In a controversial vote, the Metropolitan Transit System (MTS) has decided to postpone its pension payments, a move that will cost $51 million. This decision, made to avoid a budget crisis, has sparked debate among officials and the public alike. The MTS board approved the plan with a 12-2 vote, but the long-term implications have raised concerns.
The strategy involves delaying the pension debt payoff from 2038 to 2045, with larger annual payments during the extra seven years. While this provides short-term relief, it comes at a significant cost. MTS officials admit that the higher payments in later years will ultimately add $51 million in costs, a figure that was only disclosed after repeated requests from the board.
This bold move is the first of its kind since 2012, as MTS essentially reboots its pension system. Instead of sticking to the original 12-year plan, the board voted to extend it to 20 years, aiming for lower short-term payments. However, this decision has sparked controversy, with critics questioning its responsibility and potential impact on future boards.
San Diego Councilmember Vivian Moreno, who voted against the move, expressed her concerns about the $51 million cost increase. She had to push for the calculation, which was not initially provided, and was surprised by the staff's estimate of $25 to $40 million. Only after further pressure was the full $51 million revealed.
The new payoff plan reduces the July payment from $21.9 million to $16.5 million, with further reductions over the next six years, resulting in a total savings of $37.3 million. However, the annual payment rise due to salary increases has also been delayed, causing a temporary increase in the deficit.
While some view this move as irresponsible, MTS officials and the actuary emphasize that it aligns with accepted actuarial principles. They argue that the plan ensures the pension system's debt is paid off without annual increases until 2045. However, the debate continues, with questions about the long-term sustainability and the impact on public services.
