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1/15/2026 <br />6 <br />RiversideCA.gov <br />31 <br />•Savings is ultimately dependent on future CalPERS <br />returns; which are unknown at time of issuance <br />•Present value (PV) savings occur if PERS earns <br />greater returns than POB interest rate <br />•Near-term losses exacerbate this risk given large <br />lump sum deposit into the market <br />PRIMARY RISK <br />(1) Re-Investment / Market Timing Risk <br />RiversideCA.gov <br />32 <br />•Historical returns higher than current interest rates means strong likelihood that PV savings will be generated <br />–30-year avg PERS returns = 8.1% and 20-year avg returns = 5.8% <br />–Executing restructure when interest rates are low reduces risk (see next slide) <br />•Actuarial sensitivity analysis will simulate various “what-if” scenarios to better evaluate a pre-POB vs. post-POB situation <br />–Will include various negative scenarios, including recessionary conditions <br />•City and financing team would also evaluate strategies to further mitigate risks, potentially including: <br />–Ramping of near-term debt service to create capacity to handle any immediate adverse economic conditions (such as a stock market crash) <br />–Dollar cost averaging of proceeds raised (e. g. give to CalPERS over 3-year period as opposed to all at once) <br />–Other strategies developed by financing team (advisor, underwriter, actuary) <br />ADDRESSING REINVESTMENT/MARKET TIMING RISK <br />RiversideCA.gov <br />33 <br />EST. POB INTEREST RATE LOWER THAN HISTORICAL <br />PERS RETURNS & CURRENT DISCOUNT RATE <br />0.00% <br />1.00% <br />2.00% <br />3.00% <br />4.00% <br />5.00% <br />6.00% <br />7.00% <br />8.00% <br />9.00% <br />10.00% <br />CalPERS Discount Rate: 7.0% <br />20-Yr. Avg. CalPERS Return: 5.8% <br />Est. POB Interest Rate Range: 3.75% to 4.25% <br />30-Yr. Avg. CalPERS Return: 8.1% <br />10-Yr. Avg. CalPERS Return: 9.1% <br />RiversideCA.gov <br />34 <br />•Precise analysis would require additional actuarial engagement <br />•Rough calculations suggest that the City has saved >$20M <br />–As shown below, CalPERS returns since that time have been higher than all prior POB interest rates <br />CITY’S PREVIOUS POBS – WAS THERE BENEFIT? <br />0.00% <br />1.00% <br />2.00% <br />3.00% <br />4.00% <br />5.00% <br />6.00% <br />7.00% <br />8.00% <br />Actual CalPERS Returns (7.4% Since 2004 & 7.1% Since 2005) <br />2004 POB Interest Rate: ≈ 5.72% <br />2005A POB Interest Rate: ≈ 4.50% <br />2011 BANs and 2017 POBs: <br />1.0% to 3.0% <br />RiversideCA.gov <br />35 <br />ADDRESSING OTHER CONCERNS <br />(2) Future UAL Can Still Change <br />•Future UAL will change/occur whether City issues a POB or not <br />•Near-term losses may mean new UAL added is higher under a POB scenario than without <br />•Sensitivity analysis and comparison of pre-POB to post-POB will better quantify the difference <br />in UAL fluctuations under various reinvestment scenarios (stress-testing) <br />•A new smoother/lower repayment shape may provide more capacity/resiliency for the City to handle any future increases in contribution rates from UAL changes <br />(3) Principal Deferral/Maturity Extension <br />•Payments may be higher than currently scheduled in the later years <br />•Even with principal deferral/maturity extension, new payments are lower overall than before <br />•City is creating a more level payment schedule that enhances long-term financial stability <br />•Prudent fiscal policy is to match useful life of assets to liabilities; PERS benefits likely paid out <br />well beyond 25-30 years <br />(4) Increased Bond Debt <br />•While PERS UAL is already considered a debt, a POB would add to the City’s bond debt <br />VI. CONCLUSION AND NEXT STEPS <br />HOW THE PROCESS COULD WORK <br />31 32 <br />33 34 <br />35 36 <br />Docusign Envelope ID: BB80A86F-2853-4F40-B02D-18F5B9DD615F