Now that the campaign is over and the rhetoric has simmered down, the Chula Vista management team, both elected and unelected, really ought to read and think about the issues identified by in its analysis of the city’s finances.

Chula Vista is in debt up to their ears, their reserves are shrinking, and the funded status of their pension plan is dropping. Meanwhile, they seem to be willing to jump on new projects even when it’s not clear that there is a forseeable positive return on the monies spent.

At least up until Tuesday, they seem to be more inclined to justify the position they’ve gotten themselves into rather than try to figure out how to set things right. At least in San Diego we’ve gotten past the denial. They still have a ways to go.

One thing San Diego can learn from Chula Vista, though, is how pension obligation bonds can turn around and bite you. Back when the California Public Employees’ Retirement System was using an 8.25 percent expected rate of return on the investments in its managed pension funds, Chula Vista issued pension obligation bonds carrying an 8.15 percent interest rate. They must have had a difficult time even getting that rate because the bonds apparently aren’t callable. Subsequently, CalPers adjusted its assumed rate of return down to 7.75 percent and hasn’t even regularly been hitting that. The net result is that Chula Vista is stuck with paying 8.15 percent to earn (maybe) 7.75 percent out until 2011. Not a recommended investment strategy.

You have your hands full, Cheryl. Best of luck.


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