HomeMy WebLinkAboutItem 11 - POB Policy Presentation
PENSION & OPEB RESERVE POLICY
Current Reserve Policies 2 expenditures (not currently funded)equal to 3% of operating –Catastrophic Event Reserves •expenditures (nearly fully funded). equal to 5% of operating –Economic
Contingency Reserves •fully funded)–current status currently, does not include Measure A & P or transfers, operating expenditures (approximately $30 million equal to 15% of -General
Fund Operating Reserve •
Proposed New Reserve Policies 3 upon fully funding of the Pension Reserve Fund.calculated POB savings plus 50% of surplus funds at year end Funding allocation is equal to 50% of -POB
Bond Call Fund •upon fully funding of the Pension Reserve Fund.calculated POB savings plus 50% of surplus funds at year end Funding allocation is equal to 50% of –OPEB Reserve Fund
•surplus funds at year end.allocation is equal to 75% of calculated POB savings plus 75% of Funding –Pension Reserve Fund (Including POB, 115 Trust) •reserve fundsfunds at year end.
Remaining 25% is allocated towards existing expenditures. Funding allocation is equal to 75% of surplus 15% of operating –Pension Reserve Fund (No POB) •
Recent Actions 4 the issuance of Pension Obligation Bonds. actions necessary to begin the judicial process to allow for In September 2020, City Council approved the validation •Bond
& Disclosure Counsel.to represent the City as Rauth, Carlson, & YoccaStradling, In August 2020, City Council approved an agreement with •Stifel to represent the City as Underwriter.Also
in July 2020, City Council approved an agreement with •a potential pension obligation bond.NHA Advisors to represent the City as Financial Advisor for In July 2020, City Council approved
an agreement with •
Pension Obligation Bonds Pros and Cons of POB’s•4%-are around 3.5Current Pension Obligation Bond interest rates •on that debt annually (~$25 Million)The City is required to pay CalPERS
7% interest •millionCurrent unfunded pension liability of $355 •
6 allocable portion of lease debt-* Estimated General Fund$42 Million Par Lease Bonds* (2.00% to 5.00% Interest Rates)$354 Million CalPERS UAL (7% Interest Rate)CalPERS UAL + Lease Revenue
BondsCurrent General Fund Liabilities Millions2049204820472046204520442043204220412040203920382037203620352034203320322031203020292028202720262025202420232022 $45 $40 $35 $30 $25 $20
$15 $10
POB Options
8 Savings SummaryPreliminary POB Options
Pension Obligation Bond Goals investment shortfallssetting aside funds to weather future CalPERS Create pension funding policies that support •Reduce interest paid towards pensions•term
savings-and medium-Create short•scheduleCreate sustainable pension debt repayment •
CalPERS/Market Conditions 19 adds to market volatility.-COVID•amortization schedules (larger payments).year -Each CalPERS shortfall will result in new, 20•likelihood of a market correction.now,
valuations are extreme, increasing the Although the stock market is near all time highs •million in unfunded liability for the City.of 4.7%. This will result in an additional $22 CalPERS
finished FY 2020 with investment returns •
LONGFISCAL YEAR 2022 TO 2031TERM FINANCIAL PLAN (LTFP)-
Long 12(without Pension Obligation Bonds)2031 –Term Financial Plan FY 2022 -
Long 13(without Pension Obligation Bonds)2031 –Term Financial Plan FY 2022 -
Long 14(with Pension Obligation Bonds)2031 –Term Financial Plan FY 2022 -
Long 15(with Pension Obligation Bonds)2031 –Term Financial Plan FY 2022 -
Pension Reserve Fund Balance Projections 16(PERS 7% Returns)
Pension Reserve Fund Balance Projections 17(PERS 7% Returns)
Pension Reserve Fund Balance Projections 18(PERS 6% Returns)
Pension Reserve Fund Balance Projections 19(PERS 6% Returns)
CalPERS UAL Payment Schedule vs Est. Annual 20 Pension Obligation Bonds (POB)
Staff Recommendation General Fund Reserve PolicyReserve Fund Policy and Amending the Approve Resolution for the Pension & OPEB •
Next Steps for approval by February 2021Bring preliminary Official Statement to Council •proposed pension obligation bond structure.Return to Council by January 2021 with •
City Council Comments/Feedback