Associated Press

DAMASCUS - Oregon's newest city is having no part of the state's Public Employee Retirement System.

Damascus city employees will instead participate in a private retirement plan through International City/ County Management Association-Retirement Corp., based in Washington D.C.

Damascus Mayor Dee Wescott and City Councilman John Hartsock said there are too many potential problems with PERS. And once a city takes on those problems, it's tough to get out.

"One of the problems with PERS is that once you are on it, you can't get off," Hartsock said. "You'd have to dissolve the city and form a new one to go with a different retirement plan."

Wescott and Hartsock also cited the ever-increasing costs and unfunded liability of the state system. Its projected deficit was once estimated to be as high as $17 billion before the 2003 Legislature enacted reforms.

The Damascus area, located in Clackamas County, was included in an expansion of the Portland metro area's urban growth boundary in 2002, meaning it could see a big increase in residential development.

Voters in then-unincorporated Damascus voted for the city in November 2004. It was the first new Oregon city since Keizer incorporated in the early 1980s.

It's not, however, the first to skip PERS.

"There are 182 cities out of Oregon's 241 cities that have all or some employees covered by PERS," said Michelle Deister of the League of Oregon Cities.

Hartsock acknowledged that the city might lose some prospective employees over the issue, noting that job candidates who currently have their retirement with the state system are wary of switching to something else.

"I certainly think (the decision to use a private retirement plan) had an influence on who applied for the jobs we've filled so far," Hartsock said.

The city manager and city planner positions have been filled by candidates from out of state.

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Information from: The Oregonian, http://www.oregonlive.com