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PENSIONS: Alameda’s $100k club

Submitted by on 1, April 22, 2011 – 12:02 am28 Comments

Craig Ojala retired from the Alameda Police Department in 2008, after 30 years on the job. Ojala started working in the department as an officer in 1979, when he was 20 years old, and rose to the rank of interim chief in 2005 before leaving the department as a captain.

For his service, Ojala earns a pension of $179,730 a year, according to a database compiled by the conservative California Foundation for Fiscal Responsibility that lists retired public employees earning pensions of $100,000 or more a year – more than any other retiree from the City of Alameda.

Ojala is one of 50 people who have retired from the city with six-figure pensions, the database shows, with the CalPERS pension fund’s annual payouts for those employees alone totaling $6,248,187. The list is topped by former police and fire brass and includes an assortment of former managers and even some members of the city’s rank and file.

The figure is a “squeal point” for taxpayers, a report on pensions issued recently by the state’s Little Hoover Commission said, and it is being used as a tool to further pension reform efforts that include tighter limits on benefit payouts, higher employee contributions and the creation of a “hybrid” system that includes 401(k)-style defined contribution plans for new public employees.

But defenders of the existing defined benefit pension plan said they’re working to make changes that will help cities manage rising pension costs, including some of the changes reformers seek. And a spokesman for CalPERS, the public pension fund where Alameda invests its employees’ retirement money, said investment losses and increased staffing, not benefit increases, are the primary drivers of cities’ increased benefit costs.

“Benefit enhancement is part of the picture. But it’s not a primary driver,” CalPERS spokesman Brad Pacheco said, offering a chart that showed that payroll increases accounted for more than half of cities’ rising pension bills.

Staffing for the City of Alameda, for example, grew from 594 positions in 1993 to 738 a decade later, city budget records show (the city now has 659 positions).

The City Council voted in 2000 – unanimously and without any public discussion – to increase retirement benefits for its police officers and police management to allow them to retire at age 50 with 3 percent of their top salary for each year served instead of the 2 percent they had been getting, minutes of the meeting where the benefit was approved show, with a cap of 90 percent. (The council voted to provide firefighters the same benefit in 2001, meeting minutes show, though in that case they cut and froze positions and trimmed funding in order to pay for it.)

But at the same time city leaders increased benefits, their annual payments jumped from the 9 percent of employees’ salaries they had been paying – the same rate public safety employees pay into their own pensions – to 25.8 percent in mid-2003, a staff report written in 2002 shows. City staffers estimated that the increased value of the benefit the council had promised – $10.2 million for police and $8.6 million for fire – would be paid over 20 years.

A string of retirements of top police and fire officials hit the city in the years after the benefits were raised: All of Alameda’s top 10 pension earners are former police or fire brass, and each of them retired after the new rules went into effect.

Former Alameda Police Capt. Rich McWilliams, who served a stint as acting police chief, retired in 2005 after 30 years on the force, with earnings of $173,370.36 a year, a City Council resolution issued as he retired showed. Former Fire Chief Tim Reilly, who left as the new benefits were put in place, earns $167,770.20.

The new rates allowed some of the city’s top earners to retire with most of their pay intact. Chris Reilly, who’s on the top 10 list, spent five and a half years as a deputy chief at the Alameda Fire Department before retiring in March of 2009. In 2008, he had total earnings of $190,889.16, records obtained by The Island for an earlier investigation and a LinkedIn profile for Reilly show. After he retired, he began earning a pension of $166,926.96, the California Foundation for Fiscal Responsibility database shows, or about 88 percent of what he made in his last full year of work in Alameda.

The average benefit paid to Alameda’s retirees is much lower, though it is growing – and being offered to a growing number of people. Actuary reports supplied by CalPERS show that the pension fund paid an average benefit of $66,486 to Alameda’s 204 public safety retirees for 2009, and that they started taking the benefit, on average, at the age of 63. A year earlier, the fund paid 192 safety retirees an average of $62,623. Some 538 non-safety workers got an average of $16,128 in 2009, up from $15,223 a year earlier for 525 former city workers. They started taking the benefit, on average, when they were nearly 71, the reports show.

Meanwhile, the rates the city pays for employee retirement benefits are rising to cover the losses CalPERS suffered when in the stock market and housing crashes of 2008. The city’s public safety contribution rate is now 31 percent, and forecast to rise to 45 percent by 2015. Other city employees, who get 2 percent of their top pay for each year served, with no cap, can retire at 55; the city pays 13 percent of their salary toward their retirement now, and expects to pay 19 percent by 2015.

The city’s retirement contribution for its top-paid public safety employee – Acting Police Chief Mike Noonan – was $63,383.75 in 2010, or close to 31 percent of his base salary of $155,984 plus specialty pay add-ons. At 45 percent, the city’s annual retirement costs for Noonan alone would be roughly $92,000, or the cost of a full-time police officer or firefighter based on city employee pay records.

For its top non-safety employee, Interim City Manager Ann Marie Gallant, the city made a $31,943.73 payment in 2010. For a police officer who earned roughly $89,000 in 2010, the city made a PERS payment of $29,745.81.

Some 126 current city employees made a base salary of $100,000 or more in 2010, the city’s records show; a little more than half of them, or 68, were public safety workers. Overall, the city contributed $10.4 million toward its workers’ retirement funds in 2010, and the city’s controller, Fred Marsh, expects the city’s bill to rise by $1.75 million this year (though this year’s tab was less than what the city paid in 2008 and 2009).

California Foundation for Fiscal Responsibility president Marcia Fritz said the list of top retirement benefit earners is growing by 60 to 70 percent a year, and faster than the list of public pensioners as a whole. She said the group’s list is littered with city managers who had direct access to policy makers and who helped drive decisions on growing their own benefits. And she said the new benefit rules – allowed by a state legislative change made in 1999 – provided a perverse disincentive for top managers to retire early.

Fritz said that while CalPERS’s investments have recovered, the rate of early retirements and wage increases exceeded what actuaries had predicted.

“You’ve got guys that may have a position for one year. And then they retire at that salary,” Fritz said.

Jeff DelBono, a firefighter/paramedic and the political director for Alameda’s firefighters union, acknowledged there are problems with the pension setup, but he is resisting calls to convert city workers’ current pensions to a 401(k) plan. He said he’s willing to work with the city to save money, but there are a lot of cost-saving concessions workers can’t make unless the state Legislature changes the law to allow them. (He also stressed that his union doesn’t represent the management employees who dominate the city’s top-earning pension slots.)

While he said he couldn’t divulge details of the tentative contract the union has hammered out with the city until his members vote on it, he said one fix could be bigger employee contributions for benefits.

DelBono said other potential cost-cutting moves – including caps on retiree earnings and different contribution rates for existing and new employees – can’t be made at the bargaining table unless state legislators, who set the parameters for benefits, retirement formulas and eligibility ages, change laws that would allow those items to be renegotiated. And other strategies – like raising the retirement age for new hires who haven’t yet been promised a specific benefit level, as existing employees have – wouldn’t save the city any money up front, according to an actuarial study commissioned by the city.

“It’s a statewide problem,” he said.

DelBono said the benefits were added at the height of the dot-com boom as CalPERS was flush with cash, and that they came in lieu of pay raises and firefighting positions that had been frozen in previous budget cycles.

“These benefits were put in place when the economy was going gangbusters and people were earning a lot more money in the private sector,” DelBono said.

Previously

Tuesday: Peril is in the eye of the beholder

Wednesday: A brief history

28 Comments »

  • Jack B. says:

    I’m curious how our public safety salaries and pensions compare to Oakland’s firefighters and police. Anyone know?

  • tomcharron says:

    Michele:

    Thanks for this historical review.

    Fire and Police employees of our city will face a dramatic confrontation with fiscal reality soon.

    Hopefully the current City Council members who have close ties to the Safety Unions will act appropriately on behalf of the citizens of Alameda and bring salaries and benefits in line with the economic realities of the rest of the working masses.

    Some interesting solutions to save high expenses and make system competitive.
    1.) Privatize and contract out all Alameda fire services.
    2.) Discontinue Alameda Fire ALS transport and opt into Alameda County ALS transport contract with private ambulance service.

    Tom Charron

  • Neal_J says:

    Let me see if I got the math right uUsing Captaion Ojala as an example. He was born in 1959, joined APD in 1979 (at age 20) and retired in 2005 (at age 46). His annual pension is just under $180,000/year and is not reduced if he takes another job post-reitrement. Assuming he will live to the ripe old age of 85, Capt. Ojala’s pension that will cost the City of Alameda just over $7 million.

    The Kevins were totally right. No city can sustain such math. It’s exactly what killed the U.S. auto industry.

    • Tejo says:

      Really? You don’t think what brought the auto industry down was the CEO’s retirement packages? Or the huge profits the corporations are hoarding? Geez people, don’t buy into the hype. Yes, the pension is super high but our town has been super safe especially given it’s proximity to some very dangerous neighbors. You get what you pay for.

  • Barbara says:

    Our government and Unions lost touch with reality.
    Unfortunately it is at our expense, because we voted them in.

  • Karen Bey says:

    “Meanwhile, the rates the city pays for employee retirement benefits are rising to cover the losses CalPERS suffered when in the stock market and housing crashes of 2008.”

    I agree we need to reform pensions, but it looks like CALPERS has shifted the risk (their bad investment decisions) to the cities and workers, and it’s the losses that are creating part of the problem. We wouldn’t be having this conversation if CALPERS had not suffered such huge losses.

    So let’s not just focus on one side of the balance sheet – looks like we need to put some controls in place to protect cities from future risky investments. Perhaps giving cities more choices would be a step in the right direction.

    That said, pension benefits are high and we need to bring them in line with the rest of the world. The federal government model looks good to me – a combination of 401K and social security.

    “The federal government introduced a 401(k) plan in 1986; they also give their employees Social Security” something Alameda employees don’t get”.

    This is what the rest of us gets, and converting to the federal model will go a long way in solving our budget problems.

    • Hey Karen,

      In terms of shifting the risk, I know this is something the council has complained about, and Beverly Johnson in particular – that CalPERS doesn’t bear the risk for its investment losses, its members – cities and public agencies – do. That said, the CalPERS spokesman I chatted with yesterday said they have been shifting their asset allocations, I gathered to stabilize the fund (He said their assets had dropped from a high of $260 billion to a low of $165 billion, and within the last few days the fund was listed at $234.4 billion on their website.) Whether the concern you raise leads to some more formal effort to change the way CalPERS does business, we will see.

    • John says:

      “The federal government introduced a 401(k) plan in 1986; they also give their employees Social Security” something Alameda employees don’t get”.This is what the rest of us gets, and converting to the federal model will go a long way in solving our budget problems.

      For 2011, the maximum annual retirement benefit on Social Secuity is about $28,400. Why is Alameda Employees model any different? Plus they couldn’t start recieving benefits til they were 62.

      Here is what Alameda City Charter States

      :Establish on or before July 1, 1938, a retirement, pension and insurance system for City officers and employees based on sound actuarial principles, which system once adopted shall not be amended except by majority vote of the full Council and shall not be repealed except by the People. Such system shall provide for the support thereof by deductions from the compensation of officers and employees of the City and contributions from City funds and funds under the control of the respective boards.

  • Jack B. says:

    Karen, not just “bad investment decisions”…. how about corruption?

    http://www.latimes.com/business/la-fi-calpers-probe-20110315,0,126433.story

    “In a scathing report, a former chief executive of the California public employee pension fund was accused of pressuring subordinates to invest billions of dollars of pension money with politically connected firms…”

  • Also, didn’t CalPERS reduce the city’s contribution to zero for a few years during the meteoric rise of their accounts?

  • One thing to point out is that Fire Chiefs and Police captains/lieutenants are not IAFF/OPB members, they are represented by management unions and they have separate contracts.

    Just for clarity that negotiations with the “firefighters” or “police” unions (who delbono works for) have no bearing on the pension pay outs mentioned in the chart above.

  • Karen Bey says:

    John,

    Thanks for the clarification. As we can see there are many factors that contributed to this problem — hopefully everyone will work hard to find solutions to resolve it.

  • John says:

    Try and put a actual value and potential buyout offers on all salary , medical benefit obligations and pension obligations on all employees and retired employees. Find out what they really are in TODAYS Market. Look at all our options and stop the Bleeding. This includes AUSD. We need to face the MUSIC with full transparency. If we need to BK so frkn what. Obviously we have been betrayed by past City Managers, Boards and Council negotiating our contracts to the Citizens peril.

    This passing the buck from council to council board to board Mayor to Mayor City Manager to City Manager is just Noise. Let’s act now while our City Employees and Retired Employees won’t lose everything and quit burying all it’s citizens with this gross negligance.

    • John says:

      As an Example to buy a 35 Year Lifetime Annuity to recieve 179,000 a year would Cost 4.5 Million dollars . Now Lifetime Medical Benefits is a another huge chunk. I’m sure there is magic number on that. Let’s lay it all out there for the Citizens to see and realize where we are financially.

  • John says:

    These total compensation contracts to our City Employees look like Average citizens Income should be about 200,000 per year and Household income should be around 400,000 per year. In reality were only 20% of that number if not less.

  • John says:

    Average house cost and Tax base in Alameda should be around $2,400,000 – $3,200,000 to justify these Total compensation packages.

  • Chris says:

    So our city just gives away MILLIONS every year to people who don’t even work anymore. Meanwhile our schools threaten to shut down and the taxpayers and small business owners end up footing the bill, via Measure A. What a joke. A sick, cruel joke.

    • John says:

      Chris

      The Alameda Unified School District won’t reaveal their total compensation packages for Salaries Benefits and Pensions for their employees which They spend 95% of their budget on. The City talks of full transparency but it is just talk. It is Alameda’s Big Secret. I guess they are trying to protect us while they let pools crumble and don’t even have heat in some classrooms.

      • John says:

        95% of Measure A is Going to these Salaries Benefits and Pensions Chris. But I don’t think the Beautiful Color Brochures explained that very clearly.

        • Barbara says:

          Measure A was an insult to Alameda’s Citizens. Bully effort, successfully executed by bullies. Most importantly and sad it was an effort lead by Harbor Bay Realty. It was very sad, very sad and disappointing because they demonstrated disrespect to the property rights and they should have known better.

  • Jay Schurman says:

    Can someone please explain to me why the budgets for our fire and police salaries are conducted in secrecy? The only ones allowed in the process are those that have received money from these unions to get elected. Why is this allowed to continue?

  • Karen Bey says:

    Barbara and John,

    Please stop it. And Measure A was not an insult to Alamedans! It was approved by over 68% of the voters. Quality schools, a well trained police and fire staff who respond within minutes of an occurrence — this is all part of what makes the quality of life so good in Alameda. We take so much for granted! You’re talking to someone who grew up in Palo Alto and moved to East Palo Alto after my parents got divorced. The schools, the crime rate — it was like night and day. Palo Alto is known for its good schools and low crime, but guess what — people are willing to pay a premium to live in Palo Alto just for those reasons.

    In Oakland, it takes much longer for police to respond, and there is a direct link to the increase in their crime rate. Here’s an interesting article on the subject taken from the Bay Citizen on 3/28/11:

    “There is not any additional money, though, and 80 officers were laid off last summer. Between the layoffs and attrition, the department has lost about 140 officers in the last 18 months. The total of sworn staff members is just 662 now, and some specialized units have been disbanded. Crime rates have soared: Murders are up 50 percent, and shootings have risen 44 percent. Complaints have mounted about slow response times and neglect of lower-level crimes”

    Source: The Bay Citizen (http://s.tt/12awI)

    And guess what — its spilling over into our backyard. Alameda has experienced a murder in our own back yard last week. Times are tough, and people get desperate in times of high unemployment.

    Alameda is fortunate to have the homeland security that we have —so let’s give them the space they need to work this out. We all want a solvent city and with all the public outcry against public safety worker’s pensions and health benefits, the pressure is on them to help cities find solutions. The council will get to vote on any final package and we can certainly show up at the council meetings to take part in the process if we want — so there is a democratic process.

    But let’s also keep in mind — you get what you pay for!

  • John says:

    “But let’s also keep in mind — you get what you pay for!”

    California Teachers are #1 in Pay and Students are performing at 47th – 49th nationally.

    California Teachers Union Spent 100’s of millions last 10 Years on Political contributions. You are Right Karen you get what you Pay for. Sad but true.

    • Barbara says:

      The fact is that elementary education is horrible here in the USA. It is not actually education but community centers. That is a fact and more money will not change it. Deep reforms are drastically needed to change the education, or what some call an “education”. Children do not know English and basis multiplication table. Again, MORE MONEY will not solve LACK of education. If we are talking about feeling good about it, that is a different story. Facts are facts and California is failing in elementary “education”.
      Those who love big government and more taxes will soon realize that more is not better because the more you have the more you spend.
      If you want to be taxed more, go for it but do not count on me.

      • Jack B. says:

        Barbara, you seem to miss the fact that there are many elementary students right here in Alameda public schools that are doing quite well with their education. Yes… math, reading, writing and more. I see the evidence of this every single day as an involved parent. It’s not nearly as awful as you portray.

        • Barbara says:

          …”as an involved parent”, that is your answer. Without it???? Ask yourself… My kids did fantastic because I was an involved parent and I did not trust “educators”. I was their educator. And please do not tell me that kids can not learn. EVERY kid can do fantastic and it should.

  • Li_ says:

    JKW brings up a good point, the management bargaining units are not the same as the unions which represent the regular full time workers. Most of the people on these lists that have been published are not public employee union members.

    Also, some of our council members have gotten a lot more than “token pay” for their part time efforts in our behalf. Why are the benefit amounts so different? Why do they get benefits at all? Check out Inside Bay Area site (Oakland Trib.)

    The people who belong to the public employee unions are the ordinary full time staff. They aren’t getting huge pay checks or gross benefit packages. They aren’t retiring early or getting extra for transportation.

    Oh, and by the way, a goodly number of your much maligned public employees are classified as part time. The old standard “permanent part time” (benefits, union rep) has been almost completely phased out. Part time employees have no rights, no rep, no pension or benefits. You can be sure with the cuts coming the part timers will be the first to go.

    Just in case you think this is a non issue, Out of about 74 employees at the library, only 17 are full time. Possibly half of the librarians, I haven’t done an actual count, are part time.

    Can we agree that management level contracts should have limits set on pensions and benefits and move on to ideas about how to keep the departments running?

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