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RFP No. 21-025 <br />EXHIBIT B <br />causes of growing pension liabilities, but very few, if any, had a plan to fund increasing UAL <br />payments. This next section is a focus on UAL funding options including the following: <br />1. Targeting Strategies <br />2. Use of Reserves & One -Time Monies for Addition Discretionary Payments (ADPs) <br />3. Leveraged Refunding <br />4. Tax -Exempt Exchange <br />5. Pension Obligation Bonds <br />Targeting Strategies <br />Before we commence the discussion regarding funding options, it is important to understanding <br />the impact of using "targeting strategies". When making Additional Discretionary Payments <br />(ADPs), assuming the City has available cash to do so, CalPERS requires each agency to specify <br />the Amortization Bases to apply payments. <br />The primary purpose of developing <br />a customized pension model is to <br />determine, with precision, the <br />financial impact of each funding <br />solution. <br />Making Additional Discretionary <br />Payments (ADPs), the City is <br />principally prepaying a loan. <br />The City has a total of 46 <br />Amortization Bases (totaling $710 <br />million UAL), with terms ranging <br />from 6 years to 29 years. <br />$180,000 <br />$160,000 <br />$140,000 <br />$120,000 <br />$100,000 <br />$80,000 <br />$60,000 <br />$40,000 <br />$20,000 <br />$0 <br />TARGETING STRATEGIES <br />$1 Million UAL: 10-Year vs.30-Year Amortization <br />■ 10 Year = $1,413,000 Payments <br />■ 30-Year = $2,761,000 Payments <br />lilt 111111111111111 <br />1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 <br />The City should consider applying additional monies toward its UAL based on its financial <br />objectives: <br />• Maximize Total Interest Costs Savings - target long-term Bases (e.g., 30 year). <br />• Maximize Short -Term Cash Flow Savings - target short term Bases (e.g., 5-15 year). <br />All future funding decisions will utilize the concept of targeting strategies to tailor the application <br />of additional payments to meet the City's financial objectives. <br />Use of Reserves & One Time Monies for Additional Discretionary Payments (ADPs) <br />The unfunded liability is comprised of 46 Amortization Bases, which are effectively loan payments <br />to CalPERS @7.0%. The City should always consider the "opportunity cost" of its <br />financial/investment decision in context of this ever-growing pension liability. <br />