Calpers pension obligations hound Vallejo

Reuters
Vallejo, a port city of 115,000 near San Francisco that was staggered by the closure of a local naval base and the housing market meltdown, filed for Chapter 9 bankruptcy protection in 2008 with an $18 million deficit.

During its three-and-half year bankruptcy, the city slashed costs, including police and firefighter numbers, retiree health benefits, payments to bondholders and other city services.

The only major expense the city did not touch was its payments to the $260 billion California Public Employees Retirement System.
"We realized we did not have the time or the money to take on a giant behemoth like Calpers," said Stephanie Gomes, Vallejo's vice mayor.
Now city leaders say that growing, and unexpected, costs to Calpers are putting its post-bankruptcy budget under enormous strain. The city budget shows a deficit of $5.2 million for this fiscal year, and that is set to rise to $8.9 million next year unless significant cost savings can be found.

When Vallejo entered bankruptcy in 2008, its annual employer payments to Calpers were $8.82 million, or 11 percent of the city's general fund, according to the city's finance department.
When it exited bankruptcy at the beginning of 2011, the payments to Calpers were just over $11 million, or 14 percent of the fund. The latest budget pegs those payments at $15 million, or 18 percent of the general fund.

The increase comes largely from the recent decision by Calpers to lower its projected investment return rate, from 7.75 percent to 7.5 percent, and to change the way it calculates long-term pension maturity dates.