8D Consent 2011 0919 - Laserfiche WebLink

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Authorizing Pension Obligation Bonds Indenture of Trust September 19, 2011 The bonds will be issued under an indenture of trust between the City and the trustee, U.S. Bank. The final form of the indenture of trust will be approved by the City Council following the conclusion of the validation proceedings. The indenture of trust provides for the authorization and terms of the bonds, the deposit and application of the bond proceeds, the security of the bonds and investment of the proceeds, the role of the trustee, and other provisions. Other Refunding Source In addition to issuance of the pension obligation bonds, staff is analyzing the opportunity to utilize a loan from the Water Pollution Control Plant (WPCP) Fund reserves to partially cover the side fund refinancing. Potentially, the amount of the bond financing could be reduced by up to $6,000,000. A loan in this amount from the WPCP Fund potentially could be made at a lower rate than dictated by the bond market and yet higher than the rate reflected by the City's current investment portfolio return. Ultimately, the WPCP rate payers also would benefit from this approach. A combination of refunding the pension side fund through the pension obligation bond and a loan from the WPCP Fund may result in the overall greatest benefit and savings to the General Fund. Any additional savings from using a combination of an interfund loan and a public bond issuance may be mitigated if taxable bond interest rates continue to fall, providing a more favorable borrowing cost on the pension obligation bonds. Staff is continuing to evaluate the feasibility of this approach. Previous City Council Action The City Council held a Work Session with a presentation by John Bartel of Bartel Associates regarding the Ca1PERS Actuarial Issues — June 30, 2009 Issues. City Council Committee Review and Actions The City Council Finance Committee reviewed the option of refunding the Ca1PERS side fund with pension obligation bonds at its meeting on May 6, 2011. The proposed resolution authorizing the pension obligation bonds and filing the required validation actions was reviewed on September 9, 2011. Fiscal Impact The City's underwriter estimates that the City's pension obligation bonds could be sold at an all - in interest rate, including the cost of issuance, of around 4.61 %. This results in a potential reduction of over 3.0% in the interest rate paid by the City, a potential General Fund savings of approximately $480,000 annually through 2024. Staff is also analyzing the opportunity to utilize a loan from the Water Pollution Control Plant Fund reserves to partially cover the side fund refinancing.