Editorial: Sacramento must tackle unfunded debts, worker benefits

For the first time, the City Council is getting a full picture of Sacramento's balance sheet – and it's not pretty.

The numbers being presented this evening are staggering – nearly $2 billion in long-term unfunded liabilities, those supposed to be paid out of future revenues. While Sacramento isn't going bankrupt, the report ought to be a call to action. City Manager John Shirey describes the situation as "serious but manageable" as long as the city prudently reduces its liabilities.

The big three categories are:

• $950 million in retirement benefits.

Most worrisome are health benefits for retirees, who can be covered by the city's insurance plan and also receive monthly subsidies. The city is budgeting about $11 million a year to pay benefits, but would have to set aside $43 million annually to fully keep up with the $440 million liability.

Shirey says that the city has no choice but to reduce or roll back those benefits in the next round of union contracts this year, not only for future retirees but for current ones. This will be a severe test of political will for council members.

Retiree medical care is a looming crisis for local governments and the state. Sacramento County has cut its subsidy in recent years, and Gov. Jerry Brown wants to reduce the state's $62 billion liability.

The city also faces fast-rising pension liabilities, though it has already taken steps to lower costs and will have more authority under a new state law. In the labor negotiations, the city needs to get police officers to pay toward their own pensions – something firefighters and other workers have already agreed to do.

• $823 million in bond debt.

It is being paid down on time, and, unlike some cities, Sacramento did not go on a borrowing binge during the recession. The council took the responsible vote to increase water and sewer rates last year to fund $256 million in projects, including an upgrade of a water treatment plant.

• $167 million in other future costs, including insurance claims, development fee credits and landfill closures.

It's stunning that a report like this hasn't been done before. Now, council members no longer have the excuse that they didn't know; they must be frugal and start setting aside money to cover these liabilities.

The report also reinforces how important it is that City Hall gets it right on economic development so it can reap more revenue without raising taxes.

This evening, Shirey happens to be presenting a draft of his five-year jobs strategy that focuses on attracting private companies from outside the region and is designed to dovetail with the regionwide, business-led Next Economy plan.

Among other goals, Shirey's blueprint calls for developing the downtown railyard, K Street corridor and the riverfront; updating the zoning code to make it more business-friendly; opening an innovation center for startups; and helping launch a regional food and agriculture alliance.

For all concerned – city officials, employees, retirees and taxpayers – tax revenue from new jobs is the least painful way for Sacramento to pay what it owes.

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