The costs to public pension plans of the financial system crisis and diminished investment returns coupled with unfunded retiree commitments are coming due – and it is not a pretty sight.
The largest example of the squeeze is, of course, the state employee retirement fund CalPers, which proposed and then retreated from a plan to seek $700 million in additional contributions from state and local governments.
But the North Bay is far from immune.
In San Rafael, where employee retirement costs are said to be near 20 percent of its general fund budget, city officials are planning to borrow $4.4 million via a bond offering to pay pension costs over the next two years.
In Sonoma County, officials are preparing a proposal for a $300 million bond offering to help cover a $400 million unfunded pension liability.
In both cases in San Rafael and Sonoma County, a good argument is being made that going to the bond market makes financial sense.
The obligation is there no matter what. So why not lower the cost of paying that obligation at today's low interest rates and spreading it over many years?
And, the reasoning goes, it's not as if this hasn't been done before. Other North Bay city and county governments have sold bonds to cover pension costs. Sonoma County has done so twice before, in 1993 and 2003, both times at favorable interest rates. After all, it can be argued, public pensions have suffered in the same way as individual 401(k)s, with both requiring new and prudent approaches to investment management.
But the shortfalls and borrowing also shine a bright light on the unsustainable path of public sector pensions. It's clear governments can no longer make the same kinds of promises it has made to employees in the past and must begin moving more new and existing workers away from out-modeled defined pension plans into self-directed 401(k)s or some combination that won't leave taxpayers with the tab.
This was done long ago in the private sector. It's time for the public sector to do the same.
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Last word: Never underestimate the government's ability to mess up a good thing.
The Sonoma County Energy Independence Program, which finances energy improvements on a resident's property tax assessment, has been an unquestioned success.
But a recent letter from a federal housing official has thrown a potential wrench into the program. According to a SCIEP official, the letter argued that the property assessments could be considered loans and in a superior position to a mortgage holder. Mortgage lenders are understandably alarmed by the idea.
SCIEP and other leaders ask why pick on energy improvements when parcel taxes for schools, fire districts and other public entities are routinely added to the property rolls?
The answer is, energy shouldn't be.
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Brad Bollinger is Business Journal editor in chief and associate publisher. He can be reached at 707-521-4251 or bbollinger@busjrnl.com.
