Pasadena Pension Plan OKd : Finances: Funding of the retirement system for retired police officers and firefighters has been guaranteed, ending what sometimes seemed an insoluble financial riddle.

After eight troubled years that encompassed a citywide election, a lawsuit, passage of a special bill in the state Legislature and the labor of a 30-member citizens committee, the city’s retired firefighters and police officers can breathe a sigh of relief.

Funding for their pensions is finally guaranteed.

But the guarantee comes at a steep price. Pasadena will pay $133 million over the next 53 years to pull the Fire and Police Retirement System out of debt.

Under a complex plan unanimously approved last week by the Pasadena Board of Directors, the city will tap four revenue sources--including $3 million annually from the city’s General Fund--to ensure that 434 police officers and firefighters receive the benefits they were promised by the voters in 1969.

City officials patted themselves on the back last week after finally finding an answer to what had seemed for years an insoluble financial riddle. But other city debts remain: among them, $1.2 million in sidewalk repairs, $8 million in park improvements, and $32 million in improvements to streets and city-owned buildings.

“If all cities were run this way it would be very interesting (to know),” said Leigh Rosenberg , a volunteer with the city’s Endowment Advisory Commission.

But, Rosenberg added, Pasadena’s financial health is good. The city recently earned an improvement in its bond rating from Standard & Poor’s and Moody’s Investors Service. Its operating budget came to a hefty $100 million last year.

For years, city officials had put certain city expenses on the back burner. Finally, problems with the pension plan forced them to examine these expenses, starting with the debt-plagued retirement system.

“It’s the single biggest issue we’ve tackled in the Endowment Advisory Commission,” Rosenberg said.

The problem with the pension plan begin in 1969, when city voters approved unlimited cost-of-living increases for the city’s retired firefighters and police officers. Also approved was a companion measure to allow survivors of deceased retirees to claim 100% of the retirees’ benefits.

The change was a generous one. The retirement system had previously had a 2% cost-of-living cap. In addition, most retirement plans placed a limit, from 50% to 80%, on the amount that survivors could claim from a deceased retiree’s benefits.

When double-digit inflation rates in the late 1970s increased the fund’s future payments from $50 million to $120 million, the city found out just how generous the voters had been. The retirement system was in trouble. It lacked enough money to pay the promised benefits.

In 1977, the system was closed to incoming firefighters and police officers, who now enroll in the state-run Public Employees Retirement System. Belatedly, voters in 1981 approved a 2% cap on those still in the city-run system. But a lawsuit by the police and firefighters associations and a subsequent court decision nullified that vote.

In June, 1985, with Director John Crowley at the helm, a 30-member citizens group was created to find a solution. Under Crowley’s direction, the commission turned to the state Legislature for help to modify a $21-million downtown redevelopment loan. Senate Bill 481, passed on Pasadena’s behalf, allows the city to direct money from increased tax revenues in the redevelopment project to the pension plan. It forms the backbone of the retirement system approved Tuesday.

It provides that the city’s redevelopment project will contribute $75.9 million to the plan from 1989 to 2014. Another $3 million annually will come from the city’s General Fund until the year 2030, which will bring in $42.2 million.

Finally, money now used to pay off bonds will be shifted to the retirement fund when the bonds are paid off. Thus, in 1998, when the city completes payment on $20.8 million in bonds issued for construction of the downtown conference center, the $1.6-million annual payment will be available for the retirement system. Another $118,343 annually will be available beginning in 1993, when the city finishes paying off a $700,000 state loan for conversion of street lights to high pressure sodium bulbs. Both cash diversions will continue until 2042.

The city is also investigating whether money generated from a city-owned low-income senior housing project, the Concord-Pasadena Apartments at 275 Cordova St., and from parking structures in Old Pasadena and Plaza Las Fuentes could be used to replace the General Fund contribution.

“It reduces the unfunded liability to zero,” said City Finance Director Mary Bradley. “Pretty neat, huh?”

But the commission and city manager have no idea where the city will find money for other unfunded liabilities such as maintenance on city-owned buildings and park and sidewalk improvements.

Officials continue to look for $8 million to make park improvements recently identified by the city’s Park and Recreation Commission. In addition, the need for $55 million to finance street and sidewalk repairs has only been partially met by raising $23 million from bond-like certificates. Another $16 million worth of certificates will be issued next year.

And last week, the board added to the sidewalk debt by committing the city to an extra $1.2 million in sidewalk repairs.