The Port Leads the Way in Pre-Funding OPEB Liabilities
June 12, 2019 – For the third year in a row, the Oxnard Harbor District’s Board of Commissioners voted to reduce the Port’s unfunded liability by funding another $500,000 to the District’s California Employers’ Retiree Benefit Trust (CERBT) account for their fiscal year ending June 30, 2019. These funds are in addition to the $1,000,000 pre-funded during the last two fiscal years.
“I am proud to join my fellow Commissioners in making the fiscal health of the Port a top priority,” said Oxnard Harbor District President Jess Herrera. “Continuing to invest in prefunding the Port’s Other Post-Employment Benefits, (OPEB) liability is a signal to the public that we are committed to planning for the future of the Port, ensuring that it is a sustainable provider of jobs and benefits for many generations to come.”
As a Special District of the State of California, the Oxnard Harbor District, which owns the Port of Hueneme (the Port), has the ability to tax its residents, however it has never done so, nor does it plan too. Strong financial management, like pre-funding its OPEB liability, and a commitment to prudent sustainable growth has allowed the District to be fully self-supporting since its inception in 1937. As such, the Port has generated continued economic prosperity for the region without taking a cent of taxpayer dollars to operate the Port—a unique asset for the local community.
In 2017, the Oxnard Harbor District opened an irrevocable trust account with CERBT to reduce their unfunded OPEB liability. OPEB liabilities largely consist of health care premiums for current and future retired employees. It was estimated in July of 2017 that the District had approximately $8.3 million of Unfunded Actuarial Accrued Liability (UAAL) for its OPEB liability. This additional deposit of $500,000 will bring the District’s UAAL prefunding to over $1,500,000, which is a significant and consistent way to reduce the District’s Unfunded OPEB Liability over time. The trust, administered by CalPERS, will serve as the pre-funding element supplementing the pay-as-you-go method currently in place.
According to the Reason Foundation, the State of California has over $187 billion of unfunded OPEB liabilities. One of the major problems attributing to this daunting number is that most public agencies only utilize the pay-as-you-go funding method for OPEB. In taking steps now by adding the pre-funding element, the Port is avoiding passing on debt to future generations and preventing potential budget shortfalls in future years.
“Fiscal responsibility is an extremely high priority for the Port. The affirmative Board vote exemplifies our goal of sustainable and responsible growth,” said CEO & Port Director Kristin Decas.
Andrew Palomares, Port Deputy Executive Director, CFO/CAO elaborated, “the Port has been on a fiscally prudent path by not taxing the local Citizens to operate the Port daily and remains on a positive course of fiscal responsibility. It gives me a great sense of pride to work for a public agency that is not only the 4th largest economic engine in the County and awarded the Greenest Port Award, but to know that future financial decision makers will not have to worry about how they are going to fund these types of costs.” The Port recognizes these steps are as much an investment in the community as they are in the Port’s employees. By responsibly funding these benefits now in good economic times, the Port is reducing the risk of a budget crisis in years of economic downturn.
The Government Finance Officers Association of the United States and Canada (GFOA) identifies this type of pre-funding OPEB as “best practice”. Based on an independent valuation report, the Port’s Unfunded Actuarial Accrued Liability (UAAL) for OPEB was approximately $8.3 million as of July 1, 2017. Establishing the OPEB Trust will greatly reduce this number.