Santa Rosa adopts new pension strategy

photo credit: Courtesy the City of Santa Rosa

Santa Rosa officials voted Tuesday on a new strategy to fund city pensions. According to Santa Rosa’s Chief Financial Officer, Alan Alton, pension costs account for 62% of the city’s benefits budget.

Approved by a unanimous vote, the new strategy involves shifting to what's called section 115 trusts, named after the IRS code.
Section 115 trusts will allow the city to invest pension funds in riskier ways with the potential for greater returns on investment.

Santa Rosa chose PFM Asset Management to manage the funds.

Alton said the new strategy should allow Santa Rosa to fully fund its pension obligations.

"Using the CalPERS valuation of our funds and account with CalPERS and then doing a separate valuation to include the plans that are into 115, the combination of the two should get us to a hundred percent funded status." Alton told the council.

While Alton noted the new strategy will allow for continued local control and potentially higher returns, he said there are still two main risks.

"The market volatility could result in loss of principle and the funds held in trust may only be used for pension obligation." Alton said.

Vice Mayor Eddie Alvarez raised the issue of conscious or “green” investment, something he said the city should take into account.

"I would like to strongly suggest that we look at the companies that we invest into so that we can further our goals. When we speak of how we want to reduce coal by the year 2030, we're not investing into companies that actually produce more emissions and things of that nature, I would greatly appreciate." Alvarez said.