(PLEASANTON, CA.) – Following Vice President of NHA Advisors Mike Meyer’s presentation in Pleasanton’s Mar. 17 city council meeting, the council has many questions.
This presentation covered different ways Pleasanton can approach paying off its debt with California Public Employees' Retirement System (CalPERS), with the recommended option being option 4.
Most of the council’s questions were clarifying questions regarding the proposed plans and how Pleasanton’s debt works.
Leading with this topic, Council member Nibert opens the discussion by expressing confusion over a line made by Meyer comparing paying off the debt to paying off “100 different mortgages.”
Meyer takes this as an opportunity to provide more clarity in how exactly the debt works and is paid off. He also states that the city is not paying off literal mortgages, but that he chose to use that word because he felt it was the one he felt the council would best understand.
“Basically every year, CalPERS either beats their [investment returns] expectation or they miss it. Let's say they earn 5% instead of 6.8%, a new UAL [Unfunded Accrued Liability] develops. [...] this gets amortized over 20 years.”
Photo Credit: https://pleasantonca.portal.civicclerk.com/event/603/media / Mike Meyer
Council member Testa takes it a step further, expressing confusion regarding the point of the presentation as a whole.
"I thought that we were looking at different strategies other than simply making additional payments. I've heard in different pension strategy workshops suggestions of moving off retirement healthcare [and…] different non-paydown kinds of strategies.”
Photo Credit: https://pleasantonca.portal.civicclerk.com/event/603/media / Julie Testa
Meyer explains that he and his team came only to provide a comprehensive review of what the council could do with their 115 Trust to help pay off their debt with CalPERS.
He goes on to note that California legislation requires Pleasanton to offer CalPERS and restricts them from reducing benefits it offers. Therefore, considering something like removing the benefit of retirement healthcare is not an option.
Moving on from clarifying questions, Testa has a strong opinion to share regarding an option briefly mentioned in Meyer’s presentation. This option is the consideration of a Pension Obligation Bond (POB).
Previously, Meyer explained that this option is very complex and requires an extreme amount of analysis before consideration in order to be successful. Due to this, not much information about POBs was shared.
Testa recounts her very negative experiences witnessing others she knows in similar situations choosing to go through with a POB.
According to her, they are too risky and should not be an option at all.
Cities such as Sacramento, CA., also have businesses considering different ways to tackle their own debts and deficits.
Before entering the period in which the council can propose and vote on motions, Mayor Jack Balch recaps the purpose of the presentation and the recommended option through another series of clarifying questions.
He also seeks reassurance that the 115 Trust was intended to be used as in the recommended option. Meyer confirms that the application of the 115 Trust to Pleasanton’s CalPERS debt is indeed the intended use of the trust.
Photo Credit: https://pleasantonca.portal.civicclerk.com/event/603/media / Jack Balch
In the end, the council is unable to unanimously pass the motion that accepts this item.
Testa reiterates her strong disapproval of a POB being considered and wants to remove that option from the presentation entirely. Though not as passionate, Nibert shares Testa’s concern and supports the removal of this option.
While none of the other three council members consider a POB a good option, they believe that they should leave the option in the official documents.
They argue that it is better to leave it with the statement that consideration of a POB requires intense analysis and precautionary measures rather than removing it and leaving it with no accompanying guidance for future councils regarding POBs.
The motion is eventually passed three to one, accepting the presentation with all of its original parts, with only Testa and Nibert voting “no.”
If you have any questions, please email me at madison.v@lead4earth.org or comment below.
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