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Published on 10/06/1999 All articles from this issue

Los Altos to consider potential $2.1 million in unfunded liability for firefighters

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By Joanne Griffith Domingue

Special to the Town Crier

The Los Altos City Council is scheduled to consider an unfunded pension liability for firefighters at its regular council meeting next Tuesday.

This liability could be for as much as $2.1 million.

"This did not just suddenly appear," said Layne Long, assistant to the Los Altos city manager, "but has existed for several years."

In January 1996, the city of Los Altos no longer had firefighters on its payroll because it had begun contracting for fire protection from the Santa Clara County Fire Department. So the city's contribution to the firefighter pension fund, PERS, changed.

In January 1999, the city received a letter from PERS saying that even though the firefighters were no longer employees, the city must still make a contribution, said City Manager Phil Rose. "That's the first time we were aware of a problem," Rose said.

In February 1999, the city sent a memo to PERS asking questions, including asking why, if there was a problem, it took two years to surface.

"We do have an obligation," Rose said, "but this is not news. What they told us in January, we told the council during the budget process that there was this unfunded liability. I don't know why there was two years of not knowing."

In July and again on Sept. 23, PERS responded to city questions.

PERS makes its calculation of a city's contribution based upon the city payroll.

When the firefighters went off the city payroll, the PERS calculation changed, Rose said. Yet the city still has an obligation to fund the retirement.

"Regardless of why it happened, we own it and are going to pay it," Rose said.

The city will owe $367,899 per year, Rose said, and it has 10 years to pay.

Long said there are still several issues that need to be resolved, one of which is the portion due from Los Altos Hills. The town contracted with Los Altos for fire protection prior to contracting with County Fire.

Long estimates the Los Altos Hills County Fire District will be responsible for approximately one-third of the contributions.