The city's pension payments for employees are projected to grow at an average rate of 7.47% over 10 years
Upland has almost-flat growth of revenue, and steadily rising expenses, including employee retirement costs, and no plan to address its coming pension crisis, according to the San Bernardino County Grand Jury.
The Grand Jury’s 2018-19 report, released to the public on Friday, June 28, outlines worsening economic conditions in Upland and recommends city officials come up with a plan, and soon, to deal with them.
“A complaint was received by the Grand Jury indicating that the financial status of the City of Upland was in poor condition,” the report’s section on Upland begins. “The main concerns were the financial health and practices of the city along with unfunded pension liabilities. In addition, the complaint alleged the city manifested a culture of poor management, hostile work environments, and nepotism as well as possible ‘Brown Act’ violations.”
California’s Ralph M. Brown Act, passed in 1953, requires government agencies to release an agenda of what will be voted on 72 hours before a meeting.
During its investigation, the Grand Jury hired an auditor to perform an independent audit of the city’s financial health.
The good news:
“The Grand Jury did not discover sufficient evidence of poor management, hostile work environments and nepotism to make findings and recommendations at this time,” the report reads in part. “The committee found no evidence of ‘Brown Act’ violations.”
Former City Manager Jeannette Vagnozzi, who was fired in May, had a fraught relationship with city employees during her six months on the job, with 92% of union-represented employees voting in favor of a no-confidence motion in January.
“It confirms what I knew to be true,” Vagnozzi said Friday. “There was no poor management, no hostile work environment, no Brown Act violations.”
But there’s also bad news:
“The City of Upland, while not in great financial shape, was no different from other California cities of like size,” the report reads in part. “The City of Upland did, however, have future financial issues related to employee pension payments.”
From fiscal year 2013-14 through fiscal year 2017-18, the city’s revenue grew at an average annual rate of 0.3%, according to the report. Meanwhile, its expenditures in the same period grew by an average 3.64%. Upland ended up dipping into the red during fiscal year 2017-18, running a $781,911 debt that year. And its pension payments for city employees are projected to grow at an average rate of 7.47% over 10 years, from $8.9 million in fiscal year 2017-18 to $15.6 million in 2027-28.
And then there’s the really bad news:
“Based upon the San Bernardino County contracted audit team and two Grand Jury interviews with the City of Upland’s management, (the Grand Jury) determined that the City of Upland does not have a formal plan in place to fund future payments to the employee pension plan,” the report’s findings read in part.
According to Stanford University’s PensionTracker.org website, each Upland household is responsible for $13,072 in unfunded pension debt from the city of Upland and $186 in unfunded debt from the Upland City Housing Authority.
Americans are living longer and that means more years of pension payments.
Some cities and other government agencies are in much worse shape than Upland. According to PensionTracker.org, the average California household is actually responsible for $78,334 in unfunded pension debt.
Nevertheless, the Grand Jury wants the City of Gracious Living, which is just beginning its search for its seventh city manager since 2005, to get its house in order.
“The City of Upland must develop a formal course of action to reduce their unfunded pension liability and develop a formal plan that funds future pension contributions,” the report concludes.
The Grand Jury notes that increasing revenue would be the best course of action, but concedes that “increasing revenue is not an easy task.”
The Grand Jury also recommends that city officials consider extending retirement dates and pension annuity payouts to lower retiree pension costs and to consider setting up an escrow-type account to set aside funds each year to help pay for future pension payments.
Vagnozzi agreed that Upland’s not finished with the issue yet.
“Work still needs to be done,” she said. “It’s something that I ran out of time on.”
The city has a fund to offset future unfunded liabilities, she said, but the impact of that isn’t visible yet. Upland also eliminated its fire department in 2017, contracting with San Bernardino County and shifting firefighter pension debt there.
According to Vagnozzi, the impact of the 2013 Public Employees’ Pension Reform Act, which pushed back when public employees are eligible to take their pension and reduced how much money they’re paid out, also will help Upland and other cities in coming years.
In the meantime, the Grand Jury wrote that it’s “urgent” for Upland to develop a formal plan to correct its unfunded pension liabilities.
“The next 10 years are going to be the most difficult years” for cities across California, Vagnozzi said.
The Grand Jury has given the city a deadline of Aug. 27 for a response. Upland City Hall was closed Friday, and a call to Mayor Debbie Stone was not returned Friday afternoon.
The Grand Jury’s report also tackled children and family services, county homelessness, county prisons and jails, regional parks, school safety, and senior services centers.
June 28, 2019
Inland Valley Daily Bulletin
By Beau Yarbrough
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