After six months of study and negotiation, the city of more than 36,000 located in the foothills of the San Gabriel Mountains east of Pasadena developed an unusual five-point “CalPERS Response Plan“ that does not cut staff or services.
Instead, the plan cuts the pay of all employees, pays off current pension debt with a large bond, increases the hotel-bed tax, adds a special parcel tax on new real estate development, and speeds up payment of new pension debt.
There was no sigh of relief earlier this month as the city council, acknowledging that Monrovia is in better financial condition than many cities, approved the plan that includes rare pay cuts negotiated with city unions.
A bond could pay off a pension debt totaling $112 million, making the Monrovia pensions fully funded. But in a system that expects to pay 60 percent of future pension costs with a risky stock-laden investment portfolio, a plunge in a record-high market could quickly add new debt.
“The greatest challenge to Monrovia’s long-term fiscal sustainability — and the fiscal sustainability of government agencies in California — relate to unfunded CalPERS pension cost obligations,” said Chi’s introduction to the Monrovia plan.
He said “the impetus for the current pension crisis in California” began when then-Gov. Gray Davis signed a CalPERS-sponsored bill, SB 400 in 1999, that allowed local governments to give safety employees a large pension increase.