City of Escondido Maps Out Pension Liability Plan

Categories: California Developments,PARS In the News,Pension Rate Stabilization
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The Coast News by Steve Puterski, February 15, 2018


To combat the unfunded pension liability, the City Council is moving forward with a new plan.

The council approved a Section 115 Irrevocable Pension Trust during its Feb. 14 meeting, along with pension funding options and a policy on the use of one-time money. An initial deposit of $1,984,000 from the Reserve for PERS Rate Smoothing is required to fund the program.

Escondido follows in the footsteps of 122 other public agencies including La Mesa, Coronado, National City and Solana Beach in implementing a Pension Stabilization Program. Public Agency Retirement Services was awarded the agreement from the city.

“The next big step is we will come back in April for funding,” City Manager Jeff Epp said.

In five years, the employer pension contributions are projected to increase yearly by $15.3 million or 68 percent.

The unfunded liability is projected to reach $13.7 million in Fiscal Year 2017-18, while total PERS projected costs are $22.5 million. Those figures grow to $26.7 million and $37.8 million, respectively, by FY 2022-23. The city’s total unfunded liability is $244 million.

As for the fund, the city will engage in a “moderately conservative” plan, which estimates return between 6.51 and 4 percent.

“If rates get really high or there is a downturn in the economy, we would be able to draw out that money,” said Joan Ryan, the city’s assistant finance director.

The council conducted a workshop in September 2017 where it established the parameters for the pension issue. The benefits of the Section 115 are it allows city control to withdraw funds at any time to make a PERS payment and it’s also irrevocable.

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