Wednesday, May 15, 2024
5:30 PM
CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
Conference Room 4A & Virtual Platform (Zoom)
Council Budget and Finance Committee
Agenda
May 15, 2024Council Budget and Finance
Committee
Agenda
NOTICE: The Council Budget and Finance Committee will hold a hybrid meeting in Conference Room 4A and virtually via Zoom.
Public Participation
How to submit written Public Comment:
Send an email to [email protected] by 2:00 p.m. the day of the meeting. Please identify the Agenda Item Number in the subject line of your email. Emails will be compiled into one file, distributed to the Council Budget and Finance Committee and City staff, and published on the City's Meeting & Agenda Center under Documents Received After Published Agenda. https://hayward.legistar.com/Calendar.aspx When submitting written comments, indicate in the email if you want your comment read into the record.
Requests will be allowed provided the reading will not exceed three (3) minutes consistent with the time limit for speakers at Council Committee meetings. Email comments will become part of the record of Council Committee meetings.The Chair can limit the time for reading written comments.
When: May 15, 2024 05:30 PM Pacific Time
Topic: Council Budget and Finance Committee - May 2024
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AB 2449 TELECONFERENCE NOTIFICATIONS AND CONSIDERATION
CALL TO ORDER
ROLL CALL
PUBLIC COMMENTS:
Limited Only to Items on the Agenda and Submitted Prior to the Meeting.
APPROVAL OF MINUTES
May 15, 2024Council Budget and Finance
Committee
Agenda
Review and Approve of the Council Budget and Finance
Committee April 17, 2024, Meeting Minutes
MIN 24-0561.
Attachments: Attachment I Minutes
REPORTS/ACTION ITEMS
Water Resource Recovery Facility (WRRF) Improvements,
Phase II - Project Funding Strategy Update
RPT 24-0412.
Attachments: Attachment I Staff Report
Review and Comment on the Annual City Benefit Liabilities and Funding Plan
RPT 24-0393.
Attachments: Attachment I Staff Report
Annual Review of City Issued DebtRPT 24-0404.
Attachments: Attachment I Staff Report
Attachment II City Summary Debt
FUTURE AGENDA ITEMS
COMMITTEE MEMBER/STAFF ANNOUNCEMENTS
Review and Approve the FY 2024/2025 Agenda Planning
Calendar
ACT 24-0365.
Attachments: Attachment I Agenda Planning Calendar
ADJOURNMENT
Next Meeting - 5:30 p.m., Wednesday, June 19, 2024
The City of Hayward's Open Data Portal was designed to allow the public to explore, visualize, and download publicly accessible data. The Open Data Portal allows a clear view of the City's financial performance. Access to the portal may be found at https://haywardca.opengov.com/CITY
CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
File #: MIN 24-056
DATE: May 15, 2024
TO: Council Budget and Finance Committee
FROM: Director of Finance
SUBJECT
Review and Approve of the Council Budget and Finance Committee April 17, 2024, Meeting Minutes
RECOMMENDATION
That the Council Budget and Finance Committee (CBFC) reviews and approves the April 17, 2024, CBFC meeting minutes.
SUMMARY
The CBFC held a meeting on April 17, 2024, and the draft minutes are attached for the CBFC’s review and approval.
ATTACHMENTS
Attachment I 4/17/2024 CBFC Meeting Minutes
CITY OF HAYWARD Printed on 5/10/2024Page 1 of 1
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ATT ACHMENT I
COUNCIL BUDGET & FINANCE COMMITTEE MEETING
Meeting Minutes of April 17, 2024
Call to Order: 5:32 p.m.
Members Present: Mayor Salinas, Councilmember Syrop, and Councilmember Bonilla Jr.
Members Absent: None
Staff: Kelly McAdoo, Regina Youngblood, Nicole Gonzales, Christina Crosby, Franchesca Hatfield, Crissy Mello, Nicholas Mullins, and Mary Thomas Guests: None
Public Comments: None
1. Approval of Meeting Minutes from March 6, 2024
Action: Minutes reviewed and unanimously approved.
2. People’s Budget Project Debrief
Assistant to the City Manager Mary Thomas presented a debrief of the People’s Budget.
Councilmember Syrop Questions:
A. What is next? How do we sustain this type of program? B. Is the creation of public event spaces a part of the Lean Innovation Process?
C. How often do you recommend we visit the People’s Budget Process? Is this a conversation we bring up yearly, or as part of the Strategic Roadmap process?
Councilmember Bonilla Jr. Questions:
A. If we stick to a three-year plan, how do we commit more funds to provide support for these programs?
Action: The Committee received the presentation and provided feedback.
3. Discussion of Mayor & City Council FY 2025 Budget
Assistant to the City Manager Mary Thomas presented the list of 2024 Accomplishments, while Director Gonzales presented the Committee with the proposed operating budget.
Councilmember Syrop Questions:
A. What is the process for the Poet Laureat?
B. Can we add to the list of accomplishments, grant awards, St. Rose appropriation, and the STACK Center?
Councilmember Bonilla Jr. Questions:
A. Are we establishing a property management contract for the manage the Cinema Place property?
Mayor Salinas Questions:
A. When will the Cinema Place property transition to the City?
Action: The Committee received the report.
4. FY 2025 Budget Process Update (Oral Report)
Director Gonzales presented Council with the draft agenda for the Saturday budget work session on May 11, 2024.
Action: The Committee received the report.
5. Review and Approve the FY 2024/FY 2025 Agenda Planning Calendar Councilmember Syrop Questions:
A. Will the annual Investment Portfolio Report in the fall include ESG investment considerations?
Action: The Committee reviewed the calendar.
Committee Members/Staff Announcements: None.
Adjournment: The meeting was adjourned at 6:27 p.m.
CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
File #: RPT 24-041
DATE: May 15, 2024
TO: Council Budget and Finance Committee
FROM: Director of Finance
SUBJECT
Water Resource Recovery Facility (WRRF) Improvements, Phase II - Project Funding Strategy Update
RECOMMENDATION
That the Committee reviews and comments on the Water Resource Recovery Facility (WRRF) Improvements, Phase II - Project Funding Strategy Update.
SUMMARY
This report provides an update to the CBFC on the funding strategy of the WRRF Improvements - Phase II Project (Phase II Project). The project includes upgrades to the treatment process to enhance the treatment capabilities of the WRRF and to reduce the discharge of nutrients to the bay in compliance with the Regional Water Quality Control Board’s upcoming 3rd Watershed Permit. This project also includes construction of a new Administration Building and Laboratory. The total project cost is estimated to be between $394 and $534M. Staff will provide a review of the financing scenarios in various sources of funding and projecting out the future debt services repayment, cash flow, and sewer rate impacts at the meeting for further discussion.
ATTACHMENTS
Attachment I Staff Report
CITY OF HAYWARD Printed on 5/10/2024Page 1 of 1
powered by Legistar™
DATE: May 15, 2024
TO: Council Budget & Finance Committee
FROM: Director of Public Works
SUBJECT: Water Resource Recovery Facility (WRRF) Improvements, Phase II – Project Funding Strategy Update
RECOMMENDATION
That the Committee reviews and comments on the Water Resource Recovery Facility (WRRF) Improvements, Phase II – Project Funding Strategy Update.
SUMMARY
This report provides an update to the CBFC on the funding strategy of the WRRF Improvements – Phase II Project (Phase II Project). The project includes upgrades to the treatment process to enhance the treatment capabilities of the WRRF and to reduce the discharge of nutrients to the bay in compliance with the Regional Water Quality Control Board’s upcoming 3rd Watershed Permit. This project also includes construction of a new Administration Building and Laboratory.
The total project cost is estimated to be between $394 and $534M. Staff will provide a review of the financing scenarios in various sources of funding and projecting out the future debt services repayment, cash flow, and sewer rate impacts at the meeting for further discussion.
BACKGROUND
The core infrastructure of the Water Resource Recovery Facility (WRRF), formerly known as Water Pollution Control Facility (WPCF), was originally constructed in 1952 to treat wastewater flows from the City’s residents and businesses prior to discharge into the San Francisco Bay. Over the years, the WRRF has undergone several major upgrades to meet more stringent discharge requirements, as well as increasing capacity as the City’s population and industry have grown. The WRRF now treats an average flow of approximately eleven million gallons per day (MGD) and meets current regulatory requirements for discharge of treated effluent to the deep waters of the San Francisco Bay (Bay).
In response to growing concerns about nutrients and their impacts on the Bay, in May 2019, the San Francisco Bay Regional Water Quality Control Board (Water Board) announced upcoming regulatory requirements limiting discharge of nutrients (nitrogen) to the Bay. Currently 37 publicly owned treatment works discharge treated effluent to the Bay, representing about 2/3 of
the annual nitrogen loads to the Bay. In February of 2024, the Regional Water Quality Control Board released the Draft version of the 3rd Nutrients Watershed Permit. As currently written, this permit would require the East Bay Dischargers Authority (of which the City of Hayward is a member) to reduce nutrients by approximately 50% by 2034.
In June 2020, the City completed a comprehensive Master Plan update, the WPCF Phase II Facilities Plan (Facilities Plan) that identified improvements required to reduce nutrients in the treated effluent. In July 2022, Council authorized awarding design and engineering services during construction to Brown & Caldwell for the Phase II Project. In March 2024, Council authorized entering into a professional services agreement with Carollo Engineers to provide construction management services for the Administration Building, the Primary Effluent Equalization Facility, and the Phase II Project for a total not-to-exceed amount of $19,705,937, with an initial authorization of $949,625 for preconstruction services.
On December 12, 20231, Council authorized the City Manager to sign the WIFIA Letter of Interest (LOI) and subsequent application, and for the City Manager to be the authorized representative for the City in carrying out the City’s responsibilities under the Letter of Interest and Financial Assistance Application including compliance with applicable state and federal laws. The total project cost eligible for funding, at the time, was estimated to be $410 million. Of the total project cost, 49% of the total cost is eligible for WIFIA funding, which was approximately $200 million and stated in the authorized resolution. Staff submitted the WIFIA LOI to the EPA in February 2024, with the Council authorized resolution.
In March 2024, the EPA formally invited the City to submit a WIFIA Application. As the project design is further refined, and other WIFIA financing eligible costs have been estimated, the upper range of the estimated project cost has increased from $410 million to approximately $530 million, which increased the total 49% of eligible costs for WIFIA funding from $200 million to approximately $260 million. Subsequently, in April 20242, Council authorized applying for and increasing the USEPA WIFIA loan amount up to $260 million.
DISCUSSION
The main goal of the Phase II Project is to construct improvements necessary to enhance treatment capabilities of WRRF and to achieve nutrient reduction in compliance with the Water Board’s upcoming 3rd Watershed Permit limiting discharge of nutrients to the Bay. A summary of the project construction cost, capital cost, and financing options is presented in the following sections.
Construction Cost Update
1 https://hayward.legistar.com/LegislationDetail.aspx?ID=6448360&GUID=CB5A4ECF -8AF0-49B8-B838- 81002AFE119D
2 https://hayward.legistar.com/LegislationDetail.aspx?ID=6635303&GUID=E15C3971-6BB7-43C0-B855- 89794911A013
Construction cost estimates have been updated for the Administration Building and the Primary Effluent Equalization Facility based on 90% and 60% design levels of completion, respectively.
Phase II project elements are based on 30% design level of completion and are also updated to reflect the updated construction schedule and escalation factors for the new estimated midpoint of construction dates for the various elements. Because the overall estimated construction duration of the Phase II project increased by a year, some of the project elements that are constructed later in the project such as the grit facility and the final clarifier retrofits experienced cost escalations over previously presented costs. Nutrient treatment upgrades costs also reflect the addition of bypass pumping, or management of the water flow during construction phases, for primary effluent because the PE EQ Facility is constructed in parallel with the Phase II Improvements.
These costs will continue to be updated as the project progresses to the 60% design level of completion which is expected to be completed in June 2024.
Table 1 – Estimated Construction Cost(1)(2)
Project Element
Estimated
Construction Cost(3)
(December 2023)
Current Estimated
Construction Cost
(April 2024)
New Grit Facility $21.0M
Range $15 - $32M
$22.9M
Range $16 - $34M
New Primary Equalization (PE EQ) Tanks $21.3M
Range $15 - $32M
$ 29.5M
Range $25 - $35M
Nutrient Upgrades $134M
Range $94 – $201M
$136M
Range $95 - $204M
Existing Final Clarifiers Retrofits $25.1M
Range $18 – $38M
$26.8M
Range $19 - $40M
New Administration Building and
Laboratory
$31.9M
Range $27 - $38M
$34.8M
Range $31 – $40M
Site Waste Pump Station (SWPS)
Improvements
$1.5M
Range $1.0 to $2.2M
$1.4M
Range $1.0 – $2.2M
3W System Upgrades $4.8M
Range $3.4 to $7.2M
$4.6M
Range $3.3 - $7.0M
Total Estimated Construction Cost $239M
Range $173 to $350M
$256M
Range $191 - $363M
Notes:
(1) Soft costs including design, engineering services during construction, construction management, inspection, materials testing, etc. are not included in the above costs. (2) Range reflects the accuracy of the estimate based on the design level of completion.
The Administration Building and Laboratory estimate at 90% design level of completion (Class 1) range of accuracy is -10% to + 15%. PE EQ Facility is at 60% design level completion (Class 2) with a typical range of accuracy of -15% to +20%.
The remaining project elements at 30% complete (Class 4) have a range of accuracy between -30% to +50%.
Table 1 – Estimated Construction Cost(1)(2)
(3) Costs from the December 12, 20233 staff report Resolution Authorizing the City Manager to Apply for a United States Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) Loan for the Water Pollution Control Facility (WPCF) Improvements – Phase II Project No. 07760).
Total Capital Cost
Total capital costs are in the process of being updated as part of the financing effort currently underway. Total capital costs include facility planning, engineering design, support services during construction, construction management, administrative change orders during construction, staff time, financing costs, and other miscellaneous items like the cost of obtaining a building permit, etc. The total estimated project cost ($530M) was presented in the April 16, 2024 staff report4. A breakdown of the estimated capital cost is presented in Table 2. Note that the capital cost range presented is based on the construction cost estimate rather than including the low end of the range because costs generally have not decreased with increasing accuracies of the estimate on this project. The upper end of the range (also presented in Table 2) is currently being used for developing the financing strategy and for the WIFIA loan application. The dollar amount requested can be adjusted down without penalty prior to loan closing.
Table 2 – Estimated Total Project Cost
Element
Estimated Construction
Cost
(April 2024)
Estimated Construction
Cost High Range of
Estimate
(April 2024)
Estimated Construction Cost $256.3M $363.5M
Administrative Change Orders
(ACO) (10% of Construction Cost) $25.6M $36.4M
Design and Engineering Services
During Construction $23.5M $23.5M
Planning $0.75M $0.75M
Construction Management $22.0M $22.0M
Staff Time $5.0M $5.0M
Miscellaneous (Building permit,
IT, LEED commissioning, etc.) $0.5M $0.5M
Project Contingency (Assume 10%
of Construction Cost and ACO) $28.2M $40.0M
Financing Costs & Debt Service
Reserve Funds (Estimated) $31.9M $42.7M
3 https://hayward.legistar.com/LegislationDetail.aspx?ID=6448360&GUID=CB5A4ECF -8AF0-49B8-B838- 81002AFE119D
4 https://hayward.legistar.com/LegislationDetail.aspx?ID=6635303&GUID=E15C3971-6BB7-43C0-B855- 89794911A013
Table 2 – Estimated Total Project Cost
Total Project Cost $394M $534M
Potential Financing Options
Staff are exploring funding opportunities for the Phase II Project as summarized in Table 3 below.
Table 3 – Potential Financing Options
Options Amount Progress
Federal USEPA Water Infrastructure
Finance & Innovation Act (WIFIA)
Up to $260 million
(49% of project cost)
Application
in progress
State Clean Water State Revolving Fund
(CWSRF)
$50 million (max) TBD, limited funding
Private Municipal Bond(s) $235 million Not started
Cash Wastewater Enterprise Fund $25 million (5%) /
Others Water Resources Development Act
Project Funding
TBD Applied through
City’s lobbyist
Others Grant $0 Researching, none
identified/fit thus far
As noted above, Staff is in the process of applying for a WIFIA loan and considering applying for funding from CWSRF in the future, as well as selling bonds. WIFIA funding can be applied to fund multiple projects, as well as retroactively reimburse for engineering design services, however, WIFIA funds can only cover 49% of the eligible project costs. The Administration Building will not be eligible to apply for CWSRF since it will not be able to score high enough to be on the eligible list. Only the Phase II Project is likely to score high enough to be eligible for CWSRF funding; however, loans are currently limited to $50 million in the FY 23-24 funding cycle, and competition is very high with many projects already included on the eligible funding list ahead of the City’s project and with higher scores/priorities. Furthermore, CWSRF may experience a funding hiatus where new projects are not considered for funding that could start in FY 25, therefore Staff are pursuing financing through bonds as part of the funding strategy. Staff will also continue to seek grants and other federal and state earmarks throughout the life of the project.
Annual Debt Services and Sewer Rate Impacts
The annual debt services payment and sewer rate impacts are dependent on the structure, timing, and draw schedule of each financing option. Staff has been working closely with the City’s financial advisor, NHA Advisors, to strategize the timing of various funding sources to minimize rate impacts, while maintaining cash reserve balances and debt service coverage requirement. The preliminary analysis indicates the estimated annual debt services in the future years to be approximately $35 million per year. This would only cover the debt service and inflation and does not include other additional operating costs and capital needs. The current annual wastewater operating budget is approximately $28 million total. With financing, the preliminary analysis of the projected sewer rate impacts is summarized in Table 4 below.
Table 4 – Projected Sewer Rate Impacts
Increase FY25
(Adopted) FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
% 7% 9.5% 9.5% 10% 10% 10% 9% 9% 7% 7%
$/month for
Standard
Residential
/ $4.20 $4.60 $5.30 $5.83 $6.41 $6.35 $6.92 $5.87 $6.28
The majority of these rate increases would mainly cover the debt services and exclude other additional capital and operating cost needs. These preliminary rate impact projections will have to be confirmed through a formal rate study. Staff will provide a review of the financing scenarios in various sources of funding and projecting out the future debt services repayment, cash flow, and sewer rate impacts at the CBFC meeting for further discussion.
Recommended Sewer Rate Study
The WIFIA loan program and the municipal bond options require a credit rating report for the Wastewater Enterprise Fund. The credit rating indicates the credit risk of the borrower and predicts the City’s ability to meet financial commitments. The evaluation is typically performed by just a few external national financial institutions and the rating could have a significant impact on the interest rate of the prospective debt service. One of the critical factors that impacts the credit rating is the predictability of future revenue and ability to pay back the forecasted debt services.
The major revenue source of the Wastewater Enterprise Fund is the revenue collected from sewer service rates. The City currently has a two-year rate adoption cycle every other year. Based on the preliminary analysis, the City’s financial advisor has recommended a five-year rate adoption process for the upcoming cycle in FY26 to FY30. This five-year adopted rate cycle signifies stability and guaranteed revenue in Wastewater Enterprise Fund for the next five years.
ECONOMIC AND FISCAL IMPACT
The current construction cost is estimated to be between $256 and $364 million, and the total project cost is estimated to be between $394 and $534M. This project will affect sewer service rates and sewer connection fees. As indicated above, the sewer service rate impacts in the next ten years ranges from 7% to 10% per year. These are preliminary projections and the actual rate and connection fee impacts will have to be confirmed by a formal rate and connection fee study.
STRATEGIC ROADMAP
This agenda item supports the various goals of Council’s Strategic Roadmap. The WRRF Improvements Phase II Project will address infrastructure needs and improvements to increase the reliability of the City’s treatment plant, and construct process improvements to meet more stringent nutrient limits in accordance with upcoming regulatory requirements, while supporting the goals of the Council. Specifically, this item relates to the implementation of the following projects:
Confront Climate Crises & Champion Environmental Justice.
Mitigate Climate Crisis Impacts through Resilient Design and Community Engagement Project C14b: Implement Shoreline Master Plan, including mitigating sea level rise in the industrial corridor through building requirements and outreach
Invest in Infrastructure.
Invest in Water Supplies, Sanitation Infrastructure & Storm Sewers Project N19: Update Water Resource Recovery Facility Phase II Plan
SUSTAINABILITY FEATURES
The WRRF Improvement - Phase II Project will help maintain and improve the biology and health of the Bay which is vital for the region and the State. The Phase II Project will position the City to meet the nutrient limits as specified in the Water board’s 3rd Watershed Permit that requires plants to reduce nitrogen loading to the Bay.
The effects and risks of rising sea water levels will be reviewed and incorporated into the design of the new facilities and some retrofitted facilities where appropriate.
The Administration Building will be reviewed by the City’s Building Division for conformance with State and local requirements related to sustainability (i.e., California Building Code, California Energy Code, etc.) which requires a minimum level of energy efficiency, resource conservation, material recycling, etc. In addition, the building will be designed and constructed to meet the City required Leadership in Energy and Environmental Design (LEED) standards for a Silver Certification.
PUBLIC CONTACT
As part of the funding process, an environmental study (CEQA and/or Initial Study and Mitigated Negative Declaration) will be posted for public review and comment.
The project includes a web page to be hosted on the City’s website which is being periodically updated throughout the multi-year duration of the project.
NEXT STEPS
The following schedule has been developed for this project:
Submit WIFIA Application June 2024
Approval of Environmental Study – IS/MND or CEQA June 2024 Approval of Plans and Specifications and Call for Bids for the Administration Building August 2024
Award of Construction Contract for the Administration Building Project November 2024 WIFIA Loan Fully Funded January 2025
Approval of Plans and Specifications and Call for Bids for the Phase II Improvements Project April 2025
Award of Construction Contract for the Phase II Improvements Project August 2025 Administration Building Project Construction Completion January 2027 Phase II Improvements Project Construction Completion January 2030
Prepared by: Elli Lo, Senior Management Analyst
Reviewed by: Suzan England, Utilities Engineering Manager
Recommended by: Alex Ameri, Director of Public Works
Approved by:
______________________________________
Dustin Claussen, Interim City Manager
CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
File #: RPT 24-039
DATE: May 15, 2024
TO: Council Budget and Finance Committee
FROM: Director of Finance
SUBJECT
Review and Comment on the Annual City Benefit Liabilities and Funding Plan
RECOMMENDATION
That the Committee reviews and comments on the status of the City’s benefit liabilities and current policies regarding funding the City’s benefit liabilities.
SUMMARY
The City of Hayward actively manages its benefit liabilities and completes actuarial valuations for many of its long-term benefit liabilities. This report provides an overview of the balances and funding status of the City’s benefit liabilities.
ATTACHMENTS
Attachment I Staff Report
CITY OF HAYWARD Printed on 5/10/2024Page 1 of 1
powered by Legistar™
DATE: May 15, 2024
TO: Council Budget & Finance Committee Members
FROM: Director of Finance
SUBJECT: Review and Comment on the Annual City Benefit Liabilities and Funding Plan
RECOMMENDATION
That the Committee reviews and comments on the status of the City’s benefit liabilities and current policies regarding funding the City’s benefit liabilities.
SUMMARY
The City of Hayward actively manages its benefit liabilities and completes actuarial valuations for many of its long-term benefit liabilities. This report provides an overview of the balances and funding status of the City’s benefit liabilities.
BACKGROUND
The City of Hayward, like all public and municipal agencies, manages unfunded benefit liabilities as part of its financial picture. In 2013, staff began providing the Council Budget & Finance Committee and the City Council with an annual review of the City’s benefit liabilities and funding plan for unfunded liabilities.
Unfunded liabilities are defined as identifiable obligations of an organization for which the organization does not have 100 percent of the funding (cash or other assets) set aside to cover the cost should all obligations become immediately and simultaneously due.
Generally, an organization operates based on policies that attempt to find a responsible balance between funding the appropriate portion of these obligations, the associated risk that the unfunded portion of the obligations presents to the organization, and responsible and realistic management of the organization’s resources.
Achieving this careful balance is considered the practical and responsible approach since payment demands of these obligations rarely, if ever, occur simultaneously. The alternative would be to fully fund the obligations, eliminating the liability for the present time, which can present challenges in meeting current operating expense obligations. In 2020, as recommended by the Committee and the Council, the City established a Section 115 irrevocable trust for the prepayment of retiree medical liabilities. Staff will continue to provide updates on the funding status of the City’s unfunded liabilities on an ongoing basis.
DISCUSSION
The City actively manages its benefit liabilities and completes external and independent actuarial valuations for benefit liabilities except for accrued leave payouts (analysis conducted by staff). These valuations consider the economic, demographic, and historical compositions of the benefit programs and establish amounts that the City should set aside each year to fund its benefit-related financial obligations. It is critical that the City continue to manage and address its benefit liabilities to ensure long-term fiscal stability. Actuarial valuations identify the Annual Required Contribution (ARC) an agency should make toward the funding of the benefit and the liabilities. This is essentially the minimum funding amount that should be responsibly made by any organization. The ARC is generally comprised of two elements: a portion of funding for current costs (sometimes referred to as “pay go”) and a portion of funding for future costs (the Unfunded Actuarial Liability or UAL).
As bond rating agencies review the City’s debt, they actively consider the level of the City’s unfunded benefit liabilities and the economic pressure they place on the City. Failure to meet the minimum recommended funding levels or implement a plan to achieve full funding of the ARC and/or a long-term plan to pay down the future liabilities could have a negative impact on future bond ratings – with a possible resultant increase in the cost of borrowing should the City seek to incur new debt or wish to finance existing debt.
Table 1 provides a summary of the City’s benefit liabilities and current levels of funding based on the most recent actuarial valuations. Each of these benefit liabilities is unique in its structure and the degree of funding varies depending on the benefit.
Table 1: Summary of Benefit Liabilities (in millions)
Acceptable or Best Practice levels of funding vary by liability type. In general, funding these liabilities at a level in the 75 – 80 percent range is considered adequate and sustainable.
(in millions)
Actuarial
Valuation
Date Accrued Liability
Value of
Assets
Funded
Ratio
Unfunded
Liability
Unfunded
Ratio
CalPERS Police Safety Plan 6/30/2022 492.53$ 287.25$ 58.3% 205.28$ 41.7% CalPERS Fire Safety Plan 6/30/2022 349.87$ 215.31$ 61.5% 134.56$ 38.5% CalPERS Miscellaneous Plan 6/30/2022 557.98$ 354.82$ 63.6% 203.16$ 36.4% Total Cal PERS 1,400.37$ 857.37$ 61.2% 543.00$ 38.8% OPEB - Retiree Medical Police Officers 6/30/2021 45.16$ 11.09$ 24.5% 34.07$ 75.5% OPEB - Retiree Medical Firefighters 6/30/2021 16.49$ 6.97$ 42.3% 9.52$ 57.7% OPEB - Retiree Medical Miscellaneous 6/30/2021 29.62$ 9.70$ 32.7% 19.92$ 67.3% Total OPEB-Retiree Medical 91.27$ 27.76$ 30.4% 63.51$ 69.6% Workers' Compensation 6/30/2023 26.14 32.736 125.2% (6.60)$ -25.2% Accrued Leave Payouts 6/30/2023 11.61$ -$ 0.0% 11.61$ 100% TOTAL 1,529.39$ 917.87$ 60.0% 611.52$ 40.0%
California Public Employee Retirement System (CalPERS)
Current annual cost: $56.7 million
Unfunded Liability: $543.0 million
Benefit Summary – CalPERS is a defined benefit pension plan funded by a combination of employee and employer contributions. The City’s retirement benefit plans represent the largest benefit liability and CalPERS retirement rates continue to be one of the most significant citywide budgetary pressures. This same budgetary stress is felt by the State of California and the over 2,000 public entities statewide that contract with the California Public Employees’ Retirement System (CalPERS) for pension benefits. When CalPERS performs its actuarial analysis, it uses data from previous fiscal years; for example, the employer rates for Fiscal Year 2025 are based on data as of June 30, 2022. There were no significant changes in actuarial assumptions or polices in the 2022 actuarial valuation.
The City contributes to three plans: Police Safety Plan; Fire Safety Plan; and Miscellaneous Employee Plan (all non-sworn/professional employees). All full-time and part-time benefited employees are required to participate in CalPERS. The three plans are independent of one another with different contract plan amendments negotiated over the years through the collective bargaining process. Assets and liabilities of each plan are segregated with no cross-subsidization from one plan to another.
CalPERS Retirement Rates – The cost of the retirement plans is broken into Employee Contribution rates and Employer Contribution rates. Both rates are a percent of projected payroll. The Employee Contribution is based on the pension plan formula (generally 9 percent for public safety plans and 7 percent or 8 percent for miscellaneous plans). The Public Employees’ Pension Reform Act of 2013 (PEPRA) introduced new benefit formulas effective January 1, 2013, that affect new employees to the City that have not previously been part of the CalPERS system. While there is little immediate financial benefit to the City with this “two-tiered” system, the long-term benefit of lower retiree costs can be significant.
Many of the City’s bargaining groups contribute beyond the CalPERS defined Employee Contribution portion and “pick-up” a portion of the Employer Contribution: 6 percent for sworn police and fire personnel and 3-5 percent for all non-sworn personnel (pursuant to bargaining unit agreements). The Employer rates displayed in Table 1 represent the full employer cost according to and as assessed by CalPERS, this rate does not reflect the negotiated cost-sharing “pick-up” agreements, as these agreements do not affect the overall cost of CalPERS.
Over the last several years, the CalPERS Board of Administration has considered and adopted several rate methodology changes that directly impact the retirement rates that cities pay (employer contribution rates). Each of these changes is effective in different fiscal years, with varying phase-in schedules. While these changes significantly increase our current retirement costs, they are intended to stabilize the long-term sustainability of CalPERS retirement plans, helping cities in the long-run. Many of these changes should have been implemented long ago by CalPERS.
1. March 2012 Change (effective FY 2014, two-year phase-in through FY 2015): In March 2012, the CalPERS Board acted to reduce the assumed rate of investment return from
7.75 percent to 7.5 percent. The employer rate impact from this action was effective FY 2014, with a two-year phase-in, and a full rate impact by FY 2015. The actual rate impact resulting from this change ranged from 3 - 5 percent of payroll depending on the plan type.
2. April 2013 Change (effective FY 2016, five-year phase-in through FY 2020): On April 17, 2013, the CalPERS Board adopted significant rate methodology changes that directly impacted employer rates starting in FY 2016, phased in over five years, with the full impact being felt in FY 2020. The anticipated rate impact resulting from this change was approximately 2–5 percent of payroll beginning FY 2020. These actuarial changes were designed to boost funding levels and make employer rates more predictable in the long- run:
Shorter smoothing period1 and shorter amortization period for gains/losses Closed instead of rolling thirty-year amortization
Use market value of assets to determine rates2
3. February 2014 Change (effective FY 2017, five-year phase-in through FY 2021): On February 18, 2014, the CalPERS Board adopted additional rate methodology changes.
While the Board voted to retain its current long-term assumed rate of return at 7.5 percent, they did adopt actuarial changes to assumed mortality rates. The new mortality assumptions were expected to increase costs to local agencies an average of 6–9 percent of payroll for safety classifications and 3–5 percent of payroll for miscellaneous employees by the end of their five-year phase-in in FY2021. Some municipal officials believe these estimates may be low because of the continued decline in the local government workforce in many cities, reducing the number of active employees contributing to CalPERS.
4. November 2015 Funding Risk Mitigation Policy: On November 15, 2015, the CalPERS Board recently adopted a funding risk mitigation policy designed to incrementally lower the discount rate in years of good investment returns, help pay down the pension fund's unfunded liability, and provide greater predictability and less volatility in
1 “Smoothing” and “Closed vs. Rolling Amortization” go hand in hand. Smoothing refers to the method by CalPERS plans to address the unpredictability of investment income and the impact that unpredictability has on employer rates. The revised “smoothing” plan determines the rate increase needed to reach a funding level of 100 percent in 30 years, phase in the rate increase over five years, and then to maintain those rates as steadily as possible or even lower them. In the past, CalPERS employed an amortization and smoothing policy that spread investment returns over a 15-year period with the actual gains and losses experienced by the investment pool paid for over a rolling 30-year period. With the current change, CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly a five-year period.
2 CalPERS has traditionally used the actuarial value of their investments in their financial calculations and rate projections (i.e., the investment assets fluctuate in value from one day to the next, so the administrators calculate an average value for the assets, over a given period of time, or the “actuarial value”). In accordance with new FY 2015 GASB provisions, CalPERS will only use “market value,” which is using the actual value of the investment assets as determined by the market and adjusting the value up or down accordingly.
contribution rates for employers. Under the policy established a mechanism to reduce the discount rate - or assumed rate of return - by a minimum of 0.05 percentage points to a maximum of 0.25 percentage points in years when investment returns outperform the existing discount rate, currently 7.5 percent, by at least four percentage points. The four-percentage point threshold is intended to offset increases to employer contribution rates that would otherwise increase when the discount rate is lowered, and help pay down CalPERS' unfunded liability.
CalPERS staff modeling anticipates the policy will result in a lowering of the expected portfolio volatility to 8 percent in about 21 years, improve funding levels gradually over time, and cut risk in the system by lowering the volatility of investment returns. While rates are expected to increase for CalPERS employers in the future, the policy is designed to minimize any increases above projected rates.
The CalPERS Board implemented the first revision to the Funding Risk Mitigation Policy on February 14, 2017, lowering the first threshold for triggering a discount rate reduction from a 4.0% difference between actual investment return and discount rate to a 2.0% difference. This policy was implemented effective FY 2021.
5. December 2016 Lowering of Discount Rate (effective FY 2018, three-year phase-in through FY 2020): On December 21, 2016, the CalPERS Board voted to lower the discount rate from 7.5% to 7.0%. Lowering the discount rate, also known as the assumed rate of return, resulted in employers that contract with CalPERS to administer their pension plans experiencing increases to their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Public Employees' Pension Reform Act will also see their contribution rates rise.
The actuarial valuations provided to the City of Hayward by CalPERS immediately prior to this decision in August 2016 included the then-final rates for FY 2018; however, these rates did not incorporate the change to discount rates, which resulted in FY 2018 rates increasing over FY 2017 rates by 1.0– 8 percent of payroll. The rate change to assumed discount rates significantly impacted the City’s required contributions in the years since. The City’s revised rates (combined average for all groups) increased from
37.1% in FY 2018 to 56.2% in FY 2023 based on the latest CalPERS actuarial valuation from July 2021.
6. February 2018 Change to Amortization Period for New Members: The CalPERS Board recently voted to shorten the period over which actuarial gains and losses are amortized from 30 years to 20 years for all new members. The change in amortization period will speed up the rate of debt payments to CalPERS, and likely increase cities’ annual pension costs. The new policy was effective as of the June 30, 2019, actuarial valuations, and payments under this new policy began in FY 2021.
7. November 2021 Lowering of Discount Rate (effective FY 2024, no phase-in): On July 12, 2021, CalPERS reported a 21.3% net return on investments for the year ending on June 30, 2021. The higher-than-expected investment return triggered the Fund Risk Mitigation Policy first adopted in 2015, and resulted in a reduction of the discount rate from 7.0% to 6.8%. Triggering of the policy also began a process of revising
assumptions and portfolios, culminating in the approval of the new discount rate on November 17, 2021. Contributions under the new discount will be effective in FY 2024.
Estimated Rate Impacts and Projected Normal Cost Increases:
The most recent valuations, as of July 2023, reflect rate projections that include all of the rate actions taken by the CalPERS Board prior to the triggering of the Fund Risk Mitigation Policy and approval of the new 6.8% discount rate in November 2021. Table 2 provides a detailed summary of the City’s projected CalPERS employer rates and normal costs (employer contribution) based on current discount rate of 6.8%. Under the CalPERS rate projections shown in Table 2, by FY 2030, rates for Miscellaneous Plans are estimated to be 42.4% of payroll, rates for Police Safety Plans are projected to be 89.1% of payroll, and Fire Safety Plans are projected to be 72.7% of payroll. During the five-year period from FY 2024 through FY 2030, the City will see its contributions for the Miscellaneous plan increase by $7.8 million, by $6.7 million for the Police plan, and by $4.8 million for the Fire plan.
Table 2: CalPERS Rate Comparison & Growth
Funding Status & Plan
The City is fully meeting its annual required contribution (ARC) amounts based on the CalPERS premium rates. Given the new CalPERS “smoothing” methodology, the long-term intent is to fund the City’s liability over the 30-year amortization period.
Retiree Medical (OPEB)
Annual Required Contribution (ARC): $7.5 million
Unfunded Liability: $63.5 million
Components of OPEB $7.5 million ARC:
$3.9 million: Current Retirees (“pay as you go”)
$3.6 million: Unfunded Actuarial Liability
(in the $1,000s) FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Miscellaneous
Employer Contribution ($) $ 20,251 $ 22,491 $ 23,586 $ 24,718 $ 25,673 $ 27,367 $ 28,101 Change over Prior Year $ 817 $ 2,240 $ 1,094 $ 1,133 $ 954 $ 1,694 $ 734 Employer Contribution Rate (%) 37.3% 38.9% 39.8% 40.5% 40.9% 42.8% 42.4% Change over Prior Year 0.4% 1.7% 0.9% 0.7% 0.4% 1.9% -0.4% Police
Employer Contribution ($) $ 20,023 $ 22,067 $ 23,082 $ 24,025 $ 24,822 $ 26,317 $ 26,689 Change over Prior Year $ 408 $ 2,044 $ 1,015 $ 942 $ 797 $ 1,495 $ 372 Employer Contribution Rate (%) 76.9% 84.6% 86.1% 87.2% 87.6% 90.4% 89.1% Change over Prior Year 2.3% 7.7% 1.5% 1.1% 0.4% 2.8% -1.3% Fire
Employer Contribution ($) $ 13,491 $ 14,733 $ 15,474 $ 16,171 $ 16,780 $ 17,975 $ 18,304 Change over Prior Year $ (246) $ 1,242 $ 741 $ 697 $ 610 $ 1,194 $ 329 Employer Contribution Rate (%) 65.8% 67.7% 68.6% 69.8% 70.4% 73.4% 72.7% Change over Prior Year 1.1% 2.0% 0.9% 1.2% 0.6% 3.0% -0.7%
The retiree medical benefit represents the second largest benefit liability. By City Council resolution – and as agreed to with some bargaining groups – the City provides certain health care benefits for employees who retire directly from the City with at least five years of City service (most bargaining groups require ten years of service) and who are vested in the California Public Employees Retirement System (CalPERS). The City participates in the CalPERS health care plan, which is governed under the California Public Employees Health and Medical Care Act (PEMCHA).
The City contributes a fixed dollar amount for retiree medical benefits for all employees, except sworn police employees hired before June 12, 2012 (rate tied to Kaiser plan rates), with amounts varying by employee bargaining group and coverage level as governed by PEMCHA. Benefits continue for surviving spouses in amounts as required by PEMCHA. As of June 30, 2022, approximately 712 retirees were eligible and were receiving retiree health care benefits from the City at an annual cost of about $3.9 million, which is the “pay as you go” amount the City currently pays.
There are approximately 806 active employees that may be eligible to receive health care benefits upon retirement. This group of employees represents the number of eligible, current employees and it is the City’s current maximum exposure; it does not necessarily mean all of these employees will either retire with the City or ultimately meet the requirements for receiving this benefit. Similar to the CalPERS retirement plan, the increased life longevity of retirees places stress on the benefit. The updated actuarial valuation of our local plan will consider these impacts within its analysis.
Funding Status & Plan
The current ARC was determined as part of a June 2023 actuarially determined contribution by MacLeod Watts, the City’s OPEB Actuary. The valuation analysis was calculated based on the results of the June 30, 2021 valuation and the trust asset values as of June 30, 2021. The analysis considered benefits that are expected to be earned in the future as well as those already accrued and is required by the Governmental Accounting Standards Board (GASB) to be completed every two years; the most recent actuarial report was completed in June 2022.
The City’s OPEB unfunded actuarial accrued liability is amortized as a level percentage of projected payroll using a closed thirty-year amortization period that has twenty years remaining as of the latest valuation date. The minimum funding target is the ARC, currently estimated at $7.5 million annually. Pursuant to City Council direction, the City began contributing toward the cost of the UAL both through direct City contributions, as well as employee contributions pursuant to some bargaining unit agreements. Payments for both components of the ARC are built into payroll to spread the cost appropriately across all City funding sources. Additional voluntary contributions towards the ARC were made in FY 2014 of $1 million and FY 2015 of $2 million; however, in an effort to reduce the use of reserves in FY 2016 and FY 2017, additional voluntary contributions were not made. In FY 2018, the City reinstated its practice of contributions toward the ARC, in the amount of $1 million, with additional voluntary contributions in the amount of $2 million for FY 2019, and $2.5 million in FY 2020. The City had anticipated making a significant voluntary contribution of $4.0 million in FY 2021; however, due to fiscal uncertainties brought on by the COVID-19 pandemic, Council recommended a reduced contribution of $1 million during budget adoption. During the FY 2021 Mid-Year Review, Council recommended an additional $1.0 million contribution,
for a total voluntary contribution of $2.0 million in FY 2021. In FY 2022, the City made additional voluntary contributions towards the ARC in the amount of $4.3 million. In FY 2023, the City contributed $3.5 million to meet the ARC. The City continued to meet its commitments by fully funding its ARC payment for FY 2024 and FY 2025 at $3.9 million.
Most recently effective in January 2024, IAFF 1909 negotiated participation into an IAFF Medical Expense Retirement Plan (MERP). While overtime, this defined contribution plan will shift the retirement benefit liability to the MERP Trust, thus reducing the City’s future liability, the City did realize a reduction in the OPEB – Fire Safety accrued liability by $3 million from $19.4 million to $16.5 million.
Additionally, in 2020, the City established a Section 115 Irrevocable Trust with CalPERS – a California Employers’ Retiree Benefit Trust (CERBT) as recommended by both the Committee and the full Council. The trust was established as a means to deposit additional funds as they become available to the City. The funds are then placed in the trust to offset expenses related to future payments and to reduce future liabilities.
Workers’ Compensation
Current annual cost: $6.9 million
Unfunded Liability: -($6.6) million
The City is self-funded for Workers’ Compensation and began its program on July 1, 1975.
Payments are made to the Workers’ Compensation Self-Insurance Fund by transfers from all City funds through established rates assessed against payroll pursuant to classification type.
These accruals represent estimates of amounts to ultimately be paid for reported claims, past experience, recent claim settlement trends, and other information. Funds are available to pay claims and administrative costs of the program on a pay-as-you-go basis.
It is important to understand that payments on indemnity claims may be made over a very long period of years. Indemnity claims are those in which future medical care is projected to be needed for the injured worker and the cost is largely dependent on the type and severity of the injury, as well as whether or not the claimant is a sworn employee.
Funding Status & Plan
Pursuant to the latest actuarial valuation presented to the City in June of 2023, a funding status of 70–85 percent is recommended. Table 1 shows that the City is currently overfunded.
Several years ago, the Workers’ Compensation Fund was severely underfunded. In an effort to improve funding levels, an additional percentage was applied on top of the standard rate. As a result of this methodology, the Workers’ Compensation Fund is overfunded by 25.2%. In FY 2024, the Workers' Compensation Fund reimbursed various City funds for the overallocation from prior years. As a result, future year funding levels will begin to normalize, and remain stabilized within the recommended 70-85 percent funding levels.
The FY 2025 budget reflects the reduced Worker’s Compensation rates established in FY 2024, which will stabilize appropriate levels of contributions from all City operating funds.
Accrued Leave Payouts (Compensated Absences)
Current annual cost: varies
Unfunded Liability: $11.6 million
It is the City’s policy to permit employees to accumulate earned but unused vacation and sick leave benefits. The City records the cost of vacation and sick leave as “earned.” Earned vacation and sick leave that is taken during the year is payable from the fund(s) to which the employee’s salary or wage is charged. When an employee retires or otherwise separates from the City, vacation balances are paid out to the employee, and in some cases, some of the accumulated sick leave is also paid out (pursuant to bargaining unit agreements). These payouts are paid through a department’s budget from vacancy salary savings – and are not specifically budgeted for as a separate line item.
Funding Status & Plan
For several years, the City had lowered this liability from its all-time high in FY 2012.
Beginning in 2016, the City began to realize increases in the accrued leave liability year over year. The steady change was attributed to an increase in the number of employees who had been employed with the City of Hayward for five or more years, accruing more leave and increasing the City’s liability. Accrued leave liability balance in FY2023 was $11.6 million an increase by $0.4 million compared to FY2022. Table 3 provides a historical overview of the City’s accrued leave liability.
Table 3: Accrued Leave Liability History
Accrued Leave payouts are currently absorbed within each department’s budget appropriation. In practice, the salary savings achieved through normal attrition and the vacancy created by the exiting employee covers the cost of these payouts. In general, departments have had enough salary savings to accommodate this cost.
Unfunded
Liability
Change from
Prior Year
FY 2011 $10,497,994 $1,247,024
FY 2012 $10,701,569 $203,575
FY 2013 $8,589,354 ($2,112,215)
FY 2014 $7,230,041 ($1,359,313)
FY 2015 $7,104,541 ($125,500)
FY 2016 $7,660,340 $555,799
FY 2017 $7,894,439 $234,099
FY 2018 $7,913,945 $19,506
FY 2019 $8,347,418 $433,473
FY 2020 $9,511,174 $1,163,756
FY 2021 $11,722,431 $2,211,257
FY 2022 $11,212,700 ($509,731)
FY 2023 $11,614,570 $401,870
A possibility to further fund this liability is to build a funding mechanism into payroll as a component of the fringe benefit rate (e.g., 1% of payroll for non-sworn and 2% of payroll for sworn positions). While this might provide a segregated funding source that would prevent spikes to department payroll budgets for large payouts, it does increase the overall City payroll budget. Given the City’s fiscal challenges, it does not seem a prudent use of City resources at this time to add this cost. Staff recommends continuing to actively manage employee leave balances in order to lower the overall long-term liability.
NEXT STEPS
Staff will continue to actively manage benefit liabilities and report annually to the Committee and the Council on the funding status of these benefit liabilities, including review of existing Council policies regarding funding.
Prepared by: Christina Crosby, Deputy Director of Finance
Recommended by: Nicole Gonzales, Director of Finance
Approved by:
____________________________________________
Dustin Claussen, Interim City Manager
CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
File #: RPT 24-040
DATE: May 15, 2024
TO: Council Budget and Finance Committee
FROM: Director of Finance
SUBJECT
Annual Review of City Issued Debt
RECOMMENDATION
That the Committee accepts this report on the status of City Issued Debt.
SUMMARY
This report provides an update of the City’s issued debt and includes the City’s most recent credit rating issued by Standard & Poor’s (S&P) Global in September 2023.
ATTACHMENTS
Attachment I Staff Report
Attachment II City Debt Summary
CITY OF HAYWARD Printed on 5/10/2024Page 1 of 1
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DATE: May 15, 2024
TO: Council Budget and Finance Committee
FROM: Director of Finance
SUBJECT: Annual Review of City Issued Debt
RECOMMENDATION
That the Committee accepts this report on the status of City Issued Debt.
SUMMARY
This report provides an update of the City’s issued debt and includes the City’s most recent credit rating issued by Standard & Poor’s (S&P) Global in September 2023.
BACKGROUND
The City of Hayward, like most cities and municipal agencies, incurs and manages debt as part of the normal course of business, leveraging different financing instruments to provide immediate access to funding for significant capital projects, equipment, and other specific projects. City staff prepares informational sections included in the City’s annual budget document and the annual financial statements that include sections summarizing the City’s debt. Throughout the year, this information comes in various forms to the Council and the Committee; however, this report is meant to provide a comprehensive summary of the entire portfolio.
DISCUSSION
The City uses debt to finance the cost of capital improvements through various debt instruments (see list below). Debt service payments are generally made on an installment basis, typically annually or semiannually. This document contains debt service information for the General Fund and all other funds, including anticipated debt issuances that will be issued prior to the end of the fiscal year as have been approved by Council during the FY 2024 budget process or separate resolution. Debt service payments of previously issued debt, as well as planned issuances, are budgeted and approved annually by the Council – these obligations are funded through identified tax and/or fee supported revenues that include the General Fund,
Enterprise Funds, and Internal Service Funds.
Debt Instruments – The City and Successor Agency of the Hayward Redevelopment Agency currently maintain the following types of debt:
Certificates of Participation
Private Placement Bonds
California Energy Commission (CEC) Loan
Lease-Purchase Agreements
State Water Resources Control Board (SWRCB) Loan
Special Tax Bonds (CFD only) & Limited Obligation Improvement Bonds (LID only)
Tax Allocation Bonds (Successor Agency only)
Loans Payable (Energy Efficient Loan)
City-Issued Long-Term Debt Debt as of
6/30/2024
Certificate of Participation $42,747,856
Private Placement Bonds $2,290,923
Lease-Purchase Agreements $144,423
Special Tax Bonds (CFDs only) & Limited Obligation Improvement Bonds (LID only)
$3,880,064
Internal Fund to Fund Loans $2,778,361
Tax Allocation Bonds (Successor Agency Only) $23,694,267 Total Government Activity Debt $75,535,894
State Water Resources Control Board (SWRCB) Loan $27,579,220 Loans Payable (Energy Efficient Loan) $1,923,891
Total Business-Type Activity Debt $29,503,111
Total City-Issued Long-Term Debt $105,039,005
City-Issued Debt
Attachment II provides a basic summary of the debt the City currently maintains.
The City’s Annual Comprehensive Financial Report (ACFR) and annual budget document both contain further detail on the various debt issuances with explanations of uses and sources of funds. Hayward is a charter city and, as such, legally does not have a debt limit. A useful tool for comparison to peer agencies, who are subject to this limit, is to calculate what the legal debt limit and margin would be if Hayward were a general law city. This calculation and information are described below.
Debt Limit & Margin
The legal bonded debt limit for the City is $4.4 billion. The City does not have any bonded debt that is subject to this limitation – resulting in a legal bonded debt margin of the entire $4.4 billion. However, if the City’s debts were subject to this limit, the City’s debt that would have been subject to the limit would be $61.9 million of outstanding debt, which is approximately $4.3 billion below the limit.
The City’s projected General Bonded Debt Outstanding as of June 30, 2024 will total $61.9 million and represents 0.21% of taxable property value or $382 per capita.
Debt Limit Computation (projected June 30, 2024) –
Total FY 2024 projected assessed valuation (less
exemptions)
$29,180,687,400
Debt limit (15% of assessed value) $4,377,103,110
Amount of legal debt applicable to the debt limit $61,933,279 Legal debt margin (if Hayward were a general law city) $4,377,103,110 Amount above or (below) Legal Debt Margin ($ 4,315,169,831)
New Debt / Refunded Debt
In FY 2024, the City engaged with NHA Advisors, the City’s financial advisors on the refunding of the 2023 Refunding Certificate of Participation (2015 Certificates of Participation). Under market conditions at the time of analysis, NHA Advisors estimate net present value savings from a potential refunding of the 2015 Certificates of Participation (“2015 COPs”) to be approximately $1.7 million and the aggregate cash flow savings is estimated to be in excess of $10 million.
Credit Ratings
Credit ratings are opinions about credit risk; they are published by a rating agency that has analyzed the City’s ability and willingness to meet its financial obligations in accordance with the terms of the debt obligations. Credit ratings have a significant impact on the interest rate the City will pay when issuing debt. In August 2023, Fitch Ratings issued a rating of AA+ assigning a positive outlook primarily attributed to the City’s strong revenue growth prospects, moderate long-term liability burden, moderately-elevated fixed costs, and consistently strong reserves relative to expected revenue volatility and budget flexibility. A critical component of the rating agency review is the City’s financial management status - i.e., appropriate reserve levels, plans to reduce liabilities, fiscal policies, etc. If the City fails to maintain these areas of fiscal control, the City could see a reduction in future ratings.
In September 2023, as part of the City’s 2023 Refunding COPs, Standard & Poor’s (S&P) Global issued a rating of AA with a stable outlook. concluded that there should be no change to the existing rating or rating outlook.
ECONOMIC IMPACT
There is no economic impact associated with this report as it is informational only.
FISCAL IMPACT
The debt mentioned in this report was issued previously. This item is informational only so there is no direct fiscal impact related to its transmission to the Committee.
STRATEGIC INITIATIVES
This agenda item is a routine operational item and does not relate to any Council’s Strategic Initiatives.
SUSTAINABILITY FEATURES
There are no sustainability features associated with this report as it is informational only.
PUBLIC CONTACT
The agenda for this item was posted in compliance with the California Brown Act.
NEXT STEPS
Staff will continue to actively monitor the City’s debt levels and report annually to the Committee and City Council the funding status.
Prepared by: Nicholas Mullins, Sr. Management Analyst
Recommended by: Nicole Gonzales, Director of Finance
Approved by:
____________________________________________
Dustin Claussen, Interim City Manager
CITY OF HAYWARD DEBT SUMMARY ATTACHMENT II
Issuance
Date
Maturity
Date Interest Rate Original Debt Debt as of
6/30/2024
Total Debt as of
6/30/2024
General Fund 10,787,140$
16Refunding COP FY2016 FY2027 2.60%-2.76% 19,813,775$ 5,717,856$ 15Fire Station #7/Firehouse/Clinic FY2015 FY2030 2.84% 5,500,000$ 2,290,923$ 15Fire Station #7 Loan from Water FY2016 FY2035 2.00% 3,421,000$ 2,778,361$ 15Streetlight Conversion #05188 FY2015 FY2024 1.00% 2,488,880$ -$ Measure C Fund 37,030,000$
15Library/Fire Stations/Streets FY 2016 FY2034 3.00%-5.00% 67,535,000$ -$ 23Refunding COP FY 2024 FY2035 5.00% 37,030,000$ 37,030,000$ Internal Service Fund - Fleet 144,423$
14Equip Lease-Fire Truck FY2014 FY2024 3.05% 824,000$ -$ 15 TDA Fire Truck Loan FY2015 FY2024 2.92% 1,272,000$ 144,423$ Water -$
13Water Refunding Bonds FY2014 FY2025 2.76% 7,245,000$ -$ Sewer 15,561,395$
SWRCB Loan FY2006 FY2029 0.00% 54,550,018$ 13,637,505$ CEC Solar Energy Loan #7505 FY2011 FY2025 3.00% 2,450,000$ 213,001$ CEC Solar Energy Loan-Phase II FY2020 FY2038 1.00% 2,150,955$ 1,710,889$ Recycled Water 13,941,716$
SWRCB Loan-Recycled Water FY2017 FY2049 1.00% 27,058,436$ 13,941,716$ Total Governmental and Business Activity Debt 77,464,674$ Fiduciary 3,850,064$
13Community Facility District #1 FY2014 FY2033 4.13% 7,076,294$ 3,850,064$ Successor Agency of the Hayward
Redevelopment Agency 23,694,267$
RDA Repayment Agreement with GF FY2016 FY2022 LAIF 11,156,841$ 3,789,267$ 16 RDA TABS FY2017 FY2036 2.00%-5.00% 35,270,000$ 19,905,000$ Special Assessment Districts 30,000$
LID 17 FY2000 FY2024 4.20%-6.13% 396,014$ 30,000$
CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
File #: ACT 24-036
DATE: May 15, 2024
TO: Council Budget and Finance Committee
FROM: Director of Finance
SUBJECT
Review and Approve the FY 2024/2025 Agenda Planning Calendar
RECOMMENDATION
That the Council Budget and Finance Committee reviews and approves the FY 2024/2025 Agenda Planning Calendar.
SUMMARY
The FY 2024/2025 Agenda Planning Calendar suggests agenda topics for the year for the Committee’s consideration.
ATTACHMENTS
Attachment I FY 2024/2025 Agenda Planning Calendar
CITY OF HAYWARD Printed on 5/10/2024Page 1 of 1
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ATTACHMENT I
COUNCIL BUDGET AND FINANCE COMMITTEE
2024 Agenda Planning Calendar
May 15, 2024
Meeting Location: Conference Room 4A/Zoom Platform
Meeting Time: 5:30 p.m.
Meeting Dates: The Council Budget & Finance Committee generally meets monthly on the 3rd Wednesday of the month, except for July and August, due to City Council Break.
Special meetings will be scheduled as determined necessary by the Committee or the City Manager.
DATE SUGGESTED TOPICS (subject to change)
May 15, 2024 Water Resource Recovery Facility (WRRF) Improvements, Phase II – Project Update
Annual Review of City Issued Debt
Annual City Benefit Liabilities and Funding Plan Review June 19, 2024 Public Bank East Bay
FY 2025 Budget Process Debrief (Oral Presentation)
July 17, 2024 Council Recess
August 21, 2024 Council Recess
September 18, 2024 ARPA Funds Update
October 16, 2024 Measure C Annual Report
November 20, 2024 Investment Portfolio Review and FY 2025 Statement of Investment Policy and Delegation Authority (Oral Presentation by External Investment Manager)
FY 2024 Annual Audit Process (Oral Presentation by External Auditor) December 18, 2024 TBD
January 15, 2025 FY 2026 Budget Process and Calendar Review February 19, 2025 FY 2025 Mid-Year Budget Review and General Fund Long-Range Financial Model Update
March 19, 2025 FY 2026 Budget Update
April 17, 2024 Discussion on Mayor & City Council FY 2026 Budget FY 2026 Proposed Budget Discussion
Non-scheduled future agenda topics:
- Additional Payment OPEB Trust
- 238 Parcel Sales Update (Timing TBD on Transactions)
- Hayward Economic Development Corporation
- Hayward Community Foundation Update