FOR IMMEDIATE RELEASE (from City of Irvine)
Subject: City of Irvine has Paid Down $13 million of Unfunded Liability
Contact: Craig Reem, 949-724-6077, firstname.lastname@example.org
IRVINE, CA (June 25, 2014): The Orange County Grand Jury today released a report that tasks Orange County cities with more transparency in telling their story of unfunded liability numbers and plans for payoffs.
The City of Irvine is well poised to respond to the Grand Jury. In June 2013, the Irvine City Council addressed the pension liability issues and adopted an unprecedented plan to aggressively pay it down. By utilizing a special fund intended for infrastructure rehabilitation (the Asset Management Plan), the City has been able to pay down $13 million of its unfunded liability in the first year and will replenish the fund with savings.
“We have already taken the initiative for an early payoff, with $8 million paid last fiscal year and $5 million to date this new fiscal year,” said Irvine Mayor Steven S. Choi. “The early payoff will save Irvine millions of dollars – money that will be put back into the community.”
Through a mix of short-term borrowing from the Asset Management Plan (AMP), the retirement plans could be 98 percent funded in about 10 years. City staff estimates the savings at $33.1 million.
Irvine’s unfunded liability is the difference between the estimated cost to pay retirement obligations and the resources set aside today to fund them.
Through this plan of paying pension obligations early, the City of Irvine is best prepared to adjust for future uncertainties or other fiscal emergencies.
Information and explanation
- The City Council’s decision: To retire nearly all of the unfunded liability debt in about 10 years. An early payoff realizes significant savings by prepaying the employers’ annual retirement amount. Click here to see the staff report from June 25, 2013
- How much would be saved: An estimated $33.1 million, an amount that is equal to 21 percent of the full fiscal year City budget.
- How that savings occurs in reducing debt as well as lower CalPERS rates going forward: As the City makes payments to reduce the unfunded liability, future employer rates otherwise paid to CalPERS go down. The plan captures those savings to further reduce the unfunded liability.
Asset Management Plan: The City’s special fund has a cash balance of about $51 million. The purpose of the AMP is to provide a long-term fund source for rehabilitation of City infrastructure while preserving the fund’s principal balance; to provide financial reserves to natural disasters and other emergencies; to provide a source for internal loans and liquidity; and to serve as collateral for City debt issues.