PVE’s Pensions Caused the Structural Deficits and Fiscal Instability
EXECUTIVE SUMMARY:
PVE’s rising Pension Costs and Debt are the cause of the City’s structural deficit. Residents placed Fiscal Stability as a priority over policing in the city’s survey (page 3). The Measure PF tax does NOT include pension funding, but does include increasing staffing from 57.5 (LINK) to 65 (page 8) , the highest level in the city’s history. THIS WILL ESCALATE DEBT GROWTH FASTER, because it does not include fully funding pensions, so more employees will have benefits funded by rising debt growth.
To eliminate our Structural Deficits we must pay the full cost of Pensions, rather than continuing to fund our city on unlimited rising debt. This year the city is paying $2 M in debt service for $20 M in debt. That is 10% in debt service alone, which does not include the semi-monthly payroll payments to CalPERs.
ADDITIONAL INFORMATION:
Pensions are THE CAUSE of the city’s Structural Deficits and Fiscal Instability LINK
Pension solutions: Stop new debt and Pay off existing debt LINK
CA legislators are progressing a new law to spike pension benefits and pension costs retroactively LINK
Bottom Line: LINK
Council unanimously endorsed the Measure PF tax that excludes pension funding and have not paid the full cost causing $20M in debt
Council does not have the will to solve the problem.
It will require more funding or reduced expenses or a combination of both forever until addressed.
How Pensions are Misunderstood, Underpaid and Explode in costs
Shown is information provided to Council at a 3/10/2026 budget meeting.
This shows the extraordinary growth of pension debt payments, which is ascending quickly.
It illustrates Pension Debt (UAL) payments have tripled in the last 8 years.
But, this presentation did not include the full costs of pensions.
Full pension annual expenses are comprised of four pension expenses:
Not shown below: (which is additional millions)
The "Normal Payments" which is the employer contribution each pay period that should cover the full cost for that period (it doesn't, so it causes more debt)
The incremental debt increase because we short-pay each year causing debt to increase
Shown:
The annual Debt/UAL payments (sometimes it covers the 7% interest, sometimes it is a negative amortized payment that toss the interest payment into new debt and, infrequently, it includes a contribution to pay down the principal)
ADPs: These are discretionary volunteer payments to reduced debt (shown - called "Additional")
Staff received 9% compensation increases last year. It states due to cost of living and union contract (MOUs) negotiations. This a bit confusing because the COLAs are part of the increases in the MOUs. The term "MOUs" is used to describe union contracts.
We don't pay the full cost of pensions, so pension debt explodes because it is tied to:
Pay increases (salary + other paid benefits)
Additional staffing
CalPERs under-performance of PVE's investments ($50 million) causing inadequate returns
Changes in the Union contracts where Council provides additional or increased benefits that are pensionable
CalPERs understates the necessary employee and employee contributions for each pay period, so the full cost is tossed into debt
Our Pension debt payments increased to $2.1 M - the grid in the next section below shows how fast these payments are accelerating.
Here is where it is misleading: the full annual expense of pensions are 4 things together, but they exclude 2 of them to understate the expense:
Not shown below:
The "Normal Payments" which is the employer contribution each pay period that should cover the full cost for that period (it doesn't, so causes more debt)
The incremental debt increase because we short pay each year causing debt to increase (not shown)
Shown:
The annual Debt/UAL payments (sometimes it covers the full 7% interest, sometimes it does not and sometimes it includes a contribution to paydown the principal)
The Discretionary volunteer payments to reduced debt (shown - called "Additional")
Look at the UAL/Debt increases year by year below - this is why we have a structural deficit.
Structural Deficit over the last 15 years (2011-2025):
Pension expenses outpaced Revenue growth by 22%
Rather than pay the full pension expenses, the City created $13 M in new debt at 7% interest
Pensions are THE CAUSE of the city’s Structural Deficits and Fiscal Instability
IMPACT:
The City’s Balance sheet shrank by $33 M from 2011 to 2025
From $76.6 M to $45.7 M
The cost of pensions expenses during this period was $33 M
$20.3 M: payments made to CalPERs
$13 M: in incremental debt caused when the city short-payed the full expense (which CalPERS allows)
City docs sourced: Audited Reports: 2011 and 2025, CalPERs report, Finance Dept Pension costs report, FY2025 Budget. Note: GASB statement 68 required cities include pension debt in their financial reports starting in 2015, so 2011 was overstated by $8 M.
COSTS ARE ACCELERATING:
In 2016, CalPERs warned the rate of debt costs would accelerate faster over time, with significant increases compounded annually.
It has been 10 years and the City STILL has no plan.
UAL payments (debt service) and ADPs (optional addition payments on the debt)
As warned, CalPERs’ requirement payments (UAL) continue to rise sharply. Every single year we are told things will magically turnaround in the future, but none of these “predictions” are based on core underlying facts that cause the costs to rise.
The City’s additional payments of $2 M were too low to have an impact.
A plan for Fiscal Stability begins with a FACT-Based costs and causes, and must include steps to mitigate the debt and cost increases using new revenue. The only way to prevent continued escalation of taxes for revenue is to address the cost drivers.
Pension solutions: Stop new debt and Pay off existing debt
Both Pensions problems must be solved:
Stop debt growth ($1.15 M annually)
Pay down existing debt ($20 M)
1. Stop debt growth: city must pay $1.15 million more a year
This graph shows the city pension debt increased an average of $1.15 million a year when the city only paid the required CalPERs payments.
To simply stop the bleeding, the City must pay $1.15 million more every year — just to prevent the debt from rising further
After Council implements their plan to increase staffing to a 25 year high (page 3), and provide salaries that increase faster than inflation, this will accelerate..
2. Pay down existing debt and save the 7% high interest
The City owes $20 million in pension debt at 7% interest, costing taxpayers $1.4 million annually in interest alone.
The Council claims (Page 14) that paying an additional $1.3 million per year will reduce debt by 90%. But:
The June tax measure does not fund pensions. HOWEVER, it does include increasing the staffing levels to the highest in city history, so it will increase the pension crisis.
This forces Residents to pay for ANOTHER tax
Of the $1.3 million CalPERs payment the City proposes, $1.15 million would merely stop new debt growth
This leaves only $150,000 per year to reduce the debt
At that pace, it would take over a century to reach 90% funding — assuming no new benefit increases, no additional staffing, and no higher salary growth.
Shown above: Page 14 of the City’s State of the City Presentation
BUT IT GETS FAR WORSE
The State is progressing efforts to RETROACTIVELY increase Safety (Police) retirement benefits
State lawmakers have re-submitted bill AB 1383, which would boost pensions for safety employees without setting aside funds to meet these pension payments. This means debt will jump overnight. This is the same lethal combination that led to a 10x increase in annual pension spending and debt since 2000.
THE BOTTOM LINE
Effective Leadership Requires Problems are Faced with Facts
Without Structural reform (more money, reduced costs or both), taxpayers face rising costs with no path to fiscal stability.
The City’s plan is to kick the can down the road by passing a massive June tax, that excludes pension reform and pension funding. Then, using these funds, Council plans to increase staffing by 13% to the city’s highest historical level of 64.5 (page 3) without fully funding the full costs of pensions. This will exacerbate the problem and cause more debt.
April 13, 2021: The Council tossed a year long study with real solutions without explanation VIDEO Presentation, that used financial projections based on facts and historical trends. Inaction has caused these funding solutions to increase.
May 10, 2022: The Council created a failed “Pension Policy” using unrealistic projections. Worse, it required funding the city had neither the will or the means to provide. This resulted in debt growth expansion with increased costs. Residents provided the facts VIDEO to Council informing them of their policy’s predictable failure, but Council remained non-responsive and passed the policy without addressing facts provided.
Further information to understand pensions: LINK.