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Item 40 - Refinancing City’s Pension Obligations with California Public Employees Retirement System
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08/17/2021 Regular
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Item 40 - Refinancing City’s Pension Obligations with California Public Employees Retirement System
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Agenda Packet
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Clerk of the Council
Item #
40
Date
8/17/2021
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<br />50 <br />4826-7904-2280v7/200434-0005 <br />Occasionally, because of general market conditions or because of adverse history or economic prospects <br />connected with a particular issue, secondary marketing in connection with a particular issue is suspended or <br />terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing <br />circumstances. Such prices could be substantially different from the original purchase price. <br />In addition, the City will enter into a continuing disclosure undertaking pursuant to Rule 15c2-12 in <br />connection with the issuance of the Bonds. Any material failure to comply with such undertaking and Rule 15c2- <br />12 in the future may adversely affect the liquidity of the affected Bonds and their market price in the secondary <br />market. See the caption “CONTINUING DISCLOSURE.” <br />Changes in Law <br />There can be no assurance that the electorate of the State will not adopt additional initiatives or that the <br />State Legislature will not enact legislation that will amend the laws or the Constitution of the State in a manner <br />that results in a reduction of General Fund revenues of the City and consequently, has an adverse effect on the <br />security for the Bonds. <br />CONSTITUTIONAL AND STATUTORY LIMITATIONS <br />ON TAXES AND APPROPRIATIONS <br />Article XIIIA of the State Constitution <br />On June 6, 1978, State voters approved an amendment (commonly known as both Proposition 13 and <br />the Jarvis-Gann Initiative) to the State Constitution. The amendment, which added Article XIIIA to the State <br />Constitution, among other things affects the valuation of real property for the purpose of taxation in that it defines <br />the full cash property value to mean “the county assessor’s valuation of real property as shown on the 1975/76 <br />tax bill under ‘full cash value’, or thereafter, the appraised value of real property newly constructed, or when a <br />change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to <br />reflect inflation at a rate not to exceed 2% per year, or a reduction in the consumer price index or comparable <br />local data at a rate not to exceed 2% per year, or reduced in the event of declining property value caused by <br />damage, destruction or other factors including a general economic downturn. The amendment further limits the <br />amount of any ad valorem tax on real property to 1% of the full cash value, except that additional taxes may be <br />levied to pay debt service on indebtedness approved by the voters prior to December 1, 1978 and bonded <br />indebtedness for the acquisition or improvement of real property approved on or after December 1, 1978 by two- <br />thirds of the votes cast by the voters voting on the proposition (55% in the case of certain school facilities). <br />Property taxes that are subject to Proposition 13 are a significant source of the City’s General Fund revenues. <br />See the caption “CITY FINANCIAL INFORMATION—Property Taxes.” <br />Legislation enacted by the State Legislature to implement Article XIIIA provides that all taxable <br />property is shown at full assessed value as described above. Tax rates for voter approved bonded indebtedness <br />are also applied to 100% of assessed value. <br />Future assessed valuation growth allowed under Article XIIIA (for new construction, change of <br />ownership or 2% annual value growth) is allocated on the basis of “situs” among the jurisdictions that serve the <br />tax rate area within which the growth occurs. Local agencies and school districts share the growth of “base” <br />revenue from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation the <br />following year. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above the <br />1% limit except for taxes to support indebtedness approved by the voters as described above. <br />Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the <br />event of declining property values caused by damage, destruction or other factors, and to provide that there <br />would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed <br />in a disaster and in certain other limited circumstances.
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