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Commentary: Costa Mesa's pension burden falls on us all

March 13, 2013|By Jeff Arthur

Letter writer Charles Mooney says Costa Mesa has a pension problem. ["Outsourcing could make unfunded pension obligations worse, Mailbag, Feb. 26]. Yet many do not seem to understand the seriousness or magnitude: $196 million unfunded CalPERS pensions (66% funded) and $34 million unfunded retiree medical, (0% funded). That's more than $2,000 for every Costa Mesan — man, woman and child.

Joe Nation from Stanford University, a former six-year Democratic Assemblyman, presented his analysis to the City Council on Feb. 26. It is sobering (see pension information at http://www.costamesaca.gov.) Many wishful thinkers are hoping that the unfunded pension liabilities are lower. If anything, they are higher.

Nation reaffirmed CalPERS' unfunded pension liability estimates of $196 million, assuming PERS can really achieve its optimistic 7.5% annual rate of return. Nation believes the return rate should be from 5% to 6% and demonstrated how high the past and future liabilities will grow when PERS does not achieve its 7.5% rate of return. Moody's Investor Services recommends a 5.5% rate.

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Costa Mesans, if you don't fully understand the numbers above, we have a problem, a really big problem. These pensions are like negative-amortization mortgages; you make the payments, but the principal balance keeps getting bigger. If nothing is done, the employees will not receive their pensions, or the city will not have enough money for parks, libraries and fixing roads or worse.

So, it is concerning that Mr. Mooney quibbles about the charter, lawyers' fees and "outside" interests. It is time to get serious about resolving the problem.

City and employees' pension contributions will have to increase significantly.

Nation showed two possible revenue solutions: a $370 annual parcel tax, or a 3/4% sales tax increase, both for 20 years. These would be on top of increases coming from the Costa Mesa Sanitary, Orange County Sanitary and Coast Community College districts, as well as the California gasoline tax, etc.

A charter will provide cost-savings by not limiting Costa Mesa contracts to exorbitant "prevailing wages." It is hard to know how much the savings will be, but they appear to be significant, given the hundreds of thousands of dollars of campaign donations against the charter by unions and outside interests.

Outsourcing will also provide some cost savings. The city estimated multi-million dollars in savings. Again, it is hard to know exactly how much the savings will be, but they appear to be significant, given opponents spending $1 million in legal fees to sue the city (opponents lawyers are expensive too), attempts to intimidate and entrap council members, and other bullying tactics, including destruction of campaign signs.

I hope that Mr. Mooney gets on the charter committee and gets one done soon. I agree with Mr. Mooney that last year's $2.5 million ending balance might be utilized – that could be 1% of the solution. All of these options, and more, are needed.

I look forward to working with Mr. Mooney and other Costa Mesans to be part of the solution.

JEFF ARTHUR lives in Costa Mesa.

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