Palo Alto Eyes Bonds, Trusts to Address Unfunded Pension Liability

Categories: California Developments,Pension Rate Stabilization
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San Jose Mercury News by Jacqueline Lee, November 5, 2015

PALO ALTO —  Supplemental trusts and obligation bonds are among the options the city has to pay down its $296 million unfunded employee pension liability.

The City Council’s Finance Committee on Tuesday received more information about the different options from John Bartel, an actuary with Bartel Associates. The committee then provided more direction to city staff about the options it wants to explore.

Bartel said the city could use an “irrevocable supplemental 115 pension trust” for rate stabilization. And, putting money into a trust also reduces the city’s unfunded liability amount at the same time.

The trust is likely to yield a “much higher” investment return of 5 percent to 7 percent, Bartel said. But, he added that the trust can only be used to pay CalPERS directly or to reimburse the city for CalPERS contributions.

The city anticipates ending the fiscal year with a general fund surplus of $6 million to $8 million. Bartel recommended putting money into a fund as soon as possible to maximize returns.

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