In the long term, swelling pension obligations may make it increasingly difficult for the city to continue its current spending. By the 2016-17 fiscal year, the city could have to pay $19.5 million per year into its pension fund, according to city Finance Department estimates provided to the Pilot in August.
Those are up from $14.7 million budgeted in the 2011-12 fiscal year.
But the city's pension projections have been contentious. Union leaders point out that the figures assume employees won't pay into their pensions after the current contracts, even though many have agreed to pay since 2007. More employee contributions — a likely outcome of ongoing negotiations — would lower the city's required payments. These concessions, they say, will help stabilize the city's long-term finances.
Also, the trajectory is far less steep than the Finance Department projected last year, just before the city announced its outsourcing plans. On Feb. 8, 2011, Finance Director Bobby Young told the City Council during a study session that the city could have to pay nearly $27 million per year by fiscal 2015-16.
Righeimer said: "These are big, big jumps. This is really what stares me in the face ... That's why we're looking at this [thing] so serious right now."
During the meeting, Young pointed out another important caveat: The $27 million figure assumed the retirement fund's investments would perform worse than the California Public Employees' Retirement System (CalPERS) officially projected.
"It does get subjective, and I want to qualify it," Young said at the meeting. "This isn't gonna happen, but it is a possibility."
Nonetheless, the council voted on March 1 to issue layoff notices to more than 200 employees, and Righeimer said one of the main reasons for outsourcing was the $27-million projection.
Councilman Steve Mensinger, in a later interview, echoed Righeimer's sentiment.
"We're going to go down the same road as everybody else — toward bankruptcy," Mensinger said.
San Bernardino and Stockton are among the state's cities to recently pursue bankruptcy protections; both partially blamed their woes on payroll and retirement costs. The story was similar in Vallejo, the nation's largest city to go bankrupt.
The Costa Mesa pension projections were a prime example of how City Council majority members adjust figures to suit their needs, union officials say.
"They can move it around to make it look like anything they want," said Orange County Employees Assn. (OCEA) General Manager Nick Berardino. "And they have that decision-making power. They have the ability to subjectively move numbers."
There is no disputing Costa Mesa's historical trend: Annual pension costs rose steadily over the past decade, as City Council members promised generous retirement plans and investment returns proved unpredictable. The city's annual pension payments rose from $5.2 million in the 1999-2000 fiscal year to $14.7 million in the 2011-12 budget.
Union contracts approved by the council explain a portion of the jump. Some retirement plans let employees retire at age 50 with up to 90% of their annual pay, and in many contracts, the city agreed to pay the full amount of the workers' retirements—employees were not required to set aside any of their paychecks.
Some of that has changed.
In 2010, Costa Mesa employees agreed to increase their pension payments, amounting to $3.6 million in fiscal 2010-11.
The current City Council members, however, with the exception of Leece, have repeatedly slammed the 2010 agreements because they actually increased the retirement benefits for firefighters, and thus long-term costs, and because some employees' contributions expire before their contracts are up.
"Nobody would bargain like that in the business world," Righeimer said.
Increasing the firefighters' retirement incentives caused some of them to retire early, saving the city cash in the short term.