City Finance Team plans $5M investment in treasury notes amid rising rates

During the Financial Review Committee Meeting held on October 30, 2023, in Dana Point, key discussions centered around the city’s financial strategies, particularly regarding pension liabilities and investment opportunities.

One of the primary topics was the potential for additional payments towards the city’s unfunded actuarial liability (UAL). Committee members expressed a consensus that making these payments could stabilize the city’s financial outlook over the long term. The discussion highlighted the importance of maintaining a consistent payment strategy to manage the UAL effectively, which is projected to reach over $1.3 million by 2034. The committee emphasized the need for a predictable funding policy to ensure financial stability for the city.

Additionally, the committee reviewed the city’s investment plans, noting a strategy to capitalize on current high treasury note rates. A proposal was made to invest $5 million in treasury notes, aiming for returns close to 5%. This move is seen as a proactive step to enhance the city’s financial position amid fluctuating market conditions.

The meeting also touched on the complexities of the city’s pension plans, particularly the two-tier system for newer employees under the Public Employees' Pension Reform Act (PEPRA). With approximately 36 out of 60 employees now enrolled in this system, the committee noted that this shift could lead to a more stable and predictable financial environment.

Looking ahead, the committee plans to reconvene in January to further discuss these financial strategies and to refine projections based on updated actuarial reports. This ongoing dialogue reflects the city’s commitment to addressing its financial obligations while ensuring the long-term fiscal health of the community.