Dixon mulls adding $3 million to fire pension fund
DIXON – The city wants to spend an extra $3 million on its fire pension fund to open up investment opportunities, but there’s no answer yet on where that money would come from.
The fire pension system has assets just south of $8.2 million; state statue limits investment options for funds with less than $10 million.
Basically, surpassing that ceiling would allow more flexibility in investing, and that could lead to higher returns and more savings down the road.
Investment returns last fiscal year were 5.4 percent for fire pensions, compared to 8 percent for police pensions, a fund that goes past the $10 million threshold, actuary Todd Schroeder told the City Council earlier this week during a pension work session.
Putting more money into the fire pension isn’t a new concept for the city, but the idea is gaining more traction because of increased pension liabilities in general and the state’s mandate that municipalities fund those systems at 90 percent by 2040.
Fire pensions are about 46 percent funded.
“We all understand that there’s issues with pensions across the board,” Dixon Fire Deputy Chief Mark Callison said.
By putting in an extra $3 million and assuming a rate of return of about 6.75 percent for the next few years, fire pensions could be 80 percent funded by 2025, and it could save the city up to $1.6 million, Schroeder said.
Jon Willhite, an investment management analyst, said getting the fund up to $10 million would give a lot more flexibility, putting more investment arrows in the city’s quiver.
“You’re very handcuffed in this situation,” Willhite said.
Councilman Kevin Marx asked where the funds would come from, and Schroeder said figuring that out is step two.
A committee likely will be formed to discuss different options, such as whether to borrow the money, use recovery dollars, or find another avenue.
Mayor Li Arellano Jr. said it would be beneficial to shore up the fire pensions, but it might not be the best time to do it as the city has already increased its pension payments, and there are other matters that need money and attention like infrastructure improvements and economic development.