pages: CityCouncil/2021-10-19.pdf, 24
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CityCouncil | 2021-10-19 | 24 | Councilmember Knox White moved approval of continuing the meeting past 11:00 p.m. in order to hear the Cultivate agreement [paragraph no. 21-652]. Vice Mayor Vella seconded the motion, which failed since it required four affirmative-votes, by the following roll call vote: Councilmembers Daysog: No; Herrera Spencer: No; Knox White: Aye; Vella: Aye; and Mayor Ezzy Ashcraft: Aye. Ayes: 3. Noes: 2. Vice Mayor Vella moved approval of continuing the Cultivate agreement to Section 6 of the November 2, 2021 agenda. Councilmember Knox White seconded the motion, which carried by the following roll call vote: Councilmembers Daysog: No; Herrera Spencer: Aye; Knox White: Aye; Vella: Aye; and Mayor Ezzy Ashcraft: Aye. Ayes: 4. Noes: 1. Councilmember Daysog stated the magnitude of the matter is beyond the initial $298 million POB; when the interest is taken into account, the sum is $420 million; he understands the net present value of the figure is different; Council should not take the Government Finance Officers Association (GFOA) insight related to POBs lightly; the GFOA are the people who certify the annual budget and are a reputable organization that the City turns to for validation; the GFOA's advisory states that State and local governments should not issue POBs; Council should frame its discussion based on the vantage point of the GFOA; discussed how POBs previously worked for cities; stated cities would invest the POB money into the market in the hopes that the Return On Investment (ROI) would be above the 3.5% interest rate; Council is not attempting a previous POB approach; the new approach would generate and issue a $298 million POB in order to pre-pay the City's unfunded liability; expressed support for the new POB approach; stated the new approach is not without risks; if the return rate from CalPERS is not be 7% in the next year, the unfunded liability rate would recalibrate; the City will have to make up for the shortfall; the budgetary savings would be south of $2.7 million; CalPERS' return falling to the same amount of or less than the interest being paid is a concern and eliminates the POB savings; outlined employee hires eliminating the budgetary savings, which eliminates the purpose of the POB; stated the City Manager is correct in his recommendation for a strict, fiscal strategy in order to ensure locking the budgetary savings; CalPERS might have a return rate higher than 7% and will not issue a refund for any excess paid; the City will still pay the annual debt service; he recommends going slow; he will not support the matter. Mr. Morales stated the matter is complex; CalPERS returned 21.4% in the past fiscal year; the City will get a credit of $74.3 million; CalPERS has announced that the discount rate has to go down to 6.8%, which increases liability; the City will net $24 million; the $295 million liability will likely be somewhere closer to $241 million; a demographic adjustment always comes into the process; there is a lot of estimation because the POB is a $300 million liability which changes each year; he recommends the $295 million amount because of the CalPERS adjustment; the City does not have to borrow the full amount; there are a lot of mathematics and moving parts; outlined credits and cash flows; stated impacts would drive payments down; projections have been shared with City staff; the City should ask for the full amount and decide the amount, structure and when to perform the POB in the future. Mayor Ezzy Ashcraft requested clarification about the GFOA advisory. Regular Meeting Alameda City Council 23 October 19, 2021 | CityCouncil/2021-10-19.pdf |