Orange County Grand Jury
• 2013-2014
• Agency Response
Response to:
Orange County City Pension Liabilities; Budget Transparency Critically Needed 6/25/14, 941KB
City of Placentia 8/19/14*
⚠️ Aviso de traducción: Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
Findings and Recommendations 12 findings
F1
Orange County cities have large unfunded pension liabilities both in terms of absolute dollar value and on a per capita basis and as a percentage of city General Fund revenues. City Response: Agree
Related Recommendations (1)
R1
Each city should post its current and at least three (3) most recent prior year budgets on the city's web site, and these budgets should be easily located. Each City's web site should have a search engine and a single search on the word "budget" should immediately link to the current budget.
F2
Orange County cities' unfunded pension liabilities have been increasing on a year by year basis over the past several years as a result of the 2007-2009 Great Recession and as key actuarial assumptions have been changed by California Public Employees Retirement System (CalPERS) and Orange County Employees Retirement System (OCERS). City Response: Agree
Related Recommendations (1)
R2
Each city's budget information should contain not only this year/next year budget projections, but should show at least five (5) years of projected revenue and expenditures. Projections should be at the same level of detail and use the same line item structure as the information for the current budget.
F3
There are risks to Orange County cities of changes to key actuarial assumptions including revisions downward of expected returns on investment and the likely move by pension funds to using more realistic mortality assumptions, which would increase unfunded liabilities. City Response: Agree; the changes in assumptions will provide a more realistic picture of the unfunded pension liability for each agency.
Related Recommendations (1)
R3
Each city's budget should show separate line items for predicted employee and predicted employer contributions for the city pension systems.
F4
Locating city budget information on a city web site is not always straightforward and prior year budgets are sometimes not posted by a city. City Response: Disagree. Staff feels that the City of Placentia's budget information is displayed on the City's website in a straightforward manner and prior year's budget documents are also available on the City's website to review and compare.
Related Recommendations (1)
R4
Each city's budget should provide trend data on the accumulation/drawdown of reserves and provide details on the city's policy for the size of its reserves and on the intended uses of such reserves. In particular any discussion of reserves should address possible use of reserves to accelerate amortization of unfunded pension liabilities.
F5
City budgets posted online project revenues and expenditures for at the most one or two years into the future and sometimes do not show prior year data. City Response: Disagree. City Budget revenue forecasts are a part of the annual budget. Currently the City has prior budgets from the past five (5) fiscal years posted on the City's website for review. Long term forecasts are often conservative in nature as agencies continue to address both future expenditures and projected revenues/revenue opportunities.
Related Recommendations (1)
R5
Each city using CalPERS for one or more of its pension plans should identify the names and dates of the CalPERS Annual Valuation Report(s) which call out Annual Required Contributions (ARCs) for these plans and should provide a separate expenditure line item for predicted city catch-up contributions for the city pensions systems based on these ARCs. A discussion of the risks associated with these CalPERS projections should also be provided by the agencies and incorporated in the city's budgets.
F6
City budgets often lack footnotes explaining key assumptions, risks, and unusual changes in budgeted amounts or revenues and expenditures. City Response: Disagree. In Placentia, the City Administrator's Budget Message in the annual budget document goes into great detail to explain assumptions, risks, and unusual changes in the economy, budgeted amounts, revenues and expenditures.
Related Recommendations (1)
R6
Each city which outsources fire or police services to OCFA and/or OCSD should require them to provide projections of future costs of services out at least five years into the future and require that these projected costs explicitly show the relationship of projected pension costs including amortization of unfunded liabilities. This level of pension cost information should be provided in budgeted expenditures for outsourced services. A discussion of the risks associated with these projections should also be provided by the agencies and incorporated in the city's budgets.
F7
City budgets sometimes do not provide trend data on the accumulation/drawdown of reserves and lack details on the city's plan for the size of its reserves or their intended uses. City Response: Disagree. The City has a Reserve Policy that details the amounts of City Reserves and any plan for their use or intended use.
Related Recommendations (1)
R7
Each city that has CalPERS as a provider for pensions should include a provision in their agreements with CalPERS that CalPERS will post their Annual Valuation Reports online.
F8
Cities can control most future expenditures by increasing or decreasing budgets for those expenditures as funds are available. However, increases to annual required contributions to their pension systems are imposed externally, changes unpredictably, and when they occur, are ramped up over two to five years. City Response: Agree
No recommendations for this finding
F9
City budgets posted online do not explicitly show the link between planned city pension expenditures and pension system actuarial reports and those reports' annual required contributions. Risks associated with predictions of future annual required pensions contributions based on risk assessment data provided by their pension systems and/or based on their own analysis are not discussed. City Response: Agree; as previously mentioned in response to Finding 6, City Administrator's budget message will address such issues when information is available.
No recommendations for this finding
F10
Pension costs for new (Post-PEPRA) employees will be substantially lower than for Legacy employees, but only a small percentage of current employees, typically only a few percent of total employees, are New. Substantially reduced pension costs for cities as a result of pension reform will not be realized for one or more decades. City Response: Agree
No recommendations for this finding
F11
CalPERS Annual Valuation Reports for Miscellaneous and Safety City employees are available to the public online for a very small number of cities. City Response: Agree
No recommendations for this finding
F12
OCERS provides pension plans for Orange County Fire Authority and Orange County Sheriff's Department employees, but there is no way to trace through publically available sources OCERS unfunded pensions liabilities to the city budgets which outsource to Orange County Fire Authority and Orange County Sheriff's Department for fire and police services. City Response: Agree Staff recommends the following responses to the Jury Report recommendations:
No recommendations for this finding
* This report's PDF did not contain easily extractable text and required Optical Character Recognition (OCR) for analysis. There may be minor errors in the extracted findings and recommendations due to OCR limitations with scanned documents.