The San Diego City Council's Budget Committee was divided Monday on the best course of action for increasing the city's fiscal reserve level.
The committee voted 3-2 in favor of putting the plan supported by Budget Committee Chairman Todd Gloria and Councilman David Alvarez before City Council for further discussion.
Councilman Scott Sherman and Councilman Mark Kersey cast the dissenting votes.
In response to Monday's committee vote, Mayor Kevin Faulconer said he has asked City Council President Sherri Lightner to schedule a vote on the pension plan he supports.
The standoff stems from a proposal by Mayor Kevin Faulconer to set aside $21 million of surplus money in a special reserve account that would be tapped if the city's required pension contributions spike in a future year. City officials expect the 2016 pension bill will be $6 million higher than originally projected.
The mayor wanted to set up the pension stabilization reserve in the budget for the current fiscal year, but the City Council tabled it for more study. Some council members, including Gloria and Alvarez, objected to setting aside a significant amount of money for a solitary use.
"Some might wonder if this isn't resurrecting a pension boogeyman," Gloria said. "On the list of things that's not getting done, paying the pension bill isn't one of them. It is a solution to a problem that does not exist."
Gloria told City News Service the city's track record of paying its pension bill on-time for the past 11 years indicates the pension crisis of years past has been eliminated. There are other needs the city needs to address, however, including properly funding infrastructure, according to Gloria.
"If we continue not funding infrastructure at the rate we're going, our roads will be worse in 2020 than they are today," Gloria said. Gloria said the city's infrastructure debt is at least $5 billion.
Gloria and Alvarez said they favor a proposal by the city's Independent Budget Analyst's Office to raise the general fund reserve from 14 percent to 16 percent.
The change would include language stating that increases in the city's pension bill would be an eligible use for the reserve fund, in order to avoid service reductions in other areas of the budget. The general fund pays for basic services like public safety and libraries.
The council's reserve policy would be amended to have the mayor come up with a plan to replenish the reserve funds within one year, according to the IBA proposal. The mayor's office maintains that it has the better plan.
"The flawed alternative before the Budget Committee today would balance the budget with a rainy day fund meant to protect neighborhood services in times of crisis," Faulconer said in a statement. "The right thing to do is to create a pension reserve so that when pension costs balloon, which is expected to happen next year, we can continue making investments in streets, parks and other programs."
Sherman said he believes creating a special pension account for unanticipated costs is the best route to take. He said he's heard pension costs could again become a problem in San Diego, as it has recently in other cities.
"We've made our payments on time," Sherman said. "Isn't that what you're supposed to do? It's like taking credit for raising your kids the right way. This is a solution, in my opinion, in preparation for a problem."
Credit rating agencies are watching the debate. San Diego's finances need to be in the best shape possible because several infrastructure proposals may send the city into the bond market for financing.
Rating agencies look at how cities use their reserve funds, which aren't supposed to cover expenses city officials see coming ahead of time, according to city officials.
