On at least six different occasions and
in full view of the general public I have commented on the worrisome trend of
the City of
No one on the city council commented on
my concerns. Late last year at one of
the last meetings at the Home Owners’ Coordinating Council, the city manager
made a presentation on the city’s finances. After he finished, I raised my concerns about
the heavy and growing burden of the CalPERS
obligations. He raised his arm and made
a zero with the O.K. sign while telling the whole audience, as succinctly as he
could, that in some years the payments were zero and that this concern was
misplaced.
Well, it has taken me a few months, but I
finally was able to sit in a small conference room at
Back in 1990 the city contributed around
6 million dollars to CalPERS just from the General Fund obligations. But in the second half of the 1990’s, before
the collapse of the tech stock bubble in 2000, the city’s pension expense for the General Fund had averaged 5.5
million dollars per year. That was
followed by two years of nearly zero contributions. But since then it has grown steadily. In the last seven years it has averaged just
over 10 million dollars yearly and the more recent trends are triple those of
the 1990's. It is no accident.
In 2001 the city councilmen – three of
them who were freshmen – were persuaded by the city management and the safety
unions to double their pension benefits. That’s their 3% 30 year
package. It allows them to claim 90% of
their last salary for life (3% of the last salary times the number of years of
work up to 30). They can also retire and
claim that benefit at age fifty. Even in
“retirement” they can be rehired as consultants to do the same job and get paid
the gross salary amount, in effect, nearly doubling their pay.
The 2001 decision was based on the
councilmen’s understanding that the
increase in the pension was going to cost the city nothing. I’ve been told that by two
councilmen directly. If the majority of
the councilmen who voted for the change in the CalPERS contribution calculation
also made that decision under an erroneous analysis by the city staff, or
worse, under a purposefully misleading analysis, then I believe the city could
pursue legal action toward breaking that pension agreement if those who
misrepresented the city’s future obligations
stood to gain significantly themselves from those benefit increases made under
false presentations.
In the last three years, the budgeted
amounts for the city’s General Fund pension
have been 14, 15, and 16 million dollars respectively, and it is now budgeted
for $17 million for the 09-10 budget. Without
those increases, the city would probably not be in the financial strait jacket
it is in now, and it would be better able to withstand another financial raid
by the
We are a long way from
zero. Those magical financial returns by
CalPERS
that allowed the city to pay nearly nothing, came after the stock bubble of
1999 and 2000, the years when the average price-earnings ratio reached an
astronomical 40+ times earnings.
Today we are seeing the
effects of several major financial decisions from the past. The one in 1998 turning from a private
paramedic service to a government run enterprise; The 2001 decision doubling the pension
benefits to Fire and Police employees; The 2004 police augmentation plan unjustified
by crime trends; The 2006 four-year MOU
with the GFFA; The 2007 four-year MOU
with the GPOA. All of these increases in
the number of employees, the increases in pay, and the doubling of benefits to
safety personnel have pushed the future demands on Glendale’s pension
contributions significantly without taking into account periodic downturns of
the stock market, let alone a historic economic recession.
We have a Shakespearean
tragedy in the making all over
Herbert Molano