Larkspur might tap reserves for retirement benefits payments
Larkspur might draw $2 million from the general fund reserve to put into a city retirement trust fund after deferring payments for the past five years.
City Manager Dan Schwarz told the City Council on Wednesday he is working on the proposal now that reserve funds have been freed up to support the “other-post employment benefits” trust fund, or OPEB.
“It had been the council’s goal that, at a minimum, we should try to put half a million dollars into the trust annually, and we really haven’t done that for five years,” Schwarz told the council. “So I think at least putting the $2 million in gets as close to what we haven’t been able to accomplish and then we’ll keep working to get caught up and advance that goal, because that’s our obligation.”
He said a major cause for the deferred OPEB payments was the Bon Air Bridge replacement project.
“We ran into an issue that we realized we were going to have a cash management challenge with the bridge project,” Schwarz said. So payments stopped going into the trust, “because once it’s in the OPEB trust, it’s locked up in the trust, it doesn’t come back out.”
The $26.7 million project was completed last year. The city expects to wrap up a series of “mitigation projects” this year to offset the environmental impact of constructing the bridge, Schwarz said.
“Now I think we’re in more of a comfortable position where we can catch up on those payments,” he said.
OPEB is a mechanism for public entities and their employees to jointly pay in advance for health benefits that employees will get when they retire. The city’s payments equal about $400,000 to $500,000 a year, and the city’s total OPEB liability is about $12 million, Schwarz said.
A more detailed presentation on the funding and liability is expected to be presented in the next few months, Schwarz said.
Overall, the town’s general fund reserve is in good shape thanks to strong property tax and sales tax revenues, Schwarz said. Property taxes are projected to be about $15 million for the fiscal year, up from $13.43 million.
One of the primary purposes of the reserve fund is to set aside money for capital improvements, Schwarz said. If the city moves $2 million into the OPEB trust, there would be about $5 million remaining for capital improvements.
After those expenses, the city will still be able to maintain at least $5 million, about 25% of the operating budget, in its reserve, Schwarz said.
One project officials will be considering is adding community rooms and a disaster preparedness center to the new library project on Rose Lane, Schwarz said.
Vice Mayor Scot Candell said the potential project sounds like a candidate for grant funding.
Schwarz said it’s difficult to see what’s available because it hasn’t been decided if the council wants the disaster preparedness center as part of the project.
“Most grants we see along these lines are what are called shovel-ready grants, meaning you actually have to be ready to break ground, and we’re not at that point,” he said.
City Hall is also in need of a big makeover. Schwarz said money could be drawn from the reserve pot to pay for an assessment of the building, which would help with project decision making, he said.
Schwarz said he expects to make proposals in the winter.