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

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45 4826-7904-2280v7/200434-0005 attributable to a piece of property (adjusted for inflation) does a county assessor reinstate the Proposition 13 Value. Decreases in the assessed value of taxable property within the City resulting from a natural disaster or other calamity, economic recession, reclassification by ownership or use or as a result of the implementation of Proposition 8 all may have an adverse impact on property tax collections by the City, and consequently, the General Fund revenues that are available to make debt service payments on the Bonds. Increasing Retirement-Related Costs The City is required to make contributions to CalPERS and to the OPEB Benefit plan for City employees and retirees. Such obligations are a significant financial obligation of the City and could increase in the future. Actual contribution rates will depend on a variety of factors, including but not limited to actual investment returns and future changes to benefits or actuarial assumptions. Pension related payments in future years may increase as a result of losses in CalPERS’ portfolio resulting from stock market declines. See the caption “THE CITY—COVID-19 Outbreak.” There can be no assurances that actual increases in required pension related payments will not be greater than the amounts which are currently projected to be required by the City. See the captions “CITY PENSION PLANS” and “CITY FINANCIAL INFORMATION—Other Post-Employment Benefits.” Dependence on State for Certain Revenues A number of the City’s revenues are collected and dispersed by the State (such as sales taxes and the VLF) or allocated in accordance with State law (most importantly, property taxes). Therefore, State budget decisions can have an impact on City finances. In the event of a material economic downturn in the State, including as a result of the COVID-19 outbreak that is discussed under the caption “THE CITY—COVID-19 Outbreak,” there can be no assurance that any resulting revenue shortfalls to the State will not reduce revenues to local governments (including the City) or shift financial responsibility for programs to local governments as part of the State’s efforts to address any such related State financial difficulties. See the caption “STATE OF CALIFORNIA BUDGET INFORMATION.” Litigation The City may be or become a party to litigation that has an impact on the General Fund. Although the City maintains certain insurance policies that provide liability coverage under certain circumstances and with respect to certain types of incidents (as discussed under the caption “THE CITY—Risk Management”), the City cannot predict what types of liabilities may arise in the future. See the caption “LITIGATION.” Natural Disasters The occurrence of any natural disaster in the City, including, without limitation, earthquake, wildfire, drought, high winds, landslide or flood, which results in significant damage within the City or otherwise significantly impacts the economy of the City could materially adversely affect the financial condition of the City. The City maintains liability insurance and property casualty insurance (exclusive of earthquake insurance) for City infrastructure. However, there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. See the caption “THE CITY—Risk Management.” Earthquakes are considered a threat to the City due to the City’s highly active seismic region and the proximity of fault zones, including the San Andreas, the Newport-Inglewood-Rose Canyon and the Peralta Hills fault zones. These and other fault zones could influence the entire coastal portion of the State. In addition, there are likely to be unmapped faults in or near the City. Portions of the City lie within Seismic Hazard Zones for