Title
RESOLUTION AUTHORIZING THE ISSUANCE OF TAXABLE OTHER POST EMPLOYMENT BENEFITS OBLIGATION BONDS, SERIES 2005 (B)
A resolution of the City of Gainesville, Florida, amending resolution No. 020919, supplementing resolution No. 020918 and providing for and authorizing the issuance of the City's Taxable Other Post Employment Benefits Obligation Bonds, Series 2005 in an original aggregate principal amount not to exceed $45,000,000 to fund the unfunded retiree health care obligations of the City; authorizing the Interim City Manager, the Administrative Services Director or the Finance Director to award the sale of such bonds to Citigroup Global Markets Inc. in accordance with certain parameters set forth herein; approving the form and authorizing the execution and delivery of a bond purchase contract; appointing J.P. Morgan Trust Company N.A. as paying agent and registrar with respect to such bonds; approving the form and authorizing the circulation of a preliminary official statement and authorizing the execution and delivery of a final official statement; authorizing the Interim City Manager, the Administrative Services Director or the Finance Director to deem final the preliminary official statement; authorizing the Interim City Manager, the Administrative Services Director or the Finance Director to accept the terms of a commitment for municipal bond insurance from MBIA Insurance Corporation; approving the form and authorizing the execution of a continuing disclosure certificate; authorizing certain officials of the City to execute any documents and take any actions required in connection with the issuance of said bonds; providing an effective date for this resolution; and providing certain other details with respect thereto.
Explanation
The actuarial valuation on the City of Gainesville Retiree Health Care Plan as of September 30, 2003 established an Unfunded Actuarial Accrued Liability (UAAL) of $30,634,773. Traditionally, this unfunded liability is amortized over a period of years through contributions from the employer (City) to the plan. This liability currently carries an interest rate of 9%. As calculated by the plan actuary, the average annual employer contribution required over the next 10 years to amortize this liability is approximately $4.86 million.
Given existing market conditions, the City has the opportunity to issue taxable debt to discharge the UAAL at favorable rates relative to the current 9% level. Currently, the true interest cost on a 10-year taxable issue is approximately 4.7%. The proceeds from this financing will be deposited into the Retiree Health Care Plan, thus retiring the UAAL. The employer (City) will then make the scheduled debt service payments in lieu of the annual UAAL amortization payments.
Fiscal Impact
At current rates, the average annual debt service on a 10-year taxable issue sized to retire the UAAL is approximately $4.2 million. This produces a projected annual gross savings in excess of $600,000 per year over 10 years, for a total gross savings of approximately $6 million. On a present value basis, the total savings are approximately $4.7 million over the life of the issue.
Recommendation
The City Commission: 1) adopt the resolution authorizing and providing for the issuance of the Taxable Other Post Employment Benefits Obligation Bonds, Series 2005 to retire the Retiree Health Care Plan's Unfunded Actuarial Accrued Liability; and 2) authorize the Interim City Manager, Administrative Services Director, and Finance Director to retain the required professional services to implement this issue and to take the other actions provided for in the resolution.