Villa Park May Cut Ties to CalPERS

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The Villa Park City Council could vote Tuesday to end its contract with the California Public Employees’ Retirement System or CalPERS, the world’s sixth largest pension provider, in an effort to reduce increasing pension costs.

The CalPERS move follows an Orange County Grand Jury report that called for greater budget transparency in Orange County cities.

The report indicates Orange County cities’ unfunded pension liabilities have been increasing on an annual basis since 2007.

The city council also will decide if it will support an Assembly bill designed to hold off likely gasoline and diesel tax increases.

The bill, AB 69 by Assemblyman Henry Perea (D-Fresno) would delay putting vehicle fuels under the state’s cap-and-trade program until January 1, 2018 – three years later than originally planned.

The cap-and-trade program is part of California’s Global Warming Solutions Act of 2006, which aims to drastically reduce the amount of climate-changing emissions before 2020. The program, however, permits energy industries to buy allowances offsetting greenhouse gases they produce including:

Carbon Dioxide

Methane

Nitrous Oxide

Hydrofluorocarbons

Perfluorocarbons

Sulfur Hexafluoride

Nitrogen Trifluoride

So far, gasoline and diesel fuels have not been added to the program. When they are, the California Air Resources Board, which implements the law, estimates prices at the pump could rise anywhere from 16 to 76 cents per gallon.

“A delay may be the best we can hope for at this time,” wrote Councilwoman Deborah Pauly in a letter to the council, adding that a tax increase of this size would make it difficult for residents who are still recovering from the Great Recession.

The delay, Pauly said, would give businesses and individuals, many of whom are unaware of the tax, time to prepare for the impact.

Californians currently pay 68-cents per gallon in federal and state gas taxes, the second highest in the nation behind New York, which pays about 70 cents, according to the American Petroleum Institute. The national average is about 50-cents per gallon.

For its pension costs, Villa Park, a north OC bedroom community of about 5,000, has a shortfall of about $3.5 million, leaving 17.5 percent of its employee pension costs unfunded, according to the grand jury report.

Gov. Jerry Brown enacted sweeping pension reforms in 2012 aimed at reducing pension payments for most public employees hired after 2013.

But because many public workers were hired before 2013, they are grandfathered into the old system, and reforms likely won’t make a dent for another decade, the grand jury report states.

Earlier this week, Brown blasted the CalPERS board for including temporary pay hikes in pension calculations and watering down the Public Employees’ Pension Reform Act, according to the Sacramento Bee.

In 2013, Canyon Lake, a Riverside city of about 11,000 people, terminated its contract with CalPERS after the board raised its employee contribution rate by 50 percent.

The city council’s regular meeting is Tuesday at 6:30 pm. Read the full agenda and staff reports here.

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