Report to Mayor and City Council
Tuesday, November 19, 2019
Discussion
SUBJECT:
Title
PENSION OBLIGATION BONDS (CITY COUNCIL)
Body
I. SUMMARY
The City participates in the California Public Employees Retirement System (PERS) for funding current and retired employees' retirement costs. As of June 30, 2018, the City's plan was approximately 64.8% funded. The current unfunded actuarial liability (UAL) for the plan as of June 30, 2020 is estimated to be $107 million. The City Council created an Ad Hoc Committee to review funding scenarios to pay down the UAL and future savings by issuing Pension Obligation Bonds (POBs) and make a recommendation to the City Council.
II. RECOMMENDATION
Recommendation
The Ad Hoc Committee recommends that City Council:
1. Direct staff to prepare documents necessary to approve the issuance of Pension Obligation Bonds to pay down the full amount of the UAL as of June 30, 2020, with expected reduction in the PERS payments of an estimated $45 million over 24 years,
2. Authorize staff to use the same financing team that which was assembled for Measure M & R Bonds and RFPs already submitted, and
3. Direct staff to determine if a reimbursement for prior years PERS payment can be included in the bond issuance.
Body
III. ALTERNATIVES
TAKE another action deemed appropriate by City Council.
IV. BACKGROUND
The City has a PERS plan for its general employees, the "Miscellaneous Plan," that includes all full-time employees and some part-time staff. As of June 30, 2018, the most recent PERS valuation date, the plan was 64.8% funded.
The City's UAL for the Miscellaneous Plan is comprised of multiple "amortization bases", which are positive and negative amounts generated each year based on the performance of the PERS Investment Fund and changes in the actuarial assumptions as shown in Exhibit 1. Each amortization base has a separate payment schedule over a fixed period of years. The amortization of these UAL Bases over differing ...
Click here for full text