Council takes "first step" toward addressing pension, benefit costs

Council takes "first step" toward addressing pension, benefit costs

Michele Ellson

Alameda’s City Council took what Mayor Marie Gilmore characterized Tuesday as the first step toward addressing the city’s unfunded pension and retiree benefit costs, which combined have grown to an estimated $193 million this year.

The council heard a report drafted by a special pension task force that laid out the scope of the problem and some potential solutions, with the details on the financial impact of those proposed solutions to be offered in the months to come.

“This is a long-term problem, and tonight is probably the first step in terms of getting to that solution that we all want,” Gilmore said. “None of this is a quick fix, but every journey starts with a single step and we are starting tonight.”

While members of the task force generally agreed about what the costs are and that they need to be addressed, they differed on how to address them, with salaries emerging as a major bone of contention between task force members.

City Treasurer Kevin Kennedy and Auditor Kevin Kearney urged council members to take a closer look at employees’ salaries, with Kennedy calling them the “biggest lever” the city can pull to address pension costs. Both Kennedy and Kearney, who said Tuesday that they want the city to make sure it can pay for the benefits it’s promising employees, have urged the council to consider reducing city salaries in previous appearances in council chambers.

“Please be aware of what everybody makes. And please hammer on that point,” Kearney said.

But Domenick Weaver, who serves as president of the Alameda Firefighters Association and was also a member of the task force, accused “people with a strong background in finance” of trying to turn the discussion about salaries into a “political football game.” He said the city’s public safety workers haven’t had a raise since 2007.

“Instead of focusing on salaries, we need to really focus and look at some of those outside of the box ideas,” said Weaver.

Options the task force considered but which weren’t supported by a majority of members included selling Alameda Point or other city assets to help pay down pension costs; Kennedy and Kearney said they oppose selling city assets to pay pension and benefit costs.

Several members of the task force who spoke Tuesday said the city should focus its attention on addressing its retiree health benefit costs, which are anticipated to grow from $2.5 million a year now to $7 million a year 15 years from now. That’s because the city, which like most California cities has invested in the state’s CalPERS retirement system, faces strict legal limits on what it can do to alter those benefits and the amount of money employees pay for them.

It’s also due to the fact that many of the proposed solutions for dealing with the city’s unfunded pension liabilities that were favored by the task force have been addressed by a pension reform package recently approved by state lawmakers. The reform package will require new government employees to wait longer to retire and receive smaller pensions – something City Manager John Russo expected he’d be asking the city’s worker unions to consider at the bargaining table – and will also allow cities more flexibility in negotiating the amount their workers will pay into their pension plans.

Since the retiree medical benefit plan is city-sponsored, city leaders have more flexibility in negotiating changes that could reduce the city’s unfunded costs. Task force members who spoke Tuesday said they think city leaders should consider trying to negotiate with workers to reduce their benefits and also finding ways to prefund retiree health benefits – an effort Police Chief Mike Noonan said city leaders have considered in the past.

Other solutions endorsed by a majority of the group included additional changes to benefit vesting and eligibility rules for new hires and benefit buyouts like the one city leaders in Beverly Hills put in place for their retirees.

Task force member Jeff Bratzler said the city could also see some cost reductions as a result of the Affordable Care Act, though Russo said it’s not yet clear what if any impact the law, known as Obamacare, will have on health care costs.

Russo said city staffers plan to come back to the City Council with a “more focused discussion” on retiree medical benefit options in March or April; council members asked for more details on the cost savings that solutions posed by the task force could produce.

“I don’t know where we’re going to wind up on this, but it’s a good jumping-off point,” Gilmore said.

The council also took public input on items to be discussed in upcoming negotiations for new public safety contracts, which Russo said he hopes to start and finish in November – a time frame that shocked some on the council. Initial bargaining sessions are slated to take place next week, with the unions delivering their proposals first.

Russo said he had planned to ask all of the city’s unions to consider a second tier of reduced benefits for new employees but that state lawmakers pre-empted the need to do that by passing a pension reform package. He said he’ll ask public safety workers to consider paying more toward their pensions and benefits and to consider wage increases tied to growth of city revenues, but did not say he’d seek salary cuts.

“Because the state has mandated these changes in formula, the city no longer need grant concessions in order to get that long-term change,” Russo said. “We can approach the next set of contract negotiations with an eye toward where we stand today.”

All of the city's workers have agreed in recent years to pay more toward their pensions, with safety workers paying 11 percent of their salaries and non-safety workers paying 8.868 percent. Safety workers also jettisoned retiree medical benefits for the spouses of employees who join the city from 2011 on.

Two of the three speakers who addressed the council on bargaining were City Council candidates. Jane Sullwold said city staffers should figure out how much money they want to save and then approach the city’s unions to talk about how to do that, while Tony Daysog said the council should weave the items discussed Tuesday into a framework to guide the city through negotiations.

Russo said he’ll take the public’s suggested bargaining topics via e-mail, at jrusso@ci.alameda.ca.us, for the next week.

The city has posted an FAQ document with additional information about pensions and benefits on its website.

Comments

Submitted by Irene on Wed, Oct 31, 2012

I was disappointed the city council did not offer a single suggestion of their own for the city manager to take to the negotiating table.

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