Santa Barbara County Grand Jury
• 2020-2021
• Agency Response
Response to:
PENSIONS IN SANTA BARBARA COUNTY REQUIRE VIGILANCE: Balancing Promises and Maintaining Services
City Council Pamela Olsen, Foreperson Paula Perotte
⚠️ Translation Notice: This content has been automatically translated. The original English text is the official version. Translation may contain errors.
⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
Findings and Recommendations 1 findings
F2
Section 115 Trusts, Pension Obligation Bonds, and Pension Reserve Funds can be effective mechanisms to protect cities from dramatic impacts to the financial markets or declines in General Fund revenues. Response to Finding 2: Agree. The City agrees that Section 115 Trusts and Pension Reserve Funds to be effective mechanisms to protect cities from dramatic impacts, though finds Pension Obligation Bonds to involve considerable investment risk, making this approach very speculative and not a one size fits all approach. Issuing a Penson Obligation Bond can pay down the UAL that exists at a specific point in time, but other actuarial dynamics and market performance can create a new UAL or produce a surplus. If the pension investment return rate falls below the interest rate on the bonds, the Cy would be worse off by issuing debt.
Related Recommendations (1)
R2
That each city council and Santa Barbara County Board of Supervisors study and determine by June 30, 2022, whether a Section 115 Trust, Pension Obligation Bond, or Santa Barbara County Grand Jury Response February 17, 2022 Pension Reserve Fund would be an effective hedge against risks to their pension plans for their city.
Conclusions 1
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CL1The City of Goleta appreciates the opportunity to provide detailed responses to the Grand Jury’s findings and recommendations. Addressing the unfunded liabilities of public pensions is critical. CalPERS’ decision to lower the discount rate as a way to reduce volatility presented a fiscal challenge all participating agencies. The City of Goleta is in good financial condition and has a record of sound budgeting and fiscal prudence, which, combined with the proactive steps we are taking to reduce our UAL, will allow the City to address the challenge of increasing pension costs successfully. This concludes our responses to the Grand Jury’s Report. For any additional assistance we can provide on this, feel free to contact Luke Rioux, Finance Director at [email protected] or by phone at (805) 562-5508. Sincerely, Michelle Greene City Manager cc: Luke Rioux, Finance Director The Honorable Judge Gustavo Lavayen, Presiding Judge, Santa Barbara County Grand Jury, 312 East Cook Street, Santa Maria, CA 93454 Santa Barbara County Grand Jury Digital Copy to: [email protected]