Agenda - Council - 12/08/2020 - Laserfiche WebLink

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Our view of the city's debt profile weakened because its debt amortization fell below 65% maturing within the next 10 years, the level we consider rapid. Ramsey indicates it could issue up to $3 million in GO debt to finance various capital improvements in upcoming years; however, we do not anticipate these new money debt plans will materially weaken our view of the city's debt profile given that Ramsey will amortize more existing debt than it plans to issue in the medium term. Pension and other postemployment benefits Ramsey's combined required pension and actual other postemployment benefits (OPEB) contributions totaled 4.0% of total governmental fund expenditures in 2019. The city made its full annual required pension contribution in 2019. • We do not believe that pension liabilities represent a medium -term credit pressure, as contributions are only a modest share of the budget, and we believe Ramsey has the capacityto absorb higher costs without pressuring operations. • The city's two cost -sharing, multiple -employer pension plans have seen improvements in funded status in recent years, though plan statutory contributions have regula rlyfa Ilen short of actuarial recommendations. Along with certain plan -specific actuarial assumptions and methods, this introduces some long-term risk of funding volatility and cost acceleration. • Although the city funds its OPEB on a pay-as-you-go basis, exposing it to cost acceleration and volatility, we expect that medium -term costs will remain only a small share of total spending and therefore are not a significant budgetary pressure. They city participates in the following defined -benefit plans: • Minnesota General Employees Retirement Fund (GERF): 80.2% funded (as of June 30, 2019), with a city proportionate share of the plan's net pension liability of $2.9 million. • Minnesota Police and Fire Fund (PEPFF): 89.3% funded (June 30, 2019), with a proportionate share of $2.5 million. • A single -employer OPEB plan, limited to the implicit rate subsidy, which is funded on a pay-as- you-go basis with a net OPEB liability of $699,000. Total contributions to GERF and PEPFF were 89% and 94%, respectively, of our minimum funding progress metric and were slightly above static funding in both cases. Annual contributions are based on a statutoryformula that has typically produced contributions lower than the actuarially determined contribution for each plan. In our view, this increases the risk of underfunding over time, if the state legislature does not make adjustments to offset future funding shortfalls. Other key risks include a 7.5% investment rate -of -return assumption (exceeding our 6.0% guideline) that indicates some exposure to cost acceleration as a result of market volatility, and an amortization method that significantly defers contributions through a lengthy, closed 30-year amortization period based on a level 3.25% payroll