HomeMy WebLinkAbout02.B- City Manager , B
DOC ID: 2690
CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION
Budget
From: Allen Parker M/CC Meeting Date: 09/23/2013
Prepared by: Allen Parker, (909) 384-5122
Dept: City Manager Ward(s): All
Subject:
Discussion and Public Comments on the City's Process of Preparing a Long Term Adjustment
Plan
Current Business Registration Certificate: Not Applicable
Financial Impact:
Motion:
Background:
Supporting Documents:
Updated: 9/19/2013 by Allen Parker Packet Pg. 30
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City of San Bernardino Retired Public Employees Association
P.O. Box 67, Patton, California 92369
Statement from the City of San Bernardino Retired Public Employees
Association, regarding the City's Long Term Plan of Adjustment.
Honorable Mayor and Council Members
It is our position that the elected officials of San Bernardino have a moral
obligation to protect ALL the retirement benefits earned by the city's retirees over
the past several decades, which include those paid by CaIPFRS, PARS and city paid
medical premiums. These 1800 plus retired city employees have served the
residents of San Bernardino faithfully, many for more than 30 years, and some for
as many as 40 years. They all believed their earned retirement benefits were
vested once they retired . These retirees made the decision to retire based on
the retirement benefits they not only earned but were promised by the elected
officials of this great city. Many of the approximately 1800 city retirees never
benefited from the increased retirement formulas that 3 sitting council members
voted to approve in 2008, that some council members now partially blame for the
fiscal disaster the city is experiencing. This "Long Term Plan of Adjustment" ,
once implemented, could have devastating impacts on the livelihoods of these
retirees who devoted years and years of service to the residents of San
Bernardino and many or whom remained residents of San Bernardino after their
retirement. We acknowledge the fact that San Bernardino is experiencing a fiscal
emergency, but CSBRPEA feels the need to point out it is not the retirees that
created this fiscal emergency.
The active city employees of San Bernardino are represented by various
bargaining units that negotiate benefits for each bargaining unit, in the same
manner that hundreds of other cities in the State of California bargain with their
employees. The city council is the ultimate body that votes to grant those
benefits or deny them, based on financial projections and information provided
by the negotiation team representing the city. This meet and confer process is
1
City of San Bernardino Retired Public Employees Association
P.O. Box 67, Patton, California 92369
widely used across the country, yet San Bernardino is 1 of only 3 cities in the State
of California that has filed for bankruptcy protection and is considering reducing
vested retirement benefits through this "Long Term Plan of Adjustment"
We are only asking that the city council honor the promises that were made by
past council members and some of you still serving today.
Unlike the current employees who are still represented by collective bargaining
agreements and MOU's, if our retirement benefits are reduced in this "Long Term
Plan of Adjustment " retirees have no avenue to re-negotiate the return of any of
those lost benefits. At least the active employees can hang on to the hope that
once San Bernardino is able to recover financially, they can return to the
negotiation table and attempt to have some of their lost benefits returned to
them in future contracts. Retirees have no collective bargaining rights and have
absolutely no hope of ever having any retirement benefits restored in the future
that might be taken away in the "Long Term Plan of Adjustment " that the city
council approves. We at CSBRPEA recognize the fact that our members have
retired under various retirement formulas, a small percentage receive additional
benefits through PARS and a few were promised increased medical contributions
upon their retirement. It is the position of CSBRPEA that ALL RETIREES regardless
of which bargaining unit they were represented by in the past, should NOT be
denied any of the retirement benefits they earned and were promised before
making the decision to retire.
We are asking all members of the council to remember that we have members
who have who have been retired for over 20 years and even the slightest
decrease in benefits will be devastating to them. As you prepare the "Long Term
Plan of Adjustment ", please consider the fact that your decisions may negatively
impact the livelihoods of hundreds of retirees who are too old to return to work
to make up for lost retirement wages, are not eligible for Medicare benefits as
they were hired before the city was required to deduct Medicare payments and
your actions may actually force some individuals to file for bankruptcy protection.
Recent decisions by this city council have already resulted in a few retirees losing
2
I
f .
City of San Bernardino Retired Public Employees Association
I P.O. Box 67, Patton, California 92369
over $300.00 a month in medical benefits and another retiree losing over
$2,000.00 a month in combined retirement benefits. These were benefits that 3
sitting council members voted on and approved for those retirees, essentially
breaking the promises they made when they voted to approve those benefits to
that group of retirees. Many of the 1800 retirees made a conscience decision to
retire believing their retirement benefits were vested and protected by law.
CSBRPEA takes the position that these benefits are in fact vested and protected
by law.
None of the city retirees could have predicted that the city might possibly default
on their contract with CalPERS. Retirees have learned a new phrase "termination
pool". Prior to the city filing for bankruptcy protection this was a foreign term,
not fully understood. Sadly, CalPERS has made it perfectly clear in a letter dated
December 13, 2012 that If the city fails to come to an agreement with CalPERS
and the city is placed in a "termination pool" all the retirees will have their
retirements reduced proportionally, regardless of the formula they retired under
or the date of their retirement. An active employee at least has the opportunity
to remain a CalPERS covered employee and regain any lost service credits by
working for another CalPERS Agency. That is not an option for a retiree. Many
are too old to return to work if they wanted to.
As you make your decisions on the "Long Term Plan of Adjustment", remember
we as retirees have no avenue to recapture any benefit you decide to take away
from us. CSBRPEA believes that regardless of a retirees monthly income no one
retiree or group of retirees should be singled out for a reduction in their vested
retirement benefits. We want to thank each of you for your service to the city of
San Bernardino and as retired employees we are looking to you, to take the action
necessary to ensure that our retirement benefits remain unchanged.
In closing, We understand that the Office of the United States Trustee is in the
process of soliciting applicants for the potential appointment of an official retiree
committee to represent the interests of all retirees in the City's bankruptcy. Such
committees are commonplace and have been appointed both in the Vallejo and
3
I
City of San Bernardino Retired Public Employees Association
P.O. Box 67, Patton, California 92369
Stockton bankruptcy cases. Moreover, it is typical for the cities in bankruptcy to
fund the efforts of the retiree committee's professionals to ensure that they have
adequate representation in the bankruptcy case. However, previously in Court
filings, the City has questioned whether a retiree committee needs to be
appointed and whether that committee should be have representation at the
City's expense. CSBRPEA is very troubled by these remarks. if the city council is
in fact considering reducing any of our retirement benefits through the "Long
Term Plan of Adjustment" we firmly believe that the City should not break with
the norm and make sure that the retirees have a seat at the negotiations.
The next meeting of CSBRPEA will be held at 1st Valley Credit Union on
Wednesday October 9th at 10:30 AM and all city retirees are invited to
attend.
4
The Long, Sorry Tale of Pension Promises - WSJ.com Page 1 of 4
Home world US, Business Tec l Markem Markel Data Your%oney Opinion _. s. ` PLY. Real Estate Management
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ESSAY 1 September 24,2Ct13,6 35 p-m.ET
The Long, Sorry Tale of Pension Promises
[Tow did states and cities get nztathis mess?It's a simple case of human frailty; where to go
from here
/article I Comments I MORE IN LIFE&CULTURE.
?y R.GGER;_OWENSFEIN
Fifty years ago,the auto industry suffered a massive pension bust.The numbers
back then were small,but pension failures are never about the numbers—they're
about human frailty.People are tempted to promise more than they can deliver.
Today,cities and states across the country are way behind on the promises they
made to their employees.Several—including Detroit—are in bankruptcy.
limagel Back in 1963,Studebaker,an
independent auto maker in South
Bend.,Ind.was struggling to compete
with the Big Three. Desperate to stay
afloat,the company had increased the
benefits it was promising to its retirees
four times in the 1950s and early
1960s.What was desperate about this? C, I
Pension benefits aren't paid out of thin
air;sponsors are supposed to set aside
a sum of money proportional to the
benefits that will eventually come due. If
Ell—,rr"sieu' the money is invested prudently,the
fund will have enough assets to meet More in Life&Culture
its obligations. Netflbc Stakes History at Emmyz
Here's the rub:While Studebaker was nominally increasing benefits,R hadn't the why the Super Howl Should Be Free
slightest hope of making the requisite contributions.The"increases"were a fiction, Doom&Distance:Down With Tomato Cans
but when you have no cash,promising future benefits is the best you can do, want to win?Don't Draft a Top Tailback
whereas raising salaries is out of the question.The United Auto Workers was Redskins Keep Sliding,Bengals Shock Packers
complicit in this fiction.Union officials reckoned that it was better to tell the
members they had won an"increase"rather than to admit that their employer was popular NOW whars Thls?
going bust.
Row to D'ISmantle a Trust r—
Studebaker hafted U.S.operations at the end of'63,and the company terminated f:
its pension plan.Workers saw the bulk of their pensions go up in smoke.The loss
was devastating—$15 million—and Washington didn't offer a bailout.People were a^CEO Paychecks Not So Simple 51-01,shocked,though it isn't clear why. In 1950,when General Motors agreed to a
pension plan,a young consultant named Peter Drucker had termed the landmark
At AIG,Bennrosche Steers a
agreement a"mirage,"doubting whether any company could anticipate its finances y Steady Course IC
and the actuarial evolution of its workforce decades hence.
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t-a...-. 111 mni nnnI nln i n nnn n'l�n n .r I I I A. . ^ I
• The Long, Sorry "Pale of Pension Promises - WSJ.com Page 2 of
Planning wasn't the problem.Auto makers knew their pensions were underfunded—
they simply preferred to spend their cash on sexy tail fins or executive bonuses. 4 =White Houses Urges Senators to a
The Studebaker failure moved Congress to enact a remedy,although it took its
Defend Yellen
sweet time,finally getting around to approving the Employee Retirement income
Security Act in 1974.
Show 5 More
Ensa,as the law was known,required pension sponsors to pay annual premiums
for pension insurance.It also mandated that companies actually fund their pension
plans."Mandated'is a term of art—it presumes the power to enforce.Alas,
companies that found themselves in trouble tended to fall behind anyway.Over the
ensuing four decades,most of the heavily unionized industnes—steel,airlines,
automobiles—suffered waves of bankruptcies and pension failures(now at least
mitigated by insurance).Erisa provided some stability to corporate pensions,but not
as much as hoped.
Public pensions—and here we come back to our current straits—replicated this
behavior.Cops,firefighters and teachers had pensions well before most private-
sector workers,but benefits weren't so high as to cause a problem,since
government employers unilaterally set benefit levels(as well as salaries)without
resorting to anything as unpleasant as collective bargaining.
By the time of the Studebaker collapse,however,matters were changing.New York
City granted its employees the right to collectively bargain in 1958,and pretty soon,
yrcw news teamsters
the genie was out of the bottle. In the 1960s,New York suffered a wave of public Effective Business Cloud Strategies Expert Analysis&Best
strikes,the resolution of which typically included pension increases.The c" fathers Practices
tyP ty� P city tecfrtarget.comrBetter-Cloud
reacted just as Studebaker's executives had.By the time Erisa was passed,New Annuities Calculator
York was on the verge of bankruptcy,but Congress didn't think to deal with public Not Generating The Income You Need?See All Annuity Rates and
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plans.Cities and states could do as they pleased. www gilico com
Private pensions gradually faded as an issue because many employers with Turn$200 Into$6,000 Now
How To Earn$6,000+Every Month while You Sleep,Start Today'
pension plans failed,and newer companies(read:Google)never started them.But BinaryMoneyTrading.com
the problem with cities and states has mushroomed.As of last year,public plans
are unfunded by a cool$1 trillion. Illinois is a poster child:$100 billion in the hole.
Plans in Connecticut and Kentucky are in bad shape,ditto Chicago, Pittsburgh,the
bankrupt San Bernardino,Calif.,and many other cities.
The temptation for governments to negotiate unrealistic benefits was even greater
than in the private sphere. Elected officials knew that,by the time benefits came
due,they would be out of office.Union officials knew it,too.Once benefits were
agreed to,cities and states chose to skimp on funding.Politically,it was always
preferable to build the extra school or staff the additional fire station than to squirrel
away more pension money.
Much has been written about the poor investing performance of public pension
plans.But for all the ill-conceived speculation of Calpers(the giant California fund)
and others,the real problem is that politicians across the country have failed to
fund.For them,the choice between raising taxes and keeping the pension fund
solvent is no choice at all.
This is a pity because,when properly run,pensions remain the best form of
retirement plan.They do away with many of the risks bom by individuals alone,
such as outliving one's savings or retiring at the wrong time.And most people don't
have the expertise to manage portfolios.
Of course, if employers don't make adequate contributions,such advantages
disappear.What happens then?In the private sector,customers walk and
bankruptcy results.That is also what happened in Detroit:The city's taxpayer-
customers left town But Detroit is unusual.
Most communities will not lose half their populations,and most will not seek
recourse in bankruptcy.Like it or not,governments will have to find a route to
solvency.That will mean reduced benefits,higher taxes or,usually,a combination
The Long, Sorry Tale of Pension Promises - WSJ.com Page 3 of
of the two. In the past few years,a reform movement has begun.Governments
have begun to trim benefits—a few,such as Rhode Island,quite drastically.
What's needed is to impart a sense of urgency—to convince cities and states that
pension underfunding has to be dealt with now,like any other fiscal shortfall.Illinois
Gov.Pat Quinn has temporarily suspended legislative salaries to pressure
lawmakers to enact pension changes—an inspired move.
But if you want governments to come clean,go after their drug of choice—credit.
Detroit's bankruptcy has had a salutatory effect,pushing up interest rates for other
cities with pension problems.If bond markets punish localities for not funding their
pension plans,politicians will not be able to look the other way.
The trouble is,the bond market's memory is short.Before we get more Detroits,or
more Studebakers,the federal government should enact an Erisa(with teeth)for
public employers. More simply,it could announce that local governments that fail to
make timely and adequate contributions to their pension plans would lose the right
to sell bonds on a tax-free basis.That would get their attention.
The point isn't to punish public retirees.The point is that,when governments make
contractual promises,they ought to fund them.
—Mr Lowenstein is the author of"While America Aged,"on the pension crisis.
-I version of this artitle appeared Septenebar 2r,2w3,cra fwge C;q in the UTS.edition q(The N'nif Street
,fintmal,with the headline:Thesorni'IbleofFensiortPrornises.
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