Rohnert Park to use reserves and bonds to help pay its pension obligations

In a move expected to save Rohnert Park between $44 million and $50 million in pension costs over the next two decades, the City Council approved spending $24 million from existing reserves and the issuance of pension-obligation bonds to pay down the debt.

Because the state pension fund CalPERS requires the city to pay its unfunded liabilities at a 7% interest rate, the bonds would essentially act to refinance the city’s debt at a lower rate, Finance Director Nishil Bali told council members.

Rohnert Park’s unfunded liability is $53.8 million, which represents the difference between the estimated costs of future retirement benefits promised to city employees and the assets that have been set aside to pay for those benefits.

An updated total liability may be substantially lower, though, Bali said, based on recent investment gains.

“Our preliminary analysis shows that using the recommended combination of reserves and debt refinancing would save the city upwards of about $2 million in pension costs every year,” he said.

City Council members voted 5-0 to go forward with the plan.

When she first read about the proposal to sell bonds to finance pension debt, Councilmember Susan Hollingsworth Adams said it concerned her. But City Manager Darrin Jenkins compared it to refinancing a home loan for a better rate to save money in the long run, which made more sense, she said.

“We’re not just a reactive bunch of folks here running around like chickens with our heads cut off. There is thoughtful deliberation,” she said. “This just rages forward on putting the city in an excellent financial position.”

Councilmember Pam Stafford agreed, saying Bali and Jenkins put her mind at ease about refinancing the debt.

“The state likes to say ‘We’re going to make 21% on our investments’ and then they come back and say ‘Oh darn, we made 6%.’ It sounds like we’re going to be safe doing this, and my only concern was the safety,” she said.

The city will use $24.3 million from its general fund, including $7.7 million from reserves, $10 million from a separate facilities reserve and $6.6 million from the city’s pension trust toward the debt.

The remainder would be paid by bond proceeds.

Stafford said Rohnert Park is “in decent shape compared to a lot of cities because we started a long time ago paying down our debt.”

“It’s nice to be optimistic, but when you’re talking about finances, you have to be more conservative,” Stafford said. “Our employees have had to make concessions. Things we were giving away 20 years we can give anymore. Now people have to pay more into their health care and retirements.”

You can reach Staff Writer Lori A. Carter at 707-521-5470 or lori.carter@pressdemocrat.com. On Twitter @loriacarter.