Redding Council Prepares to Tackle Pension Time Bomb

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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.
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