Receives the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association

City of El MonteIn June 2020, the City of El Monte successfully restructured $138 million of its debt relating to pension liabilities to enhance the city’s overall financial sustainability. The City of El Monte closed on its $118 million Pension Obligation Bond (POBs) issue on June 23, 2020 to refinance and restructure its unfunded liability with CalPERS. On June 30, 2020, the City issued Lease Revenue Bonds (LRBs) to refinance and restructure the majority of its outstanding supplemental retirement fund liability with PARS. Both transactions secured interest rates significantly below those that were being previously paid – 3.82% vs. 7.00% on the POBs and 3.99% vs. 6.50% on the LRBs. The transactions were structured with City Council’s directive to increase the City’s funding ratio of its Miscellaneous and Safety Plans with CalPERS, as well as its PARS plan. In the case of the POBs, the City’s strategic restructuring delivered an overall repayment pattern that optimally utilizes the pension tax override put in place by the voters of the City in 1946. Over time, this restructuring will reduce the contributions needed from the City’s general fund and provide an ability to reduce the pension tax override levy for the benefit of the City’s residents. 

The POBs were issued with a Standard and Poor’s Global Ratings ‘A+’ and Fitch Ratings “A-“ and the LRBs were rated as “A” and “A-,” respectively. Each transaction was sold to institutional, as well as retail investors across the State of California and the United States. NHA Advisors, the City’s financial consultant and municipal advisor, and Norton Rose Fulbright, serving as bond and disclosure counsel to the City each assisted on both transactions. The POBs were underwritten by Ramirez & Co., as senior manager, and Cabrera Capital Markets as co- manager. The LRBs were underwritten by Raymond James, as sole manager. 

A couple of points in the Standard and Poor’s rating rationale were noteworthy as contributing to the solid ratings: “Budget-building process that includes a detailed examination and reporting on revenue and expenditure trends, along with the use of third-party data on economic and revenue performance to build assumptions” and “Multilayered reserve policy that sets a 15%-of- operating expenditures reserve minimum with two-year replenishment requirement to manage the occasional one-time capital spending needs, supplemented by designations for certain purposes such as economic uncertainty.” 

Mayor Andre Quintero noted, “These two bond transactions will help the City of El Monte continue to invest in the essential services that maintain the quality of life of our City’s residents. Particularly now, as we all respond to the community’s needs during the pandemic, we, as a City, have to be there for those requiring our aid. The City Council, collectively, feels strongly that we can best achieve this goal by continuously striving to maintain a solid financial foundation.” The Mayor went on to state, “the residents of the City expect and demand that the City be there in their times of need. Through these low-cost refinancings, and by being very strategic in our direction to the financing team of the City’s objectives, we believe that we can deliver on that promise. 

Alma Martinez, the City Manager, stated of the transactions, “We are very pleased with the results of these two financings. The City Council directed the finance team to achieve several important objectives: maximize savings, create a more sustainable and affordable pension repayment schedule and enhance the City’s resiliency to any potential future economic shocks due to CalPERS not meeting their reinvestment objectives. Prudent financial management, including very strategic restructurings of these large City liabilities, helps the City continue to deliver the services that our residents deserve, and thereby help the City continue to develop and flourish.” 

In addition, the City of El Monte’s comprehensive annual financial report (CAFR) for the fiscal year ending June 30, 2019 qualifies for Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting. The Certificate of Achievement is the highest form of recognition in governmental accounting and financial reporting, and its attainment represents a significant accomplishment by a government and its management. 

The City of El Monte is in Los Angeles County is home to over 117,000 residents.