BOARD MEETING DATE: December 1, 2006
AGENDA NO. 10

Adopt Resolution Authorizing Prepayment of a Portion of the Unfunded Actuarial Accrued Liability Owed to San Bernardino County Employees’ Retirement Association Utilizing One-Time Penalty/Settlement Revenues

SYNOPSIS:

The Board, at its June 9, 2006 meeting, directed staff to develop for Board consideration a long term debt reduction proposal utilizing up to $30 million in one-time penalty/settlement revenues.  On September 8, 2006, the Board approved a $19.1 million economic defeasance of a portion of AQMD’s debt service payments through 2014.  This action requests Board approval of a $10 million prepayment of a portion of the Unfunded Actuarial Accrued Liability owed to the San Bernardino County Employees’ Retirement Association

COMMITTEE:

Administrative and Finance, November 9, 2006.  The Committee elected to forward this proposal without a committee recommendation to the full Board for discussion and consideration at the December 1, 2006 meeting.

RECOMMENDED ACTION:

Adopt the attached Resolution authorizing the South Coast Air Quality Management District (AQMD) to prepay $10 million of its Unfunded Actuarial Accrued Liability (UAAL) with the San Bernardino County Employees’ Retirement Association (SBCERA) from one-time penalty money available from the General Fund, Undesignated Fund Balance.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

As part of staff’s presentations regarding the Fiscal Year 2006-07 Budget, a recommendation regarding the use of one-time penalty money to lower debt service and retirement costs was made as a means of reducing ongoing program costs.  This recommendation coupled with a cost recovery fee recommendation would help bring the AQMD budget into balance with revenues.  At the June 9, 2006 Board meeting, the Board directed staff, working under the direction of the Finance Committee, to develop a debt reduction proposal for Board consideration of up to $30 million.  At the September 8, 2006 Board meeting, the Board adopted Resolution No. 2006-25 authorizing AQMD to enter into a Guaranteed Investment Contract with a AAA-rated provider for the purpose of utilizing $19.1 million in one-time money to economically defease a portion of AQMD’s current debt service through 2014.

Proposal

This action is to authorize a $10 million prepayment towards AQMD’s Unfunded Actuarial Accrued Liability.  Currently, SBCERA amortizes AQMD’s outstanding UAAL over a 20-year period charging the SBCERA assumed earnings rate of eight percent (8%).  By prepaying a portion of its UAAL, the AQMD can lower its retirement payment to SBCERA by approximately 1.12%, or $700,000 annually, based on current payroll (see Attachment A). 

When this item was reviewed at the Board’s Finance Committee, Mayor Yates questioned whether the monies would be better spent on low emission school buses.  The Committee, however, decided that full Board discussion would be beneficial and forward the item for consideration without recommendation.

Resource Impacts

This recommended action will result in budget savings, UAAL principal and interest payments, of approximately $700,000 annually for a 20-year period based on current payroll.

Attachments (EXE 74kb)

A.        Revised Employer Contribution Rates
B.        Resolution

///