The Richmond City Council on Tuesday voted to research the impacts of paying off the city’s unfunded pension liability faster since it now has the $550 million Chevron settlement shoring up its general fund.
The council voted 6-0, with District 4 council member Soheila Bana absent during the vote, to have city staff and a researcher with the International Federation of Professional and Technical Engineers (IFPTE) Local 21 return with an update within 45 days.
The proposal calls for earmarking yearly portions of the settlement funds to pay off the pension liability in 10 years rather than 20. Richmond is currently scheduled to pay $33 million in 2025 to CalPERS with payments ballooning up to $45 million in 2030, according to Tuesday night’s presentation.
District 6 city council member Claudia Jimenez, District 3 council member Doria Robinson and District 5 council member Sue Wilson co-sponsored the proposal.
“We have been discussing ways and ideas for how to address, first the unfunded liabilities, but also how with this settlement we can also have the potential to save money or make more money,” Jimenez said. “We have been discussing this as one of the strategies.”
Kristen Schumacher Nascimento, lead research specialist for IFPTE Local 21, told the council that she had received many questions regarding whether paying off the pension faster would leave enough money to take care of the city’s immediate needs.
“I think the answer is ‘Yes’ there would be,” Schumacher Nascimento said. “There definitely would be. There would still be about $30 million dollars (from the settlement) available this coming budget year if you were to do this early payment.”
Schumacher Nascimento added that the city would supplement the currently scheduled payments, leaving it having to make an average $32.6 million annual settlement payment for the next 10 years and a budget savings that would essentially equal that amount after payments are completed. Last year, the council approved a roughly $500 million budget for the 2024-25 fiscal year — $249 million of which is general fund dollars.
“You could treat that $33 million like it is going to be a reliable source of funding that is available for the next 20 years and could be committed to longer-term expenditures,” she said. “Things like staff, longer-term infrastructure projects — I know we have heard a lot about the need to fund deferred maintenance on infrastructure — so this would create an ongoing and consistent budget savings that you could treat as available right now that won’t go away after 10 years.”
When asked by Jimenez about the potential savings, Schumacher Nascimento explained that the $392 million unfunded pension liability was accrued starting with the 2008 recession.
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“I’m hoping that the information is true and right and that we end up with a deal that gives us $667 million instead of $550 million. I think that would be a great win.”
— Doria Robinson, Richmond City Council member
“You would be paying those off (in 10 years) and that would be taken out of your budget for the long term,” she said. “I imagine the way you would do this would be focusing on the current unfunded liabilities you already have, paying those off rather than constantly trying to adjust for any new unfunded liabilities that would exist.”
According to Richmond’s 2025 benefits summary for general employees, the city contributes 13.27% of payroll to employees’ CalPERS pension plans, plus $157 monthly for retiree medical benefits with additional amounts based on eligibility. Employees make pre-tax contributions of either 8% or 8.25%, depending on their benefit formula, and also contribute $50 to $100 monthly to the retiree medical benefit trust based on their salary level.
Next, Schumacher Nascimento said, the city needs to ask CalPERS for data on Richmond’s payments over the next 10 years and establish a new payment schedule based on general fund revenue increase from the Chevron funds, which will come in the form of $50 million a year for five years and then $60 million a year for five years. They will also look into bond financing to hasten the liability pay off.
Is it Chevron money or general funds?
After the presentation, Mayor Eduardo Martinez said he was “disturbed” at the framing of the settlement as a Chevron fund, saying that looking at the money that way is “problematic.”
“I hear people talking about Chevron funds. What do we mean by Chevron funds?” he said. “Chevron funds are from utility tax, also comes from the property tax and it comes from the settlement. So these Chevron funds — all three of them — aren’t special funds. They are part of the general funds and that’s how we need to be speaking about them.”
Martinez said that although he believes paying off the pension debt early is a good idea, he refuses to view the money as “Chevron” or “settlement” funds.
“Because when you start looking at it that way then how much of the settlement funds would it be? Would it be $50 million? Would it be $30 million? Would it be $20 million? It doesn’t matter. What matters is that it comes from the general funds, and I’ll say that over and over. General funds, general funds, general funds.”
District 1 council member Jamelia Brown, who was elected after the city negotiated its Chevron settlement, said she feels the settlement was “misinterpreted” to the community and that any action to approach CalPERS about paying off the liability earlier should be preceded by robust community outreach.
“Residents were under the impression, as the majority of us were, that this settlement was earmarked for immediate concerns and improvements in our community, not a financial cleanup,” Brown said. “This money is not just about balancing the books but about prioritizing people now — not in 10 years or 20 years.”
District 5 council member Sue Wilson said that she also initially had similar concerns about using the incoming money for the outstanding pension liability but said that the long-term $117 million in savings for the next 20 years would free up city funds for other needs.
“I said ‘Oh we are just paying down a debt, we can’t use the money for anything more exciting? We want environmental changes and want to fix the roof on buildings,’ ” Wilson said. “But the idea is that if we use this additional ‘Chevron money’ with quotation marks — I heard (Mayor Martinez’) comment and we can hash that out later, maybe staff can help us later settle that debate — but if we use this money to pay down the debt, we are simultaneously taking the money that we normally use to pay that debt and freeing it up for other services for 20 years.”
The fact that the settlement money goes into the unrestricted General Fund, which would potentially free up money for staffing, intrigued District 3 council member Doria Robinson.
“One of the issues that we have with funds that are considered limited funds or one-time funds is that you aren’t supposed to use them for staffing. It is not good financial practice,” Robinson said. “I want to know, is this real? Is it true? Can we have someone study it and bring the information back so that we can discuss it and make a good decision? I’m hoping that the information is true and right and that we end up with a deal that gives us $667 million instead of $550 million. I think that would be a great win for the city.”
Ultimately, to address Martinez’ concern about the semantics, the proposal was amended to refer to the settlement as being “general funds.”
