City seeks $5 million loan
July 2, 2013 — By a 4-1 vote the Susanville City Council adopted a resolution at its May 15 meeting to authorize a $5 million loan so it can “refund the unfunded accrued actuarial liability represented by the CalPERS Side Fund Obligations” plus “an amount required to pay all costs of authorizing and delivery of the loan.”
As part of the loan process, the city also filed a complaint for validation — a type of lawsuit — in Lassen Superior Court naming “all persons interested in the matter” as defendants.
City Administrator Jared Hancock said the court action was a procedural requirement of the loan and the city wasn’t really suing anyone.
According to court documents, “The resolution authorizes the city to enter into a loan (which constituted a ‘revenue bond’ … which is payable from the general fund of the city and from any other source of legally available funds.”
Hancock said in the early 2000s small cities with fewer than 100 employees were put in a risk pool with other small jurisdictions, but the city’s contribution was under-funded.
CalPERS, the agency responsible for managing the city’s retirement funds, created a side fund for the city with a current value of about $5 million.
Hancock said PERS charged the city about 7.75 percent interest on that debt, and the city seeks a loan to refinance that debt at a much lower interest rate — expected to be between 3.75 percent and 4.75 percent.
“Even though it’s an existing debt, in an abundance of caution, we wanted to follow the process as if it were a new debt,” Hancock said. “That was the recommendation from the attorneys. It’s called a debt validation process. Basically what this does is give anyone in the city an opportunity to challenge the validity of the debt. Once that period is over, and the judge does approve the debt validation, then we can proceed with the debt refinancing.”
Those who wish to oppose the court action have until July 8 to file a written response with the court. The response must be in the correct form.
For more information or help filing the correct form, go to the California Courts Online Self-Help Center at courtinfo.ca.gov.selfhelp.
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