City scrimps its way to black ink

Penny pinching and transfers from the city’s redevelopment revenue helped Glendale’s general fund end last fiscal year $13.6 million in the black, according to the city’s annual financial report. But officials have yet to figure out how to pay for $103 million in medical benefits promised to retired employees.

The unfunded liability — which doesn’t currently affect the General Fund that pays for public services — remains a challenge for Glendale as it tries to recover from a protracted recession that has hurt revenues.

The post-retirement medical benefits are also separate from the city’s pension liability, which has grown to $205 million as of fiscal year 2010-11, according to the annual Comprehensive Annual Financial Report released earlier this month.

Pension obligations are a big expense — augmented in recent years by higher rates demanded by the California Public Employees Retirement System — but Finance Director Bob Elliot said those have a payment plan. When it comes to the forecast $103-million liability for medical benefits, the city has yet to figure out how it will pay for it.

“It’s kind of like figuring out what Ferrari we have to buy when we don’t have any money,” Elliot said.

The issue has vexed other local governments, some of which have tried to wriggle out of some of the terms in order to reduce the liability. In November, the California Supreme Court ruled that those health benefits may not be eliminated if they’ve been promised to public workers.

The ruling came after retired employees sued Orange County in 2007 after the medical benefits system was overhauled to save money.

In Glendale, employees continue their medical benefits through retirement, paying premiums comparable to those they paid while working. The retirees are blended into the same pool as younger employees, decreasing their healthcare cost, said Human Resources Director Matt Doyle.

But medical costs have been outpacing premium rates, increasing the city’s liability, according to the report.

Apart from retirement benefits, Glendale’s finances experienced some improvement.

At the close of last fiscal year, which ended June 30, the city had $1.6 billion in net assets, an increase of about $1.6 million compared to last year. The General Fund, which pays for police and libraries, ended with a surplus of $13.6 million — driven by departments coming in under budget and the city transferring money out of its Redevelopment Agency, which faces severe handicaps mandated by the state legislature.

The city also secured concessions from unions, implemented a 1.5% pay cut, and expanded salary ranges to have a lower floor.

“Although Glendale has had a couple of challenging years, the departments have really functioned as a team to address the shortage,” Elliot said. “I think that’s a testament to all the managers in all the departments. It’s tough to dial things back.”

Despite the austerity measures at City Hall, Glendale’s overall economic recovery is expected to be much slower than that nationwide as unemployment relief here may lag, according to the report. High unemployment means less spending, which depresses sales taxes, an important revenue source for the city.

But the report highlighted one budding bright spot more often associated with Hollywood or Burbank — the entertainment industry.

“Though the industry is relatively small compared to other local entertainment hubs such as Burbank and Hollywood, employment in the Glendale entertainment economy is growing very fast,” the report stated.