Yorba Linda Water District directors focus on pension, post-retirement unfunded liabilities

Happily, there's more good news to report on Yorba Linda's pension front – for both the local government workers who are hoping to someday collect promised benefits and the residents who help fund the retirement plans through taxes, rates and fees.

My Dec. 1 column noted the city plan to amortize an unfunded pension liability over 20 years instead of 30 years by making extra payments to the California Public Employees Retirement System and pre-funding a portion of retiree health benefits with payments to a trust account.

Similar action has been taken by the elected Yorba Linda Water District directors that serve close to 25,000 accounts in most of Yorba Linda and parts of Placentia, Brea and Anaheim.

A faster pay-down of the liabilities will save the city and district sizable amounts of money.

The water board wants to have 90 percent of the pension liability funded in 10 years and the same percentage of the post-employment benefits liability funded in five years. Currently, the pension liability totals $8.3 million and the retiree benefits liability $2.3 million.

Directors have chosen a “moderate investment strategy” for the funds placed in the pension and post-employment trusts created with the Public Agencies Retirement Services company.

Also, my Oct. 20 column reported that Fitch Ratings, one of three nationally recognized rating companies, awarded an AA designation for the district's $29 million bond sale earlier this year due to the district's “strong financial,” “healthy debt” and “strong operating” profiles.

However, Fitch continued: “The rating is lower than suggested by the financial metrics due to continued concerns about the district's governance and the electorate's willingness to accept rates that guarantee full cost recovery.”

Now, a November Fitch report affirmed the AA rating and stated, “The board has developed a solid financial policy framework for rate setting,” but the “rating remains lower than suggested by the financial metrics due to the history of rate controversy.”

And, according to the new Fitch report: “The rating could come under downward pressure if the district and community fail to maintain consensus on rates that lead to full cost recovery and continued solid financial performance. The rating is unlikely to move higher until rate controversy eases convincingly on a sustained basis.”

Fitch also stated: “The district's supply position is solid after the district gained access to significant groundwater supplies..., reducing reliance on imported supplies. The district will get about 75 percent of its supplies from relatively affordable local groundwater after new facilities reach full production in 2019.”

Directors voted 5-0 in September to require that Fitch reaffirm the AA rating before issuing another one-time credit. A $44.18 refund costing $1.1 million is included in December bills.

A previous $44.46 credit was applied in August.