Of all the financial woes looming on the horizon for local governments, unfunded pension liabilities look the most ominous. The PERS (Public Employment Retirement System) has lowered its estimates of what it can expect to get in return for its investments, meaning that local cities can expect to contribute more money to pay their share of the retirement costs of employees. It’s like an adjustable rate mortgage, with the rate now at 7 percent.
Huntington Beach is seeking to head that off by issuing “Pension Obligation Bonds.” According to City Manager Oliver Chi, PERS has about $913.96 million in Surf City’s account for retirement obligations. However, the estimated true cost is seen to be around $1.35 billion, a difference of $436 million.
Chi says that if the pension obligation difference has to be paid out of the city’s general funds, it could result in cutting 79 fire department positions, 91 police officers and eliminating library and community services.
The issuing of the bonds, according to Chi, would allow the “deficit” to be refinanced at 3 percent, saving close to $200 million.
There is some controversy about POBs. Boulder, Colorado used the instrument to get its interest rate down to 4.29 percent and was able to close the gap. But Oakland’s venture turned out so badly that it had to issue a second series of bonds after it was found that it was $250 million more out of balance than when it had issued the first series, according to an article at Governing.com.
The matter will be taken up at Monday’s meeting of the Huntington Beach City Council.
Where could the trail be taking us?
At Tuesday’s meeting of the Garden Grove City Council, the city leaders approved awarding a contract to Los Angeles Engineering for the construction of a new bike and pedestrian path along a stretch of the old Pacific Electric right-of-way, a piece of land now owned by the Orange County Transportation Authority.
The trail would run from Stanford Avenue northwest to Brookhurst Street, with completion by May 2020. Total cost is estimated to be $1.9 million, with most of the money coming from a state grant and the remainder from other sources, not including the general fund.
Although the awarding of the contract was approved, one councilman – George Brietigam – dissented. He called the proposed trail a “boondoggle” and a “bikepath to no where.”
In an effort to assuage his concerns, Mayor Steve Jones pointed out that plans for the trail helped persuade Howard CDM to locate the SteelCraft project on Euclid Street in Garden Grove and Saheen Sadeghi to develop the as-yet-dormant Cottage Industries in an area a few blocks to the east.
He also suggested that at some point it might be possible to “monetize” the trail by adding small eateries, shops and other businesses along the route which could eventually reach all the way from Nelson Street in downtown to Chapman Avenue, across from The Promenade shopping center, anchored by the 16-screen Regal Cinema theater and the Walmart department store.
Usually Reliable Sources is posted on alternate Wednesdays.