In the limited space allotted to me, I want to correct recent fictions printed about Moraga-Orinda Fire District finances.
Fiction: $68 million of unfunded MOFD liabilities have built up since the district was formed.
Fact: The district's unfunded liabilities include significant preformation liabilities. About 44 percent of all retirees drawing medical and/or pension benefits retired before the 1997 merger of the Moraga and Orinda districts. Further, another portion of the unfunded liabilities is traceable to vested benefits of active employees who came over in the merger and later retired.
Fiction: The pension liability was fully funded in 2005.
Fact: The pension bonds were issued in 2005 to pay to zero a $28 million unfunded pension liability because the pension fund charged 7.75 percent on the liability, but bond interest was only 5.22 percent, saving the district about $8 million over the life of the bonds. However, the $28 million bond liability, traceable to prior and then current employees, remained.
Fiction: The current board is responsible for additional pension liabilities accruing since 2005.
Fact: The recession has caused increased unfunded pension liabilities in nearly every district in California.
Fiction: The district has no plan to address unfunded liabilities.
Fact: The pension bonds themselves are part of a plan. The district will have fully paid the $28 million liability from committed tax revenues by 2024. After 2024, more than $3 million of annual property tax revenues will be available to address other long-term liabilities. The board's consultant advised at a public meeting on ways to reduce pension liabilities -- some recommendations are in place. Long-term unfunded medical and pension liabilities are the subject of current negotiations with our unions.
Fiction: Nothing has been done to address the district's financial issues.
Fact: Two years ago, the board instructed the current chief to bring back a balanced operating budget, even though the district's financial forecast indicated large future operating deficits.
In the past two years, through rigorous cost containment, the district had an aggregate operating surplus of about $220,000. We also restructured fire chief and battalion chief compensation to reduce or eliminate future pension "spiking" possibilities. Significant cost cutting was achieved without adversely affecting service -- actually, we increased the number of firefighters with paramedic training.
Fiction: The current board increased former fire Chief Pete Nowicki's pension by 20 percent.
Fact: Nowicki was a district battalion chief with vested pension rights, including the right under county pension board rules to sell back vacation time to "spike" his pension. He was induced to leave that position for the harder job as fire chief by a promise by the negotiators that he would do better financially as chief. However, had we not amended his contract, his pension would have been about 10 percent less than a battalion chief's. The board's choice was to break that promise or honor it to some degree.
The board honored the promise by improving his pension to about 6 to 9 percent more than a battalion chief's. In hindsight, perhaps the board should have broken the promise, or granted less, but decisions are made in the moment, not in hindsight.
To remain viable in these difficult times, the district must balance the general operating budget, manage long-term liabilities, and see that equipment and other capital needs, including the repair and replacement of fire stations, are not neglected. Achieving these goals will not be easy, but we have taken significant steps to do so.
This commentary may trigger more editorials -- including personal attacks -- but fair-minded readers should know that the board takes seriously its responsibilities to manage district finances.
The foregoing opinions are my own. The facts speak for themselves.
Fred Weil is president of the board of directors of the Moraga-Orinda Fire District.