Life keeps me busy, but when I found this item through a search for the Butte County Pension Obligation Bond I thought you might be interested in taking a read. This bond was passed illegally (without voter approval) in 2004. These notes are verbatim except for my note in RED typeface. Read more at the following link.
The County’s POB 2004 Series A issued for $28.02 million are taxable fixed rate
bonds with annual principal payments, which started on June 1, 2014 and
continue through June 1, 2034. The bonds have an interest rate of 5.408%
through fiscal year 2023-24 and an interest rate of 6.076% from fiscal year 2024-
25 through maturity.
The County’s POB 2004 Series B issued for $21.875 million are taxable variable
rate bonds with annual mandatory sinking fund principal payments, which started
on June 1, 2014 and continue through June 1, 2034. The bonds’ variable rate is
set monthly at London Interbank Overnight Rate (LIBOR) plus 30 basis points.
NOTE: THEY LATER SECURED A FIXED RATE, but at a higher rate. Read below.
PENSION BOND PAYMENT STRATEGY
On January 10, 2012 at the recommendation of the Finance Work Team and KNN,
the Board adopted a payment strategy for the POBs that maintained a consistent
percent of payroll charges to department budgets with a five year ramp up to
approximately 3% of payroll. The strategy also included a provision for the
County to annually revisit the strategy to update the balances and rates and
determine if a pre-payment plan for Series B has become advantageous. The
initial ramp up and projected payroll collections rates were as follows:
Projected Payroll Collection Rates
Fiscal Year Total % of Payroll Miscellaneous Rate Safety Rate
2012-2013 2.00% 1.70% 3.41%
2013-2014 2.25% 1.89% 4.06%
2014-2015 2.50% 2.10% 4.51%
2015-2016 2.75% 2.31% 4.96%
2016-2017 3.08% 2.58% 5.54%
(through 2034)
In 2020 the County refunded the Series B Pension Obligation Bonds as
historically low interest rates gave the County an opportunity to negotiate new
terms with the holder of the Series B bonds for a fixed rate of 1.17% and
prepaid $9.5 million; thus eliminating the variable interest rate risk over the
remaining loan term.
NOTE: THEY USED CAMP FIRE SETTLEMENT FUNDS TO DO THIS
Department payroll collections for the Series A and new refunded bonds debt
service will average approximately 2.36% of payroll per year for the remaining
terms of the bonds (2034 for series A and 2029 for the newly issues bonds). The
collection rate for the Series A and refunded bonds is projected to average
2.58% until the refunded bonds mature in 2029 and decrease to 2.00%
thereafter, until the Series A bonds mature in 2034. Since FY 2012-13, the
average department collections rate has also been 2.36% of payroll
NOTE: here’s a September article about a supreme court decision about legality of bonds without voter approval
https://www.thecentersquare.com/california/article_b7cc3e12-7204-11ef-8619-23e5ee66e138.html
Chico Taxpayers Association 
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