According to news reports, the plan instructs Ewell to create different strategies that include using a combination of pension obligation bonds, existing revenues and new income from selling city land assets. Each would require City Council approval. With no action, the city could face required pension payments that could reach as much as $323 million in fiscal year 2014. In contrast, the city paid $167 million for fiscal year 2006, the news reports said.
Lisa Irvine, deputy director of the city’s financial services department, said that the strategy seeks to increase the funding level of the pension from 65% currently to more than 80% in fiscal year 2008. The shrinking of that shortfall, however, will be short-lived, with the debt back on the rise in fiscal year 2010 if more cash is not poured into the system.
The council approved the plan 5-1, with Councilwoman Donna Frye opposing the measure. “This is a good analysis of options and I think that’s important,” said Councilman Jim Madaffer, according to the news reports.. “You need to have something to start your city back onto fiscal health.”
In order to increase the funded ratio to more than 80% by fiscal year 2008, the city plans to sell $100 million of real estate assets in the next three years. Irvine said these parcels would not include land associated with providing core services. “We’re not going to sell City Hall, or Balboa Park, or Torrey Pines [municipal golf course],” Irvine said.
The city manager plan also proposes two pension obligation bonds offerings, $300 million in fiscal year 2007 and an additional $100 million in fiscal year 2008.
McGrath said this portion of the plan is not accurate because it is unclear if the city will be able to offer the bonds publicly or privately. The city has not issued a certified financial report since fiscal year 2002, crippling its ability to issue bond offerings on Wall Street.