HomeMy WebLinkAbout2020-09-15 Item 11 - POB Presentation
PENSION OBLIGATION BONDS
Recent Actions 2 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 •
4 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
6 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•Create
short and medium term savings•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 •$35 million in unfunded liability for the City.-$25of 4.7%. This will likely result in an additional
CalPERS finished FY 2020 with investment returns •
LONGFISCAL YEAR 2021 TO 2026TERM FINANCIAL PLAN (LTFP)-
LTFP Forecast Summary 10 FY 2021 Adopted Budget with Adjustments FY2026)–(FY2021
Staff Recommendation bonds and additional actions related thereto.related to the issuance of pension obligation Authorizing Judicial Validation Proceedings •of the Trust Agreement and
Purchase ContractApprove the form and authorize the execution •Issuance of Pension Obligation BondsApprove the Resolution Authorizing the •
Next Steps for approval by January 2021Bring preliminary Official Statement to Council •proposed pension obligation bond structure.finalized pension funding policies and Return to Council
by December 2020 with •October/November to discusspolicies and return to Council in Staff will draft pension reserve funding •
City Council Comments/Feedback