San Diego to pay into troubled pension fund

By Marty Graham

SAN DIEGO (Reuters) – San Diego will make a required $162
million payment to its troubled city employees’ pension fund
and will look for ways to provide it with additional funding,
Mayor Jerry Sanders said on Friday.

His vow came immediately after the pension fund released
preliminary estimates for how much San Diego must pay into the
retirement system, which handles benefits for 19,000 members.

“We see this number as a floor,” Sanders told reporters at
a press conference. “We now know what the bottom is and we can
work our way up from there.”

San Diego’s pension fund crisis, discovered in February
2004, has shaken the city’s government.

San Diego and its pension fund face a deficit estimated to
be as high as $2 billion, caused by agreements in 1996 and 2002
to increase benefits while allowing the city to pay less into
the fund than the retirement system needed.

The U.S. Securities and Exchange Commission is
investigating the city’s failure to disclose the deficit to
bond investors; five former pension fund officials have been
indicted for concealing information; and six former city
employees face state conflict-of-interest charges. Those
charged have all pleaded not guilty.

Amid the fund’s troubles, San Diego’s previous mayor
resigned months after Time magazine named him one of worst big
U.S. city mayors, and Wall Street reduced the city’s credit
rating to notches above junk status.

Actuaries said on Friday the pension fund’s deficit is
about $1.39 billion and the fund is about 68 percent funded.
Most stable pension funds are at least 80 percent funded.

City officials said the $162 million due to the fund is
less than feared, with some estimates running as high as $300
million.

“The number we got today was not staggering,” said City
Council President Scott Peters. “It was manageable.”

City officials are considering a number of options in
additional to increase city payments to the fund. They include
securitizing tobacco settlement funds and selling pension bonds
when the city is able to reenter the bond market.

(Reporting by Marty Graham in San Diego)