Pico Rivera beginning pension bond process to stabilize ongoing retirement costs – Whittier Daily News | #retirement | #elderly | #seniors
Despite concerns from one council member that a pension bond might be risky, the Pico Rivera City Council gave city staff the go-ahead to start the process of selling a nearly $41 million bond.
The council voted 5-0 on Tuesday, April 27, to begin the process in order to stabilize its retirement costs.
The city now spends about $ 3.1 million a year on unfunded retirement costs — significantly more than would be required for annual debt service on the bond, according to city figures. Pico Rivera could save about $14 million over 25 years, according to a staff presentation.
In addition, the amount the city now pays for its unfunded retirement costs is expected to increase to more than $4 million a year and could go even higher depending on market performance, age of retirees and how long they might live, Finance Director Angelina Garcia told council members at its April 13 meeting.
But Mayor Raul Elias first wanted staff to answer concerns raised by the Chicago-based Government Finance Officers Association.
The association has raised concerns the bond might fail to earn more than the interest rate owed over the term of the bonds, leading to increased overall liabilities for the government and may incorporate the use of guaranteed investment contracts, swaps, or derivatives.
However, Michael Williams, managing director for Columbia Capital Management, which was hired on Tuesday to serve as municipal advisor, said interest rates are now at an all-time low. The city most likely will get an interest rate half that now charged by the Public Employees Retirement Association, he added.
Williliams said this bond doesn’t have any special uses, such as derivatives but rather is ” a plain vanilla type of structure.”
Councilman Andrew Lara said the council’s action just gives staff permission to begin the process, starting with filing a validation action with the Los Angeles County Superior Court. The court process is expected to take until September.