tell me why Harvey, Illinois municipal bonds might not be the best investment to hold in your portfolio. Use some ratios, use some key terms from the lectures/textbook (like Environmental Factors, Budgetary Solvency, etc).

Discount Rate A Single Discount Rate of 3.51% was used to measure the total pension liability. The projection of cash flow used to determine this Single Discount Rate assumed that the plan members' contributions will be made at the current contribution rate, and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. The Single Discount Rate reflects: 1. The long-term expected rate of return on pension plan investments (during the period in which the fiduciary net position is projected to be sufficient to pay benefits), and 2. The tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating (which is published by the Federal Reserve) as of the measurement date (to the extent that the contributions for use with the long-term expected rate of return are not met). For the purpose of the most recent valuation, the expected rate of return on plan investments is 6.75%, the municipal bond rate is 3.32%, and the resulting single discount rate is 3.51%. 65 CITY OF HARVEY, ILLINOIS Notes to the Financial Statements April 30, 2016 NOTE 4 - OTHER INFORMATION - Continued EMPLOYEE RETIREMENT SYSTEM - DEFINED BENEFIT PENSION PLANS - Continued Police Pension Plan - Continued Discount Rate Sensitivity The following is a sensitive analysis of the net pension liability to changes in the discount rate. The table below presents the pension liability of the City calculated using the discount rate as well as what the City's net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate: 1% Decrease (2.51%) Current Discount Rate (3.51%) 1% Increase (4.51%) $ 45,896,773 36,733,768 29,478,297 Net Pension Liability Changes in the Net Pension Liability Total Pension Liability (A) Plan Fiduciary Net Position Net Pension Liability (A)-(B) (B) $ 45,958,253 16,588,923 29,369,330 2,014,804 1,830,616 2,014,804 1,830,616 Balances at April 30, 2015 Changes for the Year: Service Cost Interest on the Total Pension Liability Difference Between Expected and Actual Experience of the Total Pension Liability Changes of Assumptions Contributions - Employer Contributions - Employees Net Investment Income Benefit Payments, including Refunds of Employee Contributions Adminstrative Expense 667,515 2,878,930 110,219 324,861 (292,841) 667,515 2,878,930 (110,219) (324,861) 292,841 (1,584,446) (1,584,446) (114,812) 114,812 Net Changes 5,807,419 (1,557,019) 7,364,438 Balances at April 30, 2016 51,765,672 15.031,904 36,733,768 EMPLOYEE RETIREMENT SYSTEM - DEFINED BENEFIT PENSION PLANS - Continued Police Pension Plan - Continued Pension Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions For the year ended April 30, 2016, the City recognized pension expense of $3,245,500. At April 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Totals $ 556,265 (312,712) 243,553 Difference Between Expected and Actual Experience Change in Assumptions 2,399,110 2,399,110 Net Difference Between Projected and Actual Earnings on Pension Plan Investments 1,127,609 1,127,609 Total Deferred Amounts Related to Police Pension 4,082,984 (312,712) 3,770,272 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future periods as follows: Fiscal Year Net Deferred Outflows of Resources $ 2017 2018 2019 2020 2021 Thereafter 797,439 797,438 797,438 786,882 591,075 Total 3.770,272 Discount Rate A Single Discount Rate of 3.51% was used to measure the total pension liability. The projection of cash flow used to determine this Single Discount Rate assumed that the plan members' contributions will be made at the current contribution rate, and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. The Single Discount Rate reflects: 1. The long-term expected rate of return on pension plan investments (during the period in which the fiduciary net position is projected to be sufficient to pay benefits), and 2. The tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating (which is published by the Federal Reserve) as of the measurement date (to the extent that the contributions for use with the long-term expected rate of return are not met). For the purpose of the most recent valuation, the expected rate of return on plan investments is 6.75%, the municipal bond rate is 3.32%, and the resulting single discount rate is 3.51%. 65 CITY OF HARVEY, ILLINOIS Notes to the Financial Statements April 30, 2016 NOTE 4 - OTHER INFORMATION - Continued EMPLOYEE RETIREMENT SYSTEM - DEFINED BENEFIT PENSION PLANS - Continued Police Pension Plan - Continued Discount Rate Sensitivity The following is a sensitive analysis of the net pension liability to changes in the discount rate. The table below presents the pension liability of the City calculated using the discount rate as well as what the City's net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate: 1% Decrease (2.51%) Current Discount Rate (3.51%) 1% Increase (4.51%) $ 45,896,773 36,733,768 29,478,297 Net Pension Liability Changes in the Net Pension Liability Total Pension Liability (A) Plan Fiduciary Net Position Net Pension Liability (A)-(B) (B) $ 45,958,253 16,588,923 29,369,330 2,014,804 1,830,616 2,014,804 1,830,616 Balances at April 30, 2015 Changes for the Year: Service Cost Interest on the Total Pension Liability Difference Between Expected and Actual Experience of the Total Pension Liability Changes of Assumptions Contributions - Employer Contributions - Employees Net Investment Income Benefit Payments, including Refunds of Employee Contributions Adminstrative Expense 667,515 2,878,930 110,219 324,861 (292,841) 667,515 2,878,930 (110,219) (324,861) 292,841 (1,584,446) (1,584,446) (114,812) 114,812 Net Changes 5,807,419 (1,557,019) 7,364,438 Balances at April 30, 2016 51,765,672 15.031,904 36,733,768 EMPLOYEE RETIREMENT SYSTEM - DEFINED BENEFIT PENSION PLANS - Continued Police Pension Plan - Continued Pension Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions For the year ended April 30, 2016, the City recognized pension expense of $3,245,500. At April 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Totals $ 556,265 (312,712) 243,553 Difference Between Expected and Actual Experience Change in Assumptions 2,399,110 2,399,110 Net Difference Between Projected and Actual Earnings on Pension Plan Investments 1,127,609 1,127,609 Total Deferred Amounts Related to Police Pension 4,082,984 (312,712) 3,770,272 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future periods as follows: Fiscal Year Net Deferred Outflows of Resources $ 2017 2018 2019 2020 2021 Thereafter 797,439 797,438 797,438 786,882 591,075 Total 3.770,272