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Scottsdale satisfies FY unfunded Public Safety Personnel Retirement System liability contributions

Actuarial report predicts Scottsdale PSPRS to be funded by 2036

Rocks like this one are found laying all around the Scottsdale Police & Fire Headquarters in central Scottsdale. (Photo by Arianna Grainey/DigitalFreePress.com)
By Terrance Thornton | Digital Free Press

Scottsdale City Council is taking active measures to pay down the unfunded liability at the Public Safety Personnel Retirement System, which today stands at $187,655,848 at the police department and $23,269,414 at the fire department.

Embedded within a part of its annual spending budget, the local governing board also approved a pension funding policy that outlines how the municipality will maintain its contributions to the public safety pension fund, according to Scottsdale Accounting Director Anna Henthorn.

The Public Safety Personnel Retirement System or PSPRS, which was established in July 1968, is meant to provide an equitable statewide retirement program for Arizona’s public safety personnel. Scottsdale City Council, earlier this month, unanimously adopted its annual PSPRS pension funding policy through resolution No. 12424 at City Hall, 3939 N. Drinkwater Blvd.

A picturesque view of the Scottsdale Fire Department seal at HQ found along Indian School Road in central Scottsdale. (Photo by Arianna Grainey/DigitalFreePress.com)

By the numbers: Scottsdale’s public safety pension

The PSPRS fund, which is governed by a nine-member board of trustees, is entrusted with the fiduciary responsibility to serve its members, and best protect the financial health of each pension fund the board oversees, according to state law.

“Arizona Revised Statutes section 38-863.01 requires the City Council to annually adopt a pension funding policy for the Public Safety Personnel Retirement System to communicate how the city will maintain stability of the city’s required contributions, how and when the city’s funding requirements will be met and defining the city’s funded ratio target under PSPRS and when it will be met,” Ms. Henthorn wrote in her May 17 report to City Council.

“The city also is required to formally accept the city’s share of the assets and liabilities based on the PSPRS actuarial report and post the pension funding policy on its website and transmit the pension funding policy to the PSPRS board.”

In her report to City Council, Ms. Henthorn outlines the municipality has separate trusts for each branch of public safety: police and fire.

“Annually PSPRS provides the city with both a police and fire actuarial report that includes the city’s assets, liabilities, unfunded actuarial liability, funding ratio, and the projected contributions required or the upcoming fiscal year,” she said.

Records show the PSPRS actuarial reports from June 30, 2021, reflect a funded ratio of 55.3% for police and 84.6% for fire. Scottsdale’s unfunded liabilities were $187,655,848 for police and $23,269,414 for fire.

“Both city and employee annual contribution rates vary depending upon the employee’s hire date,” Ms. Henthorn explained touching on the complexities of the unfunded liability funding conundrum.

“The city’s police contribution rates for fiscal year 2021 were 55.72% or 50.66%, and employee rates were 7.65%, 9.73% or 11.65%. The city’s fire contribution rates for fiscal year 2021 were 13.10% or 17.68% and employee contribution rates were 7.65%, 10.33% or 11.65%.”

The bottom line, Ms. Henthorn reports to City Council, is the municipality has paid its share to the PSPRS fund for both police and fire coming to the tune of $21,874,465 for this current fiscal year, which ends June 30.

Ms. Henthorn points out a premium insurance tax credit at the Scottsdale Fire Department is helping to reduce the financial commitment of the municipality.

“The amount received in fiscal year 2021 was $2,027,675,” she reported.

“The unfunded actuarial accrued liability is shown as a city liability; however, it will be partially paid through employee contributions and the annual allocation of the fire insurance premium tax. To comply with the statutory requirement staff recommends accepting the city’s share of assets and liabilities under the PSPRS actuarial valuation.”

Scottsdale officials anticipate the unfunded liability at PSPRS to be funded no later than June 30, 2036.

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