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RFP No. 21-025 EXHIBIT B was drafted 10 years ago under different market conditions; and, was drafted as a warning and in response to bad practices. It is important to note that are several issues that the GFOA points out to which all agencies should adhere to when issuing POBs (#1 - #3). 1 Iowever, because of pension reforms and policy changes by CaIPERS in recent years, as well as adaptation in the POB market, we believe that these concerns have been addressed and warrant reconsideration in California. Each GFOA concern is listed below, along with our response in italics. 1. POBs are complex instruments, which incorporate the use of GICs, swaps, or derivatives. PCJBs ; trould oply be isstwd rrs plain vanilla tb a'd o; hoar/;. 2. POBs are structured with "make -whole" calls, which make it more costly or difficult to refund in the future (than traditional tax-exempt debt). POR, rrrr ooia ,irrrrtrrred wrrth stondord call terrtrrres h1 er traditional tax exempt hood,. 3. POBs have been structured to incorporate annual normal costs, or in a manner that defers principal payments or extends principal payments over a longer period than the actuarial amortization period. P013s should rew include rntrrrral rusts ('exrr^pt for a(ouol jn'c pay oroount), rmr he ;tr'uctured writer an r-xte_^ndr*r'1 repayrtrr>nt ttftr°drdr°-frrtaFrrroertar'dty_ 4. POBs increase a municipality's bonding capacity or turn a soft liability into a hard liability. An una nr y's (b1Pt hS (JAI hubiWt , r r r,ra .ider r,d-debt ''by the C. ow-ts in Cuhforniu crud (W;B F,D, Allow,over, HAI payrr;(,w,; ore frxrd dollar payrrrr^trl-;, like a oridai( mol loan, wrfrach limn ed of a drsrnunt rrrtr^ of AQW1. PDBs >imply "'rr frrrrrnce" yom CWPN1 i liobtlaty, of a h r wre r rote 5. Invested POB proceeds might fail to earn more than the interest rate over the term of the bonds, leading to increased liability for the government. fhct fmam.'7cd PMthy(t Of F (M..; is depr'ndent aporr Nl(O vaoahh,";- i) Borrowinq Rate On the Holub' tmd 1) CrrR'f_HS fnvi ^stim'rit Pe rim mow e. 1,08,^ provide ^rr�rrrt.gs by w1iinaor mej COAL payrrwnP; ert a rrorable fixed rate, as opfroser! to Mended rate for a portfolio art w r er ^ (SU r-rlaitie:/ Y%frxedmcrrtywlreofpli1tr11F'anf(otroncrs;NtsI3% lircluirDty). irrv[,tort PM!,; may lo_x° erafue if the ntarkcl rir^cEirte ,onup after rrsuarrcc. itshoui(i be ooh^ri, if c'cdprFt.S underpr^rfarrw; the rity's UAC will yo up rr^r/md1 ,% if bonds arc is,acd. Howevcr, the r sucrncr, rrf bond, n'ray redcwo tho annual financial itnpar t of lr 1,ses fo orr iovestrocat retain_, or policy clrrrnrles awde by the r:afPERS Board. City Council 23 — 55 511 S/2021