The system would increase retirement age for non-police city employees from 55 to 60, and would decrease pension benefits from a maximum of four-fifths of annual salary to three-fifths. While the council is discussing imposing it on the 152 employees represented by Service Employees International Union (SEIU), the system would only go into place if the city negotiates the same deal with the city's middle management employees when their contract expires in 2011.
Henry Riggs, a leader of the "pension reform" drive, said Monday that the council's potential action would not affect his group's efforts, noting that the imposition is only temporary and contingent on future negotiations, and that the pension initiative would also require voter approval of any future pension enhancements.
The terms the council will consider at its meeting Tuesday, May 4, would also include a salary freeze, and a provision that would potentially increase employees' contributions to future pension and health care costs.
The terms are similar to those agreed to by the union representing middle-management employees in December. While the city initially made the same offer to both unions, SEIU rejected it, according to Personnel Director Glen Kramer. Negotiations have been at a standstill ever since.
Since December, the council's position on the two-tier system has apparently shifted. In a staff report, Mr. Kramer cites the continued economic downtown, as well as political factors, including the "public perception that the existing plans in place ... are excessive when compared to the private sector."
The "pension reform" group began gathering signatures for its campaign after the city agreed to that initial contract, and the issue has generated a lot of public interest since the recession began.
While several union representatives have suggested that the council's shift on the issue may have more to do with politics than financial stability, Councilman John Boyle said in an interview that the proposal is all about managing the city's risk.
"I certainly don't think this is just a political ploy," he said. "In my various conversations with other council members and with staff, I never heard anybody say anything (to that effect).
"There's a sincere intent here: We have to fundamentally change the model, and come up with something that is sustainable in the long run."
Asked why the city wasn't eyeing a two-tier system in late 2009, Mr. Boyle said that it's become clearer since then that the city's revenues are lagging. He also said that other nearby cities are implementing or exploring two-tier systems with more gusto, giving Menlo Park more confidence that it can be competitive in the labor market.
Councilman Heyward Robinson disagreed with Mr. Boyle, saying that a two-tier system would make it harder to attract employees. The city's recent inability to lure a qualified environmental programs manager for a salary of over $80,000 shows that finding employees is still a challenge, even in a recession, he said.
Councilwoman Kelly Fergusson said in an interview several weeks ago that it wasn't clear to her that a two-tier system would save the city money, but said in a phone message that she now supports the plan.
"Without taking significant steps to modify the pension structure over the long term, we are looking at layoffs and a decrease in services," she said. "That's what we want to avoid."
The council meeting begins at 7 p.m. in the council chambers, between Laurel and Alma streets in the Civic Center complex.