HomeMy WebLinkAboutSS3 - Pension Progress, Debt Service, Bond Ratings - PowerPoint (Staff)Agenda Item No. SS3
September 23, 2014
About Pension Liabilities
City Council Study Session
9/23/2014
How We Fund Facilities
General Fund
Contributions
Development
Impact Fees
4 1
FT
Investment
Earnings
Reasonable
Amount of
De bt
(if Necessary)
All Project
i Expenditures
If we didn't issue some debt, what
might not be built new?
Sunset Ridge Park
Marina Park
West Newport Community Center
Replacing Fire Stations 2 (Lido) & 5 (CdM)
Replacing CdM Library
Police HQ Replacement
Reasonable debt is part of our history
'41.
SitiC
Lg
How Rating Agencies View the City
"Low Debt Profile" - Fitch
r "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
Debt Affordability
$200,000,000
$175,000,000
$150,000,000
$125,000,000
$100,000,000
$75,000,000
$50,000,000
$25,000,000
63
Debt Service as % of GF Revenues Trend
5.5%
2014 2015 2016 2017 2018
Budgeted Projected Projected Projected
Net Debt Service General Fund Revenues
2019
Projected
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
Q: So is it $232M or $126M?
_ ° � i �_ _ IAA �y _,,. a „ s a a . a i • �
J
Time Value of Money - Present Value
Present
Value
$ 3000 $ 3000 $ 3000
0 1 2 3
$2679
$2392
$2135
$1906
$1702
# 10,814
Future
Value
$ 3000 $ 3000 $15,000
4
Is it $126M or $232M?
p °F-a i vc A r year "'M yea r
c I 2 3 4
Present Value
$126M
Future Value
$232M
year
30
Assumes 4.44% Growth Rate
Impact of Investment Losses
$900
$800
$700
$600
- $500
c
0
$400
$300
$200
$100
2007 2008 2009 2010 2011 2012 2013 2014
Fiscal Year
Unfunded Pension Liability Trend
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
5-
$40.41M increase is
<— due to changes in
mortality and other
actuarial assumptions
of 6 -30,
$255M
2009 2010 2011 2012 2013 2014
Fiscal Year
2014
Pension Progress
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 $1 13M in interest /30 years
Safety UAL retired in 25 years
Misc UAL retired in 21 years
"Rose" Award from OC Tax
Pension Costs and Employee
Contributions then and now
2004 Payment to PERS
Estimated
Payment
PERS
I Paid by City
I Paid by employees
Pension Progres�lm
Employees contribute- $7.4M this year
100 fewer FT employees since 08 -09
New pension tiers
• 2nd Tier
• 3rd Tier (State Pension Reform Act tier)
Fixed amortization period ( "Fresh Start ")
Pay more now, save $1 13M in interest /30 years
Safety UAL retired in 25 years
Misc UAL retired in 21 years
"Rose" Award from OC Tax
About a "Fresh Start "?
xtg000
14x000
160,000
t44600
114000
164666
SM
60AM
44600
AM
Outstanding Balance of Amortization Base
Unfunded Liability
Yew 1 Yew 6 Yea 11 Yew 16 Yen 71 Year 16 Yen 31 Yea 36 Yen 41 Yea, 46
— CwrmtPbIkV — Newvdky
The example chart is for illustrative purposes only and is not reflective of the City's unfunded pension obligation.
t Savings=
1/30 years
OCTax.org
Orange County Taxpayers Association
What more can be done?
Another Fresh Start?
Alternatively, more discretionary payments
Thoughtful outsourcing
Continue partnership with employees
Still need to stay competitive w /other agencies
Reform at the State level
PIERS 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
iity.
For more information
DanM@newportbeachca.gov
949- 644 -3123
Dkiff @newportbeachca.gov
949- 644 -3001