Contra Costa pension board allows Pittsburg to delay debt payment
Posted Date: 6/2/2011
Posted: 06/01/2011 06:43:50 PM PDT
CONCORD -- Leaders of Contra Costa's largest pension system agreed Wednesday to delay part of a $2 million payment Pittsburg owes under a 2001 agreement to leave the system, providing that certain terms are met.
Pittsburg asked the Contra Costa County Employees' Retirement Association in March to change how its obligations to the system are calculated, favoring a method that "smooths" the ups and downs of the stock market that the retirement system also uses. The current method requires Pittsburg to account for stock market losses or gains more quickly. The main effect would be to lower a payment due July 1 from $2 million to $1.3 million, helping Pittsburg balance its 2011-12 budget, which has a projected deficit of $2.5 million.
Pittsburg has a $9.9 million unfunded obligation to the pension system that would be paid off in about seven years at the current rate, said city Finance Director Tina Olson.
Pittsburg left the county retirement system in 2001 in favor of CalPERS, the state employees retirement system. Under the termination agreement, the city promised to maintain payments for workers who had retired under the system and current employees who were vested.
The county system is invested mostly in the stock market, and major declines in valuations since 2008 have increased the amount that the county and other public agencies have had to contribute to maintain pension payments to retirees and fund future payments for current employees.
Pittsburg has 150 people left in the county system, including 34 who are still working for the city, Olson said.
Pittsburg is forecasting an $8.25 million budget shortfall over the next five years, and may have to liquidate an $8.1 million stabilization fund to wipe out the deficits.
Delaying the $700,000 payment might compromise the city's ability to meet its payment obligations in the future if the pension system's investments decline, pension board Fiduciary Counsel Harvey Leiderman told trustees Wednesday.
Actuarial firms retained by the city and the board said, however, the changes were financially sound.
The moves "will not impair the actuarial soundness of the funding of the plan's vested benefits," according to an analysis by one of the firms, San Francisco-based The Segal Company.
Despite expressing some concerns about the city's finances, the board decided that it would agree to Pittsburg's request if it presented copies of its 2009-10 and 2010-11 financial statements along with an audited statement acknowledging the long-term effect of the changes.
The motion to establish the terms passed by a 7-2 vote.
If Pittsburg or any other member agency defaulted on its payments, the county would be liable for 90 percent of the amount due, Leiderman said.
"We have an obligation to collect (the money)," he said. "Somebody's got to cut checks to people out of something."
Contact Rick Radin at 925-779-7166.
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