Santa Maria officials will issue their response Tuesday to a Santa Barbara County grand jury report, disagreeing with part of the watchdog board’s findings that there were serious solvency risks in the city’s public employee pensions.
Grand jurors noted that one of Santa Maria’s seven different pension plans was less than 70-percent funded, putting it at a high risk of solvency issues and that the city had comparatively low General Fund revenues on a per capita basis.
The amount of money cities statewide have been required to pay toward employee retirement costs has risen dramatically since CalPERS — which manages the pensions of more than 1.6 million California public employees — voted in late 2016 to lower its expected rate of return on investment from 7.5 to 7 percent by 2019. The increasing costs have led to budget shortfalls in many cities.
CalPERS' current assets are around 68 percent of what's needed to provide for its liabilities.
While the grand jury noted that California’s Public Employee Pension Reform Act, which went into effect in 2013, has helped to improve the position of pension systems countywide for newer employees, it concluded, “there are substantial liquidity and solvency risks to the sustainability of many of the public defined benefit pension plans in the county.”
The watchdog board’s report — which was issued in June — asked that the city of Santa Maria respond to six of its findings and two recommendations within 90 days.
In a council agenda report that the City Council is expected to adopt Tuesday, city officials disagreed with the jurors finding that Santa Maria faces greater pension risk than some other cities in the county due to its comparatively low General Fund revenue per capita, which is lower than that of Santa Barbara and Lompoc.
City staff responded that while greater revenues per capita would improve the Santa Maria’s ability to pay required pension contributions and acknowledged that Santa Maria’s General Fund revenue per capita is lower than that of other county cities, the city said it believed the grand jury’s assumption about the Santa Maria’s pension was misleading.
“For example, the grand jury's analysis does not take into account that Santa Maria has (both currently and historically) a much lower number of employee-to-population ratio than Santa Barbara, San Luis Obispo and Lompoc,” city staff wrote. “In fact, Santa Maria’s employee-to-population ratio at 4.76 (per 1,000 residents) is almost half that of Santa Barbara's ratio of 9.26, San Luis Obispo's 8.93 and Lompoc’s 8.14.”
The city added that some pension costs are covered by one of the city’s enterprise funds, instead of the General Fund, for which jurors didn’t account.
Grand jurors recommended the city “analyze capital spending, employer/employee contribution rates, staffing levels, and all existing taxes and revenue sources under their control to identify potential revenue gains and cost savings.”
City staff said Santa Maria had already implemented the board’s recommendation, specifically noting the implementation of a pension cost-sharing agreement and the adaptation of the 2018-20 city budget.
“City departments were asked to reduce their operating budgets to fund the increase in CalPERS required contributions,” city staff wrote. “In order to accomplish this, dozens of positions are not being funded for the next two fiscal years. In addition, vacant positions are being held open longer to achieve a salary savings goal of $3 million.”
The city will also issue its response to a county civil grand jury report on odors in the Santa Maria Valley, which was sparked in response to community members’ complaints regarding unidentifiable odors around the city.
In their investigation, grand jurors found that there was no clear point of contact for Santa Maria residents to make odor complaints on the city website.
In its response, the city said it agreed that the grand jurors’ finding was true at the time of the report but noted the city has since included the information on its website.
The grand jury recommended the city create a section on its website that clearly directs citizens where to lodge complaints about odors.
The city adopted the recommendation, creating www.cityofsantamaria.org/odors. The section, titled Odor Complaints, lists phone numbers of agencies that respond to odor complaints and includes a link to the Santa Barbara County Air Pollution Control District’s complaint page.