Tuesday, June 8, 2010

Grand Jury: Retirement could bankrupt Mendocino County


Published: Monday, June 7, 2010 at 7:21 p.m.
Last Modified: Monday, June 7, 2010 at 7:21 p.m.

A Mendocino County Grand Jury has issued a report critical of the county’s retirement program, saying it has been ineffectively managed and could bankrupt the county if left unchanged.

“Mendocino County’s short term thinking has resulted in the real possibility of financial disaster, including bankruptcy,” the report states.

The county admits it has problems, but says they’re not as dire as that.

“We’re treading water,” said Chief Executive Officer Carmel Angelo. “We’re really short on revenue, and our operational costs are more than we have to pay for our staff and services, but we really don’t believe we’re anywhere near default.”

High debt payments and inadequate retirement reserves are among the fund’s problems, according to the report. It also points to an earlier practice of funding the retirees’ health benefits from earnings on retirement fund investments, which were hard hit by the financial crisis.

According to the Grand Jury report, the county pays $20 million a year — more than a third of its discretionary budget — in interest on pension obligation bonds issued in 2002 and 2009.

County officials say the annual debt on the bonds is about $7 million a year. Another $13 million is contributed each year to the retirement program, said retirement Administrator Jim Andersen.

Grand Jury members were not available for comment Monday and typically do not discuss their findings.

This report recommends the county pay down its debt, lower expectations about future financial growth and put more money into the retirement fund, which is about 84 percent funded.

County officials say they are working to bring costs in line with revenue, as are other counties throughout the state, all of which have been hard hit by the recession.

The county is in the process of cutting staff, salaries and services, Angelo noted. The county currently is about $5 million short of balancing its $56 million discretionary budget.


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