OC Fire Authority Agreement - Memo 6- 2014

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• Security Bond: OCFA required a bond equal to one month's payment as an assurance of payment in the event of the City's inability to make payment. Current bond value: $2,908,980 earning 0.20% interest and held by Grandpoint Bank, a financial institution agreed upon by both agencies. • The security bond is held in a Santa Ana escrow account that provides access to the funds to OCFA if the City does not make a monthly payment. As of March 2012 the City's general fiord cash balance was $6.9 million. The projected cash balance at the end of June 2014 is $34.8 million, roughly 5 times the value when OCFA required that provision. The City has a process in place to ensure OCFA's monthly payments are made. The City has not hissed or been late on any payments since the agreement started. • On June 11, 2014, the City Manager and staff met with the Finance and Budget Committee of OCFA to present the City's improved financial outlook and requested that the bond provision be eliminated. The Committee unanimously approved the request and will make the recommendation to the full board at the June 26, 2014 OCFA Board of Director's Meeting. Funds will be returned to the Risk Management Fund. • Termination of Agreement Provision: o The City entered into the OCFA JPA two years into a 20 year service contract (ending June 30, 2030). If the City chose to terminate the agreement the first opportuunity to withdrawal would be on June 30, 2020. A two year notice is required to be submitted no later than July 1, 2018 in order to exit in 2020. Thereafter the next termination opportunity would be in 2030, with a notice required in 2028. o Pension Liability Clause - In the event of termination or expiration of the agreement with OCFA, the City is required to pay OCFA the amount of the unfu ded pension liability that had accrued during the term of the Agreement. This would be payable upon separation. The City would be required to pay 50% of the cost to calculate such an amount would have 15 years to make the necessary payments with interest assuming a rate of return assumed by OCERS as its return of investment. This provision survives termination or expiration of the Agreement. • An actuary study will be required in order to determine the value of the unfirnded liability associated with the former Santa Ana Fire Department employees. The unfunded liability may fluctuate over time based on market conditions, benefit changes and disability retirements. • Prior to partnering with OCFA, the City's Fire Department annual PERS payment was $4.9M. Please let me know if you have any questions. Thank you. cc: Jorge Garcia Robert Cortez