By KEVIN McCALLUM
THE PRESS DEMOCRAT
A sharply divided Santa Rosa City Council approved a new two-year police union contract characterized by some as an important step toward pension overhaul and by others as far from the restructuring needed to save the city from financial peril.
The council voted 4-3 in favor of the contract, which establishes lower pension benefits for new officers, gets current ones to pay more toward their pension, and gives them raises to cover most of those costs.
The majority of council members praised the officers for stepping forward and welcomed the contract changes, but also acknowledged that some of their fellow council members and members of the public might be impatient for more sweeping changes.
“I know it’s not big enough, it’s not fast enough, it’s not good enough,” said Councilman Jake Ours. “But it’s what we can do, and I think we have to be realistic about this.”
But Councilman Gary Wysocky blasted the savings as “minuscule” compared to the more than $100 million in unfunded pension costs the city faces.
“I can appreciate they came in good faith, but they don’t come anywhere close to solving our financial problems,” Wysocky said of the changes. “That’s just a fact. I wish it were different.”
He said the “structure” in place in the city at the moment “leads right towards Stockton and Vallejo, a reference to one city on the verge of bankruptcy and another that just emerged from it.
The city announced nearly two weeks ago that it had struck pension overhaul deals with its police and fire unions. Discussion of an amendment to the fire contract was postponed pending additional financial analysis.
That left the council to consider just the new contract for the city’s 141 police officers.
The officers agreed to establish what is known as a “second tier” of pension benefits for new hires beginning July 1, 2012. Currently, police officers can retire at age 50 with 90 percent of their salary for life if they’ve put in 30 years of service. That age will be pushed back to 55 for new hires.
In addition, new hires will have their future pensions calculated on a somewhat less generous formula. Instead of using the single highest salary, which is usually the final year of service, pensions for future workers will be based on the average of their final three years for service.
Though often referred to as an “anti-spiking” provision, the city’s actuary, John Bartel, said that’s not really an apt term because the state pension system that administers the city’s pensions, CalPERS, keeps a close eye out for unusual final-year pay spikes, he said.
In addition, officers have agreed to pay the equivalent of 9 percent of their salary that the city had been paying on their behalf, contributions known as Employer Paid Member Contribution, or EPMC. In exchange, the city has agreed to 8-percent salary increases, representing a 1 percent savings for the city.
Chris Sliz, the city’s employee relations manager, said that the change also will allow the city to avoid paying 3.5 percent of officers’ salary in “reporting costs” to CalPERS.
Finally, the officers also agreed to lower a lump sum payment for holiday pay they get every December, a reduction equal to about $1,000 per officer.
In all, over the next two years, the package should save the city about $685,000, Sliz said.
She stressed that the contract reflects many of the recommendations of the city’s pension task force, and noted that the city is very limited in what it can change when it comes to existing employees.
“Current employees have a vested right to their retirement that cannot be taken away,” Sliz said, “and that vested right to retirement starts with the formula that is in place from the day they begin their employment with the city.”
It is easier for the city to make changes for new hires because “they don’t work here yet,” she said.
Pushing harder for changes for existing employees is challenging, Sliz said. The city is trying to solve short-term and long-term financial challenges, and forcing a change to pensions only to be sued would solve neither problem and create a third, she said.
She said a survey showed the city pays its police officers 6 percent less than comparable cities.
Wysocky zeroed in on a chart Bartel produced that showed the long-term savings from various scenarios. He noted that the second-tier would account for less than $200,000 in annual savings by 2022. Most of the savings would come from the employees paying their 9 percent. But even that would save just $452,000 a year by 2022.
He noted that the city’s current total unfunded liability, the difference between its total future retirement costs and what it has set aside, is more than $100 million.
“Aren’t these saving minuscule?” Wysocky asked.
“I’m not suggesting this is going to have a big impact on your unfunded liability by any stretch of the imagination,” Bartel responded.
That’s going to take more work, he said.
Think of a young couple overloaded with credit card debt, Bartel said. The best advice to that couple is for them to stop eating out so much and start paying down the debt.
Santa Rosa is in some ways like that couple. The city has decided to stop eating out as much, but isn’t doing much to pay down its debt, he said. The solution is a painful one.
“Really, the way to deal with this is to pay more that you are asked to pay, because you are coming close to paying the minimum payment on your credit card,” he said.
Such comments convinced Susan Gorin that the city pension is “not sustainable.” She praised the union for stepping forward when she was mayor in 2009 and offering important concessions, and for “showing leadership” by doing so again now.
“At some point the council needs to say ‘Sorry folks. You’ve given up good things, you’ve come before us and made some serious recommendations, and it’s not enough.’”
Councilman Scott Bartley, chairman of last year’s pension task force, noted that the contract does exactly what the task force recommended.
“There is no silver bullet that will make this go away. Everything we do is an incremental change. We wish it was otherwise,” he said.
Vice mayor John Sawyer agreed the city’s financial situation “is not pretty,” but said the new contract “moves us in the right direction.”
“We can’t solve 20 years of negotiation with a single contract,” Sawyer said.