Council reviewing options to confront unfunded pension liabilities

Also: Garbage franchise agreement, downtown planning update, new vice mayor

The Pleasanton City Council is set for a wide-ranging discussion Tuesday night about how to address the city's growing unfunded pension liabilities.

Pleasanton currently owns approximately $160 million in unfunded liabilities associated with city employee pensions, a figure that is expected to grow over the next several years and impact how much money the city needs to contribute annually to California Public Employees' Retirement System (CalPERS), according to city finance director Tina Olson.

"In order to sustain services at current levels, including operations, plan for new capital and set aside funds for the ongoing repair and replacement of existing assets, the city must take a proactive approach to address this matter in advance of the estimated impacts," Olson wrote in her staff report.

Tuesday's public discussion at the Pleasanton Civic Center is designed to be informational, with a presentation by John Bartel of actuarial firm Bartel Associates and input from city staff about options to confront rising pension costs, including how to utilize millions the city has set aside to help pay down its pension liabilities.

City officials then plan to return to the council next month with recommendations for approval.

There are many reasons the city of Pleasanton -- along with scores of other public employers throughout California, including the Pleasanton Unified School District -- are staring down higher pension obligations, according to Olson.

"Most of these factors cannot be controlled directly by the city of Pleasanton, but rather are reflective of external market conditions, court rulings, past decisions and recently adopted CalPERS policies," she said.

Key factors include still-unrecovered CalPERS investment losses amid the 2008 recession, pension benefit enhancements, limited fund growth for CalPERS despite positive market trends, revising mortality tables and other actuarial assumptions, and continuation of various rules that increase pension liabilities, according to Olson.

The CalPERS board also recently lowered the assumed rate of return (also dubbed the "discount rate") on assets held by the CalPERS investment pool by a half-percent to 7%.

Another impact for Pleasanton is the shrinking ratio of active employees versus retirees, Olson noted.

Last year, there were more retirees receiving pension payments (621) than active city employees contributing to the fund (502), a ratio of 0.8. Those totals shifted drastically compared to just two decades earlier, when the city had almost four times as many active employees as retirees, Olson said.

The California State Legislature also passed pension reform laws in 2012 to help address the problem, but those changes focus on long-term solutions, leaving difficulties for municipalities in the short-term, Olson said. Among the changes was requiring workers to pay their employee share of pension contributions.

Combine those factors, and others, and Pleasanton city leaders are faced with $160 million in unfunded liabilities, plus the prospect of rising costs in the years ahead.

The city's annual pension contribution is estimated to increase from $14.2 million this fiscal year to over $21 million in 2021-22 and ultimately up to $28.5 million in 2026-27, according to Olson.

Knowing the pension problem was on the horizon, the council has worked to set aside about $22 million in recent years to prefund the city's pension liabilities. The question now becomes: How to use that money to address the problem?

City officials recommend the council consider two options -- prepay pension liabilities directly to CaIPERS and/or establish a "supplemental pension trust fund" to ease the budgetary pressures resulting from higher annual pension contributions, Olson said.

The council will discuss the pros and cons of those options Tuesday night.

While those are the preferred alternatives, Olson noted city officials could also consider issuing pension obligation bonds or borrowing money from existing city funds (like capital improvement or repair and replacement reserves) -- though city staff does not recommend either of those options.

Olson recommends the council hear the presentation and then forward the matter to its Audit/Finance Committee to work with staff on a proposed strategy to address the city's short- and long-term pension obligations. That recommendation is slated to be brought to the council for consideration Jan. 16.

Tuesday's open-session meeting is scheduled to begin at 7 p.m. in the council chamber at 200 Old Bernal Ave.

In other business

* The council will receive an update on pending negotiations with Pleasanton Garbage Service (PGS) for a new tentative franchise agreement for waste collection services within the city.

In addition to new rates, other changes up for consideration for the new deal, running from July 2018 to June 2028, include that the city would begin contracting with another firm to process recyclable and organic materials collected by PGS, rather than the items being processed at the PGS transfer station.

To that end, the council will consider increasing its contract with HF&H Consultants to complete negotiations with PGS and procure bids for recycling and organics processing.

The tentative franchise agreement with PGS is expected to head to the council for final approval next month, while a recommendation for recycling and organics is expected to be ready during the spring.

* Council members will hear a presentation on the Downtown Specific Plan update process, including discussions by the task force on preferred streetscape options and revised land-use plans for the Civic Center site.

* They will consider approving their committee assignments and other appointments for 2018, including confirming Councilman Arne Olson to serve as vice mayor for the next year.

* In closed session before the open meeting, beginning at 6:30 p.m., the council will speak with labor negotiators about contract talks with the International Association of Firefighters Local 1974.

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27 people like this
Posted by woggut
a resident of Pleasanton Valley
on Dec 18, 2017 at 6:52 pm

Need to get this pension liability handled before we drop $200 million on a new civic center to house the city employees. That $160 million might be more like $250 million since the Calpers board declined to lower the assumed rate to 6.2% as recommended by the actuaries. Don't forget we probably have unfunded pension liabilities for Alameda county, the school district, water district, and park district.

22 people like this
Posted by Ptown Dad
a resident of Amador Estates
on Dec 18, 2017 at 8:40 pm

It's clear now that the promises made to retirees is unsustainable. Has anyone considered adjusting the payments to retirees to reflect the new reality? These pension liabilities are killing California cities. This is a serious question - I'm not trying to fan the flames. Has this even been seriously considered?

21 people like this
Posted by Pleasanton Parent
a resident of Pleasanton Meadows
on Dec 18, 2017 at 10:34 pm

Pleasanton Parent is a registered user.

Taxpayers and rate payers are funding retirements not services. Time to reset.

Public sector - better retirement and lower salary or market salary and 401ks. You don’t get market salaries and public works pensions.

16 people like this
Posted by David
a resident of Amador Valley High School
on Dec 19, 2017 at 9:26 am

Pleasanton Parent -
Again, I agree with you 100%.
Other than the employee union resistance, the problem is the city council members don’t want to be the bad guy by limiting their staffs pay raises and benefits. If they are in office for 4-8 years, why take on that uncomfortable position?? Especially if some want a brand new civic center?
From my experience, public employees often do not consider health and dental premiums paid for by the City (taxpayers) as a portion of their compensation package — it is just a given. The pay raises have slowly increased since 2009 when limits were imposed after the recession.

Instead of comparing salaries and benefits with other city governments to constantly increase their compensation, include local private sector positions to make sure taxpayers are not over paying for public services.

19 people like this
Posted by no name chosen
a resident of Downtown
on Dec 19, 2017 at 9:40 am

no name chosen is a registered user.

All employees must make 100% of the pension contributions. Until recently most Pleasanton workers paid NOTHING into their pensions, yet they reap the full amount on retirement. Defined benefit pensions should be frozen where they are and no further contributions made. All municipal pensions need to be 401(k) type with the employee making the bulk of the contributions. It is well beyond time for these people to pay their own way. They make better than average wages and also get outrageous pensions. That has to stop.
Another change needs to be done at the state tax level. If you are paid a pension by the taxpayers of CA (cops, teachers, city retirees, etc) you need to pay CA tax on those pensions NO MATTER WHERE YOU LIVE. This is not the former "source tax" that CA tried to enact. Source taxing said that if you lived in CA while you EARNED the pension you paid CA tax forever. Wrong. This would only tax those people whose pensions are CURRENTLY PAID FOR by the taxpayers of CA. No more moving to a non-tax state while we CA taxpayers pay your tax free pension.
Get these pensions in line before they bankrupt the state. Oh wait, bankrupting the state might allow a default on the pensions. Maybe that's the way to go.

23 people like this
Posted by Resident/taxpayer/voter
a resident of Another Pleasanton neighborhood
on Dec 19, 2017 at 10:11 am

Wonder if good ol' Matt Sullivan is reading this....maybe you'll realize how much the City will need in future years and how significant sales tax revenues generated by a Costco and two planned new hotels within the JDEDZ will help defray ever-escalating pension costs/liabilities.

Got a better solution for generating significant future revenues, Matt?

Why don't you crunch some numbers on that, Matt?

Let's hear 'em. Oh that's right--you're too preoccupied with your NIMBY battle over Costco with the City right now, at our expense.

13 people like this
Posted by Charlie Brown
a resident of Pleasanton Valley
on Dec 19, 2017 at 10:41 am

In 2008, I lost a lot of money from my retirement plan, who do I go to to replenish my unfunded retirement?

22 people like this
Posted by Steve
a resident of Stoneridge
on Dec 19, 2017 at 10:49 am

Here it comes...This is the real reason for the school bond.

It releases other funds for pensions, while it can be used for current operations.

9 people like this
Posted by sumati
a resident of Kolb Ranch Estates
on Dec 19, 2017 at 12:32 pm

Unfortunately- pension reform must be done at a state level- as communities that try and do this on their own find themselves disadvantaged. One has to take a look at San Jose and what happened to their police force when San Jose enacted a law to limit pensions. San Jose could not hire or retain officers because other communities did not have the same pension restrictions. The state and local communities are going to have to come to grips that the kick the can strategy does not work and is creating an entitled workforce and an untenable financial burden.

7 people like this
Posted by David
a resident of Amador Valley High School
on Dec 19, 2017 at 6:12 pm

There is CalPers reforms needed such as stopping practices like spiking salaries by converting unused sick and vacation pay to increase salaries so more retirement pay out is given. Separate from CalPers reforms, the city does not have to contribute towards the full pension amount but they now pay the bulk and employees pay a smaller percentage. Did I mention that city employee can also voluntarily defer their pre-tax dollars into a 457k. That is in addition to a CalPers pension. And depending on on city, many employees get paid medical benefits and retirees receive life time medical benefits!!!!!!

I agree that police are under paid for the job and should have the city pay more into their pension than regular employees. Why work in a dangerous city when there are plenty of safer cities who pay more.

10 people like this
Posted by Lynn H
a resident of Amador Estates
on Dec 20, 2017 at 10:03 am

I went to TransparentCA and counted 87 people making 100k+ Pensions from Pleasanton before I got tired of counting.

15 people like this
Posted by sumati
a resident of Kolb Ranch Estates
on Dec 20, 2017 at 11:04 am

Lynne- thanks for the heads up on the website.. I sorted the table by service years... shouldn't have because it made me very unhappy- several people is making a +50k pensions a year after ~9 years of service- Retired in 2004/5... This is fiscal insanity. The unions don't care at all about the financial burden they put on the community- nor do they want to pay the real cost of their retirement. No one in the private sector gets this type of deal... If this was a private company they would have abandoned the pension and forced everyone on to 401k's.. don't know why cities are held hostage to this pension piracy but unless it gets addressed we will end up with tax bills paying for pensions and no services...

Sorry for the rant.... ;)

13 people like this
Posted by no name chosen
a resident of Downtown
on Dec 20, 2017 at 2:00 pm

no name chosen is a registered user.

TransparentCA will make you ill. First guy on the salary list, $120K salary plus $162K in overtime/other pay. Ridiculous considering that a fire captain rarely, if ever, actually fights a fire or renders first aide. He can retire at age 50 or when he has 30 years and get 90% of that $282K (or last year if higher) the first year with annual raises. In less than 3 years he will be making more than he did when working.

We need to change the pension calculation to not more than 2% per year at age 60 and nothing other than straight salary can count. This spiking is insane. And of course he will most likely retire to a tax free state so that the taxpayers of CA can pay his pension and he will owe us nothing for it.

6 people like this
Posted by Pete
a resident of Downtown
on Dec 20, 2017 at 5:14 pm

We are the only state I know of that has 3%. All other states have 2% or less. Gray Davis gave it to get the union vote.

11 people like this
Posted by Stop_The_Gravy_Train
a resident of Amberwood/Wood Meadows
on Dec 22, 2017 at 6:39 pm

Circling back to the first comment by "woggut", the city is going to ram thru the new Library/Civic Center (was $40MM as a library, now turned into a Library/Civic Center @ $200MM) by asking the citizens to allow them to sell bonds to do it - which kicks the can further down the road. No way they can afford a $200MM building with this massive pension liability, which is only going to grow, not shrink. Who asked for a new civic center anyway? Would it be nice - sure - but how will it improve delivering services to the citizens? It won't. It will just provide the employees and police a palatial new facility that nobody was asking for, other than them. I think support is strong for new library, but unfortunately that could be voted down if coupled with this boondoggle.

Citizens please rise up and contact your city council and tell them we won't stand for this nonsense.

2 people like this
Posted by Joe
a resident of Pleasanton Valley
on Dec 24, 2017 at 9:16 am

Joe is a registered user.

"Here it comes...This is the real reason for the school bond.
It releases other funds for pensions, while it can be used for current operations"

Can you explain what you mean?

11 people like this
Posted by Crumudgeon
a resident of Vintage Hills
on Dec 24, 2017 at 12:58 pm

Crumudgeon is a registered user.

Everyone ( except public employees) agrees that public pensions are too generous. It is mind boggling that our politicians refuse to do anything about it.

Since they are beholden to the unions that funnel money to them, they stall or remain silent. The city council refuses to tackle this problem.

Now they want brand new facilities for their public sector benefactors. We owe 200 million in unfunded pension obligations and they want to drop another 200 million on new offices for them!

I suspect the costs for the pensions and new offices are higher than we've been told. So it is quite possible that residents will be on the hook for half a BILLION dollars between pensions and the city hall project.

A responsible city council would freeze all pay raises and stick city employees in trailers until the pension boondoggle is solved.

5 people like this
Posted by Pleasanton Parent
a resident of Pleasanton Meadows
on Dec 24, 2017 at 9:09 pm

Joe,it means instead of the school district using money it has for things its supposed to (ie infastructure or new schools) it funnels that money into employee benefits and then goes to taxpayers for bonds for specific things.

It's like a public company keeping revenue for salaries and issuing stock to raise money to pay for perpetuity. In the public market you can only do this so many times before youre completely devalued. But we are held hostage by our desire to ensure our kids get a good education

Like this comment
Posted by Taxes
a resident of Birdland
on Dec 25, 2017 at 11:05 am

I think this nonsense is going to stop as soon as people see model the new tax laws on themselves in this state. Maybe ballot initiatives to lower state and local taxes.

Like this comment
Posted by santa
a resident of Birdland
on Dec 25, 2017 at 11:15 pm

boo hoo. go apply you haters. firefighters and cops deserve every penny. The unfunded liability is a sham you all hang your argument on. Its a problem if every Calpers employee retired at once. THATS NOT HAPPENING.

Love to hear what jobs you haters have, Let us know what yo do for a living. Most of you don't have the Guts to do the Job of a Firefighter a Cop or a Teacher. Jealousy is no way to go through life.

9 people like this
Posted by Resident
a resident of Las Positas
on Dec 26, 2017 at 12:35 am

Santa - you MAY have a point about police and fire but needing guts to be a teacher or work in the sign shop at the transfer station - give me a break!!! Yes - they should get a good wage but NO - kids should not be saddled with jokes for "teachers" like some my kids have encountered that won't be removed due to union rules. And no one working on cutting down trees should get a huge pension for life!

Let's pay and 401k like everyone else in this country!!

3 people like this
Posted by Jack
a resident of Downtown
on Dec 27, 2017 at 6:11 pm

Jack is a registered user.

Don't you have something better to do on December 25th at 11:15pm than post on this site?

2 people like this
Posted by Lou Stuhle
a resident of Jensen Tract
on Dec 28, 2017 at 12:45 am

Lou Stuhle is a registered user.

just curious...

do those of you who feel pensions are the death of pleasanton tax payers feel that way about all city employees? do you view public safety pensions the same way you view non-public safety pensions?

5 people like this
Posted by Jack
a resident of Downtown
on Dec 28, 2017 at 9:12 am

Jack is a registered user.

I can wrap my head around why police and fire get what they get, even though the system is ripe for abuse... But why someone in the planning department gets a similar deal is beyond me...

4 people like this
Posted by Lou Stuhle
a resident of Jensen Tract
on Dec 28, 2017 at 10:58 am

Lou Stuhle is a registered user.

jack, i certainly agree about the potential for abuse. i know of a few public safety employees who once they turned 50, took a medical retirement (so 50% of their pension is tax free). definitely not the norm though.

Sorry, but further commenting on this topic has been closed.

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