pages: CityCouncil/2021-10-19.pdf, 25
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CityCouncil | 2021-10-19 | 25 | Mr. Morales stated the GFOA has a warning on its website which states: "Do not issue pension obligation bonds;" a number of policies are designed to be written for the entire country; the City's financial sophistication is different from anyone else; the GFOA policy is written with cities which might not have high financial sophistication; the information is important because each plan, State law and funding level is different; the CalPERS system is different from the County of Alameda, the State of New Jersey, Illinois or Minnesota; the GFOA writes one universal policy to cover the nation; the financial circumstances of each agency in the country are different; UFI believes a number of the circumstances have been addressed; the most disconcerting part about the GFOA is the advisory not to issue POBs without any recommended alternative options provided outside of using reserves; Council should feel free to adhere to the GFOA advisory; however, the points and counterpoints mentioned by the GFOA should also be considered; the matter is complex and has some downsides, which include equity risks; the answer is not easy; doing nothing has a detrimental impact on operations going forward; the projected operating deficit has to do with increasing pension costs and a shortfall over the next four to five years; the deficit is due to an increase in UAL payments. Mayor Ezzy Ashcraft inquired if the current economy, stock market and low interest rates are sustainable and factors into the matter. Mr. Morales responded rates are at historic lows, which makes the matter compelling; stated the discount rate has lowered; he does not believe the growth will continue on a long-term basis; a second industrial revolution is causing some tremendous economic growth; cities cannot continue at 21.3% growth and outrun the problem; the orders are taking more measured steps and being realistic; outlined gains and downsides; stated Council must consider the downside; Councilmember Daysog is correct in his statements about risk; there are things the City can do to prepare itself; the POB is not a panacea and is not without risk; Council should take the time to understand and think about alternative options; doing nothing is not ideal; a plan to address the matter is needed. Councilmember Herrera Spencer stated that she does not plan to support the matter; she would have liked the City Auditor and Treasurer to have had more time to speak; it is premature to proceed at this time; the City needs to look at both sides of the equation; she would like to hear from community members; expressed support for a workshop; stated the matter is a huge risk; expressed support for Councilmember Daysog's comments; stated the comments help provide further understanding; the City is rushing through a huge risk; expressed support for the matter returning with more information; noted cities have lost a lot of money on POBs; the examples of losses have been minimized in the report. Mayor Ezzy Ashcraft requested clarification from the City Manager on how he envisions the process going forward. The City Manager stated the City will start the court process and simultaneously come back with a Council work session and public meetings; the policies can be refined; staff will return to Council after the court decision and bring back a full recommendation; there is risk associated with the matter; the risk of doing nothing will cost roughly $530 million; the POB solution helps. In response to Mayor Ezzy Ashcraft's inquiry, the City Manager stated the timeline is about four to six months; court processes can cause delay; four to six months has been the average time in other communities. Regular Meeting Alameda City Council 24 October 19, 2021 | CityCouncil/2021-10-19.pdf |