Title
Award Resolution Authorizing the Issuance of Special Obligation Revenue Bonds, Series 2020 (B)
A resolution of the City of Gainesville, Florida, providing the delegation parameters for the award of the sale of City of Gainesville, Florida, Special Obligation Revenue Bonds, Series 2020 for the purpose of funding a portion of the unfunded pension obligations of the City with respect to the General Employees' Pension Plan and the Consolidated Police Officers’ and Firefighters’ Pension Plan to the underwriters, appointing the paying agent and approving the forms of the Preliminary Official Statement, Continuing Disclosure Agreement and Bond Purchase Contract and delegating authority to certain City officials to take actions in connection with the issuance of the bonds.
Explanation
The actuarial valuations on the General Employees' Pension Plan (General Plan) and Consolidated Police Officers' and Firefighters' Pension Plan (Consolidated Plan) as of September 30, 2019 established an Unfunded Actuarial Accrued Liabilities (UAAL) of $167,003,360 and $48,656,155 respectively.
Traditionally these unfunded liabilities are amortized over a period of years through contributions from the employer to the two plans. This liability currently carries an interest rate of 7.9% in both the General Plan and the Consolidated Plan. As calculated by the plans' actuaries, the annual employer contributions required over the next 27 years are expected to total approximately $440,366,034 for the General Plan and the Consolidated Plan.
Given existing market conditions, the City has the opportunity to issue taxable debt to discharge 95% of each Plan’s UAAL at favorable rates relative to the current 7.9% levels. Currently, the true interest cost on a 21-year taxable issue is approximately 3.03%. The proceeds from this financing would be deposited into the respective pension plans, thus retiring 95% of the UAAL in each Plan. The City would then make the scheduled debt service payments in lieu of 95% of the annual UAAL amortization payments to the General Pension Plan and Consolidated Pension Plan.
Fiscal Note
At current rates, the total debt service on a 21-year taxable issue sized to retire 95% the General Pension Plan and Consolidated Pension Plan UAAL is approximately is $285,605,695. This produces a total gross savings of $132,742,038 over 21 years. On a present value basis, the savings are approximately $69,651,690. Actual savings realized will depend on the final borrowing rate and actual investment returns over the long term.
GRU management’s recommendation is that savings accrued from the GRU portion of the City of Gainesville Special Obligation Revenue Bonds, Series 2020 be added to cash reserves, and/or utilized to redeem and/or defease outstanding debt.
Recommendation
Recommended Motion: The City Commission: 1) adopt the Award Resolution providing the delegation parameters for the award of the sale of City of Gainesville, Florida, Special Obligation Revenue Bonds, Series 2020 to the underwriters, appointing the paying agent and approving the forms of the Preliminary Official Statement, Continuing Disclosure Agreement and Bond Purchase Contract and 2) authorize the City Manager and Finance Director to take all required actions in connection with the issuance of bonds and 3) approve savings accrued from the GRU portion of the City of Gainesville Special Obligation Revenue Bonds, Series 2020 be added to cash reserves, and/or utilized to redeem and/or defease outstanding debt.