Tuesday, September 22, 2015

San Leandro council seeks five-year pension strategy

San Leandro Mayor Pauline Cutters says setting 
aside $5 million over 5 years for pensions is doable.
SAN LEANDRO CITY COUNCIL | Last year, San Leandro's tab for unfunded liabilities over the next 30 years was $158 million. The City Council Monday night moved forward a strategy directing more of its growing revenues over the next five years to lower that debt.

"It's such a big number sitting out there," San Leandro Mayor Pauline Cutter said of the city's unfunded liabilities. An estimate of the city's pension debts for 2015 will be released later this year, said a city staff report.

The plan tentatively approved by the council aims to set aside $5 million over the next 5 years for reducing its pension liabilities. Known as the Prioritization Unfunded Liabilities Liquidation (PULL) Plan, it would also lower the city's 20 percent emergency reserve to 16.7 percent and redirect the difference toward paying down pension liabilities. The higher percentage is somewhat higher than other local cities. In addition, the 16.7 percent threshold is often recommended and the limit needed for the city to maintain its credit rating, said Finance Director David Baum.

The plan also seeks to apply half of any budget surpluses in coming years to the debt along with half of the proceeds from the sale of any city-owned properties. For instance, City Manager Chris Zapata said the city's share from selling the closed CVS property on the corner of Davis and East 14th Streets could be worth $500,000.

"Five million in five years is something that is doable and it's important--with these various ways of getting there," said Cutter. "It's kind of like that number that floats around in the sky, but as long as we're actively, aggressively doing something to it and making sure we make our payments, I think we're going to see we're making some traction."

The idea behind the PULL Plan, said Baum, followed an announcement from the California Public Employees Retirement System (CalPERS) for a $1.15 million surcharge on city public safety plans. San Leandro has far fewer active participants in the plan relative to those currently receiving pension benefits, said Baum, which led to San Leandro being the hardest hit by the surcharge in the entire state.

The city appealed to CalPERS and was later offered a reduced payment schedule for the first three years, said Baum. It also allowed the city to pay off its debt in 21 years instead of 30, he added, and save the city $24 million. But, San Leandro declined the package because of much higher payments beginning in year four. "It really didn't make sense for us to take that risk," said Baum. Instead, a strategy was sought to pay down debt in early years when the city is flush in revenue. Like today.

The City Council reacted favorably to the pension strategy during Monday's night meeting. Up until four years ago--in the midst of the Great Recession--the city was not paying its Annual Required Contribution (ARC) to unfunded liabilities. Starting last year, it pledged to fund the full ARC through 2016.

With interest rates at all-time lows and CalPERS rates somewhat volatile, Councilmember Benny Lee added, "It highlights the importance of us trying to pay down it earlier because we cannot predict future in terms of the rates."


By MW:

It seems to me that the amount of money San Leandro's City Council is planning on putting towards the pension fund shortfall is not even a drop in the bucket.

But let's make an analogy. For instance, let's assume that Mr. and Mrs. John Doe and Family have a total income of one thousand dollars per week. So they spend six hundred dollars per week on absolute essentials, and such as for instance mortgage and groceries, etc, etc, etc.

However of the remaining four hundred dollars, each week they spend little or none of that on such things as putting money into a special savings account to eventually replace the roof, and even though it is obvious that their deteriorating roof will have to be replaced within a few years, and nor into a special savings account for eventually replacing their old and deteriorating car, and even though is is obvious that their car, and which is breaking down more every week, is on borrowed time.

Instead, every week the parents and their children come up with more and more nonsensical ideas to spend the remaining four hundred dollars on, and such as fancy vacation trips, meals in gourmet restaurants, a huge backyard swimming pool,,and a big cabin cruiser, etc, etc, etc.

And in regard to their earlier idea that each week they would put one hundred dollars each week into a special savings account toward replacing the roof fairly soon and another one hundred dollars per week into a separate and special savings account toward eventually replacing their fast deteriorating car, instead week they say that starting next week we will begin putting twice as much in each special savings account to not only fully fund that week's share, but also to begin making up for all the years that we put little or nothing in those accounts.

However, of course, next week never comes, and instead the John Does continue forever on their insane path of every week buying more and more fancy toys they do not need and definitely cannot afford.

And the above is similar to the way that a lot of organizations, and including many government agencies, fund pensions.

San Leandro has just joined the nationwide club of suffering from massive retirement debt by paying ex-employees for life with what's called "Defined BENEFITS". It's basically guaranteed investing with taxpayer money. Hundreds of billions in CA alone.

Symptoms: Daily identical articles to this about massive debt, denial, broken over-promises, mismanaged contributions, union influence, unsustainable contracts, pension bailouts (see article), reduced services/education/emergency/safety, deferred maintenance, crumbling infrastructure, tax/rate/toll/fee increases for retirement debt disguised as "operating costs". Note: Recent increase to 10% sales tax.

The only honest solution is to switch all government employees to 401k type "Defined CONTRIBUTION". NOT throw more tax money at it. Until then taxpayers enjoy feeding the money pit Ponzi scheme.


We have reached a point where state and local government exists to serve itself first. High lifetime pensions starting at ages 50 to 55 with yearly cost-of-living increases are rampant. State and local governments are looking for ways to tax us even more to pay for all those government folk getting these lifetime pensions.

San leandro seems to be doing the right thing and is a city moving in the right direction. People all over the east bay are saying good things about san leandro.

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