Resolution No. 5146 - Laserfiche WebLink

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Management’s Discussion and Analysis The management of the City of Eugene, Oregon (City) presents this narrative overview to facilitate both a short and a long-term analysis of the financial activities of the City for the fiscal year ended June 30, 2015. This Management’s Discussion and Analysis (MD&A) is based on currently known facts, decisions, and conditions that existed as of the date of the independent auditor’s report. Additional information outside the scope of this analysis can be found in the Letter of Transmittal. Financial Highlights This year, the City implemented significant new accounting rules for calculating and reporting the costs and obligations associated with pensions as required by the Governmental Accounting Standards Board (GASB). GASB Statements No. 68 and No. 71 require that the value of the City’s pension asset (liability), related to pension promises to employees, be recorded in the financial statements. In past years the pension unfunded liability was simply reported in the Required Supplementary Information. The pension asset represents the difference between the value of the assets set aside to pay future benefits and the actuarial calculation of the cost of those benefits. This accounting rule change does not have any impact on the City’s budget or funding for the Oregon Public Employee Retirement System (OPERS). The recording of the City’s pension asset had the following impacts to the City’s financials as of June 30, 2015: Exhibit 1 The City has a net pension asset of $30.5 million. The City and other jurisdictions in OPERS have net pension assets at this point in time because of strong past market returns for OPERS investments. Earnings on OPERS investments account for about 70% of its reserve, so a bad year would significantly impact our share of those assets. There will be annual fluctuations and the pension obligation could swing from an asset to a liability for a number of reasons. The City reports deferred outflows of resources of $12.1 million and deferred inflows of resources of $60.0 million, both related to pensions. The OPERS measurement date is as of June 30, 2014, one year behind this report, so these elements represent timing differences. The outflows are City contributions made in FY15 to OPERS and the inflows primarily represent actual market returns that were in excess of OPERS projections for that year. The excess investment returns will be recognized over a five year period, whereas the City contributions will be recognized in FY16. Exhibit 2 The effect of implementing the new pension rules is shown as an adjustment to beginning net position. There are two elements to this adjustment: The City recorded a change in accounting principle of $110.2 million to reflect the cumulative impact of applying the new pension rules. The City also recorded an adjustment of $19.2 million to allocate a portion of the Limited Tax Pension Bonds (pension bonds) to the City’s Business-type Activities to reflect their share of the future obligation to repay the pension bonds. In addition, the City reallocated the internal balances between the Governmental activities and Business-type Activities based on the pension bond allocation. Other highlights The City’s total assets and deferred outflows of resources at June 30, 2015 increased $0.7 million from $996.6 million to $997.3 million. The City’s total liabilities and deferred inflows of resources increased $53.1 million from $145.7 million to $198.8 million. The increase was primarily due the recognition of $59.9 million in deferred inflows of resources related to pensions as part of implementing the new pension accounting rules. The net position of the City (assets less liabilities) at June 30, 2015 decreased $52.3 million from $850.9 million to $798.6 million. The City’s unrestricted portion of net position is $50.7 million, which is split $43.8 million and $6.9 million for the City’s governmental and business-type activities, respectively. The majority of the governmental activities portion of unrestricted net position is in the General Fund, Telecom Fund, and the Internal Service Funds. At June 30, 2015, the General Fund’s fund balance was $41.0 million, a decrease of $2.0 million from the previous year. Of the General Fund’s fund balance $0.9 million is unassigned. 15