HomeMy WebLinkAboutPacket - 07/21/2020 - Police Pension Board
POLICE PENSION BOARD OF TRUSTEES
Tuesday, July 21, 2020, 2:30 PM
McHenry City Hall, 333 S Green St, McHenry, IL 60050
AGENDA
1. Call to Order
2. Roll Call
3. Public Input
4. Call for Nominations and Motion to Approve Annual Election of Board of Officers
5. Meeting Minutes
a. Approve the May 12, 2020, regular meeting minutes and the June 5, 2020, special
meeting minutes
b. Semi-Annual Review of Executive Session Minutes and if necessary, motion to approve,
release, and/or maintain the confidentiality of any minutes based on advice from legal
counsel as presented
6. 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
7. New Business:
a. Approve Joseph Lazicki portability request
b. Motion to accept the annual independent Medical Examination for Police Disability
Pensioner Sean Klechak
c. Motion to approve proposed actuarial services from Lauterbach & Amen through April
30, 2020
d. Motion to approve the Fiduciary Renewal Quote from Markel American Insurance
Company
8. 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
9. Additional Items for Discussion
10. Adjournment
A.4M
Police Pension Board of Trustees
M. H Regular Meeting Minutes
May 12,2020
Call to Order
The regular meeting of the City of McHenry Police Pension Board of Trustees was called to order at 3:00
p.m. as an online Zoom meeting due to the COVID-19 pandemic.
Roll call:
Members present: President Jeffery Foerster, Ann Buss, Cheryl Kranz, Marc Fisher, Sergeant Nick Clesen.
Others present: Monte Johnson, Carolyn Lynch, Gary Karshna, James Schmidt, Stephan Roberts, Dalena
Welkomer
Public Input:
No members of the public were present to offer comments.
Approve the January 14, 2020, meeting minutes.
A motion was made by Sergeant Clesen and seconded by Ann Buss to approve the January 14, 2020,
meeting minutes as presented. Vote: 5-ayes, 0-nays,0-abstained. Motion carried.
Treasurer's Report
The treasurer's report was not available for the meeting and therefore not approved.
LPL Financial Equities Report
Investment Advisor James Schmidt reviewed the Portfolio Performance Summary.Things took a turn in
March as the pandemic hit. We started the year at about$19 million and are currently down to$17.2
million. The fiscal rate of return is-3.18%. Some larger companies will benefit from the market and
most small businesses will be losers. In our American Funds we don't hold much small capital, so the
large companies will likely drive through it.There was a panic in the bond market, but hopefully things
will get stable in all markets in the next couple of months.
Semi-annual review of the Police Pension Board Fund Investment Policy
There were no major changes to the policy with the exception of the first two paragraphs that were
added regarding Statutory Requirement 40 ILCS 5/1-113.6.A motion was made by Cheryl Kranz and
seconded by Sergeant Clesen to approve the City of McHenry Police Pension Fund Investment Policy as
presented, dated May 12, 2020. Roll Call Vote: 5-ayes, 0-nays, 0-abstained. Motion carried.
Approve portability of time for Ashley O'Herron
A motion was made by Sergeant Clesen and seconded by Officer Fisher to approve the portability of
time for Ashley O'Herron as submitted. Roll Call Vote: 5-ayes,0-nays, 0-abstained. Motion carried.
Approve portability of time for Joseph Lazicki
No paperwork has been received at this time for Officer Lazicki. The issue will be placed as an agenda
item for the next regular meeting.
•
Annual independent Medical Examination for Police Disability Pensioner Justin DeBolt
A medical examination showed that Mr. DeBolt is officially disabled for another year. A motion was
made by Officer Fisher and seconded by Ann Buss to accept the annual independent Medical
Examination for Police Disability Pensioner Justin DeBolt. Roll Call Vote: 5-ayes,0-nays, 0-abstained.
Motion carried.
Annual independent Medical Examination for Police Disability Pensioner Sean Klechak
The medical report is not yet available.The item will be placed on the agenda at the next regular
meeting.
Appointment of Cheryl Kranz
It was reported that Cheryl Kranz has been appointed to the Police Pension Board of Trustees for two
additional years, ending April 30, 2022. This action took place at the regular City Council Meeting on
May 4, 2020.
Payment of Bills
A motion as made by Officer Fisher and seconded ty Cheryl Kranz to approve the payment of bills as
submitted. Roll Call Vote: 5-ayes, 0-nays,0-abstained. Motion carried.
Discussion of issuing bonds to pay off the unfunded liability for the Police Pension Fund
A discussion ensued regarding issuing bonds to pay off the unfunded liability for the Police Pension
Fund. Although the idea sounds promising, City Treasurer Lynch stated that it would be easier to
proceed if there were more success stories.
Dalena Welkomer of Baird Public Finance said that there are now success stories to share, such as in
Winnebago. Other municipalities are having discussions on the topic but haven't moved forward.There
are some unknowns due to consolidation and the actual rate of return is unknown. We would need to
look at the long term objective and be confident in the expectations for a rate of return throughout the
life of the bond. Even though the City's returns have been negative this year,the rate of return over the
next 20 years is expected to be at the 6% level.
Investment Manager Gary Karshna stated that this would be an ideal time to issue bonds with
historically low interest rates. He believes that the rates will stay low for a while, and if the economy
bounces back as expected, it makes sense to issue bonds.
Capital Gains, Inc. Fixed Assets Report
Investment Manager Gary Karshna explained that we are in the reverse of an equity market. We had
longer term that we were able to sell off and make a lot of money.With a liquidity squeeze in the bond
market,we were able to jump in and get bonds with yields with big percentages. This has been a great
opportunity to sell and reinvest.Our securities rolled off in March and we were cash rich for a while. We
sold bonds and captured profits.
Additional Items for Discussion
City Treasurer Lynch did a cash analysis to make sure there was enough money to pay bills and pensions.
There should be enough money even though taxes are coming in late. Most people have taxes that are
in escrow accounts. It is advisable to wait until the July meeting to see if we need to make a transfer to
cash.
It was agreed that the next meeting will be held July 21st. If the meeting takes place via Zoom,then the
• meeting will be at 3:00. If the meeting is in person at City Hall,the meeting will take place at 2:30 p.m.
It was also noted that securities are coming off in June if we want to purchase equities. We could have
about$1.5 million to invest in equities if we wanted. Depending on how things work out, a special
meeting may be called around June 10tn
Motion to Adjourn
A motion was made by Sergeant Clesen and seconded by Cheryl Kranzto adjourn the meeting at 3:40
p.m. Roll Call Vote: 5-ayes, 0-nays, 0-abstained. Motion carried.
? ,„A a.
Monte Johnson,14ecording Secretary Jeff Foerster, President
L) Police Pension Board of Trustees
MMC. Special Meeting Minutes
June 5, 2020
Call to Order
A special meeting of the City of McHenry Police Pension Board of Trustees was called to order at 9:32
a.m. via Zoom online due to the COVID-19 pandemic.
Roll call:
Members present: President Jeffery Foerster, Ann Buss, Officer Marc Fisher, Sergeant Nick Clesen.
Absent: Cheryl Kranz. Others present: Monte Johnson, Carolyn Lynch
Public Comments:
No members of the public were present to offer comments.
Discussion and motion regarding the investment of$1,500,000 from large bond maturity
Jeff Foerster explained that we have a large amount of bonds maturing in June that can be turned into
equity positions.Jim Schmidt, investment advisor, suggests the following via email:
Currently we stand at approximately:
Cash $1,500,000
Bonds $10,056,000
Equities $18,156,000 (60%)
This gives us an approximately 60% in equities thus a 5% opportunity to add to the equity
positions and stay within the 65%guideline. 5% of$30,225,000 equal $1,500,00. I spoke with
Gary and he has over$1,800,000 maturing in June. I'd like to recommend an averaging in over
the next 3 months of$500,000 each time on the 15th of each month.
The funds approved would be allocated be as such:
Washington Mutual 35%
AMCAP 25%
Capital World G&I 20%
SmallCap World 15%
New World 5%
A motion was made by Officer Fisher and seconded by Ann Buss to follow the investment advice
outlined above as given by Jim Schmidt.Vote: 4-ayes:Jeff Foerster,Ann Buss, Marc Fisher, Nick Clesen.
1-absent: Cheryl Kranz. 0-nays, o-abstained. Motion carried.
Motion to Adjourn
A motion was made by Sergeant Clesen and seconded by Officer Fisher to adjourn the meeting at 9:33
a.m. Vote: 4-ayes by unanimous voice vote. 1-absent: Cheryl Kranz. Motion carried.
Monte Johnson, cording Secretary Jeff Foerster, President
CITY OF MCHENRY POLICE PENSION FUND
LIST OF INVESTMENTS AT JUNE 30,2020
Capital Gains Start Date:12/5/2003
Difference Percent
Date Maturity Initial Rate of FMV at 12/31/2019 by
Description of Securties Cusip No. Acquired Date Investment Interest 6/30/2020 Initial Invest. Type
McHenry Bank&Trust Checking Acct 1,321,090.77 4.43%
IL Funds Money Market varies 1,259,063.23 4.22%
Corporate Bonds and Notes
Microsoft Corp 594918BR4 8/24/2016 8/8/2026 100,605.00 2.400 109,145.00 8,540.00
Goldman Sachs MTN 38150AD93 8/15/2019 8/15/2024 200,000.00 2.500 200,218.00 218.00
HSBC USA Inc 40428HPB2 10/9/2019 9/27/2020 308,250.00 5.000 303,132.00 (5,118.00)
First Horizon 320517AB1 11/21/2019 12/15/2020 304,350.00 3.500 302,340.00 (2,010.00)
1/21/20;2/6/20;
Gen Elec Cap Crp MTN 36962G4Y7 3/16/20 1/7/2021 529,399.20 4.625 529,958.00 558.80
General Elec Cap MTN 36962G5J9 2/6/2020 10/17/2021 199,465.12 4.650_ 199,906.33 441.21
Boeing Co 097023BM6 2/12/2020 10/30/2020 274,802.00 1.650 275,198.00 396.00
Walgreens Boots 931427AF5 2/12/2020 11/18/2021 255,687.50 3.300 257,850.00 2,162.50
Dupont De Nemours 26078JAA8 3/23/2020 11/15/2020 124,731.25 3.766 126,425.00 1,693.75
American Honda MTN 02665WBF7 3/26/2020 7/12/2021 192,352.00 1.650 202,252.00 9,900.00
HP Enterprise Co 42824CAG4 3/31/2020 10/15/2020 250,112.50 3.600 251,570.00 1,457.50
General Motors 37045XBF2 4/16/20;6/17/20 3/1/2021 353,525.00 4.200 354,655.00 1,130.00
General Motors Finl 37045XAY2 4/16/2020 7/13/2020 199,938.00 3.200 200,094.00 156.00
Wells Fargo Co MTN 95001 D6Q8 4/17/2020 4/17/2022 150,000.00 2.400 149,904.00 (96.00)
CNH Industrial 12592BAE4 5/5/2020 11/6/2020 151,020.00 4.375 151,329.00 309.00
General Motors Finl 37045XBD7 5/20/2020 11/24/2020 100,216.00 3.700 100,528.00 312.00
Sandtander Holdings 80282KAU0 6/22/2020 12/3/2021 209,324.00 208,432.00 (892.00)
3,903,777.57 3,922,936.33 19,158.76 13.15%
Muni BDS-Fixed Non Taxable
Illinois St Sales 452227QR5 6/18/2020 6/15/2022 269,050.00 5.000 268,482.50 (567.50)
269,050.00 268,482.50 (567.50) 0.90%
Muni BDS-Fixed Taxable
Decatur IL Build 243127RF6 11/8/2018 12/15/2027 179,987.50 6.300 173,456.10 (6,531.40)
Chicago Heights IL 167393NL7 5/28/2020 12/1/2022 100,000.00 3.377 103,484.00 3,484.00
Chicago Heights IL 167393NP8 6/24/2020 12/1/2025 133,593.75 3.653 133,372.50 (221.25)
413,581.25 410,312.60 (3,268.65) 1.38%
Other Foreign Corporate Bonds
Barclays Bank PLC 06739FJJ1 9/19/2019 1/11/2021 251,050.00 2.650 252,475.00 1,425.00
Santander UK Group 80281LAC9 10/9/19;3/19/20 10/16/2020 591,168.90 2.875 594,082.80 2,913.90
Barclays Bank PLC 06747NM76 11/4/2019 12/4/2020 200,000.00 2.000 200,000.00 0.00
Deutsche Bank NY 251526BU2 11/12/2019 8/20/2020 301,200.00 2.950 300,249.00 (951.00)
GE Capital MTN 36164QMS4 1/14/2020 11/15/2020 501,400.00 2.342 503,240.00 1,840.00
1/17/20;2/6/20;
Barclays PLC 06738EAQ8 2/21/20 8/10/2021 509,070.00 3.200 511,120.00 2,050.00
Deutsche Bank NY 251526BP3 2/28/2020 1/22/2021 151,528.50 3.150 150,703.50 (825.00)
Deutsche Bank NY 251525AT8 3/13/2020 7/13/2020 264,374.60 2.700 265,055.65 681.05
Royal Bk of MTN 78014RCY4 6/8/2020 6/8/2022 100,000.00 0.00001 100,260.00 260.00
Bank of Montreal MTN 06367WM42 6/19/2020 12/19/2023 200,000.00 1.00 199,196.00 (804.00)
Deutsche Bank NY 25160PAC1 6/23/2020 2/4/2021 196,049.40 4.25 195,177.04 (872.36)
3,265,841.40 3,271,558.99 5,717.59 10.96%
CITY OF MCHENRY POLICE PENSION FUND
LIST OF INVESTMENTS AT JUNE 30,2020
Capital Gains Start Date:12/5/2003
Difference Percent
Date Maturity Initial Rate of FMV at 12/31/2019 by
Description of Securties Cusip No. Acquired Date Investment Interest 6/30/2020 Initial Invest. Type
US Agencies-Disc/Zero Cpn
US Treas BD Strip 9128335A4 7/6/2016 8/15/2035 68,236.00 0.000 84,991.00 16,755.00
US Treas BD Strip 912834KB3 3/13/2020 5/15/2045 278,736.00 0.000 271,652.00 (7,084.00)
US Treas BD Strip 912834PB8 5/19/2020 11/15/2044 90,158.90 0.000 89,207.30 (951.60)
437,130.90 445,850.30 8,719.40 1.49%
FIXED INCOME TRUST A/C 8,289,381.12 8,319,140.72 29,759.60 27.88%
SEPARATE ACCOUNTS
LPL Financial:
AMCAP Fund-A 11/9/2001 4,560,074.08
Small CAP World Fund-A 5/1/1998 3,420,855.72
Capital World Growth and Income 140543109 5/1/1998 3,879,885.62
Washington Mutual Investors-A 939330106 5/1/1998 6,219,423.20
New World 858,382.27
0.00 18,938,620.89 0.00 63.47%
$ 8,289,381.12 $ 29,837,915.61 $ 29,759.60 100.00%
Property Taxes Received 7/14/20 1,056,726
IN
Lauterbach & Amen LLP
668 N.RIVER ROAD • NAPERVILLE,ILLINOIS 60563
PHONE 630.393.1483 • FAX 630.393.2516
CERTIFIED PUBLIC ACCOUNTANTS
www.lauterbachamen.com
April 21, 2020
Member of the Pension Board of Trustees
McHenry Police Pension Fund
333 S Green Street
McHenry, Illinois 60050
We are pleased to confirm our acceptance and understanding of the services we will provide for the
McHenry Police Pension Fund for the fiscal years ending April 30, 2020 through April 30, 2022. It is our
understanding that Lauterbach & Amen, LLP will prepare the Police Tax Levy Actuarial Valuation and
Police GASB 67/68 Actuarial Valuation for the Pension Fund.
You agree to assume all management responsibilities for the actuarial services we provide; you will
oversee the services by designating an individual,preferably from senior management, with suitable skill,
knowledge,or experience; you will evaluate the adequacy and results of the services; and you will accept
responsibility for them.
Lauterbach&Amen, LLP does not assume any management responsibilities for the Pension Fund. These
services cannot be relied upon to detect errors, irregularities, or illegal acts that may exist. However, we
will inform you of any such matters that may come to our attention.
Costs for our services are as follows:
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
Annual Actuarial Reports 04/30/2020 04/30/2021 04/30/2022
•Preparation of Police Tax Levy Actuarial Valuation $2,900 $2,990 $3,080
•Preparation of Police GASB 67/68 Actuarial Valuation $2,450 $2,510 $2,570
•Attendance at Meeting to present results Included Included Included
Total Annual Actuarial Reports $5,350 $5,500 $5,650
The fees as depicted on the prior page include attendance for up to 2 meetings per year, as requested, to
discuss actuarial results. Any meeting attendance required above and beyond the 2 included meetings will
be billed at the rate of$250 per meeting.
McHenry Police Pension Fund
April21,2020 Page 1 of2
We appreciate the opportunity to be of service to the McHenry Police Pension Fund and believe this letter
accurately summarizes the significant terms of our engagement. If you have any questions, please let us
know. If you agree with the terms of our engagement as described in this letter, please indicate your
acceptance by signing below and returning it to us.
Cordially,
4aute &rlmse#e, 44P
Lauterbach& Amen, LLP
RESPONSE:
This letter correctly sets forth the understanding of the McHenry Police Pension Fund:
Accepted by:
Title:
McHenry Police Pension Fund
April 21,2020 Page 2 of 2
llico
ULLICO ORGANIZED LABOR PROTECTION GROUP, LLC
a voluntary membership organization operating pursuant to the Liability Risk Retention Act of 1986 and whose
principal office is: 1625 Eye Street NW,Washington,DC 20006
GOVERNMENTAL FIDUCIARY LIABILITY INSURANCE PREMIUM QUOTATION
DATE ISSUED: 07/07/2020 UNDERWRITER: Kimberly Allen
QUOTATION NO: QT0000060697 RENEWAL: Y
ISSUED BY: Markel American Insurance Company
INSURANCE REPRESENTATIVE: Ullico Casualty Group,LLC
8403 Colesville Road, 13th Floor
Silver Spring,MD 20910
PRODUCER: Mesirow Insurance Services,Inc
ADDRESS: 353 N Clark St
Chicago,IL 60654
TRUST(S)OR PLAN(S): City of McHenry Police Pension Fund
ADDRESS: 333 S. Green Street
McHenry,IL 60050
POLICY PERIOD: 08/01/2020 to 08/01/2021
PRIOR&PENDING
LITIGATION DATE: 08/01/2012
LIMITS OF LIABILITY: (a) $1,000,000 Limit of Liability for all Loss(Aggregate)
(b) $100,000 Voluntary Compliance Program Expenditure Sub-Limit:
Aggregate Limit of Liability for all Voluntary Compliance
Program Expenditures(included within and not in addition
to the maximum Aggregate Limit of Liability set forth in
Item 04(a) of the Policy Certificate.
SELF-INSURED RETENTION: $0 each Claim
COVERAGE: Markel American Insurance Company
Governmental Fiduciary Liability Insurance Claims-Made Policy Form GOV-1000
(11/2014),Claims Expenses Inclusive
GOV-1000-Q(11/2014) Page 1 of 2
PREMIUM: (a) $4,617.00 Basic Premium
(b) $0.00 Tax/Other
(c) $4,617.00 Total
CONDITIONS/COVERAGE SUBJECT TO:
Nothing else required
THE FOLLOWING ENDORSEMENTS WILL ATTACH TO THE POLICY:
END NO./REF NO. ENDORSEMENT
1. MIL 1214(09/17) Trade or Economic Sanctions
2. MIL 1217(01/20) Extended Reporting Period for Terrorism Coverage
3. MIL 1310(01/20) Conditional Exclusion Of Terrorism
4. MPIL 1121 (01/20) Notice To Policyholders of Potential Restrictions of Terrorism Coverage
5. MPIL 1113-IL(04/18) Notice To Policyholder Illinois Important Notice
6. TRIA(06/15) Cap on Losses From Certified Acts of Terrorism
7. GOV-IL(09/15) Illinois Amendatory Endorsement
8. GOV-044(06/15) Defense and Settlement Endorsement
9. GOV-054(05/16) Modification Endorsement
This quotation is valid for a period of thirty(30)days from the Issue Date shown above unless amended or withdrawn by
Markel American Insurance Company(Insurer),with or without cause,prior to its acceptance and binding,and is subject
to the terms and conditions of the policy(ies)to be issued. If the information supplied by the Trust or Plan in the
application changes between the date of the application for this insurance and the Effective Date of the insurance or the time
when the policy is bound(whichever is later),the Trust or Plan must immediately notify Insurer in writing of such changes
and the Insurer may withdraw or amend any outstanding quotations based upon such changes.
Ullico Organized Labor Protection Group,LLC is administered by Ullico Casualty Group,LLC, a/k/a Ullico Insurance
Agency,LLC in CA, and Ullico Casualty Agency in NY. CA License#0H86030 and FL(Craig Arneson)License#A008437.
GOV-1000-Q(11/2014) Page 2 of 2
Date 'Check# Vendor Description Amount
6/1/20201 7797 DEBOLT,JUSTIN MED EXAM FOR PENSION DISABILITY $ 70.00
6/1/20201 7798 ILLINOIS DEPT OF INSURANCE ANN COMP FEE $ 5,436.48
6/12/2020 7799 CAPITAL GAINS INCORPORATED FIXED INC INV MGMT SVS $ 5,535.00
6/18/2020 7800 KLECHAK,SEAN PP DISABILITY PENSION DR VISIT REIMB $ 1,760.30
6/18/2020 7801 LAUTERBACH&AMEN, LLP LAZICKI PORTABILITY CALC $ 350.00
6/18/2020 7802 LPL FINANCIAL INVEST SVS FEES $ 11,273.76
i $ 24,425.54
City of McHenry, Illinois
Hypothetical Refunding of Police Pension Fund UAAL
Scenario#1: Level Debt Service Scenario-7% Rate of Return
April 30 Alternative Funding Method Level Debt Service Illustration l''
Tax Collection Fiscal Year
Year Ending of UAAL Annual Payment to Net Total Assumed UAAL POB
December 31 Payment Amortize UAAL rn Principal Interest Debt Service Savings t) 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 $460,13D $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%
Interest Rate Sensitivity Analysis +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%
(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.
(3)Assumes actuarially projected results are achieved and bonds are issued as described.
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.
nAu,u
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Funding of Police Pension Fund UAAL
Level Debt Service Illustration - 7% Rate of Return
$3,000,000
$2,500,000
$2,000,000
$1,500,000 -
$1,000,000 -
$500,000 -
$0
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■Assumed Cost to Amortize Current UAAL(1) 0Debt Service on POB
(1) Assumes actuarially projected results are achieved and bonds are issued as described.
City of McHenry, Illinois
Hypothetical Refunding of Police Pension Fund UAAL
Scenario#2: Level Debt Service Scenario-6%Rate of Return
April 30 Alternative Funding Method Level Debt Service Illustration(1)
•
Tax Collection Fiscal Year
Year Ending of UAAL Annual Payment to Net Total Assumed UAAL POB
December 31 Payment Amortize UAAL m 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%
Interest Rate Sensitivity Analysis +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%
(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 Citys 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.
(3)Assumes actuarially projected results are achieved and bonds are issued as described.
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.
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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
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