STRATEGIC BUSINESS PLAN
Examination of potential strategies in the City’s long-term plan are based on the baseline forecast assumptions. Scenario 1 reflects the impact of an economic downturn that resembles the Great Recession. In this scenario, beginning in FY 2021-22 revenues have sharp declines in all areas and include a one percent decline in year one and six percent decline in year two and three before revenues begin to rebound. Scenario 1 does not take into account expenditure measures that would typically be enacted. The City’s Contingency Reserves are exhausted in FY 2022-23, assuming no course corrections are made.
Scenario 2 reflects the impact of an economic downturn that resembles a 2 percent decline in revenues for three years before recovery begins. Scenario 2 does not take into account expenditure measures that would typically be enacted. $27 million of the City’s Contingency Reserves are utilized over the forecasted period, assuming no course corrections are made. Staff closely monitors the economic environment and makes corresponding adjustments as necessary and will continue to work on multiple strategies to proactively plan from a long-term perspective. Key strategies include: improving revenue growth, ensuring full cost recovery, evaluating service levels and delivery of services, and utilizing technology to
manage growth and increasing demands. In the event that a decline may occur, key strategies include re- evaluating service delivery options, delaying non-critical vacancies, eliminating non-critical vacant positions, postponing merit increases and cost of living adjustments, deferring contingency capital improvement projects, and deploying contingency reserves. Pension Plan The City participates in the California Public Employees Retirement System (CalPERS) to provide retirement and other benefits to its employees. Detailed information on the City’s plans with CalPERS can be found in the City’s Comprehensive Annual Financial Report and annual Actuarial Valuation Reports 1 prepared by CalPERS. These reports include information on required contributions, assets, liabilities and rates, methods and assumptions, as well as a risk analysis for the City’s plans. Risks for the plans include potential differences in rates of termination, retirement, mortality, salary growth and investment returns compared to plan assumptions. Differences between actual experience and plan assumptions can increase the City’s unfunded liability; a risk analysis section is provided within the Actuarial Valuation Reports showing the volatility of the City’s annual funding rates, the impact of varying investment return scenarios on the City’s future rates, and an analysis of the impact of a change in the plan’s discount rate on the City’s future rates and liabilities. To address its unfunded pension liability, the City of Irvine implemented a lower tier of retirement benefits for newly hired non-sworn personnel. Subsequently, the California Legislature implemented the Public Employees’ Pension Reform Act (PEPRA) that further lowers retirement formulas for all new members. CalPERS has adopted a number of policy and assumption changes including: lowering the discount rate from 7.5 percent to 7.0 percent incrementally over three years; accelerating the amortization period for gains and losses; and updating actuarial assumptions to better align with mortality, salary scales, and
1 CalPERS, Public Agency Actuarial Valuations: www.calpers.ca.gov
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FY 2019-21 Proposed Budget
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