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6.1.C. - Page 33
<br />Interest Charles on Unfunded Liabilities.
<br />Ca1PERS charges interest on Unfunded Liabilities at an annual rate equal to the then -current
<br />Discount Rate .80 Accordingly, the 30 -year Amortization Period historically used by Ca1PERS to
<br />amortize Unfunded Liabilities results in interest payments that make up a large percentage of
<br />total Amortization Costs. Table No. 5 (below) shows, by way of example, that more than 50
<br />percent of the Amortization Costs paid by South San Francisco, Redwood City, the City of San
<br />Mateo, and Daly City go to interest payments. It also shows that, if the Amortization Periods
<br />were shortened to 20 years, or even 15, those Cities would realize large savings on interest. Most
<br />notably, the City of San Mateo would save $56 million under a 20 -year Amortization Period and
<br />$126 million with a 15 -year period. Redwood City would save $55 million by switching to a 20 -
<br />year Amortization Period and $134 million with a 15 -year period.
<br />Table No. 5 - Interest payment savings where shorter Amortization Periods are applied
<br />($000)
<br />Shortening the Amortization Period is only one way that savings on interest can be achieved.
<br />Savings can also be made by reducing the size of the Unfunded Liabilities through supplemental
<br />80 Interviews by Grand Jury. Mendel, Old cause ofpension debt, p. 1. City of La Palma, slide 22. Eastman, p. 6. City
<br />of Daly City, Comprehensive Biennial Operating and Capital Budget, Fiscal Years 2017 and 2018, p. 25.
<br />81Ca1PERS, Actuarial Valuation — June 30, 2016 Miscellaneous Plan of the City of South San Francisco, p. 17,
<br /><httos://www. calr)ers. ca.2ov/docs/actuarial-reports/2016/south-san-francisco-citv-miscellaneous-2016.Ddf>.
<br />Ca1PERS, Actuarial Valuation — June 30, 2016 Safety Plan of the City of South San Francisco, p. 17,
<br /><https://www.calpers.ca.izov/pa2e/ ... /actuarial ... /public-a2ency-actuarial-valuation-reports>.
<br />82 CaIPERS, Actuarial Valuation — June 30, 2016 Miscellaneous Plan of the City of Redwood City, p. 17,
<br /><htt-os://www.calpers.ca.eov/docs/actuarial-reports/2016/redwood-city-miscellaneous-2016.pdf>. CaIPERS,
<br />Actuarial Valuation — June 30, 2016 Safety Plan of the City of Redwood City, p. 17,
<br /><https://www.calpers.ca. eov/docs/actuarial-reports/2016/redwood-city-safety-2016.pdf>.
<br />83 CaIPERS, Actuarial Valuation as of June 30, 2016 for the Miscellaneous Plans of the City of San Mateo, p. 17,
<br /><httos://www.calDers.ca.2ov/docs/actuarial-reports/2016/san-mateo-citv-miscellaneous-2016.Ddf>. CalPERS
<br />Actuarial Valuation as of June 30, 2016 for the Safety Plans of the City of San Mateo, p. 17,
<br /><httos://www. calDers. ca.2ov/docs/actuarial-reports/2016/san-mateo-citv-safetv-2016.Ddf>.
<br />sa Ca1PERS Actuarial Valuation as of June 30, 2016 for Miscellaneous Plans of Daly City, p. 17,
<br /><https://www.calpers.ca.aov/docs/actuarial-reports/2016/dale-city-miscellaneous-2016.pdf>. Ca1PERS Actuarial
<br />Valuation as of June 30, 2016 for Safety Plans of Daly City, p. 17, <https://www.calpers.ca.izov/docs/actuarial-
<br />reports/2016/dale-city-safety-2016.pdf>.
<br />2017-2018 San Mateo County Civil Grand Jury 19
<br />Interest over 30 years
<br />Interest over 20 -,ears
<br />Interest over 15 years
<br />City
<br />Total payments
<br />Interest
<br />Percent of 30-
<br />Interest
<br />Savings
<br />Interest
<br />Savings
<br />over 30 -years
<br />payments
<br />year.
<br />payments over
<br />compared to
<br />payments over
<br />compared to
<br />(using 30 -year
<br />over 30-
<br />Amortization
<br />20 -years (using
<br />30 -year
<br />15 -years (using
<br />30 -year period
<br />Amortization
<br />years.
<br />Cost payments
<br />20 -year
<br />period.
<br />15 -year
<br />Period).
<br />consisting of
<br />Amortization
<br />Amortization
<br />interest
<br />Period).
<br />Period).
<br />payments.
<br />South S.F.81
<br />$390,708
<br />$206,436
<br />52.8%
<br />$185,162
<br />$20,574
<br />$127,457
<br />$78,979
<br />Redwood
<br />$553,787
<br />$305,671
<br />55.2%
<br />$250,256
<br />$55,415
<br />$171,616
<br />$134,055
<br />City82
<br />City of San
<br />$502,874
<br />$280,510
<br />55.8%
<br />$224,282
<br />$56,228
<br />$153,805
<br />$126,706
<br />Mateo83
<br />Daly City1'
<br />$371,749
<br />$201,920
<br />54.3%
<br />$171,295
<br />$30,625
<br />$117,468
<br />$84,452
<br />Shortening the Amortization Period is only one way that savings on interest can be achieved.
<br />Savings can also be made by reducing the size of the Unfunded Liabilities through supplemental
<br />80 Interviews by Grand Jury. Mendel, Old cause ofpension debt, p. 1. City of La Palma, slide 22. Eastman, p. 6. City
<br />of Daly City, Comprehensive Biennial Operating and Capital Budget, Fiscal Years 2017 and 2018, p. 25.
<br />81Ca1PERS, Actuarial Valuation — June 30, 2016 Miscellaneous Plan of the City of South San Francisco, p. 17,
<br /><httos://www. calr)ers. ca.2ov/docs/actuarial-reports/2016/south-san-francisco-citv-miscellaneous-2016.Ddf>.
<br />Ca1PERS, Actuarial Valuation — June 30, 2016 Safety Plan of the City of South San Francisco, p. 17,
<br /><https://www.calpers.ca.izov/pa2e/ ... /actuarial ... /public-a2ency-actuarial-valuation-reports>.
<br />82 CaIPERS, Actuarial Valuation — June 30, 2016 Miscellaneous Plan of the City of Redwood City, p. 17,
<br /><htt-os://www.calpers.ca.eov/docs/actuarial-reports/2016/redwood-city-miscellaneous-2016.pdf>. CaIPERS,
<br />Actuarial Valuation — June 30, 2016 Safety Plan of the City of Redwood City, p. 17,
<br /><https://www.calpers.ca. eov/docs/actuarial-reports/2016/redwood-city-safety-2016.pdf>.
<br />83 CaIPERS, Actuarial Valuation as of June 30, 2016 for the Miscellaneous Plans of the City of San Mateo, p. 17,
<br /><httos://www.calDers.ca.2ov/docs/actuarial-reports/2016/san-mateo-citv-miscellaneous-2016.Ddf>. CalPERS
<br />Actuarial Valuation as of June 30, 2016 for the Safety Plans of the City of San Mateo, p. 17,
<br /><httos://www. calDers. ca.2ov/docs/actuarial-reports/2016/san-mateo-citv-safetv-2016.Ddf>.
<br />sa Ca1PERS Actuarial Valuation as of June 30, 2016 for Miscellaneous Plans of Daly City, p. 17,
<br /><https://www.calpers.ca.aov/docs/actuarial-reports/2016/dale-city-miscellaneous-2016.pdf>. Ca1PERS Actuarial
<br />Valuation as of June 30, 2016 for Safety Plans of Daly City, p. 17, <https://www.calpers.ca.izov/docs/actuarial-
<br />reports/2016/dale-city-safety-2016.pdf>.
<br />2017-2018 San Mateo County Civil Grand Jury 19
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