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

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21 4826-7904-2280v7/200434-0005 value computations were performed by an independent casualty actuary, in connection with their actuarial study of the City’s self-insured workers’ compensation and liability programs undertaken as of June 30, 2020. COVID-19 Outbreak The spread of the novel strains of coronavirus collectively called SARS-CoV-2, which causes the disease known as COVID-19 (“COVID-19”), and local, State and federal actions in response to COVID-19, have impacted the City’s operations and finances. The World Health Organization has declared the COVID-19 outbreak to be a pandemic and, on March 13, 2020, the President declared a national emergency, freeing up funding for federal assistance to state and local governments. On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Stabilization Act (the “CARES Act”), which provided, among other measures, $150 billion in financial assistance to states, tribal governments and local governments to provide emergency assistance to those most significantly impacted by COVID-19. Under the CARES Act, local governments were eligible for reimbursement of certain costs which were expended to address the impacts of the pandemic. The City received a total reimbursement of $32.4 million under the CARES Act. The funds received by the City under the CARES Act are not available for payment of debt service on the Bonds and cannot be used to backfill any City revenue losses related to COVID-19. On December 27, 2020, the President signed the $900 billion Coronavirus Response and Relief Supplemental Appropriations Act. Although the act did not provide additional financial assistance to state and local governments, it did extend the deadline (to October 2021) for them to use unspent funds that were previously approved under the CARES Act. On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the “ARP Act”), a $1.9 trillion economic stimulus package designed to help the United States’ economy recover from the adverse impacts of the COVID-19 pandemic. The ARP Act includes approximately $350 billion in aid to state and local governments such as the City, consisting of both direct funding from the United States Department of Treasury and program moneys that will flow from other federal agencies. Half of the aid to state and local governments was distributed in spring 2021, with the other half scheduled for 2022. The City has been allocated a total of approximately $128.4 million. This funding is available for a broad range of uses, including responding directly to the health emergency, addressing its negative economic impacts with assistance to households and small businesses, restoring government services that were reduced in response to pandemic-related revenue losses and making certain necessary infrastructure improvements. On June 15, 2021, the City Council appropriated $79.5 million within five broad spending categories. The appropriation includes the first 50% or $64.2 million allocation and $15.3 million of an additional ARP allocation specifically restricted to emergency housing assistance. The State also took various actions. On March 4, 2020, as part of the State’s response to address the outbreak, the Governor declared a state of emergency. On March 19, 2020, the Governor issued a mandatory Statewide shelter-in-place order applicable to all non-essential services. A phased re-opening of various sectors in the State began in mid-2020 and the economy was fully reopened on June 15, 2021. In addition, the Governor extended the deadline to file and pay spring 2020 property taxes for residential and certain commercial property owners and first quarter 2020 sales and use tax returns by 90 days for all but the very largest taxpayers. As a result of the extended deadline to file sales and use tax returns, it is estimated that up to 361,000 California businesses with less than $5 million in taxable annual sales were permitted to defer up to $50,000 in sales tax and enter into 12-month payment plans at zero interest. These actions have resulted in delays in the receipt by the City of its portion of such tax payments. The effects of the COVID-19 outbreak and governmental actions responsive to it have altered the behavior of businesses and people in a manner that is having significant negative impacts on global and local