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So much for that budget surplus.

The extra funds the city’s next mayor might have expected to come next year appear increasingly unlikely to materialize.

Next month, the city’s pension board will vote on an assumption change that could add $14 million to the city’s annual pension bill and significantly cut into the savings the city had projected from five-year deals with the city’s unions.

City leaders had expected a $25 million reduction in the city’s pension bill due to labor agreements that assume staffers will go without pensionable pay raises for five years. They were also looking forward to an additional decrease thanks to better-than-expected investment returns.

The City Council faced a new reality Monday when the city pension board’s numbers-cruncher suggest the system consider assuming a 7.25 percent return on investment rather than the 7.5 percent it has assumed since 2011.

The seemingly small change would represent a more conservative approach for the city’s pension system but could have a serious effect on the city’s annual pension bill. Cheiron, the actuarial firm that recommends the change, explained Monday that other pension systems across the nation have made similar moves to lower risks.

The potential adjustment comes at an inconvenient time for the city.

The city will need to increase its spending on stormwater projects an average of $164 million annually over the next five years to comply with more stringent anti-pollution requirements.

Meanwhile, mayoral candidates have promised to consider ways to increase police compensation to retain officers, to improve emergency response times and commit more money to repair crumbling streets and sidewalks.

The city has less cash to spend on those needs this year thanks in part to another pension board vote.

This spring, former Mayor Bob Filner and other city officials boasted of the savings associated with the five-year labor deals with the city’s unions only to see them postponed. They later scrambled to rework the city’s fiscal year 2014 budget after a motion to change an assumption necessary to reduce the city’s pension bill didn’t win enough board support.

Now the city awaits another crucial pension vote on Nov. 8.

Interim mayor Todd Gloria acknowledged he wasn’t thrilled with the news on Monday but that his hands are tied.

Gloria and other city leaders simply must await the 12-member pension board’s vote. The additional budget burden isn’t a certainty. At least seven board members must approve the rate change for it to go forward.

Gloria acknowledged Monday an affirmative vote — and the increased pension bill that would come with it — would sting.

“It’s more money than I’d like to spend because it’s money I don’t have,” he said at the afternoon City Council meeting.

But Gloria told residents and fellow City Council members that the city is continuing to pay for past leaders’ pension missteps.

“We’re making up for what others did wrong, and it’s not fun and no one on the Council enjoys doing that,” he said. “I’m sure we have other things we’d like to spend that money on but we didn’t get that luxury so I think that’s what I mean by aggressively paying off the debt.”

Lisa Halverstadt

Lisa is a senior investigative reporter who digs into some of San Diego's biggest challenges including homelessness, city real estate debacles, the region's...

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