Newport plans to pay more to bring down pension liability

Newport Beach wants to put about $9 million more toward its unfunded pension liability next fiscal year.

The move would save the city about $15 million in interest over the next 20 years, city staff told the City Council during a meeting Tuesday to review the proposed budget for fiscal 2017-18, which begins July 1.

“You pay more early, you save more later,” City Manager Dave Kiff said.

The city was already set to spend about $16.2 million in normal costs and a $25 million “default,” or compulsory, payment under a plan defined by the state. The $9.1-million addition would bring the city’s total net cost next fiscal year to $40.3 million after deducting $10 million paid by city employees.

The city is trying to fill a $353-million pension hole. In 2016, the unfunded liability was $330 million; in 2015, it was $276 million. Under a proposed payment plan, the city could fill the hole in 20 years through higher payments and related interest savings, staff said. Regular annual commitments would remain.

“It’s just like prepaying your mortgage,” Councilwoman Diane Dixon said.

Ten years ago, Kiff said the city’s total unfunded liability was $2 million. Dixon said the payment on that was “minuscule.”

She said additional debt “was really foisted on the cities in California and we are paying for it. But we are able to pay for it and we are aggressively paying for it.”

Other highlights

The next budget also proposes infusing $6 million into the harbor and beaches capital fund, its largest boost yet for infrastructure projects along the water.

Spending would remain flat or slightly higher in most city departments, increasing by $3.4 million for police and $2.6 million for fire. The increase in public safety spending reflects the $9-million pension pay-down.

There would be no overall change in full-time city workers — five positions would be added and five eliminated through attrition. The new jobs include a deputy city attorney, a budget analyst, a building inspector, a traffic engineer and an animal-control officer. Three groundskeeping positions, a facilities maintenance position and a library clerk job would go dark. Part-time positions adding up to the equivalent of about 5½ full-time posts are proposed across several departments, including the city clerk’s office and police.

The city’s key account, the general fund, is projected at $225.6 million. Of that, the city expects $209.3 million in revenue and about $16 million from surplus and transfers. Planned expenditures are $202.5 million.

The city Finance Committee will make a final review of the budget on June 1 before sending it to the City Council for a vote set for June 13.

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