi n i m u m b a l a n c e 5 0 % o f a n n u a l O & M c o s t s In f r a s t r u c t u r e R e p l a c e m e n t F u n d s Pu r p o s e F o r w a s t e w a t e r m a s t e r p l a n c o n s t r u c t i o n p r o j e c t s . Fu n d i n g p r i o r i t y S e c o n d h i g h e s t . Ta r g e t b a l a n c e N o M i n i m u m o r M a x i m u m . S h o u l d b e r e v i e w e d p e r i o d i c a l l y Mo d e l T a b l e s I n c l u d e d Ta b l e 1 A . S u m m a r y Ta b l e 1 B . G e n e r a l Ta b l e 2 A . R e v e n u e R e q u i r e m e n t P r o j e c t i o n - S e w e r Ta b l e 2 B . R e v e n u e R e q u i r e m e n t P r o j e c t i o n - R e c y c l e d W a t e r Ta b l e 3 A . R e v e n u e I n c r e a s e s - S e w e r Ta b l e 3 B . R e v e n u e I n c r e a s e s - R e c y c l e d W a t e r Ta b l e 4 . R e s e r v e s Ta b l e 5 . C I P Ta b l e 7 A . R a t e R e v e n u e - S e w e r Ta b l e 7 B . R a t e R e v e n u e - R e c y c l e d W a t e r HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 2 o f 1 4 Newport Beach Sewer 10.28.2014 1B General 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 AB C D E F G H I J K L M N O Cit y o f N e w p o r t B e a c h Se w e r R a t e S t u d y Ta b l e 2 A . R e v e n u e R e q u i r e m e n t P r o j e c t i o n - S e w e r Ta b l e 1 B A d o p t e d Fa c t o r s F Y 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 N o t e s OP E R A T I N G E X P E N S E S Sa l a r i e s a n d B e n e f i t s 70 0 0 S A L A R I E S - M I S C c . 96 4 , 7 3 5 $ $9 9 3 , 6 7 7 $ 1 , 0 2 3 , 4 8 7 $ 1 , 0 5 4 , 1 9 2 $ 1 , 0 8 5 , 8 1 8 $ 1 , 1 1 8 , 3 9 2 $ 1 , 1 5 1 , 9 4 4 $ 1 , 1 8 6 , 5 0 2 $ 1 , 2 2 2 , 0 9 7 $ 1 , 2 5 8 , 7 6 0 70 2 0 S A L A R I E S - P A R T T I M E d . - $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 70 4 0 O V E R T I M E , M I S C & a m p ; 1 / 2 T I M E c . 45 , 0 0 0 $4 6 , 3 5 0 $ 4 7 , 7 4 1 $ 4 9 , 1 7 3 $ 5 0 , 6 4 8 $ 5 2 , 1 6 7 $ 5 3 , 7 3 2 $ 5 5 , 3 4 4 $ 5 7 , 0 0 5 $ 5 8 , 7 1 5 70 6 2 N I G H T D I F F , M I S C d . - $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 70 6 3 C E R T I F I C A T I O N P A Y c . 8, 2 4 5 $8 , 4 9 2 $ 8 , 7 4 7 $ 9 , 0 1 0 $ 9 , 2 8 0 $ 9 , 5 5 8 $ 9 , 8 4 5 $ 1 0 , 1 4 0 $ 1 0 , 4 4 5 $ 1 0 , 7 5 8 70 8 0 C A L L B A C K P A Y c . 35 , 0 0 0 $3 6 , 0 5 0 $ 3 7 , 1 3 2 $ 3 8 , 2 4 5 $ 3 9 , 3 9 3 $ 4 0 , 5 7 5 $ 4 1 , 7 9 2 $ 4 3 , 0 4 6 $ 4 4 , 3 3 7 $ 4 5 , 6 6 7 71 1 4 C E L L P H O N E S T I P E N D E X P d . 6, 8 4 1 $7 , 1 8 3 $ 7 , 3 9 9 $ 7 , 6 2 0 $ 7 , 8 4 9 $ 8 , 0 8 5 $ 8 , 3 2 7 $ 8 , 5 7 7 $ 8 , 8 3 4 $ 9 , 0 9 9 72 1 0 H E A L T H / D E N T A L / V I S I O N d . 27 2 , 1 1 8 $2 8 5 , 7 2 4 $ 2 9 4 , 2 9 6 $ 3 0 3 , 1 2 4 $ 3 1 2 , 2 1 8 $ 3 2 1 , 5 8 5 $ 3 3 1 , 2 3 2 $ 3 4 1 , 1 6 9 $ 3 5 1 , 4 0 4 $ 3 6 1 , 9 4 6 72 2 3 A N N U A L O P E B C O S T d . 44 , 6 1 0 $4 6 , 8 4 1 $ 4 8 , 2 4 6 $ 4 9 , 6 9 3 $ 5 1 , 1 8 4 $ 5 2 , 7 1 9 $ 5 4 , 3 0 1 $ 5 5 , 9 3 0 $ 5 7 , 6 0 8 $ 5 9 , 3 3 6 72 2 7 R H S $ 2 . 5 0 C O N T R I B d . 9, 9 3 0 $1 0 , 4 2 7 $ 1 0 , 7 3 9 $ 1 1 , 0 6 1 $ 1 1 , 3 9 3 $ 1 1 , 7 3 5 $ 1 2 , 0 8 7 $ 1 2 , 4 5 0 $ 1 2 , 8 2 3 $ 1 3 , 2 0 8 72 9 0 L I F E I N S U R A N C E d . 1, 4 7 0 $1 , 5 4 4 $ 1 , 5 9 0 $ 1 , 6 3 7 $ 1 , 6 8 7 $ 1 , 7 3 7 $ 1 , 7 8 9 $ 1 , 8 4 3 $ 1 , 8 9 8 $ 1 , 9 5 5 72 9 5 E M P A S S I S T A N C E P R O G R A M d . 33 1 $3 4 8 $ 3 5 8 $ 3 6 9 $ 3 8 0 $ 3 9 1 $ 4 0 3 $ 4 1 5 $ 4 2 7 $ 4 4 0 73 7 0 W O R K E R S ' C O M P , M I S C d . 24 , 1 1 2 $2 5 , 3 1 8 $ 2 6 , 0 7 7 $ 2 6 , 8 5 9 $ 2 7 , 6 6 5 $ 2 8 , 4 9 5 $ 2 9 , 3 5 0 $ 3 0 , 2 3 1 $ 3 1 , 1 3 7 $ 3 2 , 0 7 2 73 7 3 C O M P E N S A T E D A B S E N C E S d . 33 , 7 6 6 $3 5 , 4 5 4 $ 3 6 , 5 1 8 $ 3 7 , 6 1 3 $ 3 8 , 7 4 2 $ 3 9 , 9 0 4 $ 4 1 , 1 0 1 $ 4 2 , 3 3 4 $ 4 3 , 6 0 4 $ 4 4 , 9 1 2 74 2 5 M E D I C A R E F R I N G E S d . 15 , 2 6 8 $1 6 , 0 3 1 $ 1 6 , 5 1 2 $ 1 7 , 0 0 8 $ 1 7 , 5 1 8 $ 1 8 , 0 4 3 $ 1 8 , 5 8 5 $ 1 9 , 1 4 2 $ 1 9 , 7 1 7 $ 2 0 , 3 0 8 74 3 9 P E R S M I S C E E C N T R B N d . 75 , 9 9 6 $7 9 , 7 9 6 $ 8 2 , 1 9 0 $ 8 4 , 6 5 5 $ 8 7 , 1 9 5 $ 8 9 , 8 1 1 $ 9 2 , 5 0 5 $ 9 5 , 2 8 0 $ 9 8 , 1 3 9 $ 1 0 1 , 0 8 3 74 4 0 P E R S M I S C E R C N T R B N d . 77 , 9 4 5 $8 1 , 8 4 2 $ 8 4 , 2 9 8 $ 8 6 , 8 2 6 $ 8 9 , 4 3 1 $ 9 2 , 1 1 4 $ 9 4 , 8 7 8 $ 9 7 , 7 2 4 $ 1 0 0 , 6 5 6 $ 1 0 3 , 6 7 5 74 4 5 E E R E T C N T R B N M I S C d . (1 0 6 , 2 0 0 ) ($ 1 1 1 , 5 1 0 ) ( $ 1 1 4 , 8 5 5 ) ( $ 1 1 8 , 3 0 1 ) ( $ 1 2 1 , 8 5 0 ) ( $ 1 2 5 , 5 0 5 ) ( $ 1 2 9 , 2 7 1 ) ( $ 1 3 3 , 1 4 9 ) ( $ 1 3 7 , 1 4 3 ) ( $ 1 4 1 , 2 5 8 ) 74 4 6 P E R S U N F N D L I A B M I S C d . 10 7 , 3 3 0 $1 1 2 , 6 9 7 $ 1 1 6 , 0 7 7 $ 1 1 9 , 5 6 0 $ 1 2 3 , 1 4 7 $ 1 2 6 , 8 4 1 $ 1 3 0 , 6 4 6 $ 1 3 4 , 5 6 6 $ 1 3 8 , 6 0 2 $ 1 4 2 , 7 6 1 To t a l S a l a r i e s a n d B e n e f i t s 1 , 6 1 6 , 4 9 7 1 , 6 7 6 , 2 6 2 1 , 7 2 6 , 5 5 0 1 , 7 7 8 , 3 4 7 1 , 8 3 1 , 6 9 7 1 , 8 8 6 , 6 4 8 1 , 9 4 3 , 2 4 7 2 , 0 0 1 , 5 4 5 2 , 0 6 1 , 5 9 1 2,123,439 3. 7 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % 3 . 0 % Op e r a t i n g C o s t s 80 0 3 G E N R A T R M A I N T & R E P R b . 17 , 5 0 0 $ $1 7 , 8 0 3 $ 1 8 , 1 1 1 $ 1 8 , 4 2 4 $ 1 8 , 7 4 3 $ 1 9 , 0 6 7 $ 1 9 , 3 9 7 $ 1 9 , 7 3 2 $ 2 0 , 0 7 4 $ 2 0 , 4 2 1 80 0 4 C E R T & M E M B E R S H I P b . 5, 5 0 0 $5 , 5 9 5 $ 5 , 6 9 2 $ 5 , 7 9 0 $ 5 , 8 9 1 $ 5 , 9 9 2 $ 6 , 0 9 6 $ 6 , 2 0 2 $ 6 , 3 0 9 $ 6 , 4 1 8 80 2 0 A U T O M O T I V E S E R V I C E b . 45 , 0 0 0 $4 5 , 7 7 9 $ 4 6 , 5 7 0 $ 4 7 , 3 7 6 $ 4 8 , 1 9 6 $ 4 9 , 0 3 0 $ 4 9 , 8 7 8 $ 5 0 , 7 4 1 $ 5 1 , 6 1 8 $ 5 2 , 5 1 1 80 3 0 M A I N T & a m p ; R E P A I R - E Q U I P b . 4, 0 0 0 $4 , 0 6 9 $ 4 , 1 4 0 $ 4 , 2 1 1 $ 4 , 2 8 4 $ 4 , 3 5 8 $ 4 , 4 3 4 $ 4 , 5 1 0 $ 4 , 5 8 8 $ 4 , 6 6 8 80 4 0 M A I N T & a m p ; R E P A I R - B U I L D I N G b . 4, 6 6 2 $4 , 7 4 3 $ 4 , 8 2 5 $ 4 , 9 0 8 $ 4 , 9 9 3 $ 5 , 0 7 9 $ 5 , 1 6 7 $ 5 , 2 5 7 $ 5 , 3 4 8 $ 5 , 4 4 0 80 6 0 P U B L I C A T I O N S & a m p ; D U E S N O C b . 1, 0 0 0 $1 , 0 1 7 $ 1 , 0 3 5 $ 1 , 0 5 3 $ 1 , 0 7 1 $ 1 , 0 9 0 $ 1 , 1 0 8 $ 1 , 1 2 8 $ 1 , 1 4 7 $ 1 , 1 6 7 80 7 0 R E N T A L / P R O P & a m p ; E Q U I P N O C b . 1, 0 0 0 $1 , 0 1 7 $ 1 , 0 3 5 $ 1 , 0 5 3 $ 1 , 0 7 1 $ 1 , 0 9 0 $ 1 , 1 0 8 $ 1 , 1 2 8 $ 1 , 1 4 7 $ 1 , 1 6 7 80 8 0 S E R V I C E S - P R O F & a m p ; T E C H N O C b . 15 , 0 0 0 $1 5 , 2 6 0 $ 1 5 , 5 2 3 $ 1 5 , 7 9 2 $ 1 6 , 0 6 5 $ 1 6 , 3 4 3 $ 1 6 , 6 2 6 $ 1 6 , 9 1 4 $ 1 7 , 2 0 6 $ 1 7 , 5 0 4 81 0 0 T R A V E L & a m p ; M E E T I N G S N O C b . 1, 0 0 0 $1 , 0 1 7 $ 1 , 0 3 5 $ 1 , 0 5 3 $ 1 , 0 7 1 $ 1 , 0 9 0 $ 1 , 1 0 8 $ 1 , 1 2 8 $ 1 , 1 4 7 $ 1 , 1 6 7 81 0 5 T R A I N I N G b . 9, 2 6 0 $9 , 4 2 0 $ 9 , 5 8 3 $ 9 , 7 4 9 $ 9 , 9 1 8 $ 1 0 , 0 8 9 $ 1 0 , 2 6 4 $ 1 0 , 4 4 1 $ 1 0 , 6 2 2 $ 1 0 , 8 0 6 81 1 2 U T I L I T I E S - T E L E P H O N E f . 8, 7 0 0 $8 , 8 5 1 $ 9 , 0 0 4 $ 9 , 1 5 9 $ 9 , 3 1 8 $ 9 , 4 7 9 $ 9 , 6 4 3 $ 9 , 8 1 0 $ 9 , 9 8 0 $ 1 0 , 1 5 2 81 1 4 U T I L I T I E S - N A T U R A L G A S f . 1, 0 0 0 $1 , 0 1 7 $ 1 , 0 3 5 $ 1 , 0 5 3 $ 1 , 0 7 1 $ 1 , 0 9 0 $ 1 , 1 0 8 $ 1 , 1 2 8 $ 1 , 1 4 7 $ 1 , 1 6 7 81 1 6 U T I L I T I E S - E L E C T R I C I T Y f . 68 , 0 0 0 $6 9 , 1 7 6 $ 7 0 , 3 7 3 $ 7 1 , 5 9 1 $ 7 2 , 8 2 9 $ 7 4 , 0 8 9 $ 7 5 , 3 7 1 $ 7 6 , 6 7 5 $ 7 8 , 0 0 1 $ 7 9 , 3 5 1 81 1 8 U T I L I T I E S - W A T E R f . 20 , 0 0 0 $2 0 , 3 4 6 $ 2 0 , 6 9 8 $ 2 1 , 0 5 6 $ 2 1 , 4 2 0 $ 2 1 , 7 9 1 $ 2 2 , 1 6 8 $ 2 2 , 5 5 1 $ 2 2 , 9 4 2 $ 2 3 , 3 3 8 81 4 0 S U P P L I E S - O F F I C E N O C b . 35 0 $3 5 6 $ 3 6 2 $ 3 6 8 $ 3 7 5 $ 3 8 1 $ 3 8 8 $ 3 9 5 $ 4 0 1 $ 4 0 8 81 5 5 W A S T E W A T E R R O O T C U T T I N G b . 15 , 8 0 1 $1 6 , 0 7 4 $ 1 6 , 3 5 2 $ 1 6 , 6 3 5 $ 1 6 , 9 2 3 $ 1 7 , 2 1 6 $ 1 7 , 5 1 4 $ 1 7 , 8 1 7 $ 1 8 , 1 2 5 $ 1 8 , 4 3 9 81 5 8 C C T V M A I N T E N A N C E P R O G R A M b . 77 , 0 0 0 $7 8 , 3 3 2 $ 7 9 , 6 8 7 $ 8 1 , 0 6 6 $ 8 2 , 4 6 8 $ 8 3 , 8 9 5 $ 8 5 , 3 4 6 $ 8 6 , 8 2 3 $ 8 8 , 3 2 5 $ 8 9 , 8 5 3 81 5 9 G R E A S E C N T R L D E V / I N S P E C b . 45 , 0 0 0 $4 5 , 7 7 9 $ 4 6 , 5 7 0 $ 4 7 , 3 7 6 $ 4 8 , 1 9 6 $ 4 9 , 0 3 0 $ 4 9 , 8 7 8 $ 5 0 , 7 4 1 $ 5 1 , 6 1 8 $ 5 2 , 5 1 1 81 6 0 M A I N T & a m p ; R E P A I R N O C b . 19 7 , 9 3 3 $2 0 1 , 3 5 7 $ 2 0 4 , 8 4 1 $ 2 0 8 , 3 8 4 $ 2 1 1 , 9 9 0 $ 2 1 5 , 6 5 7 $ 2 1 9 , 3 8 8 $ 2 2 3 , 1 8 3 $ 2 2 7 , 0 4 4 $ 2 3 0 , 9 7 2 81 8 4 M A I N T - S C A D A b . 25 , 2 5 2 $2 5 , 6 8 9 $ 2 6 , 1 3 3 $ 2 6 , 5 8 5 $ 2 7 , 0 4 5 $ 2 7 , 5 1 3 $ 2 7 , 9 8 9 $ 2 8 , 4 7 3 $ 2 8 , 9 6 6 $ 2 9 , 4 6 7 81 8 5 S E W E R M A N H O L E L I N I N G P R G M b . 75 , 0 0 0 $7 6 , 2 9 8 $ 7 7 , 6 1 7 $ 7 8 , 9 6 0 $ 8 0 , 3 2 6 $ 8 1 , 7 1 6 $ 8 3 , 1 3 0 $ 8 4 , 5 6 8 $ 8 6 , 0 3 1 $ 8 7 , 5 1 9 81 8 6 P U M P S T A T I O N M A I N T E N A N C E b . 13 , 0 0 0 $1 3 , 2 2 5 $ 1 3 , 4 5 4 $ 1 3 , 6 8 6 $ 1 3 , 9 2 3 $ 1 4 , 1 6 4 $ 1 4 , 4 0 9 $ 1 4 , 6 5 8 $ 1 4 , 9 1 2 $ 1 5 , 1 7 0 81 8 7 A L L E Y L A T E R A L R E P L P R G M . b . 43 , 5 0 0 $4 4 , 2 5 3 $ 4 5 , 0 1 8 $ 4 5 , 7 9 7 $ 4 6 , 5 8 9 $ 4 7 , 3 9 5 $ 4 8 , 2 1 5 $ 4 9 , 0 4 9 $ 4 9 , 8 9 8 $ 5 0 , 7 6 1 81 8 8 S E W E R M A N H O L E M A I N T P R G M b . 36 , 2 4 6 $3 6 , 8 7 3 $ 3 7 , 5 1 1 $ 3 8 , 1 6 0 $ 3 8 , 8 2 0 $ 3 9 , 4 9 2 $ 4 0 , 1 7 5 $ 4 0 , 8 7 0 $ 4 1 , 5 7 7 $ 4 2 , 2 9 6 81 8 9 T R E E R O O T F O A M I N G b . 85 , 0 0 0 $8 6 , 4 7 1 $ 8 7 , 9 6 6 $ 8 9 , 4 8 8 $ 9 1 , 0 3 6 $ 9 2 , 6 1 1 $ 9 4 , 2 1 4 $ 9 5 , 8 4 3 $ 9 7 , 5 0 1 $ 9 9 , 1 8 8 81 9 7 U T I L I T I E S F A C M A I N P R O G M b . 16 , 4 3 8 $1 6 , 7 2 2 $ 1 7 , 0 1 2 $ 1 7 , 3 0 6 $ 1 7 , 6 0 5 $ 1 7 , 9 1 0 $ 1 8 , 2 2 0 $ 1 8 , 5 3 5 $ 1 8 , 8 5 6 $ 1 9 , 1 8 2 82 0 0 S P E C I A L D E P T S U P P L I E S N O C b . 15 , 0 0 0 $1 5 , 2 6 0 $ 1 5 , 5 2 3 $ 1 5 , 7 9 2 $ 1 6 , 0 6 5 $ 1 6 , 3 4 3 $ 1 6 , 6 2 6 $ 1 6 , 9 1 4 $ 1 7 , 2 0 6 $ 1 7 , 5 0 4 82 0 4 U N I F O R M E X P E N S E b . 5, 0 0 0 $5 , 0 8 7 $ 5 , 1 7 4 $ 5 , 2 6 4 $ 5 , 3 5 5 $ 5 , 4 4 8 $ 5 , 5 4 2 $ 5 , 6 3 8 $ 5 , 7 3 5 $ 5 , 8 3 5 82 3 9 C O N C R E T E M A T E R I A L S b . 2, 0 0 0 $2 , 0 3 5 $ 2 , 0 7 0 $ 2 , 1 0 6 $ 2 , 1 4 2 $ 2 , 1 7 9 $ 2 , 2 1 7 $ 2 , 2 5 5 $ 2 , 2 9 4 $ 2 , 3 3 4 82 4 0 T O O L S , I N S T R U M E N T S , E T C b . 2, 5 0 0 $2 , 5 4 3 $ 2 , 5 8 7 $ 2 , 6 3 2 $ 2 , 6 7 8 $ 2 , 7 2 4 $ 2 , 7 7 1 $ 2 , 8 1 9 $ 2 , 8 6 8 $ 2 , 9 1 7 82 9 8 O T H E R A G E N C Y F E E S b . 30 , 0 0 0 $3 0 , 5 1 9 $ 3 1 , 0 4 7 $ 3 1 , 5 8 4 $ 3 2 , 1 3 0 $ 3 2 , 6 8 6 $ 3 3 , 2 5 2 $ 3 3 , 8 2 7 $ 3 4 , 4 1 2 $ 3 5 , 0 0 8 83 1 0 S O F T W A R E L I C E N S E R E N E W A L b . 29 , 2 4 9 $2 9 , 7 5 5 $ 3 0 , 2 7 0 $ 3 0 , 7 9 3 $ 3 1 , 3 2 6 $ 3 1 , 8 6 8 $ 3 2 , 4 1 9 $ 3 2 , 9 8 0 $ 3 3 , 5 5 1 $ 3 4 , 1 3 1 To t a l O p e r a t i n g C o s t s 9 1 5 , 8 9 1 9 0 8 , 3 3 8 9 2 4 , 0 5 2 9 4 0 , 0 3 8 9 5 6 , 3 0 1 9 7 2 , 8 4 5 9 8 9 , 6 7 5 1 , 0 0 6 , 7 9 7 1 , 0 2 4 , 2 1 4 1,041,933 -0 . 8 % 1 . 7 % 1 . 7 % 1 . 7 % 1 . 7 % 1 . 7 % 1 . 7 % 1 . 7 % 1 . 7 % Pr o j e c t e d HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 3 o f 1 4 Newport Beach Sewer 10.28.2014 2A. Rev Reqmt - Sewer 1 2 3 4 5 6 AB C D E F G H I J K L M N O Cit y o f N e w p o r t B e a c h Se w e r R a t e S t u d y Ta b l e 2 A . R e v e n u e R e q u i r e m e n t P r o j e c t i o n - S e w e r Ta b l e 1 B A d o p t e d Fa c t o r s F Y 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 N o t e s Pr o j e c t e d 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 In t e r n a l S e r v i c e A l l o c a t i o n s 80 2 2 E Q U I P M A I N T I S F b . 15 8 , 8 1 1 $ $1 6 1 , 5 5 8 $ 1 6 4 , 3 5 3 $ 1 6 7 , 1 9 7 $ 1 7 0 , 0 8 9 $ 1 7 3 , 0 3 2 $ 1 7 6 , 0 2 5 $ 1 7 9 , 0 7 0 $ 1 8 2 , 1 6 8 $ 1 8 5 , 3 2 0 80 2 4 V E H I C L E R E P L A C E I S F b . 18 2 , 7 8 1 $1 8 5 , 9 4 3 $ 1 8 9 , 1 6 0 $ 1 9 2 , 4 3 2 $ 1 9 5 , 7 6 1 $ 1 9 9 , 1 4 8 $ 2 0 2 , 5 9 3 $ 2 0 6 , 0 9 8 $ 2 0 9 , 6 6 4 $ 2 1 3 , 2 9 1 83 1 8 I T I S F O P E R A T I N G C H A R G E b . 25 , 9 9 6 $2 6 , 4 4 6 $ 2 6 , 9 0 3 $ 2 7 , 3 6 9 $ 2 7 , 8 4 2 $ 2 8 , 3 2 4 $ 2 8 , 8 1 4 $ 2 9 , 3 1 2 $ 2 9 , 8 1 9 $ 3 0 , 3 3 5 83 1 9 I T I S F S T R A T E G I C C H A R G E b . 9, 0 0 3 $9 , 1 5 9 $ 9 , 3 1 7 $ 9 , 4 7 8 $ 9 , 6 4 2 $ 9 , 8 0 9 $ 9 , 9 7 9 $ 1 0 , 1 5 2 $ 1 0 , 3 2 7 $ 1 0 , 5 0 6 83 3 0 S V C C H A R G E - A D M I N I S T R A T I V E b . 22 3 , 0 8 4 $2 2 6 , 9 4 3 $ 2 3 0 , 8 6 9 $ 2 3 4 , 8 6 4 $ 2 3 8 , 9 2 7 $ 2 4 3 , 0 6 0 $ 2 4 7 , 2 6 5 $ 2 5 1 , 5 4 3 $ 2 5 5 , 8 9 4 $ 2 6 0 , 3 2 1 83 4 0 G E N E R A L I N S U R A N C E b . 21 , 7 4 9 $2 2 , 1 2 5 $ 2 2 , 5 0 8 $ 2 2 , 8 9 7 $ 2 3 , 2 9 4 $ 2 3 , 6 9 7 $ 2 4 , 1 0 6 $ 2 4 , 5 2 4 $ 2 4 , 9 4 8 $ 2 5 , 3 7 9 To t a l I S F A l l o c a t i o n 6 2 1 , 4 2 4 6 3 2 , 1 7 5 6 4 3 , 1 1 1 6 5 4 , 2 3 7 6 6 5 , 5 5 5 6 7 7 , 0 6 9 6 8 8 , 7 8 3 7 0 0 , 6 9 9 7 1 2 , 8 2 1 725,153 Mi s c e l l a n e o u s 90 0 0 O F F I C E E Q U I P M E N T b . 2, 0 0 0 $2 , 0 3 5 $ 2 , 0 7 0 $ 2 , 1 0 6 $ 2 , 1 4 2 $ 2 , 1 7 9 $ 2 , 2 1 7 $ 2 , 2 5 5 $ 2 , 2 9 4 $ 2 , 3 3 4 90 1 0 C O M P U T E R E Q U I P M E N T b . 5, 0 0 0 $5 , 0 8 7 $ 5 , 1 7 4 $ 5 , 2 6 4 $ 5 , 3 5 5 $ 5 , 4 4 8 $ 5 , 5 4 2 $ 5 , 6 3 8 $ 5 , 7 3 5 $ 5 , 8 3 5 92 0 0 S H O P E Q U I P M E N T b . 1, 0 0 0 $1 , 0 1 7 $ 1 , 0 3 5 $ 1 , 0 5 3 $ 1 , 0 7 1 $ 1 , 0 9 0 $ 1 , 1 0 8 $ 1 , 1 2 8 $ 1 , 1 4 7 $ 1 , 1 6 7 93 0 0 E Q U I P M E N T , N . O . C . b . 25 , 0 0 0 $2 5 , 4 3 3 $ 2 5 , 8 7 2 $ 2 6 , 3 2 0 $ 2 6 , 7 7 5 $ 2 7 , 2 3 9 $ 2 7 , 7 1 0 $ 2 8 , 1 8 9 $ 2 8 , 6 7 7 $ 2 9 , 1 7 3 To t a l M i s c e l l a n e o u s E x p e n s e s 3 3 , 0 0 0 3 3 , 5 7 1 3 4 , 1 5 2 3 4 , 7 4 3 3 5 , 3 4 4 3 5 , 9 5 5 3 6 , 5 7 7 3 7 , 2 1 0 3 7 , 8 5 4 38,508 No n - O p e r a t i n g R e v e n u e 58 6 0 D A M A G E T O C I T Y P R O P E R T Y b . - $ $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 58 7 0 R E V E N U E , N . O . C . b . - $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 To t a l N o n - O p e r a t i n g R e v e n u e - - - - - - - - - - Ne t R e v e n u e R e q u i r e m e n t ( b e f o r e R e s e r v e E x p e n s e ) 3 , 1 8 6 , 8 1 2 $ 3 , 2 5 0 , 3 4 6 $ 3 , 3 2 7 , 8 6 5 $ 3 , 4 0 7 , 3 6 5 $ 3 , 4 8 8 , 8 9 7 $ 3 , 5 7 2 , 5 1 7 $ 3 , 6 5 8 , 2 8 2 $ 3 , 7 4 6 , 2 5 0 $ 3 , 8 3 6 , 4 8 0 $ 3,929,033 $ 2. 0 % 2 . 4 % 2 . 4 % 2 . 4 % 2 . 4 % 2 . 4 % 2 . 4 % 2 . 4 % 2 . 4 % RE S E R V E E X P E N S E T o / ( F r o m ) Op s S u p p o r t - S t o r m D r a i n B u d g e t Op e r a t i o n s b . $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 From Table 1A Ca p i t a l P r o j e c t s $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 From Table 1A Op e r a t i n g R e s e r v e 3 7 1 , 6 7 5 2 7 5 , 8 2 8 2 7 0 , 4 0 3 1 1 4 , 8 3 4 2 1 4 , 1 9 0 2 2 4 , 6 3 1 2 3 4 , 8 0 9 2 4 4 , 7 0 4 2 5 4 , 2 9 3 263,555 From Table 4 In f r a s t r u c t u r e R e p l a c e m e n t - 5 0 0 , 0 0 0 7 5 0 , 0 0 0 1 , 0 0 0 , 0 0 0 1 , 0 0 0 , 0 0 0 1 , 0 0 0 , 0 0 0 1 , 0 0 0 , 0 0 0 1 , 0 0 0 , 0 0 0 1 , 0 0 0 , 0 0 0 1,000,000 From Table 4 Su b t o t a l , R e s e r v e E x p e n s e 37 1 , 6 7 5 $ 7 7 5 , 8 2 8 $ 1 , 0 2 0 , 4 0 3 $ 1 , 1 1 4 , 8 3 4 $ 1 , 2 1 4 , 1 9 0 $ 1 , 2 2 4 , 6 3 1 $ 1 , 2 3 4 , 8 0 9 $ 1 , 2 4 4 , 7 0 4 $ 1 , 2 5 4 , 2 9 3 $ 1,263,555 $ Ne t R e v e n u e R e q u i r e m e n t $3 , 5 5 8 , 4 8 7 $ 4 , 0 2 6 , 1 7 4 $ 4 , 3 4 8 , 2 6 8 $ 4 , 5 2 2 , 1 9 9 $ 4 , 7 0 3 , 0 8 7 $ 4 , 7 9 7 , 1 4 8 $ 4 , 8 9 3 , 0 9 1 $ 4 , 9 9 0 , 9 5 4 $ 5 , 0 9 0 , 7 7 3 $ 5 , 1 9 2 , 5 8 8 To Table 3A 13 . 1 % 8 . 0 % 4 . 0 % 4 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 4 o f 1 4 Newport Beach Sewer 10.28.2014 2A. Rev Reqmt - Sewer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 AB C D E F G H I J K L M N O Cit y o f N e w p o r t B e a c h Se w e r R a t e S t u d y Ta b l e 2 B . R e v e n u e R e q u i r e m e n t P r o j e c t i o n - R e c y c l e d W a t e r Ta b l e 1 B B u d g e t Fa c t o r s F Y 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 N o t e s Sh a r e d R e c y c l e d W a t e r C o s t s Pu r c h a s e d W a t e r - O C W D i , k 16 7 , 5 9 8 $ 17 3 , 4 1 7 $ $ 1 7 9 , 4 3 8 $ 1 8 2 , 8 1 0 $ 1 8 6 , 2 4 5 $ 1 8 9 , 7 4 5 $ 1 9 3 , 3 1 1 $ 1 9 6 , 9 4 3 $ 2 0 0 , 6 4 4 $ 2 0 4 , 4 1 4 Oth e r a g e n c y f e e s b . 2,0 0 0 $ $2 , 0 3 5 $ 2 , 0 7 0 $ 2 , 1 0 6 $ 2 , 1 4 2 $ 2 , 1 7 9 $ 2 , 2 1 7 $ 2 , 2 5 5 $ 2 , 2 9 4 $ 2 , 3 3 4 Ad m i n i s t r a t i o n b . 25 , 0 0 0 $2 5 , 4 3 3 $ 2 5 , 8 7 2 $ 2 6 , 3 2 0 $ 2 6 , 7 7 5 $ 2 7 , 2 3 9 $ 2 7 , 7 1 0 $ 2 8 , 1 8 9 $ 2 8 , 6 7 7 $ 2 9 , 1 7 3 Ov e r h e a d b . 12 , 0 0 0 $1 2 , 2 0 8 $ 1 2 , 4 1 9 $ 1 2 , 6 3 4 $ 1 2 , 8 5 2 $ 1 3 , 0 7 5 $ 1 3 , 3 0 1 $ 1 3 , 5 3 1 $ 1 3 , 7 6 5 $ 1 4 , 0 0 3 Me t e r R e a d i n g b . 1,4 8 8 $1 , 5 1 4 $ 1 , 5 4 0 $ 1 , 5 6 7 $ 1 , 5 9 4 $ 1 , 6 2 1 $ 1 , 6 4 9 $ 1 , 6 7 8 $ 1 , 7 0 7 $ 1 , 7 3 6 4 h o u r s / m o n t h @ $ 3 1 / h r To t a l - S h a r e d R e c y c l e d W a t e r C o s t s 2 0 8 , 0 8 6 2 1 4 , 6 0 5 2 2 1 , 3 3 9 2 2 5 , 4 3 6 2 2 9 , 6 0 9 2 3 3 , 8 5 9 2 3 8 , 1 8 7 2 4 2 , 5 9 6 2 4 7 , 0 8 7 2 5 1 , 6 6 1 Big C a n y o n C o u n t r y C l u b In p e c t i o n s b . 3,4 5 1 $ $3 , 5 1 1 $ 3 , 5 7 1 $ 3 , 6 3 3 $ 3 , 6 9 6 $ 3 , 7 6 0 $ 3 , 8 2 5 $ 3 , 8 9 1 $ 3 , 9 5 9 $ 4 , 0 2 7 Sc h e d u l e d P r o d u c t i o n M a i n t e n a n c e b . 1,8 7 7 $1 , 9 0 9 $ 1 , 9 4 3 $ 1 , 9 7 6 $ 2 , 0 1 0 $ 2 , 0 4 5 $ 2 , 0 8 0 $ 2 , 1 1 6 $ 2 , 1 5 3 $ 2 , 1 9 0 Sc h e d u l e d S C A D A M a i n t e n a n c e b . 1,5 7 9 $1 , 6 0 6 $ 1 , 6 3 4 $ 1 , 6 6 2 $ 1 , 6 9 1 $ 1 , 7 2 0 $ 1 , 7 5 0 $ 1 , 7 8 0 $ 1 , 8 1 1 $ 1 , 8 4 3 Co r r e c t i v e M a i n t e n a n c e b . 3,8 5 1 $3 , 9 1 8 $ 3 , 9 8 5 $ 4 , 0 5 4 $ 4 , 1 2 4 $ 4 , 1 9 6 $ 4 , 2 6 8 $ 4 , 3 4 2 $ 4 , 4 1 7 $ 4 , 4 9 4 So u r c e C h a n g e o v e r s b . 70 0 $7 1 2 $ 7 2 4 $ 7 3 7 $ 7 5 0 $ 7 6 3 $ 7 7 6 $ 7 8 9 $ 8 0 3 $ 8 1 7 Pu m p S t a t i o n R e h a b / M a i n t e n a n c e ( p u m p s , m o t o r s ) j . 11 , 2 8 0 $1 8 , 5 8 4 $ 1 8 , 9 5 6 $ 1 9 , 3 3 5 $ 1 9 , 7 2 2 $ 2 0 , 1 1 6 $ 2 0 , 5 1 9 $ 2 0 , 9 2 9 $ 2 1 , 3 4 8 $ 2 1 , 7 7 5 ( p u m p s , m o t o r s ) To t a l - B i g C a n y o n C o u n t r y C l u b 2 2 , 7 3 8 3 0 , 2 4 1 3 0 , 8 1 4 3 1 , 3 9 8 3 1 , 9 9 4 3 2 , 6 0 0 3 3 , 2 1 9 3 3 , 8 4 9 3 4 , 4 9 1 3 5 , 1 4 5 33 . 0 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % Ne w p o r t B e a c h C o u n t r y C l u b In p e c t i o n s b . 3,4 5 1 $ $3 , 5 1 1 $ 3 , 5 7 1 $ 3 , 6 3 3 $ 3 , 6 9 6 $ 3 , 7 6 0 $ 3 , 8 2 5 $ 3 , 8 9 1 $ 3 , 9 5 9 $ 4 , 0 2 7 Sc h e d u l e d P r o d u c t i o n M a i n t e n a n c e b . 1,4 0 8 $1 , 4 3 2 $ 1 , 4 5 7 $ 1 , 4 8 2 $ 1 , 5 0 8 $ 1 , 5 3 4 $ 1 , 5 6 1 $ 1 , 5 8 8 $ 1 , 6 1 5 $ 1 , 6 4 3 Sc h e d u l e d S C A D A M a i n t e n a n c e b . 1,1 8 4 $1 , 2 0 4 $ 1 , 2 2 5 $ 1 , 2 4 7 $ 1 , 2 6 8 $ 1 , 2 9 0 $ 1 , 3 1 2 $ 1 , 3 3 5 $ 1 , 3 5 8 $ 1 , 3 8 2 Co r r e c t i v e M a i n t e n a n c e b . 2,9 8 7 $3 , 0 3 9 $ 3 , 0 9 1 $ 3 , 1 4 5 $ 3 , 1 9 9 $ 3 , 2 5 4 $ 3 , 3 1 1 $ 3 , 3 6 8 $ 3 , 4 2 6 $ 3 , 4 8 6 So u r c e C h a n g e o v e r s b . 70 0 $7 1 2 $ 7 2 4 $ 7 3 7 $ 7 5 0 $ 7 6 3 $ 7 7 6 $ 7 8 9 $ 8 0 3 $ 8 1 7 Pu m p S t a t i o n R e h a b / M a i n t e n a n c e ( p u m p s , m o t o r s ) j . 6,9 4 0 $7 , 0 7 9 $ 7 , 2 2 0 $ 7 , 3 6 5 $ 7 , 5 1 2 $ 7 , 6 6 2 $ 7 , 8 1 6 $ 7 , 9 7 2 $ 8 , 1 3 1 $ 8 , 2 9 4 ( p u m p s , m o t o r s ) To t a l - N e w p o r t B e a c h C o u n t r y C l u b 1 6 , 6 7 0 1 6 , 9 7 7 1 7 , 2 9 0 1 7 , 6 0 9 1 7 , 9 3 3 1 8 , 2 6 4 1 8 , 6 0 0 1 8 , 9 4 3 1 9 , 2 9 2 1 9 , 6 4 8 1.8 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % Su b t o t a l : O p e r a t i n g E x p e n s e s 2 4 7 , 4 9 4 $ 2 6 1 , 8 2 3 $ 2 6 9 , 4 4 3 $ 2 7 4 , 4 4 3 $ 2 7 9 , 5 3 5 $ 2 8 4 , 7 2 3 $ 2 9 0 , 0 0 6 $ 2 9 5 , 3 8 8 $ 3 0 0 , 8 7 0 $ 3 0 6 , 4 5 4 $ 5.8 % 2 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % 1 . 9 % De p r e c i a t i o n E x p e n s e s T o / ( F r o m ) R e s e r v e s Pu m p S t a t i o n F a c i l i t y R e p l a c e m e n t 15 , 0 0 0 $ $1 5 , 0 0 0 $ 1 5 , 0 0 0 $ 1 5 , 0 0 0 $ 1 5 , 0 0 0 $ 1 5 , 0 0 0 $ 1 5 , 0 0 0 $ 1 5 , 0 0 0 $ 1 5 , 0 0 0 $ 1 5 , 0 0 0 ( r o o f , w a l l s , c o n c r e t e ) Me t e r s r e p l a c e m e n t b . 2,5 0 0 $2 , 5 4 3 $ 2 , 5 8 7 $ 2 , 6 3 2 $ 2 , 6 7 8 $ 2 , 7 2 4 $ 2 , 7 7 1 $ 2 , 8 1 9 $ 2 , 8 6 8 $ 2 , 9 1 7 $ 2 5 9 / m e t e r / y e a r - C i t y e s t i m a t e ( 1 5 - y r s e r v i c e l i f e ) Su b t o t a l , D e p r e c i a t i o n E x p e n s e 17 , 5 0 0 $ 1 7 , 5 4 3 $ 1 7 , 5 8 7 $ 1 7 , 6 3 2 $ 1 7 , 6 7 8 $ 1 7 , 7 2 4 $ 1 7 , 7 7 1 $ 1 7 , 8 1 9 $ 1 7 , 8 6 8 $ 1 7 , 9 1 7 $ Ne t R e v e n u e R e q u i r e m e n t $2 6 4 , 9 9 4 $2 7 9 , 3 6 6 $2 8 7 , 0 3 0 $2 9 2 , 0 7 5 $2 9 7 , 2 1 3 $3 0 2 , 4 4 6 $3 0 7 , 7 7 7 $3 1 3 , 2 0 7 $3 1 8 , 7 3 8 $3 2 4 , 3 7 1 To Table 3B 5.4 % 2 . 7 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % 1 . 8 % Pr o j e c t e d HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 5 o f 1 4 Newport Beach Sewer 10.28.2014 2B. Rev Reqmt Proj - Recycled 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 AB C D E F G H I J K L M N Cit y o f N e w p o r t B e a c h Wa t e r R a t e S t u d y Ta b l e 3 A . R e v e n u e I n c r e a s e s - S e w e r Mo n t h s i n 1 s t F Y o f Es t . A c t u a l ra t e i n c r e a s e * F Y 2 0 1 3 - 1 4 F Y 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 N o t es Re v e n u e f r o m R a t e s w i t h o u t R a t e I n c r e a s e s Re v e n u e f r o m C u r r e n t R a t e s $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 $ 3 , 4 0 2 , 5 5 9 FY13-14 from Table 7A; Table 1B, g . Ba d D e b t E x p e n s e ($ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) ( $ 1 3 , 5 2 3 ) Ne t R e v e n u e 3, 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ Ne t R e v e n u e R e q u i r e m e n t s $ 3 , 5 5 8 , 4 8 7 $ 4 , 0 2 6 , 1 7 4 $ 4 , 3 4 8 , 2 6 8 $ 4 , 5 2 2 , 1 9 9 $ 4 , 7 0 3 , 0 8 7 $ 4 , 7 9 7 , 1 4 8 $ 4 , 8 9 3 , 0 9 1 $ 4 , 9 9 0 , 9 5 4 $ 5 , 0 9 0 , 7 7 3 $ 5 , 1 9 2 , 5 8 8 F r om Table 2 Su r p l u s / ( D e f i c i t ) b e f o r e r a t e i n c r e a s e ($ 1 6 9 , 4 5 1 ) ( $ 6 3 7 , 1 3 8 ) ( $ 9 5 9 , 2 3 3 ) ( $ 1 , 1 3 3 , 1 6 3 ) ( $ 1 , 3 1 4 , 0 5 1 ) ( $ 1 , 4 0 8 , 1 1 3 ) ( $ 1 , 5 0 4 , 0 5 6 ) ( $ 1 , 6 0 1 , 9 1 8 ) ( $ 1 , 7 0 1 , 7 3 7 ) ( $ 1 , 8 0 3 , 5 5 2 ) To Table 4 Re v e n u e f r o m R a t e s w i t h R a t e I n c r e a s e s In c r e a s e i n R e v e n u e f r o m R a t e s 1 0 . 0 % 8 . 0 % 8 . 0 % 4 . 0 % 4 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % From Table 1A Cu m u l a t i v e I n c r e a s e 4 . 6 % 1 8 . 3 % 2 7 . 8 % 3 2 . 9 % 3 8 . 2 % 4 1 . 0 % 4 3 . 8 % 4 6 . 7 % 4 9 . 6 % 5 2 . 6 % To Table 1A To t a l R e v e n u e f r o m E x i s t i n g R a t e s R e v e n u e f r o m C u r r e n t R a t e s 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ 3 , 3 8 9 , 0 3 6 $ Re v e n u e f r o m R a t e I n c r e a s e s FY 1 4 - 1 5 ( e f f e c t i v e 1 / 1 / 1 5 ) 6 $ 1 6 9 , 4 5 2 $ 3 3 8 , 9 0 4 $ 3 3 8 , 9 0 4 $ 3 3 8 , 9 0 4 $ 3 3 8 , 9 0 4 $ 3 3 8 , 9 0 4 $ 3 3 8 , 9 0 4 $ 3 3 8 , 9 0 4 $ 3 3 8 , 9 0 4 $ 3 3 8 , 9 0 4 FY 1 5 - 1 6 ( e f f e c t i v e 7 / 1 / 1 5 ) 1 2 $ 2 9 8 , 2 3 5 $ 2 9 8 , 2 3 5 $ 2 9 8 , 2 3 5 $ 2 9 8 , 2 3 5 $ 2 9 8 , 2 3 5 $ 2 9 8 , 2 3 5 $ 2 9 8 , 2 3 5 $ 2 9 8 , 2 3 5 $ 2 9 8 , 2 3 5 FY 1 6 - 1 7 ( e f f e c t i v e 7 / 1 / 1 6 ) 1 2 $ 3 2 2 , 0 9 4 $ 3 2 2 , 0 9 4 $ 3 2 2 , 0 9 4 $ 3 2 2 , 0 9 4 $ 3 2 2 , 0 9 4 $ 3 2 2 , 0 9 4 $ 3 2 2 , 0 9 4 $ 3 2 2 , 0 9 4 FY 1 7 - 1 8 ( e f f e c t i v e 7 / 1 / 1 7 ) 1 2 $1 7 3 , 9 3 1 $ 1 7 3 , 9 3 1 $ 1 7 3 , 9 3 1 $ 1 7 3 , 9 3 1 $ 1 7 3 , 9 3 1 $ 1 7 3 , 9 3 1 $ 1 7 3 , 9 3 1 FY 1 8 - 1 9 ( e f f e c t i v e 7 / 1 / 1 8 ) 1 2 $1 8 0 , 8 8 8 $ 1 8 0 , 8 8 8 $ 1 8 0 , 8 8 8 $ 1 8 0 , 8 8 8 $ 1 8 0 , 8 8 8 $ 1 8 0 , 8 8 8 FY 1 9 - 2 0 ( e f f e c t i v e 7 / 1 / 1 9 ) 1 2 $9 4 , 0 6 2 $ 9 4 , 0 6 2 $ 9 4 , 0 6 2 $ 9 4 , 0 6 2 $ 9 4 , 0 6 2 FY 2 0 - 2 1 ( e f f e c t i v e 7 / 1 / 2 0 ) 1 2 $9 5 , 9 4 3 $ 9 5 , 9 4 3 $ 9 5 , 9 4 3 $ 9 5 , 9 4 3 FY 2 1 - 2 2 ( e f f e c t i v e 7 / 1 / 2 1 ) 1 2 $9 7 , 8 6 2 $ 9 7 , 8 6 2 $ 9 7 , 8 6 2 FY 2 2 - 2 3 ( e f f e c t i v e 7 / 1 / 2 2 ) 1 2 $9 9 , 8 1 9 $ 9 9 , 8 1 9 FY 2 3 - 2 4 ( e f f e c t i v e 7 / 1 / 2 3 ) 1 2 $1 0 1 , 8 1 5 S u b t o t a l - R e v e n u e f r o m R a t e I n c r e a s e s $ 1 6 9 , 4 5 2 $ 6 3 7 , 1 3 9 $ 9 5 9 , 2 3 3 $ 1 , 1 3 3 , 1 6 3 $ 1 , 3 1 4 , 0 5 1 $ 1 , 4 0 8 , 1 1 3 $ 1 , 5 0 4 , 0 5 6 $ 1 , 6 0 1 , 9 1 8 $ 1 , 7 0 1 , 7 3 7 $ 1,8 0 3 , 5 5 2 To t a l R a t e R e v e n u e 3, 4 0 2 , 5 5 9 $ $ 3 , 5 5 8 , 4 8 7 $ 4 , 0 2 6 , 1 7 4 $ 4 , 3 4 8 , 2 6 8 $ 4 , 5 2 2 , 1 9 9 $ 4 , 7 0 3 , 0 8 7 $ 4 , 7 9 7 , 1 4 9 $ 4 , 8 9 3 , 0 9 2 $ 4 , 9 9 0 , 9 5 3 $ 5 , 0 9 0 , 7 7 3 $ 5 , 1 9 2 , 5 8 8 F Y 1 3 - 1 4 f r o m T a b l e 7 A Ne t R e v e n u e R e q u i r e m e n t s 2 , 8 4 5 , 9 1 1 $ $ 3 , 5 5 8 , 4 8 7 $ 4 , 0 2 6 , 1 7 4 $ 4 , 3 4 8 , 2 6 8 $ 4 , 5 2 2 , 1 9 9 $ 4 , 7 0 3 , 0 8 7 $ 4 , 7 9 7 , 1 4 8 $ 4 , 8 9 3 , 0 9 1 $ 4 , 9 9 0 , 9 5 4 $ 5 , 0 9 0 , 7 7 3 $ 5 , 1 9 2 , 5 8 8 F r o m T a b l e 2 Su r p l u s / ( D e f i c i t ) a f t e r R a t e I n c r e a s e $5 5 6 , 6 4 8 $ 0 $ 0 ($ 0 ) $0 ($ 0 ) $0 $ 0 ($ 0 ) ( $ 0 ) ( $ 0 ) To Table 4 * E s t i m a t e d # o f m o n t h s o f c o l l e c t i o n s i n F Y i n w h i c h r a t e i n c r e a s e t a k e s p l a c e Pr o j e c t e d HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 6 o f 1 4 Newport Beach Sewer 10.28.2014 3A. Revenue Incr - Sewer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 AB C D E F G H I J K L M N O Cit y o f N e w p o r t B e a c h Wa t e r R a t e S t u d y Ta b l e 3 B . R e v e n u e I n c r e a s e s - R e c y c l e d W a t e r Mo n t h s in 1 s t F Y o f E s t . A c t u a l ra t e i n c r e a s e * FY 2 0 1 2 - 1 3 F Y 2 0 1 4 - 1 5 FY 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 #R E F ! N o t e s Re v e n u e f r o m R a t e s w i t h o u t R a t e I n c r e a s e s Re v e n u e f r o m C u r r e n t R a t e s $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 # R E F ! F Y 1 2 - 1 3 f r o m T a b le 7B; Table 1B, i . Ba d D e b t E x p e n s e $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 # R E F ! Ne t R e v e n u e 52 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ # R E F ! Ne t R e v e n u e R e q u i r e m e n t s $ 2 6 4 , 9 9 4 $ 2 7 9 , 3 6 6 $ 2 8 7 , 0 3 0 $ 2 9 2 , 0 7 5 $ 2 9 7 , 2 1 3 $ 3 0 2 , 4 4 6 $ 3 0 7 , 7 7 7 $ 3 1 3 , 2 0 7 $ 3 1 8 , 7 3 8 $ 3 2 4 , 3 7 1 # R E F ! F Y 1 3 - 1 4 f r o m C i t y ; escalated by CPI Su r p l u s / ( D e f i c i t ) b e f o r e r a t e i n c r e a s e $ 2 5 7 , 1 2 9 $2 4 2 , 7 5 6 $2 3 5 , 0 9 2 $2 3 0 , 0 4 8 $2 2 4 , 9 1 0 $2 1 9 , 6 7 6 $2 1 4 , 3 4 6 $2 0 8 , 9 1 6 $2 0 3 , 3 8 5 $1 9 7 , 7 5 2 #R E F ! Re v e n u e f r o m R a t e s w i t h R a t e I n c r e a s e s In c r e a s e i n R e v e n u e f r o m R a t e s 0. 0 % -5 0 . 0 % 0. 0 % 0. 0 % 0. 0 % 0. 0 % 0. 0 % 0. 0 % 0. 0 % 0. 0 % 0.0 % Cu m u l a t i v e I n c r e a s e 0 . 0 % - 5 0 . 0 % - 5 0 . 0 % - 5 0 . 0 % - 5 0 . 0 % - 5 0 . 0 % - 5 0 . 0 % - 5 0 . 0 % - 5 0 . 0 % - 5 0 . 0 % # R E F ! To t a l R e v e n u e f r o m E x i s t i n g R a t e s R e v e n u e f r o m C u r r e n t R a t e s 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ 5 2 2 , 1 2 3 $ # R E F ! Re v e n u e f r o m R a t e I n c r e a s e s FY 1 4 - 1 5 ( e f f e c t i v e 7 / 1 / 1 4 ) 1 2 ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) # R E F ! FY 1 5 - 1 6 ( e f f e c t i v e 7 / 1 / 1 5 ) 1 2 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 # R E F ! FY 1 6 - 1 7 ( e f f e c t i v e 7 / 1 / 1 6 ) 1 2 $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 # R E F ! FY 1 7 - 1 8 ( e f f e c t i v e 7 / 1 / 1 7 ) 1 2 $0 $ 0 $ 0 $ 0 $ 0 $ 0 # R E F ! FY 1 8 - 1 9 ( e f f e c t i v e 7 / 1 / 1 8 ) 1 2 $0 $ 0 $ 0 $ 0 $ 0 # R E F ! FY 1 9 - 2 0 ( e f f e c t i v e 7 / 1 / 1 9 ) 1 2 $0 $ 0 $ 0 $ 0 # R E F ! FY 2 0 - 2 1 ( e f f e c t i v e 7 / 1 / 2 0 ) 1 2 $0 $ 0 $ 0 # R E F ! FY 2 1 - 2 2 ( e f f e c t i v e 7 / 1 / 2 1 ) 1 2 $0 $ 0 # R E F ! FY 2 2 - 2 3 ( e f f e c t i v e 7 / 1 / 2 2 ) 1 2 $0 # R E F ! FY 2 3 - 2 4 ( e f f e c t i v e 7 / 1 / 2 3 ) 1 2 #R E F ! S u b t o t a l - R e v e n u e f r o m R a t e I n c r e a s e s $ 0 ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 6 1 , 0 6 1 ) ( $ 2 61 , 0 6 1 ) # R E F ! To t a l R a t e R e v e n u e 52 2 , 1 2 3 $ $ 5 2 2 , 1 2 3 $ 2 6 1 , 0 6 1 $ 2 6 1 , 0 6 1 $ 2 6 1 , 0 6 1 $ 2 6 1 , 0 6 1 $ 2 6 1 , 0 6 1 $ 2 6 1 , 0 6 1 $ 2 6 1 , 0 6 1 $ 2 6 1 , 0 6 1 $ 2 6 1 , 0 6 1 # R E F ! Ne t R e v e n u e R e q u i r e m e n t s $ 2 6 4 , 9 9 4 $ 2 7 9 , 3 6 6 $ 2 8 7 , 0 3 0 $ 2 9 2 , 0 7 5 $ 2 9 7 , 2 1 3 $ 3 0 2 , 4 4 6 $ 3 0 7 , 7 7 7 $ 3 1 3 , 2 0 7 $ 3 1 8 , 7 3 8 $ 3 2 4 , 3 7 1 # R E F ! Su r p l u s / ( D e f i c i t ) a f t e r R a t e I n c r e a s e $5 2 2 , 1 2 3 $2 5 7 , 1 2 9 ($ 1 8 , 3 0 5 ) ( $ 2 5 , 9 6 9 ) ( $ 3 1 , 0 1 3 ) ( $ 3 6 , 1 5 2 ) ( $ 4 1 , 3 8 5 ) ( $ 4 6 , 7 1 6 ) ( $ 5 2 , 1 4 6 ) ( $ 5 7 , 6 7 6 ) ( $ 6 3 , 3 1 0 ) #R E F ! To Table 4 * E s t i m a t e d # o f m o n t h s o f c o l l e c t i o n s i n F Y i n w h i c h r a t e i n c r e a s e t a k e s p l a c e Pr o j e c t e d HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 7 o f 1 4 Newport Beach Sewer 10.28.2014 3B. Revenue Incr - Recycled 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 AB C D E F G H I J K L M N O Cit y o f N e w p o r t B e a c h Se w e r R a t e S t u d y Ta b l e 4 . R e s e r v e s Bu d g e t e d FY 2 0 1 3 - 1 4 F Y 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 N o t e s Se w e r O p e r a t i n g R e s e r v e F u n d s W i t h R a t e I n c r e a s e ( 5 3 0 ) Re v e n u e I n c r e a s e An n u a l i n c r e a s e s 10 . 0 % 8 . 0 % 8 . 0 % 4 . 0 % 4 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % From Table 1A Cu m u l a t i v e i n c r e a s e 1 0 . 0 % 1 8 . 8 % 2 8 . 3 % 3 3 . 4 % 3 8 . 8 % 4 1 . 5 % 4 4 . 4 % 4 7 . 3 % 5 0 . 2 % 5 3 . 2 % Op e r a t i o n s F u n d Be g i n n i n g B a l a n c e $ 1 , 8 6 2 , 2 7 8 $ 1 , 5 9 6 , 8 7 7 $ 1 , 6 3 4 , 7 7 9 $ 1 , 6 6 7 , 5 1 9 $ 1 , 6 9 4 , 9 1 5 $ 1 , 7 7 2 , 0 5 8 $ 1 , 8 1 0 , 0 7 2 $ 1 , 9 5 8 , 9 6 2 $ 2 , 0 6 8 , 7 1 3 $ 2 , 1 8 8 , 9 1 2 Su r p l u s / ( D e f i c i t ) $ 0 $ 0 ($ 0 ) $0 ($ 0 ) $0 $ 0 ($ 0 ) ( $ 0 ) ( $ 0 ) From Table 3A Tr a n s f e r s ( t o ) / f r o m Re v e n u e R e q u i r e m e n t 37 1 , 6 7 5 2 7 5 , 8 2 8 2 7 0 , 4 0 3 1 1 4 , 8 3 4 2 1 4 , 1 9 0 2 2 4 , 6 3 1 2 3 4 , 8 0 9 2 4 4 , 7 0 4 2 5 4 , 2 9 3 2 6 3 , 5 5 5 To Table 2 In f r a s t r u c t u r e R e p l a c e m e n t F u n d ($ 6 5 0 , 0 0 0 ) ( $ 2 5 0 , 0 0 0 ) ( $ 2 5 0 , 0 0 0 ) ( $ 1 0 0 , 0 0 0 ) ( $ 1 5 0 , 0 0 0 ) ( $ 2 0 0 , 0 0 0 ) ( $ 1 0 0 , 0 0 0 ) ( $ 1 5 0 , 0 0 0 ) ( $ 1 5 0 , 0 0 0 ) ( $ 2 2 5 , 0 0 0 ) (to)/from below Su b t o t a l - T r a n s f e r s ($ 2 7 8 , 3 2 5 ) $2 5 , 8 2 8 $ 2 0 , 4 0 3 $ 1 4 , 8 3 4 $ 6 4 , 1 9 0 $ 2 4 , 6 3 1 $ 1 3 4 , 8 0 9 $ 9 4 , 7 0 4 $ 1 0 4 , 2 9 3 $ 3 8 , 5 5 5 Su b t o t a l - F u n d B a l a n c e $ 1 , 5 8 3 , 9 5 3 $ 1 , 6 2 2 , 7 0 5 $ 1 , 6 5 5 , 1 8 2 $ 1 , 6 8 2 , 3 5 3 $ 1 , 7 5 9 , 1 0 5 $ 1 , 7 9 6 , 6 8 9 $ 1 , 9 4 4 , 8 8 1 $ 2 , 0 5 3 , 6 6 6 $ 2 , 1 7 3 , 0 0 6 $ 2 , 2 2 7 , 4 6 7 Es t i m a t e d I n t e r e s t E a r n i n g s $1 2 , 9 2 3 $ 1 2 , 0 7 3 $ 1 2 , 3 3 7 $ 1 2 , 5 6 2 $ 1 2 , 9 5 3 $ 1 3 , 3 8 3 $ 1 4 , 0 8 1 $ 1 5 , 0 4 7 $ 1 5 , 9 0 6 $ 1 6 , 5 6 1 En d i n g B a l a n c e 1, 8 6 2 , 2 7 8 $1 , 5 9 6 , 8 7 7 $1 , 6 3 4 , 7 7 9 $1 , 6 6 7 , 5 1 9 $1 , 6 9 4 , 9 1 5 $1 , 7 7 2 , 0 5 8 $1 , 8 1 0 , 0 7 2 $1 , 9 5 8 , 9 6 2 $2 , 0 6 8 , 7 1 3 $2 , 1 8 8 , 9 1 2 $2,244,02 9 Mi n i m u m B a l a n c e $ 1 , 4 2 2 , 9 5 6 $ 1 , 5 9 3 , 4 0 6 $ 1 , 6 2 5 , 1 7 3 $ 1 , 6 6 3 , 9 3 3 $ 1 , 7 0 3 , 6 8 2 $ 1 , 7 4 4 , 4 4 8 $ 1 , 7 8 6 , 2 5 9 $ 1 , 8 2 9 , 1 4 1 $ 1 , 8 7 3 , 1 2 5 $ 1 , 9 1 8 , 2 4 0 $ 1 , 9 6 4 , 5 1 7 5 0 % of annual O&M Se w e r I n f r a s t r u c t u r e R e p l a c e m e n t R e s e r v e ( 5 4 0 ) Be g i n n i n g B a l a n c e $1 , 0 2 3 , 2 0 4 $ 8 5 6 , 8 3 4 $ 1 , 1 0 4 , 1 6 0 $ 1 , 3 3 2 , 9 6 5 $ 1 , 3 8 1 , 9 0 0 $ 1 , 4 6 0 , 0 8 5 $ 1 , 5 6 7 , 3 1 5 $ 1 , 5 5 2 , 8 0 9 $ 1 , 5 6 5 , 7 7 5 $ 1 , 5 5 5 , 7 7 7 Ca p i t a l I m p r o v e m e n t P r o j e c t s ($ 8 2 3 , 3 9 4 ) ( $ 5 1 0 , 0 0 0 ) ( $ 7 8 0 , 3 0 0 ) ( $ 1 , 0 6 1 , 2 0 8 ) ( $ 1 , 0 8 2 , 4 3 2 ) ( $ 1 , 1 0 4 , 0 8 1 ) ( $ 1 , 1 2 6 , 1 6 2 ) ( $ 1 , 1 4 8 , 6 8 6 ) ( $ 1 , 1 7 1 , 6 5 9 ) ( $ 1 , 1 9 5 , 0 9 3 ) From Table 5 Tr a n s f e r s ( t o ) / f r o m Re v e n u e R e q u i r e m e n t s $0 $ 5 0 0 , 0 0 0 $ 7 5 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 F r o m T a b l e 1 A Op e r a t i o n s F u n d $ 6 5 0 , 0 0 0 $ 2 5 0 , 0 0 0 $ 2 5 0 , 0 0 0 $ 1 0 0 , 0 0 0 $ 1 5 0 , 0 0 0 $ 2 0 0 , 0 0 0 $ 1 0 0 , 0 0 0 $ 1 5 0 , 0 0 0 $ 1 5 0 , 0 0 0 $ 2 2 5 , 0 0 0 ( t o ) / f r o m a b o v e Su b t o t a l - T r a n s f e r s $ 6 5 0 , 0 0 0 $ 7 5 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 1 0 0 , 0 0 0 $ 1 , 1 5 0 , 0 0 0 $ 1 , 2 0 0 , 0 0 0 $ 1 , 1 0 0 , 0 0 0 $ 1 , 1 5 0 , 0 0 0 $ 1 , 1 5 0 , 0 0 0 $ 1 , 2 2 5 , 0 0 0 Su b t o t a l - F u n d B a l a n c e $ 8 4 9 , 8 1 0 $ 1 , 0 9 6 , 8 3 4 $ 1 , 3 2 3 , 8 6 0 $ 1 , 3 7 1 , 7 5 7 $ 1 , 4 4 9 , 4 6 8 $ 1 , 5 5 6 , 0 0 5 $ 1 , 5 4 1 , 1 5 2 $ 1 , 5 5 4 , 1 2 4 $ 1 , 5 4 4 , 1 1 5 $ 1 , 5 8 5 , 6 8 5 Es t i m a t e d I n t e r e s t E a r n i n g s $7 , 0 2 4 $ 7 , 3 2 6 $ 9 , 1 0 5 $ 1 0 , 1 4 3 $ 1 0 , 6 1 8 $ 1 1 , 3 1 0 $ 1 1 , 6 5 7 $ 1 1 , 6 5 1 $ 1 1 , 6 6 2 $ 1 1 , 7 8 0 En d i n g B a l a n c e 1, 0 2 3 , 2 0 4 $8 5 6 , 8 3 4 $1 , 1 0 4 , 1 6 0 $1 , 3 3 2 , 9 6 5 $1 , 3 8 1 , 9 0 0 $1 , 4 6 0 , 0 8 5 $1 , 5 6 7 , 3 1 5 $1 , 5 5 2 , 8 0 9 $1 , 5 6 5 , 7 7 5 $1 , 5 5 5 , 7 7 7 $1,597,46 5 Ta r g e t B a l a n c e $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 $ 1 , 5 0 0 , 0 0 0 A verage Annual CIP (per 20-Y R Re c y c l e d W a t e r I n f r a s t r u c t u r e R e p l a c e m e n t R e s e r v e Re v e n u e I n c r e a s e An n u a l i n c r e a s e s 0.0 % - 5 0 . 0 % 0 . 0 % 0 . 0 % 0 . 0 % 0 . 0 % 0 . 0 % 0 . 0 % 0 . 0 % 0 . 0 % From Table 3B Cu m u l a t i v e i n c r e a s e Be g i n n i n g B a l a n c e - 2 5 8 , 0 9 4 2 4 1 , 6 5 6 2 1 7 , 4 0 2 1 8 7 , 9 0 2 1 5 3 , 0 2 5 1 1 2 , 6 3 2 6 6 , 5 8 6 1 4 , 7 4 4 ( 4 2 , 9 3 2 ) Su r p l u s / ( D e f i c i t ) $ 2 5 7 , 1 2 9 ($ 1 8 , 3 0 5 ) ( $ 2 5 , 9 6 9 ) ( $ 3 1 , 0 1 3 ) ( $ 3 6 , 1 5 2 ) ( $ 4 1 , 3 8 5 ) ( $ 4 6 , 7 1 6 ) ( $ 5 2 , 1 4 6 ) ( $ 5 7 , 6 7 6 ) ( $ 6 3 , 3 1 0 ) From Table 3B Re i m b u r s e m e n t t o W a t e r F u n d Su b t o t a l - F u n d E x p e n d i t u r e s $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Su b t o t a l - F u n d B a l a n c e 2 5 7 , 1 2 9 2 3 9 , 7 8 9 2 1 5 , 6 8 7 1 8 6 , 3 8 8 1 5 1 , 7 5 1 1 1 1 , 6 4 0 6 5 , 9 1 6 1 4 , 4 4 0 ( 4 2 , 9 3 2 ) ( 1 0 6 , 2 4 2 ) Es t i m a t e d I n t e r e s t E a r n i n g s $9 6 4 $ 1 , 8 6 7 $ 1 , 7 1 5 $ 1 , 5 1 4 $ 1 , 2 7 4 $ 9 9 2 $ 6 7 0 $ 3 0 4 $ 0 $ 0 En d i n g B a l a n c e - $2 5 8 , 0 9 4 $ 2 4 1 , 6 5 6 $ 2 1 7 , 4 0 2 $ 1 8 7 , 9 0 2 $ 1 5 3 , 0 2 5 $ 1 1 2 , 6 3 2 $ 6 6 , 5 8 6 $ 1 4 , 7 4 4 ($ 4 2 , 9 3 2 ) ( $ 1 0 6 , 2 4 2 ) Pr o j e c t e d HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 8 o f 1 4 Newport Beach Sewer 10.28.2014 4. Reserves 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 AB C D E F G H I J K L M Cit y o f N e w p o r t B e a c h Wa t e r R a t e S t u d y Ta b l e 5 . C I P Pr o j e c t # P r o j e c t N a m e F Y 2 0 1 4 - 1 5 F Y 2 0 1 5 - 1 6 F Y 2 0 1 6 - 1 7 F Y 2 0 1 7 - 1 8 F Y 2 0 1 8 - 1 9 F Y 2 0 1 9 - 2 0 F Y 2 0 2 0 - 2 1 F Y 2 0 2 1 - 2 2 F Y 2 0 2 2 - 2 3 F Y 2 0 2 3 - 2 4 T o t a l Cost C2 0 0 2 0 4 9 G r a d e A d j u s t m e n t s : S e w e r M a n h o l e C o v e r s $1 0 0 , 0 0 0 100,000 $ C7 0 0 2 0 0 5 S a i n t J a m e s R d . S e w e r R e l o c a t i o n $2 2 3 , 3 9 4 223,394 $ C6 0 0 2 0 1 6 S C A D A S y s t e m U p g r a d e $1 0 0 , 0 0 0 100,000 $ C7 0 0 1 0 0 3 W W M a s t e r P l a n I m p r o v e m e n t s $4 0 0 , 0 0 0 400,000 $ Ad d i t i o n a l C a p i t a l F u n d i n g $0 $ 5 0 0 , 0 0 0 $ 7 5 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 8,250,000 $ To t a l P r o j e c t s $8 2 3 , 3 9 4 $ 5 0 0 , 0 0 0 $ 7 5 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 9 , 0 7 3 , 3 9 4 To t a l O p e r a t i n g $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 - $ To t a l R e p l a c e m e n t $ 8 2 3 , 3 9 4 $ 5 0 0 , 0 0 0 $ 7 5 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 9 , 0 7 3 , 3 9 4 $ To t a l U n f u n d e d $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 - $ To t a l A n n u a l P r o j e c t C o s t $ 8 2 3 , 3 9 4 $ 5 0 0 , 0 0 0 $ 7 5 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 1 , 0 0 0 , 0 0 0 $ 9 , 0 7 3 , 3 94 Co n s t r u c t i o n C o s t I n f l a t i o n 0 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % 2 . 0 % In f l a t e d O p e r a t i n g T o t a l $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 - $ In f l a t e d R e p l a c e m e n t T o t a l $8 2 3 , 3 9 4 $ 5 1 0 , 0 0 0 $ 7 8 0 , 3 0 0 $ 1 , 0 6 1 , 2 0 8 $ 1 , 0 8 2 , 4 3 2 $ 1 , 1 0 4 , 0 8 1 $ 1 , 1 2 6 , 1 6 2 $ 1 , 1 4 8 , 6 8 6 $ 1 , 1 7 1 , 6 5 9 $ 1 , 1 9 5 , 0 9 3 1 0 , 0 0 3 , 0 1 5 $ In f l a t e d U n f u n d e d T o t a l $0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 - $ So u r c e : C i t y o f N e w p o r t B e a c h W W C I P 1 3 - 1 4 HF & H C o n s u l t a n t s , L L C 11 / 1 7 / 2 0 1 4 7 : 4 4 A M Pa g e 9 o f 1 4 Newport Beach Sewer 10.28.2014 5. CIP 12 3 4 5 6 7 89 10 11 1213 14 15 16 1718 19 20 2122 23 24 2526 27 28 2930 31 32 3334 35 36 3738 39 40 41 4243 44 45 4647 48 49 5051 52 53 5455 56 57 5859 60 61 6263 64 ABCDEFGH City of Newport BeachSewer Rate Study Table 7A. Rate Revenue - Sewer Monthly Sewer Use Charge (Customers with Water and Sewer Service) - Per Meter FY11-12 FY11-12 FY11-12 FY11-12 FY11-12 FY11-12 Customer Class Meter Count Charge/meter Annual Revenue Meter Count WW Surchg Annual Revenue 5/8" 15,354 4.50$ 829,116$ 3/4"3 4.50$ 162$ 1" 6,276 4.50$ 338,904$ 1.5" 364 4.50$ 19,656$ 2" 886 4.50$ 47,844$ 478 10.00$ 57,360$ 2.5" 1 4.50$ 54$ 0 10.00$ -$ 3" 34 4.50$ 1,836$ 35 10.00$ 4,200$ 4" 119 4.50$ 6,426$ 90 10.00$ 10,800$ 6" 54 4.50$ 2,916$ 47 10.00$ 5,640$ 8" 11 4.50$ 594$ 6 10.00$ 720$ 10" 2 4.50$ 108$ 0 10.00$ -$ 23,104 1,247,616$ 656 78,720$ Source: SWR_RCY_study_meter count - Service 980 Meters Only - Active Accounts Monthly Sewer Use Charge (Customers with Sewer Service only) FY11-12 FY11-12 FY11-12 Customer Class No Of Acct.Charge/acct Annual Revenue SWR 485 6.25$ 36,375$ Source: SWR_RCY_study_meter count - SWR Accounts Only Monthly Supplemental Sewer Use Charge (for each additional DU served by same connection) FY11-12 FY11-12 FY11-12 FY11-12 Customer Class NO of DUs Charge/DU Annual Revenue Annual Revenue MULTI FAMILY RES 8477 2.00$ 203,448$ 1,327$ COMMERICAL 759 2.00$ 18,216$ 48,746$ CITY METER 42 2.00$ 1,008$ 48,746$ CONSOLIDATED 949 2.00$ 22,776$ 816$ SINGLE FAMILY RES 81 2.00$ 1,944$ 48$ SEWER ONLY 652 2.00$ 15,648$ 15,768$ 10960 263,040$ 115,452$ Source: FY 11-12 Customer Billing Analysis Service 901, 903 - Sewer Svc Multi/Bi-monthly, Sewer Svc Multi/Monthly and 904,910 SWR SRV HOSP-HOT/Bi-MO and Monthly Sewer Consumption Charge (per ccf) FY11-12 FY11-12 FY11-12 Customer Class Consumption Charge/CCF Annual Revenue SINGLE FAMILY RES 2,775,916 0.35$ 971,571$ MULTI FAMILY RES 856,276 0.35$ 299,697$ CITY METER 1,464 0.35$ 512$ COMMERICAL 940,483 0.35$ 329,169$ POOL 8,898 0.35$ 3,114$ CONSOLIDATED 160,620 0.35$ 56,217$ BOAT DOCK 512 0.35$ 179$ SPRINKLER 2,548 0.35$ 892$ FIRE 6 0.35$ 2$ PUMP STATION 9 0.35$ 3$ 4,746,732 1,661,356$ Source: FY 11-12 Customer Billing Analysis Service 892 - HCF Sewer Use Total Calculated Revenue (FY2011-12) 3,402,559$ To Table 3A 12.27$ Total from Customer Billing Data 3,321,344$ Difference 81,215$ 2% HF&H Consultants, LLC 11/17/2014 7:44 AM Page 10 of 14 Newport Beach Sewer 10.28.2014 7A. Rate Revenue - Sewer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 AB C D E F G H I J K L M N O Cit y o f N e w p o r t B e a c h Se w e r R a t e S t u d y Ta b l e 7 B . R a t e R e v e n u e - R e c y c l e d W a t e r Br e a k d o w n o f R e c y c l e d W a t e r C o s t s FY 1 4 - 1 5 Fix e d C o s t s ( b o r n e r e g a r d l e s s o f f l o w ) $4 3 , 7 3 2 Fr o m T a b l e 2 B Va r i a b l e C o s t s ( r e l a t e d t o f l o w ) 17 3 , 4 1 7 Fr o m T a b l e 2 B Pu m p S t a t i o n C o s t s 62 , 2 1 8 Fr o m T a b l e 2 B To t a l - R e c y c l e d W a t e r C o s t s $ 2 7 9 , 3 6 6 To t a l M e t e r e d F l o w 20 2 , 7 9 3 Fr o m B e l o w To t a l P u m p S t a t i o n F l o w 17 2 , 4 2 6 Fr o m B e l o w Ch a r g e p e r H C F - A l l C u s t o m e r s $0 . 8 6 Ch a r g e p e r H C F - P u m p S t a t i o n $0 . 3 6 Mo . S e r v i c e C h a r g e To t a l A c t i v e Ac c o u n t s (e x c l d C i t y ) Mo n t h l y Se r v i c e Ch a r g e An n u a l Re v e n u e To t a l Ac t i v e Ac c o u n t s EM U Mu l t i p l i e r To t a l EM U s Mo n t h l y Se r v i c e Ch a r g e An n u a l Re v e n u e Water RatesWater Multiplier 5/ 8 " o r 3 / 4 " 0 1 3 . 8 2 $ - $ 0 1. 0 0 0 $ 1 8 . 9 1 $ 0 1 7 . 2 7 $ 1.00 1" 0 2 3 . 0 3 $ - $ 0 1. 6 7 0 $ 3 1 . 5 3 $ 0 2 8 . 7 9 $ 1.67 1 1 / 2 " 0 4 6 . 0 6 $ - $ 0 3. 3 3 0 $ 6 3 . 0 5 $ 0 5 7 . 5 8 $ 3.33 2" 1 7 3 . 7 0 $ 8 8 4 $ 8 5. 3 3 42 . 6 7 3 $ 1 0 0 . 8 8 $ 9 , 6 8 4 9 2 . 1 2 $ 5.33 3" 1 1 3 8 . 1 8 $ 1 , 6 5 8 $ 3 10 . 0 0 30 . 0 0 5 $ 1 8 9 . 1 5 $ 6 , 8 1 0 1 7 2 . 7 3 $ 10.00 4" 0 2 3 0 . 3 0 $ - $ 0 16 . 6 7 0 $ 3 1 5 . 2 5 $ 0 2 8 7 . 8 8 $ 16.67 6" 2 4 6 0 . 6 1 $ 1 1 , 0 5 5 $ 2 33 . 3 4 66 . 6 7 7 $ 6 3 0 . 5 0 $ 1 5 , 1 3 2 5 7 5 . 7 6 $ 33.34 8" 1 7 3 6 . 9 8 $ 8 , 8 4 4 $ 1 53 . 3 4 53 $ 1 , 0 0 8 . 8 1 $ 1 2 , 1 0 6 9 2 1 . 2 2 $ 53.34 5 2 2 , 4 4 1 $ 1 4 1 9 3 $ 4 3 , 7 3 2 Ne w p o r t B e a c h C o m m o d i t y C h a r g e ( p e r H C F ) 2 0 2 , 7 9 3 2 . 4 6 $ 4 9 9 , 6 8 2 $ $ 0 . 8 6 $ 1 7 3 , 4 1 7 Pu m p S t a t i o n C h a r g e ( p e r H C F ) $0 . 3 6 $ 6 2 , 2 1 8 To t a l R e c y c l e d W a t e r R e v e n u e 5 2 2 , 1 2 3 $ $ 2 7 9 , 3 6 6 To T a b l e 3 B To t a l C C U s a g e T o t a l Pe r G A P W o r k b o o k s - M o n t h l y M e t e r R e a d s F Y 1 2 - 1 3 F Y 1 2 - 1 3 F Y 1 1 - 1 2 Ju l y 3 1 , 8 2 8 2 7 , 6 0 5 3 0 , 2 8 5 Au g u s t 3 1 , 0 5 8 2 6 , 3 2 6 3 1 , 3 1 1 Se p t e m b e r 1 3 , 6 2 0 1 0 , 9 6 3 1 1 , 1 3 2 Oc t o b e r 1 1 , 9 6 2 9 , 7 7 8 8 , 5 0 2 No v e m b e r 6 , 8 8 1 5 , 5 4 1 3 , 0 8 2 De c e m b e r 6 7 5 5 7 9 Ja n u a r y 4 , 0 3 2 3 , 1 8 8 6 , 1 5 6 Fe b r u a r y 6 , 3 6 9 5 , 2 8 2 7 , 1 4 0 Ma r c h 1 2 , 4 5 8 1 0 , 7 9 1 9 , 4 8 1 Ap r i l 2 6 , 4 8 8 2 2 , 8 4 4 1 2 , 5 6 2 Ma y 2 9 , 4 8 8 2 5 , 7 3 3 2 9 , 1 7 5 Ju n e 2 7 , 9 3 4 2 3 , 7 9 6 2 8 , 1 8 0 20 2 , 7 9 3 1 7 2 , 4 2 6 1 7 7 , 0 0 6 85 % T o T a b l e 2 B Cu r r e n t R e v i s e d 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 AB C D E F G H I J K L M N O OC W D c o s t o f r e c y c l e d : 1. 8 8 % 5 - Y R A v e r a g e ; T o t a b l e 1 B FY 1 4 - 1 5 ( e s t i m a t e ) 3 7 2 . 5 0 $ / A F 0 . 8 6 $ / H C F 3 . 4 7 % FY 1 3 - 1 4 3 6 0 . 0 0 $ / A F 0 . 8 3 $ / H C F 1 . 5 8 % FY 1 2 - 1 3 3 5 4 . 4 0 $ / A F 0 . 8 1 $ / H C F 5 . 1 6 % FY 1 1 - 1 2 3 3 7 . 0 0 $ / A F 0 . 7 7 $ / H C F 2 . 1 2 % FY 1 0 - 1 1 3 3 0 . 0 0 $ / A F 0 . 7 6 $ / H C F - 2 . 9 4 % FY 0 9 - 1 0 3 4 0 . 0 0 $ / A F 0 . 7 8 $ / H C F Cu s t o m e r Ju l y 2 0 1 2 A u g 2 0 1 2 S e p t 2 0 1 2 O c t 2 0 1 2 N o v 2 0 1 2 D ec 2 0 1 2 Ja n 2 0 1 3 F e b 2 0 1 3 M a r 2 0 1 3 A p r 2 0 1 3 M a y 2 0 1 3 J u n e 2 0 1 3 A v g / M o BI G C A N Y O N C O U N T R Y C L U B 40 3 6 3 8 7 8 2 6 3 7 2 9 9 2 1 0 2 3 1 0 4 4 1 6 8 3 3 1 6 8 5 3 3 9 3 5 1 8 6 3 3 6 7 2 4 6 2 . 5 (6 - I N C H M E T E R ) BI G C A N Y O N C O U N T R Y C L U B 91 6 9 9 0 4 7 6 0 6 6 6 7 8 6 1 9 5 8 1 8 5 8 1 9 1 8 5 1 3 7 5 1 7 7 9 8 7 9 9 3 7 6 5 3 5 2 5 6 . 3 3 3 (8 - I N C H M E T E R ) NE W P O R T B E A C H C O U N T R Y C L U B 14 4 0 0 1 3 4 0 1 2 2 6 0 0 2 5 6 0 2 9 0 1 9 5 3 2 5 9 8 5 3 5 5 1 1 6 5 3 1 2 5 5 4 1 2 7 7 6 6 6 5 0 (6 - I N C H M E T E R ) EA S T B L U F F S C H O O L 55 7 1 3 0 0 - 2 0 2 2 3 4 1 1 6 0 3 3 4 5 1 6 4 6 3 1 5 7 0 4 0 3 3 2 0 . 9 1 6 7 (3 - I N C H M E T E R ) OU R L A D Y Q U E E N O F A N G E L S 23 5 5 5 2 2 0 2 2 8 9 8 0 1 3 7 9 5 8 1 2 1 7 2 5 9 3 2 4 1 5 1 . 1 6 6 7 (2 - I N C H M E T E R ) HF&H Consultants, LLC 201 N. Civic Drive, Suite 230 Walnut Creek, CA 94596 CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5B November 17, 2014 TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE FROM: Finance Department Dan Matusiewicz, Finance Director (949) 644-3123, DanM@newportbeachca.gov SUBJECT: Preliminary FY 2013-14 Year-End Update EXECUTIVE SUMMARY: The City of Newport Beach Finance Department has prepared this preliminary year-end update for the Finance Committee to review the status of revenues, expenditures, and fund balance for the City’s General Fund, the Facilities Financial Planning Reserve Fund, and other available and discretionary reserves. The positive underlying economic factors in Newport Beach in recent years has allowed for the accumulation of General Fund reserves at the end of FY 2013-14 in the amount of $85.9 million, a gross fund balance increase of $4.8 million from the prior year. After eliminating capital project carryovers, deferrals, encumbrances, receipt and or use of restricted revenues sources, the General Fund annual operating surplus amounted to $10.3 million. At the end of FY 2013-14, the sum total of all available and discretionary reserves total $113.6 million. DISCUSSION: Revenues General Fund revenues overall finished the year $3.5 million or 2.03% higher than the prior year and approximately $4 million or 2.3% higher than the amended budget (see Comparative Income Statement below). The year over year increase appears relatively low due to significant one-time receipts in the prior year. Much of FY 2013-14’s increase is the result of higher than expected revenue from the General Fund’s top three revenue sources (Property Tax, Sales Tax, and Transient Occupancy Taxes). Property tax collections finished the fiscal year approximately $1.7 million or 2.1% lower than the previous fiscal year. This decrease is due to a one-time $5.4 million payment received in fiscal year 2012-13, resulting from the State’s actions to dissolve redevelopment agencies. Excluding the one-time $5.4 million payment, property tax 1 INTENTIONALLY BLANK PAGE 2 Preliminary FY 2013-14 Year-End Update November 17, 2014 Page 2 collections finished the year $3.7 million higher than the previous fiscal year. Property Tax receipts were $451 thousand or 0.6% higher than budgeted in FY 2013-14. Sales Tax revenue continues to trend upwards, finishing $3.0 million or 10.9% higher than the prior fiscal year and $676 thousand, or 2.2% higher than budgeted. This is the largest year-to-year increase the City has ever realized, surpassing the pre-recession level of fiscal year 2006-07 by approximately $990 thousand. Transient Occupancy Tax (TOT) collections increased $1.7 million or 10.2% over the prior year and $885 thousand or 5.4% higher than the amended budget. This is the result of increases in both residential and hotel transient tax collections due to higher travel and tourism. The five hotels with the highest year-over-year increases (Pelican Hill, Marriot Newport, Island, Hyatt, and Fairmont) accounted for over 67% of the hotel transient tax collection. As a further sign of an improving economy, all other General Fund revenue increased $472 thousand or 1% over the prior year and $1.2 million or 4.4% higher than the budget due mainly to higher activity levels in the following fee-for-service program areas: paramedic service, Jr. Lifeguard, building permits and plan checks, surfing classes, facility rentals, special event permits, and several other smaller increases from miscellaneous revenue sources. A B C D=C-A E=D/A F=C-B F/B 2013 Actual 2014 Amended Budget 2014 Actual (Preliminary and Unaudited) Year Over Year $ Change Year Over Year % Change 2014 Actual $ Variance from Budget 2014 Actual % Variance from Budget General Fund Revenues: Property Taxes 81,603,194$ 79,438,816$ 79,889,347$ (1,713,847)$ -2.10%450,531$ 0.55% Sales Taxes 20,764,204 22,267,601 23,142,065 2,377,861 11.45%874,464 4.21% Sales Taxes In Lieu 7,078,517 7,926,293 7,727,876 649,359 9.17%(198,417) -2.80% TOT Taxes 16,500,285 17,291,420 18,176,369 1,676,084 10.16%884,949 5.36% All other Revenues 44,461,987 42,972,231 44,933,743 471,756 1.06%1,961,512 4.41% Total Revenues 170,408,187 169,896,361 173,869,399 3,461,212 2.03%3,973,038 2.33% General Fund Expenditures: General Government 13,276,718 15,857,841 14,074,325 797,607 6.01%(1,783,516) -13.43% Public Safety 72,714,586 75,331,213 74,071,875 1,357,289 1.87%(1,259,338) -1.73% Public Works 26,977,969 29,575,003 28,605,120 1,627,151 6.03%(969,883) -3.60% Community Development 8,878,665 10,524,675 9,640,698 762,033 8.58%(883,977) -9.96% Community Services 16,570,787 18,056,137 16,841,713 270,926 1.63%(1,214,424) -7.33% Capital outlay 5,235,786 8,296,548 5,587,013 351,227 6.71%(2,709,535) -51.75% Debt Service 180,426 - 175,612 (4,814) -2.67%175,612 97.33% Total Expenditures 143,834,937 157,641,418 148,996,356 5,161,419 3.59%(8,645,062) -6.01% Income before transfers & other sources 26,573,250 12,254,943 24,873,043 (1,700,207) -6.40% Other Financing Sources (Uses) Transfers in 89,297 234,000 563,552 474,255 531.10% Transfers out (25,324,747) 16,528,645 (20,668,190) 4,656,557 -18.39% Total other financing sources (uses)(25,235,450) 16,762,645 (20,104,638) 5,130,812 -20.33% Net Change in Fund Balance 1,337,800 4,768,405 3,430,605 256.44% Fund Balance, beginning 79,792,358 81,130,158 1,337,800 1.68% Fund Balance, ending 81,130,158$ 85,898,563$ 4,768,405$ 5.88% General Fund Comparative Income Statement 3 Preliminary FY 2013-14 Year-End Update November 17, 2014 Page 3 Expenditures General Fund expenditures overall finished the year $5.2 million or 3.6% higher than the prior year and approximately $8.6 million or 6% lower than the amended budget (see Comparative Income Statement above). The savings were the result of salary and benefit savings in the amount of $2.2 million due to vacancies; $653 thousand in operating and maintenance savings; and other savings resulting from unexpended capital outlay budgets. A substantial portion of the unexpended budget ($5.6 million) was attributable to encumbered balances for capital improvement projects that were not completed at year end. This amount will be reserved for expenditures in FY 2014-15 and is therefore not counted in the annual operating surplus. Net income (revenues net of expenditures) prior to transfers and other sources of revenue amounted to $24.9 million. Of this net income amount, $20.7 million was transferred out to other funds. Transfers out include $12 million for routine purposes including the annual funding of the Facilities Financial Planning Reserve (FFPR) ($8 million) and the annual subsidy of the Tidelands Fund ($4 million). A total of $4.1 million was transferred out to other funds in furtherance of Council priorities including $2.5 for the Facilities Maintenance Reserve and additional FFPR funding, and $1.6 million for information technology and emergency communications. The remaining transfers out were made to projects and program activity in the City’s General Liability Insurance and Retiree Medical Funds. Did government grow in FY 2013-14? Not in terms of personnel. Expenditures in FY 2013-14 increased from the prior year as the result of a focus on programs and activities that support a high quality physical environment, community safety and investments in information technology. With the improving economy and the associated uptick in revenues, the City continues its ongoing commitment to improve the quality of streets, sidewalks, alleys, and other infrastructure through the increase in Public Works expenditures and capital outlay. Increased expenditures from the prior year were also the result of negotiated bargaining unit increases in salary and benefits. General Fund Reserves This section provides balances of the City’s General Fund Reserves at the end of FY 2013-14. This information is useful in assessing the City’s net resources available for spending at the end of the fiscal year. Contributions to the reserve are established by prudent fiscal policies and as part of the annual budget process, or as conditions change. The positive underlying economic factors in Newport Beach in recent years has allowed for the accumulation of General Fund reserves at the end of FY 2013-14 in the amount of $85.9 million, an increase of $4.8 million from the prior year. 4 Preliminary FY 2013-14 Year-End Update November 17, 2014 Page 4 The non-spendable and restricted categories of fund balance are for resources that are not in spendable form or are legally or contractually required to remain intact. The committed and assigned portion of fund balance includes amounts that are constrained by the City’s intent to be used for specific purposes but are still within the City's full discretion. The unassigned category is the residual portion of available fund balance that is not otherwise restricted, committed or assigned. There are a myriad of “moving parts” that impact and change the level of the fund balance from one year to the next. Factors that contribute to the increase in fund balance include the net income (higher revenue/lower expenditures than budgeted) described in the previous section, the amount needed to be set aside for capital projects that did not get completed in the prior (reserve for reappropriations), the reserve levels for restricted or non-spendable funds that result from various activities that can occur in any given year such as the $6.1 million loan receivable created in FY 2013-14 from the Tidelands Fund. Factors that contribute to decreases in fund balance include transfers out to other funds, such as the FFPR and accelerating the payment to the City’s pension unfunded liability – examples of recent transactions resulting from Council priorities. The confluence of the various financial transactions resulting from both policy decisions and the unique circumstances that arise in any given year determine the General Fund balance. Ultimately, the increase in our unassigned fund balance is the best measure of annual operating surplus which increased $10.3 million during the year. 5 Preliminary FY 2013-14 Year-End Update November 17, 2014 Page 5 Facilities Financial Planning Reserve The City continued its financial commitment to the Facilities Financial Planning Reserve (FFPR) in FY 2013-14 by allocating significant resources for the following projects that will continue or begin construction/renovation in the coming years: Lido Fire Station, CdM Library and Fire Station, West Newport Community Center, Marina Park, Sunset Ridge Park, and Bonita Canyon Artificial Turf. Council Policy F-23, Facilities Financial Planning Program (FFPP), approved in August 2009, established a long-term facilities financing plan for the replacement of all General Fund-supported facilities. The City’s FFPR was established to fund the replacement of critical City facilities such as, but not limited to, the Civic Center and Police Department buildings, fire stations, library branches, parks, community centers, and other facility improvement projects. The FFPP provides a consistent, level funding plan to minimize negative impacts on the General Fund in any given year. Preliminary & Unaudited 2013 2014 Change Non-spendable 9,919,486$ 16,300,698$ 6,381,212$ Restricted 3,170,059 3,939,751 769,692 Committed Parking Reserves 353,580 517,592 164,012 Cable Franchise 309,040 476,616 167,576 Bike Safety 308,666 167,857 (140,809) Park In Lieu 982,071 - (982,071) Encumbrances 3,093,312 5,594,060 2,500,748 Capital Reappropriations 1,843,417 6,026,110 4,182,693 Subtotal Committed 6,890,086 12,782,235 5,892,149 Assigned PERS Rate Reserve 5,000,000 - (5,000,000) Misc.(Recreation/Sr Center/Paramedic/START)1,430,377 1,272,387 (157,990) Subtotal Assigned 6,430,377 1,272,387 (5,157,990) Unassigned Contingency Reserve 22,134,775 41,321,103 19,186,328 Unassigned (Appropriations Reserve)32,585,375 - (32,585,375) Fiscal Year 14 Surplus - 10,282,390 10,282,390 Subtotal Unassigned 54,720,150 51,603,493 (3,116,657) General Fund Balance 81,130,158$ 85,898,564$ 4,768,406$ General Fund Reserves 6 Preliminary FY 2013-14 Year-End Update November 17, 2014 Page 6 Overall, the FFPR balance is decreasing $15.1 million from the prior fiscal year. This change is the net result of various increases and decreases to both revenues and expenditures. Revenues are decreasing due largely to the elimination of a large one- time transfer in from the General Fund and a one-time Park in Lieu Fee contribution in FY 2012-13. Subsequent to the close of FY 2013-14 the FFP Reserve fund receipted $32.2 million of developer contributions through the first quarter of 2014-15. Summary of Available and Discretionary Reserves In summary, the City’s ability to set aside resources for future projects, acquisitions, and other allowable purposes is the result of maintaining a focus on the City Council’s priorities, including responsible, yet difficult, spending decisions, adherence to a 15 – Point Fiscal Sustainability Plan, strong revenue monitoring, analysis and reporting. The City’s reserve funds provide a mechanism for saving money to finance all or part of future infrastructure, equipment, and other requirements and provide a degree of financial stability. The strategic reserves also normalize departmental budgeting for programs that have life-cycles greater than one year, act as a strategic savings plan for long-term assets and liabilities, and enable appropriate distribution of city-wide costs to individual departments. During both strong and uncertain economic times, reserve funds provide the City with a welcomed budgetary option that can help mitigate the need to cut services. At the end of FY 2013-14, the sum total of all available and discretionary reserves total $113.6 million. Audited Preliminary & Unaudited 2013 2014 Change Beginning Balance July 1,33,149,725$ 26,752,367$ (6,397,358)$ Revenues Transfer In 15,219,646 9,116,831 *(6,102,815) Interest Income 50,608 201,557 150,949 Park in Lieu Fees 2,817,395 860,084 (1,957,311) Developer Contributions 35,000 - (35,000) Total Revenues 18,122,649 10,178,472 (7,944,177) Expenditures 2010 Civic Center COPs Debt Service Contribution 6,757,393 9,398,769 2,641,376 Civic Center Construction 12,000,000 4,000,000 (8,000,000) Sunset Ridge - 9,000,000 9,000,000 Other Major Facilities 5,762,614 2,926,000 (2,836,614) Total Expenditures 24,520,007 25,324,769 804,762 Ending Balance June 30,26,752,367$ 11,606,070$ (15,146,297)$ * Includes required annual General Fund transfer of $8,000,000, transfers of $982,071 of Park-in lieu fees and $134,760 of of Hoag restricted funds from the General Fund. 7 Preliminary FY 2013-14 Year-End Update November 17, 2014 Page 7 Prepared by: Submitted by: /s/ Steve Montano _____________________________ /s/ Dan Matusiewicz _____________________________ Steve Montano Deputy Finance Director Dan Matusiewicz Finance Director Available and Discretionary Reserve Summary1 Preliminary & Unaudited 2014 Miscellaneous Council Commitments 14,054,622$ Strategic Savings Facilities Financing Planning Reserve 9,763,915 Sunset Ridge Park 3,987,969 Marina Park Fund 2 (6,239,052) Facilities Maintenance 2,242,177 Equipment Replacement 19,573,416 Information Technology 6,615,884 Risk Management 3 11,961,567 Contingency Reserves 41,321,103 Unassigned Reserves 10,282,391 Total Reserves 113,563,992$ 1 Excludes non-spendable and restricted reserve funds. 3 Includes General Liability, Retiree Insurance, Compensated Absences, and Workers Comp reserves. 2 Marina Park expenditures are tracked in this fund and reflected with a negative balance. When project is completed, a positive fund balance will be rendered after funds are transferred from the FFPR. 8 CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5C November 17, 2014 TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE FROM: Finance Department Dan Matusiewicz, Finance Director (949) 644-3123, DanM@NewportBeachCA.gov SUBJECT: Facilities Financial Planning (FFP) DISCUSSION: City Council Policy F-28, Facilities Financing Plan (FFP), requires that staff prepare an update to the long-term facilities replacement plan annually. Staff has projected the timing, means of financing, and fiscal impacts associated with funding high-priority projects. Staff welcomes input and recommends that the Committee file and receive the report and the attached FFP model. Prepared and submitted by: /s/Dan Matusiewicz Dan Matusiewicz Finance Director Attachment A. FFP Capital Planning Tool 1 of 1 11/14/2014 Start Start Est. Project Date Date Priority Projects Cost (Design)(Construction) 20 Marina Park 39,500,000 2011 2014 24 Sunset Ridge 8,500,000 2014 2014 8 FS 5 - CDM & Library 6,024,250 2015 2015 43 Balboa Fine Arts Center 4,225,000 2015 2015 42 BVAC Master PlanProjects 3,500,000 2015 2015 29 Bonita Creek - Artificial Turf 2,000,000 2014 2015 39 Utilities/Corporate Yard Merge 10,000,000 2015 2016 5 FS 2 - Lido 6,750,000 2015 2016 19 Marina Park Girl Scout House( Las Arenas Park 2,200,000 2011 2016 26 West Newport Comm Ctr (incl pool)16,000,000 2015 2018 27 Pedestrian Bridge at Superior/PCH 10,000,000 2015 2018 1 2 31 Lower Castaways 3,500,000 2015 2019 Total 112,199,250 2015 2016 Marina Park Utilities/Corporate Yard Merge Sunset Ridge FS 2 - Lido FS 5 - CDM & Library Marina Park Girl Scout House( Las Arenas Park) Balboa Fine Arts Center FS 6 - Mariners (apparatus bay only) BVAC Master PlanProjects Bonita Creek - Artificial Turf 2018 2019 West Newport Comm Ctr (incl pool)Lower Castaways Pedestrian Bridge at Superior/PCH 3 4 Key Metric Target Max Debt Svc as % of Revenues NA < 8.0% Minimum FFP Reserve Balance (000's)8,194$ NA Key Statistics Min Max Avg GF Contribution to FFP (000's)8,000 12,317 10,343 Debt Service (000's)7,443 8,194 7,706 GF Contributions to FFP as % Rev 4.59%5.0%5.0% Debt Svc as % of Revenues 3.02%4.7%3.8% 5 6 FFP Balance (000's)10,024$ 42,586$ 25,868$ Project Balance (000's)0$ 26,231$ 5,243$ Key Statistics Min Max Avg GF Contribution to FFP (000's)8,000 17,838 12,718 Debt Service (000's)- 8,194 6,804 GF Contributions to FFP as % Rev 4.59%5.0%5.0% Debt Svc as % of Revenues 0.00%4.7%2.9% FFP Reserve Balance (000's)10,024$ 246,463$ 74,808$ Project Balance (000's)(2,736)$ 26,231$ 2,780$ 7 8 Remaining Debt Capacity (Dbt. Svc < or = 8% of GF Rev):88,430,536$ 30 Year Council Debt Mgmt Policy (F-6) 15 Year Scenario Highlights 0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%10.00% 20 1 5 20 1 7 20 1 9 20 2 1 20 2 3 20 2 5 20 2 7 20 2 9 20 3 1 20 3 3 20 3 5 20 3 7 20 3 9 20 4 1 20 4 3 20 4 5 GF Contribution to FFP as a Percent of GF Revenue GF Contribution % Budget Debt Service - as % of Revenues $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 20 1 5 20 1 7 20 1 9 20 2 1 20 2 3 20 2 5 20 2 7 20 2 9 20 3 1 20 3 3 20 3 5 20 3 7 20 3 9 20 4 1 20 4 3 20 4 5 GF Contribution to FFP Compared to Debt Service GF Contribution to FFP Debt Service - 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 20 1 5 20 1 7 20 1 9 20 2 1 20 2 3 20 2 5 20 2 7 20 2 9 20 3 1 20 3 3 20 3 5 20 3 7 20 3 9 20 4 1 20 4 3 20 4 5 FFP Reserve Balance - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 20 1 5 20 1 7 20 1 9 20 2 1 20 2 3 20 2 5 20 2 7 20 2 9 20 3 1 20 3 3 20 3 5 20 3 7 20 3 9 20 4 1 20 4 3 20 4 5 Project Funding Cash Funded Construction Debt Funded Construction - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 20 1 5 20 1 7 20 1 9 20 2 1 20 2 3 20 2 5 20 2 7 20 2 9 20 3 1 20 3 3 20 3 5 20 3 7 20 3 9 20 4 1 20 4 3 20 4 5 Project Expenditures - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 20 1 5 20 1 7 20 1 9 20 2 1 20 2 3 20 2 5 20 2 7 20 2 9 20 3 1 20 3 3 20 3 5 20 3 7 20 3 9 20 4 1 20 4 3 20 4 5 Debt Service Capacity Max Debt Service - 8% of Revenues Debt Service 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 20 1 5 20 1 7 20 1 9 20 2 1 20 2 3 20 2 5 20 2 7 20 2 9 20 3 1 20 3 3 20 3 5 20 3 7 20 3 9 20 4 1 20 4 3 20 4 5 Debt Service as % of GF Revenues Debt Service - as % of Revenues - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 2015 2016 2017 2018 2019 Annual GF Contributions Periodic GF or One-time Transfers Private Contributions Interest Earnings Cash Contributions Project Total Interest Debt Service Description Year Proceeds COI Issue Rate Term Maturity 2010 Civic Center COPs 2011 123,000,000 1,289,442 124,289,442 4.4% 30 2041 1 of 1 11/14/14 FFP PROJECT PLANNING FY FY FV Net YR Current Repl Est $Current Age:Useful Years to Cost Est.Project Design Start Const Start Cost Est @ Private Proposed ProjNo Function Project Built Sq Ft Sq Ft /Sq Ft 2015 Life Start Date Estimate Year Year 2.5% Growth Contribtions Cost 1 Gen Gov Civic Center 2013 100,000 100,000 675 2 60 58 Jun-13 67,500,000 2070 2073 - - 4 Gen Gov Council Chambers 2013 29,000 29,000 675 2 60 58 Jun-13 19,575,000 2070 2073 - - 41 Gen Gov Civic Center Parking Structure 2013 450 450 16,000 2 60 58 Jun-13 7,200,000 2070 2073 - - 2 Police Police Station at Corporate Yard 1973 48,000 60,000 675 42 50 8 N/A 40,500,000 2021 2023 49,345,317 49,345,317 39 Municipal Operations Utilities/Corporate Yard Merge 138,185 **50 1 May-12 10,000,000 2015 2016 10,250,000 10,250,000 40 Municipal Operations Big Canyon Aux. Yard 2015 9,000 9,000 550 0 50 51 May-12 1,400,000 2062 2065 - - 3 Fire FS 1 - Peninsula & Library 1962 3,423 8,000 675 53 50 5 Mar-14 5,400,000 2017 2020 6,109,604 6,109,604 5 Fire FS 2 - Lido 1952 9,953 10,000 675 63 50 1 Mar-14 6,750,000 2015 2016 6,918,750 6,918,750 6 Fire FS 3 - Santa Barbara 1971 13,605 6,500 675 44 50 10 Mar-14 4,387,500 2022 2025 5,616,371 5,616,371 7 Fire FS 4 - Balboa Island 1994 4,597 4,400 675 21 50 29 Mar-14 2,970,000 2041 2044 6,077,830 6,077,830 8 Fire FS 5 - CDM & Library 1950 2,495 8,000 675 65 50 0 Mar-14 6,024,250 2015 2015 6,024,250 6,024,250 9 Fire FS 6 - Mariners (apparatus bay only)1957 2,926 1,500 675 58 50 1 Mar-14 1,012,500 2016 2016 1,037,813 1,037,813 10 Fire FS 7 - SAH 2007 11,027 6,500 675 8 50 42 Mar-14 4,387,500 2054 2057 12,377,116 12,377,116 11 Fire FS 8 - Npt. Coast 1995 11,027 11,027 675 20 50 30 Mar-14 7,443,225 2042 2045 15,612,667 15,612,667 12 Fire Lifeguard HQ Replacement 6,167 7,725 675 **25 49 Mar-14 5,214,375 2061 2064 17,485,243 17,485,243 13 Fire Newport Jr. Guard Building 0 **50 5 Mar-14 1,200,000 2017 2020 1,357,690 1,357,690 - 15 Library Library-Balboa 1962 5,566 5,000 550 53 50 47 Jan-12 - 2059 2062 - - 16 Library Library-CDM 1958 4,323 4,000 550 57 50 47 Jan-12 - 2059 2062 - - 17 Library Library-Mariners 2006 15,305 15,305 550 9 50 41 Jan-12 6,845,355 2053 2056 18,839,721 18,839,721 18 Library Library-Central 1997 50,930 65,000 550 18 50 37 Jan-12 35,750,000 2049 2052 89,137,216 89,137,216 19 Rec Facility Marina Park Girl Scout House( Las Arenas Park)1956 4,200 4,000 550 59 50 1 Jan-12 2,200,000 2011 2016 2,255,000 2,255,000 - 20 Rec Facility Marina Park 2015 22,000 550 0 50 -1 Jan-12 39,500,000 2011 2014 38,536,585 38,536,585 21 Rec Facility Newport Coast Ctr 2007 16,865 16,865 550 8 50 42 Jan-12 9,275,750 2054 2057 26,166,846 26,166,846 22 Rec Facility Newport Thearter Arts Center 1973 8,042 12,000 550 42 50 15 Jan-12 6,600,000 2027 2030 9,558,768 4,779,384 4,779,384 23 Rec Facility OASIS Sr. Ctr 2010 36,467 43,232 550 5 60 45 Jan-12 23,777,600 2057 2060 72,234,049 72,234,049 24 Rec Facility Sunset Ridge 2014 595,465 NA 1 50 -1 Jan-12 8,500,000 2014 2014 8,292,683 8,292,683 25 Rec Facility Sunset View Park 0 NA **∞4 Mar-14 500,000 2015 2019 551,906 551,906 26 Rec Facility West Newport Comm Ctr (incl pool)2017 11,980 25,000 550 -2 50 3 Jan-12 16,000,000 2015 2018 17,230,250 17,230,250 27 Rec Facility Pedestrian Bridge at Superior/PCH 2017 -2 3 Mar-14 10,000,000 2015 2018 10,768,906 5,000,000 5,768,906 29 Rec Facility Bonita Creek - Artificial Turf 2015 160,000 NA 12 0 15 0 Jan-12 2,000,000 2014 2015 2,000,000 2,000,000 31 Rec Facility Lower Castaways 2019 174,000 NA -4 ∞4 Mar-14 3,500,000 2015 2019 3,863,345 3,863,345 33 Rec Facility Community Youth Center (CYC) - Grant Howald 1988 5,146 5,146 550 27 50 17 Jan-12 2,830,300 2029 2032 4,306,636 4,306,636 34 Rec Facility Caroll Beek Center 1980 1,555 1,555 550 35 50 18 Jan-12 855,250 2030 2033 1,333,898 1,333,898 35 Rec Facility Bonita Creek Community Ctr.1988 2,876 2,876 550 27 50 23 Jan-12 1,581,800 2035 2038 2,791,261 2,791,261 36 Rec Facility Cliff Drive Community Room 1960 750 750 550 55 50 21 Jan-12 412,500 2033 2036 692,828 692,828 37 Rec Facility Girls & Boys Club (East Bluff Park)1965 11,800 11,800 550 50 50 5 Jan-12 6,490,000 2017 2020 7,342,839 7,342,839 - 38 Rec Facility Lawn Bowling Facility (San Joaquin Hills Park)1974 2,750 2,750 550 41 50 24 Mar-14 1,512,500 2036 2039 2,735,698 2,735,698 43 Rec Facility Balboa Fine Arts Center 6,500 650 0 50 0 Oct-14 4,225,000 2015 2015 4,225,000 4,225,000 42 Neighborhood Enhancement BVAC Master PlanProjects 0 3,500,000 2015 2015 3,500,000 3,500,000 381,128,604 468,884,287 448,149,373 1 of 1 1 2 3 4 5 6 7 8 9 10 11 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 AFFORDABILITY ASSUMPTIONs General Fund Revenues 174,337,353 178,695,787 183,163,181 187,742,261 192,435,818 197,246,713 202,177,881 207,232,328 212,413,136 217,723,464 223,166,551 Growth Assumption -0.05%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.50% GF Annual Contribution %4.59%4.75%5.00%5.00%5.00%5.00%5.00%5.00%5.00%5.00%5.00% Debt Service as % of GF Revenues 4.70%4.57%4.36%4.26%4.15%4.04%3.72%3.62%3.53%3.44%3.34% FFP SOURCES Beginning FFP Balance 11,605,870 17,640,475 20,041,660 19,335,926 30,915,612 22,825,851 42,586,164 36,641,274 40,854,750 35,434,576 22,200,112 Sources Annual GF Contributions 8,000,000 8,488,050 9,158,159 9,387,113 9,621,791 9,862,336 10,108,894 10,361,616 10,620,657 10,886,173 11,158,328 Periodic GF or One-time Transfers Private Contributions 34,153,016 16,876,385 10,836,703 9,874,514 669,018 28,428,490 634,378 651,018 666,939 683,846 701,238 Interest Earnings 87,044 220,506 300,625 338,379 618,312 456,517 851,723 732,825 817,095 708,692 444,002 Total Sources:42,240,060 25,584,940 20,295,487 19,600,006 10,909,121 38,747,343 11,594,996 11,745,460 12,104,691 12,278,710 12,303,568 Uses Debt Service (8,194,455) (8,172,755) (7,990,221) (7,990,321) (7,978,881) (7,967,030) (7,519,886) (7,511,985) (7,504,864) (7,493,175) (7,459,589) Other Fiscal Charges (11,000) (11,000) (11,000) (30,000) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000) Less: Cash Proj Funding (28,000,000) (15,000,000) (13,000,000) - (11,000,000) (11,000,000) (10,000,000) - (10,000,000) (18,000,000) (17,000,000) Total Uses:(36,205,455) (23,183,755) (21,001,221) (8,020,321) (18,998,881) (18,987,030) (17,539,886) (7,531,985) (17,524,864) (25,513,175) (24,479,589) Projected FFP Balance 17,640,475 20,041,660 19,335,926 30,915,612 22,825,851 42,586,164 36,641,274 40,854,750 35,434,576 22,200,112 10,024,090 PROJECT SOURCES Beginning Balance 21,091,028 26,231,371 12,095,328 11,152,013 4,043,035 325,110 677,582 7,317,300 5,178,939 10,244,407 1,104,482 CASH FUNDING FROM FFP 28,000,000 15,000,000 13,000,000 - 11,000,000 11,000,000 10,000,000 10,000,000 18,000,000 17,000,000 PRIVATE CONTRIBUTIONS FOR SPECIFIC PROJECTS - - - - - - - - - - - DEBT FUNDING 2010 Civic Center COPs *********** TOTAL DEBT FUNDING - - - - - - - - - - - Interest on Debt Proceeds 3,592 - 700,000 60,000 - - - - - - TOTAL PROJECT RESOURCES 49,094,620 41,231,371 25,095,328 11,852,013 15,103,035 11,325,110 10,677,582 7,317,300 15,178,939 28,244,407 18,104,482 PROJECT USES Future Cost Const Start Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Fire FS 1 - Peninsula & Library 6,109,604 2020 - - - - - (610,960) (3,360,282) (2,138,362) - - - Fire FS 2 - Lido 6,918,750 2016 (250,000) (691,875) (3,805,313) (2,171,563) - - - - - - - Fire FS 3 - Santa Barbara 5,616,371 2025 - - - - - - - - - - (561,637) Fire FS 4 - Balboa Island 6,077,830 2044 - - - - - - - - - - - Fire FS 5 - CDM & Library 6,024,250 2015 (602,425) (3,313,338) (2,108,488) - - - - - - - - Fire FS 6 - Mariners (apparatus bay only)1,037,813 2016 - (570,797) (467,016) - - - - - - - - Fire FS 7 - SAH 12,377,116 2057 - - - - - - - - - - - Fire FS 8 - Npt. Coast 15,612,667 2045 - - - - - - - - - - - Fire Lifeguard HQ Remodel 17,485,243 2064 (260,055) - - - - - - - - - - Fire Newport Jr. Guard Building - 2020 - - - - - - - - - - - Library Library-Mariners 18,839,721 2056 - - - - - - - - - - - Library Library-Central 89,137,216 2052 - - - - - - - - - - - MOD Utilities/Corporate Yard Merge 10,250,000 2016 - (1,025,000) (5,637,500) (3,587,500) - - - - - - - MOD Big Canyon Aux. Yard - 2065 (1,400,000) - - - - - - - - - - Police Police Station @ Current Cite.49,345,317 2023 - - - - - - - - (4,934,532) (27,139,925) (17,270,861) Neighborhoo BVAC Master Plan Projects 3,500,000 2015 (350,000) (1,925,000) (1,225,000) - - - - - - - - Rec Facility Marina Park Girl Scout House( Las Arenas Park - 2016 - - - - - - - - - - - Rec Facility Marina Park 38,536,585 2014 (15,590,000) (16,707,533) - - - - - - - - - Rec Facility Newport Coast Ctr 26,166,846 2057 - - - - - - - - - - - Rec Facility OASIS Sr. Ctr 72,234,049 2060 - - - - - - - - - - - Rec Facility Sunset Ridge 8,292,683 2014 (3,268,629) - - - - - - - - - - Rec Facility Sunset View Park 551,906 2019 - - - - (303,549) (248,358) - - - - - Rec Facility West Newport Comm Ctr (incl pool)17,230,250 2018 (250,000) - - (1,473,025) (9,476,638) (6,030,588) - - - - - Rec Facility Pedestrian Bridge at Superior/PCH 5,768,906 2018 - - - (576,891) (3,172,898) (2,019,117) - - - - - Rec Facility Parking Structure at Superior/PCH - 2019 - - - - - - - - - - - Rec Facility Bonita Creek - Artificial Turf 2,000,000 2015 (200,000) (1,100,000) (700,000) - - - - - - - - Rec Facility 1499 Monrovia Land Purchase 4,308,199 2013 - - - - - - - - - - - Rec Facility Lower Castaways 3,863,345 2019 (300,000) - - - (1,824,840) (1,738,505) - - - - - Rec Facility Eastbluff Park Extension - 2016 - - - - - - - - - - - Rec Facility Girls & Boys Club (East Bluff Park)- 2020 - - - - - - - - - - - Rec Facility Balboa Fine Arts Center 4,225,000 2015 (422,500) (3,802,500) - - - - - - - - - TOTAL PROJECT EXPENDITURES 448,149,373 (22,863,249) (29,136,043) (13,943,316) (7,808,978) (14,777,924) (10,647,528) (3,360,282) (2,138,362) (4,934,532) (27,139,925) (17,832,498) ENDING BALANCE OF PROJECT RESOURCES - 26,231,371 12,095,328 11,152,013 4,043,035 325,110 677,582 7,317,300 5,178,939 10,244,407 1,104,482 271,984 Sources and Uses Proforma 1 of 1 DEBT SERVICE Avg 1 2 3 4 5 6 7 8 9 10 11 Debt 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Project Total Interest Service Debt Service Description Year Proceeds COI Issue Rate Term Maturity (Net) 2010 Civic Center COPs 2011 123,000,000 1,289,442 124,289,442 4.4%30 2041 (7,614,287) (8,194,455) (8,172,755) (7,990,221) (7,990,321) (7,978,881) (7,967,030) (7,519,886) (7,511,985) (7,504,864) (7,493,175) (7,459,589) TOTAL DEBT (7,614,287) (8,194,455) (8,172,755) (7,990,221) (7,990,321) (7,978,881) (7,967,030) (7,519,886) (7,511,985) (7,504,864) (7,493,175) (7,459,589) 1 of 2 DEVELOPMENT AGREEMENTS AND PRIVATE CONTRIBUTIONS General TOTAL Non FFP Public Park Public Arts FFP Traffic Agreement REF Developer Description Trigger Benefit Benefit & Culture BENEFIT Circulation Other Total Hoag OASIS Pledge Hoag May 12, 2009 Pledge Letter Payment Schedule 500,000 - - 500,000 - - 500,000 Hoag OASIS Pledge Hoag May 12, 2009 Pledge Letter Payment Schedule 500,000 - - 500,000 - - 500,000 Hoag OASIS Pledge Hoag May 12, 2009 Pledge Letter Payment Schedule 1,500,000 - - 1,500,000 - - 1,500,000 Hoag 2,500,000 - - 2,500,000 - - 2,500,000 Friends of Oasis Pledge Friends of Oasis Oasis Construction Restricted for Oasis Only 2,000,000 - - 2,000,000 - - 2,000,000 North Newport Center 4.1 TIC In Lieu Park Fees Paid within 5 Days of Award of OASIS Contract - 5,600,000 5,600,000 5,600,000 North Newport Center 4.1 TIC In Lieu Park Fees 430 $$26,046.51 Milestone Pmts - 5,600,000 5,600,000 5,600,000 North Newport Center T2 4.1 94 Units x $26,046.51 Milestone Pmts 2,448,372 2,448,372 2,448,372 North Newport Center 4.2 TIC 1 Issuance of First Building Permit 13,545,000 - 13,545,000 13,545,000 North Newport Center 4.2 TIC Public Benefit Fee - 430 Units @ $31,500 Issuance of remaining 430 Residential Building Permits 13,545,000 - (270,900) 13,274,100 13,274,100 North Newport Center T2 Amended Agrmt Public Benefit Fee - 94 Units @ $63,000 Issuance of 431 st permit - 524 th permit 5,922,000 (118,440) 5,803,560 5,803,560 North Newport Center 4.4 TIC Street Widening and Traffic Signals Within 30 Days of Reimbursement Request - - 2,500,000 2,500,000 North Newport Center Amended Agrmt Bayside Drive Walkway Connection Within 90 Days of written notice after award of contract 200,000 200,000 200,000 33,212,000 13,648,372 (389,340) 46,471,032 2,500,000 - 48,971,032 The Dart Development (24 units)(PA2012-146) - 600,875 600,875 600,875 Newport Bay Marina Project (27 units) (PA2001-210)- 186,147 186,147 186,147 Via Lido Mixed Use(2 units) (PA2010-081)-3388 Via Lido - 104,500 104,500 104,500 2218 Channel Rd.Abell John & Helou Carol - 26,125 26,125 26,125 Plaza CDM (6 Units) (PA2010-061) - 104,500 104,500 104,500 214 Narcissus (1 Units) (PA2011-192)- - - 604 Acacia Ave (PA2012-005) - 26,125 26,125 26,125 610 Larkspur LLC (NP2013-003)- 26,125 26,125 26,125 416 Orchid Ave.- 26,125 26,125 26,125 Cohen Galina - 309 Goldenrod - 26,125 26,125 26,125 819 W. Balboa NP2012-010 26,125 26,125 26,125 Friend of the Oasis 35,000 35,000 35,000 35,000 1,152,772 - 1,187,772 - - 1,187,772 Hoag DA # 5 8.2 Hoag Semeniuk Slough Study $200K Fee Eliminated with with DA amendment in 2008 - - - - - - - Hoag DA # 5 8.2 Hoag Reimb City CIP related to Superior Ave Medians,Newport Blvd Completion of Project Expenditures - - - - 1,500,000 - 1,500,000 Hoag DA # 5 8.2 Hoag Public Benefit (Park or Pub Safety)Paid June 2009 Xfred to Facilities Reserve 1,500,000 - - 1,500,000 - - 1,500,000 Hoag DA # 5 8.4 Hoag Sunset View Park, Shrub & Groundcover Pending Improvements - 150,000 - 150,000 - - 150,000 1,500,000 150,000 - 1,650,000 1,500,000 - 3,150,000 Santa Barbara Condos - - - - - Santa Barbara Condos Section 3.3 of MOANew Home CompanUnrestricted Public Benefit Concurrent with Certificate of Occupancy 1,645,566 - (32,911) 1,612,655 - - 1,612,655 Santa Barbara Condos Section 3.3 of MOANew Home CompanUnrestricted Public Benefit Concurrent with Certificate of Occupancy 3,354,434 - (67,089) 3,287,345 - - 3,287,345 Santa Barbara Condos (NP2005-014)Section 3.2 of MOANew Home Compan79 Units x $26,046.51 Fee due at building permit issue 2,061,834 - 2,061,834 - - 2,061,834 5,000,000 2,061,834 (100,000) 6,961,834 - 6,961,834 Banning Ranch Section 3.1 Lennar => ??1375 x 30,909 - Coastal Commission Status?Each Building Permit 42,499,875 - - 42,499,875 - - 42,499,875 Newport Uptown $32,500/Unit - 1,244 Units - - - - - - Phase I - 680 Units PRIOR TO EACH BUILDING PERMIT 22,100,000 (442,000) 21,658,000 966,665 - 22,624,665 Phase II - 544 Units PRIOR TO EACH BUILDING PERMIT 17,680,000 (353,600) 17,326,400 631,456 - 17,957,856 In Lieu Park Fees - Phase I PRIOR TO EACH BUILDING PERMIT-Less Park Credits - 10,143,361 10,143,361 10,143,361 In Lieu Park Fees - Phase II PRIOR TO EACH BUILDING PERMIT-Less Park Credits - 10,550,389 10,550,389 10,550,389 39,780,000 20,693,750 (795,600) 59,678,150 1,598,121 - 61,276,271 NB Country Club 3.1 54,819 x 10.00 Golf Club Clubhouse Issuance of First Building Permits 548,190 - (10,964) 537,226 - - 537,226 Dunes Settlement Section C(e)Restaurant on Parcel B2 Issuance of Building Permit 50,000 - (1,000) 49,000 - - 49,000 Dunes Settlement Section C(f)Family Inn Issuance of Building Permit 100,000 - (2,000) 98,000 - - 98,000 Dunes Settlement Section C(g)Family Inn Prior to Occupancy 410,402 - (8,208) 402,194 - - 402,194 560,402 - (11,208) 549,194 - - 549,194 Golf Reality Fund (GRF)3.1 Tennis Club Reconstruction 3,725 x $10.00 Issuance of Building Permit 37,250 (745) 36,505 - - 36,505 Golf Reality Fund (GRF)3.1 Single Family Homes $5 x $93,000 Single Family Homes 465,000 (9,300) 455,700 - - 455,700 502,250 - (10,045) 492,205 - - 492,205 Land Re Use Decisions Monrovia Property Sale Actual 5,639,096 Lido House Hotel Lease Lease Ground Lease > of Base Rent or Percent Rents - - - - Police Facility Concord Estimated Annual Financial Benefit Not Used 1,706,000 1,706,000 - - 1,706,000 West Newport Gym - Lease Lease Ground Lease 289,055 289,055 - - 289,055 1,995,055 - - 1,995,055 - - 1,995,055 130,132,772 37,706,728 (1,317,157) 166,522,343 5,598,121 - 172,120,464 2 of 2 DEVELOPMENT AGREEMENTS AND PRIVA Agreement Hoag OASIS Pledge Hoag OASIS Pledge Hoag OASIS Pledge Friends of Oasis Pledge North Newport Center North Newport Center North Newport Center T2 North Newport Center North Newport Center North Newport Center T2 North Newport Center North Newport Center The Dart Development (24 units)(PA2012-146) Newport Bay Marina Project (27 units) (PA2001-210) Via Lido Mixed Use(2 units) (PA2010-081)-3388 Via Lido 2218 Channel Rd.Abell John & Helou Carol Plaza CDM (6 Units) (PA2010-061) 214 Narcissus (1 Units) (PA2011-192) 604 Acacia Ave (PA2012-005) 610 Larkspur LLC (NP2013-003) 416 Orchid Ave. Cohen Galina - 309 Goldenrod 819 W. Balboa NP2012-010 Friend of the Oasis Hoag DA # 5 Hoag DA # 5 Hoag DA # 5 Hoag DA # 5 Santa Barbara Condos Santa Barbara Condos Santa Barbara Condos Santa Barbara Condos (NP2005-014) Banning Ranch Newport Uptown NB Country Club Dunes Settlement Dunes Settlement Dunes Settlement Golf Reality Fund (GRF) Golf Reality Fund (GRF) Land Re Use Decisions Monrovia Property Sale Lido House Hotel Lease Police Facility West Newport Gym - Lease 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 5,600,000 - - 13,274,100 5,803,560 200,000 600,875 150,000 1,612,655 3,287,345 1,384,625 8,918,000 6,370,000 6,370,000 17,326,400 3,863,779 3,139,791 3,139,791 10,550,389 537,226 49,000 98,000 402,194 36,505 455,700 5,639,096 75,000 150,000 250,000 328,303 338,152 348,868 358,746 369,488 380,594 392,011 403,772 415,885 428,361 2,286,311 2,343,469 2,402,055 151,754 206,385 210,513 214,723 219,018 223,398 296,226 302,150 308,193 314,357 320,644 327,057 333,598 340,270 347,076 34,153,016 16,876,385 10,836,703 9,874,514 669,018 28,428,490 634,378 651,018 666,939 683,846 701,238 719,069 3,023,681 3,099,624 3,177,493 CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5D November 17, 2014 TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE FROM: Finance Department Dan Matusiewicz, Finance Director (949) 644-3123, Danm@newportbeachca.gov SUBJECT: CalPERS Pension Plan Update and Analysis of Payment Alternatives RECOMMENDATION: Provide staff with policy direction related to the proposed funding options, suggest further changes as needed and if applicable, recommend a funding option for submission to the City Council for approval. BACKGROUND: The City of Newport Beach’s pensions are pre-funded, as opposed to pay-as-you-go retirement systems like Social Security. In pre-funded systems, the employer and employee make contributions into a pension trust each year, over the course of an employee’s working life. That money is invested and earnings on these funds are re- invested. By the time the employee reaches retirement, the accumulated assets in the trust are available to pay benefits. The objective of course, is to accumulate sufficient assets to pay the benefits over the remainder of the employee’s life. To meet this objective, a pension plan should receive contributions in accordance with an actuarially based funding policy. The actuarially determined pension funding plan determines exactly how much the employer and employee should contribute each year to ensure that the benefits being earned will be securely funded in a systematic fashion. 1 INTENTIONALLY BLANK PAGE 2 CalPERS Pension Plan Update and Analysis of Payment Options Page 2 Plan assets come from three distinct sources including employee contributions, employer contributions and investment income. Since actuarial assumptions are for the long term, demographic and economic assumptions can vary from actual experience. There are many moving parts such as mortality experience, retirement rates, disability incidences, salary growth, investment returns and more. An actuarial plan valuation is therefore prepared each year to true-up contributions levels to better match actual experience. DISCUSSION: The most recent actuarial report presents the results of the June 30, 2013 California Public Employees’ Retirement System (Cal PERS) valuation of both the Miscellaneous and the Public Safety Plans for the City of Newport Beach. This report sets the fiscal year 2015-16 required contribution rates. Changes Impacting the Valuation Results On April 17, 2013, the California Public Employees Retirement System (CalPERS) Board of Administration adopted new amortization and smoothing policies. The change became effective with the current valuation (June 30, 2013) that sets the 2015-16 contribution rates. With this change, CalPERS now employs an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. Prior to this change, CalPERS employed an amortization and smoothing policy which spread investment returns over a 15-year period with experience gains and losses paid for over a rolling 30-year period. This policy resulted in a negative amortization of the City’s unfunded liability (e.g., the unfunded liability would continue to grow year after year under the previous policy). The former rate smoothing policy also employed the use of an Actuarial Value of Assets (AVA) methodology to set contribution rates. The AVA represented a moving average, of sorts, intended smooth out the everyday ups and downs of the market. While the AVA was known to reduce rate volatility, it also understated the long term funding risk in extreme market conditions. The AVA methodology lagged significantly behind the Market Value of Assets (MVA). During the course of the recession, the AVA strayed so far from the MVA, it became clear that the AVA was no longer a viable option. Despite recent positive investment returns, the elimination of the AVA, created an asset adjustment of nearly $80 million. The following chart below depicts the two asset values over time and the gap that was created during the past recession. 3 CalPERS Pension Plan Update and Analysis of Payment Options Page 3 Key Valuation Results Net of positive investment returns, annual contributions and benefit payments, the City’s unfunded pension liability decreased $17 million from $275 million to $258 million despite the $80 million adjustment mentioned above. The components of the unfunded liability are displayed in the following table. The accrued liability is the value of benefits earned to date by members currently in the plan. When a plan’s Market Value of Assets (MVA) is less than its Accrued Liability, the difference is the plan Unfunded Liability. The “Normal Cost” represents the annual pension cost of service for the upcoming fiscal year for active employees. If an Unfunded Liability exists, the plan will have to pay contributions exceeding the normal cost of the plan to pay-down the Unfunded Actuarial Liability (UAL). This amount is associated with past service periods and is due regardless of whether any further service credit is earned. Based on a current attribution analysis of the UAL, 70% of the UAL is attributable to plan participants no longer employed by the City. Utilizing the plan’s assumed payroll growth of 3% and inclining payment schedules utilized by CalPERS, we expect the total cost of the pension plans to increase as follows: 4 CalPERS Pension Plan Update and Analysis of Payment Options Page 4 The chart above also demonstrates that the payment on the unfunded actuarial liability (UAL) represents an increasing portion of the total cost of the pension plans. At the same time, normal pension costs will remain relatively stable. Employee contributions are also expected to represent a larger percentage of the plan contributions based on current labor contracts and currently exceed 50% of the normal plan costs as is demonstrated by the chart below: - 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 20,000,000 2015 2016 2017 2018 2019 2020 2021 Normal Cost Projection Employer Employee 5 CalPERS Pension Plan Update and Analysis of Payment Options Page 5 Impact of New Asset Smoothing Methodology On April 9, 2013, the City Council approved a fresh start fixing the payment schedules to 21 years for Miscellaneous and 26 for Safety. Two years later, our remaining amortization period should have been 19 years and 24 years for the respective plans. Unfortunately, the $80 million AVA adjustment was added to our unfunded liability payment schedule to be amortized over a fixed 30 year period which will slow our pension funding progress, in spite of our prior fresh start. On a weighted average basis, the remaining amortization period is now 22.9 years for Miscellaneous and 25.7 years for Safety. Options for Funding of the UAL Faster It is the City’s policy (See Reserve Policy F-2) to: 1) amortize the unfunded actuarial liability in accordance with the actuary’s funding recommendations; and 2) make effort at maintaining its UAL within a range that is considered acceptable to actuarial standards. Our actuary indicates that an 80% funded ratio is a good target, leaving room for market value adjustments in either direction. Policy F-2 further prescribes that the City Council shall consider increasing the annual CalPERS contribution should the UAL status fall below acceptable actuarial standards. The City has taken a number of actions to mitigate the rising costs including: o Establishing lower benefit formulas for new hires o Eliminating the Employer Paid Member Contribution (EPMC) o Having employees pay more of the pension costs. o Reducing the number of staff by nearly 100 employees o Adopting a fixed and shorter amortization period of the unfunded liability Investment returns have been promising as of late but are not likely to eliminate our unfunded liability without further action. Significant savings will accrue to the City as the result of previous Council actions but the current UAL will take more than two decades to fully be eliminated under the current payment schedule. A more immediate approach at addressing the escalating nature of UAL costs and to bring the City’s funded status higher than the current funded ratio of 65.8% is to accelerate our payments on the UAL, similar to paying a mortgage or car payment quicker. Nearly two years ago, the City accelerated its UAL payment schedule by increasing its payments to CalPERS. In doing so, the Council set a course to reduce interest by $113 million over the next 30 years. As previously stated, the new asset smoothing policy employs a 30 year fixed amortization with a 5 year ramp up. The 5 year ramp effectively defers the full cost of the UAL over time. By paying the full amount sooner and shortening the amortization period, the City can realize significant additional savings. 6 CalPERS Pension Plan Update and Analysis of Payment Options Page 6 The City again has an opportunity to accelerate the payment of the UAL from the current 30-year plan. Staff evaluated various funding options to accelerate the repayment of the unfunded liability and achieve significant plan savings. As directed by Chairman Henn, staff evaluated the option to repay both plans over a fixed 19 year, 15 year and 10 years periods as compared to the current schedule. The table below summarizes and compares the funding requirements and potential savings of year funding option. Each of the scenario options will result in lower interest payments and greater long-term savings. Related cash flows can be found on page 2 of Attachment A. Current 30-Year UAL Payment Plan (Current) Under the current 30-year plan presented in the latest valuation, the City will pay down the UAL over 30 years at a net present value cost of $440 million (including interest). Under this plan, the City will reach an 80% funded status in 2021 (Miscellaneous Plan) and 2027 (Public Safety Plan). Scenario 1: 19-Year UAL Payment Plan - Recommended Under the 19-year payment plan, the City will pay down the UAL at a net present value cost of $375 million (including interest) and realize present value savings of $47 million from the 30-year plan. Under this plan, the City will reach an 80% funded status in 2020 (Miscellaneous Plan) and 2024 (Public Safety Plan). On average this option will require additional funding of $5 million for the first 4 years and an average of an additional $3 million for the remaining years when compared to the current payment plan. From a cash flow perspective, staff recommends this as a financially sustainable option when compared to the scenarios that follow. It achieves significant return on investment with relatively low incremental cost. Scenario 2: 15-Year UAL Payment Plan – More Savings But Twice the Cash Flow Under the 15-year payment plan, the City will pay down the UAL at a net present value cost of $364 million (including interest) and realize present value savings of $76 million from the 30-year plan. Under this plan, the City will reach an 80% funded status in 2020 (Miscellaneous Plan) and 2023 (Public Safety Plan). On average this option will require additional funding of $9 million annually for the first 4 years and an average of an 7 CalPERS Pension Plan Update and Analysis of Payment Options Page 7 additional $8 million for the remaining years when compared to the current payment plan. Scenario 3: 10-Year UAL Payment Plan- Extremely Aggressive Under the 10-year payment plan, the City will pay down the UAL at a net present value cost of $330 million (including interest) and realize present value savings of $109 million from the 30-year plan. Under this plan, the City will reach an 80% funded status in 2019 (Miscellaneous Plan) and 2021 (Public Safety Plan). On average this option will require additional funding of $18 million annually when compared to the current payment plan. Summary CalPERS acts as an investment and administrative agent for the City’s pension assets and recognizes that a long time investment horizon is a responsibility and an advantage. While accelerating UAL payments increases the City’s exposure to market risk, doing so in an orderly “dollar cost average” basis as proposed in the accelerated payment scenarios above is an accepted method of mitigating market risk and lowering the City’s pension costs. There are two options for an accelerated UAL pay down. The first is known as a “Fresh Start” which pays down the UAL sooner and saves significant interest costs. The City employed a Fresh Start in 2013 and in doing so changed the amortization methodology from a rolling 30 year basis to a fixed declining basis. This methodology decreases interest costs by paying down principal sooner rather than deferring payments down the road. However, like any fixed mortgage rate, there is no flexibility in contributing lower payment amounts. The second alternative is known as “Additional Discretionary Payments (ADP)” which allows agencies to contribute any desired amount above the minimum payment, thereby providing more flexibility should the City find itself cash constrained in any down year. The City’s actuary, credit rating agencies and staff believe that electing to pay the unfunded liability on a discretionary basis is the preferred method because the City preserves its budget flexibility in the event of an economic down. Using cash now to pay off the UAL also has an opportunity cost. What services, programs, facilities, or beautification might the community desire now that would be foregone due to the commitment of cash for this purpose? Staff recommends scenario 1, the 19 year payment amortization. This plan produces significant long-term savings at a relatively low incremental cost. Staff proposes that the incremental cost of the first year could come from the FY 2013-14 operating surplus and future contributions could come from future anticipated revenue growth and future operating surpluses until the incremental cost can be fully absorbed into the operating budget. This initiative would have no foreseeable impact on the Facilities Financial Plan as currently contemplated. Staff requests that the Finance Committee provide policy direction related to the proposed funding options, suggest further changes as needed and if applicable, recommend a funding option for submission to the City Council for approval. 8 CalPERS Pension Plan Update and Analysis of Payment Options Page 8 Prepared by: Submitted by: /s/ Steve Montano _____________________________ /s/ Dan Matusiewicz _____________________________ Steve Montano Deputy Finance Director Dan Matusiewicz Finance Director Attachments: A. Analysis of Unfunded Pension Liability Funding Options B. Annual Valuation Report as of June 30, 2013 – Miscellaneous Plan C. Annual Valuation Report as of June 30, 2013 – Safety Plan 9 At t a c h m e n t  A An a l y s i s  of  Un f u n d e d  Pe n s i o n  Li a b i l i t y  an d  Fu n d i n g  Op t i o n s 6/ 3 0 / 1 3  Ac t u a r i a l  Va l u a t i o n Pr e p a r e d  Oc t o b e r  20 1 4 Unfunded  Liability  Payment  Savings Current 1 9  Yr 1 5  Yr 1 0  Yr Projected  Unfunded  Liability  ‐ 6/30/15 2 7 3                  273        273        273       Total  Payment  Requirement 6 6 4                  535        465        390       Gross  Payment  Savings N / A 1 2 9        198        274       NPV  Savings  @  3% N / A 4 7          76          109       Payment  Schedule(Millions) $0$5 $1 0 $1 5 $2 0 $2 5 $3 0 $3 5 $4 0 $4 5 $5 0 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 Un f u n d e d  Li a b i l i t y  ‐ Fu n d i n g  Op t i o n s (M i l l i o n s ) Cu r r e n t 19  Yr 15  Yr 10  Yr #2 ‐$1 0 0 ‐$8 0 ‐$6 0 ‐$4 0 ‐$2 0$0 $2 0 $4 0 $6 0 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 Re l a t i v e  Co s t  / Sa v i n g s As  Co m p a r e d  to  Cu r r e n t  Sc h e d u l e (I n  Mi l l i o n s ) 10  Yr 15  Yr 19  Yr Cu r r e n t #4 ‐$2 0 0 ‐$1 5 0 ‐$1 0 0 ‐$5 0$0 $5 0 $1 0 0 $1 5 0 Yr s  1 ‐5Y r s  6 ‐10 Y r s  11 ‐15 Y r s  16 ‐20 Y r s  21 ‐30 Re l a t i v e  Co s t  (S a v i n g s )   (M i l l i o n s ) Cu r r e n t 19  Yr 15  Yr 10  Yr #5 $0$50$100$150$200$250$300 201620182020202220242026202820302032203420362038204020422044Current19 Yr 15  Yr 10  YrUnfunded L i a b i l i t y  Balance (Millions)#3 30 % 70 % Un f u n d e d  Li a b i l i t y  At t r i b u t i o n  An a l y s i s Ac t i v e s Re t i r e d ,  Te r m i n a t e d  or Tr a n s f e r r e d $2 5 8  Mi l l i o n   as o f    Ju n e  30 ,  20 1 3 Ju n e 3 0 ,  20 1 5 P r o j e c t i o n   $2 7 3  Mi l l i o n #1 #6 1 At t a c h m e n t  A CH A R T  DA T A Cu r r e n t 1 9  Yr 1 5  Yr 1 0  Yr C u r r e n t 1 9  Yr 1 5  Yr 1 0  Yr C u r r e n t 1 9  Yr 1 5  Yr 1 0  Yr C u r r e n t 1 9  Yr 1 5  Yr 1 0  Yr E n t r y  Ag e  No r m a l  Ac c r u e d  Liability  Misc S a f e t y T o t a l 1 2 0 1 6 1 4 . 7            21 . 3        25 . 0        34 . 0        ‐                6. 6                10 . 3            19 . 3            27 3              27 3    27 3    27 3    63 . 8 % 6 3 . 8 % 6 3 . 8 % 6 3 . 8 % a)  Ac t i v e  Me m b e r s  [( 1 a )  ‐ (2) ‐ (3)] $122,667,031 $ 1 0 3 , 6 2 1 , 8 5 9 $ 2 2 6 , 2 8 8 , 8 9 0 2 2 0 1 7 1 6 . 3            21 . 9        25 . 8        35 . 1        ‐                5. 6                9. 5                18 . 8            27 8              27 1    26 7    25 8    65 . 4 % 6 6 . 2 % 6 6 . 7 % 6 7 . 9 % b)  Tr a n s f e r r e d  Me m b e r s  (1b) 11,038,358 6 , 9 2 2 , 0 6 5 $ 1 7 , 9 6 0 , 4 2 3 3 2 0 1 8 1 8 . 0            22 . 6        26 . 5        36 . 1        ‐                4. 6                8. 6                18 . 1            28 2              26 9    26 1    24 1    67 . 0 % 6 8 . 5 % 6 9 . 5 % 7 1 . 8 % c)  Te r m i n a t e d  Me m b e r s  (1c) 11,951,694 3 , 4 7 2 , 8 9 1 $ 1 5 , 4 2 4 , 5 8 5 4 2 0 1 9 1 9 . 8            23 . 3        27 . 3        37 . 2        ‐                3. 5                7. 6                17 . 4            28 5              26 6    25 3    22 2    68 . 7 % 7 0 . 8 % 7 2 . 2 % 7 5 . 6 % d)  Me m b e r s  an d  Be n e f i c i a r i e s  Receiving  Payments  (1d) 1 7 1 , 1 9 9 , 5 7 2 3 2 3 , 6 7 1 , 3 1 6 $ 4 9 4 , 8 7 0 , 8 8 8 5 2 0 2 0 2 1 . 6            24 . 0        28 . 2        38 . 3        ‐                2. 4                6. 6                16 . 7            28 5              26 1    24 3    20 0    70 . 5 % 7 3 . 0 % 7 4 . 9 % 7 9 . 4 % e)  To t a l $ 3 1 6 , 8 5 6 , 6 5 5 $ 4 3 7 , 6 8 8 , 1 3 1 $ 7 5 4 , 5 4 4 , 7 8 6 6 2 0 2 1 2 2 . 3            24 . 7        29 . 0        39 . 5        ‐                2. 4                6. 7                17 . 2            28 4              25 6    23 3    17 5    72 . 4 % 7 5 . 2 % 7 7 . 5 % 83 . 0 % 7 2 0 2 2 2 2 . 9            25 . 4        29 . 9        40 . 7        ‐                2. 5                6. 9                17 . 7            28 3              25 0    22 0    14 7    74 . 3 % 7 7 . 3 % 80 . 0 % 86 . 6 % Actives 3 9 % 2 4 % 3 0 % 8 2 0 2 3 2 3 . 6            26 . 2        30 . 8        41 . 9        ‐                2. 6                7. 2                18 . 3            28 0              24 2    20 5    11 6    76 . 1 % 7 9 . 3 % 8 2 . 5 % 9 0 . 1 % Retired, Terminated  or  Transferred 6 1 % 7 6 % 7 0 % 9 2 0 2 4 2 4 . 3            27 . 0        31 . 7        43 . 1        ‐                2. 7                7. 4                18 . 8            27 7              23 3    18 9    81        77 . 8 % 81 . 3 % 84 . 9 % 9 3 . 5 % 10 2 0 2 5 2 5 . 1            27 . 8        32 . 6        44 . 4        ‐                2. 7                7. 6                19 . 4            27 2              22 3    17 0    43        79 . 5 % 8 3 . 2 % 8 7 . 2 % 9 6 . 8 % 11 2 0 2 6 2 5 . 8            28 . 6        33 . 6        ‐            ‐                2. 8                7. 8                (2 5 . 8 )        26 7              21 1    14 9    ‐      81 . 2 % 85 . 1 % 8 9 . 5 % 1 0 0 . 0 % 12 2 0 2 7 2 6 . 6            29 . 5        34 . 6        ‐            ‐                2. 9                8. 1                (2 6 . 6 )        26 0              19 7    12 5    ‐      82 . 8 % 8 7 . 0 % 9 1 . 7 % 13 2 0 2 8 2 7 . 4            30 . 4        35 . 7        ‐            ‐                3. 0                8. 3                (2 7 . 4 )        25 2              18 1    99        ‐      84 . 3 % 8 8 . 7 % 9 3 . 8 % Current 1 9  Yr 1 5  Yr 1 0  Yr 14 2 0 2 9 2 8 . 2            31 . 3        36 . 7        ‐            ‐                3. 1                8. 5                (2 8 . 2 )        24 2              16 3    69        ‐      85 . 9 % 9 0 . 5 % 9 6 . 0 % Total  Payment  Requirement 6 6 3 . 9                534.9                 465.4              390.3 15 2 0 3 0 2 9 . 0            32 . 2        37 . 8        ‐            ‐                3. 2                8. 8                (2 9 . 0 )        23 1              14 3    37        ‐      87 . 3 % 9 2 . 2 % 9 8 . 0 % Gross  Payment  Savings N / A 1 2 8 . 9                 198.5              273.5 16 2 0 3 1 2 9 . 9            33 . 2        ‐            ‐            ‐                3. 3                (2 9 . 9 )        (2 9 . 9 )        21 9              12 0    ‐      ‐      88 . 8 % 9 3 . 8 % 1 0 0 . 0 % NPV  Savings  @  3% N / A 4 7 . 1                   75.6                 109.5 17 2 0 3 2 3 0 . 8            34 . 2        ‐            ‐            ‐                3. 4                (3 0 . 8 )        (3 0 . 8 )        20 4              95        ‐      ‐      90 . 2 % 9 5 . 4 % 18 2 0 3 3 3 1 . 7            35 . 2        ‐            ‐            ‐                3. 5                (3 1 . 7 )        (3 1 . 7 )        18 7              66        ‐      ‐      91 . 6 % 9 7 . 0 % 19 2 0 3 4 3 2 . 7            36 . 3        ‐            ‐            ‐                3. 6                (3 2 . 7 )        (3 2 . 7 )        16 8              35        ‐      ‐      92 . 9 % 9 8 . 5 % 20 2 0 3 5 2 5 . 4            ‐            ‐            ‐            ‐                (2 5 . 4 )        (2 5 . 4 )        (2 5 . 4 )        14 7              ‐      ‐      ‐      94 . 2 % 1 0 0 . 0 % 21 2 0 3 6 2 6 . 2            ‐            ‐            ‐            ‐                (2 6 . 2 )        (2 6 . 2 )        (2 6 . 2 )        13 2              ‐      ‐      ‐      95 . 1 % 22 2 0 3 7 2 7 . 0            ‐            ‐            ‐            ‐                (2 7 . 0 )        (2 7 . 0 )        (2 7 . 0 )        11 5              ‐      ‐      ‐      96 . 0 % 23 2 0 3 8 2 7 . 8            ‐            ‐            ‐            ‐                (2 7 . 8 )        (2 7 . 8 )        (2 7 . 8 )        95                  ‐      ‐      ‐      96 . 9 % 24 2 0 3 9 2 8 . 6            ‐            ‐            ‐            ‐                (2 8 . 6 )        (2 8 . 6 )        (2 8 . 6 )        73                  ‐      ‐      ‐      97 . 8 % 25 2 0 4 0 1 3 . 3            ‐            ‐            ‐            ‐                (1 3 . 3 )        (1 3 . 3 )        (1 3 . 3 )        49                  ‐      ‐      ‐      98 . 6 % 26 2 0 4 1 1 3 . 7            ‐            ‐            ‐            ‐                (1 3 . 7 )        (1 3 . 7 )        (1 3 . 7 )        39                  ‐      ‐      ‐      98 . 9 % 27 2 0 4 2 1 1 . 7            ‐            ‐            ‐            ‐                (1 1 . 7 )        (1 1 . 7 )        (1 1 . 7 )        28                  ‐      ‐      ‐      99 . 3 % 28 2 0 4 3 9 . 6                ‐            ‐            ‐            ‐                (9 . 6 )              (9 . 6 )              (9 . 6 )              18                  ‐      ‐      ‐      99 . 6 % 29 2 0 4 4 7 . 3                ‐            ‐            ‐            ‐                (7 . 3 )              (7 . 3 )              (7 . 3 )              9                      ‐      ‐      ‐      99 . 8 % 30 2 0 4 5 2 . 6                ‐            ‐            ‐            ‐                (2 . 6 )              (2 . 6 )              (2 . 6 )              3                      ‐      ‐      ‐      99 . 9 % Su m 6 6 3 . 9        53 4 . 9    46 5 . 4    39 0 . 3    ‐                (1 2 8 . 9 )    (1 9 8 . 5 )    (2 7 3 . 5 )    NP V 4 4 0 . 0        39 2 . 9    36 4 . 4    33 0 . 6    ‐                (4 7 . 1 )        (7 5 . 6 )        (1 0 9 . 5 )    In c r e m e n t a l Ye a r s C u r r e n t 1 9  Yr 1 5  Yr 1 0  Yr C u r r e n t 1 9  Yr 1 5  Yr 1 0  Yr Yr s  1 ‐59 0                  11 3          13 3          18 1          ‐                23                  42                  90                  Yr s  6 ‐10 1 1 8              13 1          15 4          21 0          ‐                13                  36                  91                  Yr s  11 ‐15 1 3 7              15 2          17 9          ‐            ‐                15                  42                  (1 3 7 )            Yr s  16 ‐20 1 5 1              13 9          ‐            ‐            ‐                (1 2 )                (1 5 1 )            (1 5 1 )            Yr s  21 ‐30 1 6 8              ‐            ‐            ‐            ‐                (1 6 8 )            (1 6 8 )            (1 6 8 )            Fu l l  UA L  Pa y m e n t UAL  Cost/Savings UA L  Pa y m e n t U A L  Ba l a n c e U A L  Attribution  Analysis In c r e m e n t a l  Co s t / S a v i n g s F u n d e d  St a t u s 2 At t a c h m e n t  A MI S C E L L A N E O U S  PL A N  ‐   AM O R T I Z A T I O N  BA S E S 3 At t a c h m e n t  A MI S C E L L A N E O U S  PL A N  ‐   CU R R E N T  AM O R T I Z A T I O N  SC H E D U L E 20 1 1  Fr e s h  St a r t 2 0 1 2  Ba s e   20 1 3  Ba s e Ba l a n c e P e r i o d P a y m e n t B a l a n c e P e r i o d P a y m e n t B a l a n c e P e r i o d P a y m e n t B a l a n c e Y e a r P a y m e n t F u n d e d 20 1 3 94 , 7 4 8 , 9 6 9 $ 7 0 . 1 % 20 1 4 97 , 8 1 4 , 5 6 7 $ 7 1 . 4 % 1 2 0 1 6 60 , 2 8 0 , 0 2 7 $ 1 9 4 , 7 0 3 , 4 6 7 $ 3 , 8 6 9 , 5 9 5 $ 2 9 2 3 6 , 3 3 2 $ 3 6 , 4 6 0 , 7 0 8 $ 3 0 5 1 2 , 8 2 1 $ 1 0 0 , 6 1 0 , 3 3 0 $ 3 0 5 , 4 5 2 , 6 2 0 $ 7 2 . 7 % 2 2 0 1 7 59 , 9 2 4 , 3 7 0 $ 1 8 4 , 8 4 4 , 5 7 1 $ 3 , 9 1 4 , 7 8 1 $ 2 8 2 4 3 , 4 2 2 $ 3 8 , 6 6 3 , 5 5 7 $ 2 9 1 , 0 5 6 , 4 1 2 $ 1 0 2 , 5 0 2 , 7 0 8 $ 2 9 6 , 1 4 4 , 4 0 5 $ 7 4 . 2 % 3 2 0 1 8 59 , 3 9 5 , 7 3 9 $ 1 7 4 , 9 8 9 , 9 0 9 $ 3 , 9 5 6 , 0 0 4 $ 2 7 2 5 0 , 7 2 5 $ 4 0 , 4 6 8 , 0 1 3 $ 2 8 1 , 6 3 2 , 1 5 6 $ 1 0 3 , 8 1 9 , 7 5 6 $ 2 8 6 , 8 7 2 , 7 8 9 $ 7 5 . 8 % 4 2 0 1 9 58 , 6 7 6 , 7 7 2 $ 1 6 5 , 1 3 9 , 6 0 6 $ 3 , 9 9 2 , 7 4 7 $ 2 6 2 5 8 , 2 4 6 $ 4 1 , 8 1 0 , 8 5 9 $ 2 7 2 , 2 4 1 , 4 9 4 $ 1 0 4 , 4 8 0 , 3 7 8 $ 2 7 7 , 6 3 9 , 3 4 6 $ 7 7 . 4 % 5 2 0 2 0 57 , 7 4 8 , 6 7 3 $ 1 5 5 , 2 9 3 , 7 9 4 $ 4 , 0 2 4 , 4 4 8 $ 2 5 2 6 5 , 9 9 4 $ 4 2 , 6 2 2 , 6 4 3 $ 2 6 2 , 8 8 5 , 9 2 4 $ 1 0 4 , 3 9 5 , 7 6 4 $ 2 6 8 , 4 4 5 , 7 1 1 $ 7 9 . 0 % 6 2 0 2 1 56 , 5 9 1 , 1 0 2 $ 1 4 5 , 4 5 2 , 6 0 8 $ 4 , 0 5 0 , 4 9 4 $ 2 4 2 7 3 , 9 7 3 $ 4 2 , 8 2 7 , 1 5 2 $ 2 5 2 , 9 7 2 , 5 0 1 $ 1 0 3 , 4 6 8 , 7 4 7 $ 2 5 8 , 6 9 9 , 0 8 3 $ 8 0 . 7 % 7 2 0 2 2 55 , 1 8 2 , 0 5 0 $ 1 3 5 , 6 1 6 , 1 8 6 $ 4 , 0 7 0 , 2 1 9 $ 2 3 2 8 2 , 1 9 3 $ 4 2 , 9 5 7 , 2 3 3 $ 2 4 3 , 0 6 1 , 6 7 6 $ 1 0 2 , 2 0 9 , 5 0 2 $ 2 4 8 , 9 6 0 , 0 5 5 $ 8 2 . 4 % 8 2 0 2 3 53 , 4 9 7 , 7 1 8 $ 1 2 5 , 7 8 4 , 6 7 2 $ 4 , 0 8 2 , 9 0 2 $ 2 2 2 9 0 , 6 5 8 $ 4 3 , 0 0 4 , 6 1 2 $ 2 3 3 , 1 5 3 , 5 2 7 $ 1 0 0 , 5 8 5 , 2 3 2 $ 2 3 9 , 2 2 8 , 8 5 7 $ 8 3 . 9 % 9 2 0 2 4 51 , 5 1 2 , 3 7 2 $ 1 1 5 , 9 5 8 , 2 1 2 $ 4 , 0 8 7 , 7 5 8 $ 2 1 2 9 9 , 3 7 8 $ 4 2 , 9 6 0 , 3 1 2 $ 2 2 3 , 2 4 8 , 1 3 2 $ 9 8 , 5 6 0 , 4 4 2 $ 2 2 9 , 5 0 5 , 7 2 2 $ 8 5 . 4 % 10 2 0 2 5 49 , 1 9 8 , 1 9 4 $ 1 0 6 , 1 3 6 , 9 5 8 $ 4 , 0 8 3 , 9 3 8 $ 2 0 3 0 8 , 3 6 0 $ 4 2 , 8 1 4 , 6 0 0 $ 2 1 3 , 3 4 5 , 5 7 6 $ 9 6 , 0 9 6 , 7 3 3 $ 2 1 9 , 7 9 0 , 8 9 4 $ 8 6 . 8 % 11 2 0 2 6 46 , 5 2 5 , 1 2 5 $ 9 6 , 3 2 1 , 0 6 7 $ 4 , 0 7 0 , 5 2 0 $ 1 9 3 1 7 , 6 1 0 $ 4 2 , 5 5 6 , 9 2 8 $ 2 0 3 , 4 4 5 , 9 4 4 $ 9 3 , 1 5 2 , 5 7 2 $ 2 0 1 0 , 0 8 4 , 6 2 1 $ 8 8 . 1 % 12 2 0 2 7 43 , 4 6 0 , 6 8 7 $ 8 6 , 5 1 0 , 6 9 9 $ 4 , 0 4 6 , 5 0 3 $ 1 8 3 2 7 , 1 3 9 $ 4 2 , 1 7 5 , 8 6 7 $ 1 9 3 , 5 4 9 , 3 2 2 $ 8 9 , 6 8 3 , 0 5 8 $ 1 9 1 0 , 3 8 7 , 1 5 9 $ 8 9 . 4 % 13 2 0 2 8 39 , 9 6 9 , 8 0 3 $ 7 6 , 7 0 6 , 0 2 0 $ 4 , 0 1 0 , 8 0 7 $ 1 7 3 3 6 , 9 5 3 $ 4 1 , 6 5 9 , 0 4 2 $ 1 8 3 , 6 5 5 , 8 0 2 $ 8 5 , 6 3 9 , 6 5 1 $ 1 8 1 0 , 6 9 8 , 7 7 4 $ 9 0 . 6 % 14 2 0 2 9 36 , 0 1 4 , 5 8 8 $ 6 6 , 9 0 7 , 2 0 1 $ 3 , 9 6 2 , 2 5 7 $ 1 6 3 4 7 , 0 6 1 $ 4 0 , 9 9 3 , 0 5 4 $ 1 7 3 , 7 6 5 , 4 7 6 $ 8 0 , 9 6 9 , 9 0 0 $ 1 7 1 1 , 0 1 9 , 7 3 7 $ 9 1 . 8 % 15 2 0 3 0 31 , 5 5 4 , 1 4 4 $ 5 7 , 1 1 4 , 4 1 7 $ 3 , 8 9 9 , 5 8 6 $ 1 5 3 5 7 , 4 7 3 $ 4 0 , 1 6 3 , 4 0 5 $ 1 6 3 , 8 7 8 , 4 4 0 $ 7 5 , 6 1 7 , 1 3 5 $ 1 6 1 1 , 3 5 0 , 3 3 0 $ 9 2 . 9 % 16 2 0 3 1 26 , 5 4 4 , 3 2 1 $ 4 7 , 3 2 7 , 8 4 9 $ 3 , 8 2 1 , 4 1 8 $ 1 4 3 6 8 , 1 9 7 $ 3 9 , 1 5 4 , 4 0 9 $ 1 5 3 , 9 9 4 , 7 9 3 $ 6 9 , 5 2 0 , 1 4 8 $ 1 5 1 1 , 6 9 0 , 8 4 0 $ 9 3 . 9 % 17 2 0 3 2 20 , 9 3 7 , 4 7 0 $ 3 7 , 5 4 7 , 6 8 5 $ 3 , 7 2 6 , 2 7 0 $ 1 3 3 7 9 , 2 4 3 $ 3 7 , 9 4 9 , 1 0 0 $ 1 4 4 , 1 1 4 , 6 3 7 $ 6 2 , 6 1 2 , 8 3 9 $ 1 4 1 2 , 0 4 1 , 5 6 5 $ 9 4 . 9 % 18 2 0 3 3 14 , 6 8 2 , 1 7 4 $ 2 7 , 7 7 4 , 1 1 5 $ 3 , 6 1 2 , 5 3 2 $ 1 2 3 9 0 , 6 2 1 $ 3 6 , 5 2 9 , 1 3 6 $ 1 3 4 , 2 3 8 , 0 7 6 $ 5 4 , 8 2 3 , 8 4 2 $ 1 3 1 2 , 4 0 2 , 8 1 2 $ 9 5 . 9 % 19 2 0 3 4 7, 7 2 2 , 9 6 3 $ 1 8 , 0 0 7 , 3 3 9 $ 3 , 4 7 8 , 4 6 8 $ 1 1 4 0 2 , 3 3 9 $ 3 4 , 8 7 4 , 6 9 0 $ 1 2 4 , 3 6 5 , 2 1 8 $ 4 6 , 0 7 6 , 1 2 1 $ 1 2 1 2 , 7 7 4 , 8 9 6 $ 9 6 . 8 % 20 2 0 3 5 3, 3 2 2 , 1 9 9 $ 1 0 4 1 4 , 4 0 9 $ 3 2 , 9 6 4 , 3 3 7 $ 1 1 4 , 4 9 6 , 1 7 5 $ 3 6 , 2 8 6 , 5 3 6 $ 1 1 4 , 9 1 0 , 5 8 4 $ 9 7 . 6 % 21 2 0 3 6 3, 1 4 1 , 6 9 5 $ 9 4 2 6 , 8 4 2 $ 3 0 , 7 7 4 , 9 2 9 $ 1 0 4 , 6 3 1 , 0 6 0 $ 3 3 , 9 1 6 , 6 2 4 $ 1 0 5 , 0 5 7 , 9 0 2 $ 9 8 . 0 % 22 2 0 3 7 2, 9 3 4 , 7 6 3 $ 8 4 3 9 , 6 4 7 $ 2 8 , 2 8 1 , 4 6 4 $ 9 4 , 7 6 9 , 9 9 2 $ 3 1 , 2 1 6 , 2 2 7 $ 9 5 , 2 0 9 , 6 3 9 $ 9 8 . 3 % 23 2 0 3 8 2, 6 9 9 , 0 3 5 $ 7 4 5 2 , 8 3 6 $ 2 5 , 4 5 6 , 9 4 1 $ 8 4 , 9 1 3 , 0 9 2 $ 2 8 , 1 5 5 , 9 7 5 $ 8 5 , 3 6 5 , 9 2 8 $ 9 8 . 5 % 24 2 0 3 9 2, 4 3 1 , 9 5 1 $ 6 4 6 6 , 4 2 1 $ 2 2 , 2 7 2 , 2 1 0 $ 7 5 , 0 6 0 , 4 8 4 $ 2 4 , 7 0 4 , 1 6 1 $ 7 5 , 5 2 6 , 9 0 6 $ 9 8 . 8 % 25 2 0 4 0 2, 1 3 0 , 7 5 2 $ 5 4 8 0 , 4 1 4 $ 1 8 , 6 9 5 , 8 0 4 $ 6 5 , 2 1 2 , 2 9 9 $ 2 0 , 8 2 6 , 5 5 5 $ 6 5 , 6 9 2 , 7 1 3 $ 9 9 . 1 % 26 2 0 4 1 1, 7 9 2 , 4 5 4 $ 4 4 9 4 , 8 2 7 $ 1 4 , 6 9 3 , 7 6 2 $ 5 5 , 3 6 8 , 6 6 8 $ 1 6 , 4 8 6 , 2 1 7 $ 5 5 , 8 6 3 , 4 9 4 $ 9 9 . 3 % 27 2 0 4 2 1, 4 1 3 , 8 4 1 $ 3 5 0 9 , 6 7 1 $ 1 0 , 2 2 9 , 4 4 1 $ 4 4 , 4 2 3 , 7 8 2 $ 1 1 , 6 4 3 , 2 8 2 $ 4 4 , 9 3 3 , 4 5 4 $ 9 9 . 6 % 28 2 0 4 3 99 1 , 4 4 1 $ 2 5 2 4 , 9 6 1 $ 6 , 4 0 9 , 9 7 4 $ 3 3 , 4 1 7 , 3 7 2 $ 7 , 4 0 1 , 4 1 5 $ 3 3 , 9 4 2 , 3 3 3 $ 9 9 . 7 % 29 2 0 4 4 52 1 , 5 0 7 $ 1 5 4 0 , 7 1 0 $ 3 , 3 4 7 , 5 1 6 $ 2 2 , 3 4 6 , 5 9 5 $ 3 , 8 6 9 , 0 2 3 $ 2 2 , 8 8 7 , 3 0 6 $ 9 9 . 9 % 30 2 0 4 5 1, 1 6 5 , 5 7 8 $ 1 1 , 2 0 8 , 4 9 7 $ 1 , 1 6 5 , 5 7 8 $ 1 1 , 2 0 8 , 4 9 7 $ 1 0 0 . 0 % Su m  of  Pm t s 2 3 3 , 7 8 8 , 9 7 1 $           NP V  Pm t s  @  3% $ 1 5 8 , 1 4 1 , 9 9 4 SAMPLE  AMORTIZATION  SCHEDULE S Ca s h  Fl o w  ‐   Op t i o n  1  ‐   St a t u s  Qu o Mi x e d A m o r t MI S C E L L A N E O U S  UN F U N D E D  LI A B I L I T Y 30 Y r F i x e d - L e v e l % o f P a y 3 0 Y r F i x e d - L e v e l % o f P a y F i x e d 3 0 Y r w i t h 5 Y r R a m p s  $‐ $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044Level Payment  Amortizaton  $‐ $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044Level % of  Pay  Amortization  $‐ $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044Level % of  Pay  with  5Yr  Ramps 4 At t a c h m e n t  A MI S C E L L A N E O U S  PL A N  ‐   AL T E R N A T I V E  FU N D I N G  SC H E D U L E S Ba l a n c e Y e a r P a y m e n t F u n d e d B a l a n c e P e r i o d P a y m e n t P m t . D i f f . F u n d e d B a l a n c e P e r i o d P a y m e n t P m t . D i f f . F u n d e d B a l a n c e P e r i o d P a y m e n t P m t . D i f f . F unded 20 1 3 94 , 7 4 8 , 9 6 9 $ - 7 0 . 1 % 9 4 , 7 4 8 , 9 6 9 $ 7 0 . 1 % 9 4 , 7 4 8 , 9 6 9 $ 7 0 . 1 % 9 4 , 7 4 8 , 9 6 9 $ 70.1% 20 1 4 97 , 8 1 4 , 5 6 7 $ - 7 1 . 4 % 9 7 , 8 1 4 , 5 6 7 $ 7 1 . 4 % 9 7 , 8 1 4 , 5 6 7 $ 7 1 . 4 % 9 7 , 8 1 4 , 5 6 7 $ 71.4% 1 2 0 1 6 10 0 , 6 1 0 , 3 3 0 $ 3 0 5 , 4 5 2 , 6 2 0 7 2 . 7 % 1 0 0 , 6 1 0 , 3 3 0 $ 1 9 7 , 8 5 0 , 3 1 9 $ 2 , 3 9 7 , 6 9 8 $ 7 2 . 7 % 1 0 0 , 6 1 0 , 3 3 0 $ 1 5 9 , 2 2 2 , 9 0 2 $ 3 , 7 7 0 , 2 8 2 $ 7 2 . 7 % 1 0 0 , 6 1 0 , 3 3 0 $ 10 12,550,082 $ 7,097,462 $ 72.7% 2 2 0 1 7 10 2 , 5 0 2 , 7 0 8 $ 2 9 6 , 1 4 4 , 4 0 5 7 4 . 2 % 1 0 0 , 0 1 6 , 7 2 1 $ 1 8 8 , 0 8 5 , 8 2 8 $ 1 , 9 4 1 , 4 2 3 $ 7 4 . 8 % 9 8 , 5 9 3 , 5 9 6 $ 1 4 9 , 4 9 9 , 5 8 9 $ 3 , 3 5 5 , 1 8 4 $ 7 5 . 2 % 9 5 , 1 4 3 , 9 0 2 $ 9 12,926,585 $ 6,782,180 $ 76.1% 3 2 0 1 8 10 3 , 8 1 9 , 7 5 6 $ 2 8 6 , 8 7 2 , 7 8 9 7 5 . 8 % 9 9 , 1 3 4 , 4 1 0 $ 1 7 8 , 3 2 8 , 4 0 3 $ 1 , 4 5 5 , 6 1 4 $ 7 6 . 9 % 9 6 , 1 3 8 , 7 3 2 $ 1 3 9 , 7 8 4 , 5 7 7 $ 2 , 9 1 1 , 7 8 8 $ 7 7 . 6 % 8 8 , 8 7 7 , 1 2 6 $ 8 13,314,383 $ 6,441,594 $ 79.3% 4 2 0 1 9 10 4 , 4 8 0 , 3 7 8 $ 2 7 7 , 6 3 9 , 3 4 6 7 7 . 4 % 9 7 , 9 3 4 , 4 1 9 $ 1 6 8 , 5 7 8 , 2 5 5 $ 9 3 8 , 9 0 9 $ 7 8 . 8 % 9 3 , 2 0 4 , 2 7 2 $ 1 2 1 0 , 0 7 8 , 1 1 4 $ 2 , 4 3 8 , 7 6 8 $ 7 9 . 8 % 8 1 , 7 3 8 , 2 6 5 $ 7 13,713,814 $ 6,074,468 $ 82.3% 5 2 0 2 0 10 4 , 3 9 5 , 7 6 4 $ 2 6 8 , 4 4 5 , 7 1 1 7 9 . 0 % 9 6 , 3 8 5 , 3 7 6 $ 1 5 8 , 8 3 5 , 6 0 3 $ 3 8 9 , 8 9 1 $ 8 0 . 6 % 8 9 , 7 4 5 , 3 8 1 $ 1 1 1 0 , 3 8 0 , 4 5 8 $ 1 , 9 3 4 , 7 4 6 $ 8 2 . 0 % 7 3 , 6 4 9 , 8 5 0 $ 6 14,125,228 $ 5,679,517 $ 85.2% 6 2 0 2 1 10 3 , 4 6 8 , 7 4 7 $ 2 5 8 , 6 9 9 , 0 8 3 8 0 . 7 % 9 4 , 4 5 3 , 3 3 2 $ 1 4 9 , 1 0 0 , 6 7 1 $ 4 0 1 , 5 8 8 $ 8 2 . 4 % 8 5 , 7 1 3 , 5 9 7 $ 1 0 1 0 , 6 9 1 , 8 7 1 $ 1 , 9 9 2 , 7 8 9 $ 8 4 . 0 % 6 4 , 5 2 8 , 2 4 0 $ 5 14,548,985 $ 5,849,903 $ 88.0% 7 2 0 2 2 10 2 , 2 0 9 , 5 0 2 $ 2 4 8 , 9 6 0 , 0 5 5 8 2 . 4 % 9 2 , 1 0 1 , 5 5 6 $ 1 3 9 , 3 7 3 , 6 9 1 $ 4 1 3 , 6 3 6 $ 8 4 . 1 % 8 1 , 0 5 6 , 5 4 8 $ 9 1 1 , 0 1 2 , 6 2 8 $ 2 , 0 5 2 , 5 7 3 $ 8 6 . 0 % 5 4 , 2 8 3 , 1 5 0 $ 4 14,985,455 $ 6,025,400 $ 90.6% 8 2 0 2 3 10 0 , 5 8 5 , 2 3 2 $ 2 3 9 , 2 2 8 , 8 5 7 8 3 . 9 % 8 9 , 2 9 0 , 3 2 3 $ 1 2 9 , 6 5 4 , 9 0 2 $ 4 2 6 , 0 4 5 $ 8 5 . 7 % 7 5 , 7 1 7 , 6 5 4 $ 8 1 1 , 3 4 3 , 0 0 6 $ 2 , 1 1 4 , 1 5 0 $ 8 7 . 9 % 4 2 , 8 1 7 , 1 3 6 $ 3 15,435,018 $ 6,206,162 $ 93.1% 9 2 0 2 4 98 , 5 6 0 , 4 4 2 $ 2 2 9 , 5 0 5 , 7 2 2 8 5 . 4 % 8 5 , 9 7 6 , 6 8 2 $ 1 1 9 , 9 4 4 , 5 4 9 $ 4 3 8 , 8 2 6 $ 8 7 . 2 % 6 9 , 6 3 5 , 7 9 9 $ 7 1 1 , 6 8 3 , 2 9 7 $ 2 , 1 7 7 , 5 7 4 $ 8 9 . 7 % 3 0 , 0 2 5 , 0 5 3 $ 2 15,898,069 $ 6,392,347 $ 95.5% 10 2 0 2 5 96 , 0 9 6 , 7 3 3 $ 2 1 9 , 7 9 0 , 8 9 4 8 6 . 8 % 8 2 , 1 1 4 , 2 0 5 $ 1 0 1 0 , 2 4 2 , 8 8 5 $ 4 5 1 , 9 9 1 $ 8 8 . 7 % 6 2 , 7 4 4 , 9 8 4 $ 6 1 2 , 0 3 3 , 7 9 5 $ 2 , 2 4 2 , 9 0 1 $ 9 1 . 4 % 1 5 , 7 9 3 , 4 6 3 $ 1 16,375,011 $ 6,584,117 $ 97.8% 11 2 0 2 6 93 , 1 5 2 , 5 7 2 $ 2 0 1 0 , 0 8 4 , 6 2 1 8 8 . 1 % 7 7 , 6 5 2 , 7 2 2 $ 9 1 0 , 5 5 0 , 1 7 2 $ 4 6 5 , 5 5 1 $ 9 0 . 1 % 5 4 , 9 7 3 , 9 5 3 $ 5 1 2 , 3 9 4 , 8 0 9 $ 2 , 3 1 0 , 1 8 8 $ 9 3 . 0 % - $ - -$ (10,084,621)$ 100.0% 12 2 0 2 7 89 , 6 8 3 , 0 5 8 $ 1 9 1 0 , 3 8 7 , 1 5 9 8 9 . 4 % 7 2 , 5 3 8 , 0 2 5 $ 8 1 0 , 8 6 6 , 6 7 7 $ 4 7 9 , 5 1 7 $ 9 1 . 4 % 4 6 , 2 4 5 , 7 8 8 $ 4 1 2 , 7 6 6 , 6 5 4 $ 2 , 3 7 9 , 4 9 4 $ 9 4 . 5 % ( 1 0 , 3 8 7 , 1 5 9 ) $ 13 2 0 2 8 85 , 6 3 9 , 6 5 1 $ 1 8 1 0 , 6 9 8 , 7 7 4 9 0 . 6 % 6 6 , 7 1 1 , 5 6 6 $ 7 1 1 , 1 9 2 , 6 7 7 $ 4 9 3 , 9 0 3 $ 9 2 . 7 % 3 6 , 4 7 7 , 4 7 4 $ 3 1 3 , 1 4 9 , 6 5 3 $ 2 , 4 5 0 , 8 7 9 $ 9 6 . 0 % ( 1 0 , 6 9 8 , 7 7 4 ) $ 14 2 0 2 9 80 , 9 6 9 , 9 0 0 $ 1 7 1 1 , 0 1 9 , 7 3 7 9 1 . 8 % 6 0 , 1 1 0 , 1 1 9 $ 6 1 1 , 5 2 8 , 4 5 7 $ 5 0 8 , 7 2 0 $ 9 3 . 9 % 2 5 , 5 7 9 , 4 3 4 $ 2 1 3 , 5 4 4 , 1 4 3 $ 2 , 5 2 4 , 4 0 5 $ 9 7 . 4 % ( 1 1 , 0 1 9 , 7 3 7 ) $ 15 2 0 3 0 75 , 6 1 7 , 1 3 5 $ 1 6 1 1 , 3 5 0 , 3 3 0 9 2 . 9 % 5 2 , 6 6 5 , 4 1 9 $ 5 1 1 , 8 7 4 , 3 1 1 $ 5 2 3 , 9 8 2 $ 9 5 . 0 % 1 3 , 4 5 5 , 0 2 5 $ 1 1 3 , 9 5 0 , 4 6 7 $ 2 , 6 0 0 , 1 3 7 $ 9 8 . 7 % ( 1 1 , 3 5 0 , 3 3 0 ) $ 16 2 0 3 1 69 , 5 2 0 , 1 4 8 $ 1 5 1 1 , 6 9 0 , 8 4 0 9 3 . 9 % 4 4 , 3 0 3 , 7 7 8 $ 4 1 2 , 2 3 0 , 5 4 0 $ 5 3 9 , 7 0 1 $ 9 6 . 1 % - $ - - $ ( 1 1 , 6 9 0 , 8 4 0 ) $ 1 0 0 . 0 % ( 1 1 , 6 9 0 , 8 4 0 ) $ 17 2 0 3 2 62 , 6 1 2 , 8 3 9 $ 1 4 1 2 , 0 4 1 , 5 6 5 9 4 . 9 % 3 4 , 9 4 5 , 6 6 7 $ 3 1 2 , 5 9 7 , 4 5 7 $ 5 5 5 , 8 9 2 $ 9 7 . 2 % ( 1 2 , 0 4 1 , 5 6 5 ) $ (12,041,565)$ 18 2 0 3 3 54 , 8 2 3 , 8 4 2 $ 1 3 1 2 , 4 0 2 , 8 1 2 9 5 . 9 % 2 4 , 5 0 5 , 2 7 1 $ 2 1 2 , 9 7 5 , 3 8 0 $ 5 7 2 , 5 6 9 $ 9 8 . 2 % ( 1 2 , 4 0 2 , 8 1 2 ) $ (12,402,812)$ 19 2 0 3 4 46 , 0 7 6 , 1 2 1 $ 1 2 1 2 , 7 7 4 , 8 9 6 9 6 . 8 % 1 2 , 8 9 0 , 0 0 5 $ 1 1 3 , 3 6 4 , 6 4 2 $ 5 8 9 , 7 4 6 $ 9 9 . 1 % ( 1 2 , 7 7 4 , 8 9 6 ) $ (12,774,896)$ 20 2 0 3 5 36 , 2 8 6 , 5 3 6 $ 1 1 4 , 9 1 0 , 5 8 4 9 7 . 6 % - $ - - $ ( 4 , 9 1 0 , 5 8 4 ) $ 1 0 0 . 0 % ( 4 , 9 1 0 , 5 8 4 ) $ (4,910,584)$ 21 2 0 3 6 33 , 9 1 6 , 6 2 4 $ 1 0 5 , 0 5 7 , 9 0 2 9 8 . 0 % ( 5 , 0 5 7 , 9 0 2 ) $ (5,057,902) $ (5,057,902)$ 22 2 0 3 7 31 , 2 1 6 , 2 2 7 $ 9 5 , 2 0 9 , 6 3 9 9 8 . 3 % ( 5 , 2 0 9 , 6 3 9 ) $ (5,209,639) $ (5,209,639)$ 23 2 0 3 8 28 , 1 5 5 , 9 7 5 $ 8 5 , 3 6 5 , 9 2 8 9 8 . 5 % ( 5 , 3 6 5 , 9 2 8 ) $ (5,365,928) $ (5,365,928)$ 24 2 0 3 9 24 , 7 0 4 , 1 6 1 $ 7 5 , 5 2 6 , 9 0 6 9 8 . 8 % ( 5 , 5 2 6 , 9 0 6 ) $ (5,526,906) $ (5,526,906)$ 25 2 0 4 0 20 , 8 2 6 , 5 5 5 $ 6 5 , 6 9 2 , 7 1 3 9 9 . 1 % ( 5 , 6 9 2 , 7 1 3 ) $ (5,692,713) $ (5,692,713)$ 26 2 0 4 1 16 , 4 8 6 , 2 1 7 $ 5 5 , 8 6 3 , 4 9 4 9 9 . 3 % ( 5 , 8 6 3 , 4 9 4 ) $ (5,863,494) $ (5,863,494)$ 27 2 0 4 2 11 , 6 4 3 , 2 8 2 $ 4 4 , 9 3 3 , 4 5 4 9 9 . 6 % ( 4 , 9 3 3 , 4 5 4 ) $ (4,933,454) $ (4,933,454)$ 28 2 0 4 3 7, 4 0 1 , 4 1 5 $ 3 3 , 9 4 2 , 3 3 3 9 9 . 7 % ( 3 , 9 4 2 , 3 3 3 ) $ (3,942,333) $ (3,942,333)$ 29 2 0 4 4 3, 8 6 9 , 0 2 3 $ 2 2 , 8 8 7 , 3 0 6 9 9 . 9 % ( 2 , 8 8 7 , 3 0 6 ) $ (2,887,306) $ (2,887,306)$ 30 2 0 4 5 1, 1 6 5 , 5 7 8 $ 1 1 , 2 0 8 , 4 9 7 1 0 0 . 0 % ( 1 , 2 0 8 , 4 9 7 ) $ (1,208,497) $ (1,208,497)$ Su m  of  Pm t s 1 9 7 , 1 7 5 , 4 1 8 $             (3 6 , 6 1 3 , 5 5 3 ) $   Su m  of  Pm t s 1 7 1 , 5 3 5 , 9 6 4 $    (62,253,007) $   Sum  of  Pmts 1 4 3 , 8 7 2 , 6 3 1 $   (89,916,340)$   Su m  of  Pm t s 2 3 3 , 7 8 8 , 9 7 1 $       St a t u s  Qu o  Pm t s 2 3 3 , 7 8 8 , 9 7 1 $             St a t u s  Qu o  Pm t s 2 3 3 , 7 8 8 , 9 7 1 $    Status  Quo  Pmts 2 3 3 , 7 8 8 , 9 7 1 $         Gr o s s  Pm t  (S a v i n g s ) ( 3 6 , 6 1 3 , 5 5 3 ) $                   Gr o s s  Pm t  (S a v i n g s ) ( 6 2 , 2 5 3 , 0 0 7 ) $             Gross  Pmt  (Savings) ( 8 9 , 9 1 6 , 3 4 0 ) $     NP V  Pm t s  @  3% $ 1 4 4 , 8 1 1 , 7 0 1 N P V  Pm t s  @  3% $ 1 3 4 , 3 1 4 , 1 1 0 N P V  Pmts  @  3% $ 1 2 1 , 8 4 5 , 4 6 1 NP V  Pm t s  @  3% $ 1 5 8 , 1 4 1 , 9 9 4 N P V  St a t u s  Qu o  Pm t s $ 1 5 8 , 1 4 1 , 9 9 4 N P V  St a t u s  Qu o  Pm t s $ 1 5 8 , 1 4 1 , 9 9 4 N P V  Status  Quo  Pmts $ 1 5 8 , 1 4 1 , 9 9 4    PV (  Sa v i n g s ) ( 1 3 , 3 3 0 , 2 9 3 ) $               (1 3 , 3 3 0 , 2 9 3 ) $     PV (  Sa v i n g s ) ( 2 3 , 8 2 7 , 8 8 4 ) $       (23,827,884) $       PV( Savings) ( 3 6 , 2 9 6 , 5 3 3 ) $    (36,296,533)$   Ye a r  80 %  Fu n d e d 2 0 2 1 Y e a r  80 %  Fu n d e d 2 0 2 0 Y e a r  80 %  Fu n d e d 2 0 2 0 Y e a r  80% Funded 2 0 1 9 Ye a r  10 0 %  Fu n d e d 2 0 4 5 Y e a r  10 0 %  Fu n d e d 2 0 3 5 Y e a r  10 0 %  Fu n d e d 2 0 3 1 Y e a r  100% Funded 2 0 2 6 MI S C E L L A N E O U S  UN F U N D E D  LI A B I L I T Y Cu r r e n t  Pl a n  ‐   St a t u s  Qu o Mi x e d A m o r t i z a t i o n B a s e s Al t e r n a t i v e  Fu n d i n g  Sc h e d u l e s 19 Y e a r F i x e d - L e v e l % o f P a y 1 5 Y e a r F i x e d - L e v e l % o f P a y 1 0 Y e a r F i x e d - L e v e l P e r c e n t o f P a y 5 At t a c h m e n t  A SA F E T Y  PL A N  ‐   AM O R T I Z A T I O N  BA S E S 6 At t a c h m e n t  A SA F E T Y  PL A N  ‐   CU R R E N T  AM O R T I Z A T I O N  SC H E D U L E 20 1 1  Fr e s h  St a r t 2 0 1 2  Ba s e  1 2 0 1 2  Ba s e  2 2 0 1 3  Ba s e Ba l a n c e P e r i o d P a y m e n t B a l a n c e P e r i o d P a y m e n t B a l a n c e P e r i o d P a y m e n t B a l a n c e P e r i o d P a y m e n t B a l a n c e P e r i o d P a y m e n t F u n d e d 20 1 3 16 3 , 2 0 3 , 4 5 2 6 2 . 7 % 20 1 4 16 8 , 2 9 9 , 2 7 7 6 3 . 5 % 1 2 0 1 6 11 7 , 6 6 4 , 4 4 4 $ 2 4 7 , 9 5 8 , 7 6 6 $ 9 9 8 , 9 3 9 $ 2 9 6 1 , 0 0 9 $ 1 0 , 5 1 1 , 9 8 6 $ 2 9 6 4 2 , 0 1 0 $ 4 3 , 1 7 1 , 2 4 8 $ 3 0 6 0 7 , 2 0 5 $ 1 7 2 , 3 4 6 , 6 1 7 $ 3 0 9 , 2 6 8 , 9 9 0 $ 64.6% 2 2 0 1 7 11 8 , 2 3 7 , 4 5 3 $ 2 3 8 , 1 9 7 , 5 2 9 $ 1 , 0 1 0 , 6 0 4 $ 2 8 6 2 , 8 4 0 $ 1 0 , 6 3 4 , 7 3 5 $ 2 8 6 6 1 , 2 7 0 $ 4 5 , 7 7 9 , 5 2 8 $ 2 9 1 , 2 5 0 , 8 4 3 $ 1 7 5 , 6 6 2 , 3 2 0 $ 2 9 1 0 , 1 7 2 , 4 8 1 $ 65.8% 3 2 0 1 8 11 8 , 6 0 5 , 8 8 3 $ 2 2 8 , 4 4 3 , 4 5 5 $ 1 , 0 2 1 , 2 4 6 $ 2 7 6 4 , 7 2 5 $ 1 0 , 7 4 6 , 7 2 1 $ 2 7 6 8 1 , 1 0 8 $ 4 7 , 9 1 6 , 0 9 1 $ 2 8 1 , 9 3 2 , 5 5 2 $ 1 7 8 , 2 8 9 , 9 4 0 $ 2 8 1 1 , 1 2 1 , 8 4 0 $ 67.0% 4 2 0 1 9 11 8 , 7 4 6 , 9 6 3 $ 2 1 8 , 6 9 6 , 7 5 9 $ 1 , 0 3 0 , 7 3 1 $ 2 6 6 6 , 6 6 6 $ 1 0 , 8 4 6 , 5 3 7 $ 2 6 7 0 1 , 5 4 1 $ 4 9 , 5 0 6 , 0 8 6 $ 2 7 2 , 6 5 4 , 0 3 8 $ 1 8 0 , 1 3 0 , 3 1 7 $ 2 7 1 2 , 1 1 9 , 0 0 4 $ 68.4% 5 2 0 2 0 11 8 , 6 3 5 , 9 9 4 $ 2 0 8 , 9 5 7 , 6 6 1 $ 1 , 0 3 8 , 9 1 4 $ 2 5 6 8 , 6 6 6 $ 1 0 , 9 3 2 , 6 5 4 $ 2 5 7 2 2 , 5 8 8 $ 5 0 , 4 6 7 , 2 7 8 $ 2 6 3 , 4 1 7 , 0 7 4 $ 1 8 1 , 0 7 4 , 8 4 0 $ 2 6 1 3 , 1 6 5 , 9 8 9 $ 69.9% 6 2 0 2 1 11 8 , 2 4 6 , 1 9 3 $ 1 9 9 , 2 2 6 , 3 9 1 $ 1 , 0 4 5 , 6 3 8 $ 2 4 7 0 , 7 2 6 $ 1 1 , 0 0 3 , 4 0 8 $ 2 4 7 4 4 , 2 6 5 $ 5 0 , 7 0 9 , 4 2 6 $ 2 5 3 , 5 1 9 , 5 8 6 $ 1 8 1 , 0 0 4 , 6 6 5 $ 2 5 1 3 , 5 6 0 , 9 6 9 $ 71.4% 7 2 0 2 2 11 7 , 5 4 8 , 5 3 1 $ 1 8 9 , 5 0 3 , 1 8 3 $ 1 , 0 5 0 , 7 3 0 $ 2 3 7 2 , 8 4 8 $ 1 1 , 0 5 6 , 9 9 3 $ 2 3 7 6 6 , 5 9 3 $ 5 0 , 8 6 3 , 4 4 9 $ 2 4 3 , 6 2 5 , 1 7 3 $ 1 8 0 , 5 1 9 , 7 0 3 $ 2 4 1 3 , 9 6 7 , 7 9 8 $ 73.0% 8 2 0 2 3 11 6 , 5 1 1 , 5 6 1 $ 1 7 9 , 7 8 8 , 2 7 9 $ 1 , 0 5 4 , 0 0 4 $ 2 2 7 5 , 0 3 4 $ 1 1 , 0 9 1 , 4 4 7 $ 2 2 7 8 9 , 5 9 1 $ 5 0 , 9 1 9 , 5 4 8 $ 2 3 3 , 7 3 3 , 9 2 8 $ 1 7 9 , 5 7 6 , 5 6 0 $ 2 3 1 4 , 3 8 6 , 8 3 2 $ 74.5% 9 2 0 2 4 11 5 , 1 0 1 , 2 2 5 $ 1 6 1 0 , 0 8 1 , 9 2 7 $ 1 , 0 5 5 , 2 5 8 $ 2 1 7 7 , 2 8 5 $ 1 1 , 1 0 4 , 6 4 0 $ 2 1 8 1 3 , 2 7 9 $ 5 0 , 8 6 7 , 0 9 5 $ 2 2 3 , 8 4 5 , 9 4 6 $ 1 7 8 , 1 2 8 , 2 1 7 $ 2 2 1 4 , 8 1 8 , 4 3 7 $ 76.0% 10 2 0 2 5 11 3 , 2 8 0 , 6 5 2 $ 1 5 1 0 , 3 8 4 , 3 8 5 $ 1 , 0 5 4 , 2 7 2 $ 2 0 7 9 , 6 0 3 $ 1 1 , 0 9 4 , 2 6 3 $ 2 0 8 3 7 , 6 7 7 $ 5 0 , 6 9 4 , 5 6 5 $ 2 1 3 , 9 6 1 , 3 2 5 $ 1 7 6 , 1 2 3 , 7 5 2 $ 2 1 1 5 , 2 6 2 , 9 9 0 $ 77.5% 11 2 0 2 6 11 1 , 0 0 9 , 9 4 2 $ 1 4 1 0 , 6 9 5 , 9 1 6 $ 1 , 0 5 0 , 8 0 8 $ 1 9 8 1 , 9 9 1 $ 1 1 , 0 5 7 , 8 1 0 $ 1 9 8 6 2 , 8 0 7 $ 5 0 , 3 8 9 , 4 6 8 $ 2 0 4 , 0 8 0 , 1 6 4 $ 1 7 3 , 5 0 8 , 0 2 8 $ 2 0 1 5 , 7 2 0 , 8 7 9 $ 79.0% 12 2 0 2 7 10 8 , 2 4 5 , 9 2 5 $ 1 3 1 1 , 0 1 6 , 7 9 4 $ 1 , 0 4 4 , 6 0 8 $ 1 8 8 4 , 4 5 1 $ 1 0 , 9 9 2 , 5 6 8 $ 1 8 8 8 8 , 6 9 2 $ 4 9 , 9 3 8 , 2 7 4 $ 1 9 4 , 2 0 2 , 5 6 9 $ 1 7 0 , 2 2 1 , 3 7 6 $ 1 9 1 6 , 1 9 2 , 5 0 6 $ 80.4% 13 2 0 2 8 10 4 , 9 4 1 , 9 1 5 $ 1 2 1 1 , 3 4 7 , 2 9 8 $ 1 , 0 3 5 , 3 9 3 $ 1 7 8 6 , 9 8 5 $ 1 0 , 8 9 5 , 5 9 6 $ 1 7 9 1 5 , 3 5 2 $ 4 9 , 3 2 6 , 3 2 8 $ 1 8 4 , 3 2 8 , 6 4 6 $ 1 6 6 , 1 9 9 , 2 3 1 $ 1 8 1 6 , 6 7 8 , 2 8 1 $ 81.9% 14 2 0 2 9 10 1 , 0 4 7 , 4 3 0 $ 1 1 1 1 , 6 8 7 , 7 1 7 $ 1 , 0 2 2 , 8 6 0 $ 1 6 8 9 , 5 9 4 $ 1 0 , 7 6 3 , 7 0 8 $ 1 6 9 4 2 , 8 1 3 $ 4 8 , 5 3 7 , 7 6 6 $ 1 7 4 , 4 5 8 , 5 0 6 $ 1 6 1 , 3 7 1 , 7 6 4 $ 1 7 1 7 , 1 7 8 , 6 2 9 $ 83.3% 15 2 0 3 0 96 , 5 0 7 , 9 0 5 $ 1 0 1 2 , 0 3 8 , 3 4 8 $ 1 , 0 0 6 , 6 8 1 $ 1 5 9 2 , 2 8 2 $ 1 0 , 5 9 3 , 4 5 7 $ 1 5 9 7 1 , 0 9 7 $ 4 7 , 5 5 5 , 4 2 1 $ 1 6 4 , 5 9 2 , 2 6 1 $ 1 5 5 , 6 6 3 , 4 6 4 $ 1 6 1 7 , 6 9 3 , 9 8 8 $ 84.7% 16 2 0 3 1 91 , 2 6 4 , 3 7 3 $ 9 1 2 , 3 9 9 , 4 9 8 $ 9 8 6 , 5 0 2 $ 1 4 9 5 , 0 5 0 $ 1 0 , 3 8 1 , 1 1 1 $ 1 4 1 , 0 0 0 , 2 3 0 $ 4 6 , 3 6 0 , 7 2 0 $ 1 5 4 , 7 3 0 , 0 2 9 $ 1 4 8 , 9 9 2 , 7 0 6 $ 1 5 1 8 , 2 2 4 , 8 0 8 $ 86.1% 17 2 0 3 2 85 , 2 5 3 , 1 2 7 $ 8 1 2 , 7 7 1 , 4 8 3 $ 9 6 1 , 9 3 9 $ 1 3 9 7 , 9 0 2 $ 1 0 , 1 2 2 , 6 3 4 $ 1 3 1 , 0 3 0 , 2 3 7 $ 4 4 , 9 3 3 , 5 7 6 $ 1 4 4 , 8 7 1 , 9 3 0 $ 1 4 1 , 2 7 1 , 2 7 6 $ 1 4 1 8 , 7 7 1 , 5 5 2 $ 87.5% 18 2 0 3 3 78 , 4 0 5 , 3 5 6 $ 7 1 3 , 1 5 4 , 6 2 8 $ 9 3 2 , 5 7 8 $ 1 2 1 0 0 , 8 3 9 $ 9 , 8 1 3 , 6 5 9 $ 1 2 1 , 0 6 1 , 1 4 4 $ 4 3 , 2 5 2 , 2 7 0 $ 1 3 5 , 0 1 8 , 0 8 8 $ 1 3 2 , 4 0 3 , 8 6 2 $ 1 3 1 9 , 3 3 4 , 6 9 9 $ 88.9% 19 2 0 3 4 70 , 6 4 6 , 7 4 9 $ 6 1 3 , 5 4 9 , 2 6 7 $ 8 9 7 , 9 6 9 $ 1 1 1 0 3 , 8 6 4 $ 9 , 4 4 9 , 4 6 6 $ 1 1 1 , 0 9 2 , 9 7 9 $ 4 1 , 2 9 3 , 3 2 6 $ 1 2 5 , 1 6 8 , 6 3 0 $ 1 2 2 , 2 8 7 , 5 1 0 $ 1 2 1 9 , 9 1 4 , 7 4 0 $ 90.3% 20 2 0 3 5 61 , 8 9 7 , 0 7 6 $ 5 1 3 , 9 5 5 , 7 4 5 $ 8 5 7 , 6 2 8 $ 1 0 1 0 6 , 9 8 0 $ 9 , 0 2 4 , 9 5 1 $ 1 0 1 , 1 2 5 , 7 6 8 $ 3 9 , 0 3 1 , 3 7 5 $ 1 1 5 , 3 2 3 , 6 8 9 $ 1 1 0 , 8 1 1 , 0 3 1 $ 1 1 2 0 , 5 1 2 , 1 8 2 $ 91.7% 21 2 0 3 6 52 , 0 6 9 , 7 3 3 $ 4 1 4 , 3 7 4 , 4 1 7 $ 8 1 1 , 0 3 1 $ 9 1 1 0 , 1 9 0 $ 8 , 5 3 4 , 6 0 1 $ 9 1 , 1 5 9 , 5 4 1 $ 3 6 , 4 3 9 , 0 1 0 $ 1 0 5 , 4 8 3 , 4 0 0 $ 9 7 , 8 5 4 , 3 7 6 $ 1 0 2 1 , 1 2 7 , 5 4 7 $ 93.0% 22 2 0 3 7 41 , 0 7 1 , 2 5 0 $ 3 1 4 , 8 0 5 , 6 5 0 $ 7 5 7 , 6 1 1 $ 8 1 1 3 , 4 9 5 $ 7 , 9 7 2 , 4 5 9 $ 8 1 , 1 9 4 , 3 2 7 $ 3 3 , 4 8 6 , 6 2 6 $ 9 5 , 6 4 7 , 9 0 2 $ 8 3 , 2 8 7 , 9 4 6 $ 9 2 1 , 7 6 1 , 3 7 4 $ 94.4% 23 2 0 3 8 28 , 8 0 0 , 7 7 0 $ 2 1 5 , 2 4 9 , 8 1 9 $ 6 9 6 , 7 5 8 $ 7 1 1 6 , 9 0 0 $ 7 , 3 3 2 , 0 8 9 $ 7 1 , 2 3 0 , 1 5 7 $ 3 0 , 1 4 2 , 2 5 4 $ 8 5 , 8 1 7 , 3 3 9 $ 6 6 , 9 7 1 , 8 7 0 $ 8 2 2 , 4 1 4 , 2 1 5 $ 95.7% 24 2 0 3 9 15 , 1 4 9 , 4 7 9 $ 1 1 5 , 7 0 7 , 3 1 4 $ 6 2 7 , 8 1 0 $ 6 1 2 0 , 4 0 7 $ 6 , 6 0 6 , 5 4 1 $ 6 1 , 2 6 7 , 0 6 2 $ 2 6 , 3 7 1 , 3 7 7 $ 7 5 , 9 9 1 , 8 5 9 $ 4 8 , 7 5 5 , 2 0 7 $ 7 2 3 , 0 8 6 , 6 4 2 $ 97.0% 25 2 0 4 0 55 0 , 0 5 5 $ 5 1 2 4 , 0 1 9 $ 5 , 7 8 8 , 3 1 4 $ 5 1 , 3 0 5 , 0 7 4 $ 2 2 , 1 3 6 , 7 3 9 $ 6 6 , 1 7 1 , 6 1 5 $ 2 8 , 4 7 5 , 1 0 8 $ 6 7 , 6 0 0 , 7 0 8 $ 98.4% 26 2 0 4 1 46 2 , 7 2 3 $ 4 1 2 7 , 7 4 0 $ 4 , 8 6 9 , 3 0 9 $ 4 1 , 3 4 4 , 2 2 6 $ 1 7 , 3 9 8 , 1 2 8 $ 5 6 , 3 5 6 , 7 6 3 $ 2 2 , 7 3 0 , 1 6 0 $ 5 7 , 8 2 8 , 7 2 9 $ 98.8% 27 2 0 4 2 36 4 , 9 8 4 $ 3 1 3 1 , 5 7 2 $ 3 , 8 4 0 , 7 8 4 $ 3 1 , 3 8 4 , 5 5 3 $ 1 2 , 1 1 2 , 1 5 5 $ 4 5 , 2 3 7 , 9 7 3 $ 1 6 , 3 1 7 , 9 2 3 $ 4 6 , 7 5 4 , 0 9 8 $ 99.2% 28 2 0 4 3 25 5 , 9 4 1 $ 2 1 3 5 , 5 1 9 $ 2 , 6 9 3 , 3 0 8 $ 2 1 , 4 2 6 , 0 8 9 $ 7 , 5 8 9 , 7 2 1 $ 3 4 , 0 4 6 , 3 3 4 $ 1 0 , 5 3 8 , 9 7 0 $ 3 5 , 6 0 7 , 9 4 2 $ 99.5% 29 2 0 4 4 13 4 , 6 2 8 $ 1 1 3 9 , 5 8 5 $ 1 , 4 1 6 , 7 0 6 $ 1 1 , 4 6 8 , 8 7 2 $ 3 , 9 6 3 , 6 2 1 $ 2 2 , 7 7 8 , 4 8 3 $ 5 , 5 1 4 , 9 5 4 $ 2 4 , 3 8 6 , 9 3 9 $ 99.7% 30 2 0 4 5 1, 3 8 0 , 1 0 0 $ 1 1 , 4 3 0 , 9 1 9 $ 1 , 3 8 0 , 1 0 0 $ 1 1 , 4 3 0 , 9 1 9 $ 99.9% Su m  of  Pm t s 4 3 0 , 0 6 6 , 7 0 6 $   NP V  Pm t s  @  3% $ 2 8 1 , 8 7 8 , 2 5 6 30 Y r F i x e d - L e v e l % o f P a y 3 0 Y r F i x e d - L e v e l % o f P a y 3 0 Y r F i x e d - L e v e l % o f P a y F i x e d 3 0 Y r w i t h 5 Y r R a m p s SA F E T Y  UN F U N D E D  LIABILIT Y Ca s h  Fl o w  ‐   Op t i o n  1  ‐ Status  Quo Mi x e d A m o r t CU R R E N T  FU N D I N G  SC H E D U L E 7 At t a c h m e n t  A SA F E T Y  PL A N  ‐   AL T E R N A T I V E  FU N D I N G  SC H E D U L E S Ba l a n c e Y e a r P a y m e n t F u n d e d B a l a n c e P e r i o d P a y m e n t P m t . D i f f . F u n d e d B a l a n c e P e r i o d P a y m e n t P m t . D i f f . F u n d e d B a l a n c e P e r i o d P a y m e n t P m t . D i f f . F unded 20 1 3 16 3 , 2 0 3 , 4 5 2 $ - 6 2 . 7 % 1 6 3 , 2 0 3 , 4 5 2 $ 6 2 . 7 % 1 6 3 , 2 0 3 , 4 5 2 $ 6 2 . 7 % 1 6 3 , 2 0 3 , 4 5 2 $ 62.7% 20 1 4 16 8 , 2 9 9 , 2 7 7 $ - 6 3 . 5 % 1 6 8 , 2 9 9 , 2 7 7 $ 6 3 . 5 % 1 6 8 , 2 9 9 , 2 7 7 $ 6 3 . 5 % 1 6 8 , 2 9 9 , 2 7 7 $ 63.5% 1 2 0 1 6 17 2 , 3 4 6 , 6 1 7 $ 3 0 9 , 2 6 8 , 9 9 0 6 4 . 6 % 1 7 2 , 3 4 6 , 6 1 7 $ 1 9 1 3 , 4 4 7 , 6 8 3 $ 4 , 1 7 8 , 6 9 3 $ 6 4 . 6 % 1 7 2 , 3 4 6 , 6 1 7 $ 1 5 1 5 , 7 9 8 , 9 3 4 $ 6 , 5 2 9 , 9 4 4 $ 6 4 . 6 % 1 7 2 , 3 4 6 , 6 1 7 $ 10 21,498,431 $ 12,229,441 $ 64.6% 2 2 0 1 7 17 5 , 6 6 2 , 3 2 0 $ 2 9 1 0 , 1 7 2 , 4 8 1 6 5 . 8 % 1 7 1 , 3 2 9 , 7 5 9 $ 1 8 1 3 , 8 5 1 , 1 1 4 $ 3 , 6 7 8 , 6 3 2 $ 6 6 . 6 % 1 6 8 , 8 9 1 , 9 3 0 $ 1 4 1 6 , 2 7 2 , 9 0 2 $ 6 , 1 0 0 , 4 2 1 $ 6 7 . 1 % 1 6 2 , 9 8 2 , 5 6 5 $ 9 22,143,384 $ 11,970,903 $ 68.2% 3 2 0 1 8 17 8 , 2 8 9 , 9 4 0 $ 2 8 1 1 , 1 2 1 , 8 4 0 6 7 . 0 % 1 6 9 , 8 1 8 , 3 5 0 $ 1 7 1 4 , 2 6 6 , 6 4 7 $ 3 , 1 4 4 , 8 0 7 $ 6 8 . 6 % 1 6 4 , 6 8 6 , 7 2 0 $ 1 3 1 6 , 7 6 1 , 0 8 9 $ 5 , 6 3 9 , 2 5 0 $ 6 9 . 5 % 1 5 2 , 2 4 7 , 5 0 8 $ 8 22,807,686 $ 11,685,846 $ 71.8% 4 2 0 1 9 18 0 , 1 3 0 , 3 1 7 $ 2 7 1 2 , 1 1 9 , 0 0 4 6 8 . 4 % 1 6 7 , 7 6 2 , 7 5 2 $ 1 6 1 4 , 6 9 4 , 6 4 6 $ 2 , 5 7 5 , 6 4 2 $ 7 0 . 6 % 1 5 9 , 6 5 9 , 9 5 7 $ 1 2 1 7 , 2 6 3 , 9 2 2 $ 5 , 1 4 4 , 9 1 8 $ 7 2 . 0 % 1 4 0 , 0 1 8 , 5 6 0 $ 7 23,491,916 $ 11,372,912 $ 75.4% 5 2 0 2 0 18 1 , 0 7 4 , 8 4 0 $ 2 6 1 3 , 1 6 5 , 9 8 9 6 9 . 9 % 1 6 5 , 1 0 9 , 2 2 5 $ 1 5 1 5 , 1 3 5 , 4 8 6 $ 1 , 9 6 9 , 4 9 7 $ 7 2 . 5 % 1 5 3 , 7 3 4 , 8 3 8 $ 1 1 1 7 , 7 8 1 , 8 4 0 $ 4 , 6 1 5 , 8 5 1 $ 7 4 . 4 % 1 2 6 , 1 6 3 , 0 1 5 $ 6 24,196,674 $ 11,030,685 $ 79.0% 6 2 0 2 1 18 1 , 0 0 4 , 6 6 5 $ 2 5 1 3 , 5 6 0 , 9 6 9 7 1 . 4 % 1 6 1 , 7 9 9 , 6 1 1 $ 1 4 1 5 , 5 8 9 , 5 5 0 $ 2 , 0 2 8 , 5 8 2 $ 7 4 . 5 % 1 4 6 , 8 2 8 , 3 4 7 $ 1 0 1 8 , 3 1 5 , 2 9 5 $ 4 , 7 5 4 , 3 2 6 $ 7 6 . 8 % 1 1 0 , 5 3 7 , 5 9 5 $ 5 24,922,574 $ 11,361,605 $ 82.6% 7 2 0 2 2 18 0 , 5 1 9 , 7 0 3 $ 2 4 1 3 , 9 6 7 , 7 9 8 7 3 . 0 % 1 5 7 , 7 7 0 , 9 9 1 $ 1 3 1 6 , 0 5 7 , 2 3 7 $ 2 , 0 8 9 , 4 3 9 $ 7 6 . 4 % 1 3 8 , 8 5 0 , 7 7 1 $ 9 1 8 , 8 6 4 , 7 5 4 $ 4 , 8 9 6 , 9 5 6 $ 7 9 . 2 % 9 2 , 9 8 7 , 6 4 0 $ 4 25,670,251 $ 11,702,453 $ 86.1% 8 2 0 2 3 17 9 , 5 7 6 , 5 6 0 $ 2 3 1 4 , 3 8 6 , 8 3 2 7 4 . 5 % 1 5 2 , 9 5 5 , 3 1 8 $ 1 2 1 6 , 5 3 8 , 9 5 4 $ 2 , 1 5 2 , 1 2 2 $ 7 8 . 3 % 1 2 9 , 7 0 5 , 1 8 6 $ 8 1 9 , 4 3 0 , 6 9 6 $ 5 , 0 4 3 , 8 6 5 $ 8 1 . 6 % 7 3 , 3 4 6 , 2 3 0 $ 3 26,440,359 $ 12,053,527 $ 89.6% 9 2 0 2 4 17 8 , 1 2 8 , 2 1 7 $ 2 2 1 4 , 8 1 8 , 4 3 7 7 6 . 0 % 1 4 7 , 2 7 9 , 0 1 4 $ 1 1 1 7 , 0 3 5 , 1 2 3 $ 2 , 2 1 6 , 6 8 6 $ 8 0 . 2 % 1 1 9 , 2 8 6 , 9 0 0 $ 7 2 0 , 0 1 3 , 6 1 7 $ 5 , 1 9 5 , 1 8 1 $ 8 3 . 9 % 5 1 , 4 3 3 , 2 5 0 $ 2 27,233,569 $ 12,415,133 $ 93.1% 10 2 0 2 5 17 6 , 1 2 3 , 7 5 2 $ 2 1 1 5 , 2 6 2 , 9 9 0 7 7 . 5 % 1 4 0 , 6 6 2 , 5 4 9 $ 1 0 1 7 , 5 4 6 , 1 7 6 $ 2 , 2 8 3 , 1 8 7 $ 8 2 . 0 % 1 0 7 , 4 8 2 , 8 5 8 $ 6 2 0 , 6 1 4 , 0 2 6 $ 5 , 3 5 1 , 0 3 6 $ 8 6 . 3 % 2 7 , 0 5 4 , 3 7 8 $ 1 28,050,577 $ 12,787,587 $ 96.5% 11 2 0 2 6 17 3 , 5 0 8 , 0 2 8 $ 2 0 1 5 , 7 2 0 , 8 7 9 7 9 . 0 % 1 3 3 , 0 1 9 , 9 7 8 $ 9 1 8 , 0 7 2 , 5 6 2 $ 2 , 3 5 1 , 6 8 2 $ 8 3 . 9 % 9 4 , 1 7 0 , 9 9 5 $ 5 2 1 , 2 3 2 , 4 4 7 $ 5 , 5 1 1 , 5 6 7 $ 8 8 . 6 % - $ - -$ (15,720,879)$ 100.0% 12 2 0 2 7 17 0 , 2 2 1 , 3 7 6 $ 1 9 1 6 , 1 9 2 , 5 0 6 8 0 . 4 % 1 2 4 , 2 5 8 , 4 4 5 $ 8 1 8 , 6 1 4 , 7 3 9 $ 2 , 4 2 2 , 2 3 3 $ 8 5 . 7 % 7 9 , 2 1 9 , 5 5 1 $ 4 2 1 , 8 6 9 , 4 2 0 $ 5 , 6 7 6 , 9 1 4 $ 9 0 . 9 % ( 1 6 , 1 9 2 , 5 0 6 ) $ 13 2 0 2 8 16 6 , 1 9 9 , 2 3 1 $ 1 8 1 6 , 6 7 8 , 2 8 1 8 1 . 9 % 1 1 4 , 2 7 7 , 6 5 7 $ 7 1 9 , 1 7 3 , 1 8 1 $ 2 , 4 9 4 , 9 0 0 $ 8 7 . 5 % 6 2 , 4 8 6 , 3 2 0 $ 3 2 2 , 5 2 5 , 5 0 3 $ 5 , 8 4 7 , 2 2 2 $ 9 3 . 2 % ( 1 6 , 6 7 8 , 2 8 1 ) $ 14 2 0 2 9 16 1 , 3 7 1 , 7 6 4 $ 1 7 1 7 , 1 7 8 , 6 2 9 8 3 . 3 % 1 0 2 , 9 6 9 , 3 0 4 $ 6 1 9 , 7 4 8 , 3 7 6 $ 2 , 5 6 9 , 7 4 7 $ 8 9 . 4 % 4 3 , 8 1 7 , 8 5 5 $ 2 2 3 , 2 0 1 , 2 6 8 $ 6 , 0 2 2 , 6 3 8 $ 9 5 . 5 % ( 1 7 , 1 7 8 , 6 2 9 ) $ 15 2 0 3 0 15 5 , 6 6 3 , 4 6 4 $ 1 6 1 7 , 6 9 3 , 9 8 8 8 4 . 7 % 9 0 , 2 1 6 , 4 5 0 $ 5 2 0 , 3 4 0 , 8 2 7 $ 2 , 6 4 6 , 8 3 9 $ 9 1 . 2 % 2 3 , 0 4 8 , 6 0 8 $ 1 2 3 , 8 9 7 , 3 0 6 $ 6 , 2 0 3 , 3 1 7 $ 9 7 . 7 % ( 1 7 , 6 9 3 , 9 8 8 ) $ 16 2 0 3 1 14 8 , 9 9 2 , 7 0 6 $ 1 5 1 8 , 2 2 4 , 8 0 8 8 6 . 1 % 7 5 , 8 9 2 , 8 6 5 $ 4 2 0 , 9 5 1 , 0 5 2 $ 2 , 7 2 6 , 2 4 4 $ 9 2 . 9 % - $ - - $ ( 1 8 , 2 2 4 , 8 0 8 ) $ 1 0 0 . 0 % ( 1 8 , 2 2 4 , 8 0 8 ) $ 17 2 0 3 2 14 1 , 2 7 1 , 2 7 6 $ 1 4 1 8 , 7 7 1 , 5 5 2 8 7 . 5 % 5 9 , 8 6 2 , 3 1 7 $ 3 2 1 , 5 7 9 , 5 8 4 $ 2 , 8 0 8 , 0 3 2 $ 9 4 . 7 % ( 1 8 , 7 7 1 , 5 5 2 ) $ (18,771,552)$ 18 2 0 3 3 13 2 , 4 0 3 , 8 6 2 $ 1 3 1 9 , 3 3 4 , 6 9 9 8 8 . 9 % 4 1 , 9 7 7 , 8 0 2 $ 2 2 2 , 2 2 6 , 9 7 1 $ 2 , 8 9 2 , 2 7 2 $ 9 6 . 5 % ( 1 9 , 3 3 4 , 6 9 9 ) $ (19,334,699)$ 19 2 0 3 4 12 2 , 2 8 7 , 5 1 0 $ 1 2 1 9 , 9 1 4 , 7 4 0 9 0 . 3 % 2 2 , 0 8 0 , 7 2 3 $ 1 2 2 , 8 9 3 , 7 8 0 $ 2 , 9 7 9 , 0 4 1 $ 9 8 . 2 % ( 1 9 , 9 1 4 , 7 4 0 ) $ (19,914,740)$ 20 2 0 3 5 11 0 , 8 1 1 , 0 3 1 $ 1 1 2 0 , 5 1 2 , 1 8 2 9 1 . 7 % - $ - - $ ( 2 0 , 5 1 2 , 1 8 2 ) $ 1 0 0 . 0 % ( 2 0 , 5 1 2 , 1 8 2 ) $ (20,512,182)$ 21 2 0 3 6 97 , 8 5 4 , 3 7 6 $ 1 0 2 1 , 1 2 7 , 5 4 7 9 3 . 0 % ( 2 1 , 1 2 7 , 5 4 7 ) $ (21,127,547) $ (21,127,547)$ 22 2 0 3 7 83 , 2 8 7 , 9 4 6 $ 9 2 1 , 7 6 1 , 3 7 4 9 4 . 4 % ( 2 1 , 7 6 1 , 3 7 4 ) $ (21,761,374) $ (21,761,374)$ 23 2 0 3 8 66 , 9 7 1 , 8 7 0 $ 8 2 2 , 4 1 4 , 2 1 5 9 5 . 7 % ( 2 2 , 4 1 4 , 2 1 5 ) $ (22,414,215) $ (22,414,215)$ 24 2 0 3 9 48 , 7 5 5 , 2 0 7 $ 7 2 3 , 0 8 6 , 6 4 2 9 7 . 0 % ( 2 3 , 0 8 6 , 6 4 2 ) $ (23,086,642) $ (23,086,642)$ 25 2 0 4 0 28 , 4 7 5 , 1 0 8 $ 6 7 , 6 0 0 , 7 0 8 9 8 . 4 % ( 7 , 6 0 0 , 7 0 8 ) $ (7,600,708) $ (7,600,708)$ 26 2 0 4 1 22 , 7 3 0 , 1 6 0 $ 5 7 , 8 2 8 , 7 2 9 9 8 . 8 % ( 7 , 8 2 8 , 7 2 9 ) $ (7,828,729) $ (7,828,729)$ 27 2 0 4 2 16 , 3 1 7 , 9 2 3 $ 4 6 , 7 5 4 , 0 9 8 9 9 . 2 % ( 6 , 7 5 4 , 0 9 8 ) $ (6,754,098) $ (6,754,098)$ 28 2 0 4 3 10 , 5 3 8 , 9 7 0 $ 3 5 , 6 0 7 , 9 4 2 9 9 . 5 % ( 5 , 6 0 7 , 9 4 2 ) $ (5,607,942) $ (5,607,942)$ 29 2 0 4 4 5, 5 1 4 , 9 5 4 $ 2 4 , 3 8 6 , 9 3 9 9 9 . 7 % ( 4 , 3 8 6 , 9 3 9 ) $ (4,386,939) $ (4,386,939)$ 30 2 0 4 5 1, 3 8 0 , 1 0 0 $ 1 1 , 4 3 0 , 9 1 9 9 9 . 9 % ( 1 , 4 3 0 , 9 1 9 ) $ (1,430,919) $ (1,430,919)$ Su m  of  Pm t s 3 3 7 , 7 6 3 , 6 8 9 $               (9 2 , 3 0 3 , 0 1 7 ) $     Su m  of  Pm t s 2 9 3 , 8 4 3 , 0 1 8 $     (136,223,688) $   Sum  of  Pmts 2 4 6 , 4 5 5 , 4 2 1 $   (183,611,286)$     Su m  of  Pm t s 4 3 0 , 0 6 6 , 7 0 6 $     St a t u s  Qu o  Pm t s 4 3 0 , 0 6 6 , 7 0 6 $               St a t u s  Qu o  Pm t s 4 3 0 , 0 6 6 , 7 0 6 $     Status  Quo  Pmts 4 3 0 , 0 6 6 , 7 0 6 $         Gr o s s  Pm t  (S a v i n g s ) ( 9 2 , 3 0 3 , 0 1 7 ) $                     Gr o s s  Pm t  (S a v i n g s ) ( 1 3 6 , 2 2 3 , 6 8 8 ) $         Gross  Pmt  (Savings) ( 1 8 3 , 6 1 1 , 2 8 6 ) $   NP V  Pm t s  @  3% $ 2 4 8 , 0 6 4 , 0 5 9 N P V  Pm t s  @  3% $ 2 3 0 , 0 8 1 , 5 6 7 N P V  Pmts  @  3% $ 2 0 8 , 7 2 2 , 6 3 3 NP V  Pm t s  @  3% $ 2 8 1 , 8 7 8 , 2 5 6 N P V  St a t u s  Qu o  Pm t s $ 2 8 1 , 8 7 8 , 2 5 6 N P V  St a t u s  Qu o  Pm t s $ 2 8 1 , 8 7 8 , 2 5 6 N P V  Status  Quo  Pmts $ 2 8 1 , 8 7 8 , 2 5 6    PV (  Sa v i n g s ) ( 3 3 , 8 1 4 , 1 9 8 ) $                 (3 3 , 8 1 4 , 1 9 8 ) $       PV (  Sa v i n g s ) ( 5 1 , 7 9 6 , 6 8 9 ) $       (51,796,689) $           PV( Savings) ( 7 3 , 1 5 5 , 6 2 3 ) $    (73,155,623)$        Ye a r  80 %  Fu n d e d 2 0 2 7 Y e a r  80 %  Fu n d e d 2 0 2 4 Y e a r  80 %  Fu n d e d 2 0 2 3 Y e a r  80% Funded 2 0 2 1 Ye a r  10 0 %  Fu n d e d 2 0 4 5 Y e a r  10 0 %  Fu n d e d 2 0 3 5 Y e a r  10 0 %  Fu n d e d 2 0 3 1 Y e a r  100% Funded 2 0 2 6 SA F E T Y  UN F U N D E D  LI A B I L I T Y  Cu r r e n t  Sc h e d u l e ‐  St a t u s  Qu o Al t e r n a t i v e  Fu n d i n g  Sc h e d u l e s Mi x e d A m o r t i z a t i o n B a s e s 1 9 Y e a r F i x e d - L e v e l % o f P a y 1 5 Y e a r F i x e d - L e v e l % o f P a y 1 0 Y e a r F i x e d - L e v e l % o f P a y 8 California Public Employees’ Retirement System Actuarial Office P.O. Box 942701 Sacramento, CA 94229-2701 TTY: (916) 795-3240 (888) 225-7377 phone • (916) 795-2744 fax www.calpers.ca.gov October 2014 SAFETY PLAN OF THE CITY OF NEWPORT BEACH (CalPERS ID: 1545983430) Annual Valuation Report as of June 30, 2013 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2013 actuarial valuation report of your pension plan. Your 2013 actuarial valuation report contains important actuarial information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature appears in the Actuarial Certification Section on page 1, is available to discuss the report with you after October 31, 2014. Future Contribution Rates The exhibit below displays the Minimum Employer Contribution Rate for fiscal year 2015-16 and a projected contribution rate for 2016-17, before any cost sharing. The projected rate for 2016-17 is based on the most recent information available, including an estimate of the investment return for fiscal year 2013-14, namely 18 percent, and the impact of the actuarial assumptions adopted by the CalPERS Board in February 2014 that will impact employer rates for the first time in fiscal year 2016-17. For a projection of employer rates beyond 2016-17, please refer to the “Projected Rates” in the “Risk Analysis” section, which includes rate projections through 2020-21 under a variety of investment return scenarios. Please disregard any projections that we may have provided you in the past. Fiscal Year Employer Contribution Rate 2015-16 46.910% 2016-17 49.9% (projected) Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the above rates. The employer contribution rates in this report do not reflect any cost sharing arrangement you may have with your employees. The estimate for 2016-17 also assumes that there are no future contract amendments and no liability gains or losses (such as larger than expected pay increases, more retirements than expected, etc.). This is a very important assumption because these gains and losses do occur and can have a significant impact on your contribution rate. Even for the largest plans, such gains and losses often cause a change in the employer’s contribution rate of one or two percent of payroll and may be even larger in some less common instances. These gains and losses cannot be predicted in advance so the projected employer contribution rates are just estimates. Your actual rate for 2016-17 will be provided in next year’s report. SAFETY PLAN OF THE CITY OF NEWPORT BEACH (CalPERS ID: 1545983430) Annual Valuation Report as of June 30, 2013 Page 2 Changes since the Prior Year’s Valuation On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of the PEPRA changes are included in the rates and the benefit provision listings of the June 30, 2013 valuation for the 2015-16 rates. For more information on PEPRA, please refer to the CalPERS website. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS will no longer use an actuarial value of assets and will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. Besides the above noted changes, there may also be changes specific to your plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix A, “Actuarial Methods and Assumptions.” The effect of the changes on your rate is included in the “Reconciliation of Required Employer Contributions.” We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after October 31 to contact us with actuarial questions. If you have other questions, you may call the Customer Contact Center at (888)-CalPERS or (888-225-7377). Sincerely, ALAN MILLIGAN Chief Actuary ACTUARIAL VALUATION as of June 30, 2013 for the SAFETY PLAN of the CITY OF NEWPORT BEACH (CalPERS ID: 1545983430) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR July 1, 2015 – June 30, 2016 THIS PAGE INTENTIONALLY LEFT BLANK TABLE OF CONTENTS ACTUARIAL CERTIFICATION 1 HIGHLIGHTS AND EXECUTIVE SUMMARY Introduction 5 Purpose of the Report 5 Required Employer Contribution 6 Plan’s Funded Status 6 Cost 7 Changes Since the Prior Year’s Valuation 8 Subsequent Events 8 ASSETS Reconciliation of the Market Value of Assets 11 Asset Allocation 12 CalPERS History of Investment Returns 13 LIABILITIES AND RATES Development of Accrued and Unfunded Liabilities 17 (Gain) / Loss Analysis 06/30/12 - 06/30/13 18 Schedule of Amortization Bases 19 Alternate Amortization Schedules 20 Reconciliation of Required Employer Contributions 21 Employer Contribution Rate History 22 Funding History 22 RISK ANALYSIS Volatility Ratios 25 Projected Rates 26 Analysis of Future Investment Return Scenarios 26 Analysis of Discount Rate Sensitivity 27 Hypothetical Termination Liability 28 GASB STATEMENT NO. 27 Information for Compliance with GASB Statement No. 27 31 PLAN’S MAJOR BENEFIT PROVISIONS Plan’s Major Benefit Options 35 APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data A1 Actuarial Methods A1 – A2 Actuarial Assumptions A3 – A20 Miscellaneous A20 – A21 APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B9 APPENDIX C – PARTICIPANT DATA Summary of Valuation Data C1 Active Members C2 Transferred and Terminated Members C3 Retired Members and Beneficiaries C4 – C5 APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1 APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E3 (CY) FIN PROCESS CONTROL ID: 432419 (PY) FIN PROCESS CONTROL ID: 404359 REPORT ID: 76159 THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 1 ACTUARIAL CERTIFICATION To the best of our knowledge, this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the SAFETY PLAN OF THE CITY OF NEWPORT BEACH. This valuation is based on the member and financial data as of June 30, 2013 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law. The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. KERRY J. WORGAN, MAAA, FSA, FCIA Senior Pension Actuary, CalPERS THIS PAGE INTENTIONALLY LEFT BLANK HIGHLIGHTS AND EXECUTIVE SUMMARY  INTRODUCTION  PURPOSE OF THE REPORT  REQUIRED EMPLOYER CONTRIBUTION  PLAN’S FUNDED STATUS  COST  CHANGES SINCE THE PRIOR YEAR’S VALUATION  SUBSEQUENT EVENTS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 5 Introduction This report presents the results of the June 30, 2013 actuarial valuation of the SAFETY PLAN OF THE CITY OF NEWPORT BEACH of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the fiscal year 2015-16 required employer contribution rates. On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of most of the PEPRA changes are included in the rates and the benefit provision listings of the June 30, 2013 valuation, which sets the 2015-16 contribution rates. For more information on PEPRA, please refer to the CalPERS website. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing policy, which spread investment returns over a 15-year period while experience gains and losses were amortized over a rolling 30-year period. Effective with the June 30, 2013 valuations, CalPERS will no longer use an actuarial value of assets and will employ an amortization and smoothing policy that will spread rate increases or decreases over a 5-year period, and will amortize all experience gains and losses over a fixed 30-year period. The new amortization and smoothing policy is used in this valuation. In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp- up/ramp-down in accordance with Board policy. Purpose of the Report The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2013. The purpose of the report is to:  Set forth the assets and accrued liabilities of this plan as of June 30, 2013;  Determine the required employer contribution rate for the fiscal year July 1, 2015 through June 30, 2016;  Provide actuarial information as of June 30, 2013 to the CalPERS Board of Administration and other interested parties; and to  Provide pension information as of June 30, 2013 to be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit Pension Plan. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception of including the original base amounts of the various components of the unfunded liability in the Schedule of Amortization Bases shown on page 19. Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document:  A “Deterministic Stress Test,” projecting future results under different investment income scenarios  A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or minus change in the discount rate. CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 6 The use of this report for any other purposes may be inappropriate. In particular, this report does not contain information applicable to alternative benefit costs. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above. Required Employer Contribution Fiscal Year Fiscal Year 2014-15 2015-16 Actuarially Determined Employer Contributions 1. Contribution in Projected Dollars a) Total Normal Cost $ 8,223,593 $ 8,301,212 b) Employee Contribution1 2,796,929 2,828,352 c) Employer Normal Cost [(1a) – (1b)] 5,426,664 5,472,860 d) Unfunded Liability Contribution 8,409,499 9,268,990 e) Required Employer Contribution [(1c) + (1d)] $ 13,836,163 $ 14,741,850 Projected Annual Payroll for Contribution Year $ 31,076,988 $ 31,426,132 2. Contribution as a Percentage of Payroll a) Total Normal Cost 26.462% 26.415% b) Employee Contribution1 9.000% 9.000% c) Employer Normal Cost [(2a) – (2b)] 17.462% 17.415% d) Unfunded Liability Rate 27.060% 29.495% e) Required Employer Rate [(2c) + (2d)] 44.522% 46.910% Minimum Employer Contribution Rate2 44.522% 46.910% Annual Lump Sum Prepayment Option3 $ 13,344,781 $ 14,218,303 1For classic members this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee cost sharing is not shown in this report. 2The Minimum Employer Contribution Rate under PEPRA is the greater of the required employer rate or the employer normal cost. 3Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year and after June 30. If there is contractual cost sharing or other change, this amount will change. Plan’s Funded Status June 30, 2012 June 30, 2013 1. Present Value of Projected Benefits $ 496,438,761 $ 508,922,056 2. Entry Age Normal Accrued Liability 424,868,507 437,688,131 3. Market Value of Assets (MVA) $ 252,131,503 $ 274,484,679 4. Unfunded Liability [(2) – (3)] $ 172,737,004 $ 163,203,452 5. Funded Ratio [(3) / (2)] 59.3% 62.7% Superfunded Status No No CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 7 Cost Actuarial Cost Estimates in General What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a number of assumptions about the future. These assumptions can be divided into two categories.  Demographic assumptions include the percentage of employees that will terminate, die, become disabled, and retire in each future year.  Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact, future asset returns at CalPERS for each year into the future until the last dollar is paid to current members of your plan. While CalPERS has set these assumptions to reflect our best estimate of the real future of your plan, it must be understood that these assumptions are very long-term predictors and will surely not be realized in any one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of 7.5 percent for the past twenty year period ending June 30, 2013, returns for each fiscal year ranged from negative -24 percent to +21.7 percent. Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces.  The Normal Cost (i.e., the annual cost associated with one year of service accrual) expressed as a percentage of total active payroll.  The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past service of current members) which is expressed as a lump sum dollar amount. The cost is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an orange if you will). To communicate the total cost, either the Normal Cost (i.e., future percent of payroll) must be converted to a lump sum dollar amount (in which case the total cost is the present value of benefits), or the Past Service Cost (i.e., the lump sum) must be converted to a percent of payroll (in which case the total cost is expressed as the employer’s rate, part of which is permanent and part temporary). Converting the Past Service Cost lump sum to a percent of payroll requires a specific amortization period, and the employer rate will vary depending on the amortization period chosen. CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 8 Changes since the Prior Year’s Valuation Benefits The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective even if the valuation date is prior to the effective date of the amendment. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or rate is shown for any plan changes, which were already included in the prior year’s valuation. Actuarial Methods and Assumptions On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS will no longer use an actuarial value of assets and will employ an amortization and rate smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate phased in over a 5-year period. A change in the calculation of termination with vested benefits liability for active members was made this year to better reflect the retirement experience. After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety member at age 54 rather than at earliest retirement age. The higher benefit factors at these ages results in a slightly higher liability and a modest increase in normal cost. Public Employees’ Pension Reform Act of 2013 (PEPRA) On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect, requiring that a public employer’s contribution to a defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be less than the normal cost rate. Beginning July 1, 2013, this means that some plans with surplus will be paying more than they otherwise would. For more information on PEPRA, please refer to the CalPERS website. Subsequent Events Actuarial Methods and Assumptions In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns (see Risk Analysis section of report). The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. The impact of assumption changes are included in the “Expected Rate Increases” subsection of the “Risk Analysis” section. ASSETS  RECONCILIATION OF THE MARKET VALUE OF ASSETS  ASSET ALLOCATION  CALPERS HISTORY OF INVESTMENT RETURNS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 11 Reconciliation of the Market Value of Assets 1. Market Value of Assets as of 6/30/12 Including Receivables $ 252,131,503 2. Receivables for Service Buybacks as of 6/30/12 960,526 3. Market Value of Assets as of 6/30/12 251,170,977 4. Employer Contributions 10,923,744 5. Employee Contributions 3,056,427 6. Benefit Payments to Retirees and Beneficiaries (23,601,658) 7. Refunds (51,347) 8. Lump Sum Payments 0 9. Transfers and Miscellaneous Adjustments 359 10. Investment Return 31,941,162 11. Market Value of Assets as of 6/30/13 $ 273,439,664 12. Receivables for Service Buybacks as of 6/30/13 1,045,015 13. Market Value of Assets as of 6/30/13 Including Receivables $ 274,484,679 CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 12 Asset Allocation CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges, and manages those asset class allocations within their policy ranges. CalPERS recognizes that over 90 percent of the variation in investment returns of a well-diversified pool of assets can typically be attributed to asset allocation decisions. On February 19, 2014 the CalPERS Board of Administration adopted changes to the current asset allocation as shown in the Policy Target Allocation below expressed as percentage of total assets. The asset allocation is has an expected long term blended rate of return of 7.5 percent. The asset allocation and market value of assets shown below reflect the values of the Public Employees Retirement Fund (PERF) in its entirety as of June 30, 2013. The assets for CITY OF NEWPORT BEACH SAFETY PLAN are part of the Public Employees Retirement Fund (PERF) and are invested accordingly. (A) Asset Class (B) Market Value ($ Billion) (C) Policy Target Allocation 1) Global Equity 133.4 47.0% 2) Private Equity 31.4 12.0% 3) Global Fixed Income 43.9 19.0% 4) Liquidity 10.5 2.0% 5) Real Assets 25.2 14.0% 6) Inflation Sensitive Assets 9.4 6.0% 7) Absolute Return Strategy (ARS) 7.2 0.0% Total Fund $261.0 100.0% Public Equity 51.1% Private Equity 12.0% Income 16.8% Liquidity 4.0% Real Assets 9.6% Inflation 3.6% ARS 2.8% Asset Allocation at 6/30/2013 CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 13 CalPERS History of Investment Returns The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees. The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30, 2013, (figures are reported as gross of fees). The geometric mean rate of return is the average rate per period compounded over multiple periods. It should be recognized that in any given year the rate of return is volatile. Although the expected rate of return on the recently adopted new asset allocation is 7.5 percent the portfolio has an expected volatility of 11.76 percent per year. Consequently when looking at investment returns it is more instructive to look at returns over longer time horizons. History of CalPERS Geometric Mean Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year Geometric Return 13.2% 3.5% 7.0% 7.6% 9.4% Volatility – 17.9% 13.9% 11.8% 11.6% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 2 . 0 % 1 6 . 3 % 1 5 . 3 % 2 0 . 1 % 1 9 . 5 % 1 2 . 5 % 1 0 . 5 % - 7 . 2 % - 6 . 1 % 3 . 7 % 1 6 . 6 % 1 2 . 3 % 1 1 . 8 % 1 9 . 1 % - 5 . 1 % - 2 4 . 0 % 1 3 . 3 % 2 1 . 7 % 0 . 1 % 1 3 . 2 % THIS PAGE INTENTIONALLY LEFT BLANK LIABILITIES AND RATES  DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES  (GAIN) / LOSS ANALYSIS 06/30/12 - 06/30/13  SCHEDULE OF AMORTIZATION BASES  ALTERNATE AMORTIZATION SCHEDULES  RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS  EMPLOYER CONTRIBUTION RATE HISTORY  FUNDING HISTORY THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 17 Development of Accrued and Unfunded Liabilities 1. Present Value of Projected Benefits a) Active Members $ 174,855,784 b) Transferred Members 6,922,065 c) Terminated Members 3,472,891 d) Members and Beneficiaries Receiving Payments 323,671,316 e) Total $ 508,922,056 2. Present Value of Future Employer Normal Costs $ 46,018,961 3. Present Value of Future Employee Contributions $ 25,214,964 4. Entry Age Normal Accrued Liability a) Active Members [(1a) - (2) - (3)] $ 103,621,859 b) Transferred Members (1b) 6,922,065 c) Terminated Members (1c) 3,472,891 d) Members and Beneficiaries Receiving Payments (1d) 323,671,316 e) Total $ 437,688,131 5. Market Value of Assets (MVA) $ 274,484,679 6. Unfunded Liability [(4e) - (5)] $ 163,203,452 7. Funded Ratio [(5) / (4e)] 62.7% CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 18 (Gain) /Loss Analysis 6/30/12 – 6/30/13 To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below. A Total (Gain)/Loss for the Year 1. Unfunded Accrued Liability (UAL) as of 6/30/12 $ 122,502,809 2. Expected Payment on the UAL during 2012/2013 5,411,011 3. Interest through 6/30/13 [.075 x (A1) - ((1.075)½ - 1) x (A2)] 8,988,466 4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 126,080,264 5. Change due to plan changes 0 6. Change due to assumption change 0 7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 126,080,264 8. Actual UAL as of 6/30/13 163,203,452 9. Total (Gain)/Loss for 2012/2013 [(A8) - (A7)] $ 37,123,188 B Contribution (Gain)/Loss for the Year 1. Expected Contribution (Employer and Employee) $ 13,162,535 2. Interest on Expected Contributions 484,672 3. Actual Contributions 13,980,171 4. Interest on Actual Contributions 514,779 5. Expected Contributions with Interest [(B1) + (B2)] 13,647,207 6. Actual Contributions with Interest [(B3) + (B4)] 14,494,950 7. Contribution (Gain)/Loss [(B5) - (B6)] $ (847,743) C Asset (Gain)/Loss for the Year 1. Actuarial Value of Assets as of 6/30/12 Including Receivables $ 302,365,698 2. Receivables as of 6/30/12 960,526 3. Actuarial Value of Assets as of 6/30/12 301,405,172 4. Contributions Received 13,980,171 5. Benefits and Refunds Paid (23,653,005) 6. Transfers and miscellaneous adjustments 359 7. Expected Int. [.075 x (C3) + ((1.075)½ - 1) x ((C4) + (C5) + (C6))] 22,249,227 8. Expected Assets as of 6/30/13 [(C3) + (C4) + (C5) + (C6) + (C7)] 313,981,924 9. Receivables as of 6/30/13 1,045,015 10. Expected Assets Including Receivables 315,026,939 11. Market Value of Assets as of 6/30/13 274,484,679 12. Asset (Gain)/Loss [(C10) - (C11)] $ 40,542,260 D Liability (Gain)/Loss for the Year 1. Total (Gain)/Loss (A9) $ 37,123,188 2. Contribution (Gain)/Loss (B7) (847,743) 3. Asset (Gain)/Loss (C12) 40,542,260 4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ (2,571,329) CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 19 Schedule of Amortization Bases There is a two-year lag between the Valuation Date and the Contribution Fiscal Year.  The assets, liabilities and funded status of the plan are measured as of the valuation date; June 30, 2013.  The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date; fiscal year 2015-16. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies with their employer contribution rates well in advance of the start of the fiscal year. The Unfunded Liability is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The Unfunded Liability is rolled forward each year by subtracting the expected Payment on the Unfunded Liability for the fiscal year and adjusting for interest. The Expected Payment on the Unfunded Liability for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution Rate for the first fiscal year is determined by the actuarial valuation two years ago and the rate for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year, based on payroll as of the valuation date. Amounts for Fiscal 2015-16 Reason for Base Date Established Amorti- zation Period Balance 6/30/13 Expected Payment 2013-14 Balance 6/30/14 Expected Payment 2014-15 Balance 6/30/15 Scheduled Payment for 2015-16 Payment as Percentage of Payroll FORCED FS OLD METHOD 06/30/11 24 $115,986,951 $7,501,900 $116,907,836 $7,726,957 $117,664,444 $7,958,766 25.325% PAYMENT (GAIN)/LOSS 06/30/12 29 $437,717 $(497,509) $986,374 $59,232 $998,939 $61,009 0.194% (GAIN)/LOSS 06/30/12 29 $9,655,596 $0 $10,379,766 $623,310 $10,511,986 $642,010 2.043% (GAIN)/LOSS 06/30/13 30 $37,123,188 $(113,688) $40,025,301 $(138,934) $43,171,248 $607,205 1.932% TOTAL $163,203,452 $6,890,703 $168,299,277 $8,270,565 $172,346,617 $9,268,990 29.495% CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 20 Page 20 Alternate Amortization Schedules The amortization schedule shown on the previous page shows the minimum contributions required according to CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the passible savings in doing so. Therefore, we have provided alternate amortization schedules to help analyze your current amortization schedule and illustrate the advantages of accelerating payments towards your plan’s unfunded liability of $172,346,617 as of June 30, 2015, which under the minimum schedule, will require total payments of $430,066,708. Shown below are the level rate payments required to amortize your plan’s unfunded liability assuming a fresh start over the various periods noted. Note that the payments under each scenario would increase by 3 percent for each year into the future. If you are interested in changing your plan’s amortization schedule please contact your plan actuary to discuss further. Level Rate of Payroll Amortization Period 2015-16 Rate 2015-16 Payment Total Payments Total Interest Difference from Current Schedule 25 36.247% $ 11,391,152 $ 415,313,038 $ 242,966,421 $ 14,753,670 20 41.409% $ 13,013,105 $ 349,667,004 $ 177,320,387 $ 80,399,704 CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 21 Reconciliation of Required Employer Contributions Percentage of Projected Payroll Estimated $ Based on Projected Payroll 1. Contribution for 7/1/14 – 6/30/15 44.522% $ 13,836,163 2. Effect of changes since the prior year annual valuation a) Effect of unexpected changes in demographics and financial results 2.388% 750,241 b) Effect of plan changes 0.000% 0 c) Effect of changes in Assumptions 0.000% 0 d) Effect of change in payroll - 155,446 e) Effect of elimination of amortization base 0.000% 0 f) Effect of changes due to Fresh Start 0.000% 0 g) Net effect of the changes above [Sum of (a) through (f)] 2.388% 905,687 3. Contribution for 7/1/15 – 6/30/16 [(1)+(2g)] 46.910% 14,741,850 The contribution actually paid (item 1) may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed. CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 22 Employer Contribution Rate History The table below provides a recent history of the employer contribution rates for your plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made in the middle of the year. Required By Valuation Fiscal Year Employer Normal Cost Unfunded Rate Total Employer Contribution Rate 2010 - 2011 15.407% 14.795% 30.202% 2011 - 2012 16.461% 18.567% 35.028% 2012 - 2013 16.094% 19.840% 35.934% 2013 - 2014 16.856% 23.821% 40.677% 2014 - 2015 17.462% 27.060% 44.522% 2015 - 2016 17.415% 29.495% 46.910% Funding History The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll. Valuation Date Accrued Liability Market Value of Assets (MVA) Funded Ratio Annual Covered Payroll 06/30/08 $ 336,060,918 $ 272,104,409 81.0% $ 28,055,510 06/30/09 366,918,353 200,973,963 54.8% 30,252,789 06/30/10 382,338,494 223,281,274 58.4% 29,752,737 06/30/11 405,879,283 262,881,439 64.8% 28,820,289 06/30/12 424,868,507 252,131,503 59.3% 28,439,846 06/30/13 437,688,131 274,484,679 62.7% 28,759,363 RISK ANALYSIS  VOLATILITY RATIOS  PROJECTED RATES  ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS  ANALYSIS OF DISCOUNT RATE SENSITIVITY  HYPOTHETICAL TERMINATION LIABILITY THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 25 Volatility Ratios The actuarial calculations supplied in this communication are based on a number of assumptions about very long- term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise the employer’s rates from one year to the next. Therefore, the rates will inevitably fluctuate, especially due to the ups and downs of investment returns. Asset Volatility Ratio (AVR) Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility, than a plan with an asset to payroll ratio of 4. Below we have shown your asset volatility ratio, a measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility and the asset volatility ratio, described above, will tend to move closer to this ratio as the plan matures. Rate Volatility As of June 30, 2013 1. Market Value of Assets without Receivables $ 273,439,664 2. Payroll 28,759,363 3. Asset Volatility Ratio (AVR = 1. / 2.) 9.5 4. Accrued Liability $ 437,688,131 5. Liability Volatility Ratio (LVR = 4. / 2.) 15.2 CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 26 Projected Rates The estimated rate for 2016-17 is based on a projection of the most recent information we have available, including an estimated 18 percent investment return for fiscal 2013-14, the impact of the new smoothing methods adopted by the CalPERS Board in April 2013 that will impact employer rates for the first time in 2015-16 and an estimate of the impact of the new actuarial assumptions adopted by the CalPERS Board in February 2014. These new demographic assumptions include a 20-year projection of on-going mortality improvement. A complete listing of the new demographic assumptions to be implemented with the June 30, 2014 annual actuarial valuation and incorporated in the projected rates for FY 2016-17 and beyond can be found on the CalPERS website at: http://www.calpers.ca.gov/eip-docs/about/pubs/employer/actuarial-assumptions.xls The table below shows projected employer contribution rates (before cost sharing) for the next five Fiscal Years, assuming CalPERS earns 18 percent for fiscal year 2013-14 and 7.50 percent every fiscal year thereafter, and assuming that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2016-17. New Rate Projected Future Employer Contribution Rates 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Contribution Rates: 46.910% 49.9% 52.1% 54.2% 56.3% 56.5% Analysis of Future Investment Return Scenarios In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of 7.5 percent. The newly adopted asset allocation has a lower expected investment volatility which will result in better risk characteristics than an equivalent margin for adverse deviation. The current asset allocation has an expected standard deviation of 12.45 percent while the newly adopted asset allocation has a lower expected standard deviation of 11.76 percent. The investment return for fiscal year 2013-14 was announced July 14, 2014. The investment return in fiscal year 2013-14 is 18.42 percent before administrative expenses. This year, there will be no adjustment for real estate and private equities. For purposes of projecting future employer rates, we are assuming an 18.0 percent investment return for fiscal year 2013-14. The investment return realized during a fiscal year first affects the contribution rate for the fiscal year two years later. Specifically, the investment return for 2013-14 will first be reflected in the June 30, 2014 actuarial valuation that will be used to set the 2016-17 employer contribution rates, the 2014-15 investment return will first be reflected in the June 30, 2015 actuarial valuation that will be used to set the 2017-18 employer contribution rates and so forth. Based on a 18 percent investment return for fiscal year 2013-14, the April 17, 2013 CalPERS Board-approved amortization and rate smoothing method change, the February 18, 2014 new demographic assumptions including 20-year mortality improvement using Scale BB and assuming that all other actuarial assumptions will be realized, and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2016-17, the effect on the 2016-17 Employer Rate is as follows: Estimated 2016-17 Employer Rate Estimated Increase in Employer Rate between 2015-16 and 2016-17 49.9% 3.0% CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 27 As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns during fiscal years 2014-15, 2015-16 and 2016-17 on the 2017-18, 2018-19 and 2019-20 employer rates. Once again, the projected rate increases assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur. Five different investment return scenarios were selected.  The first scenario is what one would expect if the markets were to give us a 5th percentile return from July 1, 2014 through June 30, 2017. The 5th percentile return corresponds to a -3.8 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.  The second scenario is what one would expect if the markets were to give us a 25th percentile return from July 1, 2014 through June 30, 2017. The 25th percentile return corresponds to a 2.8 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.  The third scenario assumed the return for 2014-15, 2015-16, 2016-17 would be our assumed 7.5 percent investment return which represents about a 49th percentile event.  The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from July 1, 2014 through June 30, 2017. The 75th percentile return corresponds to a 12.0 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.  Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return from July 1, 2014 through June 30, 2017. The 95th percentile return corresponds to a 18.9 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years. The table below shows the estimated projected contribution rates and the estimated increases for your plan under the five different scenarios. 2014-17 Investment Return Scenario Estimated Employer Rate Estimated Change in Employer Rate between 2016-17 and 2019-20 2017-18 2018-19 2019-20 -3.8% (5th percentile) 53.8% 59.1% 65.9% 15.9% 2.8% (25th percentile) 52.8% 56.3% 60.5% 10.5% 7.5% 52.1% 54.2% 56.3% 6.4% 12.0%(75th percentile) 51.4% 52.1% 52.1% 2.1% 18.9%(95th percentile) 50.3% 48.8% 45.1% -4.8% Analysis of Discount Rate Sensitivity The following analysis looks at the 2015-16 employer contribution rates under two different discount rate scenarios. Shown below are the employer contribution rates assuming discount rates that are 1 percent lower and 1 percent higher than the current valuation discount rate. This analysis gives an indication of the potential required employer contribution rates if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the long-term. This type of analysis gives the reader a sense of the long-term risk to the employer contribution rates. 2015-16 Employer Contribution Rate As of June 30, 2013 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Employer Normal Cost 23.908% 17.415% 12.423% Accrued Liability $ 492,850,510 $ 437,688,131 $ 391,859,205 Unfunded Accrued Liability $ 218,365,831 $ 163,203,452 $ 117,374,526 CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 28 Hypothetical Termination Liability Below is an estimate of the financial position of your plan if you had terminated your contract with CalPERS as of June 30, 2013 using the discount rates shown below. Your plan liability on a termination basis is calculated differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability both compensation and service is frozen as of the valuation date and no future pay increases or service accruals are included. In December 2012, the CalPERS Board adopted a more conservative investment policy and asset allocation strategy for the Terminated Agency Pool. Since the Terminated Agency Pool has limited funding sources, expected benefit payments are secured by risk-free assets. With this change, CalPERS increased benefit security for members while limiting its funding risk. This asset allocation has a lower expected rate of return than the PERF. Consequently, the lower discount rate for the Terminated Agency pool results in higher liabilities for terminated plans. In order to terminate your plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow your plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of your plan liabilities. CalPERS strongly advises you to consult with your plan actuary before beginning this process. Valuation Date Hypothetical Termination Liability1 Market Value of Assets (MVA) Unfunded Termination Liability Termination Funded Ratio Termination Liability Discount Rate2 06/30/11 $ 600,452,456 $ 262,881,439 $ 337,571,017 43.8% 4.82% 06/30/12 799,680,164 252,131,503 547,548,661 31.5% 2.98% 06/30/13 727,022,870 274,484,679 452,538,191 37.8% 3.72% 1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in appendix A. 2 The discount rate assumption used for termination valuations is a weighted average of the 10 and 30-year US Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For purposes of this hypothetical termination liability estimate, the discount rate used, is the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS). Note that as of June 30, 2014 the 30-year STRIPS rate was 3.55 percent. GASB STATEMENT NO. 27 THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 31 SAFETY PLAN of the CITY OF NEWPORT BEACH Information for Compliance with GASB Statement No. 27 Disclosure under GASB 27 follows. However, note that effective for financial statements for fiscal years beginning after June 15, 2014, GASB 68 replaces GASB 27. This will be the last year that GASB disclosure information will be included in your annual actuarial report. GASB 68 will require additional reporting that CalPERS is intending to provide upon request for an additional fee. We urge you to start discussions with your auditors on how to implement GASB 68. Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required contribution (ARC) plus an adjustment for the cumulative difference between the APC and the employer’s actual plan contributions for the year. The cumulative difference is called the net pension obligation (NPO). Since GASB 68 replaces GASB 27, for fiscal year 2015-16, the APC is replaced by the Actuarially Determined Contribution (ADC). The ADC for July 1, 2015 to June 30, 2016 is 46.910% percent of payroll. In order to calculate the dollar value of the ADC for inclusion in financial statements prepared as of June 30, 2016, this contribution rate, less any employee cost sharing, as modified by any amendments for the year, would be multiplied by the payroll of covered employees that was actually paid during the period July 1, 2015 to June 30, 2016. The employer and the employer’s auditor are responsible for determining the NPO, APC or ADC for a given fiscal year. A summary of principal assumptions and methods used to determine the funded status is shown below. Retirement Program Valuation Date June 30, 2013 Actuarial Cost Method Entry Age Normal Cost Method Amortization Method Level Percent of Payroll Asset Valuation Method Market Value Actuarial Assumptions Discount Rate 7.50% (net of administrative expenses) Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment Inflation 2.75% Payroll Growth 3.00% Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed annual inflation growth of 2.75% and an annual production growth of 0.25%. Initial unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry into CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan are amortized over a 30-year period with Direct Rate Smoothing with a 5-year ramp up/ramp down. If the plan’s accrued liability exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30-year amortization period. More detailed information on assumptions and methods is provided in Appendix A of this report. Appendix B contains a description of benefits included in the valuation. The Schedule of Funding Progress below shows the recent history of the actuarial accrued liability, actuarial value of assets, their relationship and the relationship of the unfunded actuarial accrued liability to payroll. Valuation Date Accrued Liability (a) Actuarial value of Assets* (b) Unfunded Liability (UL) (a)-(b) Funded Ratios (b)/(a) Annual Covered Payroll (c) UL As a % of Payroll [(a)-(b)]/(c) 06/30/09 $ 366,918,353 $ 274,649,310 $ 92,269,043 74.9% $ 30,252,789 305.0% 06/30/10 382,338,494 284,617,445 97,721,049 74.4% 29,752,737 328.4% 06/30/11 405,879,283 295,075,720 110,803,563 72.7% 28,820,289 384.5% 06/30/12 424,868,507 302,365,698 122,502,809 71.2% 28,439,846 430.7% 06/30/13 437,688,131 274,484,679 163,203,452 62.7% 28,759,363 567.5% * Beginning with the 6/30/2013 valuation Actuarial Value of Assets equals Market Value of Assets per CalPERS Direct Rate Smoothing Policy. THIS PAGE INTENTIONALLY LEFT BLANK PLAN’S MAJOR BENEFIT PROVISIONS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Receiving Receiving Receiving Active Police Active Fire Active Other Safety Active Fire Benefit Provision Benefit Formula 3.0% @ 50 3.0% @ 50 3.0% @ 50 Social Security Coverage No No No No Full/Modified Full Full Full Full Final Average Compensation Period 12 mos. 12 mos. 12 mos. Sick Leave Credit No No No No Non-Industrial Disability Standard Standard Standard Industrial Disability Yes Yes Yes No Pre-Retirement Death Benefits Optional Settlement 2W Yes Yes Yes No 1959 Survivor Benefit Level Level 4 Level 4 Level 4 No Special Yes Yes Yes No Alternate (firefighters) No No No No Post-Retirement Death Benefits Lump Sum $500 $500 $500 $500 $500 $500 $500 Survivor Allowance (PRSA) No No No No No No No COLA 2% 2% 2% 2% 2% 2% 2% Contractual Employee Cost Sharing Page 35 CALPERS ACTUARIAL VALUATION – June 30, 2013 SAFETY PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Active Fire Active Police Benefit Provision Benefit Formula 2.0% @ 50 3.0% @ 55 Social Security Coverage No No Full/Modified Full Full Final Average Compensation Period 36 mos. 36 mos. Sick Leave Credit No No Non-Industrial Disability Standard Standard Industrial Disability Yes Yes Pre-Retirement Death Benefits Optional Settlement 2W Yes Yes 1959 Survivor Benefit Level Level 4 Level 4 Special Yes Yes Alternate (firefighters) No No Post-Retirement Death Benefits Lump Sum $500 $500 Survivor Allowance (PRSA) No No COLA 2% 2% Page 36 APPENDICES  APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS  APPENDIX B – PRINCIPAL PLAN PROVISIONS  APPENDIX C – PARTICIPANT DATA  APPENDIX D – DEVELOPMENT OF PPERA MEMBER CONTRIBUTION RATES  APPENDIX E – GLOSSARY OF ACTUARIAL TERMS THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS  ACTUARIAL DATA  ACTUARIAL METHODS  ACTUARIAL ASSUMPTIONS  MISCELLANEOUS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-1 Actuarial Data As stated in the Actuarial Certification, the data, which serves as the basis of this valuation, has been obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and when they do occur, they generally do not have a material impact on the employer contribution rates. Actuarial Methods Funding Method The actuarial funding method used for the Retirement Program is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level annual cost as a percent of pay in each year from the age of hire (entry age) to the assumed retirement age. The cost allocated to the current fiscal year is called the normal cost. The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, for active members beyond the assumed retirement age, and for members entitled to deferred benefits, is equal to the present value of the benefits expected to be paid. No normal costs are applicable for these participants. The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an amortization of the unfunded liability as a level percentage of assumed future payrolls. Commencing with the June 30, 2013 valuation all new gains or losses are tracked and amortized over a fixed 30-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than golden handshakes), changes in actuarial assumptions, or changes in actuarial methodology are amortized separately over a 20-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years. If a plan’s accrued liability exceeds the market value of assets, the annual contribution with respect to the total unfunded liability may not be less than the amount produced by a 30-year amortization of the unfunded liability. An exception has been made for the change in asset value from actuarial to market value in this valuation. The CalPERS Board approved a 30-year amortization with a 5-year ramp-up/ramp-down for only this change in method. Additional contributions will be required for any plan or pool if their cash flows hamper adequate funding progress by preventing the expected funded status on a market value of assets basis to either:  Increase by at least 15 percent by June 30, 2043; or  Reach a level of 75 percent funded by June 30, 2043 The necessary additional contribution will be obtained by changing the amortization period of the gains and losses, except for those occurring in the fiscal years 2008-2009, 2009-2010, and 2010-2011 to a period, which will result in the satisfaction of the above criteria. CalPERS actuaries will reassess the criteria above when performing each future valuation to determine whether or not additional contributions are necessary. An exception to the funding rules above is used whenever the application of such rules results in inconsistencies. In these cases, a “fresh start” approach is used. This simply means that the current unfunded actuarial liability is projected and amortized over a set number of years. As mentioned above, if the annual contribution on the total unfunded liability was less than the amount produced by a 30-year amortization of the unfunded liability, the plan actuary would implement a 30-year fresh start. However, in CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-2 the case of a 30-year fresh start, just the unfunded liability not already in the (gain)/loss base (which is already amortized over 30 years), will go into the new fresh start base. In addition, a fresh start is needed in the following situations: 1) When a positive payment would be required on a negative unfunded actuarial liability (or conversely a negative payment on a positive unfunded actuarial liability); or 2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used, unless a longer fresh start is needed to avoid a negative total rate. It should be noted that the actuary may choose to use a fresh start under other circumstances. In all cases, the fresh start period is set by the actuary at what is deemed appropriate; however, the period will not be less than five years, nor greater than 30 years. Asset Valuation Method It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods to eliminate unfunded accrued liabilities or surpluses in a manner that maintains benefit security for the members of the System while minimizing substantial variations in employer contribution rates. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. CalPERS will no longer use an actuarial value of assets and will use the market value of assets. This direct rate smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value of asset corridor and a 25 year amortization period for gains and losses. The change in asset value will also be amortized over 30 years with a 5-year ramp-up/ramp-down. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-3 Actuarial Assumptions In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp- up/ramp-down in accordance with Board policy. For more details, please refer to the experience study report that can be found at the following link: http://www.calpers.ca.gov/eip-docs/about/pubs/employer/ 2014-experience-study.pdf Economic Assumptions Discount Rate 7.5 percent compounded annually (net of expenses). This assumption is used for all plans. Termination Liability Discount Rate The discount rate used for termination valuation is a weighted average of the 10 and 30-year US Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For purposes of this hypothetical termination liability estimate, the discount rate used, 3.72 percent, is the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS) as of June 30, 2013. Please note, as of June 30, 2014 the 30-year STRIPS yield was 3.55 percent. Salary Growth Annual increases vary by category, entry age, and duration of service. A sample of assumed increases are shown below. Public Agency Miscellaneous Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1420 0.1240 0.0980 1 0.1190 0.1050 0.0850 2 0.1010 0.0910 0.0750 3 0.0880 0.0800 0.0670 4 0.0780 0.0710 0.0610 5 0.0700 0.0650 0.0560 10 0.0480 0.0460 0.0410 15 0.0430 0.0410 0.0360 20 0.0390 0.0370 0.0330 25 0.0360 0.0360 0.0330 30 0.0360 0.0360 0.0330 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-4 Salary Growth (continued) Public Agency Fire Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1050 0.1050 0.1020 1 0.0950 0.0940 0.0850 2 0.0870 0.0830 0.0700 3 0.0800 0.0750 0.0600 4 0.0740 0.0680 0.0510 5 0.0690 0.0620 0.0450 10 0.0510 0.0460 0.0350 15 0.0410 0.0390 0.0340 20 0.0370 0.0360 0.0330 25 0.0350 0.0350 0.0330 30 0.0350 0.0350 0.0330 Public Agency Police Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1090 0.1090 0.1090 1 0.0930 0.0930 0.0930 2 0.0810 0.0810 0.0780 3 0.0720 0.0700 0.0640 4 0.0650 0.0610 0.0550 5 0.0590 0.0550 0.0480 10 0.0450 0.0420 0.0340 15 0.0410 0.0390 0.0330 20 0.0370 0.0360 0.0330 25 0.0350 0.0340 0.0330 30 0.0350 0.0340 0.0330 Public Agency County Peace Officers Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1290 0.1290 0.1290 1 0.1090 0.1060 0.1030 2 0.0940 0.0890 0.0840 3 0.0820 0.0770 0.0710 4 0.0730 0.0670 0.0610 5 0.0660 0.0600 0.0530 10 0.0460 0.0420 0.0380 15 0.0410 0.0380 0.0360 20 0.0370 0.0360 0.0340 25 0.0350 0.0340 0.0330 30 0.0350 0.0340 0.0330 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-5 Schools Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1080 0.0960 0.0820 1 0.0940 0.0850 0.0740 2 0.0840 0.0770 0.0670 3 0.0750 0.0700 0.0620 4 0.0690 0.0640 0.0570 5 0.0630 0.0600 0.0530 10 0.0450 0.0440 0.0410 15 0.0390 0.0380 0.0350 20 0.0360 0.0350 0.0320 25 0.0340 0.0340 0.0320 30 0.0340 0.0340 0.0320  The Miscellaneous salary scale is used for Local Prosecutors.  The Police salary scale is used for Other Safety, Local Sheriff, and School Police. Overall Payroll Growth 3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability is amortized). This assumption is used for all plans. Inflation 2.75 percent compounded annually. This assumption is used for all plans. Non-valued Potential Additional Liabilities The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation assumption, and any potential liability loss from future member service purchases are not reflected in the valuation. Miscellaneous Loading Factors Credit for Unused Sick Leave Total years of service is increased by 1 percent for those plans that have accepted the provision providing Credit for Unused Sick Leave. Conversion of Employer Paid Member Contributions (EPMC) Total years of service is increased by the Employee Contribution Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period. Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme Court decision, known as the Norris decision, which required males and females to be treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982. Termination Liability The termination liabilities include a 7 percent contingency load. This load is for unforeseen improvements in mortality. Demographic Assumptions Pre-Retirement Mortality Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See sample rates in table below. The non-industrial death rates are used for all plans. The industrial CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-6 death rates are used for Safety Plans (except for Local Prosecutor safety members where the corresponding Miscellaneous Plan does not have the Industrial Death Benefit). Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related) Age Male Female Male and Female 20 0.00047 0.00016 0.00003 25 0.00050 0.00026 0.00007 30 0.00053 0.00036 0.00010 35 0.00067 0.00046 0.00012 40 0.00087 0.00065 0.00013 45 0.00120 0.00093 0.00014 50 0.00176 0.00126 0.00015 55 0.00260 0.00176 0.00016 60 0.00395 0.00266 0.00017 65 0.00608 0.00419 0.00018 70 0.00914 0.00649 0.00019 75 0.01220 0.00878 0.00020 80 0.01527 0.01108 0.00021 Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be split into two components; 99 percent will become the Non-Industrial Death rate and 1 percent will become the Industrial Death rate. Post-Retirement Mortality Rates vary by age, type of retirement and gender. See sample rates in table below. These rates are used for all plans. Healthy Recipients Non-Industrially Disabled Industrially Disabled (Not Job-Related) (Job-Related) Age Male Female Male Female Male Female 50 0.00239 0.00125 0.01632 0.01245 0.00443 0.00356 55 0.00474 0.00243 0.01936 0.01580 0.00563 0.00546 60 0.00720 0.00431 0.02293 0.01628 0.00777 0.00798 65 0.01069 0.00775 0.03174 0.01969 0.01388 0.01184 70 0.01675 0.01244 0.03870 0.03019 0.02236 0.01716 75 0.03080 0.02071 0.06001 0.03915 0.03585 0.02665 80 0.05270 0.03749 0.08388 0.05555 0.06926 0.04528 85 0.09775 0.07005 0.14035 0.09577 0.11799 0.08017 90 0.16747 0.12404 0.21554 0.14949 0.16575 0.13775 95 0.25659 0.21556 0.31025 0.23055 0.26108 0.23331 100 0.34551 0.31876 0.45905 0.37662 0.40918 0.35165 105 0.58527 0.56093 0.67923 0.61523 0.64127 0.60135 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 The mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-going mortality improvement using Scale AA published by the Society of Actuaries until June 30, 2010. There is no margin for future mortality improvement beyond the valuation date. On February 19, 2014 the CalPERS Board adopted new recommended demographic assumption based on the most recent CalPERS Experience Study. These new actuarial assumptions will be implemented for the first time in the June 30, 2014 valuation. For purposes of the post-retirement mortality rates, the revised rates include 20 years of projected on-going mortality improvement using Scale BB published by the Society of Actuaries. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-7 Marital Status For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table. Member Category Percent Married Miscellaneous Member 85% Local Police 90% Local Fire 90% Other Local Safety 90% School Police 90% Age of Spouse It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans. Terminated Members It is assumed that terminated members refund immediately if non-vested. Terminated members who are vested are assumed to follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members: Age Load Factor 50 450% 51 250% 52 through 56 200% 57 through 60 150% 61 through 64 125% 65 and above 100% (no change) Termination with Refund Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203 2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809 4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612 5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116 10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055 15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014 20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001 35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-8 Public Agency Safety Duration of Service Fire Police County Peace Officer 0 0.0710 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0.0258 0.0437 4 0.0218 0.0245 0.0414 5 0.0029 0.0086 0.0145 10 0.0009 0.0053 0.0089 15 0.0006 0.0027 0.0045 20 0.0005 0.0017 0.0020 25 0.0003 0.0012 0.0009 30 0.0003 0.0009 0.0006 35 0.0003 0.0009 0.0006 The Police Termination and Refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217 1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071 2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926 3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781 4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636 5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135 10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049 15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011 20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002 25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002 30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002 35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 Termination with Vested Benefits Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0.0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0212 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-9 Public Agency Safety Duration of Service Fire Police County Peace Officer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.0047 0.0058 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0.0000  When a member is eligible to retire, the termination with vested benefits probability is set to zero.  After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety member at age 54.  The Police Termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0816 0.0733 0.0649 0.0566 0.0482 10 0.0629 0.0540 0.0450 0.0359 0.0000 15 0.0537 0.0440 0.0344 0.0000 0.0000 20 0.0420 0.0317 0.0000 0.0000 0.0000 25 0.0291 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety Plans. Miscellaneous Fire Police County Peace Officer Schools Age Male Female Male and Female Male and Female Male and Female Male Female 20 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0002 0.0001 35 0.0006 0.0009 0.0001 0.0003 0.0004 0.0006 0.0004 40 0.0015 0.0016 0.0001 0.0004 0.0007 0.0014 0.0009 45 0.0025 0.0024 0.0002 0.0005 0.0013 0.0028 0.0017 50 0.0033 0.0031 0.0005 0.0008 0.0018 0.0044 0.0030 55 0.0037 0.0031 0.0010 0.0013 0.0010 0.0049 0.0034 60 0.0038 0.0025 0.0015 0.0020 0.0006 0.0043 0.0024  The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors.  The Police Non-Industrial Disability rates are also used for Other Safety, Local Sheriff and School Police. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-10 Industrial (Job-Related) Disability Rates vary by age and category. Age Fire Police County Peace Officer 20 0.0002 0.0007 0.0003 25 0.0012 0.0032 0.0015 30 0.0025 0.0064 0.0031 35 0.0037 0.0097 0.0046 40 0.0049 0.0129 0.0063 45 0.0061 0.0161 0.0078 50 0.0074 0.0192 0.0101 55 0.0721 0.0668 0.0173 60 0.0721 0.0668 0.0173  The Police Industrial Disability rates are also used for Local Sheriff and Other Safety.  Fifty Percent of the Police Industrial Disability rates are used for School Police.  One Percent of the Police Industrial Disability rates are used for Local Prosecutors.  Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the Non-Industrial Disability rate and 50 percent will become the Industrial Disability rate. Service Retirement Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55 formulas, where retirement rates vary by age only. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-11 Service Retirement Public Agency Miscellaneous 1.5% @ 65 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.008 0.011 0.013 0.015 0.017 0.019 51 0.007 0.010 0.012 0.013 0.015 0.017 52 0.010 0.014 0.017 0.019 0.021 0.024 53 0.008 0.012 0.015 0.017 0.019 0.022 54 0.012 0.016 0.019 0.022 0.025 0.028 55 0.018 0.025 0.031 0.035 0.038 0.043 56 0.015 0.021 0.025 0.029 0.032 0.036 57 0.020 0.028 0.033 0.038 0.043 0.048 58 0.024 0.033 0.040 0.046 0.052 0.058 59 0.028 0.039 0.048 0.054 0.060 0.067 60 0.049 0.069 0.083 0.094 0.105 0.118 61 0.062 0.087 0.106 0.120 0.133 0.150 62 0.104 0.146 0.177 0.200 0.223 0.251 63 0.099 0.139 0.169 0.191 0.213 0.239 64 0.097 0.136 0.165 0.186 0.209 0.233 65 0.140 0.197 0.240 0.271 0.302 0.339 66 0.092 0.130 0.157 0.177 0.198 0.222 67 0.129 0.181 0.220 0.249 0.277 0.311 68 0.092 0.129 0.156 0.177 0.197 0.221 69 0.092 0.130 0.158 0.178 0.199 0.224 70 0.103 0.144 0.175 0.198 0.221 0.248 Public Agency Miscellaneous 2% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 0.015 0.018 0.021 0.023 0.026 51 0.009 0.013 0.016 0.018 0.020 0.023 52 0.013 0.018 0.022 0.025 0.028 0.031 53 0.011 0.016 0.019 0.022 0.025 0.028 54 0.015 0.021 0.025 0.028 0.032 0.036 55 0.023 0.032 0.039 0.044 0.049 0.055 56 0.019 0.027 0.032 0.037 0.041 0.046 57 0.025 0.035 0.042 0.048 0.054 0.060 58 0.030 0.042 0.051 0.058 0.065 0.073 59 0.035 0.049 0.060 0.068 0.076 0.085 60 0.062 0.087 0.105 0.119 0.133 0.149 61 0.079 0.110 0.134 0.152 0.169 0.190 62 0.132 0.186 0.225 0.255 0.284 0.319 63 0.126 0.178 0.216 0.244 0.272 0.305 64 0.122 0.171 0.207 0.234 0.262 0.293 65 0.173 0.243 0.296 0.334 0.373 0.418 66 0.114 0.160 0.194 0.219 0.245 0.274 67 0.159 0.223 0.271 0.307 0.342 0.384 68 0.113 0.159 0.193 0.218 0.243 0.273 69 0.114 0.161 0.195 0.220 0.246 0.276 70 0.127 0.178 0.216 0.244 0.273 0.306 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-12 Service Retirement Public Agency Miscellaneous 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.015 0.020 0.024 0.029 0.033 0.039 51 0.013 0.016 0.020 0.024 0.027 0.033 52 0.014 0.018 0.022 0.027 0.030 0.036 53 0.017 0.022 0.027 0.032 0.037 0.043 54 0.027 0.034 0.041 0.049 0.056 0.067 55 0.050 0.064 0.078 0.094 0.107 0.127 56 0.045 0.057 0.069 0.083 0.095 0.113 57 0.048 0.061 0.074 0.090 0.102 0.122 58 0.052 0.066 0.080 0.097 0.110 0.131 59 0.060 0.076 0.092 0.111 0.127 0.151 60 0.072 0.092 0.112 0.134 0.153 0.182 61 0.089 0.113 0.137 0.165 0.188 0.224 62 0.128 0.162 0.197 0.237 0.270 0.322 63 0.129 0.164 0.199 0.239 0.273 0.325 64 0.116 0.148 0.180 0.216 0.247 0.294 65 0.174 0.221 0.269 0.323 0.369 0.439 66 0.135 0.171 0.208 0.250 0.285 0.340 67 0.133 0.169 0.206 0.247 0.282 0.336 68 0.118 0.150 0.182 0.219 0.250 0.297 69 0.116 0.147 0.179 0.215 0.246 0.293 70 0.138 0.176 0.214 0.257 0.293 0.349 Public Agency Miscellaneous 2.5% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.026 0.033 0.040 0.048 0.055 0.062 51 0.021 0.026 0.032 0.038 0.043 0.049 52 0.021 0.026 0.032 0.038 0.043 0.049 53 0.026 0.033 0.040 0.048 0.055 0.062 54 0.043 0.054 0.066 0.078 0.089 0.101 55 0.088 0.112 0.136 0.160 0.184 0.208 56 0.055 0.070 0.085 0.100 0.115 0.130 57 0.061 0.077 0.094 0.110 0.127 0.143 58 0.072 0.091 0.111 0.130 0.150 0.169 59 0.083 0.105 0.128 0.150 0.173 0.195 60 0.088 0.112 0.136 0.160 0.184 0.208 61 0.083 0.105 0.128 0.150 0.173 0.195 62 0.121 0.154 0.187 0.220 0.253 0.286 63 0.105 0.133 0.162 0.190 0.219 0.247 64 0.105 0.133 0.162 0.190 0.219 0.247 65 0.143 0.182 0.221 0.260 0.299 0.338 66 0.105 0.133 0.162 0.190 0.219 0.247 67 0.105 0.133 0.162 0.190 0.219 0.247 68 0.105 0.133 0.162 0.190 0.219 0.247 69 0.105 0.133 0.162 0.190 0.219 0.247 70 0.125 0.160 0.194 0.228 0.262 0.296 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-13 Service Retirement Public Agency Miscellaneous 2.7% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.028 0.035 0.043 0.050 0.058 0.065 51 0.022 0.028 0.034 0.040 0.046 0.052 52 0.022 0.028 0.034 0.040 0.046 0.052 53 0.028 0.035 0.043 0.050 0.058 0.065 54 0.044 0.056 0.068 0.080 0.092 0.104 55 0.091 0.116 0.140 0.165 0.190 0.215 56 0.061 0.077 0.094 0.110 0.127 0.143 57 0.063 0.081 0.098 0.115 0.132 0.150 58 0.074 0.095 0.115 0.135 0.155 0.176 59 0.083 0.105 0.128 0.150 0.173 0.195 60 0.088 0.112 0.136 0.160 0.184 0.208 61 0.085 0.109 0.132 0.155 0.178 0.202 62 0.124 0.158 0.191 0.225 0.259 0.293 63 0.107 0.137 0.166 0.195 0.224 0.254 64 0.107 0.137 0.166 0.195 0.224 0.254 65 0.146 0.186 0.225 0.265 0.305 0.345 66 0.107 0.137 0.166 0.195 0.224 0.254 67 0.107 0.137 0.166 0.195 0.224 0.254 68 0.107 0.137 0.166 0.195 0.224 0.254 69 0.107 0.137 0.166 0.195 0.224 0.254 70 0.129 0.164 0.199 0.234 0.269 0.304 Public Agency Miscellaneous 3% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.026 0.033 0.040 0.048 0.055 0.062 51 0.021 0.026 0.032 0.038 0.043 0.049 52 0.019 0.025 0.030 0.035 0.040 0.046 53 0.025 0.032 0.038 0.045 0.052 0.059 54 0.039 0.049 0.060 0.070 0.081 0.091 55 0.083 0.105 0.128 0.150 0.173 0.195 56 0.055 0.070 0.085 0.100 0.115 0.130 57 0.061 0.077 0.094 0.110 0.127 0.143 58 0.072 0.091 0.111 0.130 0.150 0.169 59 0.080 0.102 0.123 0.145 0.167 0.189 60 0.094 0.119 0.145 0.170 0.196 0.221 61 0.088 0.112 0.136 0.160 0.184 0.208 62 0.127 0.161 0.196 0.230 0.265 0.299 63 0.110 0.140 0.170 0.200 0.230 0.260 64 0.110 0.140 0.170 0.200 0.230 0.260 65 0.149 0.189 0.230 0.270 0.311 0.351 66 0.110 0.140 0.170 0.200 0.230 0.260 67 0.110 0.140 0.170 0.200 0.230 0.260 68 0.110 0.140 0.170 0.200 0.230 0.260 69 0.110 0.140 0.170 0.200 0.230 0.260 70 0.132 0.168 0.204 0.240 0.276 0.312 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-14 Service Retirement Public Agency Miscellaneous 2% @ 62 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 51 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 52 0.0103 0.0132 0.0160 0.0188 0.0216 0.0244 53 0.0131 0.0167 0.0202 0.0238 0.0273 0.0309 54 0.0213 0.0272 0.0330 0.0388 0.0446 0.0504 55 0.0440 0.0560 0.0680 0.0800 0.0920 0.1040 56 0.0303 0.0385 0.0468 0.0550 0.0633 0.0715 57 0.0363 0.0462 0.0561 0.0660 0.0759 0.0858 58 0.00465 0.0592 0.0718 0.0845 0.0972 0.1099 59 0.0578 0.0735 0.0893 0.1050 0.1208 0.1365 60 0.0616 0.0784 0.0952 0.1120 0.1288 0.1456 61 0.0888 0.0788 0.0956 0.1125 0.1294 0.1463 62 0.0941 0.1232 0.1496 0.1760 0.2024 0.2288 63 0.1287 0.1131 0.1373 0.1615 0.1857 0.2100 64 0.1045 0.1197 0.1454 0.1710 0.1967 0.2223 65 0.1045 0.1638 0.1989 0.2340 0.2691 0.3042 66 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470 67 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470 68 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470 69 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470 70 0.1254 0.1596 0.1938 0.2280 0.2622 0.9640 Service Retirement Public Agency Fire ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.01588 0.00000 0.03442 0.01990 0.04132 0.07513 Age 56 57 58 59 60 Rate 0.11079 0.00000 0.09499 0.04409 1.00000 Public Agency Police ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.02552 0.00000 0.01637 0.02717 0.00949 0.16674 Age 56 57 58 59 60 Rate 0.06921 0.05113 0.07241 0.07043 1.00000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-15 Service Retirement Public Agency Police 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.014 0.014 0.014 0.025 0.045 51 0.012 0.012 0.012 0.012 0.023 0.040 52 0.026 0.026 0.026 0.026 0.048 0.086 53 0.052 0.052 0.052 0.052 0.096 0.171 54 0.070 0.070 0.070 0.070 0.128 0.227 55 0.090 0.090 0.090 0.090 0.165 0.293 56 0.064 0.064 0.064 0.064 0.117 0.208 57 0.071 0.071 0.071 0.071 0.130 0.232 58 0.063 0.063 0.063 0.063 0.115 0.205 59 0.140 0.140 0.140 0.140 0.174 0.254 60 0.140 0.140 0.140 0.140 0.172 0.251 61 0.140 0.140 0.140 0.140 0.172 0.251 62 0.140 0.140 0.140 0.140 0.172 0.251 63 0.140 0.140 0.140 0.140 0.172 0.251 64 0.140 0.140 0.140 0.140 0.172 0.251 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015 51 0.008 0.008 0.008 0.008 0.013 0.019 52 0.017 0.017 0.017 0.017 0.027 0.040 53 0.047 0.047 0.047 0.047 0.072 0.107 54 0.064 0.064 0.064 0.064 0.098 0.147 55 0.087 0.087 0.087 0.087 0.134 0.200 56 0.078 0.078 0.078 0.078 0.120 0.180 57 0.090 0.090 0.090 0.090 0.139 0.208 58 0.079 0.079 0.079 0.079 0.122 0.182 59 0.073 0.073 0.073 0.073 0.112 0.168 60 0.114 0.114 0.114 0.114 0.175 0.262 61 0.114 0.114 0.114 0.114 0.175 0.262 62 0.114 0.114 0.114 0.114 0.175 0.262 63 0.114 0.114 0.114 0.114 0.175 0.262 64 0.114 0.114 0.114 0.114 0.175 0.262 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-16 Service Retirement Public Agency Police 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.019 0.019 0.019 0.019 0.040 0.060 51 0.024 0.024 0.024 0.024 0.049 0.074 52 0.024 0.024 0.024 0.024 0.051 0.077 53 0.059 0.059 0.059 0.059 0.121 0.183 54 0.069 0.069 0.069 0.069 0.142 0.215 55 0.116 0.116 0.116 0.116 0.240 0.363 56 0.076 0.076 0.076 0.076 0.156 0.236 57 0.058 0.058 0.058 0.058 0.120 0.181 58 0.076 0.076 0.076 0.076 0.157 0.237 59 0.094 0.094 0.094 0.094 0.193 0.292 60 0.141 0.141 0.141 0.141 0.290 0.438 61 0.094 0.094 0.094 0.094 0.193 0.292 62 0.118 0.118 0.118 0.118 0.241 0.365 63 0.094 0.094 0.094 0.094 0.193 0.292 64 0.094 0.094 0.094 0.094 0.193 0.292 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.012 0.012 0.012 0.018 0.028 0.033 51 0.008 0.008 0.008 0.012 0.019 0.022 52 0.018 0.018 0.018 0.027 0.042 0.050 53 0.043 0.043 0.043 0.062 0.098 0.114 54 0.057 0.057 0.057 0.083 0.131 0.152 55 0.092 0.092 0.092 0.134 0.211 0.246 56 0.081 0.081 0.081 0.118 0.187 0.218 57 0.100 0.100 0.100 0.146 0.230 0.268 58 0.081 0.081 0.081 0.119 0.187 0.219 59 0.078 0.078 0.078 0.113 0.178 0.208 60 0.117 0.117 0.117 0.170 0.267 0.312 61 0.078 0.078 0.078 0.113 0.178 0.208 62 0.098 0.098 0.098 0.141 0.223 0.260 63 0.078 0.078 0.078 0.113 0.178 0.208 64 0.078 0.078 0.078 0.113 0.178 0.208 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-17 Service Retirement Public Agency Police 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0110 0.0110 0.0110 0.0110 0.0202 0.0361 51 0.0086 0.0086 0.0086 0.0086 0.0158 0.0281 52 0.0183 0.0183 0.0183 0.0183 0.0336 0.0599 53 0.0366 0.0366 0.0366 0.0366 0.0670 0.1194 54 0.0488 0.0488 0.0488 0.0488 0.0893 0.1592 55 0.0629 0.0629 0.0629 0.0629 0.1152 0.2052 56 0.0447 0.0447 0.0447 0.0447 0.0816 0.1455 57 0.0640 0.0640 0.0640 0.0640 0.1170 0.2086 58 0.0471 0.0471 0.0471 0.0471 0.0862 0.1537 59 0.1047 0.1047 0.1047 0.1047 0.1301 0.1908 60 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 61 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 62 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 63 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 64 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0052 0.0052 0.0052 0.0052 0.0081 0.0121 51 0.0057 0.0057 0.0057 0.0057 0.0088 0.0131 52 0.0121 0.0121 0.0121 0.0121 0.0187 0.0280 53 0.0326 0.0326 0.0326 0.0326 0.0501 0.0750 54 0.0447 0.0447 0.0447 0.0447 0.0688 0.1030 55 0.0608 0.0608 0.0608 0.0608 0.0935 01400 56 0.0545 0.0545 0.0545 0.0545 0.0840 0.1257 57 0.0811 0.0811 0.0811 0.0811 0.01248 0.1869 58 0.0593 0.0593 0.0593 0.0593 0.0913 0.1366 59 0.0547 0.0547 0.0547 0.0547 0.0842 0.1261 60 0.0851 0.0851 0.0851 0.0851 0.1310 0.1961 61 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964 62 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964 63 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964 64 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-18 Service Retirement Public Agency Police 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0117 0.0117 0.0117 0.0117 0.0215 0.0382 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0471 0.0471 0.0471 0.0471 0.0861 0.1535 54 0.0627 0.0627 0.0627 0.0627 0.1148 0.2047 55 0.0764 0.0764 0.0764 0.0764 0.1398 0.2492 56 0.0542 0.0542 0.0542 0.0542 0.0991 0.1767 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0565 0.0565 0.0565 0.0565 0.1034 0.1844 59 0.1256 0.1256 0.1256 0.1256 0.1562 0.2290 60 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 61 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 62 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 63 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 64 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0077 0.0077 0.0077 0.0077 0.0119 0.0178 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0419 0.0419 0.0419 0.0419 0.0644 0.0965 54 0.0574 0.0574 0.0574 0.0574 0.0885 0.1324 55 0.0738 0.0738 0.0738 0.0738 0.1136 01700 56 0.0662 0.0662 0.0662 0.0662 0.1020 0.2077 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.1639 58 0.0711 0.0711 0.0711 0.0711 0.1095 0.1513 59 0.0656 0.0656 0.0656 0.0656 0.1011 0.2354 60 0.1022 0.1022 0.1022 0.1022 0.1572 0.2356 61 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356 62 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356 63 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356 64 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-19 Service Retirement Public Agency Police 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621 54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160 55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785 56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049 59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544 60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018 54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397 55 0.0825 0.0825 0.0825 0.0825 0.1269 01900 56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077 58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821 59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681 60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615 61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-20 Service Retirement Schools 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.009 0.013 0.015 0.016 0.018 51 0.005 0.010 0.014 0.017 0.019 0.021 52 0.006 0.012 0.017 0.020 0.022 0.025 53 0.007 0.014 0.019 0.023 0.026 0.029 54 0.012 0.024 0.033 0.039 0.044 0.049 55 0.024 0.048 0.067 0.079 0.088 0.099 56 0.020 0.039 0.055 0.065 0.072 0.081 57 0.021 0.042 0.059 0.070 0.078 0.087 58 0.025 0.050 0.070 0.083 0.092 0.103 59 0.029 0.057 0.080 0.095 0.105 0.118 60 0.037 0.073 0.102 0.121 0.134 0.150 61 0.046 0.090 0.126 0.149 0.166 0.186 62 0.076 0.151 0.212 0.250 0.278 0.311 63 0.069 0.136 0.191 0.225 0.251 0.281 64 0.067 0.133 0.185 0.219 0.244 0.273 65 0.091 0.180 0.251 0.297 0.331 0.370 66 0.072 0.143 0.200 0.237 0.264 0.295 67 0.067 0.132 0.185 0.218 0.243 0.272 68 0.060 0.118 0.165 0.195 0.217 0.243 69 0.067 0.133 0.187 0.220 0.246 0.275 70 0.066 0.131 0.183 0.216 0.241 0.270 Miscellaneous Superfunded Status Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA) that became effective January 1, 2013, a plan in superfunded status (actuarial value of assets exceeding present value of benefits) would normally pay a zero employer contribution rate while also being permitted to use its superfunded assets to pay its employees’ normal member contributions. However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s contribution to a defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be less than the total normal cost rate…” This means that not only must employers pay their employer normal cost regardless of plan surplus, but also, employers may no longer use superfunded assets to pay employee normal member contributions. Internal Revenue Code Section 415 The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-21 Internal Revenue Code Section 401(a)(17) The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. PEPRA Assumptions The Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated new benefit formulas and new member contributions for new members (as defined by PEPRA) hired after January 1, 2013. For non-pooled plans, these new members will first be reflected in the June 30, 2013 non-pooled plan valuations. New members in pooled plans will first be reflected in the new Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, also beginning with the June 30, 2013 valuation. Different assumptions for these new PEPRA members are disclosed above. THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX B PRINCIPAL PLAN PROVISIONS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-1 The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not been included. Many of the statements in this summary are general in nature, and are intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself governs in all situations. PEPRA Benefit Changes The Public Employees’ Pension Reform Act of 2013 (PEPRA) requires new benefits and member contributions for new members as defined by PEPRA, that are hired after January 1, 2013. These PEPRA members are reflected in your June 30, 2013 actuarial valuation. Members in pooled plans are reflected in the new Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, beginning with the June 30, 2013 valuation. Service Retirement Eligibility A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members become eligible for Service Retirement upon attainment of age 52 with at least 5 years of service. Benefit The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation.  The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for retirement at whole year ages: Miscellaneous Plan Formulas Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60 PEPRA 2% at 62 50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A 51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A 52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000% 53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100% 54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200% 55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300% 56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400% 57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500% 58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600% 59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700% 60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800% 61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900% 62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000% CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-2 63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100% 64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200% 65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300% 66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400% 67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500% Safety Plan Formulas Retirement Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50 50 1.783% 1.426% 2.000% 2.400% 3.000% 51 1.903% 1.522% 2.140% 2.520% 3.000% 52 2.035% 1.628% 2.280% 2.640% 3.000% 53 2.178% 1.742% 2.420% 2.760% 3.000% 54 2.333% 1.866% 2.560% 2.880% 3.000% 55 & Up 2.500% 2.000% 2.700% 3.000% 3.000% * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor as in the above table. PEPRA Safety Plan Formulas Retirement Age 2% at 57 2.5% at 57 2.7% at 57 50 1.426% 2.000% 2.000% 51 1.508% 2.071% 2.100% 52 1.590% 2.143% 2.200% 53 1.672% 2.214% 2.300% 54 1.754% 2.286% 2.400% 55 1.836% 2.357% 2.500% 56 1.918% 2.429% 2.600% 57 & Up 2.000% 2.500% 2.700%  The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave.  The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers have the option of providing a final compensation equal to the highest 12 consecutive months. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for all new members based on the Social Security Contribution and Benefit Base. For employees that participate in CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-3 Social Security this cap is $113,700 for 2013 and for those employees that do not participate in social security the cap for 2013 is $136,440, the equivalent of 120 percent of the 2013 Contribution and Benefit Base. Adjustments to the caps are permitted annually based on changes to the CPI for All Urban Consumers.  Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit. Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.  The Miscellaneous Service Retirement benefit is not capped. The Safety Service Retirement benefit is capped at 90 percent of final compensation. Vested Deferred Retirement Eligibility for Deferred Status A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). Eligibility to Start Receiving Benefits The CalPERS classic members and Safety PEPRA members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA Miscellaneous members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 52. Benefit The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is based on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. Non-Industrial (Non-Job Related) Disability Retirement Eligibility A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit. Standard Benefit The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows:  Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years of service; or  Service is CalPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of Final Compensation. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-4 Improved Benefit Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent for each additional year of service to a maximum of 50 percent of final compensation. Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service. Industrial (Job Related) Disability Retirement All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option. Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled means the member is unable to perform the duties of the job because of a work-related illness or injury, which is, expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group is not eligible for this benefit, except to the extent described below. Standard Benefit The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation. Increased Benefit (75 percent of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation for total disability. Improved Benefit (50 percent to 90 percent of Final Compensation) The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation. For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions. If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial Disability Retirement benefit, the member may choose to receive the larger benefit. Post-Retirement Death Benefit Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate. Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-5 Form of Payment for Retirement Allowance Standard Form of Payment Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death. Improved Form of Payment (Post Retirement Survivor Allowance) Employers have the option to contract for the post retirement survivor allowance. For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance. In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried children until they attain age 18; or, if no eligible children, to a qualifying dependent parent) for the rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries. The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion. Pre-Retirement Death Benefits Basic Death Benefit This is a standard benefit. Eligibility An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Basic Death benefit. Benefit The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. 1957 Survivor Benefit This is a standard benefit. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-6 Eligibility An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's unmarried children under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit. Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child is disabled. The total amount paid will be at least equal to the Basic Death benefit. Optional Settlement 2W Death Benefit This is an optional benefit. Eligibility An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2W Death benefit. Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit. Special Death Benefit This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous members. Eligibility An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 22. An eligible survivor who chooses to receive this benefit will not receive any other death benefit. Benefit The Special Death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-7 have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried children under age 22. There is a guarantee that the total amount paid will at least equal the Basic Death Benefit. If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving children (eligible means unmarried children under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following:  if 1 eligible child: 12.5 percent of final compensation  if 2 eligible children: 20.0 percent of final compensation  if 3 or more eligible children: 25.0 percent of final compensation Alternate Death Benefit for Local Fire Members This is an optional benefit available only to local fire members. Eligibility An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 18. Benefit The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that which would be payable if the member had retired at age 50, based on service credited at the time of death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit. Cost-of-Living Adjustments (COLA) Standard Benefit Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2 percent. Improved Benefit Employers have the option of providing any of these improved cost-of-living adjustments by contracting for any one of these Class 1 optional benefits. An improved COLA is not available in conjunction with the 1.5% at 65 formula. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by either 3 percent, 4 percent or 5 percent. However, the cumulative adjustment may not be greater than the cumulative change in the Consumer Price Index since the date of retirement. Purchasing Power Protection Allowance (PPPA) Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-8 retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan. Employee Contributions Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee contribution is as described below. The percent contributed below the monthly compensation breakpoint is 0 percent. The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shown in the table below. Benefit Formula Percent Contributed above the Breakpoint Miscellaneous, 1.5% at 65 2% Miscellaneous, 2% at 60 7% Miscellaneous, 2% at 55 7% Miscellaneous, 2.5% at 55 8% Miscellaneous, 2.7% at 55 8% Miscellaneous, 3% at 60 8% Miscellaneous, 2% at 62 50% of the Total Normal Cost Safety, 1/2 at 55 Varies by entry age Safety, 2% at 55 7% Safety, 2% at 50 9% Safety, 3% at 55 9% Safety, 3% at 50 9% Safety, 2% at 57 50% of the Total Normal Cost Safety, 2.5% at 57 50% of the Total Normal Cost Safety, 2.7% at 57 50% of the Total Normal Cost The employer may choose to “pick-up” these contributions for the employees (Employer Paid Member Contributions or EPMC). EPMC is prohibited for new PEPRA members. An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution with or without a change in benefit. These contributions are paid in addition to the member contribution. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent. Refund of Employee Contributions If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited annually with 6 percent interest. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-9 1959 Survivor Benefit This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 was required to provide this benefit if the members were not covered by Social Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or any agency wishing to add this benefit or increase the current level must choose the 4th or Indexed Level. This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov. THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX C PARTICIPANT DATA  SUMMARY OF VALUATION DATA  ACTIVE MEMBERS  TRANSFERRED AND TERMINATED MEMBERS  RETIRED MEMBERS AND BENEFICIARIES THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C SAFETY PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-1 Summary of Valuation Data June 30, 2012 June 30, 2013 1. Active Members a) Counts 255 265 b) Average Attained Age 38.36 38.21 c) Average Entry Age to Rate Plan 27.55 27.54 d) Average Years of Service 10.81 10.67 e) Average Annual Covered Pay $ 111,529 $ 108,526 f) Annual Covered Payroll 28,439,846 28,759,363 g) Projected Annual Payroll for Contribution Year 31,076,988 31,426,132 h) Present Value of Future Payroll 279,360,915 280,175,707 2. Transferred Members a) Counts 46 45 b) Average Attained Age 43.11 43.36 c) Average Years of Service 4.23 4.15 d) Average Annual Covered Pay $ 92,275 $ 103,627 3. Terminated Members a) Counts 36 38 b) Average Attained Age 41.52 43.04 c) Average Years of Service 4.11 4.27 d) Average Annual Covered Pay $ 74,732 $ 69,957 4. Retired Members and Beneficiaries a) Counts 398 406 b) Average Attained Age 63.71 64.28 c) Average Annual Benefits $ 58,247 $ 59,746 5. Active to Retired Ratio [(1a) / (4a)] 0.64 0.65 Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have service with another agency and would therefore have a larger total benefit than would be included as part of the average shown here. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C SAFETY PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-2 Active Members Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Distribution of Active Members by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total 15-24 5 0 0 0 0 0 5 25-29 33 14 0 0 0 0 47 30-34 18 28 15 0 0 0 61 35-39 3 24 15 2 0 0 44 40-44 4 11 15 9 2 0 41 45-49 3 2 6 11 18 5 45 50-54 1 0 2 1 5 7 16 55-59 2 0 0 0 1 3 6 60-64 0 0 0 0 0 0 0 65 and over 0 0 0 0 0 0 0 All Ages 69 79 53 23 26 15 265 Distribution of Average Annual Salaries by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Average 15-24 $65,881 $0 $0 $0 $0 $0 $65,881 25-29 68,354 98,139 0 0 0 0 77,226 30-34 79,905 100,917 112,355 0 0 0 97,530 35-39 82,846 112,378 121,024 122,744 0 0 113,783 40-44 57,556 106,238 125,675 131,451 114,494 0 114,537 45-49 143,344 129,956 111,856 112,574 133,846 156,307 128,670 50-54 201,589 0 136,648 125,226 130,123 166,716 151,109 55-59 203,303 0 0 0 144,734 129,772 156,776 60-64 0 0 0 0 0 0 0 65 and over 0 0 0 0 0 0 0 All Ages $80,295 $105,383 $119,439 $121,396 $132,060 $155,858 $108,526 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C SAFETY PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-3 Transferred and Terminated Members Distribution of Transfers to Other CalPERS Plans by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 0 0 0 0 0 0 0 $0 25-29 1 0 0 0 0 0 1 63,773 30-34 5 0 0 0 0 0 5 87,008 35-39 8 1 0 0 0 0 9 106,011 40-44 8 1 1 1 0 0 11 104,109 45-49 9 0 0 1 0 0 10 112,897 50-54 1 2 1 0 0 1 5 126,444 55-59 3 0 0 0 0 0 3 87,969 60-64 1 0 0 0 0 0 1 40,000 65 and over 0 0 0 0 0 0 0 0 All Ages 36 4 2 2 0 1 45 103,627 Distribution of Terminated Participants with Funds on Deposit by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 0 0 0 0 0 0 0 $0 25-29 1 0 0 0 0 0 1 37,312 30-34 7 0 0 0 0 0 7 59,859 35-39 5 1 2 0 0 0 8 78,485 40-44 5 1 1 0 1 0 8 92,489 45-49 3 1 0 0 1 0 5 68,564 50-54 1 3 0 0 0 0 4 57,373 55-59 2 0 1 0 0 0 3 30,444 60-64 1 1 0 0 0 0 2 85,302 65 and over 0 0 0 0 0 0 0 0 All Ages 25 7 4 0 2 0 38 69,957 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C SAFETY PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-4 Retired Members and Beneficiaries Distribution of Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 30 0 0 0 0 0 0 0 30-34 0 0 2 0 0 0 2 35-39 0 0 2 0 0 0 2 40-44 0 0 2 0 0 0 2 45-49 0 0 11 0 1 1 13 50-54 31 0 8 0 0 1 40 55-59 52 0 17 0 1 2 72 60-64 66 0 27 0 1 1 95 65-69 58 0 22 0 0 6 86 70-74 24 1 16 0 0 4 45 75-79 12 0 11 0 0 3 26 80-84 7 0 2 0 0 5 14 85 and Over 1 0 1 0 0 7 9 All Ages 251 1 121 0 3 30 406 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 30 $0 $0 $0 $0 $0 $0 $0 30-34 0 0 49,527 0 0 0 49,527 35-39 0 0 53,958 0 0 0 53,958 40-44 0 0 51,436 0 0 0 51,436 45-49 0 0 40,423 0 76,163 37,201 42,924 50-54 85,500 0 58,461 0 0 3,082 78,032 55-59 88,687 0 59,593 0 59,006 50,339 80,340 60-64 76,922 0 43,635 0 87,793 1,754 66,785 65-69 63,900 0 39,932 0 0 20,012 54,707 70-74 53,018 9,891 32,950 0 0 52,186 44,850 75-79 53,474 0 25,333 0 0 24,315 38,204 80-84 15,840 0 28,376 0 0 24,641 20,774 85 and Over 23,042 0 36,854 0 0 10,249 14,626 All Ages $72,085 $9,891 $42,904 $0 $74,321 $24,647 $59,746 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C SAFETY PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-5 Retired Members and Beneficiaries (continued) Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 5 Yrs 66 0 15 0 0 10 91 5-9 88 0 24 0 1 8 121 10-14 50 0 21 0 0 5 76 15-19 27 0 14 0 2 4 47 20-24 12 1 20 0 0 2 35 25-29 4 0 6 0 0 1 11 30 and Over 4 0 21 0 0 0 25 All Years 251 1 121 0 3 30 406 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 5 Yrs $85,959 $0 $59,179 $0 $0 $22,973 $74,623 5-9 81,089 0 66,014 0 87,793 25,136 74,455 10-14 63,699 0 44,706 0 0 19,599 55,550 15-19 53,306 0 48,502 0 67,585 38,277 51,203 20-24 41,390 9,891 23,820 0 0 21,406 29,308 25-29 26,375 0 19,145 0 0 14,695 21,370 30 and Over 14,435 0 24,296 0 0 0 22,718 All Years $72,085 $9,891 $42,904 $0 $74,321 $24,647 $59,746 * Counts of members do not include alternate payees receiving benefits while the member is still working. Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for those who have service in more than one coverage group. This does not result in double counting of liabilities. THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX D DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX D SAFETY PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA D-1 DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2013. Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry age into the plan. Since the actual demographics of new members was not known during the implementation of PEPRA in December 2012, the normal cost rate was determined based on the average demographics of the members in the current 2 percent at age 55 miscellaneous risk pool and the 3 percent at age 50 safety risk pool. In analyzing the first set of PEPRA data, CalPERS staff has become concerned that, for most employers, there is insufficient data to produce stable normal costs and member contribution rates. Further, this situation is likely to persist for a number of years as employers gradually bring on more PEPRA members. The larger employers may have sufficient PEPRA members in the first few years but other employers may not have stable rates for a number of years. Staff has concluded that the best approach is to repeat the process – using the normal costs based on the demographics of the risk pools – for the current valuation and work with stakeholders over the next year to determine the best long-term approach to the issue of calculating PEPRA normal costs and member contribution rates. For more information on this topic please refer to the CalPERS Board of Administration agenda item 9a of the May 20th, 2014 meeting which is available on the CalPERS website. Basis for Current Rate Rates Effective July 1, 2015 Rate Plan Identifier Plan Total Normal Cost Member Rate Total Normal Cost Change Change Needed Member Rate 25040 Safety Fire PEPRA 22.70% 11.250% 22.70% 0.00% No 11.250% 25041 Other Safety PEPRA 22.70% 11.250% 22.70% 0.00% No 11.250% 25042 Safety Police PEPRA 22.70% 11.250% 22.70% 0.00% No 11.250% THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX E GLOSSARY OF ACTUARIAL TERMS CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E SAFETY PLAN OF THE CITY OF NEWPORT BEACH GLOSSARY OF ACTUARIAL TERMS E-1 Glossary of Actuarial Terms Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability) The total dollars needed as of the valuation date to fund all benefits earned in the past for current members. Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation. Actuarial Methods Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Actuarial Value of Assets. Actuarial Valuation The determination, as of a valuation date, of the Normal Cost, Accrued liability, Actuarial Value of Assets and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change to their plan provisions. Actuarial Value of Assets The Actuarial Value of Assets used for funding purposes is obtained through an asset smoothing technique where investment gains and losses are partially recognized in the year they are incurred, with the remainder recognized in subsequent years. This method helps to dampen large fluctuations in the employer contribution rate. Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be separately amortized and paid for over a specific period of time. However, all bases are amortized using investment and payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage note has its own terms (payment period, principal, etc.) Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract amendments, actuarial assumption changes, actuarial methodology changes, and or gains and losses. Payment periods are determined by Board policy and vary based on the cause of the change. Amortization Period The number of years required to pay off an Amortization Base. Annual Required Contributions (ARC) The employer's periodic required annual contributions to a defined benefit pension plan as set forth in GASB Statement No. 27, calculated in accordance with the plan assumptions. The ARC is determined by multiplying the employer contribution rate by the payroll reported to CalPERS for the applicable fiscal year. However, if this contribution is fully prepaid in a lump sum, then the dollar value of the ARC is equal to the Lump Sum Prepayment. Classic Member (under PEPRA) A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new member under PEPRA. (See definition of new member below) Discount Rate Assumption The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL). CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E SAFETY PLAN OF THE CITY OF NEWPORT BEACH GLOSSARY OF ACTUARIAL TERMS E-2 Entry Age The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most cases, this is the age of the member on their date of hire. Entry Age Normal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because there is less time to earn investment income to fund the future benefits.) Fresh Start A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period. Funded Status A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets verses accrued liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less than 100% means liabilities are greater than assets. A funded ratio based on the Actuarial Value of Assets indicates the progress toward fully funding the plan using the actuarial cost methods and assumptions. A funded ratio based on the Market Value of Assets indicates the short-term solvency of the plan. GASB 27 Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting for pensions. GASB 68 Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014. New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system. Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to perform the calculations necessary to properly fund a pension plan. PEPRA The California Public Employees’ Pension Reform Act of 2013 Prepayment Contribution A payment made by the employer to reduce or eliminate the year’s required employer contribution. Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members. Rolling Amortization Period An amortization period that remains the same each year, rather than declining. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E SAFETY PLAN OF THE CITY OF NEWPORT BEACH GLOSSARY OF ACTUARIAL TERMS E-3 Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee contributions for the rate year covered by that valuation could be waived. Unfunded Liability When a plan or pool’s Actuarial Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost. California Public Employees’ Retirement System Actuarial Office P.O. Box 942701 Sacramento, CA 94229-2701 TTY: (916) 795-3240 (888) 225-7377 phone • (916) 795-2744 fax www.calpers.ca.gov October 2014 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH (CalPERS ID: 1545983430) Annual Valuation Report as of June 30, 2013 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2013 actuarial valuation report of your pension plan. Your 2013 actuarial valuation report contains important actuarial information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature appears in the Actuarial Certification Section on page 1, is available to discuss the report with you after October 31, 2014. Future Contribution Rates The exhibit below displays the Minimum Employer Contribution Rate for fiscal year 2015-16 and a projected contribution rate for 2016-17, before any cost sharing. The projected rate for 2016-17 is based on the most recent information available, including an estimate of the investment return for fiscal year 2013-14, namely 18 percent, and the impact of the actuarial assumptions adopted by the CalPERS Board in February 2014 that will impact employer rates for the first time in fiscal year 2016-17. For a projection of employer rates beyond 2016-17, please refer to the “Projected Rates” in the “Risk Analysis” section, which includes rate projections through 2020-21 under a variety of investment return scenarios. Please disregard any projections that we may have provided you in the past. Fiscal Year Employer Contribution Rate 2015-16 21.080% 2016-17 22.8% (projected) Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the above rates. The employer contribution rates in this report do not reflect any cost sharing arrangement you may have with your employees. The estimate for 2016-17 also assumes that there are no future contract amendments and no liability gains or losses (such as larger than expected pay increases, more retirements than expected, etc.). This is a very important assumption because these gains and losses do occur and can have a significant impact on your contribution rate. Even for the largest plans, such gains and losses often cause a change in the employer’s contribution rate of one or two percent of payroll and may be even larger in some less common instances. These gains and losses cannot be predicted in advance so the projected employer contribution rates are just estimates. Your actual rate for 2016-17 will be provided in next year’s report. MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH (CalPERS ID: 1545983430) Annual Valuation Report as of June 30, 2013 Page 2 Changes since the Prior Year’s Valuation On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of the PEPRA changes are included in the rates and the benefit provision listings of the June 30, 2013 valuation for the 2015-16 rates. For more information on PEPRA, please refer to the CalPERS website. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS will no longer use an actuarial value of assets and will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. Besides the above noted changes, there may also be changes specific to your plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix A, “Actuarial Methods and Assumptions.” The effect of the changes on your rate is included in the “Reconciliation of Required Employer Contributions.” We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after October 31 to contact us with actuarial questions. If you have other questions, you may call the Customer Contact Center at (888)-CalPERS or (888-225-7377). Sincerely, ALAN MILLIGAN Chief Actuary ACTUARIAL VALUATION as of June 30, 2013 for the MISCELLANEOUS PLAN of the CITY OF NEWPORT BEACH (CalPERS ID: 1545983430) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR July 1, 2015 – June 30, 2016 THIS PAGE INTENTIONALLY LEFT BLANK TABLE OF CONTENTS ACTUARIAL CERTIFICATION 1 HIGHLIGHTS AND EXECUTIVE SUMMARY Introduction 5 Purpose of the Report 5 Required Employer Contribution 6 Plan’s Funded Status 6 Cost 7 Changes Since the Prior Year’s Valuation 8 Subsequent Events 8 ASSETS Reconciliation of the Market Value of Assets 11 Asset Allocation 12 CalPERS History of Investment Returns 13 LIABILITIES AND RATES Development of Accrued and Unfunded Liabilities 17 (Gain) / Loss Analysis 06/30/12 - 06/30/13 18 Schedule of Amortization Bases 19 Alternate Amortization Schedules 20 Reconciliation of Required Employer Contributions 21 Employer Contribution Rate History 22 Funding History 22 RISK ANALYSIS Volatility Ratios 25 Projected Rates 26 Analysis of Future Investment Return Scenarios 26 Analysis of Discount Rate Sensitivity 27 Hypothetical Termination Liability 28 GASB STATEMENT NO. 27 Information for Compliance with GASB Statement No. 27 31 PLAN’S MAJOR BENEFIT PROVISIONS Plan’s Major Benefit Options 35 APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data A1 Actuarial Methods A1 – A2 Actuarial Assumptions A3 – A20 Miscellaneous A20 – A21 APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B9 APPENDIX C – PARTICIPANT DATA Summary of Valuation Data C1 Active Members C2 Transferred and Terminated Members C3 Retired Members and Beneficiaries C4 – C5 APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1 APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E3 (CY) FIN PROCESS CONTROL ID: 426590 (PY) FIN PROCESS CONTROL ID: 410620 REPORT ID: 76460 THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 1 ACTUARIAL CERTIFICATION To the best of our knowledge, this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH. This valuation is based on the member and financial data as of June 30, 2013 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law. The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. KERRY J. WORGAN, MAAA, FSA, FCIA Senior Pension Actuary, CalPERS THIS PAGE INTENTIONALLY LEFT BLANK HIGHLIGHTS AND EXECUTIVE SUMMARY  INTRODUCTION  PURPOSE OF THE REPORT  REQUIRED EMPLOYER CONTRIBUTION  PLAN’S FUNDED STATUS  COST  CHANGES SINCE THE PRIOR YEAR’S VALUATION  SUBSEQUENT EVENTS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 5 Introduction This report presents the results of the June 30, 2013 actuarial valuation of the MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the fiscal year 2015-16 required employer contribution rates. On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of most of the PEPRA changes are included in the rates and the benefit provision listings of the June 30, 2013 valuation, which sets the 2015-16 contribution rates. For more information on PEPRA, please refer to the CalPERS website. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing policy, which spread investment returns over a 15-year period while experience gains and losses were amortized over a rolling 30-year period. Effective with the June 30, 2013 valuations, CalPERS will no longer use an actuarial value of assets and will employ an amortization and smoothing policy that will spread rate increases or decreases over a 5-year period, and will amortize all experience gains and losses over a fixed 30-year period. The new amortization and smoothing policy is used in this valuation. In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp- up/ramp-down in accordance with Board policy. Purpose of the Report The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2013. The purpose of the report is to:  Set forth the assets and accrued liabilities of this plan as of June 30, 2013;  Determine the required employer contribution rate for the fiscal year July 1, 2015 through June 30, 2016;  Provide actuarial information as of June 30, 2013 to the CalPERS Board of Administration and other interested parties; and to  Provide pension information as of June 30, 2013 to be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit Pension Plan. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception of including the original base amounts of the various components of the unfunded liability in the Schedule of Amortization Bases shown on page 19. Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document:  A “Deterministic Stress Test,” projecting future results under different investment income scenarios  A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or minus change in the discount rate. CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 6 The use of this report for any other purposes may be inappropriate. In particular, this report does not contain information applicable to alternative benefit costs. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above. Required Employer Contribution Fiscal Year Fiscal Year 2014-15 2015-16 Actuarially Determined Employer Contributions 1. Contribution in Projected Dollars a) Total Normal Cost $ 6,901,728 $ 6,744,068 b) Employee Contribution1 3,494,546 3,349,580 c) Employer Normal Cost [(1a) – (1b)] 3,407,182 3,394,488 d) Unfunded Liability Contribution 4,811,881 5,452,620 e) Required Employer Contribution [(1c) + (1d)] $ 8,219,063 $ 8,847,108 Projected Annual Payroll for Contribution Year $ 43,681,821 $ 41,969,427 2. Contribution as a Percentage of Payroll a) Total Normal Cost 15.800% 16.069% b) Employee Contribution1 8.000% 7.981% c) Employer Normal Cost [(2a) – (2b)] 7.800% 8.088% d) Unfunded Liability Rate 11.016% 12.992% e) Required Employer Rate [(2c) + (2d)] 18.816% 21.080% Minimum Employer Contribution Rate2 18.816% 21.080% Annual Lump Sum Prepayment Option3 $ 7,927,168 $ 8,532,909 1For classic members this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee cost sharing is not shown in this report. 2The Minimum Employer Contribution Rate under PEPRA is the greater of the required employer rate or the employer normal cost. 3Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year and after June 30. If there is contractual cost sharing or other change, this amount will change. Plan’s Funded Status June 30, 2012 June 30, 2013 1. Present Value of Projected Benefits $ 351,642,097 $ 365,020,051 2. Entry Age Normal Accrued Liability 302,006,850 316,856,655 3. Market Value of Assets (MVA) $ 200,149,332 $ 222,107,686 4. Unfunded Liability [(2) – (3)] $ 101,857,518 $ 94,748,969 5. Funded Ratio [(3) / (2)] 66.3% 70.1% Superfunded Status No No CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 7 Cost Actuarial Cost Estimates in General What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a number of assumptions about the future. These assumptions can be divided into two categories.  Demographic assumptions include the percentage of employees that will terminate, die, become disabled, and retire in each future year.  Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact, future asset returns at CalPERS for each year into the future until the last dollar is paid to current members of your plan. While CalPERS has set these assumptions to reflect our best estimate of the real future of your plan, it must be understood that these assumptions are very long-term predictors and will surely not be realized in any one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of 7.5 percent for the past twenty year period ending June 30, 2013, returns for each fiscal year ranged from negative -24 percent to +21.7 percent. Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces.  The Normal Cost (i.e., the annual cost associated with one year of service accrual) expressed as a percentage of total active payroll.  The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past service of current members) which is expressed as a lump sum dollar amount. The cost is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an orange if you will). To communicate the total cost, either the Normal Cost (i.e., future percent of payroll) must be converted to a lump sum dollar amount (in which case the total cost is the present value of benefits), or the Past Service Cost (i.e., the lump sum) must be converted to a percent of payroll (in which case the total cost is expressed as the employer’s rate, part of which is permanent and part temporary). Converting the Past Service Cost lump sum to a percent of payroll requires a specific amortization period, and the employer rate will vary depending on the amortization period chosen. CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 8 Changes since the Prior Year’s Valuation Benefits The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective even if the valuation date is prior to the effective date of the amendment. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or rate is shown for any plan changes, which were already included in the prior year’s valuation. Actuarial Methods and Assumptions On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS will no longer use an actuarial value of assets and will employ an amortization and rate smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate phased in over a 5-year period. A change in the calculation of termination with vested benefits liability for active members was made this year to better reflect the retirement experience. After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety member at age 54 rather than at earliest retirement age. The higher benefit factors at these ages results in a slightly higher liability and a modest increase in normal cost. Public Employees’ Pension Reform Act of 2013 (PEPRA) On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect, requiring that a public employer’s contribution to a defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be less than the normal cost rate. Beginning July 1, 2013, this means that some plans with surplus will be paying more than they otherwise would. For more information on PEPRA, please refer to the CalPERS website. Subsequent Events Actuarial Methods and Assumptions In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns (see Risk Analysis section of report). The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. The impact of assumption changes are included in the “Expected Rate Increases” subsection of the “Risk Analysis” section. ASSETS  RECONCILIATION OF THE MARKET VALUE OF ASSETS  ASSET ALLOCATION  CALPERS HISTORY OF INVESTMENT RETURNS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 11 Reconciliation of the Market Value of Assets 1. Market Value of Assets as of 6/30/12 Including Receivables $ 200,149,332 2. Receivables for Service Buybacks as of 6/30/12 1,736,745 3. Market Value of Assets as of 6/30/12 198,412,587 4. Employer Contributions 5,892,806 5. Employee Contributions 4,947,842 6. Benefit Payments to Retirees and Beneficiaries (13,720,388) 7. Refunds (267,453) 8. Lump Sum Payments 0 9. Transfers and Miscellaneous Adjustments (359) 10. Investment Return 25,175,719 11. Market Value of Assets as of 6/30/13 $ 220,440,754 12. Receivables for Service Buybacks as of 6/30/13 1,666,932 13. Market Value of Assets as of 6/30/13 Including Receivables $ 222,107,686 CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 12 Asset Allocation CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges, and manages those asset class allocations within their policy ranges. CalPERS recognizes that over 90 percent of the variation in investment returns of a well-diversified pool of assets can typically be attributed to asset allocation decisions. On February 19, 2014 the CalPERS Board of Administration adopted changes to the current asset allocation as shown in the Policy Target Allocation below expressed as percentage of total assets. The asset allocation is has an expected long term blended rate of return of 7.5 percent. The asset allocation and market value of assets shown below reflect the values of the Public Employees Retirement Fund (PERF) in its entirety as of June 30, 2013. The assets for CITY OF NEWPORT BEACH MISCELLANEOUS PLAN are part of the Public Employees Retirement Fund (PERF) and are invested accordingly. (A) Asset Class (B) Market Value ($ Billion) (C) Policy Target Allocation 1) Global Equity 133.4 47.0% 2) Private Equity 31.4 12.0% 3) Global Fixed Income 43.9 19.0% 4) Liquidity 10.5 2.0% 5) Real Assets 25.2 14.0% 6) Inflation Sensitive Assets 9.4 6.0% 7) Absolute Return Strategy (ARS) 7.2 0.0% Total Fund $261.0 100.0% Public Equity 51.1% Private Equity 12.0% Income 16.8% Liquidity 4.0% Real Assets 9.6% Inflation 3.6% ARS 2.8% Asset Allocation at 6/30/2013 CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 13 CalPERS History of Investment Returns The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees. The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30, 2013, (figures are reported as gross of fees). The geometric mean rate of return is the average rate per period compounded over multiple periods. It should be recognized that in any given year the rate of return is volatile. Although the expected rate of return on the recently adopted new asset allocation is 7.5 percent the portfolio has an expected volatility of 11.76 percent per year. Consequently when looking at investment returns it is more instructive to look at returns over longer time horizons. History of CalPERS Geometric Mean Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year Geometric Return 13.2% 3.5% 7.0% 7.6% 9.4% Volatility – 17.9% 13.9% 11.8% 11.6% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 2 . 0 % 1 6 . 3 % 1 5 . 3 % 2 0 . 1 % 1 9 . 5 % 1 2 . 5 % 1 0 . 5 % - 7 . 2 % - 6 . 1 % 3 . 7 % 1 6 . 6 % 1 2 . 3 % 1 1 . 8 % 1 9 . 1 % - 5 . 1 % - 2 4 . 0 % 1 3 . 3 % 2 1 . 7 % 0 . 1 % 1 3 . 2 % THIS PAGE INTENTIONALLY LEFT BLANK LIABILITIES AND RATES  DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES  (GAIN) / LOSS ANALYSIS 06/30/12 - 06/30/13  SCHEDULE OF AMORTIZATION BASES  ALTERNATE AMORTIZATION SCHEDULES  RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS  EMPLOYER CONTRIBUTION RATE HISTORY  FUNDING HISTORY THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 17 Development of Accrued and Unfunded Liabilities 1. Present Value of Projected Benefits a) Active Members $ 170,830,427 b) Transferred Members 11,038,358 c) Terminated Members 11,951,694 d) Members and Beneficiaries Receiving Payments 171,199,572 e) Total $ 365,020,051 2. Present Value of Future Employer Normal Costs $ 23,273,719 3. Present Value of Future Employee Contributions $ 24,889,677 4. Entry Age Normal Accrued Liability a) Active Members [(1a) - (2) - (3)] $ 122,667,031 b) Transferred Members (1b) 11,038,358 c) Terminated Members (1c) 11,951,694 d) Members and Beneficiaries Receiving Payments (1d) 171,199,572 e) Total $ 316,856,655 5. Market Value of Assets (MVA) $ 222,107,686 6. Unfunded Liability [(4e) - (5)] $ 94,748,969 7. Funded Ratio [(5) / (4e)] 70.1% CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 18 (Gain) /Loss Analysis 6/30/12 – 6/30/13 To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below. A Total (Gain)/Loss for the Year 1. Unfunded Accrued Liability (UAL) as of 6/30/12 $ 63,136,858 2. Expected Payment on the UAL during 2012/2013 3,541,814 3. Interest through 6/30/13 [.075 x (A1) - ((1.075)½ - 1) x (A2)] 4,604,847 4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 64,199,891 5. Change due to plan changes 0 6. Change due to assumption change 0 7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 64,199,891 8. Actual UAL as of 6/30/13 94,748,969 9. Total (Gain)/Loss for 2012/2013 [(A8) - (A7)] $ 30,549,078 B Contribution (Gain)/Loss for the Year 1. Expected Contribution (Employer and Employee) $ 10,047,766 2. Interest on Expected Contributions 369,980 3. Actual Contributions 10,840,648 4. Interest on Actual Contributions 399,175 5. Expected Contributions with Interest [(B1) + (B2)] 10,417,746 6. Actual Contributions with Interest [(B3) + (B4)] 11,239,823 7. Contribution (Gain)/Loss [(B5) - (B6)] $ (822,077) C Asset (Gain)/Loss for the Year 1. Actuarial Value of Assets as of 6/30/12 Including Receivables $ 238,869,992 2. Receivables as of 6/30/12 1,736,745 3. Actuarial Value of Assets as of 6/30/12 237,133,247 4. Contributions Received 10,840,648 5. Benefits and Refunds Paid (13,987,841) 6. Transfers and miscellaneous adjustments (359) 7. Expected Int. [.075 x (C3) + ((1.075)½ - 1) x ((C4) + (C5) + (C6))] 17,669,094 8. Expected Assets as of 6/30/13 [(C3) + (C4) + (C5) + (C6) + (C7)] 251,654,789 9. Receivables as of 6/30/13 1,666,932 10. Expected Assets Including Receivables 253,321,721 11. Market Value of Assets as of 6/30/13 222,107,686 12. Asset (Gain)/Loss [(C10) - (C11)] $ 31,214,035 D Liability (Gain)/Loss for the Year 1. Total (Gain)/Loss (A9) $ 30,549,078 2. Contribution (Gain)/Loss (B7) (822,077) 3. Asset (Gain)/Loss (C12) 31,214,035 4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ 157,120 CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 19 Schedule of Amortization Bases There is a two-year lag between the Valuation Date and the Contribution Fiscal Year.  The assets, liabilities and funded status of the plan are measured as of the valuation date; June 30, 2013.  The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date; fiscal year 2015-16. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies with their employer contribution rates well in advance of the start of the fiscal year. The Unfunded Liability is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The Unfunded Liability is rolled forward each year by subtracting the expected Payment on the Unfunded Liability for the fiscal year and adjusting for interest. The Expected Payment on the Unfunded Liability for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution Rate for the first fiscal year is determined by the actuarial valuation two years ago and the rate for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year, based on payroll as of the valuation date. Amounts for Fiscal 2015-16 Reason for Base Date Established Amorti- zation Period Balance 6/30/13 Expected Payment 2013-14 Balance 6/30/14 Expected Payment 2014-15 Balance 6/30/15 Scheduled Payment for 2015-16 Payment as Percentage of Payroll FORCED FS OLD METHOD 06/30/11 19 $60,535,312 $4,433,469 $60,478,742 $4,566,473 $60,280,027 $4,703,467 11.207% (GAIN)/LOSS 06/30/12 29 $3,554,347 $0 $3,820,923 $229,448 $3,869,595 $236,332 0.563% (GAIN)/LOSS 06/30/13 30 $30,659,310 $(536,393) $33,514,902 $(416,839) $36,460,708 $512,821 1.222% TOTAL $94,748,969 $3,897,076 $97,814,567 $4,379,082 $100,610,330 $5,452,620 12.992% CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 20 Page 20 Alternate Amortization Schedules The amortization schedule shown on the previous page shows the minimum contributions required according to CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the passible savings in doing so. Therefore, we have provided alternate amortization schedules to help analyze your current amortization schedule and illustrate the advantages of accelerating payments towards your plan’s unfunded liability of $100,610,330 as of June 30, 2015, which under the minimum schedule, will require total payments of $233,788,970. Shown below are the level rate payments required to amortize your plan’s unfunded liability assuming a fresh start over the various periods noted. Note that the payments under each scenario would increase by 3 percent for each year into the future. If you are interested in changing your plan’s amortization schedule please contact your plan actuary to discuss further. Level Rate of Payroll Amortization Period 2015-16 Rate 2015-16 Payment Total Payments Total Interest Difference from Current Schedule 20 18.100% $ 7,596,626 $ 204,124,187 $ 103,513,857 $ 29,664,783 15 21.975% $ 9,222,902 $ 171,535,963 $ 70,925,633 $ 62,253,007 CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 21 Reconciliation of Required Employer Contributions Percentage of Projected Payroll Estimated $ Based on Projected Payroll 1. Contribution for 7/1/14 – 6/30/15 18.816% $ 8,219,063 2. Effect of changes since the prior year annual valuation a) Effect of unexpected changes in demographics and financial results 2.264% 950,249 b) Effect of plan changes 0.000% 0 c) Effect of changes in Assumptions 0.000% 0 d) Effect of change in payroll - (322,204) e) Effect of elimination of amortization base 0.000% 0 f) Effect of changes due to Fresh Start 0.000% 0 g) Net effect of the changes above [Sum of (a) through (f)] 2.264% 628,045 3. Contribution for 7/1/15 – 6/30/16 [(1)+(2g)] 21.080% 8,847,108 The contribution actually paid (item 1) may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed. CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 22 Employer Contribution Rate History The table below provides a recent history of the employer contribution rates for your plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made in the middle of the year. Required By Valuation Fiscal Year Employer Normal Cost Unfunded Rate Total Employer Contribution Rate 2010 - 2011 7.528% 3.298% 10.826% 2011 - 2012 7.747% 6.881% 14.628% 2012 - 2013 7.748% 8.655% 16.403% 2013 - 2014 7.972% 9.948% 17.920% 2014 - 2015 7.800% 11.016% 18.816% 2015 - 2016 8.088% 12.992% 21.080% Funding History The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll. Valuation Date Accrued Liability Market Value of Assets (MVA) Funded Ratio Annual Covered Payroll 06/30/08 $ 217,377,776 $ 199,721,639 91.9% $ 41,147,617 06/30/09 249,666,420 152,670,408 61.1% 42,892,547 06/30/10 269,462,732 171,984,696 63.8% 40,587,600 06/30/11 287,108,575 204,473,260 71.2% 40,786,550 06/30/12 302,006,850 200,149,332 66.3% 39,975,054 06/30/13 316,856,655 222,107,686 70.1% 38,407,971 RISK ANALYSIS  VOLATILITY RATIOS  PROJECTED RATES  ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS  ANALYSIS OF DISCOUNT RATE SENSITIVITY  HYPOTHETICAL TERMINATION LIABILITY THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 25 Volatility Ratios The actuarial calculations supplied in this communication are based on a number of assumptions about very long- term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise the employer’s rates from one year to the next. Therefore, the rates will inevitably fluctuate, especially due to the ups and downs of investment returns. Asset Volatility Ratio (AVR) Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility, than a plan with an asset to payroll ratio of 4. Below we have shown your asset volatility ratio, a measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility and the asset volatility ratio, described above, will tend to move closer to this ratio as the plan matures. Rate Volatility As of June 30, 2013 1. Market Value of Assets without Receivables $ 220,440,754 2. Payroll 38,407,971 3. Asset Volatility Ratio (AVR = 1. / 2.) 5.7 4. Accrued Liability $ 316,856,655 5. Liability Volatility Ratio (LVR = 4. / 2.) 8.2 CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 26 Projected Rates The estimated rate for 2016-17 is based on a projection of the most recent information we have available, including an estimated 18 percent investment return for fiscal 2013-14, the impact of the new smoothing methods adopted by the CalPERS Board in April 2013 that will impact employer rates for the first time in 2015-16 and an estimate of the impact of the new actuarial assumptions adopted by the CalPERS Board in February 2014. These new demographic assumptions include a 20-year projection of on-going mortality improvement. A complete listing of the new demographic assumptions to be implemented with the June 30, 2014 annual actuarial valuation and incorporated in the projected rates for FY 2016-17 and beyond can be found on the CalPERS website at: http://www.calpers.ca.gov/eip-docs/about/pubs/employer/actuarial-assumptions.xls The table below shows projected employer contribution rates (before cost sharing) for the next five Fiscal Years, assuming CalPERS earns 18 percent for fiscal year 2013-14 and 7.50 percent every fiscal year thereafter, and assuming that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2016-17. New Rate Projected Future Employer Contribution Rates 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Contribution Rates: 21.080% 22.8% 24.0% 25.3% 26.5% 26.5% Analysis of Future Investment Return Scenarios In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of 7.5 percent. The newly adopted asset allocation has a lower expected investment volatility which will result in better risk characteristics than an equivalent margin for adverse deviation. The current asset allocation has an expected standard deviation of 12.45 percent while the newly adopted asset allocation has a lower expected standard deviation of 11.76 percent. The investment return for fiscal year 2013-14 was announced July 14, 2014. The investment return in fiscal year 2013-14 is 18.42 percent before administrative expenses. This year, there will be no adjustment for real estate and private equities. For purposes of projecting future employer rates, we are assuming an 18.0 percent investment return for fiscal year 2013-14. The investment return realized during a fiscal year first affects the contribution rate for the fiscal year two years later. Specifically, the investment return for 2013-14 will first be reflected in the June 30, 2014 actuarial valuation that will be used to set the 2016-17 employer contribution rates, the 2014-15 investment return will first be reflected in the June 30, 2015 actuarial valuation that will be used to set the 2017-18 employer contribution rates and so forth. Based on a 18 percent investment return for fiscal year 2013-14, the April 17, 2013 CalPERS Board-approved amortization and rate smoothing method change, the February 18, 2014 new demographic assumptions including 20-year mortality improvement using Scale BB and assuming that all other actuarial assumptions will be realized, and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2016-17, the effect on the 2016-17 Employer Rate is as follows: Estimated 2016-17 Employer Rate Estimated Increase in Employer Rate between 2015-16 and 2016-17 22.8% 1.7% CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 27 As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns during fiscal years 2014-15, 2015-16 and 2016-17 on the 2017-18, 2018-19 and 2019-20 employer rates. Once again, the projected rate increases assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur. Five different investment return scenarios were selected.  The first scenario is what one would expect if the markets were to give us a 5th percentile return from July 1, 2014 through June 30, 2017. The 5th percentile return corresponds to a -3.8 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.  The second scenario is what one would expect if the markets were to give us a 25th percentile return from July 1, 2014 through June 30, 2017. The 25th percentile return corresponds to a 2.8 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.  The third scenario assumed the return for 2014-15, 2015-16, 2016-17 would be our assumed 7.5 percent investment return which represents about a 49th percentile event.  The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from July 1, 2014 through June 30, 2017. The 75th percentile return corresponds to a 12.0 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.  Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return from July 1, 2014 through June 30, 2017. The 95th percentile return corresponds to a 18.9 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years. The table below shows the estimated projected contribution rates and the estimated increases for your plan under the five different scenarios. 2014-17 Investment Return Scenario Estimated Employer Rate Estimated Change in Employer Rate between 2016-17 and 2019-20 2017-18 2018-19 2019-20 -3.8% (5th percentile) 25.1% 28.3% 32.5% 9.7% 2.8% (25th percentile) 24.4% 26.6% 29.1% 6.3% 7.5% 24.0% 25.3% 26.5% 3.8% 12.0%(75th percentile) 23.6% 24.0% 23.9% 1.1% 18.9%(95th percentile) 23.0% 21.9% 4.9% -17.9% Analysis of Discount Rate Sensitivity The following analysis looks at the 2015-16 employer contribution rates under two different discount rate scenarios. Shown below are the employer contribution rates assuming discount rates that are 1 percent lower and 1 percent higher than the current valuation discount rate. This analysis gives an indication of the potential required employer contribution rates if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the long-term. This type of analysis gives the reader a sense of the long-term risk to the employer contribution rates. 2015-16 Employer Contribution Rate As of June 30, 2013 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Employer Normal Cost 12.149% 8.088% 5.011% Accrued Liability $ 359,117,459 $ 316,856,655 $ 281,873,869 Unfunded Accrued Liability $ 137,009,773 $ 94,748,969 $ 59,766,183 CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 28 Hypothetical Termination Liability Below is an estimate of the financial position of your plan if you had terminated your contract with CalPERS as of June 30, 2013 using the discount rates shown below. Your plan liability on a termination basis is calculated differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability both compensation and service is frozen as of the valuation date and no future pay increases or service accruals are included. In December 2012, the CalPERS Board adopted a more conservative investment policy and asset allocation strategy for the Terminated Agency Pool. Since the Terminated Agency Pool has limited funding sources, expected benefit payments are secured by risk-free assets. With this change, CalPERS increased benefit security for members while limiting its funding risk. This asset allocation has a lower expected rate of return than the PERF. Consequently, the lower discount rate for the Terminated Agency pool results in higher liabilities for terminated plans. In order to terminate your plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow your plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of your plan liabilities. CalPERS strongly advises you to consult with your plan actuary before beginning this process. Valuation Date Hypothetical Termination Liability1 Market Value of Assets (MVA) Unfunded Termination Liability Termination Funded Ratio Termination Liability Discount Rate2 06/30/11 $ 404,197,103 $ 204,473,260 $ 199,723,843 50.6% 4.82% 06/30/12 545,690,864 200,149,332 345,541,532 36.7% 2.98% 06/30/13 508,685,155 222,107,686 286,577,469 43.7% 3.72% 1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in appendix A. 2 The discount rate assumption used for termination valuations is a weighted average of the 10 and 30-year US Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For purposes of this hypothetical termination liability estimate, the discount rate used, is the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS). Note that as of June 30, 2014 the 30-year STRIPS rate was 3.55 percent. GASB STATEMENT NO. 27 THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION - June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Page 31 MISCELLANEOUS PLAN of the CITY OF NEWPORT BEACH Information for Compliance with GASB Statement No. 27 Disclosure under GASB 27 follows. However, note that effective for financial statements for fiscal years beginning after June 15, 2014, GASB 68 replaces GASB 27. This will be the last year that GASB disclosure information will be included in your annual actuarial report. GASB 68 will require additional reporting that CalPERS is intending to provide upon request for an additional fee. We urge you to start discussions with your auditors on how to implement GASB 68. Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required contribution (ARC) plus an adjustment for the cumulative difference between the APC and the employer’s actual plan contributions for the year. The cumulative difference is called the net pension obligation (NPO). Since GASB 68 replaces GASB 27, for fiscal year 2015-16, the APC is replaced by the Actuarially Determined Contribution (ADC). The ADC for July 1, 2015 to June 30, 2016 is 21.080% percent of payroll. In order to calculate the dollar value of the ADC for inclusion in financial statements prepared as of June 30, 2016, this contribution rate, less any employee cost sharing, as modified by any amendments for the year, would be multiplied by the payroll of covered employees that was actually paid during the period July 1, 2015 to June 30, 2016. The employer and the employer’s auditor are responsible for determining the NPO, APC or ADC for a given fiscal year. A summary of principal assumptions and methods used to determine the funded status is shown below. Retirement Program Valuation Date June 30, 2013 Actuarial Cost Method Entry Age Normal Cost Method Amortization Method Level Percent of Payroll Asset Valuation Method Market Value Actuarial Assumptions Discount Rate 7.50% (net of administrative expenses) Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment Inflation 2.75% Payroll Growth 3.00% Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed annual inflation growth of 2.75% and an annual production growth of 0.25%. Initial unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry into CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan are amortized over a 30-year period with Direct Rate Smoothing with a 5-year ramp up/ramp down. If the plan’s accrued liability exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30-year amortization period. More detailed information on assumptions and methods is provided in Appendix A of this report. Appendix B contains a description of benefits included in the valuation. The Schedule of Funding Progress below shows the recent history of the actuarial accrued liability, actuarial value of assets, their relationship and the relationship of the unfunded actuarial accrued liability to payroll. Valuation Date Accrued Liability (a) Actuarial value of Assets* (b) Unfunded Liability (UL) (a)-(b) Funded Ratios (b)/(a) Annual Covered Payroll (c) UL As a % of Payroll [(a)-(b)]/(c) 06/30/09 $ 249,666,420 $ 207,817,811 $ 41,848,609 83.2% $ 42,892,547 97.6% 06/30/10 269,462,732 218,258,404 51,204,328 81.0% 40,587,600 126.2% 06/30/11 287,108,575 228,755,012 58,353,563 79.7% 40,786,550 143.1% 06/30/12 302,006,850 238,869,992 63,136,858 79.1% 39,975,054 157.9% 06/30/13 316,856,655 222,107,686 94,748,969 70.1% 38,407,971 246.7% * Beginning with the 6/30/2013 valuation Actuarial Value of Assets equals Market Value of Assets per CalPERS Direct Rate Smoothing Policy. THIS PAGE INTENTIONALLY LEFT BLANK PLAN’S MAJOR BENEFIT PROVISIONS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Receiving Active Misc Active Misc Active Misc Active Misc Benefit Provision Benefit Formula 2.0% @ 55 2.5% @ 55 2.0% @ 62 2.0% @ 60 Social Security Coverage No No No No Full/Modified Full Full Full Full Final Average Compensation Period 12 mos. 12 mos. 36 mos. 36 mos. Sick Leave Credit Yes Yes Yes Yes Non-Industrial Disability Standard Standard Standard Standard Industrial Disability No No No No Pre-Retirement Death Benefits Optional Settlement 2W Yes Yes Yes Yes 1959 Survivor Benefit Level Level 4 Level 4 Level 4 Level 4 Special No No No No Alternate (firefighters) No No No No Post-Retirement Death Benefits Lump Sum $500 $500 $500 $500 $500 Survivor Allowance (PRSA) No No No No No COLA 2% 2% 2% 2% 2% Contractual Employee Cost Sharing Page 35 CALPERS ACTUARIAL VALUATION – June 30, 2013 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH CalPERS ID: 1545983430 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Benefit Provision Benefit Formula Social Security Coverage Full/Modified Final Average Compensation Period Sick Leave Credit Non-Industrial Disability Industrial Disability Pre-Retirement Death Benefits Optional Settlement 2W 1959 Survivor Benefit Level Special Alternate (firefighters) Post-Retirement Death Benefits Lump Sum Survivor Allowance (PRSA) COLA Page 36 APPENDICES  APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS  APPENDIX B – PRINCIPAL PLAN PROVISIONS  APPENDIX C – PARTICIPANT DATA  APPENDIX D – DEVELOPMENT OF PPERA MEMBER CONTRIBUTION RATES  APPENDIX E – GLOSSARY OF ACTUARIAL TERMS THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS  ACTUARIAL DATA  ACTUARIAL METHODS  ACTUARIAL ASSUMPTIONS  MISCELLANEOUS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-1 Actuarial Data As stated in the Actuarial Certification, the data, which serves as the basis of this valuation, has been obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and when they do occur, they generally do not have a material impact on the employer contribution rates. Actuarial Methods Funding Method The actuarial funding method used for the Retirement Program is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level annual cost as a percent of pay in each year from the age of hire (entry age) to the assumed retirement age. The cost allocated to the current fiscal year is called the normal cost. The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, for active members beyond the assumed retirement age, and for members entitled to deferred benefits, is equal to the present value of the benefits expected to be paid. No normal costs are applicable for these participants. The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an amortization of the unfunded liability as a level percentage of assumed future payrolls. Commencing with the June 30, 2013 valuation all new gains or losses are tracked and amortized over a fixed 30-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than golden handshakes), changes in actuarial assumptions, or changes in actuarial methodology are amortized separately over a 20-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years. If a plan’s accrued liability exceeds the market value of assets, the annual contribution with respect to the total unfunded liability may not be less than the amount produced by a 30-year amortization of the unfunded liability. An exception has been made for the change in asset value from actuarial to market value in this valuation. The CalPERS Board approved a 30-year amortization with a 5-year ramp-up/ramp-down for only this change in method. Additional contributions will be required for any plan or pool if their cash flows hamper adequate funding progress by preventing the expected funded status on a market value of assets basis to either:  Increase by at least 15 percent by June 30, 2043; or  Reach a level of 75 percent funded by June 30, 2043 The necessary additional contribution will be obtained by changing the amortization period of the gains and losses, except for those occurring in the fiscal years 2008-2009, 2009-2010, and 2010-2011 to a period, which will result in the satisfaction of the above criteria. CalPERS actuaries will reassess the criteria above when performing each future valuation to determine whether or not additional contributions are necessary. An exception to the funding rules above is used whenever the application of such rules results in inconsistencies. In these cases, a “fresh start” approach is used. This simply means that the current unfunded actuarial liability is projected and amortized over a set number of years. As mentioned above, if the annual contribution on the total unfunded liability was less than the amount produced by a 30-year amortization of the unfunded liability, the plan actuary would implement a 30-year fresh start. However, in CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-2 the case of a 30-year fresh start, just the unfunded liability not already in the (gain)/loss base (which is already amortized over 30 years), will go into the new fresh start base. In addition, a fresh start is needed in the following situations: 1) When a positive payment would be required on a negative unfunded actuarial liability (or conversely a negative payment on a positive unfunded actuarial liability); or 2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used, unless a longer fresh start is needed to avoid a negative total rate. It should be noted that the actuary may choose to use a fresh start under other circumstances. In all cases, the fresh start period is set by the actuary at what is deemed appropriate; however, the period will not be less than five years, nor greater than 30 years. Asset Valuation Method It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods to eliminate unfunded accrued liabilities or surpluses in a manner that maintains benefit security for the members of the System while minimizing substantial variations in employer contribution rates. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. CalPERS will no longer use an actuarial value of assets and will use the market value of assets. This direct rate smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value of asset corridor and a 25 year amortization period for gains and losses. The change in asset value will also be amortized over 30 years with a 5-year ramp-up/ramp-down. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-3 Actuarial Assumptions In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp- up/ramp-down in accordance with Board policy. For more details, please refer to the experience study report that can be found at the following link: http://www.calpers.ca.gov/eip-docs/about/pubs/employer/ 2014-experience-study.pdf Economic Assumptions Discount Rate 7.5 percent compounded annually (net of expenses). This assumption is used for all plans. Termination Liability Discount Rate The discount rate used for termination valuation is a weighted average of the 10 and 30-year US Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For purposes of this hypothetical termination liability estimate, the discount rate used, 3.72 percent, is the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS) as of June 30, 2013. Please note, as of June 30, 2014 the 30-year STRIPS yield was 3.55 percent. Salary Growth Annual increases vary by category, entry age, and duration of service. A sample of assumed increases are shown below. Public Agency Miscellaneous Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1420 0.1240 0.0980 1 0.1190 0.1050 0.0850 2 0.1010 0.0910 0.0750 3 0.0880 0.0800 0.0670 4 0.0780 0.0710 0.0610 5 0.0700 0.0650 0.0560 10 0.0480 0.0460 0.0410 15 0.0430 0.0410 0.0360 20 0.0390 0.0370 0.0330 25 0.0360 0.0360 0.0330 30 0.0360 0.0360 0.0330 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-4 Salary Growth (continued) Public Agency Fire Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1050 0.1050 0.1020 1 0.0950 0.0940 0.0850 2 0.0870 0.0830 0.0700 3 0.0800 0.0750 0.0600 4 0.0740 0.0680 0.0510 5 0.0690 0.0620 0.0450 10 0.0510 0.0460 0.0350 15 0.0410 0.0390 0.0340 20 0.0370 0.0360 0.0330 25 0.0350 0.0350 0.0330 30 0.0350 0.0350 0.0330 Public Agency Police Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1090 0.1090 0.1090 1 0.0930 0.0930 0.0930 2 0.0810 0.0810 0.0780 3 0.0720 0.0700 0.0640 4 0.0650 0.0610 0.0550 5 0.0590 0.0550 0.0480 10 0.0450 0.0420 0.0340 15 0.0410 0.0390 0.0330 20 0.0370 0.0360 0.0330 25 0.0350 0.0340 0.0330 30 0.0350 0.0340 0.0330 Public Agency County Peace Officers Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1290 0.1290 0.1290 1 0.1090 0.1060 0.1030 2 0.0940 0.0890 0.0840 3 0.0820 0.0770 0.0710 4 0.0730 0.0670 0.0610 5 0.0660 0.0600 0.0530 10 0.0460 0.0420 0.0380 15 0.0410 0.0380 0.0360 20 0.0370 0.0360 0.0340 25 0.0350 0.0340 0.0330 30 0.0350 0.0340 0.0330 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-5 Schools Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1080 0.0960 0.0820 1 0.0940 0.0850 0.0740 2 0.0840 0.0770 0.0670 3 0.0750 0.0700 0.0620 4 0.0690 0.0640 0.0570 5 0.0630 0.0600 0.0530 10 0.0450 0.0440 0.0410 15 0.0390 0.0380 0.0350 20 0.0360 0.0350 0.0320 25 0.0340 0.0340 0.0320 30 0.0340 0.0340 0.0320  The Miscellaneous salary scale is used for Local Prosecutors.  The Police salary scale is used for Other Safety, Local Sheriff, and School Police. Overall Payroll Growth 3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability is amortized). This assumption is used for all plans. Inflation 2.75 percent compounded annually. This assumption is used for all plans. Non-valued Potential Additional Liabilities The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation assumption, and any potential liability loss from future member service purchases are not reflected in the valuation. Miscellaneous Loading Factors Credit for Unused Sick Leave Total years of service is increased by 1 percent for those plans that have accepted the provision providing Credit for Unused Sick Leave. Conversion of Employer Paid Member Contributions (EPMC) Total years of service is increased by the Employee Contribution Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period. Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme Court decision, known as the Norris decision, which required males and females to be treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982. Termination Liability The termination liabilities include a 7 percent contingency load. This load is for unforeseen improvements in mortality. Demographic Assumptions Pre-Retirement Mortality Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See sample rates in table below. The non-industrial death rates are used for all plans. The industrial CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-6 death rates are used for Safety Plans (except for Local Prosecutor safety members where the corresponding Miscellaneous Plan does not have the Industrial Death Benefit). Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related) Age Male Female Male and Female 20 0.00047 0.00016 0.00003 25 0.00050 0.00026 0.00007 30 0.00053 0.00036 0.00010 35 0.00067 0.00046 0.00012 40 0.00087 0.00065 0.00013 45 0.00120 0.00093 0.00014 50 0.00176 0.00126 0.00015 55 0.00260 0.00176 0.00016 60 0.00395 0.00266 0.00017 65 0.00608 0.00419 0.00018 70 0.00914 0.00649 0.00019 75 0.01220 0.00878 0.00020 80 0.01527 0.01108 0.00021 Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be split into two components; 99 percent will become the Non-Industrial Death rate and 1 percent will become the Industrial Death rate. Post-Retirement Mortality Rates vary by age, type of retirement and gender. See sample rates in table below. These rates are used for all plans. Healthy Recipients Non-Industrially Disabled Industrially Disabled (Not Job-Related) (Job-Related) Age Male Female Male Female Male Female 50 0.00239 0.00125 0.01632 0.01245 0.00443 0.00356 55 0.00474 0.00243 0.01936 0.01580 0.00563 0.00546 60 0.00720 0.00431 0.02293 0.01628 0.00777 0.00798 65 0.01069 0.00775 0.03174 0.01969 0.01388 0.01184 70 0.01675 0.01244 0.03870 0.03019 0.02236 0.01716 75 0.03080 0.02071 0.06001 0.03915 0.03585 0.02665 80 0.05270 0.03749 0.08388 0.05555 0.06926 0.04528 85 0.09775 0.07005 0.14035 0.09577 0.11799 0.08017 90 0.16747 0.12404 0.21554 0.14949 0.16575 0.13775 95 0.25659 0.21556 0.31025 0.23055 0.26108 0.23331 100 0.34551 0.31876 0.45905 0.37662 0.40918 0.35165 105 0.58527 0.56093 0.67923 0.61523 0.64127 0.60135 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 The mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-going mortality improvement using Scale AA published by the Society of Actuaries until June 30, 2010. There is no margin for future mortality improvement beyond the valuation date. On February 19, 2014 the CalPERS Board adopted new recommended demographic assumption based on the most recent CalPERS Experience Study. These new actuarial assumptions will be implemented for the first time in the June 30, 2014 valuation. For purposes of the post-retirement mortality rates, the revised rates include 20 years of projected on-going mortality improvement using Scale BB published by the Society of Actuaries. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-7 Marital Status For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table. Member Category Percent Married Miscellaneous Member 85% Local Police 90% Local Fire 90% Other Local Safety 90% School Police 90% Age of Spouse It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans. Terminated Members It is assumed that terminated members refund immediately if non-vested. Terminated members who are vested are assumed to follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members: Age Load Factor 50 450% 51 250% 52 through 56 200% 57 through 60 150% 61 through 64 125% 65 and above 100% (no change) Termination with Refund Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203 2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809 4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612 5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116 10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055 15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014 20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001 35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-8 Public Agency Safety Duration of Service Fire Police County Peace Officer 0 0.0710 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0.0258 0.0437 4 0.0218 0.0245 0.0414 5 0.0029 0.0086 0.0145 10 0.0009 0.0053 0.0089 15 0.0006 0.0027 0.0045 20 0.0005 0.0017 0.0020 25 0.0003 0.0012 0.0009 30 0.0003 0.0009 0.0006 35 0.0003 0.0009 0.0006 The Police Termination and Refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217 1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071 2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926 3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781 4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636 5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135 10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049 15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011 20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002 25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002 30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002 35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 Termination with Vested Benefits Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0.0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0212 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-9 Public Agency Safety Duration of Service Fire Police County Peace Officer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.0047 0.0058 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0.0000  When a member is eligible to retire, the termination with vested benefits probability is set to zero.  After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety member at age 54.  The Police Termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0816 0.0733 0.0649 0.0566 0.0482 10 0.0629 0.0540 0.0450 0.0359 0.0000 15 0.0537 0.0440 0.0344 0.0000 0.0000 20 0.0420 0.0317 0.0000 0.0000 0.0000 25 0.0291 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety Plans. Miscellaneous Fire Police County Peace Officer Schools Age Male Female Male and Female Male and Female Male and Female Male Female 20 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0002 0.0001 35 0.0006 0.0009 0.0001 0.0003 0.0004 0.0006 0.0004 40 0.0015 0.0016 0.0001 0.0004 0.0007 0.0014 0.0009 45 0.0025 0.0024 0.0002 0.0005 0.0013 0.0028 0.0017 50 0.0033 0.0031 0.0005 0.0008 0.0018 0.0044 0.0030 55 0.0037 0.0031 0.0010 0.0013 0.0010 0.0049 0.0034 60 0.0038 0.0025 0.0015 0.0020 0.0006 0.0043 0.0024  The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors.  The Police Non-Industrial Disability rates are also used for Other Safety, Local Sheriff and School Police. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-10 Industrial (Job-Related) Disability Rates vary by age and category. Age Fire Police County Peace Officer 20 0.0002 0.0007 0.0003 25 0.0012 0.0032 0.0015 30 0.0025 0.0064 0.0031 35 0.0037 0.0097 0.0046 40 0.0049 0.0129 0.0063 45 0.0061 0.0161 0.0078 50 0.0074 0.0192 0.0101 55 0.0721 0.0668 0.0173 60 0.0721 0.0668 0.0173  The Police Industrial Disability rates are also used for Local Sheriff and Other Safety.  Fifty Percent of the Police Industrial Disability rates are used for School Police.  One Percent of the Police Industrial Disability rates are used for Local Prosecutors.  Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the Non-Industrial Disability rate and 50 percent will become the Industrial Disability rate. Service Retirement Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55 formulas, where retirement rates vary by age only. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-11 Service Retirement Public Agency Miscellaneous 1.5% @ 65 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.008 0.011 0.013 0.015 0.017 0.019 51 0.007 0.010 0.012 0.013 0.015 0.017 52 0.010 0.014 0.017 0.019 0.021 0.024 53 0.008 0.012 0.015 0.017 0.019 0.022 54 0.012 0.016 0.019 0.022 0.025 0.028 55 0.018 0.025 0.031 0.035 0.038 0.043 56 0.015 0.021 0.025 0.029 0.032 0.036 57 0.020 0.028 0.033 0.038 0.043 0.048 58 0.024 0.033 0.040 0.046 0.052 0.058 59 0.028 0.039 0.048 0.054 0.060 0.067 60 0.049 0.069 0.083 0.094 0.105 0.118 61 0.062 0.087 0.106 0.120 0.133 0.150 62 0.104 0.146 0.177 0.200 0.223 0.251 63 0.099 0.139 0.169 0.191 0.213 0.239 64 0.097 0.136 0.165 0.186 0.209 0.233 65 0.140 0.197 0.240 0.271 0.302 0.339 66 0.092 0.130 0.157 0.177 0.198 0.222 67 0.129 0.181 0.220 0.249 0.277 0.311 68 0.092 0.129 0.156 0.177 0.197 0.221 69 0.092 0.130 0.158 0.178 0.199 0.224 70 0.103 0.144 0.175 0.198 0.221 0.248 Public Agency Miscellaneous 2% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 0.015 0.018 0.021 0.023 0.026 51 0.009 0.013 0.016 0.018 0.020 0.023 52 0.013 0.018 0.022 0.025 0.028 0.031 53 0.011 0.016 0.019 0.022 0.025 0.028 54 0.015 0.021 0.025 0.028 0.032 0.036 55 0.023 0.032 0.039 0.044 0.049 0.055 56 0.019 0.027 0.032 0.037 0.041 0.046 57 0.025 0.035 0.042 0.048 0.054 0.060 58 0.030 0.042 0.051 0.058 0.065 0.073 59 0.035 0.049 0.060 0.068 0.076 0.085 60 0.062 0.087 0.105 0.119 0.133 0.149 61 0.079 0.110 0.134 0.152 0.169 0.190 62 0.132 0.186 0.225 0.255 0.284 0.319 63 0.126 0.178 0.216 0.244 0.272 0.305 64 0.122 0.171 0.207 0.234 0.262 0.293 65 0.173 0.243 0.296 0.334 0.373 0.418 66 0.114 0.160 0.194 0.219 0.245 0.274 67 0.159 0.223 0.271 0.307 0.342 0.384 68 0.113 0.159 0.193 0.218 0.243 0.273 69 0.114 0.161 0.195 0.220 0.246 0.276 70 0.127 0.178 0.216 0.244 0.273 0.306 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-12 Service Retirement Public Agency Miscellaneous 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.015 0.020 0.024 0.029 0.033 0.039 51 0.013 0.016 0.020 0.024 0.027 0.033 52 0.014 0.018 0.022 0.027 0.030 0.036 53 0.017 0.022 0.027 0.032 0.037 0.043 54 0.027 0.034 0.041 0.049 0.056 0.067 55 0.050 0.064 0.078 0.094 0.107 0.127 56 0.045 0.057 0.069 0.083 0.095 0.113 57 0.048 0.061 0.074 0.090 0.102 0.122 58 0.052 0.066 0.080 0.097 0.110 0.131 59 0.060 0.076 0.092 0.111 0.127 0.151 60 0.072 0.092 0.112 0.134 0.153 0.182 61 0.089 0.113 0.137 0.165 0.188 0.224 62 0.128 0.162 0.197 0.237 0.270 0.322 63 0.129 0.164 0.199 0.239 0.273 0.325 64 0.116 0.148 0.180 0.216 0.247 0.294 65 0.174 0.221 0.269 0.323 0.369 0.439 66 0.135 0.171 0.208 0.250 0.285 0.340 67 0.133 0.169 0.206 0.247 0.282 0.336 68 0.118 0.150 0.182 0.219 0.250 0.297 69 0.116 0.147 0.179 0.215 0.246 0.293 70 0.138 0.176 0.214 0.257 0.293 0.349 Public Agency Miscellaneous 2.5% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.026 0.033 0.040 0.048 0.055 0.062 51 0.021 0.026 0.032 0.038 0.043 0.049 52 0.021 0.026 0.032 0.038 0.043 0.049 53 0.026 0.033 0.040 0.048 0.055 0.062 54 0.043 0.054 0.066 0.078 0.089 0.101 55 0.088 0.112 0.136 0.160 0.184 0.208 56 0.055 0.070 0.085 0.100 0.115 0.130 57 0.061 0.077 0.094 0.110 0.127 0.143 58 0.072 0.091 0.111 0.130 0.150 0.169 59 0.083 0.105 0.128 0.150 0.173 0.195 60 0.088 0.112 0.136 0.160 0.184 0.208 61 0.083 0.105 0.128 0.150 0.173 0.195 62 0.121 0.154 0.187 0.220 0.253 0.286 63 0.105 0.133 0.162 0.190 0.219 0.247 64 0.105 0.133 0.162 0.190 0.219 0.247 65 0.143 0.182 0.221 0.260 0.299 0.338 66 0.105 0.133 0.162 0.190 0.219 0.247 67 0.105 0.133 0.162 0.190 0.219 0.247 68 0.105 0.133 0.162 0.190 0.219 0.247 69 0.105 0.133 0.162 0.190 0.219 0.247 70 0.125 0.160 0.194 0.228 0.262 0.296 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-13 Service Retirement Public Agency Miscellaneous 2.7% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.028 0.035 0.043 0.050 0.058 0.065 51 0.022 0.028 0.034 0.040 0.046 0.052 52 0.022 0.028 0.034 0.040 0.046 0.052 53 0.028 0.035 0.043 0.050 0.058 0.065 54 0.044 0.056 0.068 0.080 0.092 0.104 55 0.091 0.116 0.140 0.165 0.190 0.215 56 0.061 0.077 0.094 0.110 0.127 0.143 57 0.063 0.081 0.098 0.115 0.132 0.150 58 0.074 0.095 0.115 0.135 0.155 0.176 59 0.083 0.105 0.128 0.150 0.173 0.195 60 0.088 0.112 0.136 0.160 0.184 0.208 61 0.085 0.109 0.132 0.155 0.178 0.202 62 0.124 0.158 0.191 0.225 0.259 0.293 63 0.107 0.137 0.166 0.195 0.224 0.254 64 0.107 0.137 0.166 0.195 0.224 0.254 65 0.146 0.186 0.225 0.265 0.305 0.345 66 0.107 0.137 0.166 0.195 0.224 0.254 67 0.107 0.137 0.166 0.195 0.224 0.254 68 0.107 0.137 0.166 0.195 0.224 0.254 69 0.107 0.137 0.166 0.195 0.224 0.254 70 0.129 0.164 0.199 0.234 0.269 0.304 Public Agency Miscellaneous 3% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.026 0.033 0.040 0.048 0.055 0.062 51 0.021 0.026 0.032 0.038 0.043 0.049 52 0.019 0.025 0.030 0.035 0.040 0.046 53 0.025 0.032 0.038 0.045 0.052 0.059 54 0.039 0.049 0.060 0.070 0.081 0.091 55 0.083 0.105 0.128 0.150 0.173 0.195 56 0.055 0.070 0.085 0.100 0.115 0.130 57 0.061 0.077 0.094 0.110 0.127 0.143 58 0.072 0.091 0.111 0.130 0.150 0.169 59 0.080 0.102 0.123 0.145 0.167 0.189 60 0.094 0.119 0.145 0.170 0.196 0.221 61 0.088 0.112 0.136 0.160 0.184 0.208 62 0.127 0.161 0.196 0.230 0.265 0.299 63 0.110 0.140 0.170 0.200 0.230 0.260 64 0.110 0.140 0.170 0.200 0.230 0.260 65 0.149 0.189 0.230 0.270 0.311 0.351 66 0.110 0.140 0.170 0.200 0.230 0.260 67 0.110 0.140 0.170 0.200 0.230 0.260 68 0.110 0.140 0.170 0.200 0.230 0.260 69 0.110 0.140 0.170 0.200 0.230 0.260 70 0.132 0.168 0.204 0.240 0.276 0.312 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-14 Service Retirement Public Agency Miscellaneous 2% @ 62 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 51 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 52 0.0103 0.0132 0.0160 0.0188 0.0216 0.0244 53 0.0131 0.0167 0.0202 0.0238 0.0273 0.0309 54 0.0213 0.0272 0.0330 0.0388 0.0446 0.0504 55 0.0440 0.0560 0.0680 0.0800 0.0920 0.1040 56 0.0303 0.0385 0.0468 0.0550 0.0633 0.0715 57 0.0363 0.0462 0.0561 0.0660 0.0759 0.0858 58 0.00465 0.0592 0.0718 0.0845 0.0972 0.1099 59 0.0578 0.0735 0.0893 0.1050 0.1208 0.1365 60 0.0616 0.0784 0.0952 0.1120 0.1288 0.1456 61 0.0888 0.0788 0.0956 0.1125 0.1294 0.1463 62 0.0941 0.1232 0.1496 0.1760 0.2024 0.2288 63 0.1287 0.1131 0.1373 0.1615 0.1857 0.2100 64 0.1045 0.1197 0.1454 0.1710 0.1967 0.2223 65 0.1045 0.1638 0.1989 0.2340 0.2691 0.3042 66 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470 67 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470 68 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470 69 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470 70 0.1254 0.1596 0.1938 0.2280 0.2622 0.9640 Service Retirement Public Agency Fire ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.01588 0.00000 0.03442 0.01990 0.04132 0.07513 Age 56 57 58 59 60 Rate 0.11079 0.00000 0.09499 0.04409 1.00000 Public Agency Police ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.02552 0.00000 0.01637 0.02717 0.00949 0.16674 Age 56 57 58 59 60 Rate 0.06921 0.05113 0.07241 0.07043 1.00000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-15 Service Retirement Public Agency Police 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.014 0.014 0.014 0.025 0.045 51 0.012 0.012 0.012 0.012 0.023 0.040 52 0.026 0.026 0.026 0.026 0.048 0.086 53 0.052 0.052 0.052 0.052 0.096 0.171 54 0.070 0.070 0.070 0.070 0.128 0.227 55 0.090 0.090 0.090 0.090 0.165 0.293 56 0.064 0.064 0.064 0.064 0.117 0.208 57 0.071 0.071 0.071 0.071 0.130 0.232 58 0.063 0.063 0.063 0.063 0.115 0.205 59 0.140 0.140 0.140 0.140 0.174 0.254 60 0.140 0.140 0.140 0.140 0.172 0.251 61 0.140 0.140 0.140 0.140 0.172 0.251 62 0.140 0.140 0.140 0.140 0.172 0.251 63 0.140 0.140 0.140 0.140 0.172 0.251 64 0.140 0.140 0.140 0.140 0.172 0.251 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015 51 0.008 0.008 0.008 0.008 0.013 0.019 52 0.017 0.017 0.017 0.017 0.027 0.040 53 0.047 0.047 0.047 0.047 0.072 0.107 54 0.064 0.064 0.064 0.064 0.098 0.147 55 0.087 0.087 0.087 0.087 0.134 0.200 56 0.078 0.078 0.078 0.078 0.120 0.180 57 0.090 0.090 0.090 0.090 0.139 0.208 58 0.079 0.079 0.079 0.079 0.122 0.182 59 0.073 0.073 0.073 0.073 0.112 0.168 60 0.114 0.114 0.114 0.114 0.175 0.262 61 0.114 0.114 0.114 0.114 0.175 0.262 62 0.114 0.114 0.114 0.114 0.175 0.262 63 0.114 0.114 0.114 0.114 0.175 0.262 64 0.114 0.114 0.114 0.114 0.175 0.262 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-16 Service Retirement Public Agency Police 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.019 0.019 0.019 0.019 0.040 0.060 51 0.024 0.024 0.024 0.024 0.049 0.074 52 0.024 0.024 0.024 0.024 0.051 0.077 53 0.059 0.059 0.059 0.059 0.121 0.183 54 0.069 0.069 0.069 0.069 0.142 0.215 55 0.116 0.116 0.116 0.116 0.240 0.363 56 0.076 0.076 0.076 0.076 0.156 0.236 57 0.058 0.058 0.058 0.058 0.120 0.181 58 0.076 0.076 0.076 0.076 0.157 0.237 59 0.094 0.094 0.094 0.094 0.193 0.292 60 0.141 0.141 0.141 0.141 0.290 0.438 61 0.094 0.094 0.094 0.094 0.193 0.292 62 0.118 0.118 0.118 0.118 0.241 0.365 63 0.094 0.094 0.094 0.094 0.193 0.292 64 0.094 0.094 0.094 0.094 0.193 0.292 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.012 0.012 0.012 0.018 0.028 0.033 51 0.008 0.008 0.008 0.012 0.019 0.022 52 0.018 0.018 0.018 0.027 0.042 0.050 53 0.043 0.043 0.043 0.062 0.098 0.114 54 0.057 0.057 0.057 0.083 0.131 0.152 55 0.092 0.092 0.092 0.134 0.211 0.246 56 0.081 0.081 0.081 0.118 0.187 0.218 57 0.100 0.100 0.100 0.146 0.230 0.268 58 0.081 0.081 0.081 0.119 0.187 0.219 59 0.078 0.078 0.078 0.113 0.178 0.208 60 0.117 0.117 0.117 0.170 0.267 0.312 61 0.078 0.078 0.078 0.113 0.178 0.208 62 0.098 0.098 0.098 0.141 0.223 0.260 63 0.078 0.078 0.078 0.113 0.178 0.208 64 0.078 0.078 0.078 0.113 0.178 0.208 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-17 Service Retirement Public Agency Police 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0110 0.0110 0.0110 0.0110 0.0202 0.0361 51 0.0086 0.0086 0.0086 0.0086 0.0158 0.0281 52 0.0183 0.0183 0.0183 0.0183 0.0336 0.0599 53 0.0366 0.0366 0.0366 0.0366 0.0670 0.1194 54 0.0488 0.0488 0.0488 0.0488 0.0893 0.1592 55 0.0629 0.0629 0.0629 0.0629 0.1152 0.2052 56 0.0447 0.0447 0.0447 0.0447 0.0816 0.1455 57 0.0640 0.0640 0.0640 0.0640 0.1170 0.2086 58 0.0471 0.0471 0.0471 0.0471 0.0862 0.1537 59 0.1047 0.1047 0.1047 0.1047 0.1301 0.1908 60 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 61 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 62 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 63 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 64 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0052 0.0052 0.0052 0.0052 0.0081 0.0121 51 0.0057 0.0057 0.0057 0.0057 0.0088 0.0131 52 0.0121 0.0121 0.0121 0.0121 0.0187 0.0280 53 0.0326 0.0326 0.0326 0.0326 0.0501 0.0750 54 0.0447 0.0447 0.0447 0.0447 0.0688 0.1030 55 0.0608 0.0608 0.0608 0.0608 0.0935 01400 56 0.0545 0.0545 0.0545 0.0545 0.0840 0.1257 57 0.0811 0.0811 0.0811 0.0811 0.01248 0.1869 58 0.0593 0.0593 0.0593 0.0593 0.0913 0.1366 59 0.0547 0.0547 0.0547 0.0547 0.0842 0.1261 60 0.0851 0.0851 0.0851 0.0851 0.1310 0.1961 61 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964 62 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964 63 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964 64 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-18 Service Retirement Public Agency Police 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0117 0.0117 0.0117 0.0117 0.0215 0.0382 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0471 0.0471 0.0471 0.0471 0.0861 0.1535 54 0.0627 0.0627 0.0627 0.0627 0.1148 0.2047 55 0.0764 0.0764 0.0764 0.0764 0.1398 0.2492 56 0.0542 0.0542 0.0542 0.0542 0.0991 0.1767 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0565 0.0565 0.0565 0.0565 0.1034 0.1844 59 0.1256 0.1256 0.1256 0.1256 0.1562 0.2290 60 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 61 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 62 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 63 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 64 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0077 0.0077 0.0077 0.0077 0.0119 0.0178 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0419 0.0419 0.0419 0.0419 0.0644 0.0965 54 0.0574 0.0574 0.0574 0.0574 0.0885 0.1324 55 0.0738 0.0738 0.0738 0.0738 0.1136 01700 56 0.0662 0.0662 0.0662 0.0662 0.1020 0.2077 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.1639 58 0.0711 0.0711 0.0711 0.0711 0.1095 0.1513 59 0.0656 0.0656 0.0656 0.0656 0.1011 0.2354 60 0.1022 0.1022 0.1022 0.1022 0.1572 0.2356 61 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356 62 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356 63 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356 64 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-19 Service Retirement Public Agency Police 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621 54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160 55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785 56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049 59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544 60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018 54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397 55 0.0825 0.0825 0.0825 0.0825 0.1269 01900 56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077 58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821 59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681 60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615 61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-20 Service Retirement Schools 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.009 0.013 0.015 0.016 0.018 51 0.005 0.010 0.014 0.017 0.019 0.021 52 0.006 0.012 0.017 0.020 0.022 0.025 53 0.007 0.014 0.019 0.023 0.026 0.029 54 0.012 0.024 0.033 0.039 0.044 0.049 55 0.024 0.048 0.067 0.079 0.088 0.099 56 0.020 0.039 0.055 0.065 0.072 0.081 57 0.021 0.042 0.059 0.070 0.078 0.087 58 0.025 0.050 0.070 0.083 0.092 0.103 59 0.029 0.057 0.080 0.095 0.105 0.118 60 0.037 0.073 0.102 0.121 0.134 0.150 61 0.046 0.090 0.126 0.149 0.166 0.186 62 0.076 0.151 0.212 0.250 0.278 0.311 63 0.069 0.136 0.191 0.225 0.251 0.281 64 0.067 0.133 0.185 0.219 0.244 0.273 65 0.091 0.180 0.251 0.297 0.331 0.370 66 0.072 0.143 0.200 0.237 0.264 0.295 67 0.067 0.132 0.185 0.218 0.243 0.272 68 0.060 0.118 0.165 0.195 0.217 0.243 69 0.067 0.133 0.187 0.220 0.246 0.275 70 0.066 0.131 0.183 0.216 0.241 0.270 Miscellaneous Superfunded Status Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA) that became effective January 1, 2013, a plan in superfunded status (actuarial value of assets exceeding present value of benefits) would normally pay a zero employer contribution rate while also being permitted to use its superfunded assets to pay its employees’ normal member contributions. However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s contribution to a defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be less than the total normal cost rate…” This means that not only must employers pay their employer normal cost regardless of plan surplus, but also, employers may no longer use superfunded assets to pay employee normal member contributions. Internal Revenue Code Section 415 The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-21 Internal Revenue Code Section 401(a)(17) The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. PEPRA Assumptions The Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated new benefit formulas and new member contributions for new members (as defined by PEPRA) hired after January 1, 2013. For non-pooled plans, these new members will first be reflected in the June 30, 2013 non-pooled plan valuations. New members in pooled plans will first be reflected in the new Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, also beginning with the June 30, 2013 valuation. Different assumptions for these new PEPRA members are disclosed above. THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX B PRINCIPAL PLAN PROVISIONS THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-1 The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not been included. Many of the statements in this summary are general in nature, and are intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself governs in all situations. PEPRA Benefit Changes The Public Employees’ Pension Reform Act of 2013 (PEPRA) requires new benefits and member contributions for new members as defined by PEPRA, that are hired after January 1, 2013. These PEPRA members are reflected in your June 30, 2013 actuarial valuation. Members in pooled plans are reflected in the new Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, beginning with the June 30, 2013 valuation. Service Retirement Eligibility A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members become eligible for Service Retirement upon attainment of age 52 with at least 5 years of service. Benefit The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation.  The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for retirement at whole year ages: Miscellaneous Plan Formulas Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60 PEPRA 2% at 62 50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A 51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A 52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000% 53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100% 54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200% 55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300% 56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400% 57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500% 58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600% 59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700% 60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800% 61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900% 62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000% CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-2 63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100% 64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200% 65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300% 66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400% 67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500% Safety Plan Formulas Retirement Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50 50 1.783% 1.426% 2.000% 2.400% 3.000% 51 1.903% 1.522% 2.140% 2.520% 3.000% 52 2.035% 1.628% 2.280% 2.640% 3.000% 53 2.178% 1.742% 2.420% 2.760% 3.000% 54 2.333% 1.866% 2.560% 2.880% 3.000% 55 & Up 2.500% 2.000% 2.700% 3.000% 3.000% * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor as in the above table. PEPRA Safety Plan Formulas Retirement Age 2% at 57 2.5% at 57 2.7% at 57 50 1.426% 2.000% 2.000% 51 1.508% 2.071% 2.100% 52 1.590% 2.143% 2.200% 53 1.672% 2.214% 2.300% 54 1.754% 2.286% 2.400% 55 1.836% 2.357% 2.500% 56 1.918% 2.429% 2.600% 57 & Up 2.000% 2.500% 2.700%  The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave.  The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers have the option of providing a final compensation equal to the highest 12 consecutive months. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for all new members based on the Social Security Contribution and Benefit Base. For employees that participate in CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-3 Social Security this cap is $113,700 for 2013 and for those employees that do not participate in social security the cap for 2013 is $136,440, the equivalent of 120 percent of the 2013 Contribution and Benefit Base. Adjustments to the caps are permitted annually based on changes to the CPI for All Urban Consumers.  Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit. Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.  The Miscellaneous Service Retirement benefit is not capped. The Safety Service Retirement benefit is capped at 90 percent of final compensation. Vested Deferred Retirement Eligibility for Deferred Status A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). Eligibility to Start Receiving Benefits The CalPERS classic members and Safety PEPRA members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA Miscellaneous members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 52. Benefit The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is based on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. Non-Industrial (Non-Job Related) Disability Retirement Eligibility A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit. Standard Benefit The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows:  Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years of service; or  Service is CalPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of Final Compensation. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-4 Improved Benefit Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent for each additional year of service to a maximum of 50 percent of final compensation. Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service. Industrial (Job Related) Disability Retirement All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option. Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled means the member is unable to perform the duties of the job because of a work-related illness or injury, which is, expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group is not eligible for this benefit, except to the extent described below. Standard Benefit The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation. Increased Benefit (75 percent of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation for total disability. Improved Benefit (50 percent to 90 percent of Final Compensation) The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation. For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions. If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial Disability Retirement benefit, the member may choose to receive the larger benefit. Post-Retirement Death Benefit Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate. Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-5 Form of Payment for Retirement Allowance Standard Form of Payment Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death. Improved Form of Payment (Post Retirement Survivor Allowance) Employers have the option to contract for the post retirement survivor allowance. For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance. In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried children until they attain age 18; or, if no eligible children, to a qualifying dependent parent) for the rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries. The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion. Pre-Retirement Death Benefits Basic Death Benefit This is a standard benefit. Eligibility An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Basic Death benefit. Benefit The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. 1957 Survivor Benefit This is a standard benefit. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-6 Eligibility An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's unmarried children under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit. Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child is disabled. The total amount paid will be at least equal to the Basic Death benefit. Optional Settlement 2W Death Benefit This is an optional benefit. Eligibility An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2W Death benefit. Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit. Special Death Benefit This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous members. Eligibility An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 22. An eligible survivor who chooses to receive this benefit will not receive any other death benefit. Benefit The Special Death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-7 have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried children under age 22. There is a guarantee that the total amount paid will at least equal the Basic Death Benefit. If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving children (eligible means unmarried children under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following:  if 1 eligible child: 12.5 percent of final compensation  if 2 eligible children: 20.0 percent of final compensation  if 3 or more eligible children: 25.0 percent of final compensation Alternate Death Benefit for Local Fire Members This is an optional benefit available only to local fire members. Eligibility An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 18. Benefit The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that which would be payable if the member had retired at age 50, based on service credited at the time of death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit. Cost-of-Living Adjustments (COLA) Standard Benefit Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2 percent. Improved Benefit Employers have the option of providing any of these improved cost-of-living adjustments by contracting for any one of these Class 1 optional benefits. An improved COLA is not available in conjunction with the 1.5% at 65 formula. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by either 3 percent, 4 percent or 5 percent. However, the cumulative adjustment may not be greater than the cumulative change in the Consumer Price Index since the date of retirement. Purchasing Power Protection Allowance (PPPA) Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-8 retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan. Employee Contributions Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee contribution is as described below. The percent contributed below the monthly compensation breakpoint is 0 percent. The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shown in the table below. Benefit Formula Percent Contributed above the Breakpoint Miscellaneous, 1.5% at 65 2% Miscellaneous, 2% at 60 7% Miscellaneous, 2% at 55 7% Miscellaneous, 2.5% at 55 8% Miscellaneous, 2.7% at 55 8% Miscellaneous, 3% at 60 8% Miscellaneous, 2% at 62 50% of the Total Normal Cost Safety, 1/2 at 55 Varies by entry age Safety, 2% at 55 7% Safety, 2% at 50 9% Safety, 3% at 55 9% Safety, 3% at 50 9% Safety, 2% at 57 50% of the Total Normal Cost Safety, 2.5% at 57 50% of the Total Normal Cost Safety, 2.7% at 57 50% of the Total Normal Cost The employer may choose to “pick-up” these contributions for the employees (Employer Paid Member Contributions or EPMC). EPMC is prohibited for new PEPRA members. An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution with or without a change in benefit. These contributions are paid in addition to the member contribution. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent. Refund of Employee Contributions If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited annually with 6 percent interest. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PRINCIPAL PLAN PROVISIONS B-9 1959 Survivor Benefit This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 was required to provide this benefit if the members were not covered by Social Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or any agency wishing to add this benefit or increase the current level must choose the 4th or Indexed Level. This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov. THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX C PARTICIPANT DATA  SUMMARY OF VALUATION DATA  ACTIVE MEMBERS  TRANSFERRED AND TERMINATED MEMBERS  RETIRED MEMBERS AND BENEFICIARIES THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-1 Summary of Valuation Data June 30, 2012 June 30, 2013 1. Active Members a) Counts 541 504 b) Average Attained Age 43.71 44.15 c) Average Entry Age to Rate Plan 31.79 32.01 d) Average Years of Service 11.92 12.14 e) Average Annual Covered Pay $ 73,891 $ 76,206 f) Annual Covered Payroll 39,975,054 38,407,971 g) Projected Annual Payroll for Contribution Year 43,681,821 41,969,427 h) Present Value of Future Payroll 326,240,290 312,042,215 2. Transferred Members a) Counts 225 228 b) Average Attained Age 43.66 43.66 c) Average Years of Service 2.59 2.57 d) Average Annual Covered Pay $ 96,538 $ 98,383 3. Terminated Members a) Counts 281 298 b) Average Attained Age 42.89 43.27 c) Average Years of Service 3.11 3.19 d) Average Annual Covered Pay $ 55,883 $ 56,138 4. Retired Members and Beneficiaries a) Counts 523 559 b) Average Attained Age 68.53 68.46 c) Average Annual Benefits $ 25,368 $ 26,303 5. Active to Retired Ratio [(1a) / (4a)] 1.03 0.90 Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have service with another agency and would therefore have a larger total benefit than would be included as part of the average shown here. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-2 Active Members Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Distribution of Active Members by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total 15-24 10 0 0 0 0 0 10 25-29 31 15 0 0 0 0 46 30-34 18 40 12 1 0 0 71 35-39 11 22 23 2 1 0 59 40-44 12 13 21 10 6 1 63 45-49 11 22 16 15 18 11 93 50-54 6 12 13 13 13 20 77 55-59 9 8 9 8 7 9 50 60-64 2 6 2 4 2 4 20 65 and over 4 2 1 2 2 4 15 All Ages 114 140 97 55 49 49 504 Distribution of Average Annual Salaries by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Average 15-24 $30,781 $0 $0 $0 $0 $0 $30,781 25-29 42,743 61,822 0 0 0 0 48,965 30-34 68,181 68,455 75,457 89,587 0 0 69,866 35-39 61,661 73,917 77,399 80,107 105,647 0 73,737 40-44 80,192 90,949 79,125 96,412 88,890 98,057 85,743 45-49 86,497 78,275 86,352 86,590 91,956 92,448 86,303 50-54 89,750 94,378 76,128 82,440 86,238 87,786 85,834 55-59 96,278 58,210 80,573 100,490 85,675 89,225 85,280 60-64 46,090 74,407 103,128 71,175 65,662 76,851 73,415 65 and over 16,040 26,438 64,801 66,430 64,234 81,042 51,156 All Ages $61,522 $73,526 $79,534 $87,381 $87,241 $87,863 $76,206 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-3 Transferred and Terminated Members Distribution of Transfers to Other CalPERS Plans by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 3 0 0 0 0 0 3 $73,792 25-29 30 0 0 0 0 0 30 74,092 30-34 28 3 0 0 0 0 31 90,345 35-39 22 1 0 0 0 0 23 103,236 40-44 24 5 2 1 0 0 32 93,660 45-49 32 6 0 1 0 0 39 124,599 50-54 30 3 0 0 0 0 33 106,631 55-59 12 2 0 0 1 1 16 111,546 60-64 10 2 2 0 0 0 14 77,627 65 and over 4 1 2 0 0 0 7 80,758 All Ages 195 23 6 2 1 1 228 98,383 Distribution of Terminated Participants with Funds on Deposit by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 5 0 0 0 0 0 5 $32,017 25-29 29 1 0 0 0 0 30 37,587 30-34 42 7 1 0 0 0 50 51,711 35-39 33 7 1 1 0 0 42 69,886 40-44 30 7 0 0 1 0 38 57,908 45-49 28 8 2 3 0 2 43 71,273 50-54 24 9 3 1 1 1 39 60,230 55-59 26 3 4 0 0 0 33 40,964 60-64 11 2 1 0 0 0 14 54,490 65 and over 3 1 0 0 0 0 4 47,970 All Ages 231 45 12 5 2 3 298 56,138 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-4 Retired Members and Beneficiaries Distribution of Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 30 0 0 0 0 0 1 1 30-34 0 0 2 0 0 0 2 35-39 0 0 0 0 0 0 0 40-44 0 1 0 0 0 0 1 45-49 0 2 5 0 1 0 8 50-54 30 4 2 1 0 2 39 55-59 73 5 5 1 0 2 86 60-64 90 4 0 0 0 3 97 65-69 99 5 0 0 0 5 109 70-74 58 2 0 0 0 2 62 75-79 52 3 0 0 0 5 60 80-84 38 0 0 0 0 7 45 85 and Over 37 0 0 0 0 12 49 All Ages 477 26 14 2 1 39 559 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 30 $0 $0 $0 $0 $0 $3,913 $3,913 30-34 0 0 528 0 0 0 528 35-39 0 0 0 0 0 0 0 40-44 0 17,290 0 0 0 0 17,290 45-49 0 24,377 214 0 157 0 6,248 50-54 24,417 17,764 562 2,211 0 1,719 20,778 55-59 36,284 10,618 1,289 3,908 0 14,483 31,874 60-64 36,638 15,450 0 0 0 9,791 34,934 65-69 27,364 16,780 0 0 0 16,703 26,389 70-74 26,139 5,992 0 0 0 59,344 26,560 75-79 22,426 16,927 0 0 0 18,399 21,816 80-84 22,453 0 0 0 0 17,221 21,639 85 and Over 17,332 0 0 0 0 20,312 18,062 All Ages $28,437 $15,333 $692 $3,060 $157 $18,569 $26,303 CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA C-5 Retired Members and Beneficiaries (continued) Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 5 Yrs 179 3 4 1 0 13 200 5-9 106 1 6 1 0 6 120 10-14 72 5 1 0 0 7 85 15-19 58 11 2 0 1 8 80 20-24 26 5 1 0 0 2 34 25-29 22 1 0 0 0 2 25 30 and Over 14 0 0 0 0 1 15 All Years 477 26 14 2 1 39 559 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 5 Yrs $37,678 $24,811 $841 $2,211 $0 $21,938 $35,548 5-9 25,267 20,443 924 3,908 0 31,338 24,135 10-14 27,123 14,554 161 0 0 10,241 24,676 15-19 24,121 12,701 122 0 157 14,851 20,724 20-24 19,238 14,442 381 0 0 18,113 17,912 25-29 8,708 19,086 0 0 0 7,477 9,025 30 and Over 7,002 0 0 0 0 9,282 7,154 All Years $28,437 $15,333 $692 $3,060 $157 $18,569 $26,303 * Counts of members do not include alternate payees receiving benefits while the member is still working. Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for those who have service in more than one coverage group. This does not result in double counting of liabilities. THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX D DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE THIS PAGE INTENTIONALLY LEFT BLANK CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX D MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH PARTICIPANT DATA D-1 DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2013. Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry age into the plan. Since the actual demographics of new members was not known during the implementation of PEPRA in December 2012, the normal cost rate was determined based on the average demographics of the members in the current 2 percent at age 55 miscellaneous risk pool and the 3 percent at age 50 safety risk pool. In analyzing the first set of PEPRA data, CalPERS staff has become concerned that, for most employers, there is insufficient data to produce stable normal costs and member contribution rates. Further, this situation is likely to persist for a number of years as employers gradually bring on more PEPRA members. The larger employers may have sufficient PEPRA members in the first few years but other employers may not have stable rates for a number of years. Staff has concluded that the best approach is to repeat the process – using the normal costs based on the demographics of the risk pools – for the current valuation and work with stakeholders over the next year to determine the best long-term approach to the issue of calculating PEPRA normal costs and member contribution rates. For more information on this topic please refer to the CalPERS Board of Administration agenda item 9a of the May 20th, 2014 meeting which is available on the CalPERS website. Basis for Current Rate Rates Effective July 1, 2015 Rate Plan Identifier Plan Total Normal Cost Member Rate Total Normal Cost Change Change Needed Member Rate 26029 Miscellaneous PEPRA 12.50% 6.250% 12.50% 0.00% No 6.250% THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX E GLOSSARY OF ACTUARIAL TERMS CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH GLOSSARY OF ACTUARIAL TERMS E-1 Glossary of Actuarial Terms Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability) The total dollars needed as of the valuation date to fund all benefits earned in the past for current members. Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation. Actuarial Methods Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Actuarial Value of Assets. Actuarial Valuation The determination, as of a valuation date, of the Normal Cost, Accrued liability, Actuarial Value of Assets and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change to their plan provisions. Actuarial Value of Assets The Actuarial Value of Assets used for funding purposes is obtained through an asset smoothing technique where investment gains and losses are partially recognized in the year they are incurred, with the remainder recognized in subsequent years. This method helps to dampen large fluctuations in the employer contribution rate. Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be separately amortized and paid for over a specific period of time. However, all bases are amortized using investment and payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage note has its own terms (payment period, principal, etc.) Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract amendments, actuarial assumption changes, actuarial methodology changes, and or gains and losses. Payment periods are determined by Board policy and vary based on the cause of the change. Amortization Period The number of years required to pay off an Amortization Base. Annual Required Contributions (ARC) The employer's periodic required annual contributions to a defined benefit pension plan as set forth in GASB Statement No. 27, calculated in accordance with the plan assumptions. The ARC is determined by multiplying the employer contribution rate by the payroll reported to CalPERS for the applicable fiscal year. However, if this contribution is fully prepaid in a lump sum, then the dollar value of the ARC is equal to the Lump Sum Prepayment. Classic Member (under PEPRA) A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new member under PEPRA. (See definition of new member below) Discount Rate Assumption The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL). CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH GLOSSARY OF ACTUARIAL TERMS E-2 Entry Age The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most cases, this is the age of the member on their date of hire. Entry Age Normal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because there is less time to earn investment income to fund the future benefits.) Fresh Start A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period. Funded Status A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets verses accrued liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less than 100% means liabilities are greater than assets. A funded ratio based on the Actuarial Value of Assets indicates the progress toward fully funding the plan using the actuarial cost methods and assumptions. A funded ratio based on the Market Value of Assets indicates the short-term solvency of the plan. GASB 27 Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting for pensions. GASB 68 Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014. New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system. Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to perform the calculations necessary to properly fund a pension plan. PEPRA The California Public Employees’ Pension Reform Act of 2013 Prepayment Contribution A payment made by the employer to reduce or eliminate the year’s required employer contribution. Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members. Rolling Amortization Period An amortization period that remains the same each year, rather than declining. CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH GLOSSARY OF ACTUARIAL TERMS E-3 Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee contributions for the rate year covered by that valuation could be waived. Unfunded Liability When a plan or pool’s Actuarial Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost. CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5E November 17, 2014 TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE FROM: Finance Department Dan Matusiewicz, Finance Director (949) 644-3123, DanM@newportbeachca.gov SUBJECT: Enterprise Resource Planning Software Implementation (ERP) Update BACKGROUND: The purpose of this progress report is to inform the Finance Committee of the latest developments regarding the Enterprise Resource Planning (ERP) software implementation. An ERP is a business management software system that integrates all of the City’s core functional requirements for financials, human capital management, citizen services, and revenues. The ERP implementation is scheduled to take between 25 and 30 months and will consist of 5 major phases. The software provider of the City’s ERP is Tyler Technologies Inc. and this project is titled “eSAIL.” PROGRESS: Finance Phase 1 Business Process Consulting Sessions Concluded Staff concluded the five-month series of Business Process Consulting (BPC) sessions with Tyler consultants. Staff met with Tyler consultants to identify current policy, procedure and practice; identify risks; and to agree upon the intended outcome of the various Phase I module applications including: Budget General Ledger Projects and Grants Purchasing Accounts Payable Contracts Management Inventory Fixed Assets 1 INTENTIONALLY BLANK PAGE 2 Enterprise Resource Planning Software Implementation (ERP) Update November 17, 2014 Page 2 The ultimate goal of these BPC sessions was to develop software configuration specifications in conformance with the City's business needs and in consideration of industry best business practices. Information Technology Over the past several months the City’s IT group participated in all the BPC sessions, completed the ERP system administration setup, were trained on security and workflow, configured E-mail within the new system, and worked with the IT staff within the Police Department to synchronize the two networks. Change Management This important project must foster an environment of change in order to allow for the creation of more efficient and effective processes to support the City's mission and goals. With the many changes to the City's business processes that are expected, City staff must be prepared to adapt. To assist in this regard, representatives from Tyler periodically assess through surveys our organization’s ability to handle change. The survey results so far indicate the City has strong leadership and project management skills to support the eSAIL project. Department representatives who make up the Change Management team meet regularly and disseminate eSAIL project information. They also advise project managers where additional training or resources are needed for project success. Upcoming Activities Staff is anticipating the completion of the Chart of Accounts (a series of account tables used to organize and track the City’s financial information) by the end of November. The results of the BPC sessions will be used to conduct the Static Environment Testing (SET) in December where various financial transactions will be conducted and evaluated in a test environment. Following the successful completion of the SET, the conversion and importation of historical data will occur, training documentation will be prepared and Finance Department staff will be trained to use and train others on how to use the system with an anticipated Go Live date of July 2015. The Phase 2 (HR/Payroll) phase will begin in January 2015 and will generally follow the same sequence of events as indicated in the chart below. 3 Enterprise Resource Planning Software Implementation (ERP) Update November 17, 2014 Page 3 Prepared and submitted by: /s/Steve Montano Steve Montano Deputy Finance Director 4