agenda city of watsonville city council/redevelopment agency meeting

CITY COUNCIL/REDEV# 6.2 (t)
City of Watsonville
Finance Department
M E M O R A N D U M
DATE: June 9, 2011
TO:
FROM:
SUBJECT:
Carlos J. Palacios, City Manager
Marc Pimentel, Administrative Services Director
ADOPT A RESOLUTION AUTHORIZING AND SETTING FORTH
INTERNAL LOAN TERMS AND CONDITIONS BETWEEN THE
GENERAL FUND AND THE CITY’S POOLED MONEY
INVESTMENT ACCOUNT OF UP TO $6,454,697 MILLION AND
AUTHORIZING THE DEFEASANCE OF THE CALPERS SIDE
FUNDS FOR PUBLIC SAFETY PLANS.
AGENDA ITEM: June 14, 2011 City Council
RECOMMENDATION:
That the City Council adopts a resolution authorizing and setting forth the terms and conditions
between the General Fund and the City’s pooled money investment account for an internal
loan of up to $6,454,697 with the City’s 12-month average pooled money portfolio rate for 13
years and authorize the defeasance of the CalPERS Side Fund Public Safety plans.
DISCUSSION:
As part of a CalPERS action to consolidate plans with under 100 members with other
agencies, the City’s’ Public Safety liabilities were each pooled by type with other agencies
throughout the State. The liabilities at the time of the pooling for the City’s Fire and Police
personnel were subsequently segregated and have an outstanding, combined balance of
$6,454,697 at June 30, 2011. These debt obligations will continue forward for another 13
years at interest rates that average 8.35% (between 7.882% and 8.788%).
Current market conditions and portfolio cash balances allow this outstanding balance to
essentially be refinanced through an internal loan at much lower interest rates. Traditionally,
the City has refinanced debt through private placement loans or on the bond market.
However, City staff have strategically planned for the opportunities to effectively refinance this
and other prior loans using the City’s pooled money investment account. This action lowers
the debt service rates while at the same time providing for a safe rate of return for the City’s
pooled money account higher than other investment opportunities.
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Writer’s name 6/9/2011 9:00:53 AM
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