Long Beach, CA
File #: 05-3506    Version: 1 Name: FM - Resolution for 2002 Taxable Pension Obligation Bonds
Type: Resolution Status: Adopted
File created: 12/7/2005 In control: City Council
On agenda: 12/13/2005 Final action: 12/13/2005
Title: Recommendation to adopt resolution authorizing the conversion of the 2002 Taxable Pension Obligation Bonds to fixed rate from variable rate, in an amount not to exceed $79,000,000; and authorize City Manager to execute all necessary documents. (Citywide)
Sponsors: Financial Management
Attachments: 1. R-48 sr, 2. R-48 att, 3. RES-05-0142
TITLE
Recommendation to adopt resolution authorizing the conversion of the 2002 Taxable Pension Obligation Bonds to fixed rate from variable rate, in an amount not to exceed $79,000,000; and authorize City Manager to execute all necessary documents. (Citywide)

DISCUSSION
Staff recommends that the City Council adopt the attached resolution to authorize the
remarketing conversion of the 2002 Taxable Pension Obligation Bonds (2002 POBs)
from variable rates to fixed rates on the December 30, 2005 remarketing date. This
conversion will not extend the current final 2021 maturity of the 2002 POBs. This
conversion to fixed rates is intended to capture the still low fixed interest rates available
in the market while eliminating the risk associated with variable rate debt.
On July 23, 2002, the City Council authorized the issuance of $82 million of the variable
auction rate 2002 POBs to refund a large portion of the City’s outstanding 1995 POBs
(copy of letter attached). The 1995 POBs financed an existing obligation to the
California Public Employees’ Retirement System (CalPERS). The 2002 POBs were
issued for cash flow purposes, both by taking advantage of historically low variable
interests rates and extending the term of the principal repayments. The result was a
substantial short-term reduction to what would have been quickly escalating debt
payments for the 1995 POBs. The variable rate structure provided substantial cash flow
relief for the past nearly four years.
Over the past year plus, however, interest rates have risen substantially and are
expected to continue to climb in the near future. The average POB auction interest rate
has risen from a low of just over 1 percent on up to the most recent reset on November
3, 2005 at just over 4 percent. A conversion on December 30, 2005 is estimated to
garner an overall fixed rate of approximately 5.3 percent. The City has benefited
tremendously these past few years from the lower variable rate mode, but staff is
recommen...

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