Sierra Madre - Pension Stabilization Plancityofsierramadre.hosted.civiclive.com/UserFiles/Servers...1. UAL Primer 2. Current Obligations to CalPERS 3. Pension Stabilization Plan 4

Pension Stabilization PlanPension Prepayment & 115 Investment Plan Creation

City of Sierra Madre

Presentation Agenda

1. UAL Primer

2. Current Obligations to CalPERS

3. Pension Stabilization Plan

4. Current Amortization Schedule and Ability to Pay

5. Amortization Schedule with Stabilization and Ability to Pay

7/24/2018 WWW.CityOfSierraMadre.com 2

“[Y]ou would expect an agency to

be able to tolerate (higher

payments) based on…revenue

growth and whatnot.”--CalPERS on managing UAL (5/31/18)





Current UAL Structure, Negative Amortization

Negative amortization• Payments are less than interest charged

• Difference increases total amount owed

• Currently we are paying negative principle


$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Negative Amortization: Single Base, $1M Balance, 30 payments

Presentation Agenda

1. UAL Primer






CalPERS ObligationsAmortization Schedule Without Stabilization Plan:

• Payments increased from $0 in 15/16 to $1,000,000 in 18/19

• Will increase an additional 32% in the next five years

• Pension will equal more than 10% of GF expenditures in 2020/21


CalPERS ObligationsGovernment Response in SGV:

• SGV cities have: sold significant bond debt, raised taxes, created new taxes, created new taxing districts

• Sierra Madre reduced spending and is proposing a plan that will not increase costs to taxpayers


CalPERS Payments with UAL (Rocket Chart)

7/24/2018

WWW.CityOfSierraMadre.com 11

$-

$735,681

$840,844

$1,000,681

$1,160,629

$1,265,222

15-16 16-17 17-18 18-19 19-20 20-21

$-

$735,681

$840,844

$1,000,681

$1,160,629

$1,265,222

15-16 16-17 17-18 18-19 19-20 20-21

Current Schedule of UAL Payments

Current due CalPERS: $27.9M

• UAL Payments, Current Schedule• 17-18: $841,000

• 18-19: $1,001,000

• 19-20: $1,161,000

• 20-21: $1,265,000

• Annual payments exceed $1M from 18/19 to 35/36

• “Ability to Pay” exceeded in 17/18 through 35/36


CalPERS Stabilization Plan

UAL Payments

• $200k-$300k projected savings in 19/20

• Increased projected annual savings from 19/20 through 40/41

• “Ability to pay” achieved in 19/20

• Reduces total due CalPERS from $27.9M to $15.9M (42.7%)

• $6.9M in total savings (25% of total bill)


Presentation Agenda

1. UAL Primer






Pension Stabilization PlanPart 1: $5M UAL Prepayment:

• $6.9M savings

• $12M reduction due to CalPERS from $27.9M to $15.9M (42.7% reduction)

• Significant annual cash flow increase (est. $250,000 in 19/20)

• Short-term and long-term benefits for budget stabilization


Pension Stabilization PlanPart 2: Establish a 115 investment plan ($600,000 funding):

• Flexible investment with greater return potential, 10.9% (1 year) 7.9% (5 year)

• Available for use in emergencies

• Available for payment of UAL or normal CalPERS payments

• Long-term benefits for budget stabilization (solves the next CalPERS crisis)


Pension Stabilization Plan

1. Prepay CalPERS $5M towards UAL• Sources of Funding

• Apply current General Fund balance above 50% ($1.8M)

• Apply sale of SCE underground credits ($628,000)

• Apply funding from close out of accounts/transfers ($800,000)

• Revise minimum GF balance from 50% to 25% ($2.5M)

2. Establish a 115 Plan and “earmark” $600,000 for funding (from above)• Provide future direction on 115 Plan Management:

Fund Administrator, Fund Administrator with Citizen Panel oversight, Fund Administrator with Treasurer and Staff oversight


Pension Prepayment vs. 115 Investment

1. Returns over time

2. Risk vs. Benefit

3. Use in emergencies

4. Can only spend on pension


Presentation Agenda

1. UAL Primer






Amortization Schedule & Ability to Pay

7/24/2018


$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,0001

6-1

7

17

-18

18

-19

19

-20

20

-21

21

-22

22

-23

23

-24

24

-25

25

-26

26

-27

27

-28

28

-29

29

-30

30

-31

31

-32

32

-33

33

-34

34

-35

35

-36

36

-37

37

-38

38

-39

39

-40

40

-41

41

-42

42

-43

43

-44

44

-45

45

-46

46

-47

47

-48

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,0001

6-1

7

17

-18

18

-19

19

-20

20

-21

21

-22

22

-23

23

-24

24

-25

25

-26

26

-27

27

-28

28

-29

29

-30

30

-31

31

-32

32

-33

33

-34

34

-35

35

-36

36

-37

37

-38

38

-39

39

-40

40

-41

41

-42

42

-43

43

-44

44

-45

45

-46

46

-47

47

-48

Near Term Amortization Schedule & Ability to Pay

7/24/2018


$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24

Presentation Agenda

1. UAL Primer






Amortization Schedule Without Stabilization Plan

7/24/2018


$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

16

-17

17

-18

18

-19

19

-20

20

-21

21

-22

22

-23

23

-24

24

-25

25

-26

26

-27

27

-28

28

-29

29

-30

30

-31

31

-32

32

-33

33

-34

34

-35

35

-36

36

-37

37

-38

38

-39

39

-40

40

-41

41

-42

42

-43

43

-44

44

-45

45

-46

46

-47

47

-48

Total Before Prepayment Ability to pay

Amortization Schedule With Stabilization Plan

7/24/2018


$(200,000)

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

16

-17

17

-18

18

-19

19

-20

20

-21

21

-22

22

-23

23

-24

24

-25

25

-26

26

-27

27

-28

28

-29

29

-30

30

-31

31

-32

32

-33

33

-34

34

-35

35

-36

36

-37

37

-38

38

-39

39

-40

40

-41

41

-42

42

-43

43

-44

44

-45

45

-46

46

-47

47

-48

Total Before Prepayment Total After Prepayment

$(200,000)

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

16

-17

17

-18

18

-19

19

-20

20

-21

21

-22

22

-23

23

-24

24

-25

25

-26

26

-27

27

-28

28

-29

29

-30

30

-31

31

-32

32

-33

33

-34

34

-35

35

-36

36

-37

37

-38

38

-39

39

-40

40

-41

41

-42

42

-43

43

-44

44

-45

45

-46

46

-47

47

-48

Near Term Amortization Schedule With Stabilization Plan

7/24/2018


16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24

Total Before Prepayment Total After Prepayment Linear (Total Before Prepayment) Linear (Total After Prepayment)

Ability to Pay UAL With Stabilization Plan

7/24/2018


16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24

Ability to Pay Without Stabilization

7/24/2018


$(317,316)

$(500,000)

$(400,000)

$(300,000)

$(200,000)

$(100,000)

$-

$100,000

$200,000

19-20 20-21 21-22 22-23 23-24

Avg. Deficit

Ability to Pay With Stabilization

7/24/2018


$38,641

$(500,000)

$(400,000)

$(300,000)

$(200,000)

$(100,000)

$-

$100,000

$200,000

19-20 20-21 21-22 22-23 23-24

Avg. Surplus

CalPERS Stabilization Plan Recap

• $200k-$300k projected savings in 19/20

• Increased projected annual savings from 19/20 through 40/41

• “Ability to pay” achieved in 19/20

• Reduces total due CalPERS from $27.9M to $15.9M (42.7%)

• $6.9M in total savings (25% of total bill)


Thank you

7/24/2018


Documents

Sierra Madre - Pension Stabilization Plancityofsierramadre.hosted.civiclive.com/UserFiles/Servers...1. UAL Primer 2. Current Obligations to CalPERS 3. Pension Stabilization Plan 4