HomeMy WebLinkAboutSS3 - Pension Progress, Debt Service, Bond Ratings - Handout 2SEW pol> .
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About Debt,
About Pension Liabilities
City Council Study Session
9/23/2014
How We Fund Facilities
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General Fund
Contributions
Development
Impact Fees
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Investment
Earnings
OU
L Reasonable
Amount of
Debt
kk (If Necessary)
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Project
Expenditures
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I we didn't issue some debt, what
might not be built now?.L-, -Vmq�
Sunset Ridge Park
Marina Park
West Newport Community Center
Replacing Fire Stations 2 (Lido) & 5 (CdM)
Replacing CdM Library
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Police HQ Replacement.
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Reasonable - - history
How Rating Agencies View the City
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► "Low Debt Profile" - Fitch
► "Superior Financial Management" - Fitch
► "Very Strong Reserves" - S &P
► "Very strong Economic base" S &P
S &P Affirmed Rating - March 2014
Fitch Affirmed Rating - August 2014
Debt Affordability
2015 Debt Service as a % of General Fund Revenues
■ Net Debt Service ■ GF Revenues
`...debt service and retiree benefit contributions, remain
affordable. "
-Fitch Ratings, August 2014
ON -Mli
Debt Service as % of GF Revenues Trend
$200,000,000 _ - --
$175,000,000
$150,000,000
$125,000,000
$100,000,000
$75,000,000
$50,000,000
$25,000,000
2014 2015 2016 2017 2018 2019
Budgeted Projected Projected Projected Projected
Net Debt Service ! : General Fund Revenues
Q: Why not retire the Civic Center debt
now?
It costs more.
• Triggers a $44M early redemption premium
• Loss of Build America Bond (BAB) subsidy
Opportunity Cost:
• Deplete strategic savings plans and rainy day funds
• Limits flexibility to build community driven projects
So is it $232M or $1 26M?
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Time Value of Money - Present value
Present Future
Value Value
$ 3000 $ 3000 $ 3000 $ 3000 $ 3000 $15,000
0 1 2 3 4 S J
$2679 ,N
$2392
$2135
$1906 do
$1702
$ 10,814
Is it $1 26M or $232M?
year
G
Present Va I u
$126M
im
JLYI
2
7%4-1
4
Future Valiue
$232M
year
30
Assumes 4.44% Growth Rate
Impact of Investment Losses
$900
$800
$700
$600
$500
N
C
g $400
$300
$200
$100
$170M
Shortfall
2007 2008 2009
2010 2011 2012 2013 2014
Fiscal Year
Unfunded Pension Liability Trenlif
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
2009 2010 2011 2012 2013 2014
Fiscal Year
$40.4M increase is
due to changes in
mortality and other
actuarial assumptions
-30, 2014
55M
Pension Progres�;-
Employees contribute- $7.4M this year
New pension tiers
• 2nd Tier
• 3rd Tier (State Pension Reform Act tier)
100 fewer FT employees since 08 -09
Fixed amortization period ( "Fresh Start ")
• Pay more now, save $11 3M in interest /30 years
• Safety UAL retired in 25 years
• M i sc UAL retired in 21 years
"Rose" Award from OC Tax
2004 Payment to PERS
YYe.
Estimated 2015 Payment to PERS
Paid by City
Paid by employees
Ki Ai I* m
!011M
► Employees contribute- $7.4M this year
► 100 fewer FT employees since 08 -09
► New pension tiers
o 2nd Tier
o 3rd Tier (State Pension Reform Act tier)
► Fixed amortization period ( "Fresh Start ")
• Pay more now, save $11 3M in interest /30 years
• Safety UAL retired in 25 years
• Misc UAL retired in 21 years
► "Rose" Award from OC Tax
700,(M
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LV=
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an,nm
111,UW
Pill 1111,el
Outstanding Balance of Amortization Base
Unfunded Liability
O�dWay
DPW �aY
Interest Savings=
$1 13M/30 years
year!
Year6
Year 11
Year W
Year 11
Year 76
YeAr)1
Year 36
Year 41
Year db
—furrwrt F%j4Y
—NewPW
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The eyamole chart is for illustrative nurnoses only and is not reflective of the City's unfunded pension obligation.
Orange UO in
® Another Fresh Start?
o Alternatively, more discretionary payments
® Thoughtful outsourcing
Continue partnership with employees
o Still need to stay competitive w /other agencies
® Reform at the State level
o PERS Board and specialty pays
Not practical or legal:
0 "Get out of PERS entirely"
",Just move everyone to a 401 K plan"
Discretionary Payments Option
ility.
i
o Dan M @newportbeachca.gov
949- 644 -3123
o DI<iff @newportbeachca.gov
949- 644 -3001