Following an exchange between a former Mayor and the current administration over a $2.2 million pension payment, a local activist has written to the Council chastising them for misleading citizens over its significant pension debt.
The item, couched in a portion of the agenda called the “consent calendar,” where most financial items are approved without comment unless someone calls out an item.
While the Council passed the $2.2 million pension payment without objection, Mayor Pro-tem Nitesh Patel said he questioned it himself, calling the city manager at home on Sunday to explain “the very large payment.”
“I wanted to make sure that the public understands what that is. It’s not a pension buy down or anything, it’s just our regular payment and I’m going to pass it to our city manager to give more detail.”
“This is the required annual payment that the city, and pretty much every member of the PERS is required to make,” said Interim City Manager Michael Egan.
We have the option to make those payments monthly,” he said, but “paying them up front saves the city about $75,000, he said.
Cities throughout California have significant pension debts, so former Mayor Keith Nelson asked for an accounting of the city’s lingering pension obligations, since city voters passed Measure JJ in 2016 expecting to see significant paydowns of the debt.
“Do we know the outstanding balance?” asked Nelson, noting that the Council has made some discretionary payments in addition to its annual obligation. “I’m just wondering because it hasn’t gone down very far,” said Nelson.
“Actually, I don’t have that,” said Egan, who is filling in as City Manager only until the city can find a permanent replacement for former City Manager Conal McNamara.
“It’s still rather significant,” said Patel. “It’s going to be significant because it’s the pensions everyone was on and it has gone down with the discretionary payments that they’ve made,” he said.
Following the meeting, local activist Robert Carruth, who leads a hedge fund based in La Palma, suggested that the statements by Patel were misleading and that the Council should have known that, in fact, very few “discretionary payments” have been made since Measure JJ was passed.
“During the August 5, 2025, City Council meeting, a resident asked about the current amount of the City’s outstanding unfunded pension liability during a discussion of the mandatory UAL payment amount. The Interim City Manager did not have the information and did not answer the resident’s question,” said Carruth.
“Mayor Pro Tem Patel made the following statements regarding the unfunded liability, “No, it’s gone down.” and “It has gone down with the discretionary payments that were made.” Both of these statements were false and factually incorrect,” he said.
“The Interim City Manager didn’t know the current unfunded liability figure, but Mr. Patel claimed, with certitude, that the figure has decreased. One must assume that he knew the facts and data and would not misrepresent the most significant liability on the City of La Palma’s balance sheet. The unfunded accrued liability is documented annually in the City’s audited Annual Comprehensive Financial Report.
“I am writing to you asking the City Council to compel Mayor Pro Tem Patel to issue a correct statement of unfunded pension liability to the public at the next City Council meeting, and to direct Mr. Patel to cease continuing to mislead and misinform the public with false and incorrect data or statements on this matter,” he said.
Carruth included charts and graphs of the city’s financial reports “published on the city’s website.”
“Since FY 2016-17, the fiscal year voters passed Measure JJ, the City’s unfunded accrued liability has increased $5,433,044 from $18,212,933 to $23,645,977 in FY 2023-24, a 29.8% increase, and the annual Required Employer Contribution has also increased,” he said.
For example, according to the most recent CalPERS Annual Valuation Report for the City of La Palma, the Safety Tier 1 UL Payment increased from $729,285 as of 6/30/2017 to $1,370,947 as of 6/30/2023, an 87.9% increase. The Unfunded Accrued Liability (UAL) for this pension tier increased from $10,762,361 to $15,532,063, a 44.3% increase for the same period. A similar, significant increase also occurred for Miscellaneous Tier 1.
Even accounting for the $5 million of additional discretionary payments made by the City of La Palma in FY 2016-17 and in FY 2017-18, the Unfunded Accrued Liability and Required Employer Contributions increased. This is primarily due to three factors: 1) CalPERS decreased its discount rate of return used to calculate Market Value of Assets to 6.8 percent, 2) the City of La Palma has made only the minimum mandatory payments on its pension UAL since FY 2018-19, and 3) annual variance in the actual CalPERS annual rate of return versus the target rate.
It is not unreasonable to expect that, given their numerous years of tenure, Mayor Waldman, Mayor Pro Tem Patel, and Council Member Baker should have a thorough understanding of the City of La Palma’s unfunded pension liability. It is clear that Mayor Pro Tem Patel was either ignorant of the facts or that he made a purposefully misleading public statement regarding the single most significant liability on the City’s balance sheet. Mayor Waldman and Council Member Baker sat and remained silent when Mr. Patel made his inaccurate statements. Apparently, none of these seasoned council members is well-educated in the relevant facts of the matter.
Carruth said since the City Council advocated and lobbied for the passage of Measure JJ in 2016, neither staff nor the City Council has ever provided an accounting of the promises made since Measure JJ passed relative to actual results.
“A few of their claims included “pay off the debt in 9 years and save the city $20 million, rebuild reserves, establish a pension stabilization fund, restore services, and lower the Utility Users Tax. Today, in August 2026, the unfunded liability has increased, and the only promise that has been partially kept is the partial restoration or substitution of a few services and events,” he said.
“A transparent and honest city council would publish an annual summary of results along with progress on a viable strategy to keep its commitment and pay off the unfunded liability early,” said Carruth.
“Promises that were made have not been kept, and the City’s pension expense and unfunded liability position have grown materially worse. Perhaps that is why the City Council has avoided having a transparent, factual, and data-driven discussion on the topic with the public for almost a decade,” said Carruth.
Egan did say during the meeting that they would have a better idea after meeting with auditors next month.