Bakersfield residents were sharply divided when the city announced it planned to use some Measure N funds to change the way it pays for its pension system, but city officials say the move is sound financial practice.
“It’s an immediate opportunity to have an immediate impact on the city’s budget in a positive way,” said Assistant City Manager Chris Huot, adding that the city expected to save more than $800,000 in the first year, which could then be spent on other city services.
In total, the change is expected to save the city $8.7 million over seven years.
In order to achieve the savings, the city plans to switch from paying for CalPERS on a monthly basis to paying for it once a year.
That will eliminate a 7.5 percent interest rate the CalPERS system charges municipalities that pay on a monthly basis.
“When it came to pass that we could save $8.7 million in addition to reduced PERS costs, we were achieving two or three goals that we had in place anyway,” said City Manager Alan Tandy, who noted the city would still be able to pay for the 100 police officers it promised to hire with revenue from the sales tax, along with achieving the other goals the city planned for the sales tax increase.
But the city does not currently have enough money in its cash reserves to make the estimated $20.8 million payment. So the City Manager’s Office plans to inject $12 million from the sales tax revenue into the city’s cash reserves, which have been depleted since 2008.
“Putting more money in the general fund reserves in all likelihood would have been recommended as a component of this program irrespective of the savings that we can realize,” Tandy said.
The city will then use the savings to help bolster the cash reserves, which currently stands at $13.1 million, and help pay for additional city services not covered by the 1 percent sales tax increase, Tandy said.
However, the move to provide any Measure N funding to CalPERS stirred up fear shared by many in Bakersfield that the city would not use the money as promised.
“I thought voting for this measure would have increased jobs for our city, including police and fire,” Pam Simpson said on Facebook. “Very disappointed as most voters will be.”
City officials say the plan to hire police officers and firefighters, along with increasing economic development and homelessness efforts is still in effect.
Tandy said less than 15 percent of Measure N funds would go to CalPERS in the early years the city sees revenue from the tax increase.
He said the city could still inject Measure N money into its cash reserves and meet the goals it told the public during last year's election.
In March, the city will present its plan for the Measure N funds to the newly appointed oversight committee. In May, the city council vote on the city’s plan for next fiscal year’s budget.