San Marino’s liability to CalPERS – the California Public Employee Retirement System – will increase in the next few years but the city remains in a solid financial position, according to a special budget presentation held last Thursday evening in the Barth Community Room of the Crowell Public Library. All five members of the San Marino City Council were in attendance, as well as Interim City Manager Cindy Collins and Assistant City Manager Lucy Garcia.
Approximately 40 community members, including several San Marino Police and Fire personnel, witnessed an actuarial analysis by Mary Beth Redding, Vice President of Bartel Associates, who explained the mathematics of CalPERS and the impact it will have on the city’s finances.
“This gave us a more accurate picture of what we’re going to contribute to CalPERS,” said Ken Pun, San Marino’s contract deputy finance director.
According to Redding’s presentation, the rate of return is going to stay flat for the next couple of years. The old rate of return assumption was 7.5 percent. It is going to be reduced to 7 percent and eventually to 6 percent.
Redding pegged the unfunded actuarial liability at $20.6 million based on the 7.5 percent rate of return, indicating an increase in the city’s liability.
After a brief intermission, Pun discussed revenue projections for the city.
“These are not full-blown projections,” said Pun. “This just looks at the general taxes, not all programs.”
Pun told the audience that the 2017-18 budget “is still being prepared.”
“The 2017-18 budget will be used as a baseline for a five-year projection,” he said. “The city is in a really good position and it has constantly improved. Our revenue is coming in as anticipated and we still anticipate surpluses every year.”
Pun explained that the revenue projections were provided to evaluate sustainability.
“Our current pension plan is unsustainable,” he said. “There is a lot of discussion. I am hoping within the next couple months we will have a solution.”
Pun also said that the intention of the meeting was to present the city council with “the true picture.”
“This is the true data,” he said. “This is real world. We have a basis here to come up with this actuarial analysis and plot out what we are going to face in the future.”
Assistant City Manager Lucy Garcia told The Tribune that the purpose of the meeting was “to equip the city council with all the information it needs to make good decisions moving forward and plot out the future picture of what we face.”
“The city gets an actuarial study every year, but this is the first time we have hired someone to do a long-term analysis of the actuarial reports,” said Garcia. “I believe we’re way ahead of the game.”
Redding was peppered with questions and comments from many of the community members in attendance. One asked if the city could remove itself from CalPERS.
“CalPERS takes very seriously its commitment to all its members,” she said. “They don’t want members to leave because they are still responsible for all its members.”
She also said that a fee for termination “would depend on the bond rate at the time.” Pun estimated it would cost the City of San Marino approximately $100 million to leave CalPERS.
The city will also consider at a future meeting the possibility of forming an ad hoc finance committee comprised of the city finance director, treasurer, city manager and two community members with financial backgrounds. That recommendation will go before the council at a future meeting.