“DEREK LAZZARO:
”I believe that the City’s new Pension Policy was a reasonable response to concerns about pension liabilities, and the policy provides the City with a good path forward regarding the management of pension liabilities.

As a refresher, the new policy dedicates a minimum of $250,000 allocated in the budget in additional discretionary payments to CalPERS. The policy also calls for 30% of any cash surpluses be paid towards driving down pension debt, depending on plan funded ratios at the time of the surplus.

Creating this new policy was a win enabled by the current City Council.

I believe that continued heavy focus on pension liabilities could become a distraction, as the city ultimately has only limited ability to influence the course of CalPERS investing and pension management.””

“DESIREE ‘“DEZ” MYERS:
”CLARIFICATION:
• The $2 million debt payment is the minimum payment CalPERs requires. It is a negative amortized payment that excludes any principal and only part of the interest cost which is then added to the debt.
• PVE’s pension debt is $28 million. This was clarified by the auditors who stated [VIDEO] the ‘outflow pension’ asset on the Net Position (balance sheet) is actually a liability that will be recategorized in the future.

PROBLEM: Our pension debt growth exceeds our revenue growth. This is not sustainable. The debt service will soon exceed 10% of city revenue and continue unabated. The City has no plan to stop the growth which is destabilizing.

1. STOP AMASSING DEBT: Pay the full cost of pensions annually. The cost annually varies mostly depending on CalPERs investment losses. We have two tools: GovInvest and a spreadsheet to calculate cost based on current market results. The Investment Advisory committee can use these tools to advise Council on the appropriation in the budget and adjust quarterly.
2. PAY OFF EXISTING DEBT: We pay 7% interest on this debt. Options:
• Use new revenue to pay down the debt
• Refinance the debt
• Keep the debt because we have other issues and risks to focus on first

We need to start informing residents about the facts and make trade-off decisions based on residents’ priorities.””

“CRAIG QUINN:
”The City has developed a pension funding policy with the goal of reducing pension debt. It depends on surplus funds being available to allocate those funds to paying down existing debt. This would result in increased funded ratios, with a gradual reduction of pension debt and UAL payments over time.
An alternative should the city successfully pass a new parcel tax measure is to pay a significant amount down on its UAL, and establish a Fresh Start with CalPERS to create a more aggressive amortization schedule to reduce debt faster. In addition, the Council should be cautious, balancing and controlling benefits through future negotiations to remain competitive while being wise with controlling growth of pension debt. Statewide pension reform accomplished in 2013 ensured that all new employees to the CalPERS system qualify under a more balanced and effective classification called PEPRA.
As time continues, so long as the City manages what is in its control effectively, so long as CalPERS on balance meets its investment returns in comparison to its discount rate, the debt balance will continue to drop with time. It is crucial that this subject be reviewed over a reasonable time period as the CalPERS portfolio is subject to volatility based on the macro-economic and investment environment(s).””