Compton reviews plan to pay down CalPERS unfunded liability; staff says payoff could lower pension levy by about 20%

Compton’s City Council and staff on Oct. 28 heard a detailed presentation on the mechanics and costs of the city’s CalPERS unfunded actuarial liability (UAL), and about how a large, one‑time payment could lower long‑term pension costs.

At a workshop, consultant Dan Matu Chevich told the council that CalPERS bills shortfalls that accrue interest (he cited a 6.8% annual accrual rate) and that the city is facing a combined UAL for its miscellaneous, fire and police plans of roughly $152 million. "And so they send you a bill for that unfunded liability that ... accrues interest at 6.8% per year," Chevich said.

Why it matters: paying down a principal balance now would reduce the amount of interest the city pays over time. Staff framed the tradeoff as a choice between paying more now or paying more — and paying interest — later. Using the presentation’s examples, paying down roughly $65 million to $75 million in principal could save an estimated $42.7 million in interest over time and lower next year’s pension levy by about $7.2 million, a reduction staff described as roughly 20% of last year’s levy (about $35 million).

Council members pressed for operational detail. One asked whether the city treasurer had verified available cash; staff said their understanding was that the city held in excess of $100 million in the relevant fund but that the treasurer was not present to confirm the exact balance. Council members also asked how much of any savings would flow to residents; staff said the levy could be reduced when the levy is set in July, and a prior staff estimate suggested the average citizen might see about a $200 reduction on the pension component of a tax bill in the first year of a paydown.

Staff cautioned about liquidity and market risk. Presenter Chevich and staff noted that state investment rules (Government Code §53601) limit the city’s local investing options and that some portion of reserves should be retained to meet volatility. They also described a strategy used by other municipalities: set aside funds in a dedicated pension trust to smooth market swings rather than spend the entire balance at once.

Public commenters urged more study before action. Charles Davis, a former city clerk, urged the council to postpone any final decision and review all components of the retirement fund. Multiple residents asked for the treasurer to attend future discussions and for greater clarity about how a payment would affect property tax bills and other city priorities.

What’s next: the Oct. 28 session was a workshop for information and did not include a binding vote to commit city funds. Staff recommended council consider options, and any formal decision to use city funds would return to the council for action and appear in budget/levy calculations next spring.

Key authorities referenced in the discussion included CalPERS billing practices and state limits on municipal investments under Government Code §53601. The workshop materials and staff analysis were left on record for follow-up and verification by the treasurer and finance staff.