Item 11 - Pension Debt Cost Savings Update

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Finance and Management Services www.santa-ana.org/finance Item # 11 City of Santa Ana 20 Civic Center Plaza, Santa Ana, CA 92701 Staff Report February 15, 2022 TOPIC: Pension Debt Cost Savings Update AGENDA TITLE: Pension Debt Cost Savings Update RECOMMENDED ACTION Receive and file and the pension debt cost savings update. EXECUTIVE SUMMARY The City has completed the project to refinance its debt to the employee pension plan. The result is significant long-term savings, immediate short-term savings, and a long-term strategy for predictable budgeting and cost reduction in 2029 and 2039 to coincide with Measure X revenue decreases. DISCUSSION Project History On February 2, 2021, the City Council adopted the Unfunded Employee Pension Liability Cost Reduction Policy and directed staff to proceed with pension debt refinancing. On September 21, 2021, staff reported the pension debt refinancing was complete with $425.8 million of bonds sold and the proceeds sent to the California Public Employee Retirement System (CalPERS), resulting in estimated savings with a net present value of $138 million. At that time, the remaining $40.6 million of the FY 2021-22 budget for pension debt payments was set aside in the Section 115 Trust for future additional pay- down of the pension debt. The next step in the pension cost-savings strategy was to wait until the CalPERS Board set its new discount rate (the interest-rate charged on the City’s pension debt), and then analyze the best way to apply the remaining $40.6 million to maximize long-term savings in accordance with the Policy noted above. On November 15, 2021, the CalPERS Board set the discount rate to 6.8 percent. On December 20, 2021, the City sent the remaining $40.6 million to CalPERS and acquired a 20-year fresh start amortization on the remaining debt. The original CalPERS