MOORLACH UPDATE — City CAFR Rankings – Vol. 8 — February 22, 2018

The Bond Buyer, the national daily for the municipal bond market, covers my three new pension reform bills and the one I’m coauthoring with Sen. Glazer in the first piece below.

The second piece provides Volume 8, with cities #150 to #101. This grouping covers about 5 percent of the state’s population, which means that three-quarters of the cities are in the bottom 382.

The six Orange County cities in this bracket are Stanton (#150), San Clemente (#142), Villa Park (#130) (which is in my Senatorial District), Yorba Linda (#129), Aliso Viejo (#107), and La Palma (#104).

One interesting city in this group is Loyalton (#124), the city that inspired SB 1032 (see MOORLACH UPDATE — CalPERS Exit Strategies — November 18, 2017).

The top 100 cities are next with Volumes 9 and 10.

For more on the first seven volumes and the four bills discussed in The Bond Buyer piece, go to:

MOORLACH UPDATE — City CAFR Rankings – Vol. 1 – February 7, 2018
MOORLACH UPDATE — City CAFR Rankings – Vol. 2 — February 8, 2018
MOORLACH UPDATE — City CAFR Rankings – Vol. 3 — February 10, 2018

MOORLACH UPDATE — City CAFR Rankings – Vol. 4 — February 12, 2018

MOORLACH UPDATE — City CAFR Rankings – Vol. 5 — February 14, 2018

MOORLACH UPDATE — City CAFR Rankings – Vol. 6 — February 16, 2018

MOORLACH UPDATE — City CAFR Rankings – Vol. 7 — February 20, 2018

P.S. Senate Floor session started at 9 a.m. this morning. The entire agenda was focused on what would be done as a result of the Senator Tony Mendoza sexual harassment investigation and the resulting report that was released this week. After two hours of closed door Caucus meetings by held both parties, Sen. Mendoza submitted his resignation. It took the Democrats more time to accept it. So, many of my Republican colleagues and myself tweeted out his letter. This moved things along. The Democrats returned to the Floor close to the noon hour, announced their acceptance of Sen. Mendoza’s letter, and promptly closed the Session so many of my colleagues could catch their flights.

State lawmakers maneuver as CalPERS brings more change

By Keeley Webster

https://www.bondbuyer.com/news/state-lawmakers-maneuver-as-calpers-brings-more-change

Two California state lawmakers introduced pension bills as its largest public pension fund decided to shorten its amortization period to 20 from 30 years for all investments gains and losses.

The new actuarial policy the California Public Employees’ Retirement System adopted last week would raise employer contributions starting in 2021.

It comes on top of a series of rate increases since 2012. The largest came last year when the pension fund’s earnings forecast was dropped to 7% from 7.5%, but it won’t be fully phased in until 2024.

California State Sen. John Moorlach, R-Costa Mesa, said he thinks the best approach this year is to tackle public pension issues incrementally.

CalPERS’ actions enhance its long-term sustainability, but are “likely to precipitate short-term pressure to some governmental budgets,” Fitch Ratings said in a Friday report.

“Potential cost pressures will vary by locality and may depend on legal decisions going forward, but local governments in California will be especially challenged given their limited ability to raise revenues and a history of judicial decisions protecting existing pension arrangements,” Fitch analysts wrote.

The League of California Cities did not take a position on the latest change, because it received a mixed reception from the cities it represents.

Cities citing extreme financial hardship raised concerns that reducing the amortization schedule will increase their employer contribution rates even beyond what they can afford, according to the League. But some cities support the change because they believe it is prudent to shore up the fund and pay down the unfunded accrued liability faster instead of pushing the financial burden to future employees, employers and taxpayers, the League said.

Sen. John Moorlach, R-Costa Mesa, introduced three pension reform bills, revising two he floated last year that died in committee ahead of the pension fund’s announcement. Moorlach’sGOP holds only 13 of the 40 state Senate seats.

Senate Bill 1031 would allow public employers to freeze cost of living adjustments for retirees if the pension fund isn’t 80% funded, while SB 1032 would make it easier for local governments to exit CalPERS without paying termination fees.

CalPERS’ unfunded liability is currently estimated at $140 billion and it only has about 68% of the money needed to fulfill its obligations.

A third bill, SB 1033, would shift the burden of increased pension costs to the last city that hired an employee. Moorlach said that often a small city will train a police officer, who is then hired by a larger city and given a significant raise. The smaller city is then responsible for paying higher pension costs for the years the officer worked there.

Moorlach said he thinks the best approach is to tackle the issues incrementally. If Gov. Jerry Brown, in his last year in office, decides to create a trailer budget bill proposing more wholesale changes, Moorlach said he would support such an effort.

“It depends on how aggressive he wants to get this year and whether he has the juice or he’s a lame duck,” Moorlach said. “He has already done an amicus brief saying the California Rule has to be removed.” Moorlach is referring to a case before the state Supreme Court challenging the legal assumption that it is impossible to reduce future benefits accruals for current state and local government employees.

Sen. Steve Glazer, D-Orinda, introduced SB 1149 last week, which would offer new employees the option of choosing a more portable 401(k)-style plan and opt out of CalPERS. Moorlachis a co-sponsor.

Under Glazer’s bill, new employees’ contributions would be fully matched by the state, at the same level the state now contributes to CalPERS.

The main difference is that workers who leave state employment would be able to take with them the entire balance in their retirement plan, including both the employee and employer contributions and investment gains.

Currently, public employees have to stay in the job for five years before they vest into CalPERS or the California State Teachers’ Retirement System. If they leave before vesting, they do not receive pensions and they are not able to keep money their employers pay into the pension funds on their behalf.

“This pension reform idea would be good for employees and provide a more stable fiscal foundation for the state,” said Glazer, adding it would be especially attractive to younger workers who do not intend to work for the government their entire lives.

The change would make the state’s pension obligations more predictable, because the state would no longer be at risk of an unfunded liability for employees, who choose the new option, according to the legislation.

Glazer’s proposal is modeled after a University of California option that has been offered to new employees since 2016. More than a third of eligible UCLA employees hired since 2016 have chosen the 401(k)-style plan over the traditional pension system, according to the university.

Rank City Population UNP UNP Per Year of
(Thousands) Capita CAFR
150 Stanton 39,611 $12,720 $321 2017
149 Farmersville 11,248 $3,672 $326 2016
148 Ferndale 1,445 $477 $330 2017
147 Rancho Cucamonga 177,324 $58,568 $330 2017
146 Twentynine Palms 26,919 $8,985 $334 2017
145 Duarte 22,033 $7,466 $339 2016
144 Eastvale 64,613 $21,957 $340 2017
143 Adelanto 34,273 $11,892 $347 2014
142 San Clemente 65,975 $23,089 $350 2017
141 Walnut 30,134 $10,661 $354 2017
140 Chino 88,026 $32,426 $368 2016
139 Pico Rivera 64,046 $23,639 $369 2016
138 Lakewood 79,272 $29,923 $377 2017
137 Plymouth 1,009 $382 $379 2016
136 Gonzales 8,549 $3,330 $390 2017
135 Wheatland 3,509 $1,369 $390 2016
134 Calabasas 24,202 $9,452 $391 2017
133 Diamond Bar 57,066 $22,743 $399 2016
132 Loma Linda 24,528 $10,216 $417 2016
131 La Puente 40,455 $16,918 $418 2017
130 Villa Park 5,944 $2,505 $421 2017
129 Yorba Linda 67,890 $28,716 $423 2016
128 Hesperia 94,133 $40,510 $430 2017
127 Coachella 45,551 $19,631 $431 2017
126 Saratoga 30,569 $13,439 $440 2017
125 Vista 101,797 $47,397 $466 2016
124 Loyalton 766 $360 $470 2016
123 Colfax 2,070 $981 $474 2016
122 Brentwood 61,055 $29,172 $478 2017
121 Lawndale 33,365 $16,090 $482 2016
120 Los Gatos 31,314 $15,134 $483 2017
119 Santa Clarita 216,350 $104,942 $485 2017
118 Hollister 36,677 $17,813 $486 2017
117 Oakley 41,199 $20,395 $495 2016
116 Dunsmuir 1,612 $804 $499 2015
115 Blue Lake 1,295 $656 $507 2016
114 Windsor 27,371 $13,936 $509 2016
113 Rio Dell 3,447 $1,760 $511 2016
112 Marina 21,528 $11,012 $512 2017
111 Fillmore 15,683 $8,060 $514 2017
110 Calistoga 5,238 $2,730 $521 2017
109 Highland 54,377 $28,350 $521 2017
108 Weed 2,805 $1,495 $533 2016
107 Aliso Viejo 50,312 $26,883 $534 2017
106 Rancho Cordova 73,872 $39,760 $538 2017
105 Palo Alto 68,691 $37,300 $543 2017
104 La Palma 15,984 $9,052 $566 2017
103 Orinda 18,935 $10,917 $577 2016
102 Shasta Lake 10,386 $6,099 $587 2017

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