News - July 28, 2010

Divided council takes no position on pension initiative

by Renee Batti

Two council members have forcefully declared their support for the citizen-driven pension reform ballot initiative, but the Menlo Park City Council will not offer a ballot argument for the measure set to go before voters on Nov. 2.

Councilmen John Boyle and Andy Cohen said at the July 20 council meeting that they support the pension measure, which would increase the retirement age for new, non-police employees and decrease the pension payments they receive.

Arguing for the initiative and urging his colleagues to take an official position in support of it, Councilman Boyle said that he would not have voted in 2007 to enhance retirement benefits for city employees if he had had more information.

In hindsight, he said, the city is now burdened by the "unintended consequences" of that decision. "It didn't turn out the way we thought it would."

With staff analysis suggesting it would save the city money, the council approved the multi-year labor contract in 2007 with the provision that employees would agree to a lower wage increase in exchange for the enhanced retirement benefit, which would take effect in 2009.

As of March 2009, non-emergency employees can retire at 55 with 2.7 percent of their highest wage, multiplied by every year they've worked. That allows an employee who has worked for 30 years to retire at 55 with 81 percent of his or her salary. The prior formula limited the benefit to 2 percent at age 55.

The ballot measure, sponsored by the grassroots Citizens for Fair and Responsible Pension Reform, would among other things change the formula for new hires to 2 percent at age 60, which would allow a 60-year-old, 30-year employee to retire with 60 percent of the average of his or her three highest consecutive annual salaries.

At the meeting, council members considered whether to offer to write a ballot argument in support of the initiative; the supporting argument would typically be written by the sponsoring citizens group, headed by residents Henry Riggs and Roy Thiele-Sardina.

Before the vote on supporting the measure was taken, the discussion centered on the merits of the initiative, with Councilwoman Kelly Fergusson speaking out most strongly against it as being "flawed," counterproductive, and "ideology-driven."

"This could end up costing us more ... than the more measured approach the council is taking," she said, citing information in the staff report that said a retirement plan dictated by the pension initiative may force the city to move its retirement program for new hires from CalPERS to another system with higher administrative costs and lower investment returns.

The city's approach involved imposing a two-tiered "2 percent at 60" formula for new hires on one employee group when its contract was up for renewal earlier this year, she noted.

But Councilman Boyle pointed out that the imposed two-tiered system for new hires hasn't gone into effect, and might never do so because a second employee group will have to agree to it, or also have it imposed.

Also, he noted, another City Council could overturn the two-tiered system — not an option under the pension ballot initiative.

Although Mr. Boyle supports placing limits on future councils' ability to enhance pensions, as the initiative would do, Mayor Rich Cline said he's troubled by such restrictions on future councils' authority. Still, he said, he leans toward supporting it, "but I don't think I want to be the author of a ballot argument."

Noting that he began waving the red flag about the economy and urging pay cuts several years ago, Councilman Cohen said: "I support this initiative (even though) it doesn't go far enough. ... Private industry has taken voluntary cuts; other cities have taken them. Let the voters speak."

The council rejected Mr. Boyle's motion to offer the citizens' group a ballot argument showing council support, with Mr. Boyle and Mr. Cohen supporting it, Mayor Cline and Councilman Heyward Robinson opposed, and Ms. Fergusson abstaining.

Asked later why she abstained, Ms. Fergusson said, "I wouldn't read too much into it."


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