DIXON – The city is continuing the process of issuing up to $22.75 million in bonds to refinance the bulk of its unfunded pension debt.
The Dixon City Council is hoping refinancing of its unfunded police and fire pension liability will lead to saving more than $5 million across the next two decades.
The council had a public hearing on the intent to issue bonds Monday, and there were no comments.
City Manager Danny Langloss said they are looking at different scenarios and assumed rates of return, and they’re hoping for an interest rate of 4% or lower.
The city contracted with Bernardi Securities as the bond underwriter and is looking to issue up to $22.75 million in bonds if it can secure a low enough interest rate.
Bob Vail of Bernardi, in a presentation made to the council last month, said bonds paid back across 18 years would put the city’s fire and police pensions at a 90% funded level.
As of April 2021, fire pensions were at about 64% funded and the police at about 55%. There’s a state mandate in place calling for all municipalities to fund their pension systems at 90% by 2040.
The bonds would fund $10.7 million to police pensions and $7.25 million to fire pensions, while also building in $2 million in reserves as market contingency, Vail said.
There are several steps the city is taking to undergo the bonding process, including paying about $25,000 to get a bond rating for the city that represents its creditworthiness.
With low interest rates for governments, many communities are considering this avenue to achieve a higher pension system funding level, capture returns in the market and get a more consistent annual payment, Mayor Li Arellano Jr. said.
The hope is that by refinancing the debt, the city would start to see savings after four years and save $1.5 million a year after 17 years.