Pensions in Santa Barbara County Require Vigilance*

Section 115 Trusts, Pension Obligation Bonds, and Pension Reserve Funds can be effective mechanisms to protect cities from dramatic impacts to the financial markets or declines in General fund revenues. City of Solvang's Response to Finding 2: Disagree partially Section 115 Trusts or reserves set-aside to meet pension obligations can be effective tools to protect cities as a budget balancing tool. If required contributions are increased by CalPERS based on earnings (market fluctuations) or CalPERS Board policy changes, such funds can be applied toward the payment. These are planning tools which would allow for smoothing of cash payments and will result in more stable levels of ongoing operations. Section 115 Trust would also allow the City to invest in similar strategies as CalPERS, which could potentially result in higher earnings than the City can achieve from its pooled cash investment funds. Pension Obligation Bonds are risky and are generally not recommended by financial consultants who have studied this subject matter.