The City of Lake Forest on Tuesday will take the last step necessary to become the largest completely debt-free city in the California Public Employees’ Retirement System. Already completely funded on its pension obligations, the City Council on October 2 will formally notify bond holders that the City intends to pay off its only outstanding debt.
The City will mark the occasion with a short ceremony and celebration open to residents and the public at 6 p.m. October 2 at Lake Forest City Hall, 25550 Commercecentre Dr.
Tuesday’s action will make Lake Forest completely debt-free on December 2, the earliest date the City is allowed to retire a $7 million bond that financed the extension of Alton Parkway. The City will save about $1 million by making the payment early. Those savings are in various funds – such as transportation improvement funds and the General Fund.
The City’s lack of debt comes from strict conservative practices over Lake Forest’s 27-year history. The City contracts for police and fire services, as well as landscape and street maintenance, keeping the full time employee count to 69. The City also maintained its pension plan for employees at 2 percent, even when other cities offered a higher percentage.
Lake Forest is the largest of eight cities in the California Public Employees’ Retirement System (CalPERS) that is current with its payments. In September 2017, the City Council authorized a lump-sum payment of $2.45 million to the California Public Employees’ Retirement System.
That payment came after a payoff in November 2015, when the city authorized a payment of $3.7 million to pay off unfunded pension, but the second payment was necessary because of changes in the CalPERS system. At the same time as that November 2015 payment, the City established a CalPERS stabilization irrevocable trust with an initial deposit of $1 million. That fund has grown to $1.3 million.
Other examples to the City’s cautious approach to finances: After the 1991 incorporation, the City rented office buildings for City Hall rather than issuing debt to build a Civic Center. The City inherited parks from the County, but again took the same approach toward a centerpiece Sports Park, waiting until the agreements with the developers provided the cash for the Sports Park and Recreation Center to be constructed.
The City budget shows the conservative nature of the City, as well. Property tax is Lake Forest’s No. 1 source of income, followed by sales tax. The City does not rely on a specific segment, such as automobile sales or hotels, that skyrocket when the economy is good, then dive when it slumps. City income grows slightly or dips slightly depending on the economy, and the conservative spending practices allow us to keep the budget balanced – and the City debt-free.
This article was released by the City of Lake Forest.