HomeMy WebLinkAbout09. 14-278
JUNE 24, 2014 14-278 RESOLUTION
(CARRIED ___7-0___ LOST _______ LAID OVER _______ WITHDRAWN_______)
PURPOSE: AUTHORIZE BORROWING FROM STATE LAND TRUST /
REFINANCE WRS PRIOR SERVICE PENSION LIABILITY
($10,400,000)
INITIATED BY: CITY ADMINISTRATION
WHEREAS, by the provisions of sec. 24.66 of the Wisconsin Statutes, all
municipalities may borrow money for such purposes in the manner prescribed; and,
WHEREAS, by the provisions of Chapter 24 of the Wisconsin Statutes, the Board of
Commissioners of Public Lands of Wisconsin is authorized to make loans from the State
Trust Funds to municipalities for such purposes. (Municipality as defined by sec. 24.60(2),
Wisconsin Statutes, means a town, village, city, county, public inland lake protection and
rehabilitation district, town sanitary district created under sec. 60.71 or 60.72, metropolitan
sewerage district created under sec. 200.05 or 200.23, joint sewerage system created
under sec. 281.43 (4), school district or technical college district.)
NOW, THEREFORE, BE IT RESOLVED, by the Common Council of the City of
Oshkosh that the City of Oshkosh, in the County of Winnebago, Wisconsin, is authorized
to borrow from the Trust Funds of the State of Wisconsin, a sum of up to Ten Million Four
Hundred Thousand Dollars ($10,400,000) for the purpose of refinancing WRS prior service
pension liability
The loan is to be payable within 20 years from the 15th day of March preceding the
date the loan is made. The loan will be repaid in annual installments with interest at the
rate of 4.25 percent per annum from the date of making the loan to the 15th day of March
next and thereafter annually as provided by law.
BE IT FURTHER RESOLVED, that there shall be raised and there is levied upon all
taxable property, within the City of Oshkosh, in the County of Winnebago, Wisconsin, a
direct annual tax for the purpose of paying interest and principal on the loan as they
become due.
BE IT FURTHER RESOLVED, that no money obtained by the City of Oshkosh by
such loan from the state be applied or paid out for any purpose except for the purpose of
refinancing the WRS prior service pension liability without the consent of the Board of
Commissioners of Public Lands.
JUNE 24, 2014 14-278 RESOLUTION
CONT'D
BE IT FURTHER RESOLVED, that in case the Board of Commissioners of Public
Lands agrees to make the loan, that the City Manager and Clerk of the City of Oshkosh in
the County of Winnebago, Wisconsin, are authorized and empowered, in the name of the
City to execute and deliver to the Commission, certificates of indebtedness, in such form
as required by the Commission, for any sum of money that may be loaned to the City
pursuant to this resolution. The City Manager and Clerk of the City will perform all
necessary actions to fully carry out the provisions of Chapter 24 Wisconsin Statutes, and
these resolutions.
BE IT FURTHER RESOLVED, that this preamble and these resolutions and the
"aye"and "no"vote by which they were adopted, be recorded, and that the Clerk of this City
forward this certified record, along with the application for the loan, to the Board of
Commissioners of Public Lands of Wisconsin.
R6solution 14-278
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City of Oshkosh
215 Church Avenue
PO Box 1130
Oshkosh,WI 54903-1130
Trena Larson
Director of Finance
OIHKOJH
ON THE WATER
TO: Honorable Mayor and Members of the Common Council
FROM: Trena Larson, Director of Finance
DATE: June 24, 2014
RE: Authorize Borrowing of$10,400,000 from State Trust Loan to finance WRS Prior
Service Pension Liability
BACKGROUND
The City has an unfunded pension liability with the Wisconsin Retirement System (WRS).
Currently the annual payments being made are not large enough to cover current interest costs.
During a March a bond rating call with Moody's Investor's Service, staff brought up the issue of
our liability. They questioned Moody's on the advantages of paying off this liability as there would
be financial benefit as long-term savings would be realized. Moody's belief was that our liability is
not much different than regular debt and it would factor into their review regardless of how it is
classified. As a result staff asked Ehlers and Associates to review the cost-benefit of paying off the
WRS liability.
Ehlers completed an initial analysis comparing the cost benefit of continuing to pay on the liability,
issuing Taxable Bonds, or applying for a state trust fund loan. It was determined that the state trust
fund loan offered the largest amount of savings.
ANALYSIS
Attached you will find an updated analysis prepared by Ehlers (see Exhibit A) to compare the cost-
benefit of continuing to pay on the unfunded pension liability or securing a 20 year state trust fund
loan. If the City would continue to make payments over 22 years it will have paid out $14,388,434
and have a remaining unfunded pension liability of$16,234,353. However, if a state trust fund loan
is obtained the city will pay out $15,960,143 over 20 years and this unfunded pension liability will
be paid in full.
The Long Range Finance Committee has also reviewed the Ehlers analysis and are recommending
for the Council to move forward with the State Trust Fund Loan.
This loan will be secured at 4.25% interest rate for twenty years.
FISCAL IMPACT
Securing a loan and the payoff of this unfunded pension liability will result in an estimated savings
of $13,726,721 over a twenty year period. This is calculated by taking the accumulated
Savings/Cost (2,507,632) and subtracting it from the balance remaining if unfunded pension
liability if not refunded 16,234,353.
RECOMMENATION
Staff recommends adoption of the above noted resolution.
Respectfully Submitted, Approved
i KW- 3Pk-kLrY- ,,,„046.4..... 4. zote4e
Trena Larson Mark Rohloff
Director of Finance City Manager