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The Government Finance Officers' Association (GFOA) issued an advisory against POBs based upon a variety of <br />reasons such as the potential for invested proceeds to earn less than the interest owed on the bonds, structuring <br />the debt over a longer term than the original amortization period, and the potential for the bonds to consume the <br />agency's legal debt capacity. The following policy points can help mitigate these concerns. <br />6. It shall be the City's policy to consider issuing POB's only if the following criteria exist. <br />a) The City Council must conduct a public meeting to consider the results of an analysis quantifying the risk <br />probability of the City paying more over the life of the bonds. <br />b) To maximize potential savings, the bond interest rate must be at least 30% less than the plan's current <br />discount rate. <br />c) To ensure the City benefits from the possible scenario of actual plan results exceeding Ca1PER5 <br />assumptions shortly after issuing debt, the bonds must not exceed 90% of the unfunded liability. <br />d) The bond structure must not extend the life of the debt. <br />e) The City must not use bond proceeds to pay the normal cost of the pension plan. <br />UNFUNDED EMPLOYEE PENSION LIABILITY COST REDUCTION POLICY Page 4 <br />