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File #: 20-0313    Version: 1
Type: Gen. Bus. - Staff Report Status: Agenda Ready
In control: City Council Regular Meeting
On agenda: 10/20/2020 Final action:
Title: Consider the Issuance of Pension Obligation Bonds for Long-Term CalPERS Pension Liabilities and Adopt a Pension Policy (Finance Director Charelian). APPROVE
Attachments: 1. Finance Subcommittee Report (September 26, 2019), 2. Finance Subcommittee Report (July 6, 2020 and July 22, 2020), 3. Draft Pension Policy (July 22, 2020), 4. PowerPoint Presentation (October 6, 2020)
TO:
Honorable Mayor and Members of the City Council

THROUGH:
Bruce Moe, City Manager

FROM:
Steve S. Charelian, Finance Director
Henry Mitzner, Controller
Libby Bretthauer, Senior Financial Analyst
Julie Bondarchuk, Senior Accountant

SUBJECT:Title
Consider the Issuance of Pension Obligation Bonds for Long-Term CalPERS Pension Liabilities and Adopt a Pension Policy (Finance Director Charelian).
APPROVE
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Recommended Action
RECOMMENDATION:
The Finance Subcommittee and staff recommend that the City Council approve the issuance of Pension Obligation Bonds (POBs), and adopt a Pension Policy. Staff further recommends issuing POBs at 100% of the UAL at the time of issuance (currently estimated at $91.5 million) to yield the highest present value savings and take advantage of historically low borrowing rates.
Body
FISCAL IMPLICATIONS:
Paying at least the interest due on the City's CalPERS Unfunded Actuarial Liability (UAL) of an estimated $91.5 million is a priority for the City; otherwise, the UAL balance will continue to grow. Issuance of Pension Obligation Bonds can save the City up to $31,800,000 (present value) in pension amortization cash payments over the next 25 years. The savings is calculated by taking the difference between making amortization payments to CalPERS compared to debt service payments over the same period.

BACKGROUND:
The City provides retirement benefits to its employees by contracting with the California Public Employees' Retirement System (CalPERS). CalPERS offers a defined benefit plan where retirement benefits are based on a formula, rather than contributions and earnings to a savings plan. Retirement benefit formulas are calculated based on an employee's years of service credit, age at retirement, and final compensation, which is determined by an employee's average salary, excluding overtime, for a defined period of employment. Retirement formulas for employee groups var...

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