The bond proceeds will be used to pay off the City’s Unfunded Accrued Liability “UAL” for its pension retirement plans to the California Public Employees’ Retirement System “CalPERS”. To reduce the amount of the issuance, the City used cash on hand to fully fund its Utility Enterprises’ (Electric, Water, and Sewer) debt of $10.7 million.
Altogether, the issuance is estimated to generate an annual savings of approximately $2.7 million and overall savings of $54.1 million. Savings will allow the City to tackle other long-term liabilities such as retiree medical and set funds aside for future increases in UAL. One of the critical drivers of this result was the “AA” category rating established for the City. “While the City’s A+ rating was strong, being upgraded to the AA category is a result of following through on a fiscal sustainability plan which puts the city in a solid financial position and ultimately means more savings for our residents,” said Administrative Services Director, Talika M. Johnson.
S&P’s stable outlook reflects their “view that the city’s very strong reserves and management’s focus on working toward sustainable budgetary balance will enable the city to maintain the current rating…” Also noted in the rating report is acknowledgment of the economic challenges related to the ongoing COVID-19 pandemic, but passage of the City’s Measure Z sales tax, increased required reserve levels, the City’s very strong fund balance position, and ongoing pre-pandemic economic growth are all viewed as credit positives.
“We are pleased to see that our financial discipline, good planning and hard work is reflected in an improvement to our credit rating,” said Sergio Gonzalez, City Manager. “Furthermore, a stable outlook designation during these uncertain times, says a lot about our City’s financial position.”
For a full copy of the credit analysis, visit the ‘Finance’ page on the City’s website at https://www.ci.azusa.ca.us/1710/Credit-Ratings.