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1/15/2026 <br />5 <br />RiversideCA.gov <br />25 <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 />Apr-90 Apr-95 Apr-00 Apr-05 Apr-10 Apr-15 Apr-20 <br />TAXABLE INTEREST RATE TRENDS <br />*Interest rates through April 17, 2020. <br />1.27 <br />0.80% <br />1.30% <br />1.80% <br />2.30% <br />2.80% <br />Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 <br />30-Year Treasury Rates (Sep. 2019 - Apr. 2020) <br />RiversideCA.gov <br />26 <br />CREDIT SPREADS ARE WIDER AND <br />MARKETS ARE EXTREMELY VOLATILE <br />•Markets have been extremely volatile since late February due in part to the outbreak of <br />the global coronavirus pandemic and oil price war <br />–A sharp, rapid decline of equity markets has ended the longest bull market in recent history <br />•Treasury yields are hovering near all-time lows, but credit spreads and market are signaling a heightened risk aversion by investors <br />•Recent efforts by the Federal Reserve to support orderly market activity and support to <br />state and local governments from the CARES Act have been received positively by investors of municipal bonds <br />•POB issuance continues to be active with issuers seeking to take advantage of current <br />borrowing conditions: <br />–Recently Closed: Glendora, Marysville, Hawthorne, Pasadena and Chowchilla <br />–Pipeline: Riverside County, Cities of Ontario, Azusa, West Covina and 15+ other cities <br />•Recommended strategy is to prepare necessary aspects of transaction, then re-evaluate <br />and assess market in May/June <br />RiversideCA.gov <br />27 <br />•As of mid-April, stock market indices have dropped about 15-17% <br />from recent highs, and 5% since start of Fiscal Year (July 1, 2019) <br />–CalPERS returns for FY 2019/20 are unknown at this time; early estimates <br />put returns at negative 0% to 5% (7%-12% actuarial loss) <br />•Recent correction doesn’t impact the POB est. savings analysis <br />–Savings from POB is dependent on long-term FUTURE returns starting from <br />the point after the POB is issued <br />•How does the recent market crash impact the City? <br />–With or without the POB, the City’s UAL is likely to increase if FY 2019/20 <br />returns are poor) <br />–For example, a -5% return for CalPERS could mean a ≈$225M increase in <br />the City’s UAL (see next slide) <br />HOW DOES RECENT STOCK MARKET CRASH IMPACT POB? <br />RiversideCA.gov <br />28 <br />POTENTIAL UAL INCREASE IF -5% <br />RETURNS FOR FY2019/20* <br />•If CalPERS returns are -5%, <br />UAL increase is estimated to be ≈$225M <br />•Added payments to UAL <br />shown in yellow ($24M higher starting 2027) <br />•Projected GF deficits would be higher <br />•If poor returns this year, current UAL will increase by the same amount whether a POB is issued or not <br />•CalPERS may recover some of these losses in future years to offset the increased payments <br />* Estimated <br />0 <br />10,000,000 <br />20,000,000 <br />30,000,000 <br />40,000,000 <br />50,000,000 <br />60,000,000 <br />70,000,000 <br />80,000,000 <br />90,000,000 <br />100,000,000 <br />20 <br />2 <br />1 <br />20 <br />2 <br />2 <br />20 <br />2 <br />3 <br />20 <br />2 <br />4 <br />20 <br />2 <br />5 <br />20 <br />2 <br />6 <br />20 <br />2 <br />7 <br />20 <br />2 <br />8 <br />20 <br />2 <br />9 <br />20 <br />3 <br />0 <br />20 <br />3 <br />1 <br />20 <br />3 <br />2 <br />20 <br />3 <br />3 <br />20 <br />3 <br />4 <br />20 <br />3 <br />5 <br />20 <br />3 <br />6 <br />20 <br />3 <br />7 <br />20 <br />3 <br />8 <br />20 <br />3 <br />9 <br />20 <br />4 <br />0 <br />20 <br />4 <br />1 <br />20 <br />4 <br />2 <br />20 <br />4 <br />3 <br />20 <br />4 <br />4 <br />20 <br />4 <br />5 <br />20 <br />4 <br />6 <br />Payments associated <br />with a hypothetical <br />$225M UAL Increase <br />Current payments on $642M UAL <br />RiversideCA.gov <br />29 <br />•As discussed, POB savings depend on future returns AFTER <br />the POB is issued <br />–The recent sizable drop in the US equity market may be beneficial <br />for the proposed financing strategy as the market has historically <br />rebounded from prior similar events* <br />–2001/2002 Crash: CalPERS Returns Through 2019 <br />•Starting right before 2001-2002 Crash (-13%): 6.2% <br />•Starting right after 2001-2002 Crash (-13%): 7.7% <br />–2008/2009 Crash: CalPERS Returns Through 2019 <br />•Starting right before 2008-2009 Crash (-28%): 5.5% <br />•Starting right after 2008-2009 Crash (-28%): 9.5% <br />INVESTING MONEY AFTER A MARKET CRASH <br />* Past performance doesn’t guarantee future results RiversideCA.gov <br />30 <br />INVESTING MONEY BEFORE VS. AFTER A MARKET CRASH <br />Annual and Average CalPERS Returns <br />10.8% <br />-7.1% <br />-6.0% <br />3.9% <br />16.7% <br />12.6% <br />12.3% <br />19.1% <br />-4.9% <br />-23.4% <br />11.6% <br />20.9% <br />1.0% <br />13.2% <br />18.4% <br />2.4% <br />0.6% <br />11.2% <br />8.6%6.7% <br />-25.0% <br />-20.0% <br />-15.0% <br />-10.0% <br />-5.0% <br />0.0% <br />5.0% <br />10.0% <br />15.0% <br />20.0% <br />25.0% <br />20 <br />0 <br />0 <br />20 <br />0 <br />1 <br />20 <br />0 <br />2 <br />20 <br />0 <br />3 <br />20 <br />0 <br />4 <br />20 <br />0 <br />5 <br />20 <br />0 <br />6 <br />20 <br />0 <br />7 <br />20 <br />0 <br />8 <br />20 <br />0 <br />9 <br />20 <br />1 <br />0 <br />20 <br />1 <br />1 <br />20 <br />1 <br />2 <br />20 <br />1 <br />3 <br />20 <br />1 <br />4 <br />20 <br />1 <br />5 <br />20 <br />1 <br />6 <br />20 <br />1 <br />7 <br />20 <br />1 <br />8 <br />20 <br />1 <br />9 <br />Annual Investment Returns <br />Pre-2001/02 Crash (2001-2019): 6.2% <br />Post-2001/02 Crash (2003-2019): 7.7% <br />Pre-2008/09 Crash (2008-2019): 5.5% <br />Post-2008/09 Crash (2010-2019): 9.5% <br />6.2% vs. 7.7%5.5% vs. 9.5% <br />[Replace with <br />Quad (2x2) size chart <br />or other object] <br />Business Cycles <br />Peak <br />Recession <br />Trough <br />Expansion <br />“I've done historical research on stock market and business <br />cycles, economic recessions and expansions, for all bull and bear <br />markets since World War II, and can attest that there is no <br />business cycle in that history when the S&P index was off by <br />more than 35% and it wasn't higher in two years, and returned <br />high double digits over the following decade. The worst such <br />period followed the 1973-74 bear market and ensuing stagflation <br />period, but even then, equity investments acquired during what <br />have been the "POB window" did admirably over a decade.” <br />- Girard Miller, “Commentary: The time is ripe for public pension <br />obligation bonds” <br />POB <br />Window <br />30 <br />25 26 <br />27 28 <br />29 30 <br />Docusign Envelope ID: BB80A86F-2853-4F40-B02D-18F5B9DD615F