Item 40 - Refinancing City’s Pension Obligations with California Public Employees Retirement System

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TABLE OF CONTENTS i 4826-7904-2280v7/200434-0005 INTRODUCTION ........................................................ 1 General ................................................................... 1 The Bonds .............................................................. 1 Validation ............................................................... 2 Continuing Disclosure ............................................ 2 Miscellaneous ......................................................... 2 THE BONDS ............................................................... 2 General ................................................................... 2 Optional Redemption of the Bonds ........................ 3 Make-Whole Redemption of the Bonds ................. 3 Mandatory Sinking Fund Redemption of the Bonds ..................................................................... 5 Selection of Bonds for Redemption ........................ 5 Notice of Redemption ............................................ 6 SECURITY AND SOURCE OF PAYMENT FOR THE BONDS ............................................................... 7 Bond Payments ....................................................... 7 Revenue Fund ......................................................... 7 Limited Obligations ................................................ 7 Additional Bonds .................................................... 8 CITY PENSION PLANS ............................................. 8 General ................................................................... 8 California Public Employees’ Pension Reform Act of 2013 (PEPRA) ................................................... 9 Annual CalPERS Contributions ........................... 10 Normal Costs ........................................................ 10 Unfunded Accrued Liability Payments ................ 11 Potential Impacts on Future Required Contributions ........................................................ 12 GASB 68 Pension Information Provided in the Audited Financial Statements ............................... 13 PLAN OF REFINANCING ....................................... 17 ESTIMATED SOURCES AND USES OF FUNDS .. 17 FISCAL YEAR DEBT SERVICE REQUIREMENTS ..................................................... 18 THE CITY .................................................................. 18 General ................................................................. 18 Government and Administration .......................... 19 Development Activity in the City ......................... 20 Risk Management ................................................. 20 COVID-19 Outbreak ............................................ 21 CITY FINANCIAL INFORMATION ....................... 23 Accounting and Financial Reporting .................... 23 Fiscal Policies ....................................................... 24 Budget Procedure, Current Budget and Historical Budget Information .............................................. 24 Change in Fund Balance of the City General Fund ..................................................................... 29 General Fund Balance Sheets of the City ............. 30 Tax Revenues of the City ..................................... 30 Sales Taxes ........................................................... 31 Property Taxes...................................................... 32 Business License Taxes ........................................ 35 Utility Users’ Taxes ............................................. 35 Franchise Taxes .................................................... 35 Hotel Visitor’s Tax ............................................... 36 Other Taxes .......................................................... 36 Other Indebtedness ............................................... 36 City Investment Policy ......................................... 37 Other Post-Employment Benefits ......................... 38 City Financial Statements ..................................... 40 STATE OF CALIFORNIA BUDGET INFORMATION ........................................................ 41 Budget for State Fiscal Year 2022 ........................ 41 Potential Impact of State Financial Condition on the City ................................................................. 43 Future State Budgets ............................................ 43 RISK FACTORS ........................................................ 43 City Obligations ................................................... 43 Certain Risks Associated with Sales Tax and Other Local Tax Revenues ............................................. 44 Assessed Value of Taxable Property .................... 44 Increasing Retirement-Related Costs ................... 45 Dependence on State for Certain Revenues .......... 45 Litigation .............................................................. 45 Natural Disasters .................................................. 45 Climate Change .................................................... 46 Hazardous Substances .......................................... 46 Cybersecurity ....................................................... 47 Limitation on Sources of Revenues ...................... 47 Economy of City and State ................................... 47 Limitation on Remedies; Bankruptcy ................... 48 Limitation on Trustee’s Obligations ..................... 49 Limited Secondary Market ................................... 49 Changes in Law .................................................... 50 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS .................................................. 50 Article XIIIA of the State Constitution ................ 50 Proposition 19 ...................................................... 51 Article XIIIB of the State Constitution ................. 51 Proposition 62 ...................................................... 51 Proposition 218 .................................................... 52 Unitary Property ................................................... 53 Proposition 1A...................................................... 53 Proposition 22 ...................................................... 53 Proposition 26 ...................................................... 54 Future Initiatives .................................................. 54 TAX MATTERS ........................................................ 54 VALIDATION ........................................................... 55 CERTAIN LEGAL MATTERS ................................. 55 LITIGATION ............................................................. 56 RATING ..................................................................... 56 CONTINUING DISCLOSURE ................................. 56 UNDERWRITING ..................................................... 57 MUNICIPAL ADVISOR ........................................... 57 MISCELLANEOUS................................................... 58 APPENDIX A—AUDITED FINANCIAL STATEMENTS ............................................... A-1 APPENDIX B—ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE CITY OF SANTA ANA B-1 APPENDIX C—SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT ................................................ C-1 APPENDIX D—FORM OF BOND COUNSEL OPINION ........................................................ D-1 APPENDIX E—FORM OF CONTINUING DISCLOSURE CERTIFICATE ...................... E-1