Atherton's unfunded liability debt will be $2 million lighter with the City Council's decision to apply that portion of the town's $4.9 million surplus toward employee retirement obligations.
The council on Sept. 18 chose the high side of City Manager George Rodericks' recommendation to allocate between $1.1 million and $2 million to whittle down the liabilty, which represents the cost of health benefits provided to retirees. The large surplus, Mr. Rodericks wrote in his staff report, is a result of three years of efforts by the town to restructure its operations and "right-size its structural deficit situation."
Now, he wrote, "the town is in the rare and enviable position of meeting its mandatory reserve requirements and still maintaining a surplus in the unallocated general fund balance." The mandatory reserves include 15 percent of the town's operational budget for emergency funds and 20 percent for operational spending.
A healthy increase in property tax revenue in the last two years a 9 percent rise both years after several years of near stagnation also contributed to the surplus.
"Buying down the long-term liability is money in our pocket," said Councilman Jim Dobbie. "The sooner we can pay it down the better." The sentiment was echoed by the other council members, and the vote was unanimous.
The town has managed to pay down its liability for pension costs, although there's still some concern about additional costs resulting from overly optimistic investment predictions by CalPERS, the state's public employee retirement agency.
"There remains debate about the viability of CalPERS' investment rates of return and any adjustments in the assumptions," Mr. Rodericks told the Almanac. Any adjustments in the assumption will have a direct impact on the town's contribution requirements, he said.
The robust surplus is prompting talk by some council members and members of the town's finance committee that full assessment of the town's parcel tax may not be necessary.
The council put a parcel tax renewal measure on the November ballot, but the tax language allows the council to reduce the amount assessed or even suspend the assessment if it determines the additional revenue isn't needed for the following fiscal year.
Most Atherton homeowners pay $750 annually in parcel taxes. The tax expires at the end of next June.