City makes move toward paying off CalPERS debt

PIEDMONT —- The City Council has approved moving $750,000 in city general fund money to a Pension Rate Stabilization Fund to help Piedmont get a jump on paying off its state Public Employee Retirement System pension debt.

The need for Piedmont and all cities that participate in the CalPERS employee pension system to increase their payments to the state stem from a December 2016 announcement by CalPERS that its “discount rate” — essentially, the rate of return it gets from its various investments to help pay benefits — went from 7.5 percent to 7 percent over a three-year period that started with the 2017-18 fiscal year. Cities all over the state will have to pay more to make up for this significant money shortfall.

Additionally, the situation is expected to become more dire in coming years. The annual cost of Piedmont’s pension contributions is projected to increase from 7.5 percent of the city’s revenue in 2017-18 to 14.5 percent of revenue in Fiscal Year 2029-30.

The city’s pension costs are expected to increase by 139 percent over that 12-year period, while city revenue is expected to go up by a conservatively estimated 33 percent during that time.

Finance Director Michael Szczech said the city has put its CalPERS payments into a trust fund, established last April, that pays the state over time, rather than simply pay as the city has he money. The city can accrue more interest on that money this way, he said.

“It makes a lot of sense going forward,” said Mayor Robert McBain, who noted he believes Piedmont is taking an aggressive stance on dealing with an issue that challenges most California cities. “You can’t get too comfortable at all.”

In a separate but related action, the City Council on Monday moved $2.5 million from its general fund to the city’s Facilities Maintenance Fund.

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