Dixon council OKs refinancing $22.75 million pension debt

DIXON – The Dixon City Council signed off on issuing up to $22.75 million to refinance the city’s public safety pension debt, hoping to save millions down the road.

The council gave its final approval Monday after months of steps in the process to issue the bonds, which will be paid back over 18 years.

[ Eyeing millions in savings, Dixon keeps working on bonding public safety pensions ]

The authorization allows the city to spend $25,000 to obtain a bond rating, and then it can lock in an interest rate and issue the bonds as soon as mid-October, City Manager Danny Langloss said.

The idea came about earlier this year after Sterling bonded its pension debt. The goal is to stabilize the growing annual pension obligation payment and to create savings for the city in future years, he said.

The city has about $23 million in unfunded pension liability, and the bonds will pay for about $20.2 million, split with $12.4 million for police pensions and $7.8 million for fire pensions.

That would put the city at the 94.6% funded mark ahead of the state mandate requiring public safety pensions to be funded at least 90% by 2040.

The city’s annual pension payment has grown to about $2.3 million and is estimated to keep growing to $4.3 million by 2040.

With refinancing the debt, the city could see savings of $126,650 the first year and $441,000 within the first few years, said bond consultant Bob Vail of Bernardi Securities, the same bond underwriter Sterling used. Savings could be $7 million to $9 million in the next two decades depending on the market.

“That’s part of what this is about, locking in a future for Dixon that is just phenomenally stronger,” Mayor Li Arellano Jr. said.

Arellano has advocated for pension reforms and ways to offset the city’s increased obligations since taking office in 2015, and he said bonding the pension debt is a step toward a brighter future.

“The city will be tremendously more financially positioned to do any number of things,” he said.

The council began the bond process in March, made approvals in April and held a public hearing in May.

The city will likely will have about six months to lock in an interest rate for the bonds, in case market increases cause them to hold off.