Saturday, December 28, 2019
[Solano County] The Bottom Line (opinion): Vacaville on road to bankruptcy?
I have been following with keen interest the Vacaville City Council’s response to the recent county’s grand jury report voicing concern with the city’s $357 million unfunded liabilities for pensions and health care payments committed to retired city employees and their families. This deficit continues to grow at the rate of more than $30 million per year.
According to the grand jury report, although few California cities offer this benefit, the city of Vacaville provides lifetime health care to employees, retirees and their children up to the age of 26. I found it quite concerning to learn that the city of Vacaville is currently numbered in the bottom 10 percent of all 482 California cities in terms of financial soundness.
In June 2016, city staff placed on the ballot an initiative to renew the Measure M sales tax, increasing sales tax from 7.878 percent to 8.375 percent for a period of 20 years, suggesting these funds would be used for a variety of city services such as parks, youth and homeless programs.
On Aug. 13, 2019, the City Council passed (with Nolan Sullivan and Dilenna Harris voting against) an 11 percent increase for a group of city employees, plus increasing health and other benefits the impact of which is an additional $3.7 million liability for the city that had not been previously budgeted. Sullivan observed that the new safety employee contract alone will essentially use all of Measure M funds by 2023.
A 12-city analysis of employee compensation has shown that Vacaville pays 46 percent higher salaries and benefits than a dozen other California cities with similar population levels and property values.
The city of Vacaville currently pays more than $25 million per year in pensions for retired employees. One employee who retired in 2010 receives a check for $18,104 per month totaling $217,248 per year. This is just one city employee who retired in his 50s and if he lives until his 90s the city will pay him more than $10 million in pension benefits. Compare this to the $1,461 average monthly Social Security check received by most retirees, or even the maximum $2,861 monthly Social Security benefit for highest salaried individuals who wait until 70 to retire.
Last month the City Council passed yet another memorandum of understanding with two groups of city employees, voting for an 11 percent increase over 23 months for this group, when the cost of living in this country is hovering around 2 percent per year.
While retirement benefits are necessary for city employees, a city can only pay what its cash flow can afford, and our city cannot afford paying a single retired employee $10 million over his lifetime. Eighty-four of the city’s 470 retired employees are receiving pension benefits in excess of $100,000 annually. This is not sustainable.
How long will the city’s balance sheet continue bleeding before it declares bankruptcy like the cities of Vallejo and Stockton? Elections come up next year. Ponder carefully who you want to manage your city, or there won’t be much left of this city to manage.
December 20, 2019
Fairfield Daily Republic
By Danny Wells, Vacaville Citizens for Fiscal Health