Finance Highlights 2011 0909 - Laserfiche WebLink

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CITY OF SAN LEANDRO MEMORANDUM DATE: September 9, 2011 TO: Finance Committee FROM: Lianne Marshall, Interim City Manager BY: Jim O'Leary, Interim Finance Director SUBJECT: Resolution Authorizing Issuance of Pension Obligation Bonds and Filing the Required Validation Actions to Refund the Outstanding Side Fund Obligations of the City to the California Public Employees Retirement System SUMMARY AND RECOMMENDATION Staff recommends that the Finance Committee recommend that the City Council authorize the issuance of pension obligation bonds and the filing of the required validation actions to refinance the outstanding CalPERS side fund obligations of the City. The bond transaction would refund the existing side fund obligation over the same term in the same amount plus issuance costs and take advantage of lower bond interest rates. The validation action is required whereby the superior court determines the validity of this pension obligation. BACKGROUND The City's Safety Plan in the CalPERS retirement system is a cost - sharing multiple - employer plan with pooling (cost- sharing) arrangements for participating employers. All risks, rewards, and costs, including benefit costs, are shared and are not attributable to the individual employers. A single valuation covers plan members and the same contribution rate applies to all employers. A menu of benefit provisions and other requirements are established by state statute within the Public Employees' Retirement Law. The City has contractually selected optional benefit provisions from the benefit menu and adopted these benefits by City Council resolution. At the time the City was required to join the Safety Risk Pool in 2004, a side fund was created to account for the difference between the funded status of the pool and the funded status of the previous City Plan. Today, the City's total outstanding CalPERS pension obligation and the required annual employer contribution is determined by the City's share of the Safety Risk Pool and separate amortization of the City's side fund. The proposed transaction would refinance the existing side fund obligation to take advantage of low bond market rates. It would not change benefits owed to existing or prior employees. DISCUSSION Effective June 30, 2004, CalPERS created risk pools by pooling assets and liabilities across groups of employers to produce large risk sharing pools intended to dramatically reduce or