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Retirement Debt Refinancing
City of Piedmont
Majority Approval Required
Pass: 1,940 / 82.9% Yes votes ...... 400 / 17.1% No votes
Index of all Measures
|Information shown below: Impartial Analysis | Arguments ||
Shall the City of Piedmont, at City Council discretion, issue bonds or otherwise incur debt in a principal amount not to exceed $8,000,000 to refinance a portion of the City's existing obligation to the California Public Employees Retirement System for the purpose of achieving debt service savings, as more specifically set forth in Ord. 711 N.S. which is on file with the Piedmont City Clerk?
The City has participated in PERS since 1974. In 2003, PERS adopted a requirement that all pension plans with fewer than 100 active members be assigned to risk sharing pools with other agencies having similar benefits. Because the City's miscellaneous and safety plans each had fewer than 100 members, PERS assigned the City 's plans to risk pools. Because the various plans joining these risk pools had different levels of unfunded liability at the time they joined,PERS established a separate "Side Fund" for each plan to address its outstanding unfunded liability at the time it joined the pool.
The Side Funds are distinct from the City's other PERS plans and liabilities and are currently scheduled to be retired over fixed terms (seven years remaining for the miscellaneous plan and nine years remaining for the safety plan) under a fixed amortization schedule. The total current amount of the City's Side Fund obligations is approximately $7,800,000. PERS charges the City an interest rate on the Side Fund obligations at a rate equal to the PERS actuarial rate of return, which is currently 7.5%.
Measure A would allow the City Council to authorize the refinancing of the City's PERS Side Fund obligations at a lower interest rate through the issuance of new bonds or other indebtedness in an amount up to $8,000,000 (i.e.,the current outstanding obligation plus transaction costs of the refinancing). Current projections estimate that such a refinancing could save the City between $600,000 and $700,000 over the next nine years. Section 4.14 of the Charter of the City of Piedmont requires that the voters must give majority (50% + 1) approval prior to the issuance of any bonds that would constitute a general obligation of the City.
A "Yes" vote on Measure A means the voter is in favor of authorizing the City Council to issue bonds or otherwise incur debt to refinance the City's Side Fund obligations to PERS.
A "No" vote on Measure A means the voter is opposed to authorizing the City Council to issue bonds or otherwise incur debt to refinance the City's PERS Side Fund obligations.
Should a majority of qualified voters approve Measure A, the City Council would then have the authority required under the Charter to approve the terms and conditions of a bond refinancing of the PERS Side Fund obligations.If a majority of the voters do not approve Measure A, the City would not be able to issue bonds to refinance the PERS Side Fund obligations. The City would continue to be required to meet its PERS Side Fund obligations
The above statement is an impartial analysis of Measure A. The full text of Measure A is printed in the Voter's Information Pamphlet and is also available on the City of Piedmont's website at: http://www.ci.piedmont.ca.us.
|Arguments For Measure A|
This ballot measure is seeking voter approval to refinance approximately $7.8 million in "side fund" pension obligations to CalPERS. The City of Piedmont's underwriters for this transaction currently estimate that the City could save between $600,000 and $700,000 over the next 9 years by refinancing at a lower interest rate.
The City of Piedmont currently owes approximately $7.8 million in side fund obligations to CalPERS as evidenced by the CalPERS contracts referred to as "PERS Side Fund Obligations", which are debt obligations of the City imposed by law. Currently, these obligations are scheduled to be paid off over the next 9 years and the City is being charged an effective rate of interest of 7.5%. The City is fully obligated to pay the PERS Side Fund Obligations with interest, regardless of any other steps taken concerning future pensions and benefits for City employees. Section 4.14 of the Piedmont City Charter requires voter approval for any new bonded indebtedness, even if such indebtedness merely refinances an existing obligation such as the PERS Side Fund Obligations.
The Budget Advisory and Financial Planning Committee recommended and each of its five members individually supports the refinancing of the City's side fund obligations. The City Council voted unanimously to ask for voter approval to refinance this debt at today's lower interest rates, just as wise homeowners do when they refinance their mortgage with a lower interest rate, and endorses this measure. As of the time of writing this argument, all the announced candidates for City Council have endorsed measure A. Approval of this measure does not require the City Council to proceed with the refinancing. In the event conditions, such as interest rates or expected savings, are not favorable, the City Council would not be required to go forward with the refinancing.
John Chiang, Mayor
Margaret Fujioka, Vice Mayor
Jeff Wieler, Councilmember
Dean Barbieri, Former Mayor
Bill Hosler, Chair, Budget Advisory and Financial Planning Committee
(No arguments against Measure A were submitted)