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Item # 9
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
September 21, 2021
TOPIC: Pension Debt Refinancing Update
AGENDA TITLE:
Pension Debt Refinancing Update
RECOMMENDED ACTION
Receive and file.
DISCUSSION
Background
On August 17, 2021, the City Council took the final action necessary to authorize issuance
of bonds to refinance the City’s pension debt. The purpose of this report is to provide the
final bond numbers and detail the next steps in the overall strategy to achieve long-term
pension debt savings.
On August 25, 2021, the City sold bonds to refinance a portion of its debt to the California
Public Employee Retirement System (CalPERS) for both the miscellaneous and safety
employee pension plans. The financing team’s analysis to maximize savings and
minimize risk determined the appropriate amount of bonds to sell.
Final Bond Numbers
Bonds Sold (par amount)$425,830,000
All-In True Interest Cost 2.816%
Net Present Value Savings $138,021,023
Costs of Issuance (paid from bond proceeds)$1,198,983
First Semi-Annual Bond Payment Date February 1, 2022
First Bond Payment Amount $4,372,062
Final Bond Maturity August 1, 2044
Portion of Existing Debt Refinanced 75%
The transaction closed on September 8, 2021 and CalPERS received the bond proceeds,
net of the costs of issuance. In compliance with the City Council adopted Unfunded
Employee Pension Liability Cost Reduction Policy, the City applied the bond proceeds to
the layers of pension debt with the longest amortization periods to maximize savings.
Pension Debt Refinancing Update
September 21, 2021
Page 2
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Exhibit 1 includes the following items:
Sources and Uses of Funds
Final bond pricing (transaction summary statistics)
Debt service schedule.
Next Steps in the Overall Strategy
The CalPERS Board will meet in November 2021 to set the discount rate for the next four
years. The discount rate is CalPERS investment earnings assumption and the interest
rate charged on employer pension debt. CalPERS recently decreased its discount rate
from 7.0% to 6.8% due to the FY20-21 investment return of 21.3%, in accordance with
CalPERS policy. In November 2021, the Board could choose to reset the discount rate
back to 7.00%, leave it at 6.80%, or reduce it to 6.75% or 6.50%.
Prior to issuing refinancing bonds, the estimated debt to CalPERS was $570,011,000,
based upon the new 6.80% discount rate. After sending the bond proceeds, the estimated
debt to CalPERS decreased to $145,379,983. If CalPERS reduces the discount rate
below 6.80% in November, the City’s debt to CalPERS will grow.
As reported on August 17, 2021, after the CalPERS Board makes its decision in
November 2021, the financing team will analyze the best way to apply the remaining
$40,604,672, currently held in the City’s Section 115 trust, of current-year spending
authorization to the CalPERS debt and request a Fresh Start to pay-off the remaining
debt faster.
The analysis and Fresh Start process may take a couple months to complete. Therefore,
staff expects to provide an estimate of long-term savings and introduce a future budget
strategy to the City Council with the February 15, 2022 City Council meeting agenda,
along with a final housekeeping adjustment to move the current-year spending
authorization into the correct accounts to reflect the first bond payment.
FISCAL IMPACT
Estimated net present value savings from the overall strategy including the refinanced
bonds is $138,021,063. Additional savings will be generated from the $40,604,672
payment and request to CalPERS for a Fresh Start on the City’s existing liability after
November 2021. Approximately 86% or $118,698,000 is attributable to the General Fund.
EXHIBIT(S)
1. Bond Final Pricing Numbers: Sources and Uses of Funds; Final Bond Pricing and
Debt Service Schedule
Submitted By: Kathryn Downs, Executive Director Finance and Management Services
Approved By: Kristine Ridge, City Manager
Aug 25, 2021 11:00 am Page 1
SOURCES AND USES OF FUNDS
CITY OF SANTA ANA
2021 Taxable Pension Obligation Bonds, Series A
August 25, 2021
FINAL PRICING NUMBERS
Sources:
Bond Proceeds:
Par Amount 425,830,000.00
425,830,000.00
Uses:
Project Fund Deposits:
FY22 UAL Prepayment 46,846,680.00
CalPERS Deposit (Misc)150,006,478.00
CalPERS Deposit (Safety)227,777,859.00
424,631,017.00
Delivery Date Expenses:
Cost of Issuance 383,924.98
Underwriter's Discount 815,058.02
1,198,983.00
425,830,000.00
EXHIBIT 1
Aug 25, 2021 11:00 am Page 2
BOND SUMMARY STATISTICS
CITY OF SANTA ANA
2021 Taxable Pension Obligation Bonds, Series A
August 25, 2021
FINAL PRICING NUMBERS
Dated Date 09/08/2021
Delivery Date 09/08/2021
First Coupon 02/01/2022
Last Maturity 08/01/2044
Arbitrage Yield 2.790384%
True Interest Cost (TIC) 2.807905%
Net Interest Cost (NIC) 2.827905%
All-In TIC 2.816174%
Average Coupon 2.813565%
Average Life (years) 13.348
Weighted Average Maturity (years) 13.348
Duration of Issue (years) 11.085
Par Amount 425,830,000.00
Bond Proceeds 425,830,000.00
Total Interest 159,920,506.44
Net Interest 160,735,564.46
Total Debt Service 585,750,506.44
Maximum Annual Debt Service 40,748,935.75
Average Annual Debt Service 25,581,727.81
Underwriter's Fees (per $1000)
Average Takedown 1.750000
Other Fee 0.164046
Total Underwriter's Discount 1.914046
Bid Price 99.808595
Par Average Average PV of 1 bp
Bond Component Value Price Coupon Life change
Serial Bond 201,205,000.00 100.000 2.221% 9.161 163,052.35
Term Bond (2044) 224,625,000.00 100.000 3.098% 17.098 366,138.75
425,830,000.00 13.348 529,191.10
All-In Arbitrage
TIC TIC Yield
Par Value 425,830,000.00 425,830,000.00 425,830,000.00
+ Accrued Interest
+ Premium (Discount)
- Underwriter's Discount -815,058.02 -815,058.02
- Cost of Issuance Expense -383,924.98
- Other Amounts
Target Value 425,014,941.98 424,631,017.00 425,830,000.00
Target Date 09/08/2021 09/08/2021 09/08/2021
Yield 2.807905% 2.816174% 2.790384%
Aug 25, 2021 11:00 am Page 4
BOND DEBT SERVICE
CITY OF SANTA ANA
2021 Taxable Pension Obligation Bonds, Series A
August 25, 2021
FINAL PRICING NUMBERS
Dated Date 09/08/2021
Delivery Date 09/08/2021
Period
Ending Principal Coupon Interest Debt Service
06/30/2022 4,372,061.82 4,372,061.82
06/30/2023 6,025,000 0.248% 10,999,118.20 17,024,118.20
06/30/2024 2,065,000 0.378% 10,987,744.35 13,052,744.35
06/30/2025 3,345,000 0.660% 10,972,803.00 14,317,803.00
06/30/2026 5,970,000 0.976% 10,932,630.90 16,902,630.90
06/30/2027 8,790,000 1.176% 10,851,812.10 19,641,812.10
06/30/2028 12,890,000 1.465% 10,705,707.65 23,595,707.65
06/30/2029 22,810,000 1.665% 10,421,395.15 33,231,395.15
06/30/2030 15,220,000 1.869% 10,089,271.00 25,309,271.00
06/30/2031 14,965,000 2.089% 9,790,730.68 24,755,730.68
06/30/2032 17,135,000 2.189% 9,446,878.68 26,581,878.68
06/30/2033 26,135,000 2.339% 8,953,687.28 35,088,687.28
06/30/2034 32,505,000 2.489% 8,243,513.73 40,748,513.73
06/30/2035 33,350,000 2.639% 7,398,935.75 40,748,935.75
06/30/2036 34,320,000 3.098% 6,427,265.70 40,747,265.70
06/30/2037 33,295,000 3.098% 5,379,909.35 38,674,909.35
06/30/2038 31,720,000 3.098% 4,372,827.00 36,092,827.00
06/30/2039 29,720,000 3.098% 3,421,121.40 33,141,121.40
06/30/2040 28,340,000 3.098% 2,521,772.00 30,861,772.00
06/30/2041 27,880,000 3.098% 1,650,924.20 29,530,924.20
06/30/2042 14,360,000 3.098% 996,626.60 15,356,626.60
06/30/2043 10,135,000 3.098% 617,199.05 10,752,199.05
06/30/2044 10,450,000 3.098% 298,337.40 10,748,337.40
06/30/2045 4,405,000 3.098% 68,233.45 4,473,233.45
425,830,000 159,920,506.44 585,750,506.44
Aug 25, 2021 11:00 am Page 5
BOND DEBT SERVICE
CITY OF SANTA ANA
2021 Taxable Pension Obligation Bonds, Series A
August 25, 2021
FINAL PRICING NUMBERS
Dated Date 09/08/2021
Delivery Date 09/08/2021
Period Annual
Ending Principal Coupon Interest Debt Service Debt Service
12/30/2021
06/30/2022 4,372,061.82 4,372,061.82 4,372,061.82
12/30/2022 6,025,000 0.248% 5,503,294.60 11,528,294.60
06/30/2023 5,495,823.60 5,495,823.60 17,024,118.20
12/30/2023 2,065,000 0.378% 5,495,823.60 7,560,823.60
06/30/2024 5,491,920.75 5,491,920.75 13,052,744.35
12/30/2024 3,345,000 0.660% 5,491,920.75 8,836,920.75
06/30/2025 5,480,882.25 5,480,882.25 14,317,803.00
12/30/2025 5,970,000 0.976% 5,480,882.25 11,450,882.25
06/30/2026 5,451,748.65 5,451,748.65 16,902,630.90
12/30/2026 8,790,000 1.176% 5,451,748.65 14,241,748.65
06/30/2027 5,400,063.45 5,400,063.45 19,641,812.10
12/30/2027 12,890,000 1.465% 5,400,063.45 18,290,063.45
06/30/2028 5,305,644.20 5,305,644.20 23,595,707.65
12/30/2028 22,810,000 1.665% 5,305,644.20 28,115,644.20
06/30/2029 5,115,750.95 5,115,750.95 33,231,395.15
12/30/2029 15,220,000 1.869% 5,115,750.95 20,335,750.95
06/30/2030 4,973,520.05 4,973,520.05 25,309,271.00
12/30/2030 14,965,000 2.089% 4,973,520.05 19,938,520.05
06/30/2031 4,817,210.63 4,817,210.63 24,755,730.68
12/30/2031 17,135,000 2.189% 4,817,210.63 21,952,210.63
06/30/2032 4,629,668.05 4,629,668.05 26,581,878.68
12/30/2032 26,135,000 2.339% 4,629,668.05 30,764,668.05
06/30/2033 4,324,019.23 4,324,019.23 35,088,687.28
12/30/2033 32,505,000 2.489% 4,324,019.23 36,829,019.23
06/30/2034 3,919,494.50 3,919,494.50 40,748,513.73
12/30/2034 33,350,000 2.639% 3,919,494.50 37,269,494.50
06/30/2035 3,479,441.25 3,479,441.25 40,748,935.75
12/30/2035 34,320,000 3.098% 3,479,441.25 37,799,441.25
06/30/2036 2,947,824.45 2,947,824.45 40,747,265.70
12/30/2036 33,295,000 3.098% 2,947,824.45 36,242,824.45
06/30/2037 2,432,084.90 2,432,084.90 38,674,909.35
12/30/2037 31,720,000 3.098% 2,432,084.90 34,152,084.90
06/30/2038 1,940,742.10 1,940,742.10 36,092,827.00
12/30/2038 29,720,000 3.098% 1,940,742.10 31,660,742.10
06/30/2039 1,480,379.30 1,480,379.30 33,141,121.40
12/30/2039 28,340,000 3.098% 1,480,379.30 29,820,379.30
06/30/2040 1,041,392.70 1,041,392.70 30,861,772.00
12/30/2040 27,880,000 3.098% 1,041,392.70 28,921,392.70
06/30/2041 609,531.50 609,531.50 29,530,924.20
12/30/2041 14,360,000 3.098% 609,531.50 14,969,531.50
06/30/2042 387,095.10 387,095.10 15,356,626.60
12/30/2042 10,135,000 3.098% 387,095.10 10,522,095.10
06/30/2043 230,103.95 230,103.95 10,752,199.05
12/30/2043 10,450,000 3.098% 230,103.95 10,680,103.95
06/30/2044 68,233.45 68,233.45 10,748,337.40
12/30/2044 4,405,000 3.098% 68,233.45 4,473,233.45
06/30/2045 4,473,233.45
425,830,000 159,920,506.44 585,750,506.44 585,750,506.44
Aug 25, 2021 11:00 am Page 9
FORM 8038 STATISTICS
CITY OF SANTA ANA
2021 Taxable Pension Obligation Bonds, Series A
August 25, 2021
FINAL PRICING NUMBERS
Dated Date 09/08/2021
Delivery Date 09/08/2021
Redemption
Bond Component Date Principal Coupon Price Issue Price at Maturity
Serial Bond:
08/01/2022 6,025,000.00 0.248% 100.000 6,025,000.00 6,025,000.00
08/01/2023 2,065,000.00 0.378% 100.000 2,065,000.00 2,065,000.00
08/01/2024 3,345,000.00 0.660% 100.000 3,345,000.00 3,345,000.00
08/01/2025 5,970,000.00 0.976% 100.000 5,970,000.00 5,970,000.00
08/01/2026 8,790,000.00 1.176% 100.000 8,790,000.00 8,790,000.00
08/01/2027 12,890,000.00 1.465% 100.000 12,890,000.00 12,890,000.00
08/01/2028 22,810,000.00 1.665% 100.000 22,810,000.00 22,810,000.00
08/01/2029 15,220,000.00 1.869% 100.000 15,220,000.00 15,220,000.00
08/01/2030 14,965,000.00 2.089% 100.000 14,965,000.00 14,965,000.00
08/01/2031 17,135,000.00 2.189% 100.000 17,135,000.00 17,135,000.00
08/01/2032 26,135,000.00 2.339% 100.000 26,135,000.00 26,135,000.00
08/01/2033 32,505,000.00 2.489% 100.000 32,505,000.00 32,505,000.00
08/01/2034 33,350,000.00 2.639% 100.000 33,350,000.00 33,350,000.00
Term Bond (2044):
08/01/2035 34,320,000.00 3.098% 100.000 34,320,000.00 34,320,000.00
08/01/2036 33,295,000.00 3.098% 100.000 33,295,000.00 33,295,000.00
08/01/2037 31,720,000.00 3.098% 100.000 31,720,000.00 31,720,000.00
08/01/2038 29,720,000.00 3.098% 100.000 29,720,000.00 29,720,000.00
08/01/2039 28,340,000.00 3.098% 100.000 28,340,000.00 28,340,000.00
08/01/2040 27,880,000.00 3.098% 100.000 27,880,000.00 27,880,000.00
08/01/2041 14,360,000.00 3.098% 100.000 14,360,000.00 14,360,000.00
08/01/2042 10,135,000.00 3.098% 100.000 10,135,000.00 10,135,000.00
08/01/2043 10,450,000.00 3.098% 100.000 10,450,000.00 10,450,000.00
08/01/2044 4,405,000.00 3.098% 100.000 4,405,000.00 4,405,000.00
425,830,000.00 425,830,000.00 425,830,000.00
Stated Weighted
Maturity Interest Issue Redemption Average
Date Rate Price at Maturity Maturity Yield
Final Maturity 08/01/2044 3.098% 4,405,000.00 4,405,000.00
Entire Issue 425,830,000.00 425,830,000.00 13.3478 2.7904%
Proceeds used for accrued interest 0.00
Proceeds used for bond issuance costs (including underwriters' discount) 1,198,983.00
Proceeds used for credit enhancement 0.00
Proceeds allocated to reasonably required reserve or replacement fund 0.00
Aug 25, 2021 11:00 am Page 10
PROOF OF ARBITRAGE YIELD
CITY OF SANTA ANA
2021 Taxable Pension Obligation Bonds, Series A
August 25, 2021
FINAL PRICING NUMBERS
Present Value
to 09/08/2021
Date Debt Service Total @ 2.7903844878%
02/01/2022 4,372,061.82 4,372,061.82 4,324,200.61
08/01/2022 11,528,294.60 11,528,294.60 11,245,201.52
02/01/2023 5,495,823.60 5,495,823.60 5,287,100.89
08/01/2023 7,560,823.60 7,560,823.60 7,173,590.08
02/01/2024 5,491,920.75 5,491,920.75 5,138,949.49
08/01/2024 8,836,920.75 8,836,920.75 8,155,182.51
02/01/2025 5,480,882.25 5,480,882.25 4,988,452.41
08/01/2025 11,450,882.25 11,450,882.25 10,278,670.58
02/01/2026 5,451,748.65 5,451,748.65 4,826,323.85
08/01/2026 14,241,748.65 14,241,748.65 12,434,450.26
02/01/2027 5,400,063.45 5,400,063.45 4,649,912.41
08/01/2027 18,290,063.45 18,290,063.45 15,532,585.71
02/01/2028 5,305,644.20 5,305,644.20 4,443,746.81
08/01/2028 28,115,644.20 28,115,644.20 23,224,258.65
02/01/2029 5,115,750.95 5,115,750.95 4,167,598.29
08/01/2029 20,335,750.95 20,335,750.95 16,338,768.12
02/01/2030 4,973,520.05 4,973,520.05 3,940,992.47
08/01/2030 19,938,520.05 19,938,520.05 15,581,787.90
02/01/2031 4,817,210.63 4,817,210.63 3,712,809.29
08/01/2031 21,952,210.63 21,952,210.63 16,686,601.87
02/01/2032 4,629,668.05 4,629,668.05 3,470,740.41
08/01/2032 30,764,668.05 30,764,668.05 22,746,110.81
02/01/2033 4,324,019.23 4,324,019.23 3,153,008.71
08/01/2033 36,829,019.23 36,829,019.23 26,485,632.25
02/01/2034 3,919,494.50 3,919,494.50 2,779,923.77
08/01/2034 37,269,494.50 37,269,494.50 26,069,876.12
02/01/2035 3,479,441.25 3,479,441.25 2,400,366.79
08/01/2035 37,799,441.25 37,799,441.25 25,717,936.48
02/01/2036 2,947,824.45 2,947,824.45 1,978,039.65
08/01/2036 36,242,824.45 36,242,824.45 23,984,907.54
02/01/2037 2,432,084.90 2,432,084.90 1,587,367.12
08/01/2037 34,152,084.90 34,152,084.90 21,983,584.58
02/01/2038 1,940,742.10 1,940,742.10 1,232,059.70
08/01/2038 31,660,742.10 31,660,742.10 19,822,921.06
02/01/2039 1,480,379.30 1,480,379.30 914,117.88
08/01/2039 29,820,379.30 29,820,379.30 18,160,382.79
02/01/2040 1,041,392.70 1,041,392.70 625,473.63
08/01/2040 28,921,392.70 28,921,392.70 17,131,536.34
02/01/2041 609,531.50 609,531.50 356,086.82
08/01/2041 14,969,531.50 14,969,531.50 8,624,830.96
02/01/2042 387,095.10 387,095.10 219,959.49
08/01/2042 10,522,095.10 10,522,095.10 5,896,711.50
02/01/2043 230,103.95 230,103.95 127,178.70
08/01/2043 10,680,103.95 10,680,103.95 5,821,681.09
02/01/2044 68,233.45 68,233.45 36,681.99
08/01/2044 4,473,233.45 4,473,233.45 2,371,700.09
585,750,506.44 585,750,506.44 425,830,000.00
Proceeds Summary
Delivery date 09/08/2021
Par Value 425,830,000.00
Target for yield calculation 425,830,000.00