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Decision on health benefits haunts Rohnert Park

By JEREMY HAY
THE PRESS DEMOCRAT

In 2007, Rohnert Park officials cut in half the amount the city needed to cover the costs of retiree medical benefits it offered its employees.

Overnight, the city’s unfunded liability went from $56 million to $27 million - at least on paper.

But that gain has since evaporated. Today, the unfunded liability stands at $53.2 million – principally because the city failed to start putting away money it had promised its retirees and those still employed.

“There’s just been this perfectly awful combination of revenues down and what we’re seeing with medical costs going up,” said Councilman Jake Mackenzie, who was on the 2007 council. He said the economic slump prevented the city from saving money as planned.

But former politicians who worked alongside Mackenzie to reduce the liability, and employees who took benefit cuts to help achieve that goal, say the city missed a rare chance to substantially improve its long-term fiscal health.

“I’m deeply disappointed that what we had accomplished was dropped,” said Tim Smith, a councilman at the time and a former Rohnert Park mayor.

“Even understanding that the economy took a turn, nonetheless, it’s deeply disappointing that this … was allowed to slip away,” Smith said.

The daunting gap between what the city is on the long-term hook for and what it has in the bank is just one of several steep fiscal challenges it now faces.

The city confronts a liability in its employee retirement plan program of $45.5 million at last count. Like that of the retiree medical benefits, the liability is the difference between what it has paid into the state public employees’ retirement system and what actuarial studies show it will owe.

At the same time, the city has a $1.5 million budget deficit, although it has made progress on that front, cutting it from a projected $6 million a year ago.

Rohnert Park Police Sgt. Dale Utecht said employees agreed to the benefit cuts - as they had in 1993, when the city also tried to tackle the liability - with the understanding that the city would set aside money to fund the health costs.

“Because nothing was done by the city to improve the situation, it’s continued to grow. It’s definitely frustrating,” said Utecht, president of the Public Safety Officers Association, the city’s biggest public employees’ union.

Prior to 2007, when employees with 25 or more years of employment retired, the city covered 100 percent of their and their family members’ health insurance costs for life.

Post-2007, 80 percent of the employee’s insurance costs plus one dependent are covered upon their retirement. But employees have to work for the city for longer to qualify. And for new hires, the city makes monthly payments into a medical savings account, which eliminates any future liability.

Those measures saved about $8 million.

Employees agreed to them, but unhappily.

“They’d already done the work and now they weren’t going to get paid for it,” said Dave Stubblebine, a now-retired police officer who was involved in the negotiations that led to the 2007 benefit changes.

But the bulk of the savings achieved in 2007 were based on the promise of good intentions.

The plan assumed the city would put $4.7 million a year into a state-managed trust fund to pay for its current and future benefit obligations and that the fund would earn a higher interest rate than the city’s general investment portfolio.

Of the $29 million reduction in the liability, $18 million was from a projected jump in interest rate income, said Sandy Lipitz, the city’s finance director.

The city, however, did not put the money away and thus, did not get those earnings. The economic crash also flattened the city’s second-largest income source, sales tax revenue.

Since 2007, Rohnert Park has been paying $1.5 million a year to cover benefits for 109 retired employees - leaving its contribution $3.2 million short of that once planned for. The city has 118 current employees whose contracts entitle them to to retiree medical benefits.

“We just didn’t have the money” to put into the fund, said Councilwoman Pam Stafford, who was on the council in 2007.

Smith said a formal process to save the money was never created.

“The agreement to set up the mechanism was never implemented, and because of that … it’s now ballooned,” he said.

There was little point in setting up such a system, Stafford said: “You can set up any kind of mechanism you want, but we didn’t have the money to put in there.”

Now employees who agreed in 2007 to benefit cuts believe they are once again in the bullseye. Contract negotiations are under way and retiree benefits are expected to be on the table.

“My benefit is about a third of what it was five years ago, it’s not anywhere near the promise that I signed on for,” said Jim McIntyre, a public works mechanic who has worked for the city for 30 years.

Like other employees and retirees, McIntyre acknowledges a real problem with the liability. But he said the city has to do better this time.

“They’re not going to get out of this thing free. They have to reduce their risk, but I’m not going to give up something I have coming,” he said.

The city says its options are limited.

Officials believe they cannot adjust the benefits of retired employees, said Interim Assistant City Manager John Dunn.

That means the city can cut benefits for existing employees or start to fund the benefits trust fund, Lipitz said. The latter seems doubtful in the short term, at least, with the city facing a $1.5 million budget deficit.

“We just have to get the point where we can start doing that,” said Stafford.

“Clearly, intellectually you do that, you establish a lock box, you put the stuff in the lock box and there it sits,” said Mackenzie.

“In terms of dealing with immediate problems in terms of balancing the budget, you have to take more pragmatic steps in the short term,” he said.

McIntyre and Stubblebine concede the city needs to act. “I understand why the City Council wants to be on top of it,” Stubblebine said. But both said the problem is being overstated.

McIntyre, who worries that the city may try to eliminate the retirement benefit altogether, said, in a nod to its current leadership, that the city is headed in the right direction by encouraging economic development. That would boost its finances and allow it to make up some lost ground in the liability, he said.

“There will be money, in time there will be money. The economy’s only going to be bad for so long, and I do like our leadership,” he said. “To completely remove a benefit when things will probably be fine in five, six, seven years…”

Stubblebine argued that the entire $53 million liability will never be due at once, reducing the need for benefit cuts.

“They don’t have to have that much on hand, they never will,” he said. “They need to have what the annual bill is.”

In the meantime, he said, the city should concentrate on raising revenue, some of which could be put away to reduce the liability.

“”They’re paying a lot of attention to how money is spent and how to reduce that,” he said, “and not paying enough attention to how much is earned and how that is increased. If they had done that they wouldn’t have this problem.”

At a January council meeting at which the issue was raised, Stubblebine, vice president of the Association of Retired Employees of the City of Rohnert Park, asked the council to remember that many workers joined the city partly for the benefits offered.

“Tread as lightly as you can,” he said. “This obligation…represents promises made to a lot of good, very hardworking people.”

Then Lipitz outlined the extent of the liability. Mackenzie responded, “To ask us to tread lightly, is, I think, not possible.”





22 Responses to “Decision on health benefits haunts Rohnert Park”

  1. Misanthrope says:

    I’m not part of the conspiracy because I don’t use the politically correct or approved terms in my posting.

    So, just for the record, you have written a proposed modification to the municipal code that the city council can just enact that is agreeable and fair to all the residents? I know you are itching for a lawsuit and maximum publicity, outrage and confrontation, but… you should give it a shot.

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  2. John Hudson says:

    Well, Missy, if you call subsidizing developers through and expanded sewer system “paying for the future” it is pretty clear that you are part of the corruption.

    It is a violation of our rights under Article XIII D of the California Constitution to be forced to pay more than the share of the cost of the sewer system attributable to the ratepayer’s property. The cost of expanding the sewer system is attributable only to properties where development will take place.

    For me, my son is the future. I am willing to pay for him. He doesn’t need an expanded sewer system. Neither do I or any of the other residents of Rohnert Park who don’t make money when more houses are built. Only developers need an expanded sewer system.

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  3. Misanthrope says:

    Well Johnny, I’m glad that Rohnert Park can just amend their municipal code and remove the part about paying for the future and then raise the rates to cover actual costs. Seems like a pretty simple fix to what was a controversial and complicated topic. Have you taken a shot at writing a proposed municipal code change that would make everything fair and equitable?

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  4. John Hudson says:

    Well, Missy, Rohnert Park Municipal Code sections 13.42.030 and 13.42.035 state that the city shall set sewer user fees high enough to pay not only for the operation and maintenance of the sewer system, but high enough to pay for the expansion of the sewer system as well. You can access the entire Rohnert Park Municipal Code on the city’s website under the “Government” tab on the home page. In short, the city makes existing residents pay for the sewer pipes to land where it wants developers to build new houses and, after the infrastructure is put in place, collects an impact fees from the developers which is not more than the cost of the infrastructure and does not repay the existing residents.

    Measure L short circuited this practice by preventing the sewer rate increases necessary to finance the eastside sewer line which would serve the projects of three developers who want to build about 5,000 houses between them.

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  5. Misanthrope says:

    What about the guy that opened the pizza parlor over by Target? He had to downsize his business and get a loan from the City of Rohnert Park to pay the sewer fees just to open the doors, didn’t he?

    How was Rohnert Park able to construct all the pipes and sewer lines to tracts of land where no houses exist on the speculation that some developer would build there?

    And what about privatizing the sewer system? How could a developer in a free market get something for nothing?

    I suppose I do not fully understand the issue. Why can’t Rohnert Park collect what it actually costs to operate the sewer system? What kind of proof would satisfy everyone concerning what it actually costs and how much they should charge?

    Is there some kind of itemization available?

    We’re off the topic of the retiree health benefits. However, they should have set aside the money if that’s what they contracted to do. How can they say it’s our fault but all those retirees are going to be screwed?

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  6. John Hudson says:

    Sorry Missy. I’m only one man who is opposed to building more houses and happened to become aware that developers were getting free infrastructure financing from existing residents about 20 years ago. This is why I have become sort of specialized in sewer matters. I have since become aware that the same thing happens with water. Rohnert Park is not the only place where developers are subsidized. It happens all over the state.

    Even if the impact fees that developers pay are adequate, those fees are not paid until a building permit is issued. Somebody has to finance the construction of the sewer, water, educational, parks, etc so that a building permit can be issued. That somebody is us. Nobody has ever been paid back from developer impact fees. It is a big rip off!

    Developers pay no impact fees at all for services provided by the state. Obviously developers burden state services in very similar ways that they burden local infrastructure. Developers pay nothing for clogging the freeways, state higher education systems, state water systems, state parks, etc. Nonetheless, Schwarzenegger spearheaded an $80 billion bond issue on the November 2006 ballot for more roads and water systems so developers can continues to profit by making our quality of life worse and continue to pick our pockets while doing so.

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  7. Misanthrope says:

    A couple of questions for Mr. Hudson who seems most knowledgeable on Rohnert Park’s prevarications…

    On the health benefits, if I’m reading this right the contract negotiated required that Rohnert Park set aside money in some separate safe account to insure that they could pay the health benefits, but it turns out they didn’t do what they promised to do. Had they done what they contracted to do, this would not be an issue, right? They are claiming they can’t pay what they promised because they didn’t keep their own promise? Seems like Rohnert Park’s own bad faith is the cause of the problem they are now bemoaning?

    Also, I notice may of your posts have to do with the sewer rates in Rohnert Park. Is it legal or possible for Rohnert Park to contract out the operation and maintenance of the city sewer system to some for profit entity? Why does the government have to run the sewer system? If it was private would people still have to vote to raise the rates?

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  8. John Hudson says:

    If you could tell me where and how I could post Lidster’s letter I would be happy to do so. If you want to post and email address I can send them as attachments. If I can get the computer nerd that put up the RPUCC website to do it agian we’ll post everything there.

    You can see both financial statements online by going to the website of The Community Voice and looking in the archives. The button is at the bottom of the page. One statement was published on October 31, 2009 and the second was published on November 12, 2010. Look in the legals.

    The point is that you cannot believe what the City of Rohnert Park says about its finances. They will say that they are audited. However, I will point out that the Bell city auditor, Mayer, Hoffman & McCann, gave the City of Bell a clean bill of health for the three years before the scandal broke. Since then that firm has been fired by the City of Riverside. However, there are several other cities who have found it desirable to have an auditor that will keep its mouth shut about malfeasance. I would add that the Rohnert Park city council is fully aware of these “clerical errors” and has not said one word of criticism.

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  9. Ricardo Sorentino says:

    “Lidster’s letter to me said that the city actually had a deficit of $13.7 million and general reevenues of $23.7 million. Lidster claimed that the figures in the statement were the result of “clerical errors”.

    “On November 12, 2011 the City of Rohnert Park published a similar statement in The Community Voice that reported that the city had “excess revenues” of $2,017,432 from public utilities.”

    Pretty serious ‘clerical errors’ if true, and false claims by Lidster if not. And government employees wonder why the public don’t trust them.

    Whoever made these multi-million ‘errors’, and the employees whose job is to verify the information before going out to the public, should be fired. Since it happened not just once, but supposedly twice, clearly they are incompetent in their job duties and should be terminated. Two weeks ago!

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  10. Kent Domogalla says:

    In 2007 Rohnert Park negotiates a cut in employee/retiree benefits plan thereby reducing it’s liability by 50%. The plan calls for the City to deposit the benefit funds with the higher earning state trust fund rather than keeping it in the City general fund. The City doesn’t even bother to set up the investment mechanism, “since we didn’t have the money”.
    Pretty obvious that there was never any intention of meeting the terms of the negotiated agreement and the employees were taken for a ride. Bet the agreement drawn by the City Attorney is so full of weasel words that there is no legal recourse.

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  11. Misanthrope says:

    Pensions and health care plans were given to these workers in lieu of higher salaries. Now, as the bills are coming due, employers want to balk.

    If the public is willing to renege on its promises, then workers need to have the guts to walk off the job, to lobby politicians and to engage in civil disobedience in order to force the public to keep its word. You want your children taught, your garbage collected and city parks maintained? Then keep your promises.

    The dumb question for a voter to ask is “Why should they get pensions and good health insurance when I don’t?” The smart question is, “How do I get a pension and good health insurance, too?”

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  12. John Hudson says:

    Here goes the PD again reporting that the City of Rohnert Park is broke as if it is an undisputable fact. The truth is that the City of Rohnert Park makes false financial statements all the time to suit whatever its immediate purpose is. For example, On October 30, 2019 the City of Rohnert Park published a financial statement in The Community Voice that said that the city had a surplus of $13.9 million and general revenues of $51.2 million. After I started posting about this statement on the PD forum I received an unsolicited letter in the mail from Beth Lidster, the city’s CFO. Lidster’s letter to me said that the city actually had a deficit of $13.7 million and general reevenues of $23.7 million. Lidster claimed that the figures in the statement were the result of “clerical errors”. At the time the city was negotiating with public employee “bargaining units” and wanted to cry poor mouth. Lidster’s letter was copied to the “bargaining units”.

    On November 12, 2011 the City of Rohnert Park published a similar statement in The Community Voice that reported that the city had “excess revenues” of $2,017,432 from public utilities. Lidster is again claiming that this is a “clerical error”. It just so happens the city is planning to raise sewer rates 50% over the next two years.

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  13. Dogs Rule says:

    The government fails to meet commitments and public priorities all the time. This is why taxpayers don’t trust the government. When promised any sort of benefit for life, I’m skeptical.

    Thumb up 26 Thumb down 3

  14. Erick says:

    Here is the solution.
    When the Sheriff gives his bid for Police services, and it is lower than the cost for RPPD, take the bid and put the savings in the Retiree Medical Benefit Fund.
    The Retiree’s will get what was promised, the working people will get hired by the SO. And all the Money Sucking Management Officers are on their own.
    Problem Solved…
    Next…

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  15. Mike says:

    If given an opportunity to miss an opportunity leave it to our Jake Mackenzie. He is great at spending taxpayers money, but a little slow on cost savings.

    Mackenzie spends so much time spending tax money on his pet projects like the SMART train and every transportation board he can sit on, he really doesn’t have time to spend on RH business.

    If I were a RH employee or retireee, I wouldn’t hold out too much hope for a good resolution to this health benefits issue.

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  16. Dan Delgado says:

    I am amazed at all you public employees crying that the government promised you this and the government promised you that. Just what did you think was going to happen? You’ve got your hand-picked union reps sitting on city councils, boards of supervisors, state houses, etc. making promises at the bargaining table over monies that belong to someone else. Did you really think this well would never run dry? In the private sector, those sitting on the employer side of the table have a real incentive to bargain for the best deal possible. The money they give away comes right out of their pockets. Further, the employees and their unions know there is a limit to be expected before the the company is forced to close its doors. Not so in the public sector where those sitting on both sides of the table are playing with other peoples’ money. Why not give away the store? They’ll never have to pay for it and probably won’t even be around when the bill comes due. So when you put the fox in charge of the chicken coop, don’t cry when you run out of eggs.

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  17. OMeyer says:

    The problem is promises have been made that cannot be kept.

    When one generation negotiates obligations without funding them now, and asking the next generation of cops, teachers and taxpayers to pay for them; you’ve created an unsustainable system whereby everyone loses.

    Medical benefits are not protected by the contracts clause of the constitution. Sonoma County cut retiree medical in half, Mendocino County had to end their retiree medical completely, and most cities in Sonoma County pay nothing in retiree medical (some like Santa Rosa don’t even pay into social security).

    With no money to pay for these unfunded benefits Rohnert Park is forced to either raise taxes, cut services OR rescind the benefit. If it’s any consolation to the City Council or city staff, you still have benefits many times over that of most taxpayers that are paying your salary.

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  18. Phil Maher says:

    “The road to Hell is paved with good intentions.”

    Change and opportunity don’t come to those who refuse to change their perspective and see them for what they are. The most disturbing aspect of this whole story is that current and future endeavors to foster “economic development” are being viewed as a convenient and sure fire way to remedy the past’s errors and miscalculations, not as a means to grow and prosper in the future. How long can cities afford to keep two sets of increasingly falsified and unrealistic books…and how long will we tolerate it? Constantly back-filling holes that you dug yesterday is not progress. The pattern repeats, and the definition of insanity is again realized.

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  19. Misanthrope says:

    Critics generally say something like, “It’s not unreasonable that as times and conditions change, an elected government might have to renegotiate promises that it made to public employees.” But if that’s true, these workers really did need to organize against the might and greed of the public. A pension with terms that can be altered at the convenience of an employer is akin to collision insurance that doesn’t protect you when you’re driving in the rain.

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  20. Ricardo Sorentino says:

    Hey, it’s all about the employee’s first, so I’m sure the city will decide to close all the parks and pools. It’s about all that’s left, since other than filling a few potholes, the city does no road repair. Can anyone remember the last time a street was actually repaved? Not the slurry-seal-and-gravel version, real pavement. Look at the Synder Lane in front of the high school, or Synder, north of the middle school.

    Here’s the best part: next time you go to the library, (watch out for all the potholes on RP Expressway) drive by the parking lot for the police department and check out the ‘police bus’ and the ‘special operations support truck’. Has anyone ever seen these vehicles in use? As taxpayers, did we pay for these vehicles with our tax money locally, through the state, or at a federal level? Guess it doesn’t really matter which pot it came from, all those ‘pots of gold’ are empty and essentially bankrupt.

    Let’s all make sure we pass those tax extensions; maybe we can pay for all the unfunded medical and retirement packages for the police and city employees, and still buy a 40′ police bus and maybe a double-decker command center bus, so we can park them next to each other at the back of the parking lot. They look ‘cool’, you know.

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  21. STINKS says:

    And there you have it. . . . government making promises and then falling through on their end of the bargain and not making good on their promises.

    Then . . . because of their MISMANAGEMENT they demand that employees make up for their wrong doings or else

    RIDICULOUS!

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  22. John says:

    Is anybody surprised that a government body chose not to be responsible and put away funds it promised so it could fulfill its obligations? If you are, then you truely don’t understand the reasons we don’t just jump at the opportunity to give back our wages and benefits. You wouldn’t understand why we don’t trust them at their word.

    Santa Rosa had a similar situation where they could have bought into a low fixed rate system for PERS but it was a little more at the time and they chose not to enroll. Now they are wishing they had but the greed at the time has severely hurt their current situation. On top of that the employees get the blame. Yet we still do much of what is asked to give back.

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