Council directs $1.9M toward ASRS prepayment and moves remainder of FY26 surplus to capital reserve

Councilors voted to allocate the city’s audited FY26 surplus (approximately $5.5 million) between a pension prepayment vehicle and the general fund capital reserve.

Staff explained that Arizona State Retirement System (ASRS) is a multi‑employer, cost‑sharing plan and that a lump‑sum prepayment behaves differently than a single‑employer funding payment. The city’s actuary advised against one large market‑timing lump sum; instead staff recommended a phased or dollar‑cost‑averaging approach. Councilors asked questions about liquidity, use rules and what using prepayment funds to cover employer contributions would look like in practice.

Outcome: Council agreed to place $1.9 million into an ASRS prepayment account to be funded over the coming budget process in a way that mitigates market timing risk, and to move the remaining audited surplus into the general fund capital reserve. Council framed the capital reserve allocation as a flexible pool the city can use if major CIP grants fail to materialize or to address unexpected large capital needs.

Why it matters: The move preserves flexibility for the FY27 CIP while starting a pension prepayment program that staff say can provide better long‑term positioning and potential investment returns. Staff will return with operational details on timing and mechanics.