City of Garden Grove Garden Grove Bruce A. Broadwater Mayor Dina Nguyen Mayor Pro Tem*

dollar value and on a per capita basis and as a percentage of city General Fund revenues. The City agrees with this finding. OC cities' unfunded pension liabilities have been increasing on a year over

year basis over the past several years as a result of the 2007-2009 Great Recession and as key actuarial assumptions have been changed by CalPERS and OCERS. The City agrees with this finding. There are risks to OC cities of changes to key actuarial assumptions including

revisions downward of expected returns on investment and the likely move by pension funds to using more realistic mortality assumptions, which would increase unfunded liabilities. The City agrees with this finding. 11222 Acacia Parkway • P.O.Box 3070 • Garden Grove, CA 92842 www.ci.garden-grove.ca.us City of Garden Grove's Response to Orange County Grand Jury Report, "Orange County Pension Liabilities - Budget Transparency Critically Needed." September 23, 2014

Locating city budget information on a city website is not always straightforward and prior year budgets are sometimes not posted by a city. The City disagrees wholly with this finding. Since fiscal year 2007-08, the City's annual budgets have been available on the City web page. City budgets posted online project revenues and expenditures for at most

one or two years into the future and sometimes do not show prior year data. The City disagrees wholly with this finding. All City of Garden Grove annual budgets posted online contain a delineated section, which shows a 5-year forecast of operational and capital budgets. City budgets often lack footnotes explaining key assumptions, risks, and

unusual changes in budgeted amounts or revenues and expenditures. The City disagrees wholly with this finding. The City of Garden Grove annual budget contains a transmittal letter that discusses unusual changes in the budgeted amounts, and extensively discusses the budget's underlying assumptions including risks, economic climate, major initiatives, and financial strategy that support the projected revenues and expenditures.

budgets sometimes do provide trend data City not the on accumulation/drawdown of reserves and lack details on the city's plan for the size of its reserves or their intended uses. The City disagrees partially with this finding. The City of Garden Grove does not have a general reserve policy as described in the Grand Jury report. Instead, the City sets aside funds specific to identified needs, potential exposure and accrued liabilities via internal service funds mechanisms.

Cities can control most future expenditures by increasing or decreasing budgets for those expenditures as funds are available. However, increases to annual required contributions to their pension systems are imposed externally, change unpredictably, and when they occur, are ramped up over two to five years. The City agrees with this finding.

City budgets posted online do not explicitly show the link between planned city pension expenditures and pension system actuarial reports and those reports' annual required contributions. Risks associated with predictions of future annual required pension contributions based on risk assessment data provided by their pension systems and/or based on their own analysis are not discussed. City of Garden Grove's Response to Orange County Grand Jury Report, "Orange County Pension Liabilities - Budget Transparency Critically Needed." September 23, 2014 The City disagrees partially with this finding. The City agrees that its annual budget does not show details of the pension expenditures or the pension actuarial reports. However, the City's Comprehensive Annual Financial Report (CAFR), consistent with Governmental Accounting Standards Board requirements, provides a detailed discussion of the City's pension system that provides the link between pension obligations, current year expenditures, and actuarial reports. Copies of the City's CAFR beginning from fiscal year 2004/05 to present are posted on the City's website. The CAFR can be reviewed along with the budget to get a complete financial picture of the city.

Pension costs for New (Post-PEPRA) employees will be substantially lower than for Legacy employees, but only a small percentage of current employees, typically only a few percent of total employees, are New. Substantially reduced pension costs for cities as a result of pension reform will not be realized for one or more decades. The City agrees with this finding.

CalPERS Annual Valuation Reports for Miscellaneous and Safety City employees are available to the public online for a very small number of cities. The City agrees with this finding.

OCERS provides pension plans for OCFA and OCSD employees, but there is no way to trace through publicly available sources OCERS unfunded pension liabilities to the city budgets which outsource to OCFA and OCSD for fire and police services. This finding does not apply to the City of Garden Grove as the City does not have pension plans with OCERS. Response to Recommendations