The city of San Diego will make a $173 million pension payment to settle a former employee’s lawsuit, using at least $100 million in borrowed money, pending council approval.

Ex-city worker William McGuigan sued the city for underfunding its pension system from 1996 to 2005, a factor in the city’s $1.4 billion pension deficit.

The city is currently on its way to the public finance markets to borrow $100 million now in exchange for up to $10.1 million of its tobacco settlement revenues for the next couple decades.

The other $73 million that the city agreed to pay into its pension fund will not have to be forked over for five years. Both parties agreed that this sum can be covered by proceeds from the other $574 million that Mayor Jerry Sanders plans to borrow for the pension system.

In the meantime, the city’s real estate holdings will be used as collateral on the remaining $73 million. Specific properties will be presented by the Mayor’s Office at a later time and vetted by the plaintiff’s attorney Michael Conger before they are encumbered.

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