The cost of city employee pensions has long been a subject of controversy, and that debate was given new life recently after three city department heads retired last month — then returned to work part-time while still receiving their pensions.
To do what city officials called "critical work" for the city, library director Karen Burnett and employee services director Kathy Farrar have returned to their posts after retiring in December. They will be paid $110 an hour and $113 an hour, respectively, while also drawing annual pensions of more than $100,000.
Farrar's annual pension could be a record-high $187,000 due to her salary of $183,000 and her steady employment with the city for 38 years. (Burnett's salary of $176,000 and her 8.5 years with the city could lead to a $40,000 yearly pension from Mountain View alone.) Calls to CalPERS to confirm these figures were not returned as of press time.
Newly retired city attorney Michael Martello is also returning to work, as interim "town attorney" in Los Gatos, where he will be paid an undisclosed amount while also drawing a pension. He retired from Mountain View with a salary of $235,000 last year — possibly resulting in another unusually large yearly pension as he will receive $101,000 from his work in Mountain View alone.
The practice of taking a pension and returning to work part-time is known as "double dipping." And while it is illegal in some states, such as Michigan, it's allowed in California.
CalPERS, the agency responsible for managing pensions for the retirees of most California cities, allows government workers to receive their pensions while returning to work for another agency under CalPERS (which includes Los Gatos) as long as it is for no more than 960 hours a year — translating to about six months of full-time work or a year of half-time work. The policy spurred council member Margaret Abe Koga to say she'd like to see a report on how many hours Martello is working for Los Gatos.
Passing the torch
Critics say double dipping encourages senior officials to retire early while preventing others from moving up in the ranks. Proponents say it allows government agencies to save money since a retiree does not need to be provided additional health care coverage. Martello himself pointed out that retired police chiefs are known to move from city to city filling vacancies.
City Council members had mixed opinions about city manager Kevin Duggan's decision to bring back Farrar and Burnett for part-time work.
"I prefer the practice in which you train someone to take over," said council member John Inks. "I think (Duggan) has probably done that, we're just not seeing it here."
Abe-Koga said she had hoped to have replacements for Burnett and Farrar already in place since the council budgeted $150,000 for "succession planning."
But assistant city manager Nadine Levin said the two retirees will work for no more than four months each until replacements are found. And Inks noted that Duggan is dealing with a wave of retirements, including a dozen in December alone.
"He's got big shoes to fill, and a bunch of them all at once," Inks said. He added that assistant public works director Mike Fuller has temporarily taken over for Cathy Lazarus, the retired public works director.
CalPERS investment earnings currently cover 75 percent of pension payments, according to city finance director Patty Kong.
In recent years the city's contribution — most of which comes from its general fund — has decreased slightly, and currently hovers at around $9 million. But the recession has caused CalPERS investment revenue to take a significant hit, and Kong said the city's contribution will increase for the 2010-11 fiscal year.
The financial burden to cities is a topic of concern being discussed on a regional level by city managers, said Levin. A possible solution often talked about, she said, is a "two tier" system in which newer employees' pensions are set at lower rates.
She said nothing could be done to lower the pensions already agreed upon for existing employees, as "those are contractual obligations."
Council member Mike Kasperzak noted that pension rates increased during the dot-com boom, when cities believed the heated economic climate would last. Now Mountain View is facing a deficit of up to $5 million out of its $89 million general fund this year.
Levin said pension rates increased in 2006 to stay competitive with other cities, and as part of bargaining with unions which agreed to cuts in retiree health care, another major expense which is growing. For salaried city employees not in public safety, pension rates rose from "2 at 55" to "2.7 at 55" — meaning Mountain View employees can retire as early as age 55 and receive 2.7 percent of their highest annual salary multiplied by the number of years they worked for the city. After 30 years of employment, that comes to 81 percent of their highest salary.
For public safety personnel, rates increased to "3 at 50," meaning they can retire at age 50 and receive, for example, 90 percent of their salary after 30 years of employment.
CalPERS calculates how much previous employment adds to an accumulated final pension. Employees have to work for at least five years for the city to receive anything from Mountain View towards their pensions.
The dim economic climate is sure to affect upcoming union negotiations. Mountain View is expected to begin negotiations soon with the Police Officer's Association, as its contract ends in June. The city's three other unions have contracts expiring in 2011.
While the city's CalPERS rate is not unusual (Palo Alto also pays its employees "2.7 at 55"), Levin said Mountain View's city employees pay a significant portion of their own salaries toward their pensions. As for Martello and other non-pubic safety employees, 10.5 percent of his salary over the last few years "went to pay for his pension," she said. Public safety employees pay 13 percent of their salaries toward their pensions.
"This is very unusual," Levin said. "You will probably find (in Mountain View) the highest cost share of any other city around."
According to records published online by www.californiapensionreform.com, there are at least 16 retired city of Mountain View employees who are paid over $100,000 a year in retirement income, not including those who just retired in December 2009. The highest paid on that list is former police captain Bruce Barsi, who receives $156,000 a year, or $13,000 a month.
By comparison, 21 city of Palo Alto retirees are paid over $100,000 a year, and 54 city of Sunnyvale retirees are paid over $100,000 a year.
MOUNTAIN VIEW'S $100,000 CLUB
Below are the city of Mountain View retirees, not counting Karen Burnett, Kathy Farrar and Michael Martello, who are currently drawing annual pensions of more than $100,000:
Bruce Barsi: $156,187
Timothy Ko: $146,734
Marc Revere: $138,618
Steven Conte: $133,164
Paula Bettencourt: $130,285
Ronald Geary: $122,851
Larry Bertuccelli: $119,933
Michael Freeberg: $115,601
Michael Alexander: $106,590
Glenn Lyles: $105,925
Charles Gibson: $105,874
Benvenuto Lenci: $104,358
Larry Janda: $103,639
Dennis Belluomini: $102,966
John Welbourn: $101,716
Bruce Fritz: $100,372