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City's retirement burden tallied

Costa Mesa council says steps will need to be taken to cover the $228 million in unfunded pension liabilities.

February 05, 2014|By Bradley Zint

It was almost 11 p.m. Tuesday, nearly five hours after the start of the Costa Mesa City Council meeting, when the discussion turned to a touchy subject: pension obligations.

That's when the "big boogeyman" of a number, as the city's Pension Oversight Committee Chairman Jeff Arthur called it, was announced: $228 million in unfunded pension liabilities.

It's the most current estimated shortfall between what City Hall will owe its retiring employees and what funds are available to pay that contractual obligation, according to Arthur.

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When the clock struck midnight, the City Council approved some initial steps toward addressing the foreboding figure.

The steps include a prepayment of roughly $6 million this July to the California Public Employees' Retirement System pension fund, or CalPERS. The move would take advantage of a CalPERS incentive for prepayment and save the city about $226,000 this year. It was approved by the four remaining council members. Councilman Gary Monahan left the meeting early.

For Mayor Jim Righeimer, the theory behind everything is good, but the step isn't nearly enough to solve the problem. He compared the scenario to "rearranging the deck chairs" on a sinking Titanic.

"This is not in any way, shape or form a fix to the pension problem," Righeimer told the Daily Pilot after the meeting. "The $226,000 savings is noise compared to the $228 million that we owe."

Pension committee member John Stephens was more optimistic.

"There is a lot of darkness, but this is a little flicker of light," he told the council.

The Pension Oversight Committee — made up of six finance professionals, two attorneys and one engineer — began meeting last May to study and address the city's pension concerns. In January, the panel approved recommendations, which were presented to the council Tuesday.

Arthur, a retired finance professional and CalPERS recipient, said the city has "limited options" to address the problem. Costa Mesa's unfunded pension liability has grown exponentially, he said, from an estimated $9 million in 2002 to $228 million in 2012.

Of that $228 million, the police officers' pensions are unfunded by $83 million, the firefighters by $61 million, and the municipal employees by $84 million.

The unfunded figure shot up, according to the committee, partially because of CalPERS's bad investment returns, increases in pension benefits and growth in salaries and cost-of-living adjustments.

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