Richmond city officials are considering a plan that aims to save taxpayers $117 million by using the majority of the $550 million Chevron settlement to pay off the city’s pension debt faster.
The International Federation of Professional and Technical Engineers (IFPTE) Local 21, which represents city employees, will give a presentation on the idea at Tuesday night’s Richmond City Council meeting. Council members would then decide whether to direct staff to work with the IFPTE to research the proposal and report back in 45 days.
The proposal calls for redirecting portions of the Chevron settlement to pay down $392 million in unfunded pension liabilities over 10 years instead of the current 20-year plan, thus freeing up funds for other uses. Of the $550 million settlement, the city would use $535.7 million for the pension plan.
In 1999, California adopted SB 400 which brought many public employees — including public safety employees — benefit enhancements amid a strong dot-com economy but, once the tech wave waned, the unfunded benefits liability grew rapidly with many cities — like Richmond — unable to keep up with its obligations as employees retired.
A 2022 California State Auditor’s report identified Richmond’s $392 million in unfunded pension liabilities as a major financial risk, pointing out that in the 2020-21 fiscal year, the city paid $35 million in pension costs — nearly 25% of its general fund expenditures — with costs projected to reach $53 million by 2028-29.
The report also suggested that the city consider making additional payments.
“Contributing additional funds to CalPERS to further improve Richmond’s funding status would require difficult budgeting decisions by the city,” the report stated. “However, additional contributions represent an opportunity to reduce cumulative city expenditures by tens or hundreds of millions of dollars in the coming decades.”
District 6 city council member Claudia Jimenez, District 3 council member Doria Robinson and District 5 council member Sue Wilson co-sponsored bringing the proposal to the full council.
“This presents an opportunity for the city to explore turning these short-term, time-limited (Chevron) funds into long-term, permanent investments in Richmond’s future,” said the council agenda report.
Last summer, Richmond secured the $550 million from Chevron after the city settled with the company and agreed to drop a ballot measure that would have established a tax of $1 per barrel of oil refined.
In February, Mayor Eduardo Martinez issued a press release acknowledging that there is “significant interest” in the settlement funds. It explained that the payments will be made over 10 years and will go directly to the city’s general fund.
“These funds must be allocated through the City’s established annual budget process, which is open to public input and requires a formal vote at City Council meetings,” the press release said.
Richmondside contacted Martinez’ office for comment on Monday but was told the mayor would be making his comments at Tuesday’s council meeting.
There are three community city budget meetings scheduled: April 10, from 1 p.m. to 3 p.m. at the Richmond City Council chambers; April 14, at 7 p.m. during the Richmond Neighborhood Coordinating Council meeting; and April 23, 5:30 p.m. to 7:30 p.m. at the Richmond City Council chambers. All of the meetings can be attended remotely.
City’s current pension payments to cost $652 million with interest
Under Richmond’s current pension payment schedule, the city will pay $32.6 million into its pension fund debt annually until 2044, ultimately costing $652 million with interest. The proposed accelerated plan would require larger annual payments of $53 million but would eliminate the debt by 2034 at a total cost of $535.7 million.
The early pay-off proposal comes amid concerns about Richmond’s heavy reliance on Chevron, which accounts for 15% of the city’s revenue, and the potential financial instability the city might face after the 10-year settlement payout period ends. There are also concerns about how Chevron’s decommissioning one day would impact the city’s economy.
City documents compare the proposed strategy to “winning the lottery and using the proceeds to pay off your mortgage,” turning a one-time windfall into long-term cost savings.
The plan also considers addressing the city’s $74 million in unfunded retiree medical benefits and explores bond financing that could potentially increase savings to $152 million if favorable interest rates can be secured.
Additionally, the proposal notes that existing pension override tax revenues — special property tax assessments that some local governments use to fund pensions — which provided $19.4 million revenue to the city in 2023 — could also be used for the pension pay down, reducing the amount of Chevron funds needed.
If approved, the proposal states that application of the settlement funds would free up general fund money for other city priorities, including efforts to diversify Richmond’s economy away from fossil fuel dependency.
In September the council passed a resolution setting up broad guidelines for how to determine how the Chevron money should be spent, with council member Gayle McLaughlin, whose term ended in January, stating that because the council worked directly with environmental groups, like APEN and Communities for a Better Environment (CBE), who have engaged the community, the council must “do right” by them when deciding how to spend it.
Sandy Saeteurn, APEN’s Contra Costa County political director, told Richmondside by email Monday that she supports the city researching how to best spend the settlement.
“Frontline communities campaigned to make sure that Richmond has the funds we need to repair our streets, fully fund firefighting services, clean our air, and ensure taxpayers won’t be stuck with the bill for refinery cleanup,” she said. “Now, Richmond residents deserve to see all of the options available to them and weigh in on how these funds are spent.”
CBE and IFPTE Local 21 were contacted for comment but did not reply by publication time.
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“Richmond residents deserve to see all of the options available to them and weigh in on how these funds are spent.”
— Sandy Saeteurn, APEN
The City of Richmond (Leaders & Residents) should proceed with extreme caution on spending the Chevron money. I believe the City of Richmond in on verge of Bankruptcy.
Unbelievable! Sounds like some back door dealing between the City of Richmond City Council Members and Chevron. The City council dislikes and even hates Chevron, but will take the finds meant for the city’s residents and used it to bail out thier own pensions. That’s like during Christmas when I would get money from my family, my mom would say, “Give that to me, I’ll hold it for you.” Mom kept the money for herself. I never saw that money again. Shame on you Richmond City Council Members!!
would like to receive an update on the $550 Million Where is the money going to? When? Was this approved? Will the residents have a chance to vote on this? A response at your earliest convenience is appreciated! Thanking you in advance.
Hi Cathleen, The last we reported was that the annual payments from the Chevron settlement (paid out in annual installments over 10 years) are part of the city’s General Fund. Here’s the last story we did, which noted that it was setting aside most of this year’s installment to cover federal budget uncertainties.