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Expert: City needs new taxes to cover pensions

Leece, however, points out that no one from CalPERS attended meeting to give its take on the math.

February 27, 2013|By Bradley Zint

It would take new sales or parcel taxes for the city of Costa Mesa to meet its long-term pension obligations, a Stanford University professor told the City Council on Tuesday night.

Joe Nation said the scenario surrounding the difference between the amounts promised to retirees versus projected available funding to meet those commitments to the California Public Employees' Retirement System (CalPERS) is "stark."

Nation, a Democrat speaking before four of the five Republicans on the council, said his bleak assessment was about math and numbers, not "beating up anybody."

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After running through a two-hour presentation replete with data and graphics, Nation said a likely solution to solve the problem would be finding additional revenue. That's code for "taxes," Mayor Pro Tem Steve Mensinger responded.

Nation said a quarter-cent sales tax increase for Costa Mesa would raise $5.5 million annually and would close less than one-third of the gap in a 6% investment return scenario.

Nation also wrote in his presentation that a parcel tax of $370 per residential household each year for nearly 20 years would "address most, if not all, of the shortfall."

He called that particular solution "uncommon, but not unheard of."

Oakland homeowners, he said, pay an average of $1,200 a year toward city employee pensions.

"Here's the worst part: They're in worse shape than you are," Nation said.

One of Nation's graphics showed Costa Mesa's reported fund ratio for its pensions, as of June 2011, as less than 65% — the lowest ratio when compared to Anaheim, Fullerton, Huntington Beach, Newport Beach, Orange and Santa Ana.

Nation, who represented Marin and Sonoma counties in the state Assembly for six years, called CalPERS an inherently political organization whose 13 board members face a conflict of interest because most of them are current or former CalPERS employees.

CalPERS' board president, by trade, is a window glazer for a school district, Nation said, adding that a recently proposed bill could add more independent voices to CalPERS' board.

Nation said CalPERS is "kind of gambling on the market," with a lofty hope of a 7.5% return on its investments.

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