OPEB Panel Discussion

1
OPEB Panel Discussion

• FGFOA Career Development Seminar
• September 15, 2006
• OPEB from the Government Practitioners Finance
  Side

2
OPEB Panel Discussion

• Village of Wellington
• - Francine Ramaglia
• Town of Davie
• - Bill Underwood
• Orange County Comptrollers Office
• - Paul Wunderlich

3
OPEB Panel Discussion

• How did the Finance and Human Resource functions
  coordinate their efforts in order to assure that
  all elements of OPEB issues were identified for
  discussion and resolution?

4
OPEB Panel Discussion

• Were there complications due to existing union
  contracts? What types of issues were encountered
  and how were they resolved?

5
OPEB Panel Discussion

• What were the reactions of the senior
  administrative staff and elected officials to the
  actuarially determined contributions?

6
OPEB Panel Discussion

• What management decisions were reached as to the
  approach to take for implementation?
• Funded versus unfunded
• Any change in benefits to be offered
• Any designation of revenue sources

7
OPEB Panel Discussion

• What kinds of challenges arose in the process of
  implementation?

8
OPEB Panel Discussion

• Has there been any communication with or feedback
  from current retirees relative to the management
  decisions made for funding OPEB?

9
OPEB Panel Discussion

• Were there concerns as to the effects of OPEB
  financial management on the bond ratings of the
  jurisdiction?

10
OPEB Panel Discussion

• Possible effect on bond ratings each ratings
  agency has issued comments on the implementation
  of the OPEB pronouncements

11
OPEB Panel Discussion

• Moodys Opinion
• Moodys does not anticipate that the liability
  disclosures will cause immediate rating
  adjustments on a broad scale.
• Extent to which OPEB Funding Status will be
  incorporated into Rating Process It depends .
• Still early in discovery phase
• Political dynamics

12
OPEB Panel Discussion

• Absolute size of UAL and relative size to key
  financial measures (payroll, budget, tax base)
• Plan for UAL amortization as well as ongoing
  funding of new OPEB costs as incurred on an
  accrual basis impact of full funding on
  issuers financial flexibility and strength
• Actuarial assumptions used
• Nature of the benefits promised ability to modify

13
OPEB Panel Discussion

• Fitchs Opinion
• Pre-funding will be a stabilizing factor and
  protective of credit over time
• Focus on the issuers plans (and reasons
  therefor) for addressing the liability and
  absence of action taken to fund OPEB liabilities
  or otherwise manage them will be viewed as a
  negative rating factor

14
OPEB Panel Discussion

• Will view negatively any actuarial assumptions
  that are overly aggressive
• Viewed as soft liabilities, like pensions, that
  fluctuate based on assumptions and actual
  experience

15
OPEB Panel Discussion

• Standard Poors
  Opinion
• Unfunded actuarial retiree healthcare obligations
  are viewed as debt-like in nature, similar to
  pensions
• The key to maintaining a stable credit profile
  for employers will be how they manage these
  liabilities
• OPEB obligations affect not only debt and
  management factors, but also financial
• Conservative approach