NBC Super-sized pensions

In New York, a 44-year-old firefighter retires with a $101,000 a year pension, for life. Near Chicago, a parks commissioner quits and begins collecting a $166,000 pension – a sum sweetened by $50,000 thanks to a one-time retirement year windfall of $270,000. And in California, a former city manager pulls down $500,000 in retirement checks every year....

Wall Street analyst Meredith Whitney correctly predicted the need for a government bailout of banks three years ago, so people listened in September when she forecast who will be next to beg for a federal bailout: States like California, New Jersey and Ohio. State and local governments have effectively run up huge credit card bills, and soon won’t even be able to make the minimum payments on that debt. What happens then? Middle America, Whitney predicted in a report called “Tragedy of the Commons,” might revolt at the idea at bailing out coastal states for years of mismanagement and overspending.

A Ponzi scheme?
In truth, pension systems rely on what might be considered an accounting trick, not unlike the trick which keeps the Social Security system afloat for now. While state workers contribute payments to the system – typically about 5 percent of their salary -- and those payments are matched by government employers -- about 10 percent -- those payments scarcely cover the eventual payouts.

“You can never pay enough to pay for your retirement,” Tom said.

In fact, "defined benefit" pension plans make no direct connection between the worker's contributions and the benefits enjoyed later. Pension systems hope for large investment gains during a worker's career – in many states the calculations project an annual return of around 8 percent, a fantasy -- but really rely on the

Sacramento has published Encinitas pension payouts online, here.

The City of Encinitas has budgeted only $2.3 million for street maintenance in the current fiscal year. That is $7.1 million less than is needed to begin a 5 year program of catching up on the backlog of deferred maintenance.

The street maintenance backlog has accumulated over the last decade.

See Also: The city has been taking out loans to cover shortfalls.

Under pressure of recent court filings and efforts of Tony Kranz, the city released their streets condition assessment today.

The version of the report released today indicates that the city has over $17 million in deferred streets maintenance. The city currently spends about $2 million on streets maintenance and much of that is funded from outside the city. The version of the report released today indicates that $9.4million/year needs to be spent to catch up with the backlog of deferred maintenance.

The Director of Engineering has not responded to requests (sent yesterday) to orient the ETA to the report and allow the public access to the modeling software used to produce the report. There are only two staff working days before Wednesday's meeting.

The city required half a year to review this report, which was originally authored by a consultant. The city is still withholding the consultant's original work and records that outline what changes were made by the city, and why the changes were made.

We will send more information on what to look for in the report as soon as we have a chance to orient ourselves to its contents. A staff presentation of the report will be given during Wednesday's council meeting.

You can read the report here:
http://www.encinitastaxpayers.org/Resources/2010-09-22%2520City%2520Item%25207%2520-%2520%2520PavementManagementProgram.pdf

Please send us your comments on this report.

streets@encinitastaxpayers.org

SEE ALSO:
City denies access to the report:
http://encinitastaxpayers.org/blog/index.php/PMR/?blog=3

Tony Kranz investigates the status of the report:
http://encinitastaxpayers.org/blog/index.php/2010/07/23/streets-report-long-overdue?blog=3

A Look Back at 2005
Encinitas workers get improved salaries, benefits
The City Council brought finality to months of negotiations Wednesday by approving 3.2 percent raises and increases to health and retirement benefits for city staffers...

Bussey said the premiums Encinitas pays to the California Public Employee Retirement System could increase with downturns in the economy.

Encinitas approves worker's contracts
James Bond cast the dissenting vote in the 4-1 decision to approve the contract. Bond said he was concerned that the increase in city contribution to employee pension funds might cause financial strain in the future.

Encinitas must stand with taxpayers
"In Encinitas, the City Council is scheduled to vote on a pay package that would give a staggering 35 percent raise to city workers in the form of a lavish, lifetime boost in their retirement incomes. For good measure, ordinary wages would rise 3.2 percent annually for three years. All this comes as the state government wrestles with billions of dollars in projected deficits, a precarious condition that threatens the fiscal health of local governments."

Encinitas pays city employees well and wisely, by Jerome Stocks
"The employees, not the city, will assume the lion's share of the increased cost of the pension plan enhancement"

Current Situation
The city pension projections assume a 7.75% yearly rate of return and a 3% rate of inflation. We have not found rates of return for secure investment instruments anywhere near a guaranteed 8%, in the private market. Any resulting shortfall will have to come from the taxpayers. Coming hyperinflation is a concern among many economists.

We have been unable to find the city's pension documents online.

For decades the State of California and local governments have offered a "defined benefit" retirement plan for employees. A defined benefit plan guarantees an annual pension based on retirement age, years of service, a multiplier and final salary (retirement formula). For most cities in California, including Encinitas, the retirement plans are managed by the Public Employees Retirement System (PERS). Cities & employees make annual contributions to PERS which in turn pays the retirees.

Due to changes in the retirement formula in the 1990's, contract agreements that required cities to pay both the city's and the employees contribution to PERS and the recent volatility in the stock market have made these increased benefits no longer sustainable.

Current State law prevents cities from changing the retirement formula for existing employees. However, we can create a different retirement plan for new employees. I will recommend increasing the retirement age, averaging the last three years of wages to determine final salary calculation and reducing the multiplier.

Current employees will be required to pay their full retirement contribution requirement.

For the Record: I am a retired State employee. I was hired before the retirement formulas were changed and I paid the employee contribution. My total gross is $1214.42 a month with $109.11 in deductions for medical benefits.

Notes: The ETA will publish any candidate's positions on financial issues.

In 2005 current council members Houlihan, Dalager, and Stocks voted to increase pension liabilities. More information can be found here.

The city started its streets maintenance schedule and streets condition study in February 2009, by hiring Nichols Engineering to study our streets. The report to come out is to be used to help the city optimize how much and where to do preventative street maintenance. The contract called for the report to be complete by August 2009.

Mayor Dalager has been saying publicly that the city is adequately funding essential services and infrastructure maintenance. We hope the report will confirm his assessment.

Staff have stated that the consultants finished their report and sent it to the city a half year ago, but the city will not release the document to the public.

Calaware has requested the report from the City of Encinitas. Here are some excerpts from the the requests and responses:

I received your request to view the Pavement Management Report. Right now it is in only draft form and is not available to the public. It will become available to the public when the report is finalized. The Pavement Management Report should be finalized sometime in late July. Feel free to call me periodically after July 20 to see if the report has been finalized. Once the report is finalized I can make a copy of it for you and have it ready for your pick up. Just let me know. We are going to Council on September 8 to present the final Pavement Management Report to Council. Thanks.

Kipp Hefner
Associate Civil Engineer
City of Encinitas

Calaware's first response:

Mr. Hefner,

The California Public Records Act contains no exemption from disclosure for documents on the basis that they are not "finalized." The term does not appear anywhere in the CPRA, or any relevant case law or opinions of the Attorney General. The concept it represents was considered and rejected by the California Supreme Court nearly 90 years ago.

The CPRA does contain an exemption from disclosure for preliminary drafts, under certain limited circumstances, in Government Code Section 6254, subdivision (a). You may be referring to this provision, but it is inapplicable to the report I am requesting, since among other things the exemption refers to documents so primitive that are not "retained by the public agency in the ordinary course of business." This document, referred to in the budget as my request noted, has been retained in city files for long months and will not be disposed of.

In the only case law interpreting subdivision (c)— Citizens for a Better Environment v. Department of Food & Agriculture, 171 Cal.App.3d 704 (3d Dist. 1985)—the California Court of Appeal several times cited as leading authority a 1921 decision of the California Supreme Court, long predating the CPRA, Coldwell v. Board of Public Works, 187 Cal. 510. That case involved a citizen's request to review engineering plans and other documents in the office of the San Francisco public works department concerning the ongoing construction of Hetch Hetchy dam in the Sierra. The high court, in upholding the trial court's order that the citizen's request be complied with, expressly repudiated the notion that plans in progress—not yet completed by the city engineer or presented to the public works board—were therefore not subject to public disclosure.

That the Hetch Hetchy project is a public matter, in which the public has an interest, cannot be doubted. It follows that the public has an interest in the plans and designs which are adopted for the completion of the project. Not only is the work being done in the course of completing a public project, but it is being done by public officers and employees at public expense. That these plans are tentative and are liable to error or alteration cannot change their character, for, while they may not represent the final result of the work of the city engineer’s office, they are important details of that work. As such they are matters which affect the public, and in which the public has an interest, if that interest is only to see that the city engineer is taking steps toward the completion of the Hetch Hetchy project. It must be held that the implied finding of the trial court that they are of such character was justified.

Id. at 510 (emphasis added).

Please provide a copy of the requested document without further delay.

Terry Francke
General Counsel

Then City Attorney Glen Sabine responded and claimed the city could withhold the documents based on a deliberative privilege exception. Read that here.

Read Calaware's response to City Attorney Glen Sabine here. Here are excerpts:

First, the court in Times Mirror Co. applied the common law deliberative process privilege as a basis for finding an overriding public interest in nondisclosure of materials that were not drafts. Had they been drafts, the court could not have ignored the limitations of the draft exemption in Government Code Section 6254, subd. ...

Supreme Court case antedating the California Public Records Act that holds that the public has a right to see the documentation of a public works project even though not (or not yet) “approved” or in final form...

The second problem with the applicability of Times Mirror Co. is that it antedates Proposition 59 of 2004, which
• elevated public access to the writings of public officials and agencies to a constitutional right as fundamental as, for example, speech or assembly;
• grandfathered in limits to such access found in then existing statutes and constitutional provisions—but not then existing judicial authority;
• required any such limitations to be given a narrow construction; and
• was adopted by more than 83 percent of the vote based on a ballot argument that asserted the need “to understand the deliberative process.” The City Attorney of San Diego, noting this event, has concluded that the privilege after Proposition 59 “is of dubious authority.” Opinion No. 2005-01.

There are strong appearances that the the city keeps its documents secret and labels them "draft" until right before the document gets put on an agenda. This is a trampling of the California Public Records Act, in the context of Prop 59. It is true that the city can withhold a draft public document, but only under narrow circumstances where the document meets certain conditions. The city applies the exemption to the entirety of ALL internal documents it decides to label draft.

Several other important documents were kept from (most of) the public for months and years. City insiders, who were not employees, have had access to some of these documents while city watchdogs were simultaneously refused access.

Please recall that the city and its consultants have admitted to having not released the traffic study (which was a shocker) for political reasons (an election was approaching). When it was finally released the public was only given two full staff days before the day the council was to accept the report and potentially condone its dramatic changes to city policy.

The city also refused to release the employee health care liability study, on the grounds that it was a draft and might need edits. There is no evidence that the report changed from the time the consultants first turned it in to the city and months later when it was quickly pushed through the city council. It is doubtful that any of the city staff have actuarial skills that could have resulted in material changes to the report. The report appears to have been complete many months before it was allowed to be seen by the public.

What if the document wasn't done and needed edits? Why not let the public help vet the document up front? If staff is directing changes to consultants' work, shouldn't they be able to defend those requested changes?

How to deal with such issues is exactly the sort of thing that the City Council (minus Barth) recently decided to avoid discussing in public. See here.