Healdsburg to Refinance Pension Debt

Healdsburg officials this week took the final step this week to refinance the a $9 million pool of debt that the city incurred when it joined CalPERS, the state retirement system.

City Council also finalized a new "second tier" of pension benefits for new public safety personnel hires.

At Tuesday's City Council meeting, council members voted 3-0 to proceed with issuing up to $9 million in bonds to pay back and then refinance the "side fund" debt. The refinancing is expected to save $900,000 over the decade-long term of the debt repayment.

Voting in favor of the move were Vice Mayor Susan Jones and councilmembers Tom Chambers and Jim Wood. Mayor Gary Plass and Councilmember Steve Babb were absent.

City Council members made clear on Tuesday that the "side fund" refinancing is separate from and won't affect the $26 million the city still owes in unfunded pension liability. That is the amount of gap between the money needed to pay off all employees' future pension benefit obiigations and the money currently accumulated in the city's pension fund.

The second pension action on Tuesday, the creation of the "second tier," is not expected to dramatically reduce the $26 million in unfunded liability, but it could slow down the rise of that gap.

Under the "second tier," new hires will be eligible to retire at age 50 and collect 2 percent of their salary for every year of service. The current "first tier" benefits are 3 percent at age 50.

Healdsburg Fire Chief Steve Adams said later he understood the "second tier" action was necessary, but he said it could hamper future recruitment and retention efforts.

"If another fire agency has an opening, and their pension benefit is 3 percent at 55, that could be very attractive to someone on our force," he said. "If that person left, we would lose all the time and money we spent to train that person."

The new pension benefits package also calls for the salary calculation formula to use the average of the three highest years' salaries, instead of the current formula, which uses the final year's salary -- presumably a higher figure than the average of three years.

Last month, became Healdsburg's first public safety employee to be hired under the new "second tier" pension benefits package. Benner had been a reserve officer prior to his hiring on the force.