LAKE FOREST – For the second time in less than two years, the City Council has voted to pay off its unfunded pension liability, saving an estimated $3.4 million in interest over a 30-year period.
The council voted 4-0-1 on Tuesday, Sept. 19, with Councilman Dwight Robinson absent, to authorize a lump sum payment of $2.45 million to the California Public Employees Retirement System, which it contracts with to provide pension benefits for the city’s retirees.
“If we pay it now, it’s, theoretically, a one-time event, but we do not have an ongoing annual obligation,” said Councilman Andrew Hamilton, who originally asked for the item to be discussed last month.
If the city does not pay off the unfunded pension liability, CalPERS adds a 7.25 percent interest rate to the debt, said Keith Neves, the city’s finance.
In November 2015, the city authorized a payment of $3.7 million to pay off unfunded pension liability as of Aug. 31, 2015. Along with that authorization, the city established a CalPERS stabilization irrevocable trust with an initial deposit of $1 million.
Since the formation of that trust, the value has increased to $1.16 million as of July 31, thanks to an investment return of 10.53 percent, according to a staff report.
At the Aug. 15 meeting, Neves told the council the new unfunded liability was caused by a reduction in the discount rate from CalPERS, adding the city is currently 91.3 percent funded.
The payment would come from the city’s General Fund reserves, the same method used in 2015. Neves told the council the reserves would remain fully funded.
Hamilton praised previous city staff members and council members.
“The foundation and financial stability we have now is due to prior staff and prior councils…and the fiscal due diligence they’ve done,” he said.
The request for the lump sum payment must be completed and returned to CalPERS with a wire transfer by Oct. 30.
• The council also received and filed the Certificate of Sufficiency for the Petition to Recall Council Member Andrew Hamilton, but did not take any action in calling a special election.
According to the California Elections Code, the council has 14 days after receiving the Certificate of Sufficiency to issue an order stating an election will be held to determine whether or not Hamilton shall be recalled.
The council has until Oct. 3 to issue an order for the special election, which will be held between 88 and 125 days after the issuance of the order,…