City outlines pension options

December 14, 2018

DIXON – Fire and police pension obligations continue to grow, and the City Council is looking at several possible options to address the rising cost.

The council spent about 2 hours at a special meeting Thursday going over a list of ways to combat the projected pension payment increases, which will go from $1.7 million this year to $2.2 million in fiscal year 2024.

“Based on 5 year revenue and expense projections, the city cannot sustain this increase without significant increases to city revenues or significant cuts to city operations,” City Manager Danny Langloss said.

City expenses are expected to outpace revenues by $244,000 by FY23, he said.

The options that Langloss compiled across the last several months and outlined in an 18-page pension planning document are to: add at least $3 million to the fire and/or police pension system with city dollars or through issuing bonds; lay off police and fire staff or other city employees; place a referendum on the ballot asking to increase property taxes or sales tax; bring in considerable retail development to increase sales tax revenue; and upping city fees to bring in more revenue or finding more areas to cut in the budget.

Langloss said there’s “no magic bullet” to address the problem, that some options would be a last resort, and it’s likely going to take a combination of options to find a solution.

Additional possibilities would depend on state legislation, like creating a downstate public safety pension fund similar to the Illinois Municipal Retirement Fund or other pension reform.

Mayor Li Arellano Jr. and actuary John Wilhite said one of the challenges about adding millions to give a boost to the pension funds is timing. If they put in the money and there’s a downturn in the market that results in negative investment returns, it’s going to be costly.

“The cost of being wrong in the front end of this deal can be very expensive,” Wilhite said.

Councilman Mike Venier said there’s no easy answer to the problem.

“Any sustainable solution is going to hurt somewhere down the line,” he said. “There’s no clear-cut solution.”

In 2010, the state passed legislation requiring cities to have their pension systems at least 90 percent funded by 2040, and a few years ago, life expectancy tables were changed for the first time in decades, which caused unfunded pension liability to grow significantly.

The council has talked about different pension funding solutions during the last few years, the main one being to get its fire pension fund past $10 million to have more investment flexibility in hopes of getting higher investment returns.

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