Ventura council to look at rising pension costs
No other cost will rise faster in the years ahead, which is prompting Ventura officials to explore how they can financially prepare for future pension growth.
The City Council will take a closer look at the issue on Monday night. The discussion will focus on the unfunded accrued liability, which is money the city owes employees for hours they've already worked.
Ventura is part of the California Public Employees' Retirement System, which pays benefits for retirees. As investments fail to hit targets and the number of retirees grows faster than workers contributing to the system, cities are increasingly making up the shortfall by paying more into the system. Ventura also significantly beefed up benefits for public safety and other workers after the state approved big enhancements in 1999.
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A CalPERS participant, in this case Ventura, pays a portion of payroll, known as "normal costs," and the unfunded liability annually. Employees separately pay a portion of their retirement costs.
For 2017-18, Ventura will pay CalPERS just under $18 million. Of that, $11 million is the unfunded liability portion. By 2022-23, that figure could double, to $22 million, based on a recent readjustment by CalPERS to lower what it thinks it might make in stocks, bonds, real estate and other investments.
To help offset a portion of the unfunded liability, Ventura finance officials are recommending the city pay the entire year's unfunded liability payment at the start of the year. Currently, it pays it monthly, city Finance and Technology Director Gilbert Garcia said.
"We would be earning a higher interest rate by giving them it all up front," he said.
So the city could either make a small payment or have the savings applied to the overall unfunded liability, he said. "I think it's fiscally prudent as long as you have the cash flow. Not every city has the cash to pre-fund their liability for the year."
Many cities pay upfront, he said.
In addition to that change, the council will consider other possible options, including reducing the amortization schedule from 30 years to 15 or 20 years. Either change would add significantly to the city's out-of-pocket costs but would reduce interest in the long run, the staff report notes.
On the 20-year schedule, the savings would be $44.3 million: $1.9 million from miscellaneous and $42.4 million from public safety. Moving to the 15-year schedule would save the city $101.7 million: $18.2 million from miscellaneous and $83.5 million for public safety.
The city could also require employees to contribute more. In 2017-18, employees paid CalPERS around $4 million toward the retirement costs. That's on top of the city's $18 million payment.
Monday's meeting will start at 6 p.m. at City Hall, 501 Poli St.