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Long Range Financial 2009-2019
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City of AlamedaPensionsIn Corporate America, large companies like General Motors and United Airlines are paying the price for baby boomers who are about to retire. As a result, most public companies eliminated/phased out pensions in the 1990s. In the public sector, the costs of generous benefits benefits were not accounted for like a business until 2015. As a result, elected officials at all levels of government have increased benefits without understanding the true cost. As a result, taxpayers in the future will be stuck with ever increasing bill for public sector baby boomers. For the city of Alameda, the challenge facing funding future pension obligations began surfacing as early as 2004. In 2011, the city of Alameda formed a Pension Reform Task Force. The members on the task force were:
The task force had two phases. First, the Task Force was asked to develop a consensus on the amount of the gap in the City's funding gap. Specifically, the Task Force was asked to come up with a range of years over which a financing gap will exist. Second, the Task Force to propose solutions for Alameda. There was no expectation of developing a consensus on the second phase as Task Force members would ally into different groups to present their best thinking about how to address the funding gap. In March, 2012 a subcommittee presented a report on CalPERS pension benefits and Other Post Employment Benefits (OPEB). The subcommittee believed the valuations of the total unfunded liability of $95 million, comprised of $23 million for Miscellaneous members and $72 million for Safety members were overly optimistic. They believed the total unfunded liability to be in the $120 million range. They noted the CalPERS board had lowered the assumed rate of return from 7.75% to 7.5% which would lead to higher increases in the unfunded liability. The subcommittee also pointed out that in 2006 (for the Miscellaneous member plan) and 2009 (for the Safety member plan) the number of retired employees exceeded the number of current employees covered by the plan. In 1990's used as a "pay-as-you-go" approach for paying for retiree medical benefits, meaning no money was put aside as benefits accrue. This OPEB liability was estimated to be $86 million in 2011. This OPEB liability was projected to grow to $150 million in 15 years. In 2010, the city was paying $2.5 million to cover retiree medical premiums. This amount was projected to increase to $7.0 million in 15 years. Effective July 1, 2014, the City implemented Statement No. 68 of the Governmental Accounting Standards Board (GASB 68), which requires the City to include its net pension liability in the government-wide and proprietary funds financial statements. In previous years, the City has reported this long-term obligation in the notes to the basic financial statements as the unfunded actuarial accrued liability for retirement benefits. Similar to the City’s long-term debt, the net pension liability is payable over an extended time horizon and does not present a claim on current financial resources. At June 30, 2015, the following employees were covered by the benefit terms for each Plan:
As of June, 2015 the Net Pension Liability was $166.4 million, a decrease of $30 million from June, 2014. As of June, 2015 the Net OPEB obligation was $31.7, an increase of $5 million from June, 2014. In 2015, the City created an OPEB Trust (Trust) for the purpose of setting aside and accumulating funds to be used toward the payment of OPEB benefits for those sworn employees in the City's Fire and Police Departments who pay into the Trust and retire after January 1, 2019. The City made an initial deposit of $5 million dollars into the Trust and will deposit an additional $250,000 each year for ten years starting in 2016. In addition to the City’s contributions, all safety employees began making contributions to the Trust equivalent to 2% of their base salary. These contributions will grow to 4% for those members hired prior to June 2011. Comments. Questions. Broken links? Bad spelling! Incorrect Grammar? Let me know at webmaster.
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