April Boling, a board member of the San Diego County Taxpayers Association and former chairwoman of the city of San Diego’s pension reform committee attacked as illegal the 20-year plan to not pay the principal and ignore the interest in the first few years – a process known as “negative amortization,” the North County (California) Times said in a news report.
Attorney Michael Conger, representing Boling, said Wednesday that the system would increase the pension fund’s debt and possibly leave future taxpayers with a huge, unwarranted debt “to clean up.”
County and association officials emphatically lashed back at Conger’s allegations, saying that negative amortization was legal and that the payment plan was a responsible, acceptable method to pay off the pension debt.
This week, a state appellate court upheld an earlier trial court’s ruling that San Diego County supervisors did nothing wrong by using a specially called early review of its pension fund to count $550 million in bonds to shrink the fund’s debt and its annual required financial contribution to the pension fund.
Conger said the new lawsuit asserts that a true definition of amortization must include some payment of the debt’s principal. He said the retirement association’s repayment plan was a scheme that allowed the county to illegally “mask” what its true pension debt level was, and therefore, avoid funding its fair, required, contribution to reduce the pension debt.
“I’m saying they’re masking its debt, and using different techniques to underfund its pension plan,” Conger told the newspaper. “They’re paying an actuary that says it’s OK to negatively amortize their debt.”