Laserfiche WebLink
Resolution authorizing the issuance and refinancing of the City’s Pension obligations with <br />CalPERS <br />August 17, 2021 <br />Page 4 <br />1 <br />9 <br />9 <br />3 <br />On March 16, 2021, the City Council approved a resolution authorizing the issuance of <br />Bonds and approving both the Trust and Bond Purchase Agreements. Prior to the closing <br />of bonds, the City will finalize the previously authorized agreements to include the final <br />pricing of the debt issuance. <br />Fresh Start Amortization <br />After applying the bond proceeds to the existing pension debt, staff will request a “Fresh <br />Start” amortization for the remaining pension debt to CalPERS. The fresh start will reduce <br />the amortization period for the remaining debt, contributing to the overall savings. The <br />City will repay the remaining debt to CalPERS faster to save additional interest. <br />A CalPERS policy requires an additional cash payment to reduce the debt when <br />requesting a Fresh Start. Staff recommends holding $40 million of the current year <br />spending authorization to fund this additional cash payment and request a Fresh Start, <br />after the CalPERS Board selects a discount rate and investment strategy in November. <br />Comparison of Other Cities Recent Pension Debt Refinancing Activity <br />The following table compares the estimated City refinancing compared with other <br />agencies that have recently refinanced pension debt. <br />Sale Date City Amount ($M)S&P Rating All-In TIC <br />8/25/211 Santa Ana 1 Up to $5131 AA 2.9%1 <br />8/3/21 Whittier $133.90 AA 2.59% <br />7/14/21 Covina $62.80 AA 2.64% <br />7/1/21 Redondo Beach $226.18 AA 2.82% <br />5/26/21 El Segundo $144.14 AA+2.59% <br />4/28/21 Manhattan Beach $91.28 AAA 2.75% <br />3/17/21 Huntington Beach $363.65 AA+2.94% <br />3/3/21 Orange $286.49 AA 2.75% <br />2/11/21 Chula Vista $350.03 AA 2.53% <br />2/9/21 Downey $113.59 AA 2.63% <br />2/2/21 Monterey Park $106.34 AA 2.67% <br />1/13/21 El Cajon $147.21 AA 2.87% <br />11/10/20 Gardena $101.49 AA-3.33% <br />10/29/20 Placentia $52.95 BBB+4.25% <br />10/27/20 Arcadia $90.00 AAA 2.70% <br />1Estimate <br />Risk of Refinancing Pension Debt <br />There is a risk associated with refinancing pension debt. CalPERS assumes it will earn <br />7% interest on its investments. If CalPERS consistently earns more than the assumption <br />over the life of the debt, the City will pay more with the refinancing. The CalPERS <br />investment rates of return follow.