Flagstaff says pension financing brought police and fire plans to full funding

The city’s management service director, Rick, told the Public Safety System Committee that the city addressed growing unfunded liabilities in the public safety pension plans by pursuing pension financing in 2020. Rick said the council approved issuing certificates of participation (COPs) that pledged city facilities as repayment and that the financing was structured to reduce long‑term pension costs and stabilize annual payments.

Rick said the COP issuance totaled about $131,000,000 — the largest debt the city has issued — and that the financing produced an all‑in interest cost near 2.69% at the time. He said both the police and fire plans were roughly 100% funded after the financing and that the transaction produced an estimated net present value savings of about $76,000,000 over the financing horizon. Rick also said the city set aside a contingency reserve fund to manage actuarial and market risk; that reserve has grown from $14,000,000 to $16,000,000 per the presentation.

"We were the first in the state, to do a pension debt, in Arizona," Rick said during the briefing, describing the 2020 action as a bold step. He told the committee that switching from pay‑as‑you‑go pension payments to an amortized debt structure substantially lowered the annual pension‑related cost pressure (Rick estimated roughly $2,000,000 in annual relief compared with prior pension payments).

Rick emphasized that the financing also reduced the volatility of future pension payments and that the city will continue monitoring actuarial assumptions and market conditions. Committee members asked clarifying questions about the mechanics and about how contingency funds will be used; Rick said staff would provide further detail if required.

No formal action was taken at the meeting; the pension financing discussion was informational and historical in nature.