Pension Funding Strategy (proposed version)
Managing Pension Costs Responsibly
The City of Upland, like most California public agencies, participates in CalPERS, which provides retirement benefits for public employees. Over time, changes in investment performance, economic conditions, and benefit structures have created a funding gap—commonly referred to as the Unfunded Accrued Liability (UAL). Rather than letting this liability grow, the City Council has taken early, deliberate, and fiscally responsible steps to control pension costs and protect long-term financial stability. Through its Pension Funding Policy and a coordinated approach known as BLAST, the City is projected to reduce long-term pension costs.
What is the Unfunded Pension Liability (UAL)?
Recognizing these long-term cost pressures, the City evaluated options and developed a strategy that would:
- Reduce long-term costs
- Avoid unnecessary financial risk
- Maintain flexibility
The result was BLAST—a coordinated, multi-step approach that uses existing resources, disciplined policies, and lower-cost financing tools to reduce pension liabilities.
A Proactive Approach - The BLAST Strategy
Recognizing these long-term cost pressures, the City evaluated options and developed a strategy that would:
- Reduce long-term costs
- Avoid unnecessary financial risk
- Maintain flexibility
The result was BLAST—a coordinated, multi-step approach that uses existing resources, disciplined policies, and lower-cost financing tools to reduce pension liabilities. BLAST stands for:
| ADDITIONAL DISCRETIONARY PAYMENT (ADP) - The City made an additional $10 million payment from its Pension Trust directly to UAL. Making payments earlier reduces the outstanding balance sooner, lowering total interest costs over time. This is a straightforward yet highly effective approach for any liability. | |
Results and Ongoing Commitment
The BLAST strategy reflects a deliberate choice to prioritize financial stability over short-term fixes by:
- Reducing long-term pension costs by tens of millions of dollars
- Avoiding the risks of Pension Obligation Bonds, which depend on market timing
- Lowering effective interest costs on pension liabilities
- Preserving flexibility in future budgets
- Protecting City services for residents
The BLAST strategy was approved by the City Council in December 2021 and implemented in early 2022. Shortly thereafter, CalPERS experienced significant investment losses in 2022, which increased pension liabilities for agencies statewide. Despite this, Upland’s earlier actions helped offset a substantial portion of those impacts. The City has continued to follow through on its strategy by:
- Making ongoing contributions to its Pension Trust
- Maintaining disciplined funding policies
- Adopting a 15-year amortization “fresh start” in 2024, which is expected to reduce long-term costs compared to longer repayment periods
The BLAST strategy builds on years of forward-looking decisions by the City Council:
- 2016 – Established a Section 115 Pension Trust
- 2016 – Implemented employee cost-sharing through labor agreements
- 2016–2017 – Reduced future liabilities through service restructuring
- 2020 – Engaged independent financial advisors to evaluate options
- 2020–2021 – Conducted multiple public meetings to review strategies
- 2021 – Adopted Pension Funding and Reserve Policies
- 2022 – Implemented the BLAST strategy
- 2022–2025 – Continued funding of Pension Trust
- 2024 – Adopted a 15-year amortization schedule to reduce long-term costs
These actions reflect a consistent effort to address pension challenges early rather than defer them to the future.
What are Pension Obligation Bonds?
Some agencies use Pension Obligation Bonds (POBs) to address pension liabilities. POBs provide funding but bring market timing risk, fixed debt obligations regardless of investment performance, and reduced financial flexibility. After careful evaluation, the City opted for a measured approach that reduces costs, maintains control, and limits risk.
Continuing Challenges
Continuing Challenges
Pension costs are a long-term challenge for cities across California. The City has chosen to address this challenge directly through thoughtful planning, disciplined financial policies, and strategic use of existing resources. The City’s Pension Funding Policy and BLAST strategy demonstrate how proactive decision-making today can reduce future costs, stabilize the City’s finances, and help ensure that essential services remain sustainable for years to come.
| UAL Paydown Sources | Paydown Amount |
| Water Fund | $9.1 Million |
| Sewer Fund | $4.6 Million |
| Solid Waste Fund | $1.6 Million |
| Enterprise Funds Subtotal | $15.26 Million |
| General Fund ADP | $10.00 Million |
| General Fund Lease | $20.75 Million |
| Total Paydown | $46.01 Million |
| Projected Net UAL Savings by Category | Projected Savings Amount |
| Enterprise Funds | $32,340,972 |
| General Fund ADP | $19,535,177 |
| General Fund Lease | $14,924,287 |
| Total Savings | $66,800,436 |
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Documents sorted by SEQ in Ascending Order within category
Documents sorted by SEQ in Ascending Order within category