Unions sue Menlo Park over pension measure

City finance director says 'bad bank deal' complaint not valid

(This is an expanded version of a previously posted article)

A Menlo Park resident and two unions representing Menlo Park employees have launched a legal counterattack on a grassroots group that led a successful effort to put a pension-reform measure on the November ballot.

The unions and resident Katy Rose on June 23 filed a lawsuit to keep the measure off the ballot, naming the city of Menlo Park and resident Ned Moritz, treasurer of Citizens for Fair and Responsible Pension Reform, the group that gathered some 3,100 signatures to qualify the initiative for the ballot.

The initiative would increase the retirement age for new, non-police employees from 55 to 60 years of age, and would also decrease the pension payments those employees receive.

The city was named as a plaintiff because the City Council voted last month to place the measure on the ballot rather than vote it into law -- the only two options available to it under state law after the validated petition was filed.

Mr. Mortiz was named as a "real party in interest," but the lawsuit states that its "allegations and causes of action" are not directed against him.

The unions and Ms. Rose held a press conference on June 23 in the city's Civic Center to announce the legal challenge.

The lawsuit asserts that the pension reform initiative violates Article XI, section 7, of the California Constitution; and provisions of the Meyers-Milias-Brown Act. It asks the court to decide the issue, and keep the measure off the ballot if it agrees that it's illegal.

Representatives of the unions, Service Employees International Union Local 521 (SEIU) and American Federation of State County and Municipal Employees Local 829 (AFSCME), denounced the initiative as not only illegal but misguided. The initiative organizers are "taking advantage of our poor economy" to take fair compensation away from the city's employees, said Muriel Frederick, a SEIU member who works for Santa Clara County.

The plaintiffs assert that state law prohibits public pension contracts from being changed through a voter initiative, giving authority for such action exclusively to a city council.

Ms. Rose also spoke at the press conference, and afterward said she and her husband are unemployed blue-collar workers who "believe fundamentally" that the initiative is a "broad strategic attack on workers as a whole."

Bad bank deal?

The real solution to the city's financial difficulties, Ms. Rose and union representatives said, would be to renegotiate a "bad bank deal" the city made for its redevelopment agency in 2006, one that, according to speakers, is on track to lose nearly $37 million in public funds.

As the speakers presented their statements, a handful of city employees stood behind the podium, some with signs reading, "Illegal Initiative Not the Answer" and "Real Solution Fix Bad Bank Deal."

Carol Augustine, the city's finance director, forcefully rejected the unions' claims that the 2006 deal -- a renegotiation of redevelopment agency bonds -- was a "toxic swap" that is costing the city $2.5 million annually.

The interest-rate swap agreement was made in hopes of saving $5 million over the life of the bond, a reasonable assumption at the time it was made, she said. But even though the subsequent economic downturn lowered those hopes, the city still is in line to save "just short of $4 million" as a result of the deal, Ms. Augustine said.

The agreement "is performing perfectly," she said, adding that the unions' assertions are "just not valid."

After the press conference, Henry Riggs, who along with Roy Thiele-Sardina co-chaired the initiative drive, said the unions were "trying to separate the immediate budget issues from the long-term issues. We're looking at the long term."

Mr. Moritz accused the unions of "trying to shift attention away from our effort."

What's next?

The City Council held a closed-session meeting on the lawsuit on June 25, and took no action regarding how to address the complaints in the lawsuit, according to Mayor Rich Cline. But council members did ask the city attorney to do more legal analysis about the litigation so that they can have "more clarity" before deciding the next step, he said.

Before the council went into closed session, several residents, including Mr. Riggs and Mr. Moritz, addressed council members to encourage them to get behind the effort to prove the legality of the initiative in court.

Earlier in the day, Mr. Riggs said his group would supply legal support that "can coordinate with the city attorney," but that the city should be willing to provide a "vigorous defense" of the measure.

Noting that 3,100 people signed the petition to place the initiative on the ballot, he said, "We would have a great deal to say to our City Council if they were in any way hesitant to defend the will of the people."

City Attorney Bill McClure said that the plaintiffs had to name the city as a defendant in the lawsuit because the measure will be voted on in a city election. But, he added, the council had only two options under state law when presented with the validated petition: adopt the initiative as law or put it on the ballot. Sending it to the ballot didn't make the city an advocate, he noted.

"The city could take a position that we will abide by the decision of the court ... saying, since it wasn't our choice (to introduce the measure), we will not expend the time creating legal arguments, and spending tens of thousands of dollars" defending the pension-initiative group's position, he said.

What is democracy worth to you?
Support local journalism.


Like this comment
Posted by Joseph E. Davis
a resident of Woodside: Emerald Hills
on Jun 28, 2010 at 12:12 pm

Let us hope that these ridiculous and offensive actions by the public sector unions will awaken more of the citizenry to the fact that they are being fleeced and ripped off by our supposed public servants, who have far superior compensation and benefits than the average private sector worker.

Like this comment
Posted by Mical Brenzel
a resident of Menlo Park: Central Menlo Park
on Jun 28, 2010 at 12:24 pm

My message to the public sector unions: you can try all the legal intimidation techniques you wish, but the will of the people will prevail at the ballot box. Public sector unions are outrageous in their demands. If they succeed in thwarting this relatively mild measure to reduce public employee pensions they will only pull the entire structure down on their own heads. The next measure will be to freeze or radically reconfigure ALL public employee defined benefit pensions, as has been done in most of the private sector. Hogs get slaughtered...

Like this comment
Posted by fiscal conservative
a resident of Menlo Park: other
on Jun 28, 2010 at 3:01 pm

The City should not spend any of its precious budget money either for or against this referendum. The people who drafted it and collected the signatures had to have known there would be a legal challenge to it. The Council has already voted, after reaching an impasse during negotiations, to impose the actual 2 at 60 terms (plus other terms that bring much more savings to the City much sooner and without undue risk to service quality). The remaining issue is whether any future changes shoudl always go to the voters, and that is what the lawsuit apparently takes issue with. The Pension referendum committee needs to step up and defend that unusual featurethemselves, not drain city coffers out of their concerns about the future. We have much more important things to spend scarce City budget resources on -- like avoiding letting go of a police officer, which could well be the next option "one the cutting board" for the City's budget.

Like this comment
Posted by Joanna
a resident of Menlo Park: Downtown
on Jun 28, 2010 at 10:45 pm

Go Pension Initiative! GO! GO! GO!

Sorry, but further commenting on this topic has been closed.

Stay informed

Get daily headlines sent straight to your inbox.

Su Hong 2.0? Former waiter reopens Chinese standby under new name in Palo Alto
By Elena Kadvany | 5 comments | 3,790 views

What is a "ton" of carbon dioxide anyway?
By Sherry Listgarten | 15 comments | 2,477 views

Living as Roommates? Not Having Much Sex?
By Chandrama Anderson | 0 comments | 1,423 views

Holiday Traditions
By Cheryl Bac | 0 comments | 397 views


Support local families in need

Your contribution to the Holiday Fund will go directly to nonprofits supporting local families and children in need. Last year, Almanac readers and foundations contributed over $150,000.