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Editorial: City pay in the spotlight

There is no shortage of advice from residents offering ways for Menlo Park to reduce, or at least not increase, its employee costs, the most expensive chunk of the city's annual budget.

And at a meeting last week where residents were given a tutorial on how the city sets wages and benefits, the city's biggest labor union, which represents 152 employees, lobbed a pre-emptive strike on any effort to rein in pay by offering to forgo any salary or benefit increases for the next two years.

The city has not responded to the offer publicly, but in today's economic climate, it has to be welcome news as potentially difficult labor negotiations are about to begin.

And former council member Mickie Winkler laid out a plan she said could reduce the size of the city's workforce in a way that would not require negotiations with the city's unions. The city could save by reorganizing some departments and contracting out services such as child care, she said.

City employees were a big part of the crowd at the meeting, and librarian Jennifer Wilkins urged the council not to lose sight of the quality work done by staff members, who, she contended are not overpaid when compared with private sector employees.

That may be true, but pension costs are another matter. More and more companies are trading defined benefit pension plans like the city's for 401(k) accounts that are subject to the ups and downs of the marketplace. There are no guarantees with a 401(k), as many retirees found out in the recent downturn, when many saw 20- and 30-percent losses in the value of their accounts.

City employees who retire receive a fixed sum every month, and in the case of police officers, can earn 90 percent of their highest salary for life. Such pensions are becoming increasingly costly for cities, including Menlo Park, due to losses suffered by CalPERS, the state retirement plan. When CalPERS' funds drop significantly due to faltering investments, cities must increase their contributions to the agency, which can add thousands of dollars to the city's pension costs.

Over the years, Menlo Park has used pay scales in other Peninsula cities to set compensation levels and remain competitive in the market for police officers and other city workers. But that strategy has backfired, as wages spiraled upward, beyond comparable pay in the private sector. For example, Menlo Park felt compelled to adopt a 30 percent salary increase for police sergeants last year to remain competitive with other Peninsula cities.

But now, the economic downturn is putting tremendous pressure on the City Council and others to regain control of employee wages and benefits. Residents are more aware and concerned about compensation than ever before, and rightly so.

The days of the council approving a never-ending upward spiral of salary and benefit increases without any comment from residents must stop. More transparency is needed, including a more publicized means for the public to comment on proposed contracts before they are approved by the council.

The Menlo Park Fire Protection District has instituted this policy, and it is time for the city to adopt it too. With more awareness of proposed contract terms, residents could bring pressure to bear on the council before salary increases are approved. This transparency would not guarantee lower contract terms, but it would force council members to defend their decisions before approving pay increases, as they have in the past.