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City report reveals upkeep, pension costs constitute bulk of unfunded liabilities

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FEBRUARY 21, 2013

At a special meeting Tuesday night, Berkeley City Council heard the city manager’s first report of the year regarding the city’s unfunded liabilities.

While pension costs account for the largest part of Berkeley’s unfunded liabilities — costs the city must pay in the future but that are not due presently — costs for improvements in infrastructure compose the second-largest in liabilities, according to the city’s report.

“This is not a particularly bright picture, but we’re not alone,” said Mayor Tom Bates at the meeting. “I don’t know any city in the state of California that doesn’t have similar kinds of problems, not to mention the state itself.”

The city’s infrastructure includes 56 public buildings, 270 miles of public sanitary sewer mains, 52 parks, two pools, three camps and 42 other facilities. For the next five years, the city is facing $37.4 million in unfunded liabilities of improvements of these public buildings, streets, sewers and storm drain systems.

To fund improvements of public buildings, Berkeley has allocated $4 million in its budget over the next five years. However, the five-year projected costs are $23 million, leaving the city with an unfunded liability of $19 million.

For storm drains, $11.6 million has been allocated in the budget, but the city needs $37.4 million to cover the entire $49 million of maintaining the drains.

“We are in a reality of limited resources,” said Jacquelyn McCormick, a previous mayoral candidate and a member of Berkeley Budget SOS. “We should not grasp at straws or short-term fixtures for problems that have been in the making for years.”

An ongoing issue involves pension costs. Of the approximately $362 million in pension costs, CalPERS, a state pension fund that uses investment returns to provide for employee pensions, accounts for the largest employee-related unfunded liability, which is almost $250 million, according to a city report.

The city manager’s office proposed allocating the $5.7 million saved from refinancing certain bonds in 2012 to reduce pension costs.

One of the proposed options to reduce infrastructure costs is applying for more state and regional grants. Additionally, last November’s Measure M — which allows the city to issue $30 million worth of general obligation bonds to fund and accelerate the city’s five-year street-repaving plan and the Watershed Management Plan — is expected to bring in additional revenue.

However, the city must also address a projected deficit of $3 million in the general fund and $3.9 million in special funds for fiscal year 2014.

“I hope that we will show some fiscal discipline,” said Councilmember Laurie Capitelli.

The council will hold two more work sessions in March before the budget for fiscal years 2014 and 2015 is presented on May 7.

Daphne Chen is the lead city government reporter. Contact her at [email protected]
LAST UPDATED

FEBRUARY 21, 2013


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