The Santa Ana City Council will have its regular meeting tonight, Feb. 2. The meeting will take place virtually and the public is encouraged to participate via Zoom. The closed session begins at 5 p.m. and the open meeting is at 5:45 p.m. (immediately following the closed session.)
The major item the Santa Ana City Council will consider tonight is “Consider refinancing the city’s employee pension debt and adoption of the proposed Unfunded Employee Pension Liability Cost Reduction Policy.” The City Council will determine whether to proceed with refinancing any portion of the pension debt. If City Council wishes to proceed with pension debt refinancing they will direct staff to propose a contract for bond counsel services to prepare a resolution for City Council consideration authorizing the sale of pension obligation bonds, which is necessary to begin the court validation process to refinance the pension debt; and adopt the proposed Unfunded Employee Pension Liability Cost Reduction Policy.
The market value of investments in the Santa Ana plan is less than the liability for benefits already earned, and the City has an Unfunded Pension Liability. Each year, the amount of the liability changes based upon actual plan results and CalPERS changes in assumptions. The liability grows when actual plan results do not meet CalPERS assumptions, such as retirees living longer than expected; or when CalPERS changes its assumptions, such as reducing the assumed rate of investment return. Conversely, the liability decreases when actual plan results exceed CalPERS assumptions, such as investments earning more than the assumed rate of return. CalPERS also charges “interest” on the unpaid liability each year, based on the plan’s discount rate, equivalent to the assumed rate of return. CalPERS requires the City to make annual contributions to reduce the unfunded liability.
There are two basic strategies to reduce the City’s cost for the unfunded pension liability:
- Contribute more than required by CalPERS (an Additional Discretionary Payment) to reduce the accrual of
interest; or - Refinance the liability, which is a legal debt of the City, at a lower interest rate.
From a recent O.C. Register article:
Santa Ana has been sliding. In 2016, its per-person deficit was $3,400; that yawned to $5,400 per resident. “Santa Ana went into the coronavirus pandemic in poor fiscal health, and it will probably come out of the crisis worse,” TIA said. The city’s debt burden was $571.9 million.
The city, however, says the situation improved substantially as the 2020 fiscal year closed, dropping down to $3,047 per resident. Of that amount, $2,621 per resident is long-term debt amortized over many years, to be funded in future periods. Current debt is $426 per resident, more than offset by cash and short-term receivables; and its general fund cash reserve balance exceeded $54 million, nearly a quarter of what it spends in a year.
Learn more about how to participate and watch the meeting here: www.santa-ana.org/cc/city-meetings. The meeting agenda is available here: https://bit.ly/3oC2a8k.
Reunión del Concejo Municipal de Santa Ana esta noche 2 de febrero del 2021
El Concejo Municipal de Santa Ana va tener su reunión ordinaria esta noche, 2 de febrero. La reunión se llevará a cabo virtualmente y se anima al público a participar.
La sesión cerrada empieza a las 5 de la tarde y la reunión abierta es a las 5:45 de la tarde (inmediatamente después de la sesión cerrada.)
Aprenda más sobre como participar y ver la reunión aquí: www.santa-ana.org/cc/city-meetings.
La agenda para la reunión está disponible aquí: https://bit.ly/3oC2a8k.
