PIEDMONT -- Measure A, the ballot measure to refinance about $7.8 million in "side fund" pension obligations to the Public Employees Retirement System (PERS), passed by a resounding margin in Tuesday's election.
The measure needed a simple majority, 50 percent plus 1, to pass. Total votes were 1,940 for and 400 against, with all six precincts reporting. The measure passed by 82.91 percent. Because the measure passed with more than a two-thirds majority, the constitutional debt limit is also satisfied. Section 18 of the California Constitution prohibits cities and counties from incurring indebtedness exceeding one year without a two-thirds vote of the people.
Measure A will allow the City Council to authorize refinancing the side fund at a lower interest rate through issuance of new bonds or other indebtedness up to $8 million.
PERS currently charges the city an interest rate of 7.5 percent. With favorable market conditions, the Council could refinance for a lower rate.
A side fund was established in 2003 when PERS adopted a requirement that all pension plans with fewer than 100 active employees be assigned to a risk sharing pool. The various plans joining the risk pools had different levels of unfunded liability; therefore, side funds were established.
Last May, the city's Budget Advisory and Financial Planning Committee reviewed the side funds and recommended they be refinanced to save money.
The city is obligated to pay the PERS side fund with interest regardless. It was estimated the city could save $600,000 to $700,000 over the next nine years by refinancing at a lower rate.
Finance Director Erick Cheung said that refinancing would reduce the current employer contribution rates for a cost savings.