City of Wheaton City Council met Nov. 23.
Here is the minutes provided by the council:
1. Call to Order
The Wheaton City Council Planning Session was called to order at 7:31 p.m. by Mayor Suess following the conclusion of a public hearing. The following were:
Physically Present: Mayor Suess
Councilman Barbier
Councilwoman Bray-Parker
Councilwoman Robbins
Councilman Rutledge
Present By Video Conference: Councilman Zaruba
Absent: Councilwoman Fitch
City Staff Physically Present: Michael Dzugan, City Manager
John Duguay, Assistant City Manager
Susan Bishel, Public Information Officer
Robert Lehnhardt, Director of Finance
2. Public Comment
There were no public comments.
3. Approval of October 26, 2020 Minutes
The Council approved the October 26, 2020 City Council Planning Session minutes.
4. Analysis of Future Funding of Pension Liabilities
Mayor Suess provided an overview of the City’s Police and Fire pension liabilities. He stated that the City’s Police and Fire pension assets are currently more than $100 million and the funding ratios on those plans are approximately 65% - 70%. Over the past two years the cost of the Police and Fire pensions have increased by approximately $1.2 million. The City is currently seeking strategies to fully fund those pensions and do it in a cost-effective way for the benefit our residents.
Ben Mohr of Marquette Associates presented five funding strategy options that would provide more predictable annual payments while reducing long-term costs on the City’s path to fully fund the Police and Firefighters’ Pension Plans’ liabilities by 2041.
Option 1 would maintain the City’s current course of action, which involves not issuing any debt and gradually increasing annual contributions to both the police and firefighters’ pensions. The present value of these combined future annual contributions is $105.2 million.
In response to Council questions, Mr. Mohr stated that there is an assumed net investment income rate of 6.75% added to each year through 2041 of the analysis to project growth within the pension assets investment portfolio.
In response to Council questions, Mr. Mohr stated that the analysis assumption is that the interest rate of each bond will remain the same when the City refinances them.
Option 2 involves issuing a non-amortizing taxable pension obligation bond with a maximum allowable amount of $35 million. With this bond, the City would only have to pay the annual interest expense on the bond in addition to annual pension contributions. The bond would carry the risk of having to refinance at higher interest rates when refinanced every 10 years, but because the bond proceeds help increase investment returns, the future annual required contributions by the City would be reduced. The present value of the combined future annual contributions in this option, with an estimated 3.0% annual bond interest rate, is $83 million.
Option 3 involves issuing an amortizing taxable pension obligation bond with a maximum allowable amount of $35 million. With this bond, the City would have to make annual principal payments on the bond in addition to interest payments and annual pension contributions. The bond would be assumed to be fully paid off in 10 years. By amortizing the bond, the City would mitigate the risk of the need to refinance the bond at potentially higher interest rates, but the City would need to contribute significant costs up front. The present value of the combined future annual contributions in this option is $102.4 million.
Option 4 involves depositing $12 million of the City’s available cash into the police and firefighters’ pensions and issuing a $12 million amortizing tax-exempt general obligation bond to finance city infrastructure projects. The principal and interest on this general obligation bond would be paid by the City, and the bond would be fully paid off in 10 years. The present value of the combined future annual contributions in this option is $103.8 million.
Option 5 involves maintaining the City’s current course of action while elevating the contributions in the first five years by $500,000 annually combined into both the police and firefighters’ pension funds. By doing so, the funded status improves in the first five years and the future annual required contributions are reduced to achieve 100% funding by 2041. The present value of the combined future annual contributions in this option is $103.9 million, which is a $1.3 million savings from Option 1.
In response to Council questions, Mr. Mohr stated that the City would potentially need to pay higher contributions if the assets were to decline due to an economic shortfall.
The Council requested that Marquette Associates provide a revised analysis that provides further details of Option 5’s strategies to increase funding contributions and Option 4’s issuance of an amortizing tax-exempt general obligation bond for the City’s Police and Firefighters’ Pension Plans’ unfunded liabilities.
5. City Council/City Staff Comments
Mayor Suess wished the City of Wheaton a happy Thanksgiving. He acknowledged the multiple holiday happenings around the City, including the Nights of Lights at Adams Park, the Light Up Wheaton holiday decorating contest, the downtown’s Reindeer on Parade and window paintings, and the Wheaton Park District’s Cosley Zoo holiday lights and Christmas tree sale.
6. Adjournment
The meeting was adjourned at 8:57 p.m.
https://www.wheaton.il.us/AgendaCenter/ViewFile/Minutes/_11232020-1531
Alerts Sign-up