By Kristina Houck
Facing a shortfall of more than $9 million in its pension fund, the Del Mar City Council on Sept. 3 unanimously established a pension reserve fund as a new pillar in the city budget process.
“I think this is very needed,” Mayor Terry Sinnott said. “It should be something used every year as a tool. It allows us to take a little bit more control over how we’re meeting this obligation. We want to meet this obligation.”
Del Mar’s firefighters, lifeguards and miscellaneous employees, meaning all other city employees, participate in the California Public Employees’ Retirement System. Del Mar contributes varying amounts each year, which represent about 27 percent of the city’s payroll.
According to the latest CalPERS reports released in June 2011, Del Mar has pension liabilities totaling $31.7 million with pension assets having a market value of $22.4 million, which means benefit pools are underfunded by more than $9 million, said Jim Eckmann, chair of the Del Mar Finance Committee and Pension Subcommittee.
City staff and the Del Mar Finance Committee recommended Del Mar establish a pension reserve fund and contribute an amount of money each year based on a 15-year amortization period, prevailing interest rates and new standards set by the Governmental Accounting Standards Board. GASB 68 is a new accounting policy for all public pension plans, which the city must implement in July 2014.
Based on these elements, the Finance Committee estimated the city should set aside $520,000 per year as a local savings account to offset and gradually eliminate the city’s unfunded pension liabilities. This amount would be adjusted each year, according to the actual GASB reported pension liability with consideration given to the market rate adjustment by Moody’s Investor Services.
The funds would be retained on Del Mar’s balance sheet, “so the cash will remain under our control,” said Tom McGreal, member of the Finance Committee and Pension Subcommittee.
“The city should pay CalPERS an annual contribution amount that’s equivalent to what the new GASB accounting policy tells us we should be accruing each year because we’re trying to do two things: We’re trying to solve the unfunded liability problem that we have today, and we’re trying to make sure that it doesn’t grow in the future,” McGreal said.
“The pension reserve policy we’re advocating addresses a growing problem that we’ve been looking at now for over a year. It also provides a long-term solution to what really is a long-term pension obligation problem, so it’s properly timed.”
In June 2011, the City Council expanded membership of the Del Mar Finance Committee from seven to nine members to analyze the city’s long-term pension obligations and offer solutions. Council members thanked committee and staff members for their work on the issue.
“I think that we’re far beyond what other cities and municipalities are doing in looking at our liability and establishing a policy, which is nothing else other than financial discipline on our part,” Councilman Al Corti said. “If nothing else, I think it’s prudent. I think it will help us financially.”