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1/15/2026 3 RiversideCA.gov 13 •City is currently updating 2-year budget •Primary factors driving projected annual deficits: –Projected personnel and pension cost growth outpacing core property and sales tax revenues –Reduction in Measure Z transfers to General Fund 5-YEAR GENERAL FUND PROJECTIONS RiversideCA.gov 14 •Current strategies (managed hiring, Section 115 Trust, etc.) are important, but the magnitude of the problem may be greater than these can solve for •Primary Tools to Reduce Deficits to Desired Levels 1.UAL Restructuring – careful consideration recommended given current market environment (see next Section) •Use debt (<4% interest rate) to partially pay off UAL with CalPERS (7% interest rate) and re-structure new payments to work better for the City 2.Use Reserves – however, maintaining minimum levels is important for credit rating, liquidity and protection against future recession 3.Measure Z Transfers to General Fund – may be needed to cover any remaining shortfalls (if #1 and #2 can’t fully address) 4.Service Reductions – last resort; not recommended NO MAGIC BULLET TO REDUCING DEFICIT Major Solutions/Decisions Must be Made III. UAL RESTRUCTURING IDEA RiversideCA.gov 16 •The City can borrow money and use that money to pay off all or a portion of its debt (UAL) with CalPERS –Typical method is through a Pension Obligation Bond (POB) •Bond is issued to investors –City has utilized this strategy on several occasions in past to generate savings •Interest rate paid on the new debt would be significantly lower than the 7% currently being paid on the UAL debt –Most importantly, the City can restructure its annual payments in a manner that works better for the City with the opportunity to garner significant cash flow savings RESTRUCTURING UAL DEBT Conceptual Overview RiversideCA.gov 17 •The City can create an amortization schedule with a more smooth and predictable shape (teal line) –Creates near term savings to address GF Deficits –New payments in the out- years higher than currently scheduled –Overall, total payments would be lower than before WHAT DO YOU MEAN BY RESTRUCTURE? 20 2 1 20 2 2 20 2 3 20 2 4 20 2 5 20 2 6 20 2 7 20 2 8 20 2 9 20 3 0 20 3 1 20 3 2 20 3 3 20 3 4 20 3 5 20 3 6 20 3 7 20 3 8 20 3 9 20 4 0 20 4 1 20 4 2 20 4 3 20 4 4 20 4 5 20 4 6 20 4 7 20 4 8 20 4 9 20 5 0 Increased payments after restructure Hypothetical New Payments After a UAL Restructuring Current UAL Payments Before Restructure RiversideCA.gov 18 UAL RESTRUCTURING – SUMMARY OF KEY BENEFITS Ability to re-structure the City’s pension debt payments in a way that creates enhanced long-term fiscal sustainability, budgetary predictability, and lower/stabilized annual costs Fiscal Sustainability Tool By modifying the current near-term peak in scheduled payments into a more level structure, near term cash flow savings are created Near-Term Budgetary Savings City can borrow at historically low interest rates that are much lower (currently <4%) than those CalPERS is charging on UAL debt (7%)Interest Rate Savings Current ratios are between 71.5% (Safety) and 78% (Miscellaneous); increasing these ratios is viewed as a credit rating positive Increase Funding Ratio City has flexibility to shorten or lengthen repayment period to meet financial and policy objectivesModify Maturity UAL Restructuring may eliminate need to draw on reserves, reduce services, and/or avoid additional increases to Measure Z transfers Reserves/Services/ Measure Z 13 14 15 16 17 18 Docusign Envelope ID: BB80A86F-2853-4F40-B02D-18F5B9DD615F