Arcadia Adopts Comprehensive Pension Management Plan, Saving $85 million
On February 18, 2020, the Arcadia City Council unanimously adopted a comprehensive Pension Management Plan to address the City’s $154 million in unfunded pension liabilities. After several months of careful review and consideration, the Citizen’s Financial Advisory Committee (CFAC) recommended a six-point strategy to reduce the City’s long-term pension costs by over $85 million dollars.
“This plan is a comprehensive approach to tackling the biggest issue of our time,” said City Manager Dominic Lazzaretto. “It creates flexibility to address whatever surprises may come our way without exposing the City to excessive levels of risk.”
The Pension Management Plan focuses on the following:
- Use of reserves to prepay existing liabilities
- Refinancing existing debt to lower interest rates to free up cash flow
- Prepaying costs with surplus funds from the voter-approved Measure A sales tax increase
- Financing long-term capital improvements
- Using pension obligation bonds to lower the overall costs of pensions
- Negotiating for more employee cost-sharing
In June 2019, Arcadia residents approved Measure A, a ¾ cent sales tax increase to help address the City’s rising cost of services, primarily driven by increasing pension costs. The Citizen’s Financial Advisory Committee recommended the tax increase and voters overwhelmingly approved the measure.
“Two years ago I recommended that we impanel an advisory committee to study this issue,” said Mayor April Verlato. “The City Council has unanimously supported the CFAC’s work and with careful planning and implementation, we can save the taxpayers $85 million. It’s a remarkable accomplishment for our City.”
In presenting the plan, City Manager Lazzaretto noted that the organization will need to continually manage and adapt the six strategies to ensure that the estimated savings become reality. “The plan lays out a viable framework to address our staggering pension debt, but there is no quick fix here. We will have to have discipline over a very long period of time,” he said.