CalPERS Study Session Wrap-Up
PERS EXPERT
I attended the Costa Mesa City Council Study Session yesterday afternoon/evening at City Hall. Actuary and CalPERS expert John Bartel had the whole show to himself and managed to guide the council and the 20 or so people in the audience through the morass that is our pension system with much skill - and a slide show presentation that involved 64 slides. You can read the brief staff report HERE and Bartel's PowerPoint presentation HERE.
BEVER MADE IT - RIGHEIMER WAS AWOL
First, I'm pleased to announce that part-time, part-time city councilman Eric Bever actually made it to this meeting. And, more than that, he actually managed one or two semi-intelligent comments and questions, too. Mayor Pro Tem Jim Righeimer was reported to be out of state, so the initiator of all the pension dust-up was absent and unable to participate.
MEETING WAS TELEVISED LIVE AND TAPED
The meeting began at around 4:30 and ended just before 8:00 p.m., so the promised (threatened?) four hour meeting didn't materialize. It was conducted in council chambers televised live and taped, so it will be available for viewing on Channel 24, CMTV - Channel 99 on ATT U-verse and via streaming video - maybe sometime tomorrow. You may wish to watch it to double-check my facts. NOTE: Streaming video is now available for viewing, HERE.
2-TIER SYSTEM IS LONG TERM STRATEGY
Bartel told us that implementing a 2-tier pension system - where new-hires after a certain date receive a severely reduced benefit - won't generate any appreciable immediate savings. He said it's a long-term strategy, and quantified some of the options available. There were too many variables to cover here.
EMPLOYEES MUST PAY THEIR FULL CONTRIBUTION
He said the only real short-term strategy for finding cash is for the employees to pick-up all their contributions to the pensions. From where I sit, that seems very unlikely. The City sent letters to the six employee associations, requesting they re-open their Memorandums of Understanding. It is my understanding that none of the associations are willing to do that because that opens EVERYTHING up for negotiation and this council has already demonstrated its willingness to get rid of the bargaining units. I'm told, however, that some of the associations might be willing to sit down and discuss side letters to the existing MOUs. It's all a matter of trust. We know the City Council majority doesn't trust the employees and it certainly seems like the employees have every reason not to trust the council.
AN IMPASSE SOON....
It seems likely that we will soon be at an impasse, with heels dug in on both sides. I found it interesting that the only bargaining unit officer present was Helen Nenadal of the Costa Mesa City Employees Association. I did not see representatives from the Police or Fire Associations, but they may have been watching on television. Nothing I saw or heard last night would have made any of them very comfortable.
IMPATIENCE ON DISPLAY
Clearly, the most agitated and animated of the council members last night was Steve Mensinger. He asked most of the questions - some, apparently, because he hadn't read the staff report. Others he asked gave me a clear idea of what he's planning - a full-frontal assault on the associations at the next council meeting.
TWO SUGGESTIONS
At the end of the evening Bartel left a couple suggestions. First, the council should try to quickly pay off the Fire organization's Side Fund. Second, the employees should pay their entire portion of the pension cost to help reduce the prodigious unfunded liability. When pressed by Mensinger he told us that, of the 40-50 organizations he's working with, only about 4-5 are developing a plan to deal with similar problems.
WHAT ABOUT OUTSOURCED UNITS?
I followed Bartel out of the a
uditorium following his presentation and asked him what happens if, for example, the Fire organization joins up with the Orange County Fire Authority? What happens to the pension liability? He told me that NOTHING happens to it - we, the city, remain on the hook for it all up to that point. The same is true about any other units that are "outsourced" - our obligation remains.
WE'LL SEE THE DIRECTION WE'RE GOING NEXT WEEK
This issue will appear on the agenda of the next council meeting, on Tuesday, Octo
ber 18th, at which time the staff will be looking for direction from the council on how to proceed. That's going to be very interesting, since Mensinger has already requested a hiring freeze across the board until a 2-tier pension system is implemented. He may have to wait until 2014, when the last of the contracts expire, for that to happen. I guess we'll see. If we do have a hiring freeze public services and safety will certainly suffer.
I attended the Costa Mesa City Council Study Session yesterday afternoon/evening at City Hall. Actuary and CalPERS expert John Bartel had the whole show to himself and managed to guide the council and the 20 or so people in the audience through the morass that is our pension system with much skill - and a slide show presentation that involved 64 slides. You can read the brief staff report HERE and Bartel's PowerPoint presentation HERE. BEVER MADE IT - RIGHEIMER WAS AWOL
First, I'm pleased to announce that part-time, part-time city councilman Eric Bever actually made it to this meeting. And, more than that, he actually managed one or two semi-intelligent comments and questions, too. Mayor Pro Tem Jim Righeimer was reported to be out of state, so the initiator of all the pension dust-up was absent and unable to participate.
MEETING WAS TELEVISED LIVE AND TAPED
The meeting began at around 4:30 and ended just before 8:00 p.m., so the promised (threatened?) four hour meeting didn't materialize. It was conducted in council chambers televised live and taped, so it will be available for viewing on Channel 24, CMTV - Channel 99 on ATT U-verse and via streaming video - maybe sometime tomorrow. You may wish to watch it to double-check my facts. NOTE: Streaming video is now available for viewing, HERE.2-TIER SYSTEM IS LONG TERM STRATEGY
Bartel told us that implementing a 2-tier pension system - where new-hires after a certain date receive a severely reduced benefit - won't generate any appreciable immediate savings. He said it's a long-term strategy, and quantified some of the options available. There were too many variables to cover here.
EMPLOYEES MUST PAY THEIR FULL CONTRIBUTION
He said the only real short-term strategy for finding cash is for the employees to pick-up all their contributions to the pensions. From where I sit, that seems very unlikely. The City sent letters to the six employee associations, requesting they re-open their Memorandums of Understanding. It is my understanding that none of the associations are willing to do that because that opens EVERYTHING up for negotiation and this council has already demonstrated its willingness to get rid of the bargaining units. I'm told, however, that some of the associations might be willing to sit down and discuss side letters to the existing MOUs. It's all a matter of trust. We know the City Council majority doesn't trust the employees and it certainly seems like the employees have every reason not to trust the council.AN IMPASSE SOON....
It seems likely that we will soon be at an impasse, with heels dug in on both sides. I found it interesting that the only bargaining unit officer present was Helen Nenadal of the Costa Mesa City Employees Association. I did not see representatives from the Police or Fire Associations, but they may have been watching on television. Nothing I saw or heard last night would have made any of them very comfortable.
IMPATIENCE ON DISPLAY
Clearly, the most agitated and animated of the council members last night was Steve Mensinger. He asked most of the questions - some, apparently, because he hadn't read the staff report. Others he asked gave me a clear idea of what he's planning - a full-frontal assault on the associations at the next council meeting.TWO SUGGESTIONS
At the end of the evening Bartel left a couple suggestions. First, the council should try to quickly pay off the Fire organization's Side Fund. Second, the employees should pay their entire portion of the pension cost to help reduce the prodigious unfunded liability. When pressed by Mensinger he told us that, of the 40-50 organizations he's working with, only about 4-5 are developing a plan to deal with similar problems.
WHAT ABOUT OUTSOURCED UNITS?
I followed Bartel out of the a
uditorium following his presentation and asked him what happens if, for example, the Fire organization joins up with the Orange County Fire Authority? What happens to the pension liability? He told me that NOTHING happens to it - we, the city, remain on the hook for it all up to that point. The same is true about any other units that are "outsourced" - our obligation remains.WE'LL SEE THE DIRECTION WE'RE GOING NEXT WEEK
This issue will appear on the agenda of the next council meeting, on Tuesday, Octo
ber 18th, at which time the staff will be looking for direction from the council on how to proceed. That's going to be very interesting, since Mensinger has already requested a hiring freeze across the board until a 2-tier pension system is implemented. He may have to wait until 2014, when the last of the contracts expire, for that to happen. I guess we'll see. If we do have a hiring freeze public services and safety will certainly suffer.Labels: CalPERS, Eric Bever, Jim Righeimer, John Bartel, Pension Reform, Steve Mensinger
posted by The Pot Stirrer at 10/12/2011 12:25:00 AM
31 Comments:
It sounds like the city as asked the associations to open up their entire contract for re-negotiation and that does open up everything and could lead to impasse. Side letters, on the other hand, are a re-opening of specific areas of the contracts for re-negotiation. A two-tier retirement system or paying the full share of the pension cost are examples. I can't imagine why the employees would be against opening the entire contracts when Righeimer made it clear to the cops when he made the threat to Hatch that the cops will "pay their fair share and them some". Gee, sounds like a reasonable guy, right?
Further, the budget is balanced and Righeimer admitted to the New Yorker this is not about money, so what is the problem? They are spending on secretaries and executive assistants like drunken sailors. How are they going to convince employees to give up more (and yes, the employees have made significant concessions every year since at least 2008) under those circumstances?
Enjoyed watching the discussion on tv and your wrap-up is quite accurate. A lot of that was too complicated for most of us.
Couple of things that stuck out to me.
1. 3% at 50 is absolutely ruining the City of Costa Mesa. The numbers show a significant impact on us for retiring folks so early.
2. Mr. Bartel very early on dispelled the myth that fire and police die earlier than the rest of us. He actually said some data suggests they live longer.--83-84 years old. If so, our current system of a defined benefit simply won't work. Under our current system, you get paid in retirement longer than you work- 90% of highest salary to work for 30 years (age 20 to age 50), but then you retire for 34-35 years (age 50-83-84) How can we afford to pay people to be in retirement longer than we pay them to work, and at their highest of salaries?
Can you imagine if we retired the American workforce on Social Security at age 50?
My takeaway from the presentation was that our current system of retirement is not sustainable and will ultimately catch-up with us, regardless of where the stock market goes. Seems like both sides have to work together to solve it or our City will go belly-up.
For the sake of fairness, a breakdown of what each bargaining unit pays in PERS contribution would make an excellent discussion. From what I understand, managers and general employees pay a significant portion of their PERS contribution, while police and fire do not. Managers and general employees do not get 3% at 50 like police and fire. Even when police and fire employees move into the manager ranks, they still get 3% at 50. Employees can only pay their contribution, not the city's share. Do the City Council members who get a PERS pension (Bever, Monahan, Leece) pay their portion or does the city pick it up. They should not even get a PERS pension, but that is another argument. If police takes such large chunk out of the budget, why were the layoff notices only for fire, general employees and a few managers? Why isn't contracting with the OC Sheriff Department even being looked at? While I believe police do a fine job in Costa Mesa, I do believe they are being greedy. Tonight I am going to try and determine what each group pays. If someone else has those figures, that would be great.
Barry P,
Stop the presses! Barry P. actually agrees with me! Yikes! :-)
Thanks for note. Yes, Bartel's presentation was complex - I'm glad I had a copy of his slide show on which to scribble notes.
I don't believe 3@50 is "ruining our city". Most safety personnel don't start to work at age 20 and those who retire at 50 with fewer years receive a smaller benefit.
You're correct about Bartel's explanation about life expectancy of safety personnel.
I agree that a 2-Tier system is essential - the question now is how do we get there with the lack of trust on both sides?
So the solution would be for all groups to pay their PERS retirement contribution, especially public safety, and have a two-tier formula. This would provide immediate savings, pay off the unfunded liability and cancel the layoffs? Why is anyone balking at this, especially public safety? I guess they would rather throw the other employees under the bus for their own gain. How selfish.
Wait a pension minute. OC Register says we owe $22.6 million next June? Did I get that right? How are we going to pay for that?
Isn't that the elephant in Council chambers.
Either way, we have to play massive catch up for the actuarial smoothing that has occurred
If so, then my consistent observation about Geoff West is that he could add value to our community.
But West instead chooses personal attacks and observations on the trivial. And offers no recommendations.
I would like to see discussion on solutions.
I support outsourcing as this maintains service levels vs the option of eliminating bodies & services.
What are the solutions?
can employees buy "air time" to retire at 3@50?? I have heard rumors that they can. for those who don't know what it is, they can buy "years of service" so if in reality they only have 25 years of service at 50, they buy 5 years so they can retire 3@50. And Geoff, this formula is a killer. It makes calpers "gamble" more to meet the high payoffs. If they win, fine. If not, more unfunded liablilities accrue. the taxpayers are on the hook for poor investment returns. It finally looks like a few a getting it. Righeimer all along said the problem was future pension payments, especially police and fire. It is a fact whether he likes police or fire or not. And why wouldn't he like police? they were so kind to him during the election you would think he would go out of his way for them like Leece has. The police and fire are greedy and are willing to sacrifice the general workers of this city.
The first thing that you should do when you find yourself in a hole is to stop digging.
As much as I want excellent services for myself and my neighbors, we do need to recognize the financial hole we are in and reverse the process. If that means reduced services or higher taxes, I can tell you that I can probably live with reduced services and make a decision on higher taxes if I decide I don't like the new service level.
As every employer knows, if you need employees, it is a symbiotic relationship. The employees need income and the employer needs labor. If it doesn't work for both sides, it doesn't take too long for the relationship to go sour. We the taxpayers are the employers. We are spending faster than we are receiving income. That doesn't work for me, I don't know about the rest of you.
At the risk of starting to sound like a broken record (for those of you old enough to know what a broken record sounded like) I am not thrilled with the way the city council went about getting us here, but here we are. It is their job to deal with these issues. I do not support cancelling the layoff notices. That would be counterproductive at this point.
As to their tone deafness, if they don't want to listen to suggestions, then they will have to answer at the next election if enough of us are unhappy with the outcome.
Until then, keep suggesting alternative solutions, but if you are serious about gaining traction, cut out the silly name calling and insults. That kind of behaviour not only guarantees that they will ignore you, but you lose any shred of credibility you may have had with your neighbors like me.
The way I read the OC Register article is that as of June 30th (this year) the city owed $22.6 million for a fire fund, not that this amount is due next June 30th. This whole thing makes me sick as it looks like police and fire have been on the gravy train and are unwilling to give anything back, althoug the general employees and manager's have. So my question is why would the city even think that laying off rank and file workers and a few managers would have any kind of meaningful savings where the real savings would be in police and fire? Fire and Police must pay their contribution to PERS and agree to a two-tier retirement program as the other groups have. I do not get why they are unwilling. Maybe someone from those groups can explain their rational. No one is saying they aren't valuable employees. They just need to step up and do the right thing. Their unwillingness just proves that they are greedy and selfish. Lets try and keep employees so that they can assist in paying off the unfunded liabilities. As a taxpayer is this fine city, I believe this is the only sound and logical solution.
Did anybody happen to see that State Capital of Pennsylvania, Harrisburg, declared bankruptcy today.
What a shame.
It is obvious that 3%@50 is ruinous. The Little Hoover Commission, a non-partisan state body run by a Democrat, has issued a report saying as much. The entire scheme was based on incorrect projections, which has been extensively reported on. SB 400 was passed during a huge technology boom, when everyone was getting rich, and public employees wanted their share. I undertsand that, and they are certainly not to blame. SB 400 passed without debate, it was not controversial at the time. That retroactive increase in retirement benefits for state workers was passed when the economy was booming. Most local governments quickly followed suit.
Logically - a retroactive reversal of the increases granted by SB 400 is appropriate. Of course, that will never happen, as logic does not apply. The private sector rules don't apply.
As last night's presentation made clear, public safety needs to come to the table and start reworking their pensions. First and foremost - they should start paying their full employee share immediately.
Excerpt from the Little Hoover Commission PUBLIC PENSIONS FOR
RETIREMENT SECURITY report:
"Treated like another speculative house during the boom, the state
allowed public agencies and employees to pull equity in the form of
increased retirement benefits from the pension funds whose value was
inflated by optimistic market return estimates. The retirement promises
that elected officials made to public employees over the last decade are
not affordable, yet this is a mortgage that taxpayers cannot walk away
from easily.
When the economy crashed, another lesson from the housing bubble
became just as important. A public pension, like a house, is not a getquick-
rich investment. As a house is for shelter, a pension is for longterm
financial security. Even the “teaser rates” reflecting aggressive
investment assumptions are re-setting, revealing a higher cost to
maintain a level of benefits that have become more generous than
reasonable."
http://www.lhc.ca.gov/reports/listall.html
Understanding a little history of this predicament would seem to be in order. Years ago all of the cities employees paid their 9 percent. Along came super funding, the return on PERS investments was such that payments from the city were not necessary. The city then offered to take over the employes portion in lieu of a series of pay raises, knowing full well they were not paying anything into PERS. This lasted for 12 or 13 years, with the city pocketing the money.
Now this set of circumstances could not and did not continue under the current poor economic conditions. The city finds itself actually having to pay the full amount that they had offer all those years ago.
Then comes the professional carpetbagger and his appointed cronies. Lies and more lies from the city camp. Wild spending on mouthpieces, lawyers and other folks. Long time city managers flee, when their learned advise falls upon deaf ears. The city manager openly says the boys on the council don't trust him or any of the employees. The carpetbagger admittedly says it is no longer about the money and vilifies the employees at every turn.
And somewhere in this mess we really expect the employees to trust the council? Really, they must have lawyers telling them they would be crazy to open any kind of negotiating with this bunch. Would you trust them, I know I wouldn't.
While it is sad that Harrisburg, PA filed bankruptcy, it had nothing to do with pensions. Lets try and keep the discussion on track shall we. Here is a synapsis from Bloomberg.
Oct. 12 (Bloomberg) -- Harrisburg, Pennsylvania, which faces a state takeover of its finances, filed for bankruptcy protection after failing to pay the debt on a trash-to-energy incinerator.
The city of 49,500, which is the seat of Dauphin County, faces a debt five times its general-fund budget because of an overhaul and expansion of the incinerator, which doesn’t generate enough revenue. Its guaranteed debt is about $242 million, with $65 million of it overdue, according to the petition.
Pot Stirrer:
You assert there is a "...lack of trust on both sides ..."
I respectfully disagree; I think there is a certain level of trust, narrow though it is, between the employee groups and council leadership (AKA Jim Righeimer). Let me explain ...
On the employees' side, they trust that Jim is completely committed to destroying their bargaining units. They see not only his current actions, but remember that he has been at it for at least 14 years. (Read his proud testimony to a friendly Republican Congressional subcommittee in 1997 about his coauthoring of a California initiative that would weaken unions: http://commdocs.house.gov/committees/edu/hedcew5-24.000/hedcew5-24.htm)
On Jim's side, from all appearances, he trusts that the employee associations are completely committed to thwarting him, if not destroying him. (E.g., they campaigned vigorously against him in the recent election.)
IMHO, this kind of trust, especially since it's so deep seeted, cannot lead to peace in our time. Israel and the Arabs might well reach a peace agreement before Jim and the employees do.
Is Public Safety going to support paying the employee share and establishing a second tier?
Or is this going to be the easiest election in years?
Spectator, one thing: this is happening ALL OVER the USA !!! go ahead and pick out this and past councils if you must but this is not an isolated incident. Santa Ana is in real trouble with a bunch of libs on council. this is just the result of unsustainable promises.
So police and fire, what are you going to do? Are you going to continue to throw other city employees under the bus, or are you going to step up and do the right thing, regardless of your opinion of Righeimer? Heck if I was getting 3% at 50, I would pay my portion, the city's portion and any other amount just to be able to earn that kind of pension.
Second those sentiments Mr. Egan.
I'll go a step further. Hopefully all the "Neville Chamberlains" in town will take heed.
When deadly bacteria invade the body, you take the strongest antibiotic possible to rid yourself of the invader. The purpose of this is to keep the body from dying.
CM Taxpayer:
You "... believe [your idea] is the only sound and logical solution."
It may well be. But that dooms it, of course. To be clear, those of us who dream of a can't-we-just-get-along, sound and logical solution are living in a dream world.
Why?
After seven months of earnest entreaties by earnest citizens who object to how the city council is going about whatever it is they are doing, have we seen any hint that they've modified their agenda?
Or any hint that they will in the future?
Or that they even care what critics say?
Nope. (For a little perspective, I've never seen intransigence like this in the couple of decades I've been paying attention to city hall. And I've never before seen insults hurled from the dais at voters.)
What we know about their leader Jim Righeimer is that he hasn't changed his attitude toward employee bargaining units in at least 14 years (See the URL I noted above re his testimoney to a congressional subcommittee: http://commdocs.house.gov/committees/edu/hedcew5-24.000/hedcew5-24.htm )
What I know about two of his followers -- Gary & Eric -- is that they were never like this before. They've always seemed reasonably responsive to public pressure. I don't know Steve's past, so I can't comment on that.
And since it's unlikely that Gary and Eric would otherwise meekly become Stepford Wives to a carpetbagging newbie on the council, it's more likely they are in thrall to higher levels of the Republican power structure (think Scott Baugh, Karl Rove, the Koch brothers) who've perhaps assured them they don't have to worry about any consequences from losing future elections.
And since the modern-day Republican party (not to be confused with the party of Lincoln) -- to which the Wrecking Crew clearly pledge allegiance -- is intent on knee-capping organized workers nationwide (think Wisconsin, for example), how likely is it that they'd ever want Jim, Gary, Eric, and Steve to join hands with public employees and sing Kumbaya?
Sorry to say, CM Taxpayer, the only dream in CM that's grounded in reality is the nightmare known as the Wrecking Crew.
Ok, so maybe 3%@50 isn't going to work out right now. The city needs to cut back because revenues are off. I'm all for cutting back. However, the behavior of the Righeimer council is still horrible. Riggy wants more cut through traffic, is for junk food restaurants in our neighborhood parks, is for destroying the financially successful SoBeCa area, is for selling the fairgrounds, and against the freedoms most of us Costa Mesans love.
I want someone who can balance the budget but isn't associated at all with Righeimer's views.
I have read the story on Pensions.. and again I shake my head. Is this attack on employees really about money? Fifth-Floor "Furniture-Gate" should be exposed. The entire 5th floor is getting a very expensive make-over. New furniture on order, and decorator on the payroll. As soon as HCD is moved to the second floor- this week (or by the 21st)the Penthouse (5th floor) will be a decorator's dream. Where is that money coming from?
Tom Egan:
"..What we know about their leader Jim Righeimer is that he hasn't changed his attitude toward employee bargaining units in at least 14 years.."
Me:
"In the early stages, signs of inflammation may not be apparent
if the bacteria are deep within the tissue. If they are not deep, signs of inflammation, such as redness and swollen or hot skin, develop very quickly. Skin color may progress to violet, and blisters may form, with subsequent necrosis (death) of the subcutaneous tissues."1
1 http://en.wikipedia.org/wiki/Necrotizing_fasciitis
Everyone, don't forget the Fire side agreement- 5% towards their EMPLOYEE PORTION OF 9%, expires at the end of this month. What will they do?
If they refuse to renew, the City will be forced to extract roughly $500k from its currently balanced budget. Where will those cuts come from???
Will Fire agree to continue contributing towards the EMPLOYEE PORTION, or not???
Mr. Egan, I certainly understand the Mr. Righeimer is not a rational person and obviously has a agenda. That aside, I really hope that Public Safety steps up and does the right thing. All the employees have been treated like crap by the council majority, but aside from that they really need to pay their fair share. I have learned that most politicians do not do what is best for those they represent. I am certainly not on the council majority's side. I just want each employee group to pay the same. It is ludicrous that the most highly compensated group, public safety, pays the least amount for their retirement. Significant savings can be achieved right now if public safety would just agree to at least pay what the other groups do and agree to a two-tiered formula. I hope for some new rational voices on the council next year and I will certainly vote to make that happen.
Yet again Dickson comes off ignorant.
If the employees increase their contributions we can afford more "yes" men, consultants, lawyers and new furniture for the 5th floor!
Am I the only one confused, I have read that a job freeze at the city is in effect then I get a press release that the Police Deptrment's Desk will have extended hour since three Community Servicer Specialists were rehired. Isn't rehired and hired the same thing???? I am thankful and appreciate the extra availabilty of the desk hours.
harriet,
No hiring freeze - yet. That was just stream of consciousness blather from Mensinger in an apparent attempt to put pressure on the bargaining units to come to the table and negotiate. We should hear more about that on Tuesday at the council meeting.
Yes, it's good to see that the PD has re-hired some of those civilian staffers that were laid off not too long ago. They will certainly relieve the pressure on the cops on patrol.
Taxpayer, I agree with you. However, the employee pension contributions are only part of the story. General employees are paying more of the employee share (might even be the full share). However, in regards to all paying the same, be careful what you wish for. General employees get a larger benefits stipend (for medical etc) than the safety employees get. So, to even the playing field, so to speak, and have everyone on the same "package" either safety will have to receive more in benefits stipend, or the general employees will have to reduce theirs. It would probably be a wash at that point.
I still think that the safety employees will end up paying the full employee portion, and that's the right thing to do. From what I have heard, the majority of those employes agree with that.
I am wondering if Bartel has some sort of agenda. Earlier this year a presentation was made where certain assumptions and math created a somewhat different take on the problem and how to solve it. Bobby Young presented figures that were based upon his opinions and not based in fact, which he latter admitted. Of course this endeared him to the council majority and thus a promotion came his way. Here is a summary of that meeting.
COSTA MESA — The ballooning pension cost estimates that City Council members are using to rationalize their dramatic restructuring and layoffs efforts hinge almost entirely on a single, negotiable premise, according city finance department officials.
"One probably pretty big assumption is that when [employee contracts] are completed, it is assuming the employees are not going to continue to pay what they pay" now into their pensions, said Bobby Young, a budget and research officer for Costa Mesa.
At a February study session, Young presented a chart that council members often cite that predicts the city's pension costs going from $15 million now to more than $25 million by 2015. Costa Mesa has a $93-million annual budget for all expenses.
Young's five-year projection did not include employee contributions once their contribution agreements expired.
The cost to the city could feasibly remain where it is if employees continue to contribute, he said.
"It's an assumption. It's subjective, because if employees are requested to, if they come to the table, it would reduce future costs," Young said. "I didn't want to assume if the city were to be negotiating anything in the future, to state one way or the other what those negotiations should entail. If the city chose to negotiate in a certain way, I wouldn't want my projections to guide those negotiations."
But those projections have quickly steered the direction of the city.
The council recently approved issuing more than 200 layoff notices that could take effect in September, and dissolved the police helicopter program it shares with Newport Beach. Officials are considering laying off more than 20 police officers.
In March, city Chief Executive Tom Hatch hired an interim finance director, communications manager and human resources expert, partly to assist in the layoffs. Officials from CalPERS, the state's public employee pension fund, said City Hall could be basing decisions more on politics than on real math.
"You'd have some people who, because it's popular right now, blame everything on pensions," said Ed Fong, a spokesman for CalPERS. "That's an ideological thing. There are some people who for whatever reason are adamantly opposed to labor unions."
CalPERS saw its investments suffer significantly because of a downward market and the real estate collapse.
The fund's losses take two to three years to be felt on the local level, meaning Costa Mesa will only start seeing the effects now, CalPERS officials said.
Cont...
Then a presentation was made by Bartel and Richard Santos of PERS. Bartel was more the sky is falling where Santos saw a different prediction. Bartel was paid for his opinion where Santos gave his opinion without compensation.
COSTA MESA — Like so much of the debate in the city to date, a public discussion on the costs of Costa Mesa employees' benefits was a mix of optimism and pessimism, some focused on worst-case scenarios and others confident the costs will be minimal.
The dichotomy extended beyond city officials and the public Tuesday night.
Even the two experts the city brought in to discuss how much the city contributes to public pensions — Richard Santos from the California Public Employees' Retirement System (CalPERS) and John Bartel of Bartel Associates — presented different philosophies on how much to pay into the state's pension fund.
"There's no right or wrong answer to that question," Santos said outside of the council chambers.
At the heart of the discussion is how much the city can expect to increasingly pay — a little or a lot — over the next five years toward its employees' pensions while the economy slowly tries to recover.
City employees' benefits are covered by revenues from CalPERS investments and Costa Mesa's own monthly contributions. As the economy has suffered, so have those investments, leaving the city on the hook for more and more.
While Santos reassured the city that in the long term, as in decades, CalPERS investments have recovered and costs to the city have smoothed out, Bartel suggested the city pay even more than what's required to pay down its debt to CalPERS.
"Think of it as a minimum," he said.
Councilman Steve Mensinger emphasized that there's no guarantee the economy will recover and that another recession-type loss could happen again, which would leave the city with the bill. Mayor Pro Tem Jim Righeimer asked what happens if a city can no longer cover its part of the pensions, something that's only happened once in CalPERS history.
"It's in the lore of CalPERS," Santos said, noting that it was so long ago, today it's talked about more as a legend than a lesson.
Costa Mesa's bookkeepers will readjust their CalPERS cost projections next month because of the pension fund's announcement of its returns being better this year than expected. If city employees continue to contribute part of their portion to the fund, the city's costs could almost level out, city officials have said.
But city leaders argue that would leave an insufficient amount for maintenance and improvement funding, which they already consider at bare bones.
If the city were to cut staffing — such as through outsourcing nearly half of the city staff, like is currently being explored — Costa Mesa would have to pay a higher percentage to the pension fund, though it's actually fewer dollars because there's fewer employees.
It's basically contributing a bigger piece of a smaller employee pie, Santos said.
Because of state law, Costa Mesa cannot renegotiate its benefits packages with city employees until its most recent agreements expire, Santos said.
Other cities have had presentations by Bartel but have not taken the sky is falling, fire all the employees mentality that this council majority wants to do. Why is that? For all the cities, counties, special districts, etc., that utilize CALPERS, only Costa Mesa is taking this drastic approach. Many agencies have adopted a two-tier program and have employees paying their portion to PERS and some have not. Some of these cities are in very conservative areas. I just do not think that Bartel is as impartial as one may think and certainly Bobby Young is going to follow the party line. Anyone that is paid for an opinion is going to give you the one you want.
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