MOFD’s Underfunded Retirement Plans
In the December 25, 2018 edition of the Lamorinda Weekly, an article was published with the headline “Latest MOFD financial report shows a $12 million dent in long-term liabilities.” In reality, this is not what happened. Retirement plan net liabilities INCREASED by $14 million. The report goes on to claim that MOFD’s retirement liabilities are 88% funded (suggesting that being $25 million underfunded is OK). This claim also understates reality: They are only 68% funded.
From 2017 to 2018 MOFD’s retirement plans* Liabilities increased from $216 million to $245 million.* Assets increased from $153 million to $167 million.* Thus the Net Liabilities increased by $14 million, from $64 million to $78 million.* And the percent funding, $167 million of $245 million, is only 68%, not 88% as reported.
Sorting through MOFD’s financials is complex. They do not show the total assets and liabilities for either the Pension or the Retiree Medical Plan (OPEB), only the net liabilities. They show $20 million of “long term liabilities”, of which $14 million are a loan to the pension plan; another pension liability not identified as such. And then there are accounting entries “deferred inflows and outflows of resources” that have adjustments to the assets showing up as liabilities. And to top it all off, while it is reported that MOFD is now using a lower, more conservative 6.25% discount rate to discount its Pension and OPEB liabilities, the reported pension liability uses a 7% rate which produces a value $20 million lower than it really is.
It is a nightmare to sort out all of these complications and the 111 page annual audited financial statement, what they call a CAFR (Comprehensive Annual Financial Report), makes no attempt to do so.
The reporter from the Lamorinda Weekly can be excused for being deceived. But when the author of this site submitted a letter to the editor, it was rejected with the excuse that the article accurately reflected what the MOFD financials presented. And THAT is the problem. The official financials, compliant with industry standards, present a false, or at least a cloudy picture of MOFD’s true condition and the Media passes that on to the community.
A full report of MOFD’s financials, reformatted to reflect the true condition of our fire district, can be seen on the next page of this web site.