Finance officials: High pension estimates are subjective

City leaders insist they can't rely on a recovering economy or employees' help, but Costa Mesa needs to act immediately.

April 04, 2011|By Joseph Serna,

COSTA MESA — The ballooning pension cost estimates that City Council members are using to rationalize their dramatic restructuring and layoffs efforts hinge almost entirely on a single, negotiable premise, according to city finance department officials.

"One probably pretty big assumption is that when [employee contracts] are completed, it is assuming the employees are not going to continue to pay what they pay" now into their pensions, said Bobby Young, a budget and research officer for Costa Mesa.

At a February study session, Young presented a chart that council members often cite that predicts the city's pension costs going from $15 million now to more than $25 million by 2015. Costa Mesa has a $93-million annual budget for all expenses.


Young's five-year projection did not include employee contributions once their contribution agreements expired.

The cost to the city could feasibly remain where it is if employees continue to contribute, he said.

"It's an assumption. It's subjective, because if employees are requested to, if they come to the table, it would reduce future costs," Young said. "I didn't want to assume if the city were to be negotiating anything in the future, to state one way or the other what those negotiations should entail. If the city chose to negotiate in a certain way, I wouldn't want my projections to guide those negotiations."

But those projections have quickly steered the direction of the city.

The council recently approved issuing more than 200 layoff notices that could take effect in September, and dissolved the police helicopter program it shares with Newport Beach. Officials are considering laying off more than 20 police officers.

In March, city Chief Executive Tom Hatch hired an interim finance director, communications manager and human resources expert, partly to assist in the layoffs. Officials from Cal

PERS, the state's public employee pension fund, said City Hall could be basing decisions more on politics than on real math.

"You'd have some people who, because it's popular right now, blame everything on pensions," said Ed Fong, a spokesman for CalPERS. "That's an ideological thing. There are some people who for whatever reason are adamantly opposed to labor unions."

CalPERS saw its investments suffer significantly because of a downward market and the real estate collapse.

The fund's losses take two to three years to be felt on the local level, meaning Costa Mesa will only start seeing the effects now, CalPERS officials said.

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