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AGENDA
ORO VALLEY TOWN COUNCIL
REGULAR SESSION
APRIL 7, 2021
ONLINE ZOOM MEETING
Click link to join:
https://orovalley.zoom.us/j/96070780591
To attend via phone only, dial 1-346-248-7799 then enter Meeting/Webinar ID: 960 7078 0591
The Town recently updated its Zoom capability to allow for increased public attendance and to better facilitate the
Town's virtual meetings. When you log in to the meeting you will be added as an attendee. You will be able to
address the Town Council during the "Call to Audience," public hearing and public comment items on the agenda. If
you wish to address the Council during those parts of the agenda, select "Raise your hand" from the Zoom controls
and wait until you are called upon to speak by the Mayor. Town staff will then unmute your microphone and camera.
For additional information about the Town's Zoom meetings, visit
https://www.orovalleyaz.gov/Government/Departments/Town-Clerk/Zoom-meeting-attendance
Executive Sessions – Upon a vote of the majority of the Town Council, the Council may enter into Executive
Sessions pursuant to Arizona Revised Statutes §38-431.03 (A)(3) to obtain legal advice on matters listed on the
Agenda.
REGULAR SESSION AT OR AFTER 5:00 PM
CALL TO ORDER
ROLL CALL
EXECUTIVE SESSION - Pursuant to A.R.S. §38-431.03(A)(1) and (A)(3) Personnel matter - Chief of Police
annual performance review
RECONVENE REGULAR SESSION AT OR AFTER 6:00 PM
CALL TO ORDER
ROLL CALL
PLEDGE OF ALLEGIANCE
UPCOMING MEETING ANNOUNCEMENTS
COUNCIL REPORTS
TOWN MANAGER'S REPORT
The Mayor and Council may consider and/or take action on the items listed below:
ORDER OF BUSINESS: MAYOR WILL REVIEW THE ORDER OF THE MEETING
INFORMATIONAL ITEMS
CALL TO AUDIENCE – At this time, any member of the public is allowed to address the Mayor and Town Council
on any issue not listed on today’s agenda. Pursuant to the Arizona Open Meeting Law, individual Council
Members may ask Town Staff to review the matter, ask that the matter be placed on a future agenda, or respond
to criticism made by speakers. However, the Mayor and Council may not discuss or take legal action on matters
raised during “Call to Audience.” In order to speak during “Call to Audience” please specify what you wish to
discuss when completing the blue speaker card.
PRESENTATIONS
1.Presentation to outgoing Magistrate, George Dunscomb
2.Presentation - Youth Art Program by the Arts and Culture Ambassadors
3.Presentation and update by Executive Director Kate Marquez of the Southern Arizona Arts and Cultural
Alliance (SAACA)
4.Proclamation - Week of the Young Child
CONSENT AGENDA
(Consideration and/or possible action)
A.Minutes - March 17, 2021
REGULAR AGENDA
1.DISCUSSION AND POSSIBLE ACTION REGARDING THE FY21/22 - FY22/23 TOWN COUNCIL
STRATEGIC LEADERSHIP PLAN (continued from March 17, 2021 Town Council meeting)
2.PRESENTATION, DISCUSSION AND POSSIBLE ACTION REGARDING PSPRS LIABILITY FUNDING
OPTIONS
FUTURE AGENDA ITEMS (The Council may bring forth general topics for future meeting agendas. Council may
not discuss, deliberate or take any action on the topics presented pursuant to ARS 38-431.02H)
ADJOURNMENT
The Mayor and Council may, at the discretion of the meeting chairperson, discuss any Agenda item.
POSTED: 3/31/21 at 5:00 p.m. by pp
POSTED: 3/31/21 at 5:00 p.m. by pp
When possible, a packet of agenda materials as listed above is available for public inspection at least 24 hours
prior to the Council meeting in the office of the Town Clerk between the hours of 8:00 a.m. – 5:00 p.m.
The Town of Oro Valley complies with the Americans with Disabilities Act (ADA). If any person with a disability
needs any type of accommodation, please notify the Town Clerk’s Office at least five days prior to the Council
meeting at 229-4700.
INSTRUCTIONS TO SPEAKERS
Members of the public have the right to speak during any posted Public Hearing. However, those items
not listed as a Public Hearing are for consideration and action by the Town Council during the course of
their business meeting. Members of the public may be allowed to speak on these topics at the discretion
of the Chair.
In accordance with Amendment #2 of the Mayoral Proclamation of Emergency issued on March 27, 2020, the
following restrictions have been placed on all public meetings until further notice:
1. In-person attendance by members of the public is prohibited.
2. Member of the public can either watch the public meeting
online https://www.orovalleyaz.gov/town/departments/town-clerk/meetings-and-agendas or, if they would like to
participate in the meeting (e.g. speak at Call to Audience or speak on a Regular Agenda item), they can attend the
meeting and participate via the on-line meeting application, Zoom, https://orovalley.zoom.us/j/96070780591 , or
may participate telephonically only by dialing 1-346-248-7799 then enter Meeting ID: 960 7078 0591 prior to or
during the posted meeting.
3. If a member of the public would like to speak at either Call to Audience or on a Regular Agenda item, please
"Raise Your Hand" during the meeting when the Chair announces that it is the appropriate time to do so. For those
participating in the meeting through Zoom, place your cursor towards the bottom, middle of the page and look for
the "Raise Hand" icon and click on it to "Raise Your Hand" to speak. For those participating via phone only, press
*9 to "Raise Your Hand".
4. All members of the public who participate in the Zoom meeting either with video or telephonically will enter the
meeting with microphones muted. For those participating via computer/tablet/phone device, you may choose
whether to turn your video on or not. Those participating via computer/tablet/phone device can click the "Raise
Your Hand" button during the Call to the Public or Regular Agenda item, and the Chair will call on you in order. For
those participating by phone, you can press *9, which will show the Chair that your hand is raised. When you are
recognized at the meeting by the Chair, your microphone will be unmuted by a member of staff and you will have
three minutes to speak before your microphone is again muted.
5. If a member of the public would like to submit written comments to the Town Council for their consideration prior
to the meeting, please email those comments to mstandish@orovalleyaz.gov no later than sixty minutes before the
public meeting. Those comments will then be electronically distributed to the public body prior to the meeting.
If you have questions, please contact Town Clerk, Mike Standish, at 520-229-4700 or email at
mstandish@orovalleyaz.gov
Thank you for your cooperation.
Town Council Regular Session 1.
Meeting Date:04/07/2021
Presentation to Outgoing Magistrate, George Dunscomb
Subject
Presentation to outgoing Magistrate, George Dunscomb
Summary
Attachments
Proclamation
Town Council Regular Session 2.
Meeting Date:04/07/2021
Presentation - Youth Art Program by the Arts and Culture Ambassadors
Subject
Presentation - Youth Art Program by the Arts and Culture Ambassadors
Summary
Attachments
No file(s) attached.
Town Council Regular Session 3.
Meeting Date:04/07/2021
Presentation and Update by the Southern Arizona Arts and Cultural Alliance (SAACA)
Subject
Presentation and update by Executive Director Kate Marquez of the Southern Arizona Arts and Cultural Alliance
(SAACA)
Summary
Attachments
SAACA Presentation
T O W N O F O R O V A L L E Y
P A R T N E R S H I P U P D A T E
2 0 2 1
S o u t h e r n A r i z o n a A r t s & C u l t u r a l A l l i a n c e
WWW.SAACA.ORG
S A A C A I S A N O N P R O F I T O R G A N I Z A T I O N
T H A T C R E A T E S C O L L A B O R A T I V E
A R T S -D R I V E N E X P E R I E N C E S W H I C H
S T R E N G T H E N T H E B O N D S B E T W E E N
P E O P L E , P L A C E A N D P U R P O S E
S o u t h e r n A r i z o n a A r t s & C u l t u r a l A l l i a n c e
T h e o r g a n i z a t i o n a s w e k n o w i t t o d a y g r e w o u t o f t h e r u r a l a r t s o r g a n i z a t i o n , t h e
G r e a t e r O r o V a l l e y A r t s C o u n c i l , w h i c h w a s f o u n d e d i n 1 9 9 7 t o e n r i c h t h e l i v e s
o f t h e c o m m u n i t y t h r o u g h t h e a r t s . N e a r l y 2 0 + y e a r s l a t e r , o u r p r o g r a m m i n g ,
c o l l a b o r a t i o n s a n d w o r k h a v e g r o w n t o b e r e c o g n i z e d a s a s t a t e w i d e l e a d e r i n
a d v a n c i n g n e w p a r t n e r s h i p s a n d a p p r o a c h e s f o r t h e a r t s t o t r a n s f o r m s t h e l i v e s ,
e x p e r i e n c e s a n d o p p o r t u n i t i e s o f i n d i v i d u a l s t h r o u g h o u t t h e r e g i o n .
HISTORY OF THE PARTNERSHIP
C R E A T I V E P L A C E M A K I N G & T H E
T O W N O F O R O V A L L E Y S I N C E 1 9 9 7
A R T S & E D U C A T I O N
C R E A T I V E P L A C E M A K I N G
P U B L I C A R T
S A A C A F O C U S I N O R O V A L L E Y
WWW.SAACA.ORGW e b e l i e v e t h a t c u l t u r e i s e q u a l l y a s i m p o r t a n t i n c r a f t i n g
a n d s h a p i n g o u r c o m m u n i t i e s a s a r e f i n a n c e a n d t r a d e .
C u l t u r a l v i b r a n c y a n d c i t y s u c c e s s g o h a n d -i n -h a n d .
B y s h a p i n g a s e n s e o f p l a c e a n d s o c i a l s p a c e , c u l t u r a l
r i c h n e s s i n c r e a s e s a c o m m u n i t y ’s a t t r a c t i v e n e s s t o a n
e d u c a t e d w o r k f o r c e , t h e b u s i n e s s e s t h a t e m p l o y t h o s e
w o r k e r s , a n d v i s i t o r s s e e k i n g a u t h e n t i c e x p e r i e n c e s
u n i q u e t o t h e d e s t i n a t i o n i t s e l f . S A A C A ’s w o r k d e v e l o p s
a n d s t r e n g t h e n s t h e a r t s i n o u r r e g i o n a n d m a k e s
e x p e r i e n c e s w i d e l y a v a i l a b l e t o r e s i d e n t s a n d v i s i t o r s .
E C O N O M I C D E V E L O P M E N T
O P P O R T U N I T I E S F O R A R T I S T S
F E S T I V A L S & E V E N T S
T O U R I S M
Combining over 14,000 square feet of flexible learning, performance,
gathering and maker spaces which highlight over 30 disciplines. Teaching
Kitchen, Arts & Crafts Studio, Robotics & Engineering Lab, Community
Room, Music & Digital Arts Lab, Coworking and Performance Venue.
CATALYST ARTS & MAKER SPACE
A N O V E R V I E W O F T H E W O R K
Creation and production of diverse arts-centric community art, culinary,
performing arts and visual arts-based festivals and events.
EVENTS & FESTIVALS
Developing partnerships between the arts and business sector that
promote innovation in business practices, creative sector impact,
and employee engagement through artistic programs which
include community galleries, live music, film series, chalk art festivals
and culinary events.
BUSINESS & ARTS PARTNERSHIPS
ARTS EDUCATION
Connecting hundreds of artists to the classroom with our
collaborative Community Share partnership.
Leveraging the power of arts, culture and community to drive a
broader agenda for change and transformation in our public spaces
through permanent and temporary public art and mural
installations.
PLACEMAKING
A R T S & H E A L T H C A R E
P a r t n e r i n g w i t h h o s p i t a l s , a s s i s t e d l i v i n g a n d m e m o r y c a r e
f a c i l i t i e s t o p r o v i d e n o -c o s t , a r t s -b a s e d p r o g r a m s a n d c u l t u r a l
e n g a g e m e n t e x p e r i e n c e s .
COVID-19, THE CREATIVE
SECTOR & ARIZONA
T H E I M P A C T O N A R T S & C U L T U R E
A s t u d y f r o m t h e B r o o k i n g s I n s t i t u t e r a n k e d T u c s o n
t h i r d a m o n g t h e h a r d e s t h i t m e t r o p o l i t a n a r e a s i n
t h e c o u n t r y w h e n i t c o m e s t o j o b l o s s e s i n t h e
c r e a t i v e w o r k f o r c e a s a r e s u l t o f C O V I D -1 9 . T h e s e
f i g u r e s a r e u n d e r s c o r e d b y t h e r e c e n t d a t a c o l l e c t e d
f r o m 5 1 a r t s o r g a n i z a t i o n s w h i c h r e p o r t e d a n
e s t i m a t e d l o s s o f o v e r $2 3 m i l l i o n d o l l a r s . W h e n
c o u p l e d w i t h t h e e s t i m a t e d f i n a n c i a l l o s s o f c r e a t i v e
w o r k e r s , T u c s o n ’s c r e a t i v e i n d u s t r y h a s t a k e n a
c o l l e c t i v e h i t o f m o r e t h a n $2 6 m i l l i o n d o l l a r s l o s t
t o t h e p a n d e m i c .
THE LONG TERM EFFECTS
ON THE CREATIVE SECTOR
H O W D O W E D E F I N E T H E C R E A T I V E S E C T O R
A r i z o n a i s o n l y o n e o f 4 s t a t e s i n t h e U .S . t h a t d o e s
n o t s u p p l y a p e r m a n e n t f u n d i n g s t r e a m f o r A r t s ,
C u l t u r e , a n d t h e b r o a d e r c r e a t i v e s e c t o r .
T h e e f f e c t s o f t h i s h a v e b e e n f e l t d e e p l y d u r i n g
t h e p a n d e m i c a s t h e r e i s n o l o n g -t e r m s t r a t e g y f o r
f u n d i n g t h e a r t s a n d c u l t u r a l s e c t o r i n A r i z o n a ,
w h i c h f u e l s o u r e c o n o m i c r e c o v e r y , t o u r i s m
d o l l a r s , s e n s e o f p l a c e , a n d c u l t u r a l l e g a c y .
A p l a n m u s t b e i m p l e m e n t e d t h a t c a n p r o v i d e
l o n g -t e r m s o l u t i o n s a t b o t h t h e l o c a l a n d s t a t e
l e v e l s , w h i c h w i l l p r o v i d e a s u s t a i n a b l e f u t u r e f o r
o u r C r e a t i v e S e c t o r
N O N -P R O F I T S
P E R F O R M I N G A R T S
V E N U E S
F I L M
V I D E O & D I G I T A L
D E S I G N
E V E N T P R O D U C T I O N
L I T E R A R Y A R T S
I N D I V I D U A L A R T I S T S
M U S I C I A N S
E D U C A T O R S
C U L I N A R Y
C U L T U R A L G R O U P S
O U R R E S P O N S E T O C O V I D -1 9
Collaboration breeds innovation
Banding together
Technology & the Arts
Providing space and facilitating
collaboration opportunities
Business & Arts Partnerships
Creative Placemaking Programs
Arts and Equitable Dialogue
Reenvisioning CATALYST
Arts Care Package Program
Building Arts & Equity
Creative Sector Survey - COVID-
19 Recovery and Relief
Paid Opportunities for Artists
Digital Resources & Training
Advocacy
COLLABORATION ACTIVATING
COMMUNITIES PROVIDING SOLUTIONS
ORO VALLEY
P R O G R A M M I N G S U C C E S S
D U R I N G C O V I D -1 9
WWW.SAACA.ORG
In 2020/2021 the Town of Oro Valley and SAACA
quickly pivoted to provide new opportunities for
the community to stay engaged, remain uplifted,
and stay connected online through arts and
culture.
PHOTOGRAPHY COMPETITION
C R E A T I V E P L A C E M A K I N G P R O J E C T
WWW.SAACA.ORG
Over 400 images were submitted from the
community between the months of November
2020 and March 2021.
Winners will be announced in May 2021,
featuring cash prizes and honorable mentions.
The community was invited to submit imagery
that captured the essence of Oro Valley life,
animals, outdoor spaces, urban and residential
life, and life experience within the community.
VIRTUAL TREE LIGHTING
A V I R T U A L C O M M U N I T Y
C E L E B R A T I O N
WWW.SAACA.ORG
SAACA celebrated the Holidays with a virtual
Tree Lighting and Holiday Festival of the Arts,
with a five-day shopping, family, and virtual
holiday performances and concerts.
SAACA partnered with local artists, schools,
performance groups, and businesses in Oro
Valley to create a week-long virtual celebration
that was emulated by art festivals across the
country in the subsequent months.
VIRTUAL EXPERIENCES
P R O V I D I N G O P P O R T U N I T I E S F O R
A R T I S T S I N O R O V A L L E Y
WWW.SAACA.ORG
SAACA has produced two seasons of digital
concerts, including providing online access to
Steam Pump drive-in concerts with professional
video productions.
In addition, support from Oro Valley has
underwritten online cooking classes, art tutorials,
and symphonic holiday concerts.
IN PERSON SPRING MARKET
S A F E L Y R E T U R N I N G T O O U T D O O R
G A T H E R I N G O P P O R T U N I T I E S
WWW.SAACA.ORG
On March 27 & 28, SAACA held the first in person
celebration and gathering in Oro Valley. Over 45
artists participated in the event, with record
success and support from the Oro Valley
Community.
CHARTING A PATH
FOR FUTURE
OPPORTUNITY
F O S T E R I N G C R E A T I V I T Y & N E W I D E A S
S U P P O R T I N G L O C A L A R T I S T S
P A R T N E R I N G W I T H T H E C O M M U N I T Y
P R I O R I T I E S
WWW.SAACA.ORGI n a t i m e m a r k e d b y s o c i a l d i s t a n c i n g a n d q u a r a n t i n e ,
t h e i m p o r t a n t r o l e o f c u l t u r a l a n d c r e a t i v e i n d u s t r i e s i n
o u r l i v e s i s m o r e e v i d e n t t h a n e v e r . A w e l l -d e v e l o p e d
c r e a t i v e e c o n o m y s u p p o r t s e m p l o y m e n t ,
s o c i o e c o n o m i c d e v e l o p m e n t , i n n o v a t i o n , a n d c u l t u r a l
p r e s e r v a t i o n w i t h i n a r e g i o n . C u l t u r a l a n d c r e a t i v e
s e c t o r i n v e s t m e n t c o n t r i b u t e s t o i n c l u s i v e s o c i a l
d e v e l o p m e n t b y e n c o u r a g i n g d i a l o g u e b e t w e e n
c o m m u n i t i e s , w h i c h c a n u l t i m a t e l y l e a d t o h e i g h t e n e d
l e v e l s o f u n d e r s t a n d i n g , o p p o r t u n i t y a n d r e s i l i e n c y .
Town Council Regular Session 4.
Meeting Date:04/07/2021
Proclamation - Week of the Young Child
Subject
Proclamation - Week of the Young Child
Summary
Attachments
Proclamation
Town Council Regular Session A.
Meeting Date:04/07/2021
Requested by: Mike Standish Submitted By:Michelle Stine, Town Clerk's Office
Department:Town Clerk's Office
SUBJECT:
Minutes - March 17, 2021
RECOMMENDATION:
Staff recommends approval.
EXECUTIVE SUMMARY:
N/A
BACKGROUND OR DETAILED INFORMATION:
N/A
FISCAL IMPACT:
N/A
SUGGESTED MOTION:
I MOVE to approve (approve with the following changes) the March 17, 2021 minutes.
Attachments
3-17-21 Draft Minutes
D R A F T
MINUTES
ORO VALLEY TOWN COUNCIL
REGULAR AND STUDY SESSION
MARCH 17, 2021
ONLINE ZOOM MEETING
REGULAR SESSION AT OR AFTER 6:00 PM
CALL TO ORDER
Mayor Winfield called the meeting to order at 6:00 p.m.
ROLL CALL
Present: Joseph C. Winfield, Mayor
Melanie Barrett, Vice-Mayor
Tim Bohen, Councilmember
Harry Greene, Councilmember
Joyce Jones-Ivey, Councilmember
Steve Solomon, Councilmember
Absent: Josh Nicolson, Councilmember
PLEDGE OF ALLEGIANCE
Mayor Winfield led the audience in the Pledge of Allegiance
UPCOMING MEETING ANNOUNCEMENTS
Town Clerk Mike Standish announced the upcoming Town meetings.
COUNCIL REPORTS
Councilmember Jones-Ivey recognized Kaitlyn Edmonds, an eighth grade student at Casas Christian
School, for her academic excellence and outstanding community service.
Mayor Winfield reported that Oro Valley Police Department Chief Kara Riley had been voted "Best
Community Leader" and Naranja Park was voted "Best Park" in the annual Best of the Northwest
publication.
Councilmember Greene reported that an art exhibit from the Southern Arizona Art Guild had been
displayed at the Community and Recreation Center.
3-17-21 Minutes, Town Council Regular and Study Session 1
TOWN MANAGER'S REPORT
Town Manager Mary Jacobs reported the following information:
Update regarding the OVSafesteps program
Status update regarding the former Vistoso Golf Course
Congratulated the Oro Valley Parks and Recreation team and Oro Valley Police Chief
Kara Riley on their Best of the Northwest recognition
ORDER OF BUSINESS
Mayor Winfield reviewed the order of business and stated that the order would stand as posted.
Mayor Winfield provided the guidelines for participation in the Town Council's Regular and Study
Session Zoom meeting.
INFORMATIONAL ITEMS
There were no informational items.
CALL TO AUDIENCE
Bob Hagen spoke regarding the proposed Westward Look annexation.
Oro Valley resident Craig MacKay spoke regarding the Vistoso Golf Course.
Oro Valley resident Roy Hoff spoke regarding the Vistoso Golf Course.
Oro Valley resident Rosa Dailey spoke regarding the Vistoso Golf Course.
Ranay Guifarro spoke regarding the proposed Westward Look annexation.
Oro Valley resident Patricia Sturmon spoke regarding the Vistoso Golf Course.
Mat Bailey spoke regarding the proposed Westward Look annexation.
Sue Bradley spoke regarding the proposed Westward Look annexation.
Oro Valley resident Ray Barth spoke regarding the Vistoso Golf Course.
Oro Valley resident Tom Stegman spoke regarding the Vistoso Golf Course.
Oro Valley resident Rich Molnar spoke regarding the Vistoso Golf Course.
Oro Valley resident Michael B. spoke regarding the Vistoso Golf Course.
Oro Valley resident Stephen Panebianco spoke regarding the Vistoso Golf Course.
Oro Valley resident Richard Beam spoke regarding the Vistoso Golf Course.
Oro Valley resident Teresa Marrow spoke regarding the Vistoso Golf Course.
Oro Valley resident Gayle Mateer spoke regarding the Vistoso Golf Course.
3-17-21 Minutes, Town Council Regular and Study Session 2
Jon Rowley spoke regarding the proposed Westward Look annexation.
Oro Valley resident Janice Friel spoke regarding the Vistoso Golf Course.
Oro Valley resident Nancy Olson spoke regarding the Vistoso Golf Course.
Oro Valley resident Bill Garner spoke regarding the Vistoso Golf Course.
Oro Valley resident Cindy Wicker spoke regarding the Vistoso Golf Course.
Oro Valley resident Gordon Parkhill spoke regarding the Vistoso Golf Course.
Jean Glattke spoke regarding the proposed Westward Look annexation.
Vice Mayor Barrett requested that staff follow-up on Mr. Jon Rowley's comments about the Westward
Look, closing the loop on making sure that privacy is agreed to shown on concept plans that Mr.
Rowley mentioned. Vice Mayor Barrett would also like to have the staff follow-up on any potential
need to update the traffic study as mentioned by Ms. Jean Glattke and Vice Mayor Barrett would like
to have the staff follow-up on Ms. Janice Friel's comments about looking into a burial site on the golf
course.
PRESENTATIONS
1.Proclamation - Education and Sharing Day, Oro Valley
Mayor Winfield proclaimed March 24, 2021 as Education and Sharing Day in Oro Valley.
Rabbi Zimmerman accepted the proclamation.
2.Presentation and possible discussion of the Town's FY 20/21 financial update through January 2021
Finance and Budget Administrator Wendy Gomez presented the Town's Fiscal Year 20/21 financial
update through January 2021 and included the following;
General Fund Revenues
General Fund Expenditures
General Fund
Highway Fund
Community Center Fund
Discussion ensued amongst Council and staff regarding the Town's Fiscal year 20/21 financial
update through January 2021.
CONSENT AGENDA
Vice Mayor Barrett requested that item (B) be removed from the Consent Agenda for discussion.
A.Minutes - February 18, February 19 and March 3, 2021
C. Approval to authorize expenditure of budgeted funds in PAG/RTA fund for the paving of Limewood
3-17-21 Minutes, Town Council Regular and Study Session 3
C. Approval to authorize expenditure of budgeted funds in PAG/RTA fund for the paving of Limewood
Drive region dirt roads for $125,000
Motion by Mayor Joseph C. Winfield, seconded by Vice-Mayor Melanie Barrett to approve items (A)
and (C) of the Consent agenda.
Vote: 6 - 0 Carried
B.Request for Final Plat approval of the Linda Vista Luxury Rentals and Office Space development,
located on the northwest corner of Oracle and Linda Vista Boulevard
Vice Mayor Barrett requested clarification on Consent Agenda item (B).
Planning Manager Bayer Vella provided clarification regarding item (B).
Motion by Vice-Mayor Melanie Barrett, seconded by Councilmember Tim Bohen to table item B until
further analysis was provided to Council.
Discussion ensued amongst Council and staff regarding the proposed final Plat approval of the Linda
Vista Luxury Rentals and Office Space development, located on the northwest corner of Oracle and
Linda Vista Boulevard.
Motion by Vice-Mayor Melanie Barrett, seconded by Councilmember Tim Bohen to amend the main
motion to Continue item B until further analysis was provided to Council.
Discussion continued amongst Council and staff regarding item B.
Vice Mayor Barrett withdrew her motion to Continue item B until further analysis was provided to
Council.
Motion by Vice-Mayor Melanie Barrett, seconded by Mayor Joseph C. Winfield to make a substitute
motion to approve item (B) of the Consent Agenda.
Discussion continued amongst Council and staff regarding item B.
Motion by Vice-Mayor Melanie Barrett, seconded by Mayor Joseph C. Winfield to approve Consent
Agenda item B.
Vote: 5 - 1 Carried
OPPOSED: Councilmember Tim Bohen
Mayor Winfield recessed the meeting at 8:19 p.m
Mayor Winfield reconvened the meeting at 8:31 p.m.
REGULAR AGENDA
1.DISCUSSION AND POSSIBLE ACTION REGARDING THE FY21/22 - FY22/23 TOWN COUNCIL
STRATEGIC LEADERSHIP PLAN
Motion by Mayor Joseph C. Winfield, seconded by Councilmember Harry Greene to continue the
3-17-21 Minutes, Town Council Regular and Study Session 4
Motion by Mayor Joseph C. Winfield, seconded by Councilmember Harry Greene to continue the
Fiscal Year 21/22 - Fiscal Year 22/23 Town Council Strategic Leadership Plan to the April 7th Council
meeting.
Vote: 6 - 0 Carried
Mayor Winfield encouraged Council to provide written comments to staff by March 31st.
2.DISCUSSION AND POSSIBLE ACTION REGARDING A POSSIBLE CENSURE OF
COUNCILMEMBER BOHEN FOR ALLEGED VIOLATION(S) OF TOWN PROCEDURES AND
POLICIES
Councilmember Solomon recognized that Councilmember Bohen had apologized to the Town
Manager prior to the meeting and therefore did not request further action on this item.
ADJOURNMENT OF THE REGULAR SESSION
Motion by Mayor Joseph C. Winfield, seconded by Vice-Mayor Melanie Barrett to adjourn the
Regular Session at 8:36 p.m.
No vote taken as Councilmember Bohen requested a Future Agenda Item.
FUTURE AGENDA ITEMS
Councilmember Bohen requested a future agenda item to consider dividing the 1/2 cent sales tax
currently used for the Oro Valley Community and Recreation Center to also include funding towards
the Public Safety Personnel Retirement System. No second received.
Councilmember Bohen withdrew his request for the future agenda item regarding the utilization of the
1/2 cent sales tax.
Motion by Mayor Joseph C. Winfield, seconded by Vice-Mayor Melanie Barrett to adjourn the
Regular Session at 8:38 p.m.
Vote: 6 - 0 Carried
CALL TO ORDER
Mayor Winfield called the Study Session to order at 8:39 p.m.
STUDY SESSION AGENDA
1.DISCUSSION REGARDING THE PARKS AND RECREATION MASTER PLAN UPDATE
Parks and Recreation Director Kristy Diaz Trahan, Mike Svetz of PRO's Consulting, Rebeca Field
with Kimly Horn and Klindt Breckinridge from the Breckinridge Group provided follow-up to Council's
written comments and questions.
Discussion ensued amongst Council and staff regarding Study Session item #1.
3-17-21 Minutes, Town Council Regular and Study Session 5
ADJOURNMENT
Mayor Winfield adjourned the meeting at 10:05 p.m.
_______________________________
Michelle Stine, MMC
Deputy Town Clerk
I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the regular and study
session of the Town of Oro Valley Council of Oro Valley, Arizona held on the 17th day of March 2021. I further
certify that the meeting was duly called and held and that a quorum was present.
___________________________
Michael Standish, CMC
Town Clerk
3-17-21 Minutes, Town Council Regular and Study Session 6
Town Council Regular Session 1.
Meeting Date:04/07/2021
Requested by: Amanda Jacobs Submitted By:Amanda Jacobs, Town Manager's
Office
Department:Town Manager's Office
SUBJECT:
DISCUSSION AND POSSIBLE ACTION REGARDING THE FY21/22 - FY22/23 TOWN COUNCIL STRATEGIC
LEADERSHIP PLAN (continued from March 17, 2021 Town Council meeting)
RECOMMENDATION:
Review and discuss the draft plan, and provide staff with any direction on changes/additions/deletions.
EXECUTIVE SUMMARY:
On February 18 and 19, 2021, Town Council held a Council Retreat with Facilitator Evelyn Casuga of the Arizona
Town Hall and Town leadership staff to begin planning for the FY21/22 - FY22/23 Strategic Leadership Plan. During
the Council Retreat, Town Council identified focus areas and priorities for the next two fiscal years which were
captured and subsequently incorporated into proposed goals and objectives as incorporated into the draft Strategic
Leadership Plan (attached).
Town Council will be provided the opportunity to share feedback on the draft Strategic Leadership Plan to ensure
the objectives outlined are aligned with Council's discussion during their two-day retreat. Feedback will be
incorporated into the final Strategic Leadership Plan, which is tentatively scheduled for Council consideration at the
Town Council's regular meeting on April 7, 2021.
BACKGROUND OR DETAILED INFORMATION:
The draft FY2021/23 Council Strategic Leadership Plan includes seven focus areas:
Economic Vitality1.
Culture and Recreation2.
Public Safety3.
Roads, Water and Town Infrastructure4.
Land Use and Design5.
Effective and Efficient Government6.
Financial Stability and Sustainability7.
Additionally, there are 48 proposed measurable objectives that will be achieved over the next two fiscal years.
FISCAL IMPACT:
N/A
SUGGESTED MOTION:
Town Council may choose to vote on specific direction for changes/modifications to the draft Strategic Leadership
Plan. No suggested motion is specified.
Attachments
Draft Council Strategic Plan
STRATEGIC LEADERSHIP PLAN
FY 21/22 - FY 22/23
ORO VALLEY TOWN COUNCIL
DRAFT
1
Oro Valley strives to be a well-managed community that provides all
residents with opportunities for quality living. Oro Valley will keep its
friendly, small-town, neighborly character, while increasing services,
employment and recreation. The Town’s lifestyle continues to be defined
by a strong sense of community, a high regard for public safety and an
extraordinary natural environment and scenic views.
INDEX
Overview 2
Economic Vitality 3
Culture and Recreation 5
Public Safety 6
Roads, Water
and Town Assets 7
Land Use and Design 8
Effective and Efficient
Government 9
Financial Stability and
Sustainability 11
OVERVIEW
ORO VALLEY’S VISION FOR THE FUTURE
The Council-adopted Strategic Leadership Plan for fiscal years 2021/22
through 2022/23 is the culmination of an extensive three-month process
involving Town Council and staff. Rooted deeply in the values and priorities
of the Your Voice, Our Future 10-year general plan, the two-year Strategic
Leadership Plan provides organizational direction in seven focus areas:
• Economic Vitality
• Culture and Recreation
• Public Safety
• Roads Water and Town Assets
• Land Use and Design
• Effective and Efficient
Government
• Financial Stability and
Sustainability
Within these focus areas are 16 goals and 48 objectives to guide everything
from budget decisions to municipal operations, providing the community with
a clear understanding of goals and expectations for the next two fiscal years.
YOUR VOICE, OUR FUTURE
2
OBJECTIVES
• Transition the OVSafeSteps initiative to ongoing business
support programs designed to help with post-pandemic
recovery.
• Review and propose changes to Town codes that assist local
businesses in adapting to emerging consumer buying habits.
OBJECTIVES
• Develop strategies to incentivize entrepreneurial
opportunities for start-up and home-based businesses,
business expansion opportunities and adaptive reuse of
vacant buildings.
• Evaluate the effectiveness of the 2019-2020 economic
development business attraction efforts and recommend any
improvements.
TOWN COUNCIL FOCUS AREA 1: ECONOMIC VITALITY
GOAL 1A:
Implement actions to support and assist
local businesses in navigating the current
and projected economic conditions.
GOAL 1B:
Implement strategies to attract, grow
and retain primary employers and
expand local job opportunities
3
4
OBJECTIVES
• Conduct an external retail market assessment by a qualified firm to
provide targeted data designed to assist the town in attracting and
retaining restaurant and retail establishments.
• Work with the owner of the Oro Valley Village Center to develop a
multi-faceted, mutually agreeable approach to attract and retain new
investment and an expanded customer base to that complex.
• Partner with the Greater Oro Valley Chamber of Commerce to convene an
annual business summit focused on increasing the Town and community’s
understanding of the challenges and opportunities associated with
operating a thriving business.
• Leverage the growing positive relationships with local businesses to
develop enhanced strategies that make Oro Valley more business friendly.
GOAL 1C:
Implement strategies to attract
and retain retail, restaurant
and hospitality investment and
expansion in commercial centers.
OBJECTIVES
• Partner with Visit Tucson to produce and begin implementation of a
robust Oro Valley-centric visitor attraction strategy.
• Partner with stakeholders to develop and implement actions and
strategies that highlight the Town’s flourishing arts and culture
opportunities to both visitors and residents.
GOAL 1D:
Identify strategies to entice area
residents and visitors to choose
Oro Valley as a premiere place to
dine, shop, play and stay.
5
GOAL 2A:
Invest in and maintain a high-
quality parks, recreation and
trail system that is accessible,
comprehensive, connected and
serves the community’s needs.
GOAL 2B:
Support recreational, cultural
and arts programs that provide
opportunities for residents to
connect with their community.
OBJECTIVES
• Implement the Town Council’s decision regarding the Pusch Ridge golf
course.
• Finalize a cost-effective plan and develop a corresponding
intergovernmental agreement with Amphitheater Unified School
District to utilize appropriate school facilities for community recreation
programs.
• Invest in the top priorities of the final Council-adopted Parks and
Recreation Master Plan.
OBJECTIVES
• Explore opportunities to create or expand multigenerational programs
and facilities.
• Establish a task force to review current senior recreation programming
and identify opportunities that will broaden and improve such
program access.
• Expand or reimagine programs that address community wellness
issues across all generations.
• Identify and implement expanded ways in which volunteers can help
effectively support and grow community programs and events.
TOWN COUNCIL FOCUS AREA 2: CULTURE AND RECREATION
6
OBJECTIVES
• Utilize data to enhance deployment strategies for High Visibility
Enforcement (HiVE) in high collision areas to address the increasing
volume of traffic and associated issues in and around Oro Valley
roadways.
• Develop an outreach and marketing campaign to effectively recruit
diverse and qualified officers, to include partnering with local
educational institutions.
• Develop and implement ways to expand drug free awareness
education and programming to area youth.
OBJECTIVES
• Work with local and regional partners to educate and address the
impacts mental health issues are having on public safety and the entire
community.
• Complete the Arizona Law Enforcement Accreditation Program
(ALEAP).
6
GOAL 3A:
Support strategies that continue
to ensure Oro Valley’s standing as
one of the safest communities in
Arizona.
GOAL 3B:
Support actions that maintain
and enhance the community’s
trust in the Oro Valley Police
Department.
TOWN COUNCIL FOCUS AREA 3: PUBLIC SAFETY
7
TOWN COUNCIL FOCUS AREA 4: ROADS, WATER AND TOWN ASSETS
OBJECTIVES
• Continue to invest in a pavement management program that results in an
Overall Condition Index (OCI) rating of 76 or better for all paved streets.
• Expand the Town’s community beautification program.
• Participate in and support the Regional Transportation Authority’s (RTA)
effort to facilitate voter reauthorization of RTA Next by ensuring Oro
Valley’s long-term transportation needs are fairly represented.
• Analyze the service and financial impacts of an RTA discontinuation
scenario and provide alternative options in addressing transit service
needs and future transportation infrastructure.
OBJECTIVES
• Implement a plan to further improve water infrastructure reliability,
maintenance and efficiency.
• Implement steps to ensure the Water Utility continues to supply water
to its current and future customers in an environmentally and financially
sustainable manner.
• Leverage technology to enhance customer support through improved
communication and expanded conservation opportunities.
OBJECTIVES
• Develop a comprehensive, organization-wide facility space plan that
maximizes efficiencies and reflects the best use of Town properties for
current and future needs.
• Determine the feasibility of expanding solar shade structures throughout
Town facilities and evaluate grant funding opportunities.
• Invest adequate resources to cost effectively maintain, repair and improve
aging Town facilities.
• Develop strategies to expand broadband services throughout the Town.
GOAL 4A:
Support investments and
strategies that result in a
quality transportation network
throughout the community.
GOAL 4B:
Deliver a safe, reliable and
sustainable water supply that
meets the long-term needs of the
community.
GOAL 4C:
Support investments and
strategies that ensure the effective
utilization of Town resources
in maintaining properties and
equipment.
OBJECTIVES
• Review and evaluate the effectiveness of the Environmentally Sensitive
Land Ordinance (ESLO) against the goals in which it was originally
established, identify any unintended consequences, and recommend
improvements to the Planning and Zoning Commission and Town Council.
• Conduct an assessment to determine the types of residential
opportunities necessary to successfully promote a thriving and diverse
economic base.
• Conduct an analysis of Town codes and ordinances to ensure the design
standards maintain the unique character of Oro Valley while also providing
for a variety of architectural concepts that integrate with and enhance the
community.
• Develop a Master Plan for the Rooney property that takes into
consideration opportunities for economic growth, retention of open space
and potential future municipal uses.
8
GOAL 5A:
Ensure quality development
with integrated architecture
and natural open space
while maintaining and
enhancing the character of the
community.
TOWN COUNCIL FOCUS AREA 5: LAND USE AND DESIGN
OBJECTIVES
• Foster a culture of continuous improvement through actions that
support, challenge and engage the employee at all levels.
• Continue to provide regular training to Town staff to enhance
process improvement proficiencies.
• Identify and implement ways in which Peak Performance teams
share their journey and successes within the organization.
OBJECTIVES
• Utilize creative methods to increase resident knowledge and
understanding of Town services, programs and facilities.
• Broaden the use of web-based tools and technologies to increase
community engagement and transparency.
• Evaluate the utilization of citizen volunteers on the Town’s boards
and commissions and make recommendations for improvements.
9
GOAL 6A:
Continue strengthening community
outreach, engagement and
transparency.
GOAL 6B:
Maintain and strengthen our culture
of continuous improvement to affect
an efficient and high-performing
organization.
TOWN COUNCIL FOCUS AREA 6: EFFECTIVE & EFFICIENT GOVERNMENT
OBJECTIVES
• Review and modify town policies to incorporate innovative and
effective workforce practices that remain viable post-pandemic.
• Ensure wellness and benefit programs are valuable, cost effective
and desired by employees and families to support wellness and
productivity.
• Conduct a comprehensive compensation evaluation to ensure the
Town remains competitive in recruiting and retaining employees.
GOAL 6C:
Attract and retain talented employees to
effectively carry out the Town’s mission.
10
OBJECTIVES
• Adopt a comprehensive plan for permanently addressing the Town’s
PSPRS unfunded actuarial accrued liability.
• Continue to pursue top priority annexations as identified in the Town
Council’s annexation policy.
• Develop a buildout analysis that projects short and long-term impacts to
Town service levels and provides potential mitigation options.
GOAL 7A:
Ensure the Town can financially
sustain expected levels of
service for current and future
residents.
TOWN COUNCIL FOCUS AREA 7: FINANCIAL STABILITY
AND SUSTAINABILITY
11
Town Council Regular Session 2.
Meeting Date:04/07/2021
Requested by: David Gephart Submitted By:David Gephart, Finance
Department:Finance
SUBJECT:
PRESENTATION, DISCUSSION AND POSSIBLE ACTION REGARDING PSPRS LIABILITY FUNDING OPTIONS
RECOMMENDATION:
Staff and the Budget and Finance Commission recommend the Town Council authorize the hybrid option to pay
PSPRS unfunded liability with a $10 million contribution from reserves and $17 million in pension obligation debt,
while continuing to pay current contribution rates on an annual basis.
EXECUTIVE SUMMARY:
The Town has engaged an independent financial consulting firm, CBIZ, to calculate and propose options for dealing
with its PSPRS unfunded liability. CBIZ was tasked, at a minimum, to examine the following options:
A scenario in which the Town continued paying only the Annual Required Contribution (ARC) "Baseline"1.
A scenario in which the Town continued paying the ARC plus an additional annual contribution "Current
Approach"
2.
A scenario in which the Town continued paying the ARC plus a significant up-front contribution from reserves3.
A scenario in which the Town continued paying the ARC plus taking out a significant debt issuance4.
A scenario in which any of the above options were combined5.
All of the above options, and more, were presented to the Town Budget and Finance Commission (BFC) in two
separate meetings. The BFC, after considering all options presented, made a unanimous recommendation to
Town Council to approve a hybrid option utilizing 1) a mixture of keeping the same annual contribution rate over the
next 15 years, 2) a $10 million one-time contribution from reserves, and 3) a $17 million debt issuance. This option
not only exceeds the Town PSPRS policy objectives of becoming 70% funded by 2024, 80% funded by 2028, 90%
funded by 2032, and 100% funded by 2036, but it also produced the lowest net present value of Town contributions
of any considered scenario. It also struck the right balance of taking advantage of current low interest rates for debt
issuances, mitigating market and actuarial risk, and committing the Town and future Councils to budget prioritization
of PSPRS funding through a debt issuance.
BACKGROUND OR DETAILED INFORMATION:
About two months ago, the Town engaged independent financial consultants to examine its PSPRS situation and
calculate and propose strategic options for permanently dealing with its unfunded liability. The Town selected a
national firm, CBIZ, because of their expertise in financial analysis and their independence from the bonding
community. In short, the Town desired an objective approach to solving the problem where the numbers from the
scenarios were not tainted by any sort of bias.
Utilizing the most current information available from PSPRS, CBIZ constructed a financial model forecasting future
liabilities and assets under various assumptions to determine which funding strategy was most advantageous to the
Town. Some key assumptions utilized in the calculations, which may vary significantly from PSPRS plan
assumptions, include the following:
Investment return on assets is assumed to be 5.3% (the plan assumes 7.3%)
Discount rate for net present value calculations is 2.75% (the plan assumes 7.3%)
Future employer pension contributions to the plan will remain at 41.65% for Police and 75.53% for CORP
Any debt issuance would be repaid over 20 years, with an estimated 2.75% interest rate
Initial options were then presented to the Town Budget and Finance Commission for consideration in a study
session on March 9, and then additional options.were presented at the regular Commission meeting on March 16.
The Budget and Finance Commission made a unanimous recommendation for Council approval for a hybrid
scenario encompassing ongoing annual contributions at the current ARC rate (currently 41.62% for Police Pension),
a one time $10 million payment from reserves, and a $17 million pension obligation debt issuance.
For review, the Town’s PSPRS unfunded liability has risen steadily over the past decade, increasing from $5.36
million in 2010 to $25.74 million in 2020, just for Police. Further, the funding ratio has declined over the same
period of time from 76.2% to 61.7%. The following chart shows the growth of the Town's Police PSPRS Assets,
Liabilities, Unfunded Liabilities over the past decade.
As a result, the Town’s employer rate which includes both a normal contribution component and a liability
amortization component, has significantly increased from 15.02% to 41.62% from 2010 to 2020. This is shown in
the chart below.
Clearly the Town's PSPRS assets are not keeping up with the growth in liabilities, causing employer contribution
rates and related Town contribution amounts to increase substantially. The reasons for this are varied, including
investment underperformance of the plan, incorrect actuarial assumptions, legislative and plan changes, etc.
Without action, forecasted contributions over the next 15 years will continue to increase to abate the increase in
liability and achieve the policy directive of 100% funding status. Unfortunately, this will produce significant and
negative impacts on future Town service levels.
Looking forward, there are a number of risks that must be considered for any proposed solution. These risks, first
and foremost, include market risk and actuarial risk, but also includes debt issuance risk and the impact a debt
issuance could have on the future bonding capacity of the Town. The Budget and Finance Commission also
highlighted the risk of future Town Councils not placing as great a budget priority on the PSPRS funding issue, and
the potential for the Town to backslide on this issue. The proposed solution attempts to strike a balanced approach
in mitigating these risks to hopefully place the Town in the best possible situation to meet its policy objectives and
hedge against potential future unfavorable conditions.
Lastly, Town staff has assembled a team of subject-matter experts who will be available to present and answer
questions. This team includes the Town's consultants from CBIZ, a representative from PSPRS, and
representatives from Stifel.
FISCAL IMPACT:
Estimated $99,532,000 over the next 15 years, with an estimated $14,549,000 for next fiscal year inclusive of debt
repayment
SUGGESTED MOTION:
I MOVE that the Town Council authorize staff to incorporate into the FY21/22 Recommended Budget and bring
forward any other required authorizations necessary to execute the recommended option of making a $10 million
payment from General Fund reserves and issuing Pension Obligation Bonds at or around $17 million to be
deposited into the Town's PSPRS and CORP pension plans, while continuing to pay the current employer rates to
PSPRS and CORP for next fiscal year.
Attachments
PSPRS Powerpoint Presentation
CBIZ Presentation
Projection of Contributions
2020 Actuarial Report
CORP Actuarial Report
Pension Funding Policy
TOWN OF ORO VALLEY
APRIL 2021
PSPRS
SERVING THOSE WHO SERVE OTHERS
•ARIZONA PENSION PLANS
•Arizona State Retirement System (ASRS)
•Multiple-employer cost-sharing, pooled plan
•State & Local employees not in another plan
•Public Safety Personnel Retirement System (PSPRS)
•Multiple employer agent plan for Tiers 1&2
•Tier 3 risk pool
•Law Enforcement Officers, Firefighter
•Correction Officers Retirement Plan (CORP)
•Multiple employer agent plan for Tiers 1&2
•Tier 3 AOC pooled plan, Detention DC plan
•Corrections, Detention and Probation Officers, Dispatchers
•Elected Officials Retirement Plan (EORP)
•Multiple-employer cost-sharing, pooled plan
•Tier 3 DC plan or ASRS option
•State and Local Elected Officials, Judges
•Phoenix & Tucson
•Single employer (each city) plan
•Participate in PSPRS for Police and Fire 2
3
UNDERSTANDING
PENSIONS
Past, Present & Future
UNINTENDED CONSEQUENCES
Past -How did we get here?
•PBI (Permanent Benefit Increase)
•50% of Investment Returns above 9%
•Actuarial losses below assumed rate 100% in trust
•Half of excess returns moved to different fund
•PBI fund resulted in increased liabilities
•Same $ increase to all members
•Disproportionate impact
•28 years of increases
•Actuarial assumptions did not reflect
•Investment impacts –reduced volatility resulted in reduced returns
4
What happened & What changed
Past
•PBI
•Actuarial Assumptions
•Investment Allocations
Present (recent changes)
•Prop 124 & 125
•Eliminate PBI
•Did not resolve unfunded liability
•New COLA
•2% cap
•New Actuaries
•Assumption changes
•Investment changes
•Staff
•Asset allocation
5
CHANGES IMPLEMENTED
PRESENT
6
•Implemented new General Ledger System July 1st
•Cash and Contribution Processing reviews
•Hired new auditors (CliftonLarsonAllen)
•Hired new leadership positions
•Deputy Administrator
•CFO, Controller, Internal Auditor
•Actuarial Modelers for each system
•IT Security upgrades
•Investment Opportunities and Asset Allocation Review
•PSPRS Board adopted actuarial changes to eliminate negative amortization
•Advisory Committee –ongoing stakeholder engagement
7
Defined Benefit
What the numbers are AND how the numbers are calculated. Basic example:
•Actual benefit, at retirement it will be paid
•Years of service x % multiplier
•Tier 1, 25 years of service = 62.5%
•62.5% x average compensation
•62.5% x $80,000 = $50,000 annual pension
•Estimated liability
•Estimated present value of the future benefit payments.
•Based on actuarial assumptions
8
Unfunded Liability
Assets
•Market value of assets are the assets as of TODAY!
Liabilities
•All future pension benefits earned as of today
•Considers all future pension payments to be paid
•Discounted to present value
•Discounted at the assumed rate of return on assets
•The difference is the over funded or unfunded liability.
9
Funded %
•Identifies the assets available to fund the liabilities (in today’s dollars)
•Goal: 100% funded
•Remember additional benefits will continue to accrue. (investment and actuarial risk)
Plan assets
Liabilities (present value)
10
Pension funding equation
C + I = B + E
Contributions Investment Benefits Expenses
Income
11
Unfunded liability -Debt
•PSPRS liabilities are not pooled (264 plans)
•Unfunded liabilities have been earned and are subject
to the pension clause and legal precedent.
•Reforms created Tier 3, DID NOT reduce closed Tier 1
and 2 unfunded pension liability (legacy costs)
•Unfunded liabilities are debt, liabilities are owed!
•The amount and timing of your contribution directly
impacts the funded status of your plan
•Every additional dollar contributed today, can earn investment
returns
•Every additional dollar not paid is a lost opportunity to earn
investment returns
12
Where does the money come from?PSPRS system wide
Net
Investment
Income
45%
Employer
Contributions
38%
Employee
Contributions
17%
48.2% funded as of June 30, 2020
(minus health insurance subsidy)
Three consecutive years of
improvement
Status varies per employer
Public Safety
Funded Status
(Aggregate)
61.90%
58.60%57.10%
50.40%50.30%
47.30%46.60%47.00%47.70%48.20%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
PSPRS
PSPRS Funded Ratio
165 employers (73%) have funded
status of at least 50%
61 employers fall below 50% funded
(27%)
Compares to 163 / 63 from 2018
valuation (72% / 28%)
Public Safety
Funded Status
Employer Ranges
Oro Valley Police 61.7%
52.47% aggregate employer
contribution rate
Stabilized but with slight increases
for three years
Status varies per employer
Public Safety
Contribution Rate
History
Contribution rate changes reflect
Tiers 1, 2 only
Tier 3 maintains 50/50 member-
employer split
Public Safety
Contribution Rate
Ranges
Oro Valley Police 43.57%
17
Oro Valley Police
Actual numbers from the Police plan, the Dispatch plan would use the same math
41,498,361
25,742,165
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
2020
Oro Valley Police Dept.
18
Total PV
Liabilities
Assets
Unfunded
Liabilities
19
Oro Valley Police Dept.
•Investment returns (expected at 7.3%) are earned on the $41.5 million in assets
•If this plan were 100% funded, investment returns would be earned on $67.3 million in assets
•Current payment on unfunded liabilities makes up for this lost opportunity.
•This payment will grow at 3.5% next year.
•New actuarial assumptions will impact the unfunded portion of the contributions.
•Regardless of the funded status, the total $67.3 million liabilities will be discounted one less year in the FY 2021 valuation
AAL
2020 67,240,526
2021 72,149,084
Change 4,908,558
Assets
Begin FY21 41,498,361
Investments 3,029,380
Contributions 3,566,131
Ending FY21 48,093,872
20
Oro Valley Police Dept.
•Investments + contributions (ARC) = $6,595,511
•Increased liabilities•Increased assets
•Present value of liabilities discounted one less year
25,742,165
24,055,212
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
2020 2021
AVA Inv Contributions UAAL
AAL
2020 67,240,526
2021 72,149,084
Change 4,908,558 21
Oro Valley Police Dept.
Total Liabilities
22
Oro Valley Police Dept.FY2021
Employee
8%
ER Normal Cost
14%
UAL contr
31%
Investments
47%
Employee ER Normal Cost UAL contr Investments
23
Oro Valley Police Dept.if 100% funded
Employee
8%
Normal Cost
14%
Investments
78%
Employee Normal Cost UAL contr Investments
24
C + I = B + E
Contributions Investment Benefits Expenses
Income
•Investment returns will not solve large unfunded liabilities.
•Additional contributions leverage investment opportunities.
•Over a 17 year amortization cycle, $1 million will save taxpayers an estimated $1.8 million, and the original $1 million will still be in the fund.
•Continued Diligence (Investment & Actuarial Risk)
25
QUESTIONS,
COMMENTS, AND
DISCUSSION
Town of Oro Valley
Pension Funding Alternatives
APRIL 7, 2021
Table of Contents
1.Objectives
2.Key Assumptions
3.Risk Factors
4.Recommendation
5.Other Alternatives Analyzed
2 CBIZ, Inc.
Objectives
1.Achieve 70% funding of unfunded pension liability by
2024 and 100% by 2036
2.Minimize the net present value of contributions
3.Minimize the burden of future annual additional
contributions and cash flow on the Town Council
3 CBIZ, Inc.
Key Assumptions
1.Current minimum required contribution (41.65% PSPRS,
75.53% CORP) continues every year for all alternatives
2.Debt issuance all in cost is 2.75%
3.Earnings rate for investable funds is 5.3%
4.Earnings rate for proceeds of debt issuance is 5.3% and also
stressed at 3.3% and 7.3%
5.Debt term is 20 years with principal fully amortizing
6.Net present values are calculated only for additional
contributions (annual or significant) less any debt service
4 CBIZ, Inc.
Risk Factors
1.Plan participant growth
2.Actuarial risk
3.Investment returns
4.Debt interest rate
5.Form of investment for debt proceeds –direct
investment in Plan versus Section 115 Trust
6.Future Oro Valley financial position
5 CBIZ, Inc.
Recommendation -Hybrid of Significant
Contribution of $10 Million and Debt Issuance of
$17 Million
CBIZ, Inc.6
▪Assumes minimum required contribution every year, one -time significant contribution of $10
million and debt issuance of $17 million
▪Results in unfunded liability in 2036:
▪100% at 5.3% earnings rate
▪146% at 7.3% earnings rate
▪73% at 3.3% earnings rate
▪Net Present Value of Contributions (NPV) is $15.9 million
▪Pros
▪Reduces cash outflow in later years
▪Meets Pension Policy funding guidelines
▪Lowest NPV
▪Minimizes level of debt issuance
▪Cons
▪High cash outflow in early years
Other Alternatives Analyzed
Alternative NPV Funding Goals Met
$24 Million Debt Issuance $15.9 million Yes
Hybrid of Significant Contribution of $5 Million, $500,000 $18.6 million Yes
Annual Add’l Contribution and $17 Million Debt Issuance
Baseline Plus Significant Contribution of $15 Million and $24.4 million Yes
$1 Million Annual Additional Contribution
Baseline Plus Significant Contribution of $10 Million and $24.8 million Yes
$1.5 Million Annual Additional Contribution
Baseline Plus $2.5 Million Annual Additional Contribution $25.4 million Yes
$40 Million Debt Issuance $26.5 million Yes
Baseline Minimum Contribution N/A No
7 CBIZ, Inc.
ARIZONA PUBLIC SAFETY PERSONNEL
RETIREMENT SYSTEM
ORO VALLEY POLICE DEPT. (122)
ACTUARIAL VALUATION
AS OF JUNE 30, 2020
CONTRIBUTIONS APPLICABLE TO THE
PLAN/FISCAL YEAR ENDING JUNE 30, 2022
VIA E-MAIL
13420 Parker Commons Boulevard, Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com
December 2020
Board of Trustees
Arizona Public Safety Personnel Retirement System
Phoenix, AZ
Re: Actuarial Valuation Report as of June 30, 2020 for Oro Valley Police Dept. (122)
Dear Members of the Board:
We are pleased to present to the Board this report of the annual actuarial valuation of the Arizona Public Safety
Personnel Retirement System (PSPRS). The valuation was performed to determine whether the assets and
contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding
requirements for the applicable plan year.
This report was prepared at the request of the Board and is intended for use by PSPRS and those designated or
approved by the Board. It documents the valuation of the consolidated plan and provides summary information
for PSPRS participating employers. This report may be provided to parties other than PSPRS only in its entirety
and only with the permission of the Board. Foster & Foster is not responsible for the unauthorized use of this
report.
The valuation has been conducted in accordance with generally accepted actuarial principles and practices,
including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflects
laws and regulations issued to date pursuant to the provisions of Title 38, Chapter 5, Article 4 of the Arizona
Revised Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in
this valuation, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan
experience. Future actuarial measurements may differ significantly from the current measurements presented
in this report for a variety of reasons including changes in applicable laws, changes in plan provisions, changes
in assumptions, or plan experience differing from expectations. Due to the limited scope of the valuation, we
did not perform an analysis of the potential range of such future measurements.
The computed contribution rates shown in the “Contribution Results” section should be considered minimum
contribution rates that comply with the Board’s funding policy and Arizona Statutes. Users of this report should
be aware that contributions made at that rate do not guarantee benefit security. Given the importance of benefit
security to any retirement system, we suggest that contributions to the System in excess of those presented in
this report be considered.
The funding percentages and unfunded accrued liability as measured based on the actuarial value of assets will
differ from similar measures based on the market value of assets. These measures, as provided, are appropriate
for determining the adequacy of future contributions, but may not be appropriate for the purpose of settling a
portion or all of the Plan’s liabilities.
Board of Trustees
Arizona Public Safety Personnel Retirement System | Page 2
13420 Parker Commons Boulevard, Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com
In conducting the valuation, we have relied on personnel, plan design, and asset information supplied by PSPRS
through June 30, 2020 and the actuarial assumptions and methods described in the Actuarial Assumptions
section of this report. While we cannot verify the accuracy of all this information, the supplied information
was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the
substantial accuracy of the information and believe that it has produced appropriate results. This information,
along with any adjustments or modifications, is summarized in various sections of this report.
This valuation assumes the continuing ability of the participating employers to make the contributions necessary
to fund this plan. A determination regarding whether or not the participating employers are actually able to do
so is outside our scope of expertise. Consequently, we did not perform such an analysis.
The undersigned are familiar with the immediate and long-term aspects of pension valuations and meet the
Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions
contained herein. All sections of this report are considered an integral part of the actuarial opinions.
To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct
financial interest or indirect material interest in the Arizona Public Safety Personnel Retirement System, nor
does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the Arizona Public Safety
Personnel Retirement System. Thus, there is no relationship existing that might affect our capacity to prepare
and certify this actuarial report.
If there are any questions, concerns, or comments about any of the items contained in this report, please contact
us at 239-433-5500.
Respectfully Submitted,
Foster & Foster, Inc.
By: ________________________________
Bradley R. Heinrichs, FSA, EA, MAAA
By: ________________________________
Jason L. Franken, FSA, EA, MAAA
By: ________________________________
Paul M. Baugher, FSA, EA, MAAA
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122)
TABLE OF CONTENTS
I. Summary of Report ..........................................................................................................................................1
II. Contribution Results ........................................................................................................................................4
III. Liability Support ............................................................................................................................................9
IV. Asset Support ...............................................................................................................................................13
V. Member Statistics ..........................................................................................................................................18
VI. Actuarial Assumptions and Methods ...........................................................................................................20
VII. Discussion of Risk ......................................................................................................................................25
VIII. Summary of Current Plan..........................................................................................................................28
IX. Actuarial Funding Policy .............................................................................................................................34
X. Glossary ........................................................................................................................................................36
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 1
I. S UMMARY OF REPORT
The regular annual actuarial valuation of the Arizona Public Safety Personnel Retirement System for the Oro
Valley Police Dept., performed as of June 30, 2020, has been completed and the results are presented in this
Report. The purpose of this valuation is to:
Compute the liabilities associated with benefits likely to be paid on behalf of current retired and active
members. This information is contained in the section entitled “Liability Support.”
Compare accumulated assets with the liabilities to assess the funded condition. This information is
contained in the section entitled “Liability Support.”
Compute the employers’ recommended contribution rates for the Fiscal Year beginning July 1, 2021. This
information is contained in the section entitled “Contribution Results.”
1. Key Valuation Results
The funded status as of June 30, 2020 and the employer contribution amounts applicable to the plan/fiscal
year ending June 30, 2022 are as follows:
Tier 1 & Tier 2 Members Tier 3 Members *
Pension Health Total Pension Health Total
Employer Contribution Rate 43.57% 0.00% 43.57% 9.05% 0.13% 9.18%
Funded Status 61.7% 132.7% 62.9% 101.4% 203.9% 103.0%
2. Comparison of Key Results to Prior Year
The chart below compares the results from this valuation with the results of the prior year’s valuation (as
of June 30, 2019):
Contribution Rate
Tier 1 & Tier 2 Members Tier 3 Members *
Valuation Date Pension Health Total Pension Health Total
June 30, 2019 41.62% 0.03% 41.65% 9.21% 0.14% 9.35%
June 30, 2020 43.57% 0.00% 43.57% 9.05% 0.13% 9.18%
Funded Status
Tier 1 & Tier 2 Members Tier 3 Members
Valuation Date Pension Health Total Pension Health Total
June 30, 2019 60.8% 146.2% 62.0% 116.9% 205.3% 118.4%
June 30, 2020 61.7% 132.7% 62.9% 101.4% 203.9% 103.0%
* The Tier 3 rates shown are the calculated rates as of the valuation date and do not reflect any Legacy costs that the employer
must also contribute.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 2
3. Reasons for Change
Changes in the results from the prior year’s valuation can be illustrated in the following tables along with
high-level explanations for the entire System below:
Contribution Rate
Tier 1 & Tier 2 Tier 3 Members
Pension Health Pension Health
Contribution Rate Last Valuation 41.62% 0.03% 9.21% 0.14%
Asset Experience 1.00% 0.04% 0.02% 0.00%
Payroll Base (0.49%) 0.01% 0.02% (0.02%)
Liability Experience (0.67%) 0.00% (0.15%) 0.00%
Assumption/Method Change 0.67% (0.07%) 0.00% 0.00%
Other 1.44% (0.01%) (0.05%) 0.01%
Contribution Rate This Valuation 43.57% 0.00% 9.05% 0.13%
Funded Status
Tier 1 & Tier 2 Tier 3 Members
Pension Health Pension Health
Funded Status Last Valuation 60.8% 146.2% 116.9% 205.3%
Asset Experience (1.1%) (2.6%) (0.6%) (1.2%)
Liability Experience 0.4% 0.3% 4.1% 5.4%
Assumption/Method Change 0.0% 0.0% 0.0% 0.0%
Other 1.6% (11.2%) (19.0%) (5.6%)
Funded Status This Valuation 61.7% 132.7% 101.4% 203.9%
Assets Experience – Asset gains and losses (relative to the assumed earnings rate) are smoothed over seven
years for Tiers 1 and 2 and over five years for Tier 3. The return on the market value of assets for the year
ending June 30, 2020 was 1.2% for Tiers 1 and 2 and 1.7% for Tier 3. On a smoothed, actuarial value of
assets basis, however, the average return was 5.4% for Tiers 1 and 2 and 6.1% for Tier 3. This fell short of
the 2019 assumed earnings rate for Tiers 1 and 2 of 7.3% and for Tier 3 of 7.0%.
Liability Experience – Experience overall was unfavorable, driven by less than expected inactive mortality
and turnover.
Payroll Base – Under the current amortization policy for Tiers 1 and 2, the contribution rate is developed
as a level percentage of payroll. The payroll is expected to increase each year in line with the growth
assumption (currently 3.50%). To the extent that actual payroll is lower/greater than expected, the
contribution rate will increase/decrease as a result.
Assumption / Method Change – The amortization method for Tiers 1 and 2 was updated to use a layered
approach. New bases will be amortized on a Level Dollar basis while the 2019 base will continue to be
amortized on a Level Percentage of Payroll basis.
Other – This is the combination of all other factors that could impact liabilities year-over-year, with the
primary sources being changes resulting from an updated understanding of some data components provided
by staff and changes in member data. Note that Tier 3 experience will stabilize as the group matures.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 3
4. Looking Ahead
The continuing effect of prior asset losses was dampened by the asset smoothing reflected in the actuarial
value of assets. There remain unrecognized investment losses that will, in the absence of other gains, put
upward pressure on the contribution rate next year.
If the June 30, 2020 pension valuation results were based on the market value of assets instead of the
actuarial value of assets, the pension funded percentage for Tiers 1 and 2 would be 57.3% (instead of 61.7%)
and the pension employer contribution requirement would be 47.55% of payroll (instead of 43.57%).
5. Conclusion
The funded status for Tiers 1 and 2 will continue to improve if assumptions are met and contributions at
least equal to the rates determined for each employer are made to the fund. The recent adoption of a layered
amortization approach along with a plan to systematically lower the payroll growth assumption was an
excellent step to improve funding and ensure the Plan is on a viable path.
The funded status for Tier 3 will stabilize as the population continues to grow, as contributions appear
sufficient to keep the liabilities fully funded.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 4
II. CONTRIBUTION RESULTS
Contribution Requirements
Development of Employer Contributions - Tiers 1 & 2 Members
Valuation Date June 30, 2020 June 30, 2019
Applicable to Fiscal Year Ending 2022 2021
Rate Dollar Rate Dollar
Pension
Normal Cost
Total Normal Cost 20.84% $ 1,407,038 21.60% $ 1,418,920
Employee Cost (7.65%) (516,499) (7.65%) (502,556)
Employer (Net) Normal Cost 13.19% 890,539 13.95% 916,364
Amortization of Unfunded Liability 30.38% 2,051,143 27.67% 1,947,211
Total Employer Cost (Pension) 43.57% 2,941,682 41.62% 2,863,575
Health
Normal Cost 0.45% 30,382 0.49% 32,433
Amortization of Unfunded Liability (0.45%) (30,382) (0.46%) (32,371)
Total Employer Cost (Health) 0.00% 0 0.03% 62
Total Employer Cost (Pension + Health) 43.57% 2,941,682 41.65% 2,863,637
Total Minimum Contribution Requirement (if applicable) 0.00% 0.00%
Alternate Contribution Rate (ACR) * 30.38% 27.67%
Underlying Payroll (as of valuation date) 6,523,308 6,569,363
* The Alternate Contribution Rate is the sum of the positive amortization rates for Tiers 1 & 2 Pension and Health and is charged when
retirees return to active status.
The results above are shown both prior to and after the application of the statutory minimum contribution
requirement of 8% of payroll (5% of payroll if the actual employer contribution is less than 5% for the
2006/2007 Fiscal Year) and are based on the current amortization schedule approved by the Board of Trustees
for your individual plan (see "Actuarial Assumptions and Methods").
A.R.S. 38-843, subsection I allows for the employer to request a one-time increase in the amortization period
up to a maximum of 30 years. The costs below are provided to assist with that decision, where needed. If the
current approved amortization period is greater than those below, that request has already been made for this
plan and the following is provided to facilitate earlier payoff, if desired.
Rate Dollar
Total Pension Employer Cost (25-year amortization) 35.61% 2,404,252
Total Pension Employer Cost (30-year amortization) 33.34% 2,250,873
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 5
Development of Employer Contributions – Tier 3 Members
Valuation Date June 30, 2020 June 30, 2019
Applicable to Fiscal Year Ending 2022 2021
Defined Benefit (DB) Retirement Plan
Rate Dollar Rate Dollar
Pension
Total Normal Cost 18.10% $ 95,943 18.41% $ 29,478
Amortization of Unfunded Liability 0.00% 0 0.00% 0
Total Pension Cost 18.10% 95,943 18.41% 29,478
Employee (EE) Pension Cost 9.05% 47,972 9.21% 14,739
Employer (ER) Pension Cost 9.05% 47,972 9.21% 14,739
Health
Total Normal Cost 0.25% 1,325 0.28% 448
Amortization of Unfunded Liability 0.00% 0 0.00% 0
Total Health Cost 0.25% 1,325 0.28% 448
Employee (EE) Health Cost 0.13% 663 0.14% 224
Employer (ER) Health Cost 0.13% 663 0.14% 224
Total
Total Calculated Tier 3 Required EE/ER Individual Cost 9.18% 48,635 9.35% 14,963
Board Approved Tier 3 Required EE/ER Individual Cost 1 9.94% 52,689 9.94% 15,916
ER Legacy Cost of Tiers 1 & 2 Amort of Unfunded
Liabilities 2 30.38% 161,036 27.67% 47,460
Total Calculated Tier 3 Required ER Defined Benefit Cost 39.56% 209,671 37.02% 62,423
Total Board Approved Tier 3 Required
ER Defined Benefit Cost 40.32% 213,725 37.61% 63,376
Underlying Payroll (as of valuation date) 512,148 160,118
1 The Board decided to keep Tier 3 rates level (as calculated with the June 30, 2019 valuation) for the fiscal year ending June 30, 2022.
2 Pursuant to ARS § 38-843(B), the amortization of positive unfunded liabilities for Tiers 1 & 2 shall be applied to all Tier 3 payroll on a
level percent basis. However, while it is statutorily required to present the rates in this manner, these are the minimums where alternate
methods for paying down that unfunded liability is at the discretion of each employer. Further, to understand the effects of reform in relation
to Tier 3, compare the total rate of Tier 3 before application of those legacy costs.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 6
Development of Employer Contributions – Tier 3 Members
Valuation Date June 30, 2020 June 30, 2019
Applicable to Fiscal Year Ending 2022 2021
Defined Contribution (DC) Retirement Plan
Rate Dollar Rate Dollar
Tier 2 & 3 DB / Non-Social Security
Employee Cost 3.00% 3.00%
Employer Cost 1 3.00% 3.00%
Tier 3 DC Only
Employee Cost 9.00% $ 4,710 9.00% $ 0
Employee Disability Program Cost 0.88% 461 1.41% 0
Total Employee Cost 9.88% 5,171 10.41% 0
Employer Cost 9.00% 4,710 9.00% 0
Employer Disability Program Cost 0.88% 461 1.41% 0
Total Employer Cost (before Legacy) 9.88% 5,171 10.41% 0
ER Legacy Cost of Tiers 1 & 2 Amort of Unfunded
Liabilities 2 30.38% 15,899 27.67% 0
Total Employer Cost 40.26% 21,070 38.08% 0
Underlying Payroll (as of valuation date) 50,563 0
1 Employer rate is 4% for Tier 2 members for a period of time depending on the individual's membership date.
2 Pursuant to ARS § 38-843(B), the amortization of positive unfunded liabilities for Tiers 1 & 2 shall be applied to all Tier 3 payroll on
a level percent basis. However, while it is statutorily required to present the rates in this manner, these are the minimums where
alternate methods for paying down that unfunded liability is at the discretion of each employer. Further, to understand the effects of
reform in relation to Tier 3, compare the total rate of Tier 3 before application of those legacy costs.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 7
Contribution Rate Summary
Tier 1 Tier 2 Tier 3
Membership Date On or After 7/1/1968 7/20/2011 1/1/2012 7/1/2017
Participates in Social Security N/A N/A Yes No Yes No N/A
Available Retirement Plan ¹ DB Only DB Only DB Only Hybrid DB Only Hybrid DC Only
Employee Contribution Rate
PSPRS DB Rate 7.65% 11.65% 11.65% 11.65% 9.94% 9.94%
PSPRS DC Rate 3.00% 3.00% 9.00%
PSPDCRP Disability Program Rate 0.88%
Total EE Contribution Rate 7.65% 11.65% 11.65% 14.65% 9.94% 12.94% 9.88%
Employer Contribution Rate
PSPRS DB Normal Cost 13.64% 13.64% 13.64% 13.64% 9.94% 9.94%
PSPRS DB Tier 1 & 2 Legacy Cost ² 29.93% 29.93% 29.93% 29.93% 30.38% 30.38% 30.38%
PSPRS DC Rate ³ 4.00% 3.00% 9.00%
PSPDCRP Disability Program Rate 0.88%
Total ER Contribution Rate 43.57% 43.57% 43.57% 47.57% 40.32% 43.32% 40.26%
¹ Employers that pay into Social Security on behalf of their members do not participate in the Hybrid Plan.
² Per statute (ARS § 38-843(B)), any positive unfunded liability for Tiers 1 and 2 is to be applied to all Tier 3 (DB and DC) payrolls.
³ The 4.00% employer match for Tier 2 Hybrid members is for a short period of time depending on the membership date of the employee
at which point the rate will change to 3.00% (ARS § 38-868(C)).
Exhibit summarizes employee and employer contributions based on Statute and the results of June 30, 2020
actuarial valuation. Pension and health components are combined, where applicable.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 8
Impact of Additional Contributions
Additional Contribution (000s)
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000
Impact On
Funded Status 06/30/2020 61.7% 63.2% 64.7% 66.2% 67.7% 69.2% 70.6% 72.1% 73.6% 75.1% 76.6%
FYE 2022 Contribution Rate 43.57% 42.20% 40.83% 39.45% 38.08% 36.71% 35.34% 33.97% 32.59% 31.22% 29.85%
Table shows the hypothetical change in the funded status and contribution rate from the June 30, 2020 actuarial valuation results for Tiers 1 & 2 if
an additional contribution of the amount shown had been made to the Fund on June 30, 2020. This illustration can help estimate the impact of
contributing additional monies to the fund in the future.
Historical Summary of Employer Rates
Pension Health
Valuation Date
June 30
Fiscal Year Ending
June 30 Normal Cost Unfunded
Amortization Total Normal Cost Unfunded
Amortization Total
TIERS 1 & 2 2018 2020 14.15% 24.11% 38.26% 0.33% 0.00% 0.33%
2019 2021 13.95% 27.67% 41.62% 0.49% (0.46%) 0.03%
2020 2022 13.19% 30.38% 43.57% 0.45% (0.45%) 0.00%
TIER 3 1 , 2 2018 2020 9.68% 0.00% 9.68% 0.26% 0.00% 0.26%
2019 2021 9.68% 0.00% 9.68% 0.26% 0.00% 0.26%
2020 2 2022 9.05% 0.00% 9.05% 0.13% 0.00% 0.13%
2020 2022 9.68% 0.00% 9.68% 0.26% 0.00% 0.26%
1 Rates shown are Board approved EE/ER rates, unless otherwise noted. Does not reflect Legacy costs that the employer must also contribute.
2 Rates shown are calculated EE/ER rates
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 9
III. LIABILITY SUPPORT
Liabilities and Funded Ratios by Benefit - Tiers 1 & 2
June 30, 2020 June 30, 2019
Pension
Actuarial Present Value of Benefits
Retirees and Beneficiaries $ 27,357,215 $ 25,296,073
DROP Members 10,147,515 8,661,914
Vested Members 483,193 525,750
Active Members 40,105,448 39,375,074
Total Actuarial Present Value of Benefits 78,093,371 73,858,811
Actuarial Accrued Liability (AAL)
All Inactive Members 37,987,923 34,483,737
Active Members 29,252,603 27,795,116
Total Actuarial Accrued Liability 67,240,526 62,278,853
Actuarial Value of Assets (AVA) 41,498,361 37,842,906
Unfunded Actuarial Accrued Liability
Gross Unfunded Actuarial Accrued Liability 25,742,165 24,435,947
Stabilization Reserve 0 0
Net Unfunded Actuarial Accrued Liability 25,742,165 24,435,947
Funded Ratio (AVA / AAL) 61.7% 60.8%
Health
Present Value of Benefits
Retirees and Beneficiaries $ 366,193 $ 231,511
DROP Members 144,755 129,090
Active Members 800,984 828,102
Total Present Value of Benefits 1,311,932 1,188,703
Actuarial Accrued Liability (AAL)
All Inactive Members 510,948 360,601
Active Members 586,446 585,833
Total Actuarial Accrued Liability 1,097,394 946,434
Actuarial Value of Assets (AVA) 1,456,224 1,383,468
Unfunded Actuarial Accrued Liability (358,830) (437,034)
Funded Ratio (AVA / AAL) 132.7% 146.2%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 10
Liabilities and Funded Ratios by Benefit - Tier 3
June 30, 2020 June 30, 2019
Pension
Actuarial Present Value of Benefits
Retirees and Beneficiaries $ 429,363 $ 0
Vested Members 743,741 203,244
Active Members 203,486,437 120,826,663
Total Actuarial Present Value of Benefits 204,659,541 121,029,907
Actuarial Accrued Liability (AAL)
All Inactive Members 1,173,104 203,244
Active Members 22,066,495 7,753,481
Total Actuarial Accrued Liability 23,239,599 7,956,725
Actuarial Value of Assets (AVA) 23,570,444 9,305,220
Unfunded Actuarial Accrued Liability (330,845) (1,348,495)
Funded Ratio (AVA / AAL) 101.4% 116.9%
Health
Present Value of Benefits
Retirees and Beneficiaries 0 0
Active Members 2,785,857 1,814,082
Total Present Value of Benefits 2,785,857 1,814,082
Actuarial Accrued Liability (AAL)
All Inactive Members 0 0
Active Members 353,563 136,597
Total Actuarial Accrued Liability 353,563 136,597
Actuarial Value of Assets (AVA) 721,079 280,404
Unfunded Actuarial Accrued Liability (367,516) (143,807)
Funded Ratio (AVA / AAL) 203.9% 205.3%
The liabilities shown on this page are the liabilities for all Tier 3 members grouped together in the Risk
Sharing group. These liabilities are NOT the liabilities for Oro Valley Police Dept. Tier 3 members.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 11
Derivation of Experience (Gain)/Loss
Tiers 1 & 2 Tier 3
Pension Health Pension Health
(1) Unfunded Actuarial Accrued Liability as of June 30, 2019 24,435,947 (437,034) (1,348,495) (143,807)
(2) Normal Cost Developed in Last Valuation 916,364 32,433 4,806,265 73,059
(3) Actual Contributions 3,072,830 21,330 6,660,557 411,565
(4) Expected Interest On (1), (2), and (3) 1,740,536 (30,301) 13,589 (19,922)
(5) Expected Unfunded Actuarial Accrued Liability as of June 30, 2020
(1)+(2)-(3)+(4) 24,020,017 (456,232) (3,189,198) (502,235)
(6) Changes to UAAL Due to Assumptions, Methods and Benefits 0 0 0 0
(7) Change to UAAL Due to Actuarial (Gain)/Loss 1,722,148 97,402 2,858,353 134,719
(8) Unfunded Actuarial Accrued Liability as of June 30, 2020 25,742,165 (358,830) (330,845) (367,516)
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 12
Amortization of Unfunded Liabilities - Tiers 1 & 2
Date Established Outstanding Balance Years Remaining Amortization Rate
Pension 06/30/2019 24,667,732 16 28.14%
06/30/2020 1,578,165 16 2.24%
Total 26,245,897 30.38%
Health 06/30/2019 0 19 0.00%
06/30/2020 (358,830) 20 (0.46%)
Total (358,830) (0.46%)
Amortization of Unfunded Liabilities - Tier 3
Date Established Outstanding Balance Years Remaining Amortization Rate *
Pension 06/30/2018 166,947 8 0.03%
06/30/2019 (1,419,864) 9 (0.24%)
06/30/2020 922,072 10 0.15%
Total (330,845) 0.00%
Health 06/30/2018 (3,540) 8 0.00%
06/30/2019 (129,816) 9 (0.02%)
06/30/2020 (234,160) 10 (0.04%)
Total (367,516) 0.00%
* By Statute, negative amortization rates are not subtracted in Tier 3 rate calculations.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 13
IV. ASSET SUPPORT
Statement of Changes in Fiduciary Net Position for Year Ended June 30, 2020
Market Value Basis
Tiers 1 & 2 Tier 3
Pension Health Pension Health
Additions
Contributions
Member Contributions $ 128,443,154 $ 0 $ 14,386,911 $ 0
Employer Contributions 938,799,348 0 14,392,453 0
Health Insurance Contributions 0 4,741,938 0 909,053
Total Contributions 1,067,242,502 4,741,938 28,779,364 909,053
Investment Income
Net Increase in Fair Value 58,711,963 1,945,052 350,525 8,778
Interest and Dividends 66,905,282 2,216,486 399,442 10,003
Other Income 26,056,951 1,568,972 155,567 7,081
Less Investment Expenses (49,802,841) (1,555,022) (297,336) (7,018)
Net Investment Income 101,871,355 4,175,488 608,198 18,844
Transfers In 379,476 0 155,830 0
Total Additions 1,169,493,333 8,917,426 29,543,392 927,897
Deductions
Distributions to Members
Benefit Payments 900,036,400 0 0 0
Health Insurance Subsidy 0 17,050,706 0 0
Refund of Contributions 14,184,072 0 157,299 0
Total Distributions 914,220,472 17,050,706 157,299 0
Administrative Expenses 8,356,791 339,564 49,892 1,532
Transfers Out 367,881 0 0 0
Other 0 0 0 0
Total Deductions 922,945,144 17,390,270 207,191 1,532
Net Increase / (Decrease) 246,548,189 (8,472,844) 29,336,201 926,365
Net Position Held in Trust
Prior Valuation 7,810,990,750 336,551,716 18,922,750 554,433
Beginning of the Year Adjustment (163) 163 163 (163)
End of the Year 8,057,538,776 328,079,035 48,259,114 1,480,635
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 14
Development of Pension Actuarial Value of Assets - Tiers 1 & 2
A. Investment Income
A1. Actual Investment Income $ 93,514,564
A2. Expected Amount for Immediate Recognition 575,689,672
A3. Amount Subject to Amortization (482,175,108)
Year Ended June 30
B. Amortization Schedule 2020 2021 2022 2023 2024 2025 2026
2020 Experience (A3 / 7) (68,882,158) (68,882,158) (68,882,158) (68,882,158) (68,882,158) (68,882,158) (68,882,160)
2019 Experience (22,859,275) (22,859,275) (22,859,275) (22,859,275) (22,859,275) (22,859,275)
2018 Experience (6,266,349) (6,266,349) (6,266,349) (6,266,349) (6,266,351)
2017 Experience 33,380,149 33,380,149 33,380,149 33,380,148
2016 Experience (64,250,729) (64,250,729) (64,250,726)
2015 Experience (36,894,248) (36,894,251)
2014 Experience 33,458,496
Total Amortization (132,314,114) (165,772,613) (128,878,359) (64,627,634) (98,007,784) (91,741,433) (68,882,160)
C. Actuarial Value of Assets Total Employer
C1. Actuarial Value of Assets, 06/30/2019 8,079,039,739
C2. Noninvestment Net Cash Flow 153,033,625
C3. Preliminary Actuarial Value of Assets, 06/30/2020
(A2 + B + C1 + C2) 8,675,448,922
C4. Market Value of Assets, 06/30/2020 8,057,538,776 38,542,634
C5. Final Actuarial Value of Assets, 06/30/2020
(C3 Within 20% Corridor of C4) 8,675,448,922 41,498,361
D. Rates of Return
D1. Market Value Rate of Return 1.2%
D2. Actuarial Value Rate of Return 5.4%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 15
Development of Health Actuarial Value of Assets - Tiers 1 & 2
A. Investment Income
A1. Actual Investment Income $ 3,835,924
A2. Expected Amount for Immediate Recognition 24,126,918
A3. Amount Subject to Amortization (20,290,994)
Year Ended June 30
B. Amortization Schedule 2020 2021 2022 2023 2024 2025 2026
2020 Experience (A3 / 7) (2,898,713) (2,898,713) (2,898,713) (2,898,713) (2,898,713) (2,898,713) (2,898,716)
2019 Experience (1,075,569) (1,075,569) (1,075,569) (1,075,569) (1,075,569) (1,075,572)
2018 Experience (304,653) (304,653) (304,653) (304,653) (304,656)
2017 Experience 1,532,136 1,532,136 1,532,136 1,532,136
2016 Experience (3,221,043) (3,221,043) (3,221,044)
2015 Experience (1,796,589) (1,796,586)
2014 Experience 1,653,381
Total Amortization (6,111,050) (7,764,428) (5,967,843) (2,746,799) (4,278,938) (3,974,285) (2,898,716)
C. Actuarial Value of Assets Total Employer
C1. Actuarial Value of Assets, 06/30/2019 350,002,781
C2. Noninvestment Net Cash Flow (12,308,768)
C3. Preliminary Actuarial Value of Assets, 06/30/2020
(A2 + B + C1 + C2) 355,709,881
C4. Market Value of Assets, 06/30/2020 328,079,035 1,343,107
C5. Final Actuarial Value of Assets, 06/30/2020
(C3 Within 20% Corridor of C4) 355,709,881 1,456,224
D. Rates of Return
D1. Market Value Rate of Return 1.2%
D2. Actuarial Value Rate of Return 5.2%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 16
Development of Pension Actuarial Value of Assets - Tiers 3
A. Investment Income
A1. Actual Investment Income $ 558,306
A2. Expected Amount for Immediate Recognition 2,314,784
A3. Amount Subject to Amortization (1,756,478)
Year Ended June 30
B. Amortization Schedule 2020 2021 2022 2023 2024
2020 Experience (A3 / 5) (351,296) (351,296) (351,296) (351,296) (351,294)
2019 Experience 44,435 44,435 44,435 44,437
2018 Experience (370) (370) (371)
2017 Experience 0 0
2016 Experience 0
Total Amortization (307,231) (307,231) (307,232) (306,859) (351,294)
C. Actuarial Value of Assets Total Employer
C1. Actuarial Value of Assets, 06/30/2019 18,746,119
C2. Noninvestment Net Cash Flow 28,777,895
C3. Preliminary Actuarial Value of Assets, 06/30/2020
(A2 + B + C1 + C2) 49,531,567
C4. Market Value of Assets, 06/30/2020 48,259,114 22,964,925
C5. Final Actuarial Value of Assets, 06/30/2020
(C3 Within 20% Corridor of C4) 49,531,567 23,570,443
D. Rates of Return
D1. Market Value Rate of Return 1.7%
D2. Actuarial Value Rate of Return 6.1%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 17
Development of Health Actuarial Value of Assets - Tiers 3
A. Investment Income
A1. Actual Investment Income $ 17,312
A2. Expected Amount for Immediate Recognition 70,089
A3. Amount Subject to Amortization (52,777)
Year Ended June 30
B. Amortization Schedule 2020 2021 2022 2023 2024
2020 Experience (A3 / 5) (10,555) (10,555) (10,555) (10,555) (10,557)
2019 Experience 1,507 1,507 1,507 1,508
2018 Experience 0 0 (2)
2017 Experience 0 0
2016 Experience 0
Total Amortization (9,048) (9,048) (9,050) (9,047) (10,557)
C. Actuarial Value of Assets Total Employer
C1. Actuarial Value of Assets, 06/30/2019 548,406
C2. Noninvestment Net Cash Flow 909,053
C3. Preliminary Actuarial Value of Assets, 06/30/2020
(A2 + B + C1 + C2) 1,518,500
C4. Market Value of Assets, 06/30/2020 1,480,635 703,098
C5. Final Actuarial Value of Assets, 06/30/2020
(C3 Within 20% Corridor of C4) 1,518,500 721,078
D. Rates of Return
D1. Market Value Rate of Return 1.7%
D2. Actuarial Value Rate of Return 6.1%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 18
V. MEMBER STATISTICS
Valuation Data Summary
June 30, 2020 June 30, 2019
Tiers 1 & 2 Tier 3 Tiers 1 & 2 Tier 3
Actives
Number 73 9 78 3
Average Current Age 40.9 26.7 40.9 28.7
Average Age at Employment 26.7 25.8 27.2 28.2
Average Past Service 14.2 0.9 13.7 0.5
Average Annual Salary $81,619 $53,586 $79,934 $53,373
Actives (transferred)
Number 5 0 6 0
Average Current Age 32.7 N/A 32.0 N/A
Average Age at Employment 23.6 N/A 24.5 N/A
Average Past Service 9.2 N/A 7.5 N/A
Average Annual Salary $60,837 N/A $55,751 N/A
Retirees
Number 25 0 22 0
Average Current Age 58.7 N/A 58.0 N/A
Average Annual Benefit $50,349 N/A $50,316 N/A
Drop Retirees
Number 9 N/A 8 N/A
Average Current Age 53.8 N/A 52.7 N/A
Average Annual Benefit $67,887 N/A $66,777 N/A
Beneficiaries
Number 6 0 6 0
Average Current Age 69.2 N/A 68.2 N/A
Average Annual Benefit $34,740 N/A $34,059 N/A
Disability Retirees
Number 12 0 12 0
Average Current Age 53.0 N/A 52.1 N/A
Average Annual Benefit $38,020 N/A $37,274 N/A
Inactive / Vested
Number 9 1 8 1
Average Current Age 43.0 25.5 40.7 24.5
Average Accumulated Contributions $30,066 $9,493 $28,487 $9,493
Total Number 139 10 140 4
Former Members (transferred) 2 0 3 0
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 19
Counts and Pay Summary by Service - Tiers 1 & 2
Past Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30+ Total Count Total Pay Average Pay
<20 0 0 0 0 0 0 0 0 0 0
20 - 24 0 0 0 0 0 0 0 0 0 0
25 - 29 3 5 0 0 0 0 0 8 579,951 72,494
30 - 34 1 12 3 0 0 0 0 16 1,128,262 70,516
35 - 39 0 2 8 3 0 0 0 13 1,039,149 79,935
40 - 44 0 2 3 14 1 0 0 20 1,626,640 81,332
45 - 49 0 0 2 2 4 1 0 9 794,469 88,274
50 - 54 0 0 1 4 2 3 0 10 933,857 93,386
55 - 59 0 0 1 0 0 0 1 2 160,019 80,010
60 - 64 0 0 0 0 0 0 0 0 0 0
65+ 0 0 0 0 0 0 0 0 0 0
Total 4 21 18 23 7 4 1 78 6,262,347 80,287
Counts and Pay Summary by Service - Tier 3
Past Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30+ Total Count Total Pay Average Pay
15 - 19 0 0 0 0 0 0 0 0 0 0
20 - 24 4 0 0 0 0 0 0 4 203,068 50,767
25 - 29 3 0 0 0 0 0 0 3 168,440 56,147
30 - 34 2 0 0 0 0 0 0 2 110,763 55,382
35 - 39 0 0 0 0 0 0 0 0 0 0
40 - 44 0 0 0 0 0 0 0 0 0 0
45 - 49 0 0 0 0 0 0 0 0 0 0
50 - 54 0 0 0 0 0 0 0 0 0 0
55 - 59 0 0 0 0 0 0 0 0 0 0
60 - 64 0 0 0 0 0 0 0 0 0 0
65+ 0 0 0 0 0 0 0 0 0 0
Total 9 0 0 0 0 0 0 9 482,271 53,586
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 20
VI. ACTUARIAL ASSUMPTIONS AND METHODS
Interest Rate This is the assumed earnings rate on System assets, compounded
annually, net of investment and administrative expenses.
Tiers 1 & 2:
7.30% per year.
Tier 3:
7.00% per year.
Salary Increases See table below. This is an annual increase for individual member’s
salary. These rates, which are based on a 2017 experience study
using actual plan experience, consist of 3.5% for wage inflation with
the remaining portion for merit / seniority increases.
Inflation 2.50%.
Tier 3 Compensation Limit $110,000 for calendar 2020. Assumed increases of 2.00% per year
thereafter.
Cost-of-Living Adjustment 1.75%.
Mortality Rates These rates are used to project future decrements from the population
due to death.
Active Lives:
PubS-2010 Employee mortality, loaded 110% for males and females,
projected with future mortality improvements reflected
generationally using 75% of scale MP-2019. 100% of active deaths
are assumed to be in the line of duty.
Inactive Lives
PubS-2010 Healthy Retiree mortality, loaded 110% for males and
females, projected with future mortality improvements reflected
Maricopa Pima Maricopa Pima
County County Other County County Other
Age Police Police Police Fire Fire Fire
20 7.50% 7.50% 7.50% 7.50% 7.50% 7.20%
25 7.14% 6.24% 6.60% 7.35% 6.36% 6.60%
30 6.00% 5.16% 5.25% 6.74% 5.48% 5.60%
35 4.77% 4.55% 4.15% 5.56% 4.83% 4.96%
40 3.90% 3.89% 3.60% 4.46% 4.03% 4.44%
45 3.54% 3.56% 3.50% 3.74% 3.60% 3.78%
50+ 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 21
generationally using 75% of scale MP-2019.
Beneficiaries:
PubS-2010 Survivor mortality, projected with future mortality im-
provements reflected generationally using 75% of scale MP-2019.
Disabled Lives:
PubS-2010 Disabled mortality, projected with future mortality im-
provements reflected generationally using 75% of scale MP-2019.
The mortality assumptions sufficiently accommodate anticipated
future mortality improvements.
Retirement / DROP Rates These rates are used to project future decrements from the active
population due to retirement. The rates below are based on a 2017
experience study using actual plan experience.
Tier 1 – reaching age 62 before attaining 20 years of service:
Age-related rates based on age at retirement: 60% assumed at age 62,
50% assumed at ages 63 – 69, and 100% assumed at age 70. Rates
are the same for all employers.
Tier 1 – reaching age 62 after attaining 20 years of service:
Service-related rates based on service at retirement:
60% are assumed to enter the DROP program while the remaining
40% are assumed to retire and commence benefits immediately.
Maricopa Pima Maricopa Pima
County County Other County County Other
Service Police Police Police Fire Fire Fire
20 27% 24% 35% 14% 18% 23%
21 18% 19% 30% 14% 18% 18%
22 14% 14% 23% 7% 11% 11%
23 10% 10% 10% 7% 7% 8%
24 8% 7% 10% 7% 7% 5%
25 38% 32% 36% 22% 22% 30%
26 36% 32% 30% 26% 26% 30%
27 29% 22% 30% 19% 19% 30%
28 29% 22% 30% 32% 25% 25%
29 29% 22% 30% 30% 25% 16%
30 34% 35% 30% 30% 30% 32%
31 34% 35% 30% 30% 30% 35%
32 65% 65% 70% 55% 55% 60%
33 65% 65% 70% 55% 55% 60%
34+ 100% 100% 100% 100% 100% 100%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 22
Tiers 2 & 3:
Age-related rates based on age at retirement:
Termination Rate These rates are used to project future decrements from the active
population due to termination. Service-related rates based on service
at termination are shown below. The rates below apply to members
prior to retirement eligibility and are based on a 2017 experience
study using actual plan experience.
Maricopa Pima Maricopa Pima
County County Other County County Other
Age Police Police Police Fire Fire Fire
53 38% 32% 36% 22% 22% 30%
54 36% 32% 30% 26% 26% 30%
55 29% 22% 30% 19% 19% 30%
56 29% 22% 30% 32% 25% 25%
57 29% 22% 30% 30% 25% 16%
58 34% 35% 30% 30% 30% 32%
59 34% 35% 30% 30% 30% 35%
60-63 65% 65% 70% 55% 55% 60%
64+ 100% 100% 100% 100% 100% 100%
Maricopa Pima Maricopa Pima
County County Other County County Other
Service Police Police Police Fire Fire Fire
1 14.00% 16.00% 16.00% 7.00% 10.00% 9.50%
2 8.50% 9.00% 12.50% 4.50% 5.00% 9.00%
3 6.50% 7.50% 11.50% 3.70% 5.00% 7.50%
4 4.50% 6.00% 9.00% 3.00% 4.00% 7.50%
5 3.60% 6.00% 8.00% 2.50% 4.00% 6.50%
6 3.30% 4.50% 8.00% 1.70% 3.50% 4.50%
7 3.30% 4.50% 7.00% 1.70% 3.00% 4.00%
8 3.30% 3.20% 7.00% 1.70% 2.40% 3.50%
9 2.70% 3.20% 6.50% 1.70% 2.40% 3.50%
10 2.70% 3.20% 6.00% 1.50% 2.40% 3.00%
11 2.70% 3.20% 5.00% 1.10% 2.40% 2.70%
12 1.80% 1.40% 4.00% 0.70% 1.00% 2.00%
13 1.30% 1.40% 3.50% 0.70% 1.00% 2.00%
14 1.30% 1.40% 3.00% 0.70% 1.00% 1.70%
15 1.30% 1.00% 3.00% 0.60% 1.00% 1.20%
16 0.70% 1.00% 2.00% 0.50% 1.00% 1.20%
17 0.70% 1.00% 1.75% 0.50% 0.50% 1.20%
18 0.70% 1.00% 1.75% 0.40% 0.50% 1.20%
19 0.50% 1.00% 1.75% 0.40% 0.50% 1.20%
20+ 0.50% 1.00% 1.75% 0.40% 0.50% 0.50%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 23
Disability Rate These rates are used to project future decrements from the active
population due to disability. Sample age-related rates based on age
at disability are provided below. These rates are based on a 2017
experience study using actual plan experience. 100% of
disablements are assumed to be duty-related.
Marital Status For active members, 85% of males and 60% of females are assumed to be
married. Actual marital status is used, where applicable, for inactive
members.
Spouse’s Age Males are assumed to be three years older than females.
Health Care Utilization For active members, 70% of retirees are expected to utilize retiree
health care. Actual utilization is used for inactive members.
Funding Method Entry Age Normal Cost Method.
Actuarial Asset Method Method described below. Note that during periods when investment
performance exceeds (falls short) of the assumed rate, the actuarial
value of assets will tend to be less (greater) than the market value of
assets.
Tiers 1 & 2:
Each year the assumed investment income is recognized in full while
the difference between actual and assumed investment income are
smoothed over a 7-year period subject to a 20% corridor around the
market value.
Tier 3:
Each year the assumed investment income is recognized in full while
the difference between actual and assumed investment income are
smoothed over a 5-year period subject to a 20% corridor around the
market value.
Maricopa Pima Maricopa Pima
County County Other County County Other
Age Police Police Police Fire Fire Fire
20 0.08% 0.08% 0.10% 0.03% 0.03% 0.03%
25 0.08% 0.08% 0.10% 0.03% 0.03% 0.03%
30 0.17% 0.16% 0.20% 0.04% 0.03% 0.03%
35 0.22% 0.21% 0.26% 0.09% 0.07% 0.08%
40 0.36% 0.35% 0.44% 0.17% 0.16% 0.17%
45 0.51% 0.49% 0.62% 0.17% 0.43% 0.48%
50 0.78% 0.75% 0.95% 0.43% 0.59% 0.65%
55 1.02% 0.98% 1.23% 1.00% 1.01% 1.13%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 24
Funding Policy Amortization Method Tiers 1 & 2:
Any positive UAAL (assets less than liabilities) is amortized using a
layered approach beginning with the June 30, 2020 valuation, with
new amounts determined according to a Level Dollar method over a
closed period of 15 years (phased into from current period of at most
30 years). Initial layer from June 30, 2019 valuation continues to be
amortized according to a Level Percentage of Payroll method. Any
negative UAAL (assets greater than liabilities) is amortized
according to a Level Dollar method over an open period of 20 years.
Tier 3:
Any positive UAAL (assets less than liabilities) is amortized
according to a Level Dollar method over a closed period of 10 years.
No amortization is made of any negative UAAL (assets greater than
liabilities).
Payroll Growth 3.50% per year. This is annual increase for total employer payroll.
Stabilization Reserve Beginning with the June 30, 2007 valuation and with each
subsequent valuation, if the actuarial value of assets exceeds the
actuarial accrued liability, one half of this excess in each year is
allocated to a Stabilization Reserve. This Reserve is excluded from
the calculation of the employer contribution rates. The Reserve
accumulates as long as the plan is overfunded. Once the plan
becomes underfunded, the Stabilization Reserve will be used to
dampen increases in the employer contribution rates.
Changes to Actuarial Assumptions and Methods Since the Prior Valuation
The amortization method was changed for Tiers 1 and 2 to use a layered amortization approach.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 25
VII. DISCUSSION OF RISK
ASOP No. 51, Assessment and Disclosure of Risk Associated with Measuring Pension Obligations and
Determining Pension Plan Contributions, states that the actuary should identify risks that, in the actuary’s
professional judgment, may reasonably be anticipated to significantly affect the plan’s future financial
condition.
Throughout this report, actuarial results are determined under various assumption scenarios. These results are
based on the premise that all future plan experience will align with the plan’s actuarial assumptions; however,
there is no guarantee that actual plan experience will align with the plan’s assumptions. Whenever possible,
the recommended assumptions in this report reflect conservatism to allow for some margin of unfavorable
future plan experience. However, it is still possible that actual plan experience will differ from anticipated
experience in an unfavorable manner that will negatively impact the plan’s funded position.
Below are examples of ways in which plan experience can deviate from assumptions and the potential impact
of that deviation. Typically, this results in an actuarial gain or loss representing the current-year financial
impact on the plan’s unfunded liability of the experience differing from assumptions; this gain or loss is
amortized over a period of time determined by the plan’s amortization method. When assumptions are selected
that adequately reflect plan experience, gains and losses typically offset one another in the long term, resulting
in a relatively low impact on the plan’s contribution requirements associated with plan experience. When
assumptions are too optimistic, losses can accumulate over time and the plan’s amortization payment could
potentially grow to an unmanageable level.
Investment Return: When the rate of return on the Actuarial Value of Assets falls short of the assumption,
this produces a loss representing assumed investment earnings that were not realized. Further, it is
unlikely that the plan will experience a scenario that matches the assumed return in each year as capital
markets can be volatile from year to year. Therefore, contribution amounts can vary in the future.
Salary Increases: When a plan participant experiences a salary increase that was greater than assumed, this
produces a loss representing the cost of an increase in anticipated plan benefits for the participant as
compared to the previous year. The total gain or loss associated with salary increases for the plan is the
sum of salary gains and losses for all active participants.
Payroll Growth: The plan’s payroll growth assumption, if one is used, causes a predictable annual increase
in the plan’s amortization payment in order to produce an amortization payment that remains constant as
a percentage of payroll if all assumptions are realized. If payroll does not increase according to the plan’s
payroll growth assumption, the plan’s amortization payment can increase significantly as a percentage of
payroll even if all assumptions other than the payroll growth assumption are realized.
Demographic Assumptions: Actuarial results take into account various potential events that could happen
to a plan participant, such as retirement, termination, disability, and death. Each of these potential events
is assigned a liability based on the likelihood of the event and the financial consequence of the event for
the plan. Accordingly, actuarial liabilities reflect a blend of financial consequences associated with
various possible outcomes (such as retirement at one of various possible ages). Once the outcome is
known (e.g. the participant retires) the liability is adjusted to reflect the known outcome. This adjustment
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 26
produces a gain or loss depending on whether the outcome was more or less favorable than other outcomes
that could have occurred.
Contribution risk: This risk results from the potential that actual employer contributions may deviate from
actuarially determined contributions, which are determined in accordance with the Board’s funding policy.
The funding policy is intended to result in contribution requirements that if paid when due, will result in
a reasonable expectation that assets will accumulate to be sufficient to pay plan benefits when due.
Contribution deficits, particularly large deficits and those that occur repeatedly, increase future
contribution requirements and put the plan at risk for not being able to pay plan benefits when due.
Impact of Plan Maturity on Risk
For newer pension plans, most of the participants and associated liabilities are related to active members who
have not yet reached retirement age. As pension plans continue in operation and active members reach
retirement ages, liabilities begin to shift from being primarily related to active members to being shared amongst
active and retired members. Plan maturity is a measure of the extent to which this shift has occurred. It is
important to understand that plan maturity can have an impact on risk tolerance and the overall risk
characteristics of the plan. For example, plans with a large amount of retired liability do not have as long of a
time horizon to recover from losses (such as losses on investments due to lower than
expected investment returns) as plans where the majority of the liability is attributable to active members. For
this reason, less tolerance for investment risk may be warranted for highly mature plans with a
substantial inactive liability. Similarly, mature plans paying substantial retirement benefits resulting in a small
positive or net negative cash flow can be more sensitive to near term investment volatility,
particularly if the size of the fund is shrinking, which can result in less assets being available for
investment in the market.
To assist with determining the maturity of the plan, we have provided some relevant metrics in the table
following titled “Plan Maturity Measures and Other Risk Metrics.” For a better understanding of the overall
Plan and the impact of these risks, please refer to the consolidated PSPRS valuation report.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 27
Plan Maturity Measures and Other Risk Metrics
1 Tier 3 results are shown for the Risk Sharing group, where applicable.
2 Determined as total contributions minus benefit payments. Administrative expenses are typically included but are considered part of the
net interest rate assumption for this plan.
Tiers 1 & 2 Tier 3 1
06/30/2018 06/30/2019 06/30/2020 06/30/2018 06/30/2019 06/30/2020
Support Ratio
Total Actives 90 84 78 419 944 1,408
Total Inactives 52 56 61 23 57 130
Actives / Inactives 173.1% 150.0% 127.9% 1,821.7% 1,656.1% 1,083.1%
Asset Volatility Ratio
Market Value of Assets (MVA) 36,587,342 38,542,634 9,392,896 22,964,925
Total Annual Payroll 6,569,363 6,262,347 50,420,565 84,448,996
MVA / Total Annual Payroll 556.9% 615.5% 18.6% 27.2%
Accrued Liability (AL) Ratio
Inactive Accrued Liability 28,120,209 34,483,737 37,987,923 203,244 1,173,104
Total Accrued Liability 57,022,056 62,278,853 67,240,526 7,956,725 23,239,599
Inactive AL / Total AL 49.3% 55.4% 56.5% 2.6% 5.0%
Funded Ratio
Actuarial Value of Assets (AVA) 34,172,618 37,842,906 41,498,361 1,635,349 9,305,220 23,570,444
Total Accrued Liability 57,022,056 62,278,853 67,240,526 1,831,715 7,956,725 23,239,599
AVA / Total Accrued Liability 59.9% 60.8% 61.7% 89.3% 116.9% 101.4%
Net Cash Flow Ratio
Net Cash Flow 2 1,315,467 1,532,336 7,281,178 13,192,598
Market Value of Assets (MVA) 36,587,342 38,542,634 9,392,896 22,964,925
Net Cash Flow / MVA 3.6% 4.0% 77.5% 57.4%
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 28
VIII. SUMMARY OF CURRENT PLAN
The following is a summary of the benefit provisions provided in Title 38, Chapter 5, Article 4 of the Arizona
Revised Statutes.
Membership Full-time employees of an eligible group, prior to attaining age 65,
who are engaged to work for more than six months in a calendar year.
Benefit Tiers Benefits differ for members based on their hire date:
Tier Hire Date
1 Hired before January 1, 2012
2 Hired on or after January 1, 2012 but before July 1,
2017
3 Hired on or after July 1, 2017
Compensation Compensation is the amount including base salary, overtime pay, shift
and military differential pay, compensatory time used in lieu of
overtime pay, and holiday pay, paid to an employee on a regular
payroll basis and longevity pay paid at least every six months for
which contributions are made to the System. For Tier 3 members,
compensation is limited by statutory cap ($110,000 with adjustments
by the Board).
Average Monthly Benefit Tier 1:
Compensation The highest compensation paid to member during three consecutive
years out of the last 20 years of Credited Service, divided by months.
Tier 2:
The highest compensation paid to member during five consecutive
years out of the last 20 years of Credited Service, divided by months.
Tier 3:
The highest compensation paid to member during five consecutive
years out of the last 15 years of Credited Service, divided by months.
Credited Service Total periods of service, both before and after the member’s date of
participation, for which the member made contributions to the fund.
Normal Retirement
Date Tier 1:
First day of month following attainment of 1) 20 years of service or
2) 62nd birthday and completion of 15 years of service.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 29
Tier 2:
First day of month following the attainment of age 52.5 and com-
pletion of 15 years of service.
Tier 3:
First day of month following the attainment of age 55 and comple-
tion of 15 years of service.
Benefit Tier 1:
50% of Average Monthly Benefit Compensation, adjusted based on
Credited Service as follows (maximum benefit of 80% of Average
Monthly Benefit Compensation):
Credited Service Benefit Adjustment
15 years, but less than 20 Reduced 4% per year less than 20
20 years, but less than 25 Plus 2% per year between 20 and 25
25+ years Plus 2.5% per year above 20
Tier 2:
Benefit multiplier (below) times Average Monthly Benefit
Compensation times Credited Service (maximum benefit of 80% of
Average Monthly Benefit Compensation):
Credited Service Benefit Multiplier
15 years, but less than 17 1.50%
17 years, but less than 19 1.75%
19 years, but less than 22 2.00%
22 years, but less than 25 2.25%
25+ years 2.50%
Tier 3:
Benefit multiplier (below) times Average Monthly Benefit
Compensation times Credited Service (maximum benefit of 80% of
Average Monthly Benefit Compensation):
Credited Service Benefit Multiplier
15 years, but less than 17 1.50%
17 years, but less than 19 1.75%
19 years, but less than 22 2.00%
22 years, but less than 25 2.25%
25+ years 2.50%
Form of Benefit For married retirees, an annuity payable for the life of the member
with 80% continuing to the eligible spouse upon death. For unmarried
retirees, the normal form is a single life annuity.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 30
Early Retirement Only applicable to Tier 3 members:
Date Attainment of age 52.5 and 15 years of Credited Service.
Benefit Actuarial equivalent of Normal Retirement benefit.
Disability Benefit – Accidental (duty-related)
Eligibility Total and permanent disability incurred in performance of duty.
Benefit Amount A maximum of:
a.) 50% of Average Monthly Benefit Compensation, and;
b.) The monthly Normal Retirement pension that the member is
entitled to receive if he or she retired immediately.
Disability Benefit – Ordinary (not duty-related)
Eligibility Total and permanent disability not incurred in performance of duty.
Benefit Amount Normal Retirement pension that the member is entitled to receive
prorated on Credited Service (maximum 20 years) over 20.
Disability Benefit – Other
Temporary Benefit equals 1/12 of 50% of compensation during year preceding
date of disability. Payments terminate after 12 months.
Catastrophic Benefit equals 90% of Average Monthly Benefit Compensation. After
60 months member receives greater of 62.5% Average Monthly
Benefit Compensation and accrued normal pension.
Pre-Retirement Death Benefit
Service Incurred 100% of Average Monthly Benefit Compensation, reduced by child’s
pension.
Non-Service Incurred 80% of benefit based on calculation for accidental disability
retirement.
Child’s Pension 10% of pension for each child (maximum 20% paid) based on
calculation for accidental disability retirement. Payable to dependent
child under age 18 (23, if full-time student).
Guardian’s Pension Same as spouse’s pension. Payable (along with child’s pension) when
no spouse is being paid and there is at least one child under 18 (23, if
full-time student).
Vesting (Termination)
Vesting Service Requirement Tier 1:
10 years of Credited Service.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 31
Tiers 2 & 3:
15 years of Credited Service.
Non-Vested Benefit Tier 1:
Lump sum payment of accumulated contributions, plus additional
amount based on years of Credited Service.
Service Additional % of Contributions
Less than 5 years 0%
5 years 25%
6 years 40%
7 years 55%
8 years 70%
9 years 85%
10+ years 100%
Tiers 2 & 3:
Lump sum payment of accumulated contributions, with interest at rate
determined by the Board.
Vested Benefit Tier 1:
Deferred retirement annuity based on two times member’s
accumulated contributions, deferred to age 62. Member is not entitled
to survivor benefits, benefit increases, or group health insurance
subsidy.
Tiers 2 & 3:
Calculated same as normal retirement pension. Payable if
contributions left in fund until reach age requirement. Member is
entitled to survivor benefits, benefit increases, and group health
insurance subsidy.
Cost-of-Living Adjustment Payable to retired member or survivor of retired member
Tiers 1 & 2:
Compound cost-of-living adjustment on base benefit. First payment is
made on July 1, 2018, with annual adjustments effective every July 1
thereafter.
Cost-of-living adjustment will be based on the average annual
percentage change in the Metropolitan Phoenix-Mesa Consumer Price
Index published by the United States Department of Labor, Bureau of
Statistics. Maximum increase of 2%.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 32
Tier 3:
Compound cost-of-living adjustment on base benefit beginning earlier
of first calendar year after the 7th anniversary of retirement or when
the retired member reaches 60 years of age.
A cost-of-living adjustment shall be paid on July 1 each year that the
funded ratio for members hired on or after July 1, 2017 is 70% or
more.
The cost-of-living adjustment will be based on the average annual
percentage change in the Metropolitan Phoenix-Mesa Consumer Price
Index published by the United States Department of Labor, Bureau of
Statistics. The cost-of-living adjustment will not exceed:
2%, if funded ratio for members who are hired on or after July 1,
2017 is 90% or more;
1.5%, if funded ratio for members who are hired on or after July
1, 2017 is 80-90%;
1%, if funded ratio for members who are hired on or after July 1,
2017 is 70-80%.
Deferred Retirement Option Plan (DROP):
Eligibility Tier 1 and 20 years of Credited Service.
DROP Period Maximum 60 months.
Member Contributions Cease upon DROP entry.
Benefit Amount Calculated based on Credited Service and average monthly
compensation as of the beginning of the DROP period, credited to
DROP participation account for DROP period.
Interest on DROP Beginning Year Interest Rate
Participation Account July 1, 2015 7.50%
July 1, 2016 7.40%
July 1, 2017 7.40%
July 1, 2018 7.30%
July 1, 2019 7.30%
Payment of DROP Payable as lump sum distribution to Public Safety Personnel
Participation Account Defined Contribution Retirement Plan at end of DROP period or at
termination.
Payment Monthly Benefit System commences payment of benefit amount at the earlier of 1) the
end of the DROP period and 2) at termination.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 33
Post-Retirement Health Insurance Subsidy
Eligibility Retired member or survivor who elect health coverage provided by
the state or participating employer.
Maximum Subsidy Amounts Member Only With Dependents
(monthly) Medicare Eligible $100 $170
One w/ Medicare N/A $215
Not Medicare Eligible $150 $260
Employee Contributions Members hired before July 20, 2011:
7.65%
Members hired on/after July 20, 2011, but before July 1, 2017:
11.65%. Amounts in excess of 7.65% are not used to reduce the
employer contribution (“maintenance of effort”).
Tier 3:
50% of total contribution, which is Normal Cost plus a level-
dollar amortization of unfunded actuarial accrued liability over
a closed period not to exceed 10 years.
Employer Contributions Tiers 1 & 2:
Normal Cost plus amortization of unfunded actuarial accrued
liability over a closed period not to exceed 20 years (subject to
one-time election to extend to closed period not to exceed 30
years). Contribution will never be less than 8% of payroll.
Tier 3:
50% of total contribution, which is Normal Cost plus a level-
dollar amortization of unfunded actuarial accrued liability over
a closed period not to exceed 10 years.
Changes to Benefit Provisions Since the Prior Valuation
None.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 34
IX. ACTUARIAL FUNDING POLICY
The purpose of this Actuarial Funding Policy is to record the funding objectives and policy set by the Board for
the Arizona Public Safety Personnel Retirement System (PSPRS). The Board establishes this Funding Policy
to help ensure the systematic funding of future benefit payments for members of the Retirement System.
This funding policy was reviewed by the Board annually for several years following initial adoption until the
2017 experience study. Subsequently, it shall be reviewed every five years in conjunction with the experience
study, although some adjustments may be warranted sooner to properly reflect Tier 3 benefits and changes to
amortization methodology.
Funding Objectives
1. Maintain adequate assets so that current plan assets plus future contributions and investment earnings are
sufficient to fund all benefits expected to be paid to members and their beneficiaries.
2. Maintain stability of employer contribution rates, consistent with other funding objectives.
3. Maintain public policy goals of accountability and transparency. Each policy element is clear in intent and
effect, and each should allow an assessment of whether, how and when the funding requirements of the
plan will be met.
4. Promote intergenerational equity. Each generation of members and employers should incur the cost of
benefits for the employees who provides services to them, rather than deferring those costs to future
members and employers.
5. Provide a reasonable margin for adverse experience to help offset risks.
6. Continue progress of systematic reduction of the Unfunded Actuarial Accrued Liability (UAAL).
Elements of Actuarial Funding Policy
1. Actuarial Cost Method
a. The Entry Age Normal level percent of pay actuarial cost method of valuation shall be used in
determining the Actuarial Accrued Liability (AAL) and Normal Cost. Differences in the past between
assumed experience and actual experience (“actuarial gains and losses”) shall become part of the AAL.
The Normal Cost shall be determined on an individual basis for each active member.
2. Asset Smoothing Method
a. The investment gains or losses of each valuation period, resulting from the difference between the
actual investment return and assumed investment return, shall be recognized annually in level amounts
over seven years in calculating the Actuarial Value of Assets.
b. The Actuarial Value of Assets so determined shall be subject to a 20% corridor relative to the Market
Value of Assets.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 35
3. Amortization Method
a. The Actuarial Value of Assets are subtracted from the computed AAL. Any unfunded amount is
amortized as a level percent of payroll over a closed period. If the Actuarial Value of Assets exceeds
the AAL, the excess is amortized over an open period of 20 years and applied as a credit to reduce the
Normal Cost otherwise payable.
4. Funding Target
a. The targeted funded ratio shall be 100%.
b. The maximum amortization period shall be 30 years.
c. If the funding ratio is between 100% and 120%, a minimum contribution equal to the Normal Cost will
be made.
5. Risk Management
a. Assumption Changes
i. The actuarial assumptions used shall be those last adopted by the PSPRS Board based on the most
recent experience study and upon the advice and recommendation of the actuary. In accordance
with best practices, the actuary shall conduct an experience study every five years. The results of
the study shall be the basis for the actuarial assumption changes recommended to the PSPRS Board.
ii. The actuarial assumptions can be updated during the five-year period if significant plan design
changes or other significant events occur, as advised by the actuary.
b. Amortization Method
i. The amortization method, Level Percent Closed, will ensure full payment of the UAAL over a
finite, systematically decreasing period not to exceed 30 years. The amortization period will be
reviewed once the period reaches 15 years.
c. Risk Measures
i. The following risk measures will be annually determined to provide quantifiable measurements of
risk and their movement over time.
1. Classic measures currently determined
Funded ratio (assets / liability)
2. UAAL / Total Payroll
Measures the risk associated with contribution decreases relative impact on the ability to
fund the UAAL. An increase in this measure indicates an increase in contribution risk.
3. Total Liability / Total Payroll
Measures the risk associated with the ability to respond to liability experience through
adjustments in contributions. An increase in this measure indicates an increase in
experience risk.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 36
X. GLOSSARY
Actuarial Accrued Liability – Computed differently under different funding methods, the actuarial accrued
liability generally represents the portion of the actuarial present value of benefits attributable to service credit
earned (or accrued) as of the valuation date.
Actuarial Present Value of Benefits – Amount which, together with future interest, is expected to be sufficient
to pay all benefits to be paid in the future, regardless of when earned, as determined by the application of a
particular set of actuarial assumptions; equivalent to the actuarial accrued liability plus the present value of
future normal costs attributable to the members.
Actuarial Assumptions – Assumptions as to the occurrence of future events affecting pension costs. These
assumptions include rates of investment earnings, changes in salary, rates of mortality, withdrawal, disablement,
and retirement as well as statistics related to marriage and family composition.
Actuarial Cost Method – A method of determining the portion of the cost of a pension plan to be allocated to
each year; sometimes referred to as the "actuarial funding method." Each cost method allocates a certain portion
of the actuarial present value of benefits between the actuarial accrued liability and future normal costs.
Actuarial Equivalence – Series of payments with equal actuarial present values on a given date when valued
using the same set of actuarial assumptions.
Actuarial Present Value - The amount of funds required as of a specified date to provide a payment or series of
payments in the future. It is determined by discounting future payments at predetermined rates of interest, and
by probabilities of payments between the specified date and the expected date of payment.
Actuarial Value of Assets – The value of cash, investments, and other property belonging to the pension plan
as used by the actuary for the purpose of the actuarial valuation. This may correspond to market value of assets,
or some modification using an asset valuation method to reduce the volatility of asset values.
Asset Gain (Loss) – That portion of the actuarial gain attributable to investment performance above (below) the
expected rate of return in the actuarial assumptions.
Amortization – Paying off an interest-discounted amount with periodic payments of interest and (generally)
principal, as opposed to paying off with a lump sum payment.
Amortization Payment – That portion of the pension plan contribution designated to pay interest and reduce the
outstanding principal balance of unfunded actuarial accrued liability. If the amortization payment is less than
the accrued interest on the unfunded actuarial accrued liability the outstanding principal balance will increase.
Assumed Earnings Rate – The interest rate used in developing present values to reflect the time value of money.
Decrements – Events which result in the termination of membership in the system such as retirement, disability,
withdrawal, or death.
Arizona Public Safety Personnel Retirement System
Actuarial Valuation Report as of June 30, 2020 – Oro Valley Police Dept. (122) 37
Entry Age Normal (EAN) Funding Method – A standard actuarial funding method whereby each member’s
normal costs (service costs) are generally level as a percentage of pay from entry age until retirement. The
annual cost of benefits is comprised of the normal cost plus an amortization payment to reduce the UAL.
Experience Gain (Loss) – The difference between actual unfunded actuarial accrued liabilities and anticipated
unfunded actuarial accrued liabilities during the period between two valuation dates. It is a measurement of the
difference between actual and expected experience, and may be related to investment earnings above (or below)
those expected or changes in the liability due to fewer (or greater) than expected numbers of retirements, deaths,
disabilities, or withdrawals, or variances in pay increases relative to assumed pay increases. The effect of such
gains (or losses) is to decrease (or increase) future costs.
Funded Ratio – A measure of the ratio of the actuarial value of assets to liabilities of the system. Typically, the
assets used in the measure are the actuarial value of assets as determined by the asset valuation method. The
funded ratio depends not only on the financial strength of the plan but also on the asset valuation method used
to determine the assets and on the funding method used to determine the liabilities.
Market Value of Assets (MVA) – The value of assets as they would trade on an open market.
Normal Cost – Computed differently under different funding methods, generally that portion of the actuarial
present value of benefits allocated to the current plan year.
Unfunded Actuarial Accrued Liability (UAAL) – The excess of the actuarial accrued liability over the valuation
assets; sometimes referred to as "unfunded past service liability". UAL increases each time an actuarial loss
occurs and when new benefits are added without being fully funded initially and decreases when actuarial gains
occur.
ARIZONA CORRECTIONS OFFICER
RETIREMENT PLAN
TOWN OF ORO VALLEY - DISPATCHERS (556)
ACTUARIAL VALUATION
AS OF JUNE 30, 2020
CONTRIBUTIONS APPLICABLE TO THE
PLAN/FISCAL YEAR ENDING JUNE 30, 2022
VIA E-MAIL
13420 Parker Commons Boulevard, Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com
December 2020
Board of Trustees
Arizona Corrections Officer Retirement Plan
Phoenix, AZ
Re: Actuarial Valuation Report as of June 30, 2020 for Town of Oro Valley - Dispatchers (556)
Dear Members of the Board:
We are pleased to present to the Board this report of the annual actuarial valuation of the Arizona Corrections
Officer Retirement Plan (CORP). The valuation was performed to determine whether the assets and
contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding
requirements for the applicable plan year.
This report was prepared at the request of the Board and is intended for use by CORP and those designated or
approved by the Board. It documents the valuation of the consolidated plan and provides summary information
for CORP participating employers. This report may be provided to parties other than CORP only in its entirety
and only with the permission of the Board. Foster & Foster is not responsible for the unauthorized use of this
report.
The valuation has been conducted in accordance with generally accepted actuarial principles and practices,
including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflects
laws and regulations issued to date pursuant to the provisions of Title 38, Chapter 5, Article 6 of the Arizona
Revised Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in
this valuation, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan
experience. Future actuarial measurements may differ significantly from the current measurements presented
in this report for a variety of reasons including changes in applicable laws, changes in plan provisions, changes
in assumptions, or plan experience differing from expectations. Due to the limited scope of the valuation, we
did not perform an analysis of the potential range of such future measurements.
The computed contribution rates shown in the “Contribution Results” section should be considered minimum
contribution rates that comply with the Board’s funding policy and Arizona Statutes. Users of this report should
be aware that contributions made at that rate do not guarantee benefit security. Given the importance of benefit
security to any retirement system, we suggest that contributions to the Plan in excess of those presented in this
report be considered.
The funding percentages and unfunded accrued liability as measured based on the actuarial value of assets will
differ from similar measures based on the market value of assets. These measures, as provided, are appropriate
for determining the adequacy of future contributions, but may not be appropriate for the purpose of settling a
portion or all of the Plan’s liabilities.
Board of Trustees
Arizona Corrections Officer Retirement Plan | Page 2
13420 Parker Commons Boulevard, Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com
In conducting the valuation, we have relied on personnel, plan design, and asset information supplied by CORP
through June 30, 2020 and the actuarial assumptions and methods described in the Actuarial Assumptions
section of this report. While we cannot verify the accuracy of all this information, the supplied information
was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the
substantial accuracy of the information and believe that it has produced appropriate results. This information,
along with any adjustments or modifications, is summarized in various sections of this report.
This valuation assumes the continuing ability of the participating employers to make the contributions necessary
to fund this plan. A determination regarding whether or not the participating employers are actually able to do
so is outside our scope of expertise. Consequently, we did not perform such an analysis.
The undersigned are familiar with the immediate and long-term aspects of pension valuations and meet the
Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions
contained herein. All sections of this report are considered an integral part of the actuarial opinions.
To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct
financial interest or indirect material interest in the Arizona Corrections Officer Retirement Plan, nor does
anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the Arizona Corrections Officer
Retirement Plan. Thus, there is no relationship existing that might affect our capacity to prepare and certify
this actuarial report.
If there are any questions, concerns, or comments about any of the items contained in this report, please contact
us at 239-433-5500.
Respectfully Submitted,
Foster & Foster, Inc.
By: ______________________________
Bradley R. Heinrichs, FSA, EA, MAAA
By: ______________________________
Jason L. Franken, FSA, EA, MAAA
By: ______________________________
Paul M. Baugher, FSA, EA, MAAA
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556)
TABLE OF CONTENTS
I. Summary of Report ..........................................................................................................................................1
II. Contribution Results ........................................................................................................................................4
III. Liability Support ............................................................................................................................................8
IV. Asset Support ...............................................................................................................................................11
V. Member Statistics ..........................................................................................................................................14
VI. Actuarial Assumptions and Methods ...........................................................................................................16
VII. Discussion of Risk ......................................................................................................................................21
VIII. Summary of Current Plan..........................................................................................................................24
IX. Actuarial Funding Policy .............................................................................................................................29
X. Glossary ........................................................................................................................................................31
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 1
I. S UMMARY OF REPORT
The regular annual actuarial valuation of the Arizona Corrections Officer Retirement Plan for the Town of Oro
Valley - Dispatchers, performed as of June 30, 2020, has been completed and the results are presented in this
Report. The purpose of this valuation is to:
Compute the liabilities associated with benefits likely to be paid on behalf of current retired and active
members. This information is contained in the section entitled “Liability Support.”
Compare accumulated assets with the liabilities to assess the funded condition. This information is
contained in the section entitled “Liability Support.”
Compute the employers’ recommended contribution rates for the Fiscal Year beginning July 1, 2021. This
information is contained in the section entitled “Contribution Results.”
1. Key Valuation Results
The funded status as of June 30, 2020 and the employer contribution amounts applicable to the plan/fiscal
year ending June 30, 2022 are as follows:
Tier 1 & Tier 2 Members
Pension Health Total
Employer Contribution Rate 79.23% 0.00% 79.23%
Funded Status 44.6% 151.2% 46.1%
2. Comparison of Key Results to Prior Year
The chart below compares the results from this valuation with the results of the prior year’s valuation (as
of June 30, 2019):
Contribution Rate
Tier 1 & Tier 2 Members
Valuation Date Pension Health Total
June 30, 2019 75.53% 0.00% 75.53%
June 30, 2020 79.23% 0.00% 79.23%
Funded Status
Tier 1 & Tier 2 Members
Valuation Date Pension Health Total
June 30, 2019 44.0% 138.5% 45.4%
June 30, 2020 44.6% 151.2% 46.1%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 2
3. Reasons for Change
Changes in the results from the prior year’s valuation can be illustrated in the following tables along with
high-level explanations for the entire Plan below:
Contribution Rate
Tier 1 & Tier 2
Pension Health
Contribution Rate Last Valuation 75.53% 0.00%
Asset Experience 0.94% 0.04%
Payroll Base (0.82%) 0.00%
Liability Experience 0.18% (0.11%)
COLA 0.00% 0.00%
Assumption/Method Change 3.91% (0.19%)
Other (0.51%) 0.26%
Contribution Rate This Valuation 79.23% 0.00%
Funded Status
Tier 1 & Tier 2
Pension Health
Funded Status Last Valuation 44.0% 138.5%
Asset Experience (0.6%) (2.1%)
Liability Experience (0.2%) 12.8%
COLA 0.0% 0.0%
Assumption/Method Change 0.0% 0.0%
Other 1.4% 2.0%
Funded Status This Valuation 44.6% 151.2%
Assets Experience – Asset gains and losses (relative to the assumed earnings rate) are smoothed over seven
years for Tiers 1 and 2. The return on the market value of assets for the year ending June 30, 2020 was
2.6%. On a smoothed, actuarial value of assets basis, however, the average return was 5.7%. This fell short
of the 2019 assumed earnings rate of 7.3%.
Liability Experience – Experience overall was unfavorable, driven by greater than expected salary
increases.
Payroll Base – Under the current amortization policy for Tiers 1 and 2, the contribution rate is developed
as a level percentage of payroll. The payroll is expected to increase each year in line with the growth
assumption (currently 3.00%). To the extent that actual payroll is lower/greater than expected, the
contribution rate will increase/decrease as a result.
Assumption / Method Change – The amortization method for Tiers 1 and 2 was updated to use a layered
approach. New bases will be amortized on a Level Dollar basis while the 2019 base will continue to be
amortized on a Level Percentage of Payroll basis. The payroll growth assumption was decreased to 3.00%.
Other – This is the combination of all other factors that could impact liabilities year-over-year, with the
primary sources being changes resulting from an updated understanding of some data components provided
by staff and changes in member data.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 3
4. Looking Ahead
The continuing effect of prior asset losses was dampened by the asset smoothing reflected in the actuarial
value of assets. There remain unrecognized investment losses that will, in the absence of other gains, put
upward pressure on the contribution rate next year.
If the June 30, 2020 pension valuation results were based on the market value of assets instead of the
actuarial value of assets, the pension funded percentage for Tiers 1 and 2 would be 41.9% (instead of 44.6%)
and the pension employer contribution requirement would be 83.52% of payroll (instead of 79.23%).
5. Conclusion
The funded status for Tiers 1 and 2 will continue to improve if assumptions are met and contributions at
least equal to the rates determined for each employer are made to the fund. The recent adoption of a layered
amortization approach along with a plan to systematically lower the payroll growth assumption was an
excellent step to improve funding and ensure the Plan is on a viable path.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 4
II. CONTRIBUTION RESULTS
Contribution Requirements
Development of Employer Contributions - Tiers 1 & 2 Members
Valuation Date June 30, 2020 June 30, 2019
Applicable to Fiscal Year Ending 2022 2021
Rate Dollar Rate Dollar
Pension
Normal Cost
Total Normal Cost 10.51% $22,257 10.99% $22,224
Employee Cost (7.96%) (16,860) (7.96%) (16,099)
Employer (Net) Normal Cost 2.55% 5,397 3.03% 6,125
Amortization of Unfunded Liability 76.68% 162,414 72.50% 146,628
Total Employer Cost (Pension) 79.23% 167,811 75.53% 152,753
Health
Normal Cost 0.33% $690 0.34% $692
Amortization of Unfunded Liability (0.33%) (690) (0.34%) (692)
Total Employer Cost (Health) 0.00% 0 0.00% 0
Total Employer Cost (Pension + Health) 79.23% 167,811 75.53% 152,753
Total Minimum Contribution Requirement (if applicable) 0.00% 0.00%
Alternate Contribution Rate (ACR) * 76.68% 72.50%
Underlying Payroll (as of valuation date) 211,807 202,246
* The Alternate Contribution Rate is the sum of the positive amortization rates for Tiers 1 & 2 Pension and Health and is charged when
retirees return to active status.
The results above are shown both prior to and after the application of the statutory minimum contribution
requirement of 6% of payroll.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 5
Development of Employer Contributions – Tier 3 Members
Valuation Date June 30, 2020 June 30, 2019
Applicable to Fiscal Year Ending 2022 2021
Defined Contribution (DC) Retirement Plan
Rate Dollar Rate Dollar
Tier 3 DC Only
Employee Cost 7.00% $ 0 7.00% $ 0
Employee Disability Program Cost 0.49% 0 0.65% 0
Total Employee Cost 7.49% 0 7.65% 0
Employer Cost 5.00% 0 5.00% 0
Employer Disability Program Cost 0.49% 0 0.65% 0
Total Employer Cost (before Legacy) 5.49% 0 5.65% 0
ER Legacy Cost of Tiers 1 & 2 Amort of Unfunded
Liabilities * 76.68% 0 72.50% 0
Total Employer Cost 82.17% 0 78.15% 0
Underlying Payroll (as of valuation date) 0 0
* Pursuant to ARS § 38-891(A), the amortization of positive unfunded liabilities for Tiers 1 & 2 shall be applied to all Tier 3 payroll on
a level percent basis. However, while it is statutorily required to present the rates in this manner, these are the minimums where
alternate methods for paying down that unfunded liability is at the discretion of each employer. Further, to understand the effects of
reform in relation to Tier 3, compare the total rate of Tier 3 before application of those legacy costs.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 6
Contribution Rate Summary
Tier 1 Tier 2 Tier 3
Membership Date On or After 7/1/1986 1/1/2012 7/1/2018
Available Retirement Plan DB Plan DB Plan DB Plan 1 DC Plan
Employee Contribution Rate
CORP DB Rate 7.96% 7.96% 0.00%
CORP DC Rate 2 7.00%
CODCRP Disability Program Rate 0.49%
Total EE Contribution Rate 7.96% 7.96% 0.00% 7.49%
Employer Contribution Rate
CORP DB Normal Cost 2.55% 2.55% 0.00%
CORP DB Tier 1 & 2 Legacy Cost 3 76.68% 76.68% 0.00% 76.68%
CORP DC Rate 5.00%
CODCRP Disability Program Rate 0.49%
Total ER Contribution Rate 79.23% 79.23% 0.00% 82.17%
1 Applicable to AOC Probation and Surveillance only.
2 Although the default contribution rate is 7%, Tier 3 members in the DC plan may choose an employee contribution rate anywhere
between 5% and 40%.
3 Per statute (ARS § 38-891(A), any positive unfunded liability for Tiers 1 and 2 is to be applied to all Tier 3 (DB and DC) payrolls.
Exhibit summarizes employee and employer contributions based on Statute and the results of June 30, 2020
actuarial valuation. Pension and health components are combined, where applicable.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 7
Impact of Additional Contributions
Additional Contribution (000s)
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100
Impact On
Funded Status 06/30/2020 44.6% 44.9% 45.2% 45.5% 45.8% 46.1% 46.4% 46.7% 47.0% 47.3% 47.5%
FYE 2022 Contribution Rate 79.23% 78.76% 78.28% 77.80% 77.33% 76.85% 76.38% 75.90% 75.43% 74.95% 74.48%
Table shows the hypothetical change in the funded status and contribution rate from the June 30, 2020 actuarial valuation results for Tiers 1 & 2 if
an additional contribution of the amount shown had been made to the Fund on June 30, 2020. This illustration can help estimate the impact of
contributing additional monies to the fund in the future.
Historical Summary of Employer Rates
Pension Health
Valuation Date
June 30
Fiscal Year Ending
June 30 Normal Cost Unfunded
Amortization Total Normal Cost Unfunded
Amortization Total
TIERS 1 & 2 2018 2020 6.42% 53.52% 59.94% 0.11% (0.11%) 0.00%
2019 2021 3.03% 72.50% 75.53% 0.34% (0.34%) 0.00%
2020 2022 2.55% 76.68% 79.23% 0.33% (0.33%) 0.00%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 8
III. LIABILITY SUPPORT
Liabilities and Funded Ratios by Benefit - Tiers 1 & 2
June 30, 2020 June 30, 2019
Pension
Actuarial Present Value of Benefits
Retirees and Beneficiaries $ 1,703,353 $ 1,720,080
Vested Members 73,902 72,053
Active Members 1,723,515 1,588,169
Total Actuarial Present Value of Benefits 3,500,770 3,380,302
Actuarial Accrued Liability (AAL)
All Inactive Members 1,777,255 1,792,133
Active Members 1,597,678 1,448,266
Total Actuarial Accrued Liability 3,374,933 3,240,399
Actuarial Value of Assets (AVA) 1,504,732 1,424,947
Unfunded Actuarial Accrued Liability
Gross Unfunded Actuarial Accrued Liability 1,870,201 1,815,452
Stabilization Reserve 0 0
Net Unfunded Actuarial Accrued Liability 1,870,201 1,815,452
Funded Ratio (AVA / AAL) 44.6% 44.0%
Health
Present Value of Benefits
Retirees and Beneficiaries $ 22,311 $ 25,421
Active Members 28,313 28,573
Total Present Value of Benefits 50,624 53,994
Actuarial Accrued Liability (AAL)
All Inactive Members 22,311 25,421
Active Members 25,732 25,739
Total Actuarial Accrued Liability 48,043 51,160
Actuarial Value of Assets (AVA) 72,662 70,878
Unfunded Actuarial Accrued Liability (24,619) (19,718)
Funded Ratio (AVA / AAL) 151.2% 138.5%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 9
Derivation of Experience (Gain)/Loss
Tiers 1 & 2
Pension Health
(1) Unfunded Actuarial Accrued Liability as of June 30, 2019 1,815,452 (19,718)
(2) Normal Cost Developed in Last Valuation 6,125 692
(3) Actual Contributions 122,322 0
(4) Expected Interest On (1), (2), and (3) 128,589 (1,389)
(5) Expected Unfunded Actuarial Accrued Liability as of June 30, 2020
(1)+(2)-(3)+(4) 1,827,844 (20,415)
(6) Changes to UAAL Due to Assumptions, Methods and Benefits 0 0
(7) Change to UAAL Due to Actuarial (Gain)/Loss 42,357 (4,204)
(8) Unfunded Actuarial Accrued Liability as of June 30, 2020 1,870,201 (24,619)
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 10
Amortization of Unfunded Liabilities - Tiers 1 & 2
Date Established Outstanding Balance Years Remaining Amortization Rate
Pension 06/30/2019 1,812,944 16 73.96%
06/30/2020 57,257 16 2.72%
Total 1,870,201 76.68%
Health 06/30/2019 0 19 0.00%
06/30/2020 (24,619) 20 (1.05%)
Total (24,619) (1.05%)
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 11
IV. ASSET SUPPORT
Statement of Changes in Fiduciary Net Position for Year Ended June 30, 2020
Market Value Basis
Tiers 1 & 2
Pension Health
Additions
Contributions
Member Contributions $ 46,151,025 $ 0
Employer Contributions 167,010,059 0
Health Insurance Contributions 0 639,397
Total Contributions 213,161,084 639,397
Investment Income
Net Increase in Fair Value 14,436,837 1,717,282
Interest and Dividends 16,250,842 1,933,060
Other Income 35,823,718 1,367,974
Less Investment Expenses (12,090,328) (1,438,161)
Net Investment Income 54,421,069 3,580,155
Transfers In 226,097 0
Total Additions 267,808,250 4,219,552
Deductions
Distributions to Members
Benefit Payments 170,102,004 0
Health Insurance Subsidy 0 4,546,349
Refund of Contributions 20,532,931 0
Total Distributions 190,634,935 4,546,349
Administrative Expenses 2,106,260 138,561
Transfers Out 780,939 0
Other 0 0
Total Deductions 193,522,134 4,684,910
Net Increase / (Decrease) 74,286,116 (465,358)
Net Position Held in Trust
Prior Valuation 1,996,273,344 126,440,064
Beginning of the Year Adjustment 2 (1)
End of the Year 2,070,559,462 125,974,705
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 12
Development of Pension Actuarial Value of Assets - Tiers 1 & 2
A. Investment Income
A1. Actual Investment Income $ 52,314,809
A2. Expected Amount for Immediate Recognition 146,515,782
A3. Amount Subject to Amortization (94,200,973)
Year Ended June 30
B. Amortization Schedule 2020 2021 2022 2023 2024 2025 2026
2020 Experience (A3 / 7) (13,457,282) (13,457,282) (13,457,282) (13,457,282) (13,457,282) (13,457,282) (13,457,281)
2019 Experience (5,782,115) (5,782,115) (5,782,115) (5,782,115) (5,782,115) (5,782,112)
2018 Experience (1,511,828) (1,511,828) (1,511,828) (1,511,828) (1,511,825)
2017 Experience 8,429,734 8,429,734 8,429,734 8,429,733
2016 Experience (16,290,498) (16,290,498) (16,290,497)
2015 Experience (9,194,258) (9,194,260)
2014 Experience 8,714,004
Total Amortization (29,092,243) (37,806,249) (28,611,988) (12,321,492) (20,751,222) (19,239,394) (13,457,281)
C. Actuarial Value of Assets Total Employer
C1. Actuarial Value of Assets, 06/30/2019 2,063,352,240
C2. Noninvestment Net Cash Flow 21,971,307
C3. Preliminary Actuarial Value of Assets, 06/30/2020
(A2 + B + C1 + C2) 2,202,747,086
C4. Market Value of Assets, 06/30/2020 2,070,559,462 1,414,433
C5. Final Actuarial Value of Assets, 06/30/2020
(C3 Within 20% Corridor of C4) 2,202,747,086 1,504,732
D. Rates of Return
D1. Market Value Rate of Return 2.6%
D2. Actuarial Value Rate of Return 5.7%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 13
Development of Health Actuarial Value of Assets - Tiers 1 & 2
A. Investment Income
A1. Actual Investment Income $ 3,441,594
A2. Expected Amount for Immediate Recognition 9,090,033
A3. Amount Subject to Amortization (5,648,439)
Year Ended June 30
B. Amortization Schedule 2020 2021 2022 2023 2024 2025 2026
2020 Experience (A3 / 7) (806,920) (806,920) (806,920) (806,920) (806,920) (806,920) (806,919)
2019 Experience (382,214) (382,214) (382,214) (382,214) (382,214) (382,213)
2018 Experience (81,544) (81,544) (81,544) (81,544) (81,541)
2017 Experience 574,691 574,691 574,691 574,693
2016 Experience (1,140,445) (1,140,445) (1,140,442)
2015 Experience (623,076) (623,078)
2014 Experience 584,154
Total Amortization (1,875,354) (2,459,510) (1,836,429) (695,985) (1,270,675) (1,189,133) (806,919)
C. Actuarial Value of Assets Total Employer
C1. Actuarial Value of Assets, 06/30/2019 130,925,631
C2. Noninvestment Net Cash Flow (3,906,952)
C3. Preliminary Actuarial Value of Assets, 06/30/2020
(A2 + B + C1 + C2) 134,233,358
C4. Market Value of Assets, 06/30/2020 125,974,705 68,191
C5. Final Actuarial Value of Assets, 06/30/2020
(C3 Within 20% Corridor of C4) 134,233,358 72,662
D. Rates of Return
D1. Market Value Rate of Return 2.8%
D2. Actuarial Value Rate of Return 5.6%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 14
V. MEMBER STATISTICS
Valuation Data Summary – Tiers 1 & 2
June 30, 2020 June 30, 2019
Actives
Number 3 3
Average Current Age 54.3 53.3
Average Age at Employment 31.9 31.9
Average Past Service 22.4 21.4
Average Annual Salary $68,025 $67,415
Actives (transferred)
Number 0 0
Average Current Age N/A N/A
Average Age at Employment N/A N/A
Average Past Service N/A N/A
Average Annual Salary N/A N/A
Retirees
Number 3 3
Average Current Age 64.9 63.9
Average Annual Benefit $34,012 $33,345
Beneficiaries
Number 1 1
Average Current Age 66.0 65.0
Average Annual Benefit $35,606 $34,908
Disability Retirees
Number 1 1
Average Current Age 49.0 48.0
Average Annual Benefit $4,605 $4,514
Inactive / Vested
Number 4 4
Average Current Age 45.1 44.2
Average Accumulated Contributions $16,262 $16,262
Total Number 12 12
Former Members (transferred) 0 0
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 15
Counts and Pay Summary by Service - Tiers 1 & 2
Past Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30+ Total Count Total Pay Average Pay
< 25 0 0 0 0 0 0 0 0 0 0
25 - 29 0 0 0 0 0 0 0 0 0 0
30 - 34 0 0 0 0 0 0 0 0 0 0
35 - 39 0 0 0 0 0 0 0 0 0 0
40 - 44 0 0 0 0 0 0 0 0 0 0
45 - 49 0 0 1 0 0 0 0 1 60,993 60,993
50 - 54 0 0 0 0 1 0 0 1 83,460 83,460
55 - 59 0 0 0 0 0 0 0 0 0 0
60 - 64 0 0 0 0 0 0 1 1 59,621 59,621
65+ 0 0 0 0 0 0 0 0 0 0
Total 0 0 1 0 1 0 1 3 204,074 68,025
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 16
VI. ACTUARIAL ASSUMPTIONS AND METHODS
Interest Rate 7.30% per year. This is the assumed earnings rate on System assets,
compounded annually, net of investment and administrative
expenses.
Salary Increases See table below. This is annual increase for individual member’s
salary. These rates, which are based on a 2017 experience study
using actual plan experience, consist of 3.5% for wage inflation with
the remaining portion for merit / seniority increases.
Inflation 2.50%.
Tier 3 Compensation Limit $70,000 for calendar 2020. Assumed increases of 2.00% per year
thereafter.
Cost-of-Living Adjustment 1.75%.
Reverse DROP Interest 2.00%.
Mortality Rates These rates are used to project future decrements from the population
due to death.
Active Lives:
PubS-2010 Employee mortality, loaded 125% for males and 115%
for females, projected with future mortality improvements reflected
generationally using 75% of scale MP-2019. 100% of active deaths
are assumed to be in the line of duty.
Inactive Lives
PubS-2010 Healthy Retiree mortality, loaded 125% for males and
115% for females, projected with future mortality improvements
reflected generationally using 75% of scale MP-2019.
Age Rate
20 6.5%
25 6.1%
30 5.4%
35 4.7%
40 4.2%
45 4.0%
50 3.9%
55 3.7%
60+ 3.5%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 17
Beneficiaries:
PubS-2010 Survivor mortality, projected with future mortality im-
provements reflected generationally using 75% of scale MP-2019.
Disabled Lives:
PubS-2010 Disabled mortality, projected with future mortality im-
provements reflected generationally using 75% of scale MP-2019.
The mortality assumptions sufficiently accommodate anticipated
future mortality improvements.
Retirement These rates are used to project future decrements from the active
population due to retirement. The rates below are based on a 2017
experience study using actual plan experience.
Tier 1 – reaching age 62 before attaining 20 (25 for dispatchers)
years of service:
Age-related rates based on age at retirement: 45% per year from age
60 - 74 and 100% assumed at age 75.
Tier 1 – reaching age 62 after attaining 20 (25 for dispatchers)
years of service:
Service-related rates based on service at retirement:
Service Rate
20 30%
21 28%
22 19%
23 17%
24 13%
25-26 26%
27-29 19%
30-31 27%
32-33 40%
34-35 50%
36 60%
37+ 100%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 18
Tiers 2 & 3:
Age-related rates based on age at retirement:
Termination Rate These rates are used to project future decrements from the active
population due to termination. Service-related rates based on service
at termination are shown below. The rates below apply to members
prior to retirement eligibility and are based on a 2017 experience
study using actual plan experience.
Disability Rate These rates are used to project future decrements from the active
population due to disability. Sample age-related rates based on age
at disability are provided below. These rates are based on a 2017
experience study using actual plan experience. 100% of
disablements are assumed to be duty-related.
Service Rate
0 23.00%
1 20.00%
2 16.50%
3 14.50%
4 13.00%
5 10.50%
6 9.50%
7 9.00%
8-10 8.50%
11 6.00%
12 5.00%
13 4.50%
14-16 3.00%
17+ 2.00%
Age Rate
20 0.03%
25 0.03%
30 0.03%
35 0.04%
40 0.05%
45 0.06%
50 0.08%
55 0.08%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 19
Marital Status For active members, 75% of males and 50% of females are assumed to be
married. Actual marital status is used, where applicable, for inactive
members.
Spouse’s Age Males are assumed to be three years older than females.
Health Care Utilization For active members, 60% of retirees are expected to utilize retiree
health care. Actual utilization is used for inactive members.
Funding Method Entry Age Normal Cost Method.
Actuarial Asset Method Method described below. Note that during periods when investment
performance exceeds (falls short) of the assumed rate, the actuarial
value of assets will tend to be less (greater) than the market value of
assets.
Tiers 1 & 2:
Each year the assumed investment income is recognized in full while
the difference between actual and assumed investment income are
smoothed over a 7-year period subject to a 20% corridor around the
market value.
Tier 3:
Each year the assumed investment income is recognized in full while
the difference between actual and assumed investment income are
smoothed over a 5-year period subject to a 20% corridor around the
market value.
Funding Policy Amortization Method Tiers 1 & 2:
Any positive UAAL (assets less than liabilities) is amortized using a
layered approach beginning with the June 30, 2020 valuation, with
new amounts determined according to a Level Dollar method over a
closed period of 15 years (phased into from current period of at most
30 years). Initial layer from June 30, 2019 valuation continues to be
amortized according to a Level Percentage of Payroll method. Any
negative UAAL (assets greater than liabilities) is amortized
according to a Level Dollar method over an open period of 20 years.
Tier 3:
Any positive UAAL (assets less than liabilities) is amortized
according to a Level Dollar method over a closed period of 10 years.
No amortization is made of any negative UAAL (assets greater than
liabilities).
Payroll Growth 3.00% per year. This is annual increase for total employer payroll.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 20
Stabilization Reserve Beginning with the June 30, 2007 valuation and with each
subsequent valuation, if the actuarial value of assets exceeds the
actuarial accrued liability, one half of this excess in each year is
allocated to a Stabilization Reserve. This Reserve is excluded from
the calculation of the employer contribution rates. The Reserve
accumulates as long as the plan is overfunded. Once the plan
becomes underfunded, the Stabilization Reserve will be used to
dampen increases in the employer contribution rates.
Changes to Actuarial Assumptions and Methods Since the Prior Valuation
The amortization method was changed for Tiers 1 and 2 to use a layered amortization approach.
The payroll growth assumption was lowered from 3.50% to 3.00%.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 21
VII. DISCUSSION OF RISK
ASOP No. 51, Assessment and Disclosure of Risk Associated with Measuring Pension Obligations and
Determining Pension Plan Contributions, states that the actuary should identify risks that, in the actuary’s
professional judgment, may reasonably be anticipated to significantly affect the plan’s future financial
condition.
Throughout this report, actuarial results are determined under various assumption scenarios. These results are
based on the premise that all future plan experience will align with the plan’s actuarial assumptions; however,
there is no guarantee that actual plan experience will align with the plan’s assumptions. Whenever possible,
the recommended assumptions in this report reflect conservatism to allow for some margin of unfavorable
future plan experience. However, it is still possible that actual plan experience will differ from anticipated
experience in an unfavorable manner that will negatively impact the plan’s funded position.
Below are examples of ways in which plan experience can deviate from assumptions and the potential impact
of that deviation. Typically, this results in an actuarial gain or loss representing the current-year financial
impact on the plan’s unfunded liability of the experience differing from assumptions; this gain or loss is
amortized over a period of time determined by the plan’s amortization method. When assumptions are selected
that adequately reflect plan experience, gains and losses typically offset one another in the long term, resulting
in a relatively low impact on the plan’s contribution requirements associated with plan experience. When
assumptions are too optimistic, losses can accumulate over time and the plan’s amortization payment could
potentially grow to an unmanageable level.
Investment Return: When the rate of return on the Actuarial Value of Assets falls short of the assumption,
this produces a loss representing assumed investment earnings that were not realized. Further, it is
unlikely that the plan will experience a scenario that matches the assumed return in each year as capital
markets can be volatile from year to year. Therefore, contribution amounts can vary in the future.
Salary Increases: When a plan participant experiences a salary increase that was greater than assumed, this
produces a loss representing the cost of an increase in anticipated plan benefits for the participant as
compared to the previous year. The total gain or loss associated with salary increases for the plan is the
sum of salary gains and losses for all active participants.
Payroll Growth: The plan’s payroll growth assumption, if one is used, causes a predictable annual increase
in the plan’s amortization payment in order to produce an amortization payment that remains constant as
a percentage of payroll if all assumptions are realized. If payroll does not increase according to the plan’s
payroll growth assumption, the plan’s amortization payment can increase significantly as a percentage of
payroll even if all assumptions other than the payroll growth assumption are realized.
Demographic Assumptions: Actuarial results take into account various potential events that could happen
to a plan participant, such as retirement, termination, disability, and death. Each of these potential events
is assigned a liability based on the likelihood of the event and the financial consequence of the event for
the plan. Accordingly, actuarial liabilities reflect a blend of financial consequences associated with
various possible outcomes (such as retirement at one of various possible ages). Once the outcome is
known (e.g. the participant retires) the liability is adjusted to reflect the known outcome. This adjustment
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 22
produces a gain or loss depending on whether the outcome was more or less favorable than other outcomes
that could have occurred.
Contribution risk: This risk results from the potential that actual employer contributions may deviate from
actuarially determined contributions, which are determined in accordance with the Board’s funding policy.
The funding policy is intended to result in contribution requirements that if paid when due, will result in
a reasonable expectation that assets will accumulate to be sufficient to pay plan benefits when due.
Contribution deficits, particularly large deficits and those that occur repeatedly, increase future
contribution requirements and put the plan at risk for not being able to pay plan benefits when due.
Impact of Plan Maturity on Risk
For newer pension plans, most of the participants and associated liabilities are related to active members who
have not yet reached retirement age. As pension plans continue in operation and active members reach
retirement ages, liabilities begin to shift from being primarily related to active members to being shared amongst
active and retired members. Plan maturity is a measure of the extent to which this shift has occurred. It is
important to understand that plan maturity can have an impact on risk tolerance and the overall risk
characteristics of the plan. For example, plans with a large amount of retired liability do not have as long of a
time horizon to recover from losses (such as losses on investments due to lower than
expected investment returns) as plans where the majority of the liability is attributable to active members. For
this reason, less tolerance for investment risk may be warranted for highly mature plans with a
substantial inactive liability. Similarly, mature plans paying substantial retirement benefits resulting in a small
positive or net negative cash flow can be more sensitive to near term investment volatility,
particularly if the size of the fund is shrinking, which can result in less assets being available for
investment in the market.
To assist with determining the maturity of the plan, we have provided some relevant metrics in the table
following titled “Plan Maturity Measures and Other Risk Metrics.” For a better understanding of the overall
Plan and the impact of these risks, please refer to the consolidated CORP valuation report.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 23
Plan Maturity Measures and Other Risk Metrics
Tiers 1 & 2
06/30/2018 06/30/2019 06/30/2020
Support Ratio
Total Actives 4 3 3
Total Inactives 8 9 9
Actives / Inactives 50.0% 33.3% 33.3%
Asset Volatility Ratio
Market Value of Assets (MVA) 1,378,623 1,414,433
Total Annual Payroll 202,246 204,074
MVA / Total Annual Payroll 681.7% 693.1%
Accrued Liability (AL) Ratio
Inactive Accrued Liability 1,756,856 1,792,133 1,777,255
Total Accrued Liability 2,945,307 3,240,399 3,374,933
Inactive AL / Total AL 59.6% 55.3% 52.7%
Funded Ratio
Actuarial Value of Assets (AVA) 1,337,558 1,424,947 1,504,732
Total Accrued Liability 2,945,307 3,240,399 3,374,933
AVA / Total Accrued Liability 45.4% 44.0% 44.6%
Net Cash Flow Ratio
Net Cash Flow * (288) (892)
Market Value of Assets (MVA) 1,378,623 1,414,433
Net Cash Flow / MVA (0.0%) (0.1%)
* Determined as total contributions minus benefit payments. Administrative expenses are typically included but are considered
part of the net interest rate assumption for this plan.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 24
VIII. SUMMARY OF CURRENT PLAN
The following is a summary of the benefit provisions provided in Title 38, Chapter 5, Article 6 of the Arizona
Revised Statutes.
Membership Full-time employees of a participating employer in a designated
position, whose customary employment is at least 40 hours each
week. Includes employees hired after July 1, 2018 only if they are a
judiciary probation or surveillance officer who makes the irrevocable
election to participate in the plan.
Benefit Tiers Benefits differ for members based on their hire date:
Tier Hire Date
1 Hired before January 1, 2012
2 Hired on or after January 1, 2012 but before July 1,
2018
3 Hired on or after July 1, 2018
Salary Salary is the amount including base salary, shift and military
differential pay, and holiday pay, paid to an employee on a regular
payroll basis. For Tier 3 members, salary is limited by statutory cap
($70,000 with adjustments by the Board).
Average Monthly Benefit Tier 1:
Salary One-thirty-sixth of the highest total salary during a period of thirty-six
consecutive months of service within the last one hundred twenty
months of service.
Tier 2 & 3:
One-sixtieth of the highest total salary during a period of sixty
consecutive months of service within the last one hundred twenty
months of service.
Credited Service Total periods of service, both from service other State plans and those
compensated periods of service for which the member made
contributions to the fund.
Normal Retirement
Date Tier 1:
First day of the month following attainment of 1) age 62 with 10
years of Credited Service, 2) 20 (25, if dispatcher) years of Cred-
ited Service, or 3) age and Credited Service points equal to 80.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 25
Tier 2:
First day of month following the attainment of 1) age 52.5 with 25
years of Credited Service, or 2) age 62 with 10 years of Credited
Service.
Tier 3:
First day of month following the attainment of age 55 with 10 years
of Credited Service.
Benefit Tier 1:
2.50% times Credited Service (up to 20 years) times Average
Monthly Salary. If Credited Service exceeds 20 years, an additional
2.00% accrual is provided for up to five years. If Credited Service
exceeds 25 years, the additional accrual for service in excess of 20
years is increased to 2.50%. Maximum benefit equals 80% of
Average Monthly Salary.
Tier 2:
2.50% times Credited Service times Average Monthly Salary
(maximum benefit equals 80% of Average Monthly Salary).
Tier 3:
Benefit multiplier (below) times Average Monthly Benefit Salary
times Credited Service (maximum benefit of 80% of Average
Monthly Benefit Salary):
Credited Service Benefit Multiplier
10 years, but less than 15 1.25%
15 years, but less than 20 1.50%
20 years, but less than 22 1.75%
22 years, but less than 25 2.00%
25+ years 2.25%
Form of Benefit For married retirees, an annuity payable for the life of the member
with 80% continuing to the eligible spouse upon death. For unmarried
retirees, the normal form is a single life annuity.
Early Retirement Only applicable to Tier 3 members:
Date Attainment of age 52.5 and 10 years of Credited Service.
Benefit Actuarial equivalent of Normal Retirement benefit.
Disability Benefit – Duty-Related
Eligibility Total and permanent disability incurred in performance of duty.
Arizona Corrections Officer Retirement Plan
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Benefit Amount The greater of 1) 50% of Average Monthly Salary, and 2) the Normal
Retirement pension that the member is entitled to receive.
Disability Benefit – Ordinary
Eligibility Total and permanent disability not incurred in performance of duty.
Benefit Amount
Dispatchers Normal Retirement pension that the member is entitled to receive
prorated on Credited Service (maximum 25 years) over 25.
All Others Normal Retirement pension that the member is entitled to receive
prorated on Credited Service (maximum 20 years) over 20.
Pre-Retirement Death Benefit
Payable to Eligible Survivor Payable to eligible spouse for life; payable to eligible children until
adopted, age 18, or age 23 if full-time student.
Service Incurred 100% of Average Monthly Salary
Non-Service Incurred 40% of Average Monthly Salary.
No survivors Two times member’s accumulated contributions.
Vesting (Termination)
Deferred Annuity Tier 1:
For those with 10 or more years of Credited Service, an annuity based
on two times member’s accumulated contributions, deferred to age
62. Member is not entitled to survivor benefits, benefit increases, or
group health insurance subsidy.
Return of Contributions Tier 1:
Lump sum payment of accumulated contributions, plus additional
amount based on years of credited service.
Service Additional % of Contributions
Less than 5 years 0%
5 years 25%
6 years 40%
7 years 55%
8 years 70%
9 years 85%
10+ years 100%
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 27
Tiers 2 & 3:
Lump sum payment of accumulated contributions, with interest at rate
determined by the Board.
Cost-of-Living Adjustment Payable to retired member or survivor of retired member
Tiers 1 & 2
Compound cost-of-living adjustment on base benefit. First payment is
made on July 1, 2018, with annual adjustments effective every July 1
thereafter.
Cost-of-living adjustment will be based on the average annual
percentage change in the Metropolitan Phoenix-Mesa Consumer Price
Index published by the United states Department of Labor, Bureau of
Statistics. Maximum increase of 2%.
Tier 3
Compound cost-of-living adjustment on base benefit beginning earlier
of fist calendar year after the 7th anniversary of retirement or when the
retired member reaches 60 years of age.
A cost-of-living adjustment shall be paid on July 1 each year that the
funded ratio for members hired on or after July 1, 2018 is 70% or
more.
The cost-of-living adjustment will be based on the average annual
percentage change in the Metropolitan Phoenix-Mesa Consumer Price
Index published by the United States Department of Labor, Bureau of
Statistics. The cost-of-living adjustment will not exceed:
2%, if funded ratio for members who are hired on or after July 1,
2018 is 90% or more;
1.5%, if funded ratio for members who are hired on or after July
1, 2018 is 80-90%;
1%, if funded ratio for members who are hired on or after July 1,
2018 is 70-80%.
Reverse Deferred Retirement Option
Plan (Reverse DROP):
Eligibility Tier 1 and eligible for normal pension with at least 24 years of
Credited Service (25 years for dispatchers). Must not have been
awarded disability pension.
Reverse DROP Date First day of month immediately following completion of required
Credited Service or date not more than 60 consecutive months before
the date the member elects to participate in the Reverse DROP,
whichever is later.
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Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 28
Benefit Amount Calculated based on Credited Service and Average Monthly Salary as
of the Reverse DROP Date.
Reverse DROP Lump Sum Accumulated benefit amounts (with interest) from Reverse DROP
date to the date the member elected to participate in Reverse DROP.
Interest is equal to the yield on five-year Treasury note as of the first
day of the month, as published by the Federal Reserve Board.
Post-Retirement Health Insurance Subsidy
Eligibility Retired member or survivor who elect health coverage provided by
the state or participating employer.
Maximum Subsidy Amounts Member Only With Dependents
(monthly) Medicare Eligible $100 $170
One w/ Medicare N/A $215
Not Medicare Eligible $150 $260
Employee Contributions Tiers 1 and 2:
Non-dispatchers: 8.41% of salary, or 50/50 split of total employer and
employee costs, whichever is lower, until the plan is 100% funded.
Minimum contribution of 7.65% of salary.
Dispatchers: 0.45% less than non-dispatcher rate until plan is 100%
funded; equal thereafter.
Tier 3:
66.7% of the Normal Cost plus 50% of a level-dollar amortiza-
tion of unfunded actuarial accrued liability over a closed pe-
riod not to exceed 10 years.
Employer Contributions Tiers 1 & 2:
Normal Cost, plus amortization of unfunded actuarial accrued
liability over a closed period not to exceed 20 years. Contribu-
tion will never be less than 6% of payroll.
Tier 3:
33.3% of the Normal Cost plus 50% of a level-dollar amortiza-
tion of unfunded actuarial accrued liability over a closed pe-
riod not to exceed 10 years.
Changes to Benefit Provisions Since the Prior Valuation
None.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 29
IX. ACTUARIAL FUNDING POLICY
The purpose of this Actuarial Funding Policy is to record the funding objectives and policy set by the Board for
the Arizona Corrections Officer Retirement Plan. The Board establishes this Funding Policy to help ensure the
systematic funding of future benefit payments for members of the Retirement System.
This funding policy was reviewed by the Board annually for several years following initial adoption until the
2017 experience study. Subsequently, it shall be reviewed every five years in conjunction with the experience
study, although some adjustments may be warranted sooner to properly reflect Tier 3 benefits and changes to
amortization methodology.
Funding Objectives
1. Maintain adequate assets so that current plan assets plus future contributions and investment earnings are
sufficient to fund all benefits expected to be paid to members and their beneficiaries.
2. Maintain stability of employer contribution rates, consistent with other funding objectives.
3. Maintain public policy goals of accountability and transparency. Each policy element is clear in intent and
effect, and each should allow an assessment of whether, how and when the funding requirements of the
plan will be met.
4. Promote intergenerational equity. Each generation of members and employers should incur the cost of
benefits for the employees who provides services to them, rather than deferring those costs to future
members and employers.
5. Provide a reasonable margin for adverse experience to help offset risks.
6. Continue progress of systematic reduction of the Unfunded Actuarial Accrued Liability (UAAL).
Elements of Actuarial Funding Policy
1. Actuarial Cost Method
a. The Entry Age Normal level percent of pay actuarial cost method of valuation shall be used in
determining the Actuarial Accrued Liability (AAL) and Normal Cost. Differences in the past between
assumed experience and actual experience (“actuarial gains and losses”) shall become part of the AAL.
The Normal Cost shall be determined on an individual basis for each active member.
2. Asset Smoothing Method
a. The investment gains or losses of each valuation period, resulting from the difference between the
actual investment return and assumed investment return, shall be recognized annually in level amounts
over seven years in calculating the Actuarial Value of Assets.
b. The Actuarial Value of Assets so determined shall be subject to a 20% corridor relative to the Market
Value of Assets.
Arizona Corrections Officer Retirement Plan
Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 30
3. Amortization Method
a. The Actuarial Value of Assets are subtracted from the computed AAL. Any unfunded amount is
amortized as a level percent of payroll over a closed period. If the Actuarial Value of Assets exceeds
the AAL, the excess is amortized over an open period of 20 years and applied as a credit to reduce the
Normal Cost otherwise payable.
4. Funding Target
a. The targeted funded ratio shall be 100%.
b. The maximum amortization period shall be 30 years.
c. If the funding ratio is between 100% and 120%, a minimum contribution equal to the Normal Cost will
be made.
5. Risk Management
a. Assumption Changes
i. The actuarial assumptions used shall be those last adopted by the PSPRS Board based on the most
recent experience study and upon the advice and recommendation of the actuary. In accordance
with best practices, the actuary shall conduct an experience study every five years. The results of
the study shall be the basis for the actuarial assumption changes recommended to the PSPRS Board.
ii. The actuarial assumptions can be updated during the five-year period if significant plan design
changes or other significant events occur, as advised by the actuary.
b. Amortization Method
i. The amortization method, Level Percent Closed, will ensure full payment of the UAAL over a
finite, systematically decreasing period not to exceed 30 years. The amortization period will be
reviewed once the period reaches 15 years.
c. Risk Measures
i. The following risk measures will be annually determined to provide quantifiable measurements of
risk and their movement over time.
1. Classic measures currently determined
Funded ratio (assets / liability)
2. UAAL / Total Payroll
Measures the risk associated with contribution decreases relative impact on the ability to
fund the UAAL. An increase in this measure indicates an increase in contribution risk.
3. Total Liability / Total Payroll
Measures the risk associated with the ability to respond to liability experience through
adjustments in contributions. An increase in this measure indicates an increase in
experience risk.
Arizona Corrections Officer Retirement Plan
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X. GLOSSARY
Actuarial Accrued Liability – Computed differently under different funding methods, the actuarial accrued
liability generally represents the portion of the actuarial present value of benefits attributable to service credit
earned (or accrued) as of the valuation date.
Actuarial Present Value of Benefits – Amount which, together with future interest, is expected to be sufficient
to pay all benefits to be paid in the future, regardless of when earned, as determined by the application of a
particular set of actuarial assumptions; equivalent to the actuarial accrued liability plus the present value of
future normal costs attributable to the members.
Actuarial Assumptions – Assumptions as to the occurrence of future events affecting pension costs. These
assumptions include rates of investment earnings, changes in salary, rates of mortality, withdrawal, disablement,
and retirement as well as statistics related to marriage and family composition.
Actuarial Cost Method – A method of determining the portion of the cost of a pension plan to be allocated to
each year; sometimes referred to as the "actuarial funding method." Each cost method allocates a certain portion
of the actuarial present value of benefits between the actuarial accrued liability and future normal costs.
Actuarial Equivalence – Series of payments with equal actuarial present values on a given date when valued
using the same set of actuarial assumptions.
Actuarial Present Value - The amount of funds required as of a specified date to provide a payment or series of
payments in the future. It is determined by discounting future payments at predetermined rates of interest, and
by probabilities of payments between the specified date and the expected date of payment.
Actuarial Value of Assets – The value of cash, investments, and other property belonging to the pension plan
as used by the actuary for the purpose of the actuarial valuation. This may correspond to market value of assets,
or some modification using an asset valuation method to reduce the volatility of asset values.
Asset Gain (Loss) – That portion of the actuarial gain attributable to investment performance above (below) the
expected rate of return in the actuarial assumptions.
Amortization – Paying off an interest-discounted amount with periodic payments of interest and (generally)
principal, as opposed to paying off with a lump sum payment.
Amortization Payment – That portion of the pension plan contribution designated to pay interest and reduce the
outstanding principal balance of unfunded actuarial accrued liability. If the amortization payment is less than
the accrued interest on the unfunded actuarial accrued liability the outstanding principal balance will increase.
Assumed Earnings Rate – The interest rate used in developing present values to reflect the time value of money.
Decrements – Events which result in the termination of membership in the system such as retirement, disability,
withdrawal, or death.
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Actuarial Valuation Report as of June 30, 2020 – Town of Oro Valley - Dispatchers (556) 32
Entry Age Normal (EAN) Funding Method – A standard actuarial funding method whereby each member’s
normal costs (service costs) are generally level as a percentage of pay from entry age until retirement. The
annual cost of benefits is comprised of the normal cost plus an amortization payment to reduce the UAL.
Experience Gain (Loss) – The difference between actual unfunded actuarial accrued liabilities and anticipated
unfunded actuarial accrued liabilities during the period between two valuation dates. It is a measurement of the
difference between actual and expected experience, and may be related to investment earnings above (or below)
those expected or changes in the liability due to fewer (or greater) than expected numbers of retirements, deaths,
disabilities, or withdrawals, or variances in pay increases relative to assumed pay increases. The effect of such
gains (or losses) is to decrease (or increase) future costs.
Funded Ratio – A measure of the ratio of the actuarial value of assets to liabilities of the system. Typically, the
assets used in the measure are the actuarial value of assets as determined by the asset valuation method. The
funded ratio depends not only on the financial strength of the plan but also on the asset valuation method used
to determine the assets and on the funding method used to determine the liabilities.
Market Value of Assets (MVA) – The value of assets as they would trade on an open market.
Normal Cost – Computed differently under different funding methods, generally that portion of the actuarial
present value of benefits allocated to the current plan year.
Unfunded Actuarial Accrued Liability (UAAL) – The excess of the actuarial accrued liability over the valuation
assets; sometimes referred to as "unfunded past service liability". UAL increases each time an actuarial loss
occurs and when new benefits are added without being fully funded initially and decreases when actuarial gains
occur.