Redding Council Prepares to Tackle Pension Time Bomb

 

Redding’s largesse in the 1980s and 1990s, when the city offered its employees high-end pension benefits, has returned to take a monstrous bite out of recession-depleted coffers.

How big a bite? In a best-case scenario, the city will need to come up with an additional $7.5 million in the next five years to meet its obligations to the state’s public employee retirement system (CalPERS). The city already pays $23 million to CalPERS in pension obligations.

And it could get worse. City Manager Kurt Starman told the City Council on Tuesday that the city could be on the hook for an additional $5 million if CalPERS decides to change its assumptions on the rate of return on its investments and its mortality assumptions.

“It’s like living with a variable-rate mortgage,” Mayor Rick Bosetti said. Starman agreed that was an apt comparison.

Even at the conservative $7.5 million figure, Starman said the city’s general fund—the catch-all department that pays for police, fire, street maintenance and parks—would be $1.2 million in the red, plus there would be no money for pothole repairs or anything else.

Starman delivered his grim update in the form of a report to the council. It was a follow-up to the council’s June workshop on the CalPERS issue and intended to frame the tough decisions awaiting the five elected officials.

Compounding matters, Starman said, are the California constitution, state statutes, case law and Redding’s contract with CalPERS that combine to limit the council’s options when it comes to finding a way to save the general fund.

Starman’s list of options starts on the bargaining table with a combination of asking employees to contribute more toward their pensions, coupled with a reduction in wages and fringe benefits.

Following that is a reduction in the number of positions through attrition, with an accompanying reduction in services; reduce other general fund expenses where feasible (“we’re down to the bone,” Starman noted); and rely more on public-private partnerships.

Councilwoman Missy McArthur asked if Starman had considered a tax increase to pay the city’s CalPERS obligations and Starman, with a rueful smile, said he wanted to stick to realistic solutions.

“We may no longer be a full-service city,” Councilman Gary Cadd warned. Councilman Patrick Jones noted that 73 cents out of every dollar the city spends now goes for personnel costs. How can the city meet its CalPERS obligations without reducing services, he asked. “We’re going to have to make tougher decisions going forward,” Jones said.

Councilwoman Francie Sullivan sought to end the discussion on a positive note, pointing out that Redding’s sales tax proceeds are bound to increase as people continue to invest in the city. She listed the new Dick’s Sporting Goods and the proposed Costco relocation to Oasis Road at I-5 (with fuel pumps) as potential revenue sources.

“We need to view this with balance,” Sullivan said.
Jon Lewis is a freelance writer living in Redding. He has more than 30 years experience writing for newspapers and magazines. Contact him at jonpaullewis@gmail.com.

Jon Lewis
Jon Lewis is a freelance writer living in Redding. He has more than 30 years experience writing for newspapers and magazines. Contact him at jonpaullewis@gmail.com.
Comment Policy: We welcome your comments, with some caveats: Please keep your comments positive and civilized. If your comment is critical, please make it constructive. If your comment is rude, we will delete it. If you are constantly negative or a general pest, troll, or hater, we will ban you from the site forever. The definition of terms is left solely up to us. Comments are disabled on articles older than 90 days. Thank you. Carry on.

11 Responses

  1. Avatar Joanne Lobeski Snyde says:

    Thank you for the great article Jon. I like that you, unlike some others, never blamed the retirees for this fiasco. Am I wrong when I imagine that monies properly managed and invested for a retirement program will be available when they're needed?

  2. Avatar Scott says:

    "Councilwoman Missy McArthur asked if Starman had considered a tax increase to pay the city’s CalPERS obligations and Starman, with a rueful smile, said he wanted to stick to realistic solutions."

    Why the hell not? I don't want to pay additional taxes any more than the next person, but we've got to be realistic. Is the prospect of "no longer be(ing) a full-service city" any better?

    It's time to wake up and smell the coffee. No, I'm not thrilled about the benefit deals that were made in headier, overly-optimistic times (much like the mortgage I saddled myself with during them). And I try not to resent the retirees over the benefits they managed to negotiate during them. But dammit, we have to do more than just survive, and hoping that revenues increase isn't enough. Let's be realistic, people. A self-imposed tax increase could solve this problem in relatively short order…

  3. Avatar Mike says:

    Jon- Here is a link to an excellent article that explains how this situation was planned years ago.

    http://www.rollingstone.com/politics/news/looting

    It is not a pleasant time to be a dedicated public servant. Many of those employees with 20 or more years on the job, have bargained away higher wages in exchange for PERS, PARS, Health, Dental and Vision benefits. Concessions have already been made across the city by those same employees who now have to pay a portion of the pension costs as well as costs associated with health care. They will be asked to pay more out of pocket from wages they never received. The typical reasoning from the likes of Jones, Cadd and Bosetti has been "Well, we live in a beautiful area and you should be willing to earn 25% less to live here". That reasoning is not working out so well. Just look at the vacancies at REU and crucial training requirements. The educated and highly trained potential employees are seeking employment elsewhere. Duh!

    The level and quality of city services will decline over time. The dismantling of the Police Department is just one example. The Redding Fire Department will be next. The grant funding for the apprentice firefighters expires in 2 years. You can almost predict that the full-time professional firefighters will be asked to make concessions to make these apprentices full-time positions when the time comes. Good luck with that one. Another example of adding services that you cannot afford long term. The apprentice program will go away and staffing levels will return to bare-bones.

    All of this in the name of Pension Reform.

    • Avatar Scott says:

      Good call on referencing that article, Mike, which I read with anger and disgust when it was printed. Matt Taibbi says what few others in the country will, and he does so with passion and in great detail. His presence alone keeps me renewing Rolling Stone…

  4. Avatar Mike says:

    Tough Love- I love this. We can go back and forth and share articles and opinions. We will have to agree to disagree. I am convinced that the ultimate goal of the "big picture" is to put an end to unions and collective bargaining. That will be the end of the middle class and employee protections of wages, hours and working conditions. Everyone will be "at will" employees making bare minimum wages. If you don't like it, you can hit the road.

    Yes, PERS is a much better savings account than social security because the politicians cannot reach into the pot like Social Security. PERS has been in place for over 70 years and was working just fine until 2008 when all those people found out that a 401K was a very poorly designed retirement plan for a reason. The only people that benefit from a 401K are money managers. The hidden fees are criminal but no one seems to care about that.

    What is interesting is that none of the "big brains" are working on a "new retirement system" for everyone across the board. That is because of greed and the intent to end organize labor. Instead you have the Arnold Foundation bankrolling initiatives in California to prevent organized labor groups from doing payroll deductions for union dues. Millions of dollars being spend by an out of state anti-labor think tank.

    These billionaires are not interested in a retirement plan that benefits the employee, they want complete control of the work force.

  5. Avatar Mike says:

    A blogger identified as Tough Love had a posting here which countered my link to a Rolling Stones article. Not sure what happened to his posting, but it was a good one.

    Anyway, if you research John Arnold and the Koch brothers, you will discover that they have quite an array of writers and organizations who are there to squash any attempt by organized labor to stand-up for themselves.

    This is years in the making. You have to ask the question: If they are spending millions to reform organized labor, how much money do they stand to make on that investment?

  6. Avatar Magnolia Neighborhoo says:

    I worked myself through college, and was hired after a major effort and hoop-jumping application process. I did my best, was reliable and hardworking 20+ years for a California state government agency. My wages were regularly lowered due to "budget scares", years passed without pay raises, IOU's distributed instead of paychecks when state budgets weren't passed on time. Furloughs were enacted, and services to the public were decreased or eliminated. State departments were perenially understaffed and underfunded. Now, I'm hearing increased verbal attacks on opinions about my PERS pension. Was it worth it? Believe me, the upcoming generations of workers won't think so. Yes, I earned a living wage, thankfully. My puny pension is not enough to live on, however. Today a member of the younger generation told me the Baby Boomers are taking jobs that he needs………Wall Street's hand in the pension pot is a portent of disaster to the future workplace.