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Pension Debt Refinancing and Related Bond Financing <br />March 16, 2021 <br />Page 3 <br />5 <br />5 <br />8 <br />Maximum Refinancing Amount to Authorize <br />The proposed resolution and attached agreements must identify the maximum amount of <br />the debt refinancing. As recommended by staff, the City Council adopted Unfunded <br />Employee Pension Liability Cost Reduction Policy includes a refinancing cap of 90% of <br />the debt. The most recent actuarial valuation received from CalPERS calculates the <br />pension debt as a total of $707 million at June 30, 2019 for the miscellaneous and safety <br />plans combined. Using the FY19-20 CalPERS investment return of 4.7% for FY19-20, <br />and the assumed return of 7.0% for FY20-21, the CalPERS Pension Outlook Tool <br />estimates the City’s pension debt at June 30, 2021 will be $744 million. <br />The maximum refinancing amount to be authorized is $672 million ($670 million <br />represents the Principal balance), calculated as 90% of the $744 million plus up to $2 <br />million for costs of issuance paid from refinancing proceeds. The City Financial Adviser <br />has provided a good faith estimate confirming the up to amount for a potential debt <br />issuance (Exhibit 4). <br />ENVIRONMENTAL IMPACT <br />There is no environmental impact associated with this action. <br />FISCAL IMPACT <br />If the City issues approximately $672 million in bonds, the total cash flow savings is <br />projected as follows: <br />On a Net Present Value (NPV) basis, savings over 25 years is approximately $182 <br />million. If comparison is made between “Estimated total reductions in payments vs. <br />CalPERS estimate of payments”, the City projects to save approximately $223 million. <br />Furthermore, the savings assumptions noted above is based on the bonds carrying an <br />average rate of three percent (3%), assuming current interest rates as of March 2021, <br />with the actual rate subject to market conditions at the time of pricing. <br /> <br />EXHIBIT(S) <br />1. Resolution <br />2. Trust Agreement <br />3. Bond Purchase Agreement <br />4. Good Faith Estimate <br />Submitted By: <br />Kathryn Downs, Executive Director Finance and Management <br />Services <br />Approved By: Kristine Ridge, City Manager