City Debt Report

Sandra Talbott, nterim City Attorney Shirley Concolino, City Clerk Russell Fehr, City Treasurer
John F. Shirey, City Manager

City of Sacramento
City CounciI
915 Street, Sacramento, CA, 95814
www.CityofSacramento.org
Meeting Date: 1/8/2013 Report Type: Staff/Discussion
TitIe: City of Sacramento Long-Term LiabiIities Report and Presentation
Report ID: 2013-00021
Location: Citywide
Recommendation: Receive and file.
Contact: Russell Fehr, City Treasurer, (916) 808-5832, Office of the City Treasurer
Presenter: Russell Fehr, City Treasurer, Office of the City Treasurer, (916) 808-5832
Department: City Treasurer
Division: City Treasurer
Dept ID: 05001011
Attachments:
_____________________________________________________________________________________________________________
1-Description/Analysis
2-Background Report Regarding the Long-Term Financial Liabilities of the City
3-Presentation to the City Council
_________________________________________________________________________
City Attorney Review
Approved as to Form
Grace Arupo
1/3/2013 8:54:16 AM
City Treasurer Review
Reviewed for mpact on Cash and Debt
Russell Fehr
1/2/2013 11:55:01 AM
ApprovaIs/AcknowIedgements
Department Director or Designee: Russell Fehr - 1/3/2013 8:46:37 AM
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Description/AnaIysis
Issue: The City has nearly $2 billion in long-term financial liabilities. These liabilities have not
previously been presented to the City Council as a unit. Long-term financial issues and
trends are being integrated into the on-going budget and financial planning process.
PoIicy Considerations: Long-term financial information will be integrated into the development
of City fiscal policies where appropriate.
Economic Impacts: None
EnvironmentaI Considerations: None
SustainabiIity: Development long-term sustainable budgets requires consideration of long-
term financial issues and trends
Commission/Committee Action: None
RationaIe for Recommendation: The information presented will be further used in financial
planning and the budget process
FinanciaI Considerations: The long-term liabilities which are the subject of this report and
presentation are financial obligation of the City which must be paid, with interest, over the
next 30 years. The nature of these liabilities, trends in their reduction or growth, and
other issues association with those liabilities constitute critical information necessary for
the sound financial management of the City
Emerging SmaII Business DeveIopment (ESBD): Not applicable
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of Contents
8ackground
1he Long-1erm llnanclal LlablllLles
of Lhe ClLy of SacramenLo
8ussell lehr
ClLy 1reasurer
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of Contents
Cf Lhe ClLy of SacramenLo
2
Along wlLh Lhe severe shorL-Lerm flscal challenges broughL on by Lhe deep and prolonged recesslon,
Lhe ClLy also faces long-Lerm flnanclal lssues. ln developlng Lhe lmmedlaLe and shorLer Lerm
budgeLary plans lL ls lmporLanL also conslder and plan for Lhe long-Lerm flnanclal lssues.
1hls ls a reporL and a presenLaLlon regardlng long-Lerm flnanclal llablllLles of Lhe ClLy of SacramenLo.
Speclflcally, Lhe reporL and presenLaLlon focus on Lhose long-Lerm llablllLles whlch wlll be pald from
fuLure revenues, also referred Lo as unfunded llablllLles."
1hese long-Lerm llablllLles for whlch Lhe ClLy has noL currenLly seL aslde fundlng LoLal nearly $2 bllllon.
ln Lhe sLandard summary flnanclal presenLaLlons of Lhe Annual 8udgeL and Annual llnanclal 8eporL
(CAl8) Lhe long-Lerm llablllLles are noL presenLed LogeLher as a unlL, Lhey are, raLher, found scaLLered
ln Lhe presenLaLlon. 1he ClLy Manager requesLed Lhe ClLy 1reasurer prepare Lhe reporL and
presenLaLlon focuslng on Lhe long-Lerm llablllLles of Lhe ClLy. 1he goals of Lhls reporL are:
1. resenL Lhe dlfferenL Lypes and values of long-Lerm llablllLles LogeLher,
2. ldenLlfy Lrends, and
3. ulscuss promlnenL pollcy lssues.
Long-Lerm llablllLles
A long-Lerm llablllLy ls a flnanclal obllgaLlon arlslng from pasL evenLs or LransacLlons and payable more
Lhan one year ln Lhe fuLure. 1hls can Lake Lhe form of fuLure paymenLs Lo lndlvlduals or
organlzaLlons, Lhe fuLure provlslon of servlces, or fuLure Lransfer of asseLs. Lxamples of ClLy of
SacramenLo long-Lerm llablllLles lnclude ouLsLandlng prlnclpal debL balances, fuLure cosLs of
remedlaLlon of Loxlcs aL clLy land flll slLes, and fuLure penslon paymenLs Lo reLlrees and currenL
employees. A crlLlcal polnL ls LhaL Lhough Lhe paymenLs are made or servlce rendered ln Lhe fuLure,
Lhe obllgaLlons for whlch Lhose paymenLs are made have been lncurred ln Lhe pasL up Lo Lhe
lmmedlaLe presenL. 1he currenL level of long-Lerm llablllLles does noL lnclude any obllgaLlon lncurred
ln Lhe fuLure.
1he ClLy of SacramenLo has currenLly unfunded long-Lerm llablllLles ln excess of $1.9 bllllon. 1he
ma[or caLegorles of unfunded long-Lerm llablllLles lnclude debL, posL-reLlremenL beneflLs, and oLher
fuLure cosLs. 1he follow Lable glves Lhe values of Lhe ClLy's unfunded long-Lerm llablllLles:
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3
ClLy of SacramenLo Long-1erm LlablllLles
L|ab|||ty Va|ue
uebL $ 823 mllllon
8eneflLs $ 930 mllllon
CLher luLure CosLs $ 167 mllllon
1oLal $ 1,940 mllllon
lundlng Long-1erm LlablllLles
Long-Lerm llablllLles, by Lhelr very naLure, are pald ln Lhe fuLure. uependlng upon Lhe Lype of llablllLy
and dlscreLlonary declslons made by flnanclal enLlLy (Lhe ClLy), long-Lerm llablllLles are funded ln
dlfferenL ways. 1here are Lwo broad caLegorles: (1) paymenL of Lhe long-Lerm llablllLles ouL of fuLure
budgeLs wlLh fuLure revenues, and (2) seLLlng aslde funds aL Lhe Llme Lhe long-Lerm llablllLles are
belng lncurred. 1he flrsL meLhod ls Lyplcally used Lo pay debL, and Lhe second ls used Lo fund and pay
employee beneflLs. 1hese Lwo caLegorles, however, are noL muLually excluslve.
An example of Lhe fuLure paymenL caLegory ls debL and debL servlce. A long-Lerm llablllLy ls
esLabllshed when bonds are lssued and funds are borrowed. 1he long-Lerm llablllLy ls Lhe value of Lhe
ouLsLandlng prlnclpal on Lhe debL. 1he paymenLs of prlnclpal and lnLeresL over Llme are lncluded ln
annual budgeLs. 1he debL servlce paymenLs are funded wlLh revenues collecLed Lhe fuLure. 1hls
paymenL ln Lhe fuLure ls Lhe plan when Lhe funds are borrowed.
An example of seLLlng aslde funds whlle llablllLles are belng lncurred ls Lhe acLuarlal fundlng of
penslons. ln Lheory, an employee and Lhe employer would annually conLrlbuLe sufflclenL funds lnLo a
penslon plan so LhaL Lhose funds plus fuLure lnvesLmenL lncome on Lhose funds would be sufflclenL Lo
make penslon paymenLs Lo Lhe employee afLer reLlremenL.
Agaln, Lhe Lwo general meLhods are noL muLually excluslve. lunds Lo make fuLure debL servlce
paymenLs may be seL aslde early and lnvesLed so LhaL lnvesLmenL lncome would be avallable Lo make
fuLure debL servlce paymenLs. Conversely, some employee beneflL programs whlch could be funded
on an acLuarlal seL aslde basls are noL. aymenLs are made ouL of fuLure budgeLs funded wlLh fuLure
revenues.
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4
1he ClLy of SacramenLo fundlng of lLs long-Lerm llablllLles ls dlscussed ln deLall ln Lhls reporL. 1he
reallLy ls LhaL Lhe ClLy wlll have Lo pay down Lhese long-Lerm llablllLles
DL81
1he ClLy borrows funds for caplLal pro[ecLs and oLher caplLal needs such as acqulrlng land, bulldlng
and resLorlng faclllLles, and acqulrlng equlpmenL. 1he long-Lerm llablllLy for debL ls Lhe ouLsLandlng
prlnclpal balance of Lhe debL. Lven Lhough lnLeresL paymenLs wlll also be made ln Lhe fuLure, Lhe
value of Lhose lnLeresL paymenLs ls noL lncluded ln Lhe long-Lerm llablllLy.
1he ClLy's debL ls ln Lhree forms:
1. 8onded debL -- A securlLy lssued (sold) by Lhe ClLy paylng prlnclpal and lnLeresL aL regular
lnLervals over Llme ln exchange for up fronL fundlng. 8onds are negoLlable, belng Lraded on
secondary markeLs
2. Leases -- ShorL Lerm borrowlng used for equlpmenL. 1he equlpmenL ls leased over a flxed
perlod. AL Lhe end of Lhe lease Lhe ClLy Lyplcally owns Lhe equlpmenL. Leases Lyplcally have a
Lerm of flve years or less.
3. Loans -- lunds borrowed from oLher governmenLal enLlLles or flnanclal lnsLlLuLlons. aymenL
of prlnclpal and lnLeresL ls speclfled ln Lhe Lerms of Lhe loan.
4. Swap - 1hls ls assoclaLed wlLh Lhe klngs loan and assoclaLed debL lssue. lf Lhe loan ls prepald,
Lhen Lhe lnLeresL raLe swap ln place musL be pald off. 1he !une 30, 2012 value was $ 14
mllllon. 1hls would be an obllgaLlon of Lhe Leam.
1he ouLsLandlng leases are Lhrough banks or speclallzed lease provlders. 1he ouLsLandlng loans are
wlLh sLaLe agencles.
1he followlng graph lllusLraLes Lhe levels of ouLsLandlng ClLy debL. 1he LoLal debL was approxlmaLely
$823 mllllon as of !une 30, 2012.
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1he LoLal ClLy debL noL does lnclude Lhe debL of Lhe forme
ClLy elecLed Lo become Lhe successor agency. 1hls debL ls pald from a dedlcaLed properLy Lax
allocaLlon and ls noL a llablllLy of Lhe ClLy.
8educLlon of Long-1erm LlablllLles
1he annual debL servlce paymenLs made o
lncluded prlnclpal and lnLeresL componenLs. 1he long
are made. lf Lhe ClLy were Lo borrow no new funds, Lhen all debL would be pald off by 2033 wlLh Lhe
flnal paymenLs on Lhe 2006 debL lssue. CurrenL leases wlll be pald off ln flve years. 1he reducLlon ln
debL servlce paymenLs does noL exacLly maLch Lhe reducLlon ln Lhe long
reducLlon comes when debL lssues and lndlvldual loa
prlnclpal and debL servlce ls lllusLraLed ln Lhe followlng graph.
lnclude Lhe debL of Lhe former redevelopmenL agencles for whlch Lhe
allocaLlon and ls noL a llablllLy of Lhe ClLy.
1he annual debL servlce paymenLs made on ClLy debL lssues, Lhe loans, and Lhe equlpmenL leases
lncluded prlnclpal and lnLeresL componenLs. 1he long-Lerm llablllLles are reduced as Lhe paymenLs
debL servlce paymenLs does noL exacLly maLch Lhe reducLlon ln Lhe long-Lerm llablllLles.
reducLlon comes when debL lssues and lndlvldual loans or leases are pald off. 1he reducLlon of
prlnclpal and debL servlce ls lllusLraLed ln Lhe followlng graph.
3
r redevelopmenL agencles for whlch Lhe
n ClLy debL lssues, Lhe loans, and Lhe equlpmenL leases
Lerm llablllLles are reduced as Lhe paymenLs
Lerm llablllLles. 8udgeLary
1he reducLlon of
7 of 54
ShlfL of uebL 8urden Away lrom Ceneral lund
All of Lhe ouLsLandlng ClLy bond lssues are
enLered lnLo a long Lerm lease relaLlonshlp wlLh debL servlce Laklng Lhe form of lease paymenLs. uebL
securlLy ls ClLy owned land and faclllLles. All Lhe ouLsLandlng bond lssues are
backed by Lhe Ceneral lund.
WlLh Lhe changes slnce 2008, Lhls Lype of flnanclng ls noL favored by lnvesLors. Whlle Lhere have
been very few acLual debL defaulLs, Lhere ls a concern LhaL Lhe securlLy ls weak and LhaL Lhe
commlLmenL Lo make paymenLs ls weakenlng. 1hough munlclpal faclllLles are pledged as securlLy,
lnvesLors belleve LhaL many faclllLles have no real markeL value. Whlle Lhere may be buyers for
parklng garages and offlce bulldlngs, Lhere may noL be buyers for parks,
llbrarles, even waLer planLs.
ln Lhls conLexL, Lhe ClLy's plans Lo lssue debL mesh well wlLh markeL changes. 1he ClLy plans Lo lssue
revenue bonds for waLer and wasLewaLer lnfrasLrucLure. SecurlLy for Lhe debL ls Lhe revenue sLream
and noL Lhe faclllLles flnanced. uebL ln Lhls form and for essenLlal lnfrasLrucLure pro[ecLs ls favored ln
Lhe flnanclal markeLs meanlng Lhe ClLy would pay
ShlfL of uebL 8urden Away lrom Ceneral lund
All of Lhe ouLsLandlng ClLy bond lssues are ln Lhe form of lease revenue bonds, where Lhe ClLy has
securlLy ls ClLy owned land and faclllLles. All Lhe ouLsLandlng bond lssues are dlrecLly or lndlre
ls weakenlng. 1hough munlclpal faclllLles are pledged as securlLy,
parklng garages and offlce bulldlngs, Lhere may noL be buyers for parks, LheaLers, communlL
faclllLles flnanced. uebL ln Lhls form and for essenLlal lnfrasLrucLure pro[ecLs ls favored ln
Lhe flnanclal markeLs meanlng Lhe ClLy would pay lower lnLeresL raLes.
6
ln Lhe form of lease revenue bonds, where Lhe ClLy has
dlrecLly or lndlrecLly
ls weakenlng. 1hough munlclpal faclllLles are pledged as securlLy,
communlLy cenLers,
faclllLles flnanced. uebL ln Lhls form and for essenLlal lnfrasLrucLure pro[ecLs ls favored ln
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C1nLk IU1UkL CCS1S
1here are a serles of Lhere fuLure cosLs classlfled as long-Lerm llablllLles whlch are nelLher debL nor
employee beneflLs. 1he long-Lerm llablllLles ln Lhls general caLegory LoLal $167 mllllon. 1hese
lnclude:
1. Landflll osL-Closure CosLs ($23 mllllon) - Lhere are long-Lerm cosLs assoclaLed wlLh Lhe closed
clLy refuse dlsposals slLes. A long-Lerm llablllLy ls recorded whlle Lhe acLual cosLs are pald year
Lo year.
2. 8lsk Clalms ($39 mllllon) - Clalms are pald by Lhe ClLy ln Lhe fuLure for evenLs whlch have
already happened. Long-Lerm llablllLles are esLlmaLed and recorded. 8eserves have been
esLabllshed Lo fund fuLure clalms paymenLs
3. uevelopmenL lmpacL lee CredlLs ($43 mllllon) - A long-Lerm llablllLy ls recorded wlLh Lhe
credlL ls granLed.
lundlng of Lhese separaLe llablllLles ls mlxed. CosLs assoclaLed wlLh Lhe closed landflll slLes are
funded from Lhe solld wasLe fund, and some reserves have been esLabllshed. lor llablllLy clalms,
deparLmenLs are assessed ln Lhe budgeL process, and reserves are esLabllshed ln Lhe ClLy LlablllLy
lund. 1hese reserves appear Lo be sufflclenL Lo meeL known and anLlclpaLed clalms over Lhe nexL
several years.
CS1 LMLCMLN1 8LNLII1S
1he ClLy has $930 mllllon ln unfunded long-Lerm llablllLles for posL-employmenL beneflLs Lo be pald Lo
Lhose who worked for Lhe ClLy and Lhelr survlvors. 1hese beneflLs lncluded penslons, Lhe reLlree
medlcal beneflL, and payoff of leave balances upon reLlremenL. ln very round numbers, and
expressed ln an acLuarlal basls, Lhe long-Lerm llablllLy for Lhese beneflLs ls approxlmaLely $3 bllllon
buL only $2 bllllon has been seL aslde Lo fund Lhose beneflLs. ln acLuarlal Lerms Lhe reLlree medlcal
beneflL ls unfunded. 1he followlng Lable summarlzes Lhe fundlng sLaLus of Lhe long-Lerm beneflL
llablllLles.
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lunds are currenLly seL aslde only for Lhe penslon plans. 1he reLlree medlcal beneflL ls funded on a
currenL basls, paymenLs are made Lo reLlrees ouL of Lhe annual budgeL. 1he compensaLed absences
are recorded as llablllLles, yeL are pald ouL every year as employees reLlree. lf a reserve were
esLabllshed, funds would be placed ln Lhe reserve and wlLhdrawn every year. 1he flnanclal galn Lo
Lhe ClLy would be a hlgher cash balance.
1he enslon lans
ClLy employees and reLlrees parLlclpaLe ln one of Lhree penslon plans:
1. L8S SafeLy - Members of Lhls plan recelve Lhe hlgher, and more cosLly, safeLy reLlremenL
beneflL.
2. L8S Mlscellaneous - Members of Lhls plan recelve a lower, and less cosLly, beneflL.
3. SCL8S - 1hls was Lhe penslon plan for clLy employees unLll 1978 when Lhe ClLy enLered
CalL8S. All employees hlred afLer Lhls daLe became members on a L8S plan. uurlng Lhe
1980s, acLlve safeLy members of SCL8S mlgraLed Lo Lhe L8S safeLy plan funded wlLh a
Lransfer of asseLs. SCL8S provldes boLh a safeLy and mlscellaneous beneflL.
ed as llablllLles, yeL are pald ouL every year as employees reLlree. lf a reserve were
Lhe ClLy would be a hlgher cash balance.
oyees and reLlrees parLlclpaLe ln one of Lhree penslon plans:
Members of Lhls plan recelve Lhe hlgher, and more cosLly, safeLy reLlremenL
Members of Lhls plan recelve a lower, and less cosLly, beneflL.
1hls was Lhe penslon plan for clLy employees unLll 1978 when Lhe ClLy enLered
sfer of asseLs. SCL8S provldes boLh a safeLy and mlscellaneous beneflL.
8
ed as llablllLles, yeL are pald ouL every year as employees reLlree. lf a reserve were
Members of Lhls plan recelve Lhe hlgher, and more cosLly, safeLy reLlremenL
Members of Lhls plan recelve a lower, and less cosLly, beneflL.
1hls was Lhe penslon plan for clLy employees unLll 1978 when Lhe ClLy enLered
sfer of asseLs. SCL8S provldes boLh a safeLy and mlscellaneous beneflL.
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normal CosLs and unfunded LlablllLles
aymenL Lo Lhe penslon plans are ln Lwo Lypes. aymenLs accordlng Lo Lhe acLuarlal assumpLlons are
normal cosLs. 1hese, ln effecL, keep Lhe penslon plans currenL. 1he normal cosLs are shared by Lhe
ClLy and mosL employees. An employee share ls calculaLed. aymenLs agalnsL any unfunded
llablllLles are made by Lhe ClLy only.
unfunded LlablllLles
1he penslon plans have a collecLlve unfunded long-Lerm llablllLy of $469 mllllon, and Lhe unfunded
long-Lerm llablllLles have grown slgnlflcanLly ln recenL years:
Va|uat|on
Date
Iune 30th
LkS Safety LkS M|sc SCLkS 1ota|
2003 $93 m $71 m ($3 m) $161 m
2006 $121 m $89 m $30 m $240 m
2007 $118 m $92 m $30 m $240 m
2008 $140 m $107 m $32 m $279 m
2009 $189 m $140 m $84 m $413 m
2010 $196 m $144 m $98 m $438 m
2011 $214 m $160 m $100 m $474 m
$93 m $469 m
uollar Change $121 m $89 m $98 M $308 m
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10
Slnce Lhe concluslon of Lhe 2004-03 llscal ?ear, Lhe unfunded long-Lerm llablllLles ln Lhe penslon
plans have grown by $308 mllllon, from $161 mllllon Lo $469 mllllon. 1hls ls a debL Lhe ClLy, as Lhe
employer, owes Lo Lhe Lhree penslon plans. And llke Lhe bonded debL, Lhese long-Lerm llablllLles are payable
wlLh lnLeresL aL Lhe penslon plan dlscounL raLe.
Why 1here Are unfunded LlablllLles
1he obvlous reason for unfunded llablllLles would be Lhe weak performance of lnvesLmenL markeLs ln
recenL years. 1here are acLually four fundamenLal reasons for unfunded llablllLles ln Lhe penslon
plans:
1. ln half Lhe years slnce 2000 lnvesLmenL reLurns have fallen below assumpLlons. 1he aggregaLe
reLurn ln Lhe perlod ls below Lhe assumpLlon. 1he resulL ln 2008/09 was parLlcularly bad. As a
polnL of reference, Lhe S& 300 sLock lndex ls sLlll below 2000 levels.
2. 1here has been a recognlLlon LhaL people llve longer afLer reLlremenL. 1hls lncreases Lhe
long-Lerm beneflL paymenL assumpLlons
3. 8oLh L8S and SCL8S had employer conLrlbuLlon holldays," deprlvlng Lhe funds of asseLs.
4. Lmployee beneflL levels were enhanced wlLhouL an lncrease ln asseLs or conLrlbuLlons.
llnanclal markeLs have been volaLlle ln Lhe pasL decade, afLer a decade of sLeady growLh. 1he L8S
penslon plan lnvesLmenL lncome has falled Lo meeL Lhe LargeL level ln 6 of pasL 12 years due Lo Lhese
markeL condlLlons. ln four years Lhe plans acLually experlenced neL asseL losses, ln Lwo years Lhe galn
was less Lhan Lhe dlscounL raLe.
1here have been slgnlflcanL ad[usLmenLs Lo reLlree longevlLy assumpLlons whlch have resulLed ln
lncreases Lo boLh normal cosLs and unfunded llablllLles. 1he penslon paymenLs ouL Lo reLlrees have
Lurned ouL Lo be made over a longer perlod Lhan prevlously assumed. 1hls resulLs ln a unfunded
llablllLy for reLlrees and for acLlve employees and an lncrease ln normal cosLs prospecLlvely.
1he lmpacL of Lhe lnvesLmenL performance ln Lhe pasL decade has been made worse by prlor use of
surplus" fundlng conLrary Lo sound acLuarlal and long-Lerm budgeLary pracLlce. enslon plan
LrusLees acLlvely advocaLed for Lhese acLlons. 1here were raLe holldays", or years where Lhe ClLy dld
noL conLrlbuLe Lo Lhe penslon plans or conLrlbuLed less Lhan Lhe normal cosL. 1hls deprlved Lhe
penslon plans of asseLs. 1here were also enhancemenLs Lo Lhe penslon beneflLs for acLlve employees
and reLlrees wlLhouL any lncrease ln asseLs or ln raLes. lan LrusLees losL Lhelr way and raLher Lhan
proLecLlng Lhe lnLegrlLy of Lhe penslon plans fell for argumenLs LhaL plan asseLs were avallable for Lhe
use by employers and employees.
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L8S 8aLes
aymenLs Lo Lhe Lwo acLlve L8S penslon plans are deLermlned by applylng raLes Lo salary. 1he raLes
are broken lnLo componenLs are shown ln Lhe followlng Lable glvlng Lhe raLes Lo be used for Lhe llscal
?ear 2013/14:

lor boLh Lhe L8S SafeLy and Mlscell
penslon raLes go Lo paylng down Lhe unfunded llablllLles. 1he employer raLe Lo pay off Lhe unfunded
llablllLy ln Lhe SafeLy lan ls over 12 of salarles. 1he employer raLe for unfunded llablllLl
Mlscellaneous lan ls approxlmaLely 6.3 of salary.
1he penslon raLes have grown slgnlflcanLly ln recenL years as Lhe unfunded llablllLles have grown.
ClLy raLes have lncreased slgnlflcanLly slnce llscal ?ear 2008/09 as ls lllusLraLed ln Lhe f
Lable how a hlsLory of Lhe SafeLy and Mlscellaneous 8aLes. llscal ?ear 2008/09 was when Lhe ClLy
began maklng budgeL and sLafflng reducLlons ln Lhe Ceneral lund.
overall decllne ln Lax revenue ln Lhe perlod
Llve L8S penslon plans are deLermlned by applylng raLes Lo salary. 1he raLes
lor boLh Lhe L8S SafeLy and Mlscellaneous enslon lans, nearly one-Lhlrd of Lhe
llablllLy ln Lhe SafeLy lan ls over 12 of salarles. 1he employer raLe for unfunded llablllLl
Mlscellaneous lan ls approxlmaLely 6.3 of salary.
ClLy raLes have lncreased slgnlflcanLly slnce llscal ?ear 2008/09 as ls lllusLraLed ln Lhe f
began maklng budgeL and sLafflng reducLlons ln Lhe Ceneral lund. 1here also has been a slgnlflcanL
overall decllne ln Lax revenue ln Lhe perlod represenLed ln Lhe Lables.
11
Llve L8S penslon plans are deLermlned by applylng raLes Lo salary. 1he raLes
Lhlrd of Lhe of Lhe LoLal
llablllLy ln Lhe SafeLy lan ls over 12 of salarles. 1he employer raLe for unfunded llablllLl es for Lhe
ClLy raLes have lncreased slgnlflcanLly slnce llscal ?ear 2008/09 as ls lllusLraLed ln Lhe followlng Lwo
1here also has been a slgnlflcanL
13 of 54

1he SafeLy raLe has lncreased by 6 percenL. 1he unfunded porLlon of Lhe raLe has grown by 4.3
percenL of salary. All Lhe growLh ln Lhe Mlscellaneous 8aLe ls due Lo Lhe unfunded porLlon.
All Lhe growLh ln Lhe Mlscellaneous 8aLe ls due Lo Lhe unfunded porLlon.
12
All Lhe growLh ln Lhe Mlscellaneous 8aLe ls due Lo Lhe unfunded porLlon.
14 of 54
13
1he growLh ln penslon raLes has posed a budgeL challenge slnce llscal ?ear 2011/12. WlLh no growLh
ln revenue and no one-Llme fundlng avallable, ln Lhe Ceneral lund, Lhe lncrease ln penslon raLes was
flnanced by reducLlon of poslLlons, lncludlng layoffs.
luLure enslon 8aLes
ClLy conLrlbuLlon raLes wlll conLlnue Lo lncrease for Lhe nexL several years. L8S earned 1 percenL ln
llscal ?ear 2011/12, well below Lhe 7.3 percenL dlscounL raLe, whlch wlll begln Lo be reflecL ln Lhe
2014/13 raLes. 1he very low lnLeresL raLe envlronmenL conLlnues. 1he lmpacLs Lo Lhe penslon
changes enacLed lasL summer and effecLlve aL Lhe sLarL of Lhls calendar year wlll Lake years Lo have
lmpacL.
1here ls a debaLe regardlng Lhe level of Lhe dlscounL raLe, or long-Lerm earnlngs assumpLlon. 1hose
advocaLlng lowerlng Lhe dlscounL raLe polnL Lo Lhe fallure Lo meeL lnvesLmenL LargeLs ln half of Lhe
pasL 12 years and an lncreaslngly volaLlle economy. Lowerlng Lhe dlscounL raLe would lncrease
unfunded llablllLles and lncrease Lhe need for conLrlbuLlons.
ket|ree Med|ca| 8enef|t
1he ClLy provldes medlcal beneflLs Lo reLlred employees. 8eLlrees have access Lo Lhe group medlcal
plans. ln addlLlon, reLlrees meeLlng cerLaln servlce Lhresholds are ellglble Lo recelve monLhly
paymenLs Lo offseL medlcal lnsurance cosLs. Cne-half Lhe beneflL ls earned afLer 10 years of servlce,
and Lhe full beneflL ls earned afLer 20 years of servlce. 1he beneflL ls pro-raLed for reLlrees beLween
10 and 20 years of servlce.
1hls beneflL ls pald from Lhe budgeL Lo reLlrees, lL ls noL acLuarlally funded. Lven Lhough Lhe beneflL
ls funded on Lhls pay-as-you-go basls, flnanclal sLandards requlre Lhe ClLy Lo accounL for Lhe beneflL
as lf lL were acLuarlally funded. 1hls resulLs ln an unfunded llablllLy currenLly of $440 mllllon and
whlch has grown by $60 mllllon slnce llscal ?ear 2007/08. A porLlon of Lhls llablllLy ls on Lhe balance
sheeL, Lhe remalnder ls a noLe.
1he ClLy has an acLuarlal sLudy of Lhe reLlree medlcal beneflL performed every oLher year, Lhe lasL was
compleLed durlng Lhe currenL flscal year. 1he followlng Lable seLs forLh how Lhe beneflL would be
funded acLuarlally and changes slnce Lhe 2007/08 sLudy:
15 of 54

1oLal paymenLs lnLo Lhe LrusL fund ln Lhe currenL year would be $43 mllllon wlLh $19 mllllon belng Lhe
normal cosL proacLlvely fundlng Lhe beneflL for Lhe remalnlng career of acLlve employees and $24
mllllon paylng down Lhe $440 mllllon unfunded llablllLy. 8eneflL paymenLs would be made from Lhe
LrusL fund. ln Llme, as Lhe balance ln Lhe LrusL and lnvesLmen
conLrlbuLlons would drop slgnlflcanLly.
1hls paymenL ls far greaLer Lhan Lhe currenL $11 mllllon under Lhe pay
shorL run Lhe currenL meLhod ls less expenslve. 8uL under Lhe currenL meLhod beneflL paym
always made from prlnclpal, never wlLh lnvesLmenL lncome.
of fundlng Lhe beneflL ls less expenslve due Lo lnvesLmenL lncome.
1he pracLlcal problem ls LhaL lL ls clearly beyond Lhe budgeLary capaclLy of Lh
lncrease Lo Lhe budgeL of over $30 mllllon, Lhe dlfference from Lhe currenL paymenL level Lo full
acLuarlal fundlng.
Where Lhe growlng unfunded llablllLy for Lhe reLlree medlcal beneflL ls an lmmedlaLe problem for Lhe
ClLy ls ln debL lssuance, credlL raLlng and lnvesLor evaluaLlon.
noLe of Lhe growlng unfunded llablllLy, buL Lhls has noL been Lhe lmmedlaLe cause of a raLlng
downgrade. 1he lnsLlLuLlonal lnvesLors who hold ClLy bonds and are Lhe po
fuLure ClLy debL lssues are also lnLeresLed ln Lhe fundlng sLaLus of Lhls beneflL.
rmal cosL proacLlvely fundlng Lhe beneflL for Lhe remalnlng career of acLlve employees and $24
LrusL fund. ln Llme, as Lhe balance ln Lhe LrusL and lnvesLmenL lncome accumulaLed, Lhen
conLrlbuLlons would drop slgnlflcanLly.
1hls paymenL ls far greaLer Lhan Lhe currenL $11 mllllon under Lhe pay-as-you-go meLhod. ln Lhe
shorL run Lhe currenL meLhod ls less expenslve. 8uL under Lhe currenL meLhod beneflL paym
always made from prlnclpal, never wlLh lnvesLmenL lncome. ln Lhe longer run, Lhe acLuarlal meLhod
of fundlng Lhe beneflL ls less expenslve due Lo lnvesLmenL lncome.
1he pracLlcal problem ls LhaL lL ls clearly beyond Lhe budgeLary capaclLy of Lhe ClLy Lo absorb an
lssuance, credlL raLlng and lnvesLor evaluaLlon. 1he credlL raLlng agencles are Laklng
downgrade. 1he lnsLlLuLlonal lnvesLors who hold ClLy bonds and are Lhe poLenLlal purchasers of
fuLure ClLy debL lssues are also lnLeresLed ln Lhe fundlng sLaLus of Lhls beneflL.
14
rmal cosL proacLlvely fundlng Lhe beneflL for Lhe remalnlng career of acLlve employees and $24
L lncome accumulaLed, Lhen
go meLhod. ln Lhe
shorL run Lhe currenL meLhod ls less expenslve. 8uL under Lhe currenL meLhod beneflL paymenLs are
ln Lhe longer run, Lhe acLuarlal meLhod
e ClLy Lo absorb an
1he credlL raLlng agencles are Laklng
LenLlal purchasers of
16 of 54
13
lrom long-Lerm flscal perspecLlve, Lhe sLaLus quo for Lhe reLlree medlcal beneflL ls noL susLalnable.
CosLs wlll grow, and Lhe ClLy's fallure make a change Lhe beneflL wlll become a credlL raLlng problem.
1wo noL muLually excluslve opLlons are suggesLed:
1. AlLer Lhe beneflL
2. LsLabllsh a LrusL fund and begln Lo make conLrlbuLlons from employer and employees.
CCMMLN1S
Sound flnanclal managemenL and plannlng lnLegraLes Lhe shorL-Lerm, lmmedlaLe needs wlLh a long-
Lerm perspecLlve. 1he ClLy Manager has asked LhaL Lhls lnformaLlon be broughL forward aL Lhe sLarL
of Lhe llscal ?ear 2013/2014 budgeL process. 1hls ls an example of Lhe sound flscal managemenL of
Lhe ClLy. 1he shorL-Lerm budgeL flnanclal plannlng wlll conslder LhaL Lhe Ceneral lund has very llLLle
debL capaclLy, LhaL flnanclal markeLs are changlng, LhaL penslon raLes conLlnue Lo rlse, and LhaL Lhe
reLlree medlcal beneflL presenLs a flnanclal challenge. ulfflculL lssues wlll be addressed raLher Lhan
deferred or lgnored.
1he paymenL of long-Lerm llablllLles ls by deflnlLlon long-Lerm. aymenL of llablllLles lncurred ln Lhe
pasL and Lhe presenL wlll be passed off Lo Lhe nexL generaLlon, Lo fuLure resldenLs of Lhe ClLy. 1hls
poses Lhe pollcy lssue and concern of lnLer-generaLlonal equlLy. eople pay Laxes and fees ln reLurn
for servlces and lnfrasLrucLure. 1he ClLy wlll soon lssue waLer revenue bonds Lo be repald over 30
years. 1he ma[or pro[ecL wlll be rehablllLaLlon of Lhe SacramenLo 8lver WaLer 1reaLmenL lanL. L8S
ls spreadlng 2008/09 lnvesLmenL losses over 30 years. ln looklng aL lnLer-generaLlonal equlLy, Lhe
beneflL Lo Lhe fuLure resldenL of clean, safe waLer from Lhe 1reaLmenL lanL ls clear, however, Lhe
beneflL of paylng on oLher llablllLles ls dlfflculL Lo esLabllsh. aymenLs on some llablllLles were
purposely pushed lnLo Lhe fuLure Lo avold Lhe lmpacL of paylng ln Lhe presenL. When beLLer
economlc Llmes reLurn lL would be approprlaLe Lo reconslder some of Lhose declslons.
17 of 54
1he Long-1erm LlablllLles of
1he ClLy of SacramenLo
Offlce of tbe
clty 1teosotet
resenLaLlon Lo
SacramenLo ClLy Councll
!anuary 8, 2013
1
18 of 54

Back to Table
of Contents
Long-1erm LlablllLles
llnanclal obllgaLlons
lncurred ln Lhe pasL up Lo Lhe presenL
ayable ln Lhe fuLure
locus on long-Lerm llablllLles whlch wlll be
Offlce of tbe
clty 1teosotet
locus on long-Lerm llablllLles whlch wlll be
pald from fuLure revenues, "unfunded"
aymenLs lnvolve conLracLual obllgaLlons
lmpacL fuLure budgeLs, consLralnlng fuLure cholces
lnLer-generaLlonal equlLy - Who pays?
2
19 of 54
ClLy Long-1erm LlablllLles
$1.94 8llllon
$823 m
$930 m
$167 m
Offlce of tbe
clty 1teosotet
uebL 8eneflLs luLure CosLs
3
20 of 54
uebL
ClLy borrows money for caplLal needs
Land acqulslLlon
laclllLy consLrucLlon and rehablllLaLlon
LqulpmenL
Offlce of tbe
clty 1teosotet
LqulpmenL
1he cosL of hlgh value asseLs ls spread ouL
over Llme
LlablllLy equals Lhe ouLsLandlng prlnclpal
balance of debL
lnLeresL paymenLs also made ln Lhe fuLure
4
21 of 54
1ypes of ClLy uebL
8onds
A securlLy lssued (sold) by Lhe ClLy paylng prlnclpal
and lnLeresL aL regular lnLervals. 8onds are negoLlable,
belng Lraded on secondary markeLs
Leases
Offlce of tbe
clty 1teosotet
Leases
ShorL Lerm borrowlng for equlpmenL. LqulpmenL ls
leased over a flxed perlod. ClLy owns equlpmenL aL
end of lease
Loans
lunds borrowed from oLher governmenLal enLlLles or
flnanclal lnsLlLuLlons. aymenL of prlnclpal and
lnLeresL ls speclfled ln Lhe Lerms of Lhe loan.
3
22 of 54
ClLy uebL
$823 mllllon
$733 m
$36 m
$20 m $14 m
8onds Loans Leases Swap
6
23 of 54
uebL 8educLlon
uebL reducLlon & lnLeresL paymenLs
rlnclpal & lnLeresL paymenLs on every debL lssue
every year reduclng Lhe long-Lerm llablllLy
$33 m ln bond prlnclpal pald ln l? 2011/12
$146 m ln bond prlnclpal pald slnce l? 2007/08
Offlce of tbe
clty 1teosotet
$146 m ln bond prlnclpal pald slnce l? 2007/08
1oLal paymenLs, lncludlng lnLeresL, on $733 m ln bonded
debL prlnclpal wlll be $1.17 bllllon
uebL servlce reducLlon & budgeL reducLlon comes ln
sLeps when enLlre debL lssues are pald off.
Some debL lssues can be called" or prepald, oLhers
cannoL
7
24 of 54
Annual uebL Servlce
and rlnclpal CuLsLandlng
(ln mllllons)
$300
$600
$700
$800
$30.0
$60.0
$70.0
$80.0
r
|
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|
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|

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u
t
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t
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|
n
g
A
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n
u
a
|

D
e
b
t

S
e
r
v
|
c
e
$0
$100
$200
$300
$400
$-
$10.0
$20.0
$30.0
$40.0
2013 2020 2023 2030 2033
r
|
n
c
|
p
a
|

C
u
t
s
t
a
n
d
|
n
g
A
n
n
u
a
|

D
e
b
t

S
e
r
v
|
c
e
Ax|s 1|t|e
Annual uebL Servlce rlnclpal CuLsLandlng
8
25 of 54
new uebL
WaLer & WasLewaLer 8evenue 8onds
MulLl-year plannlng & publlc process by uLlllLles
ueparLmenL
8aLe lncreases approved
Offlce of tbe
clty 1teosotet
8aLe lncreases approved
8aLed separaLely
CommunlLy CenLer 1heaLer
8eporL back requesLed
8edevelopmenL replacemenL
9
26 of 54
CLher luLure CosLs
$167 Mllllon
Landflll posL-closure ($23 mllllon)
lncluded ln Solld WasLe long-Lerm plannlng
8lsk clalms ($39 mllllon)
8eserves esLabllshed
Offlce of tbe
clty 1teosotet
8eserves esLabllshed
uevelopmenL lmpacL lee CredlLs ($43 mllllon)
10
27 of 54
Lmployee 8eneflLs
osL 8eLlremenL
Lmployee beneflLs as long-Lerm flnanclal
llablllLles
Larned durlng a career
ayable ln Lhe fuLure and over Llme, afLer reLlremenL
Offlce of tbe
clty 1teosotet
ayable ln Lhe fuLure and over Llme, afLer reLlremenL
May (should) be funded on an acLuarlal basls
8eneflLs whlch are long-Lerm llablllLles
enslons $469 mllllon
8eLlree medlcal beneflL $440 mllllon
CompensaLed absences $41 mllllon
11
28 of 54
8eneflL unfunded LlablllLles
$930 Mllllon
$214
$440
$41
Offlce of tbe
clty 1teosotet
$160
$93
$440
L8S SafeLy L8S Mlsc SCL8S CL8 Comp Absences
12
29 of 54
AcLuarlal lundlng
AccepLed meLhod for fundlng of penslons &
reLlree medlcal beneflL
8ased on fundlng fuLure cosL of reLlremenL
beneflL durlng Lhe career of an employee, noL
Offlce of tbe
clty 1teosotet
beneflL durlng Lhe career of an employee, noL
afLer reLlremenL
AL reLlremenL, funds are avallable ln a LrusL
fund Lo make penslon paymenLs
AllgnmenL of long-Lerm fundlng plan wlLh
long-Lerm llablllLy
13
30 of 54
8asls of AcLuarlal lundlng
CalculaLlon of whaL musL be seL aslde Lo make
beneflL paymenLs Lhrough a comblnaLlon of:
uurlng career of employee
ConLrlbuLlons of employee
Offlce of tbe
clty 1teosotet
ConLrlbuLlons of employee
ConLrlbuLlons of ClLy
lnvesLmenL lncome on conLrlbuLlons
normal cosLs - currenL wlLhln assumpLlons
unfunded llablllLy -debL Lo penslon plan
14
31 of 54
ComponenLs of L8S 8aLes
l? 2013/14
kate Component Safety |an M|sce||aneous |an
ClLy normal 17.324 7.676
Lmployee normal 9.000 7.000
1oLal normal CosL 26.324 ** 14.496
ClLy unfunded LlablllLy CosL 12.133 6.487
Offlce of tbe
clty 1teosotet
ClLy unfunded LlablllLy CosL 12.133 6.487
1oLal 8aLe 38.4S7 20.983
1oLal Lmployee Share 9.000 7.000
1oLal ClLy Share 29.437 14.163
13
** AcLuarlal LoLal from L8S sLudy
32 of 54
2013/14 L8S 8A1LS
12.1
23.0
30.0
33.0
40.0
43.0
26.3
13.3
6.3
0.0
3.0
10.0
13.0
20.0
SafeLy Mlscellaneous
normal unfunded
16
33 of 54
lnvesLmenL lncome
lnvesLmenL lncome makes up Lhe greaLesL
share of penslon paymenLs Lo reLlrees
1he long-Lerm lnvesLmenL reLurn, or dlscounL
raLe, ls a cr|t|ca| assumpt|on
Offlce of tbe
clty 1teosotet
raLe, ls a cr|t|ca| assumpt|on
Small changes ln Lhe dlscounL raLe have
slgnlflcanL lmpacLs
lundlng sLaLus of a reLlremenL plan
luLure conLrlbuLlons of ClLy
17
34 of 54
ClLy 8lsk
lunds musL be avallable Lo provlde Lhe
deflned beneflL
Long-Lerm fundlng gaps may develop
lnvesLmenL lncome falls shorL of assumed levels
Offlce of tbe
clty 1teosotet
lnvesLmenL lncome falls shorL of assumed levels
AcLuarlal changes Lo long-Lerm cosL of beneflL
enslon plan asseLs are used conLrary Lo acLuarlal
assumpLlons
More funds are requlred. 1hese funds come
from lncreased ClLy conLrlbuLlons
18
35 of 54
unfunded LlablllLy
1he acLuarlal deLermlnaLlon of any gap
beLween Lhe funds needed & funds avallable
under acLuarlal fundlng plans, any unfunded
llablllLy musL be pald down over Llme wlLh
Offlce of tbe
clty 1teosotet
llablllLy musL be pald down over Llme wlLh
lnLeresL aL Lhe dlscounL raLe
aylng down Lhe unfunded llablllLy ls Lhe
responslblllLy of Lhe ClLy
Unfunded ||ab|||t|es mov|ng from notes to
ba|ance sheet |n CAIk
19
36 of 54
AcLuarlal LlablllLles and AsseLs
|an
Actuar|a|
L|ab|||t|es
Actuar|a|
Assets
Unfunded
L|ab|||ty
Iund|ng
kat|o
L8S SafeLy $1,249 m $1,033 m $214 m 83
L8S Mlsc $819 m $660 m $160 m 81
Offlce of tbe
clty 1teosotet
L8S Mlsc $819 m $660 m $160 m 81
SCL8S $389 m $294 m $93 m 76
8eLlree Medlcal $440 m $0 m $440 m 0
Comp Absences $41 m $0 m $41 m 0
1oLal $2,938 m $1,989 m $930 m 68
20
37 of 54
8easons for enslon lan
lnvesLmenL performance under dlscounL raLe
slnce 2000 - 2008/09 far below assumpLlons
non-economlc assumpLlon changes -- longevlLy
use of lnvesLmenL earnlngs conLrary Lo
fundamenLal acLuarlal loglc & flnanclal
Offlce of tbe
clty 1teosotet
fundamenLal acLuarlal loglc & flnanclal
responslblllLy
ClLy conLrlbuLlon raLe holldays" - normal cosLs
should have always been pald
unfunded employee beneflL enhancemenLs
lan LrusLees losL slghL of flduclary
responslblllLles
21
38 of 54
CrowLh ln unfunded LlablllLles
for enslon lans
Va|uat|on Date
Iune 30th
LkS
Safety LkS M|sc SCLkS 1ota|
2003 $93 m $71 m ($3 m) $161 m
2006 $121 m $89 m $30 m $240 m
2007 $118 m $92 m $30 m $240 m
Offlce of tbe
clty 1teosotet
2007 $118 m $92 m $30 m $240 m
2008 $140 m $107 m $32 m $279 m
2009 $189 m $140 m $84 m $413 m
2010 $196 m $144 m $98 m $438 m
2011 $214 m $160 m $100 m $474 m
2012 $93 m $469 m
uollar Change $121 m $89 m $98 M $308 m
ercenL Change 130 123 191
22
39 of 54
enslon unfunded LlablllLles
(ln mllllons)
$143
$193
L8S SafeLy
Offlce of tbe
clty 1teosotet
$(3)
$43
$93
2003 2006 2007 2008 2009 2010 2011 2012
L8S SafeLy
L8S Mlsc
SCL8S
23
40 of 54
8ecenL PlsLory of SafeLy 8aLe
I|sca| ear Norma| kate UnfundeSSd kate 1ota| kate
2008/2009 24.794 7.601 32.393
2009/2010 24.813 6.771 31.384
2010/2011 24.829 7.338 32.187
2011/2012 24.861 10.669 36.330
Offlce of tbe
clty 1teosotet
2011/2012 24.861 10.669 36.330
2012/2013 23.933 10.848 36.781
2013/2014 26.324 12.133 38.437
6 ?ear 8aLe Change 1.330 4.332 6.062
6 ?ear Change 3 60 19
24
41 of 54
8ecenL PlsLory of Mlscellaneous 8aLe
I|sca| ear Norma| kate Unfunded kate 1ota| kate
2008/2009 14.792 3.660 18.432
2009/2010 14.740 3.302 18.042
2010/2011 14.767 3.780 18.347
2011/2012 14.337 3.142 19.479
2012/2013 14.233 3.411 19.664
2013/2014 14.496 6.487 20.983
6 ?ear 8aLe Change (0.296 ) 2.827 2.331
6 ?ear Change (2) 77 14
23
42 of 54
SafeLy 8aLe
10.30
11.30
12.30
Offlce of tbe
clty 1teosotet
6.30
7.30
8.30
9.30
10.30
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
26
43 of 54
Mlscellaneous 8aLe
3.23
3.73
6.23
Offlce of tbe
clty 1teosotet
3.23
3.73
4.23
4.73
3.23
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
27
44 of 54
luLure enslon CosLs
ClLy can expecL conLlnulng L8S raLe lncreases
for nexL several years
1 reLurn ln l? 2011/12
unreallzed losses
Offlce of tbe
clty 1teosotet
unreallzed losses
Low lnLeresL raLe envlronmenL
ulscounL raLe assumpLlon
enslon 8eform" lmpacLs decades ouL
roposed balloL measures
28
45 of 54
8eLlree Medlcal 8eneflL
1he 8eLlree Medlcal beneflL supplemenLs
penslons
Palf beneflL earned afLer 10 years of servlce
lull beneflL earned afLer 20 years of servlce
8eLlrees are ln Lhe same lnsurance pool as acLlve
Offlce of tbe
clty 1teosotet
8eLlrees are ln Lhe same lnsurance pool as acLlve
employees
non-Medlcare reLlrees pay acLlve raLes raLher Lhan
acLual cosLs
AcLlve employee & employer premlums subsldlze
reLlree cosLs
29
46 of 54
8eneflL lundlng
ay as you go fundlng - annual paymenLs Lo
reLlrees from annual budgeL
lf Lhe beneflL were funded llke a penslon
$440 mllllon LrusL fund
Offlce of tbe
clty 1teosotet
$440 mllllon LrusL fund
SlgnlflcanL porLlon of beneflL paymenLs would
come from lnvesLmenL lncome
AccounLlng sLandards requlre ClLy Lo accounL
for beneflL as lf lL were acLuarlally funded
creaLlng a large unfunded llablllLy
30
47 of 54
8eLlree Medlcal lan
CalculaLed AcLuarlal lundlng
I 2007]08 I 2012]13 Change
L|ab|||ty 5380 m 5440 m 560 m
aymenLs
normal CosL $16.4 m $18.9 m $2.3 m
Offlce of tbe
clty 1teosotet
normal CosL $16.4 m $18.9 m $2.3 m
unfunded $13.1 m $23.9 m $8.8 m
1oLal $31.3 m $42.8 m $11.3 m
8aLes
normal 6.1 7.2 0.9
unfunded 3.7 9.1 3.6
1oLal 11.8 16.3 4.3
31
48 of 54
lundlng 8eLlree Medlcal
$43 m per year Lo fund Lhe beneflL & pay
down Lhe unfunded llablllLy ls well beyond
currenL capaclLy of ClLy
Crowlng llablllLy becomlng a credlL raLlng &
Offlce of tbe
clty 1teosotet
Crowlng llablllLy becomlng a credlL raLlng &
lnvesLor evaluaLlon problem
aymenLs all prlnclpal, no lnvesLmenL lncome
ln long run, sLaLus quo more expenslve
lmpacL of naLlonal healLhcare changes noL
knowable aL Lhls polnL ln Llme
32
49 of 54
CommenLs
33
50 of 54
uebL
rudenL use of debL ln fuLure
Ceneral lund debL capaclLy
Ceneral lund debL servlce over 6 of revenue,
hlgh
Offlce of tbe
clty 1teosotet
hlgh
LxLenslve borrowlng 1999 - 2006 ln era of
slgnlflcanL revenue growLh, revenue decllne slnce
2006
no debL lssue redempLlon unLll 2019
LlmlLed addlLlon capaclLy when revenues grow
34
51 of 54
uebL
uebL Changes
All ouLsLandlng ClLy debL ls ln Lhe form of Ceneral
lund back lease revenue bonds
SecurlLy ls pool of ClLy faclllLles
lalllng ls dlsfavor wlLh lnvesLors. Munlclpal faclllLles
Offlce of tbe
clty 1teosotet
lalllng ls dlsfavor wlLh lnvesLors. Munlclpal faclllLles
have llLLle markeL value
Callfornla bankrupLcles
MarkeL favors revenue bonds
SecurlLy ls revenue
WaLer & WasLewaLer debL ClLy ls plannlng Lo lssue
33
52 of 54
8eneflLs
enslon cosLs wlll rlse over nexL several years
ulscounL raLe assumpLlon
8ecenL penslon changes wlll noL lmpacL budgeL
for over a decade
Offlce of tbe
clty 1teosotet
for over a decade
8eLlree medlcal sLaLus quo noL susLalnable long
Lerm
LlablllLles wlll conLlnue Lo grow, flnanclally &
repuLaLlonally
LsLabllsh a LrusL
Change Lhe beneflL
36
53 of 54
lnLer-CeneraLlonal LqulLy"
lssue of whaL llablllLles are passed Lo fuLure
resldenLs for paymenL
lssue of assoclaLlon of beneflL wlLh paymenL
8esldenLs recelve servlces ln reLurn for Laxes & fees
Offlce of tbe
clty 1teosotet
Should fuLure resldenLs pay only lf beneflL ls
recelved ?
luLure beneflL from a rehablllLaLed & enhanced waLer
LreaLmenL planL
luLure resldenLs may noL percelve beneflL from paylng
on oLher long-Lerm llablllLles
37
54 of 54

City Debt Report

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City Debt Report

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Sandra Talbott, nterim City Attorney Shirley Concolino, City Clerk Russell Fehr, City Treasurer

John F. Shirey, City Manager

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