Pensions, general funds pose financial risks for Grass Valley, Nevada City
A new report by the California State Auditor’s Office ranking 471 cities from highest to lowest risk for fiscal distress found Nevada City and Grass Valley to be at moderate and low risk, ranked 191 and 275, respectively.
The report relies primarily on financial information as of June 30, 2017, and uses a set of 10 indicators including liquidity, revenue trends, ability to pay retirement benefits, debt burden and financial reserves to determine financial risk.
Marysville and Yuba City were listed as among the most financially distressed in the North State and in the top 30 in the state, according to the report. Those cities dispute the findings.
According to the report, a major contribution to Nevada City’s moderate risk designation was its low score for general fund reserves. The report ranked the city as high risk, top 50 in the state, for general fund reserves fiscal distress, an indicator that measures the city’s ability to cover expenditures during times of declining revenues or increasing costs.
“A city with insufficient reserves may have difficulty responding to revenue shortfalls or expenditure overruns while maintaining service levels,” the report read.
Although Nevada City may have ranked high for general reserve risk compared to other California cities, according to Nevada City Manager Catrina Olson, the city’s general reserves are doing well compared to previous years.
“The city’s general fund currently has over $1.2 million in restricted funds with almost $800k in operational reserves,” Olson wrote in an email. “This is the best financial reserve position the city has been in since I came on board in 2007.”
While Grass Valley was ranked as low risk for financial distress, with a 5.5% unemployment rating, it was also found to have some pension liabilities. Grass Valley was tied for first in Other Post-Employment Benefits risk and judged as high risk for its future pension costs.
It was also found to be in the top 15%, ranked 66, for revenue trends risk, an indicator measuring whether a city’s general fund revenues are increasing or declining over time.
“A city with relatively flat or declining revenues may have difficulty maintaining service levels, especially in times of rising costs,” according to the report.
According to Grass Valley City Manager Tim Kiser, although he has not been able to read the report to provide contextualized comments, the city has made significant savings efforts to its pension costs.
“Our pension liability risks are actually much less than most cities in the state,” Kiser said. “We’ve actually got money set aside for some of it and the city has done quite a lot to secure different options in the future.”
Last month Grass Valley voted to refinance bond obligations to its pension system, saving nearly $3 million.
To contact Staff Writer John Orona, email email@example.com or call 530-477-4229.
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