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HomeMy WebLinkAboutPacket - 05/12/2020 - Police Pension Board POLICE PENSION BOARD OF TRUSTEES Tuesday, May 12, 2020 3:00 PM Remote Meeting VIA Zoom Join Zoom Meeting https://cityofmchenry.zoom.us/j/91362751543 or phone +1 312 626 6799, Meeting ID: 913 6275 1543 AGENDA 1. Call to Order 2. Roll Call 3. Public Input 4. Approve the January 14, 2020, meeting minutes 5. Report of Investments and Accounts: a. Presentation and motion to approve the Treasurer’s Report b. LPL Financial Equities Report c. Capital Gains, Inc. Fixed Assets Report d. Semi-annual review of the Police Pension Board Fund Investment Policy 6. New Business: a. Approve portability of time for Ashley O’Herron b. Approve Joseph Lazicki portability request c. Motion to accept the annual independent Medical Examination for Police Disability Pensioner Justin DeBolt d. Motion to accept the annual independent Medical Examination for Police Disability Pensioner Sean Klechak 7. Unfinished Business: a. Motion to approve the payment of bills b. Discussion of issuing bonds to pay off the unfunded liability for the Police Pension Fund 8. Additional Items for Discussion 9. Adjournment City of McHenry, Illinois Hypothetical Refunding of Police Pension Fund UAAL Scenario #1: Level Debt Service Scenario - 7% Rate of Return April 30 Tax Collection Fiscal Year Year Ending of UAAL Annual Payment to Net Total Assumed UAAL POB December 31 Payment Amortize UAAL (2)Principal Interest Debt Service Savings (3)Balance (2)Balance Avg= 3.42% $22,522,070 2019 2020 $22,462,771 $22,985,000 2020 2021 $1,574,691 $1,305,000 $264,797 $1,569,797 $4,894 $22,350,246 $21,680,000 2021 2022 $1,621,931 $885,000 $684,120 $1,569,120 $52,811 $22,179,297 $20,795,000 2022 2023 $1,670,589 $905,000 $665,181 $1,570,181 $100,408 $21,944,317 $19,890,000 2023 2024 $1,720,707 $925,000 $645,362 $1,570,362 $150,345 $21,639,263 $18,965,000 2024 2025 $1,772,328 $945,000 $624,642 $1,569,642 $202,687 $21,257,621 $18,020,000 2025 2026 $1,825,498 $965,000 $601,867 $1,566,867 $258,631 $20,792,371 $17,055,000 2026 2027 $1,880,263 $990,000 $577,646 $1,567,646 $312,617 $20,235,956 $16,065,000 2027 2028 $1,936,671 $1,015,000 $551,114 $1,566,114 $370,557 $19,580,235 $15,050,000 2028 2029 $1,994,771 $1,045,000 $522,897 $1,567,897 $426,874 $18,816,447 $14,005,000 2029 2030 $2,054,614 $1,075,000 $492,487 $1,567,487 $487,127 $17,935,161 $12,930,000 2030 2031 $2,116,252 $1,110,000 $460,130 $1,570,130 $546,123 $16,926,233 $11,820,000 2031 2032 $2,179,740 $1,140,000 $425,609 $1,565,609 $614,131 $15,778,747 $10,680,000 2032 2033 $2,245,132 $1,180,000 $389,015 $1,569,015 $676,118 $14,480,968 $9,500,000 2033 2034 $2,312,486 $1,220,000 $349,957 $1,569,957 $742,530 $13,020,276 $8,280,000 2034 2035 $2,381,861 $1,260,000 $308,355 $1,568,355 $813,506 $11,383,104 $7,020,000 2035 2036 $2,453,317 $1,305,000 $264,129 $1,569,129 $884,188 $9,554,873 $5,715,000 2036 2037 $2,526,916 $1,350,000 $217,018 $1,567,018 $959,898 $7,519,914 $4,365,000 2037 2038 $2,602,723 $1,400,000 $166,798 $1,566,798 $1,035,925 $5,261,393 $2,965,000 2038 2039 $2,680,805 $1,455,000 $114,018 $1,569,018 $1,111,787 $2,761,229 $1,510,000 2039 2040 $2,761,229 $1,510,000 $58,437 $1,568,437 $1,192,792 $0 $0 $42,312,524 $22,985,000 $8,383,573 $31,368,573 $10,943,950 Assumed Unfunded Actuarial Accrued Liability Funded by POBs …………………………$22,522,070 Assumed Present Value Savings @ Bond Rate………………………………...……………$7,238,551 Assumed PV Savings @ Bond Rate / UAAL………………..…………………………………32.14% +10 basis points -10 basis points Potential Gross Savings $10,671,095 $11,210,112 Potential Present Value Savings $6,956,173 $7,523,801 Hypothetical Refunding Bond Yield (Discount Rate)3.493%3.291% Potential Percent Present Value Savings 30.89%33.41% (3) Assumes actuarially projected results are achieved and bonds are issued as described. Alternative Funding Method Level Debt Service Illustration (1) Interest Rate Sensitivity Analysis (1) This illustration represents a mathematical calculation of potential interest cost savings, assuming hypothetical rates based on current rates for taxable general obligation bonds rated Aa2 as of May 5, 2020. Actual rates may vary. If actual rates are higher than those assumed, the interest cost savings would be lower. This illustration provides information and is not intended to be a recommendation, proposal or suggestion for a refinancing or otherwise be considered as advice. Assumes the bonds are dated as of August 1, 2020 with principal due December 15 and a first interest payment on December 15, 2020. Preliminary, subject to change. (2) Total UAAL, 3.00% increase in payroll, 7.00% investment rate and 22 year repayment period and amounts are based on the actuarial assumptions detailed in the City's Police Pension Fund Actuarial Valuation Report as of April 30, 2019. The UAAL payment is calculated as a constant percentage of payroll for covered employees. Preliminary, subject to change. Robert W. Baird & Co. Incorporated (“Baird”) is not recommending any action to you. Baird is not acting as an advisor to you and does not owe you a fiduciary duty pursuant to Section 15B of the Securities Exchange Act of 1934. Baird is acting for its own interests. You should discuss the information contained herein with any and all internal or external advisors and experts you deem appropriate before acting on the information. Baird seeks to serve as an underwriter (or placement agent) on a future transaction and not as a financial advisor or municipal advisor. The primary role of an underwriter (or placement agent) is to purchase, or arrangement for the placement of, securities in an arm’s length commercial transaction with the issuer, and it has financial and other interests that differ from those of the issuer. The information provided is for discussion purposes only, in seeking to serve as underwriter (or placement agent). See “Important Disclosures” contained herein. Prepared by Robert W. Baird Co. Incorporated 2020_0506 City of McHenry IL Police Pension Refunding Analysis BWP5/7/2020 (1) Assumes actuarially projected results are achieved and bonds are issued as described. $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 20212022202320242025202620272028202920302031203220332034203520362037203820392040Funding of Police Pension Fund UAAL Level Debt Service Illustration -7% Rate of Return Assumed Cost to Amortize Current UAAL Debt Service on POB(1) City of McHenry, Illinois Hypothetical Refunding of Police Pension Fund UAAL Scenario #2: Level Debt Service Scenario - 6% Rate of Return April 30 Tax Collection Fiscal Year Year Ending of UAAL Annual Payment to Net Total Assumed UAAL POB December 31 Payment Amortize UAAL (2)Principal Interest Debt Service Savings (3)Balance (2)Balance Avg= 3.43% $22,522,070 2019 2020 $22,300,946 $22,985,000 2020 2021 $1,444,809 $1,175,000 $265,977 $1,440,977 $3,831 $22,107,505 $21,810,000 2021 2022 $1,488,153 $795,000 $690,009 $1,485,009 $3,144 $21,856,513 $21,015,000 2022 2023 $1,532,797 $855,000 $672,996 $1,527,996 $4,802 $21,543,139 $20,160,000 2023 2024 $1,578,781 $920,000 $654,271 $1,574,271 $4,510 $21,162,219 $19,240,000 2024 2025 $1,626,145 $960,000 $633,663 $1,593,663 $32,482 $20,708,239 $18,280,000 2025 2026 $1,674,929 $980,000 $610,527 $1,590,527 $84,402 $20,175,308 $17,300,000 2026 2027 $1,725,177 $1,005,000 $585,929 $1,590,929 $134,248 $19,557,139 $16,295,000 2027 2028 $1,776,932 $1,030,000 $558,995 $1,588,995 $187,937 $18,847,019 $15,265,000 2028 2029 $1,830,240 $1,060,000 $530,361 $1,590,361 $239,879 $18,037,785 $14,205,000 2029 2030 $1,885,148 $1,090,000 $499,515 $1,589,515 $295,633 $17,121,796 $13,115,000 2030 2031 $1,941,702 $1,125,000 $466,706 $1,591,706 $349,996 $16,090,900 $11,990,000 2031 2032 $1,999,953 $1,160,000 $431,719 $1,591,719 $408,235 $14,936,403 $10,830,000 2032 2033 $2,059,952 $1,195,000 $394,483 $1,589,483 $470,469 $13,649,039 $9,635,000 2033 2034 $2,121,750 $1,235,000 $354,928 $1,589,928 $531,822 $12,218,926 $8,400,000 2034 2035 $2,185,403 $1,280,000 $312,815 $1,592,815 $592,588 $10,635,535 $7,120,000 2035 2036 $2,250,965 $1,325,000 $267,887 $1,592,887 $658,078 $8,887,644 $5,795,000 2036 2037 $2,318,494 $1,370,000 $220,054 $1,590,054 $728,440 $6,963,299 $4,425,000 2037 2038 $2,388,049 $1,420,000 $169,090 $1,589,090 $798,959 $4,849,766 $3,005,000 2038 2039 $2,459,690 $1,475,000 $115,556 $1,590,556 $869,134 $2,533,481 $1,530,000 2039 2040 $2,533,481 $1,530,000 $59,211 $1,589,211 $944,270 ($0)$0 $38,822,549 $22,985,000 $8,494,689 $31,479,689 $7,342,859 Assumed Unfunded Actuarial Accrued Liability Funded by POBs …………………………$22,522,070 Assumed Present Value Savings @ Bond Rate………………………………...……………$4,740,072 Assumed PV Savings @ Bond Rate / UAAL………………..…………………………………21.05% +10 basis points -10 basis points Potential Gross Savings $7,046,527 $7,637,699 Potential Present Value Savings $4,479,465 $5,003,897 Hypothetical Refunding Bond Yield (Discount Rate)3.496%3.293% Potential Percent Present Value Savings 19.89%22.22% (3) Assumes actuarially projected results are achieved and bonds are issued as described. Alternative Funding Method Level Debt Service Illustration (1) Interest Rate Sensitivity Analysis (1) This illustration represents a mathematical calculation of potential interest cost savings, assuming hypothetical rates based on current rates for taxable general obligation bonds rated Aa2 as of May 5, 2020. Actual rates may vary. If actual rates are higher than those assumed, the interest cost savings would be lower. This illustration provides information and is not intended to be a recommendation, proposal or suggestion for a refinancing or otherwise be considered as advice. Assumes the bonds are dated as of August 1, 2020 with principal due December 15 and a first interest payment on December 15, 2020. Preliminary, subject to change. (2) Total UAAL, 3.00% increase in payroll, 6.00% investment rate and 22 year repayment period and amounts are based on the actuarial assumptions detailed in the City's Police Pension Fund Actuarial Valuation Report as of April 30, 2019. The UAAL payment is calculated as a constant percentage of payroll for covered employees. Preliminary, subject to change. Robert W. Baird & Co. Incorporated (“Baird”) is not recommending any action to you. Baird is not acting as an advisor to you and does not owe you a fiduciary duty pursuant to Section 15B of the Securities Exchange Act of 1934. Baird is acting for its own interests. You should discuss the information contained herein with any and all internal or external advisors and experts you deem appropriate before acting on the information. Baird seeks to serve as an underwriter (or placement agent) on a future transaction and not as a financial advisor or municipal advisor. The primary role of an underwriter (or placement agent) is to purchase, or arrangement for the placement of, securities in an arm’s length commercial transaction with the issuer, and it has financial and other interests that differ from those of the issuer. The information provided is for discussion purposes only, in seeking to serve as underwriter (or placement agent). See “Important Disclosures” contained herein. Prepared by Robert W. Baird Co. Incorporated 2020_0506 City of McHenry IL Police Pension Refunding Analysis BWP5/7/2020 (1) Assumes actuarially projected results are achieved and bonds are issued as described. $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 20212022202320242025202620272028202920302031203220332034203520362037203820392040Funding of Police Pension Fund UAAL Level Debt Service Illustration -6% Rate of Return Assumed Cost to Amortize Current UAAL Debt Service on POB(1) Important Disclosures Robert W. Baird & Co. Incorporated (“Baird”) is not recommending that you take or not take any action. Baird is not acting as financial advisor or municipal advisor to you and does not owe a fiduciary duty pursuant to Section 15B of the Securities Exchange Act of 1934 to you with respect to the information contained herein and/or accompanying materials (collectively, the “Materials”). Baird is acting for its own interests. You should discuss the Materials with any and all internal or external advisors and experts that you deem appropriate before acting on the Materials. Baird seeks to serve as underwriter in connection with a possible issuance of municipal securities you may be considering and not as financial advisor or municipal advisor. Baird is providing the Materials for discussion purposes only, in anticipation of being engaged to serve as underwriter (or placement agent). The role of an underwriter includes the following: Municipal Securities Rulemaking Board Rule G-17 requires an underwriter to deal fairly at all times with both municipal issuers and investors. An underwriter’s primary role is to purchase the proposed securities to be issued with a view to distribution in an arm’s length commercial transaction with the issuer. An underwriter has financial and other interests that differ from those of the issuer. An underwriter may provide advice to the issuer concerning the structure, timing, terms, and other similar matters for an issuance of municipal securities. Any such advice, however, would be provided in the context of serving as an underwriter and not as municipal advisor, financial advisor or fiduciary. Unlike a municipal advisor, an underwriter does not have a fiduciary duty to the issuer under the federal securities laws and is therefore not required by federal law to act in the best interests of the issuer without regard to its own financial or other interests. An underwriter has a duty to purchase securities from the issuer at a fair and reasonable price but must balance that duty with its duty to sell those securities to investors at prices that are fair and reasonable. An underwriter will review the official statement (if any) applicable to the proposed issuance in accordance with, and as part of, its responsibilities to investors under the federal securities laws, as applied to the facts and circumstances of the proposed issuance. The Materials do not include any proposals, recommendations or suggestions that you take or refrain from taking any action with regard to an issuance of municipal securities and are not intended to be and should not be construed as ''advice'' within the meaning of Section 15B of the Securities Exchange Act of 1934 or Rule 15Ba1-1 thereunder. 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IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that the Materials do not constitute tax advice and shall not be used for the purpose of (i) avoiding tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.