Categories: Pension liability, utility optimization

Drivers: Simi Valley had depleted reserves in its water and wastewater utility, significant capital improvement needs, and unfunded pension liabilities across the government. $72 million in investments were needed in the water and wastewater utilities including $24 million for recycled water projects, which was a high priority given the City’s heavy reliance on purchased water. Despite repeated water main breaks in the evening news, the city had continually underfunded its utilities, choosing to utilize reserves rather than implement the approved rate increases necessary to meet operating and capital expenses. Utility reserves had declined from $22 million in 2011 to $3.5 million in 2016. Pension liabilities were about 80% funded and retiree health benefit liabilities were between 3% and 75% funded. Simi Valley needed a structure that would ensure proper funding and help address pension issues.

Partnership Analysis: Table Rock’s proposed partnership solution funded an upfront lease payment to pay off the unfunded pension liability of water and sewer employees. The partnership invested over $70 million in water and sewer infrastructure (including a recycled water plant that would have reduced reliance on imported water), restored utility reserves, and created a $5 million – $7 million annual payment to address budget deficits and other unfunded pension liabilities. This proposed approach presented significant long-term savings for Simi Valley.

Potential Pension Savings over 30-Year Concession Life

WaterSanitationTotal
2013-14 Budget PERS Contribution$602,800$865,000$1,467,800
30-Year Savings Projections Low Range
30-Year Savings Projection High Range
$18,084,000
$30,150,000
$25,950,000
$43,250,000
$44,034,000
$73,390,000