“MICHAEL KEMPS (incumbent)
”We need to balance the need to avoid new debt, retire existing debt, and manage funded ratios with other cash needs. Significant additional discretionary payments against debt will reduce minimum unaccrued liability payments, freeing cash and reducing long-term cost. I do not support the use of Pension Obligation Bonds (POBs). They do nothing to solve the underlying challenges and costs associated with promised benefits and missed returns; they actually increase risk, causing debt to be paid at a point in time while continuing to depend on CalPERS to meet its promised annual return and discount rate; they create a false sense of security that a problem was solved. Rather, they allow local government to “kick-the-can down the road” while financing debt at a potentially lower interest rate; and they require a new revenue source for repayment. The present economic climate and monetary policy of the Federal Reserve is not friendly to taking on new debt. Inflationary pressures and resulting increasing interest rates make POBs even less desirable.

I participated in the creation of the first round of a pension funding policy to begin targeting pension debt. In addition to $1.82MM in cash discretionary payments made over the last two years, the 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.””

“VICTORIA LOZZI (incumbent)
”Our unfunded pension liability (“UAL”) is one of the biggest pressures on the balance sheet of the City (along with depreciation), so I do believe it needs to be attacked on a thoughtful basis. In early 2020, at the start of COVID when interest rates plummeted, I believe there was a window of opportunity (now closed due to rising interest rates) to consider Pension Obligation Bonds. POBs are one tool in the toolbox of pension funding strategies, and in the end PVE had not yet explored other options and opted not to pursue the POB route. As part of the Long-Range Financial Plan, this Council determined that paying down our UAL was a priority and analyzed various scenarios for doing that, which along with great work by our Finance Advisory Committee, resulted in the Council adopting a Pension Funding Policy that sets the discipline for using a portion of surplus funds, when available, to make additional discretionary payments to our UAL. In the past two years, this Council has paid an additional amount of approximately $1.5 million, on top of our required minimum annual payment. If we are able to stay on this path, this could result in our pension being fully funded in 10-12 years.””

“DAVID MCGOWAN (incumbent)
”The answer to this question is a complex one that can be facilitated by my background and experience as a forensic accountant. Before the city can determine what, if any, cash can be assigned to pension debt reduction we must understand the timing and magnitude of the future city requirements related to operations and infrastructure. I have provided leadership in establishing a Long-Range Plan methodology that will document all foreseeable needs within PVE and to develop a strategy as to how those needs can be achieved. Residents need to understand the trade-off “risks” of funding one alternative verses another. Until the community fully understands all the competing requirements/needs, we are not able to adequately address allocating scarce resources.

Manhattan Beach has utilized Pension Obligation Bonds (POB) but that was before the recent rise in interest rates. Manhattan Beach’s revenue sources and operational needs are much different than those of PVE. I would be open to analyzing POBs as an alternative funding vehicle, but that evaluation needs to be based on PVE’s financial situation and the market conditions for POBs at that time.””

“DESIREE “DEZ” MYERS
”RE: Use available cash to cover other pressing needs of the city vs paying down pension debt?

The cost/benefit of paying down the debt (7% interest) vs. how other pressing needs should be evaluated. First, pressing needs are to be identified with alignment to resident priorities. Risks should be hedged by ensuring emergency loans are available in the unlikely event additional funds are needed.

RE: Issue Pension Obligation Bonds (POBs)?

PVE is not a good candidate for POBs. I provided a risk analysis to the Council in an email 7/26/21.

The League of CA Cities and the GFOA (Government Finance Officers Association) all warn against Pension Bonds because of the risk. POBs have caused cities to go bankrupt: Philadelphia, Scranton, Eerie, Detroit, Stockton and San Bernardino, etc.

Similar to these cities, PVE is not fiscally strong enough to absorb the loss, potentially causing us to go bankrupt like other cities with POBs. While bankruptcy allows cities to absolve themselves of pension obligations (a precedent established by Stockton’s bankruptcy), we need to show our employees their retirement funds are secure for employee retention.

RE: Next steps
As a member of the city’s Pension Adhoc Committee, we provided a comprehensive 12 step solution to stop new debt and pay off existing debt, securing the retirement funds for our employees, while eliminating high interest costs ($1 MM increasing to $2+ MM) which frees these funds for infrastructure. These solutions should be deliberated and considered.””