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Council OKs Use of Cell Leases for Retirement Costs

First published in the Nov. 19 print issue of the South Pasadena Review.

The City Council last week determined that it would dedicate millions of dollars in cell tower lease revenue toward its retirement liabilities.
It will have to figure out, however, whether it prefers an immediate payout or if it would rather invest those dollars now to make a more substantial future payment. These discussions took place during a study session on Wednesday, Nov. 10, in which the council examined the lease revenues and the city’s capital projects program.

The council made its decision on the recommendation of the city’s Finance Commission.
“There is widespread agreement and acceptance of the Finance Commission’s recommendation that the proceeds of the cell tower revenue would be most appropriately expanded to help us pay down our CalPERS liability,” Mayor Diana Mahmud said, “and for the benefit of members of the public that may be watching, if we do that, that has benefit in future years in that it will reduce our annual payments to CalPERS.”
For the current fiscal year, there is roughly $4.3 million expected to be used toward CalPERS, the state’s public employment retirement system. In late September, the Finance Commission recommended that $600,000 of that revenue be put toward Other Post-Employment Benefits, or OPEB, which is currently underfunded by an estimated $17.4 million.
The remaining $3.7 million will go directly to CalPERS in two major plans: miscellaneous and safety. Miscellaneous is 71% funded and safety is 68% funded.
“The best way to explain unfunded liability to the general public,” Interim Director of Finance Ken Louie said, “is if every employee walked out the door today, no one ever worked again, no one was ever hired again, we would only have 70% set aside for all our future liability to pay the retirement of people.”
The advantages of paying CalPERS directly include an immediate savings of 7%. It’s also an immediate reduction in pension liability and is more secured investing. However, the council wants to explore trust options, which allows for more investment strategy choices and more visibility in those investments.
“It would be helpful to find out what would be the most financially advantageous to the city,” Mahmud said.
The council also received an update on the Capital Improvement Program, or CIP, at its study session. The CIP is the community’s vision for short- and long-range development and improvements for residential and business benefits.
The previous CIP was adopted in 2019 and included 26 projects in eight categories. Projects are mostly related to streets, infrastructure, parks and large-scale citywide technology. Previously completed CIP projects include the compressed natural gas station, the Monterey and Orange Grove pavement project and Graves Reservoir.
A handful of projects remain to be completed. Sewer repair was one of the big-ticket items, with about $2 million of proposed funding over five years.
“In evaluating what our sewer and water costs would be in the next five years though the CIP process,” Deputy Public Works Director Ted Gerber said, “we would understand the funding gap and how we want to achieve the gap with either grant funding or with adjusting sewer rates in this year’s sewer and water study.”
Other CIP projects include permit management software ($150,000 over five years) as well as the Grevelia and Berkshire pocket parks ($1 million over five years). Street repairs, sidewalk repairs and water main repairs are also on the list.

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