Trusts, taxes and … top hats?
Council approves pension trust, discussion on street bond
Chico staff has been lobbying the gatekeepers of its employee pensions for at least a year in an all-hands-on-deck effort to secure a future that doesn’t include bankruptcy for the city.
Administrative Services Director Scott Dowell recalled meetings over the past year at the California Public Employees’ Retirement System headquarters in Sacramento, where representatives from more than 40 cities and counties rallied—locally, this included Chico Area Recreation and Park District and the cities of Chico, Oroville and Yuba City—to “lend their voices in support for change.”
“I think it has brought an awareness to us. We’ve avoided some additional [cost] increases that I think CalPERS could have done,” Dowell told the CN&R. “I wish there was an easy answer to it.”
Government entities across California are trying to assess their options moving forward: How can they possibly manage to keep up with escalating retirement costs? Last year, Chico paid $6.5 million to CalPERS for its share of employee benefits. By 2024, the cost is projected to double. (See “Ending secrecy,” Newslines, April 19.)
City staff has been making a calculated effort to get ahead of the problem: on Tuesday (June 19), the City Council decided to open a pension stabilization trust through benefit trust company Keenan & Associates, at the recommendation of Dowell and City Manager Mark Orme.
The current estimate, based on a conservative investment model, shakes out to a 4.5 percent return over five years, compared to a 1.68 percent return if the city kept the money in its Local Agency Investment Fund account, Dowell said.
To begin with, the city will transfer a little over $1 million—already set aside for CalPERS—in increments. Fees will be paid monthly, with a set annual rate of .003 percent (given the initial investment, that will be $3,000 for the first year).
It certainly won’t account for all of the looming liability obligations facing the city, but it’ll make a dent. Dowell used saving up for a new car as an example: by saving over the next five years, “you’ll have enough to pay for part of the car, but not all of the car,” he told the CN&R.
Both Mayor Sean Morgan and Councilman Mark Sorensen referenced the current council’s expiration date, remarking that “we’re all worried” for the day when the current panel isn’t around, and there exists a potential to extract pension trust funds for other uses.
Roslyn Washington, account manager with Torrance-based Keenan Financial Services, emphasized that an irrevocable trust is beneficial because “you can’t pull that money out and build a bridge … [or] to give [pay] increases to council members.”
The trust was approved unanimously, along with the creation of a budget policy requiring quarterly reporting on the status of the fund and council approval to make changes on the aggressiveness of the investment model.
How does the rest of the liability get paid for? Councilman Karl Ory brought up the Chico Chamber of Commerce’s proposed revenue measure (see “Time to tax?” Newslines, Feb. 1) for a potential discussion, but that was shot down along party lines.
“It is a response to the five-year projections and getting ahead of the curve,” Ory said. “I don’t think we want to go through another round of cutting services.”
Ory, seemingly trying to appeal to the council majority, said that it seems everyone has at least been able to come to an agreement that not looking at all of the city’s options isn’t “prudent.”
“This council has gone through a torturous last several years and has knowledge and experience that we’ll lose,” he said. “I do like the courtesy of having this discussion with you.”
Instead, Sorensen made a motion that the panel forward a discussion of a street maintenance bond to the Finance Committee. It passed unanimously.
Sales tax measures offer no level of comfort, Sorensen said, because “you cannot control where that money goes,” to which Ory replied, that “would have been a great conversation to have.”
Councilwoman Ann Schwab then chimed in that she was unclear why Sorensen could make a seemingly unrelated motion without submitting a request for a future agenda, as Ory had. The mayor asked City Clerk Debbie Presson to weigh in. She said it did not appear to violate policy because the council can refer things to committee at any time.
Councilman Randall Stone relieved the tension in the room with a clarification: “We wouldn’t be able to immediately approve the mayor wearing a pink top hat, but we could discuss bringing forward a proposal for the mayor to wear a pink top hat and refer that to another committee?”
“Please make that motion,” Councilman Andrew Coolidge said.
Also at the meeting:
• The council approved penalties for false fire alarms to cut costs for the Fire Department. The first violation is a warning, the second is $100 and subsequent are $200.
• The panel will take a closer look at the city’s regulations surrounding campaign financing, along with Humboldt Road’s issues with illegal dumping and environmental damage.
• There were about a dozen speakers from the floor, who addressed the council on issues ranging from homelessness to addressing quality-of-life issues in the park to increasing crisis-intervention training for police officers. Kat Lee addressed the dais as a member of the Justice 4 Desmond Philips campaign. During her comments, she brought up a moment where Vice Mayor Reanette Fillmer allegedly grabbed her arm at the last council meeting. Fillmer has denied the allegation.