Whittier Daily News (California)
BYLINE: By Peter Fullam, SGVN www.twitter.com/pfullam
While some cities in the San Gabriel Valley may be facing financial challenges, they are not future San Bernardinos, their leaders say.
San Bernardino, which is nearly out of money, declared a fiscal emergency last week, a week after the City Council voted to seek Chapter 9 bankruptcy protection. Interim City Manager Andrea Travis-Miller had warned that the city might not have enough money to pay employees in August and was facing a $45.8 million budget deficit.
San Bernardino was the third California city to say it’s broke in the past month, along with Stockton and Mammoth Lakes, and Compton is taking steps in the same direction.
The cities’ financial woes have been blamed on several factors such as rising pension costs, loss of funds to the state, loss of redevelopment agency money and declining revenues.
But four of the largest cities in the San Gabriel Valley say they are not in danger of going bust, and are finding ways to address pension costs.
El Monte this year was one of eight communities that officially notified the municipal bond market that it is facing significant financial hardships. Earlier this week it declared a fiscal emergency in order to get a soda tax on the November ballot.
But Finance Director Julio Morales said the city’s budget is balanced.
Pension costs aren’t a threat, in part because El Monte has a pension tax, like other cities in the San Gabriel Valley.
The city’s 2012 $50.5 million budget is down from last year’s $51.6 million.
“We think we might end up this year with a slight surplus,” Morales said.
“The city is in good standing with regard to pension costs,” he added.
However, he cautioned that future developments could challenge the city, such as rising health care costs and the loss of funds to the state.
“(If) the state keeps taking more money from local government, how are you going to fix that?” he asked.
And medical costs for employees and retirees “may be the hidden iceberg,” he said.
In Pasadena, Budget Administrator Richard Davis said the city is on solid ground.
Pension costs are slightly less for fiscal 2013 than what CalPERS projected in 2010, he said.
That could be because the city has fewer employees, he said.
In 2009, the city had 2,427 full-time equivalent employees. For fiscal 2013, it had 2,107 employees. The driving force in the reductions has been declining revenues.
The city budgeted $28.3 million for its safety and miscellaneous plan pension contributions for fiscal 2013, he said. It has a $782 million total operating and capital budget for the year and $215.7 million in general fund operating costs for fiscal 2013.
“We are not in any danger,” he said.
If anything, Pasadena has improved its position since the recession started, he said.
In West Covina, rising pension costs are a concern, according to Thomas Bachman, assistant city manager and finance director.
West Covina’s general fund pension costs for 2012-13 are projected to be $6,136,788 for safety employees, and $835,536 for nonsafety employees, Bachman said.
The total of $6,972,324 represents 13.5 percent of the city’s projected $51,496,861 general fund budget.
Employees there now pay the entire employee share of pension costs – a shift that other Valley cities have also been making.
Safety employees pay 9 percent and nonsafety employees pay 8 percent, Bachman said.
“This shifting of costs from the city to the employees in the last year has offset the increased pension costs that the city faced due to rising pension contribution rates. Our employer safety rates have gone from 25.2 percent in 2008-09 to 35.2 percent in 2012-13, while our nonsafety rates have gone from 9 percent to 13.7 percent over that same period.
“As pension rates are projected to continue to rise in the future, especially public safety costs, they will continue have an impact on our ability to provide services,” he said.
With CalPERS’ reduction of its assumed earnings rate from 7.75 percent to 7.5 percent, West Covina’s pension costs are expected to increase by 1.5percent in 2013-14. (CalPERS own actuaries recommended a 7.25 percent rate, he said.)
“A 1 percent increase costs the city approximately $175,000 per year, about the cost of one police officer,” said Bachman. “Therefore, this change will cost us the equivalent of 1 1/ 2 police officers.
“And because PERS phased in the impact over a number of years, like they have with so many other assumption changes in the past, it will cause pension rates to gradually rise and remain at elevated levels for a very long period, and ultimately cost taxpayers more in the long run.”
In Whittier, where city employees in September 2011 agreed to pay their share of retirement costs, pension costs are not expected to force a reduction in services.
“We’ve always been frugal,” said Rod Hill, city controller and director of human resources.
But the city is under some financial pressure. In September, City Council approved a $57.1 million budget for fiscal 2013 that was balanced by using an estimated $2.4 million from reserves. About $1.3million of the deficit is due to the state’s elimination of redevelopment agencies, according to City Manager Jeff Collier.
There’s also a gap in the city’s general fund operating budget, which is using about $753,000 in retirement funds saved during the early 2000s. The retirement money was accumulated after CalPERS reduced its rates, but the city continued to charge itself at a higher rate and saved about $5.8 million. Of that amount, about $5.1 million remains.
In other financial moves, the council agreed to lease unused water rights to raise nearly $1.9million and cut $507,000 through the elimination of five positions.
But the council also agreed to spend $180,000 to help three homeless shelters in Whittier that previously received money through the now-defunct redevelopment agency.
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