Costa Mesa firefighter Mike Ruhl is welcomed home by his wife Megan and 2-year-old son Bradley at their Mission Viejo townhome. (SCOTT SMELTZER, Daily Pilot / July 5, 2012)

Newport-Mesa Unified school board Trustee Katrina Foley, a city councilwoman between 2004 and 2010, said that the council thought the trade-off for a more generous pension plan was worth it.

"It's what everyone else has in the county, anyway," she said. "It's not like it's unusual."

One of the intentions of these pension plans is to lure people like Ruhl, who calls the CMFD a "destination department."

The average Costa Mesa firefighter receives $78,768 per year in retirement, and the average police officer gets $72,367. Other employees pale in comparison, at $27,359.

"I think we have always tried to be as fair as we could to the employees," said state Assemblyman Allan Mansoor, a city councilman from 2002 to 2010. "And quite frankly, they were treated very well."

Mansoor, a Republican, and other city leaders went along with pay raises during good economic times, as sales tax from South Coast Plaza and Harbor Boulevard's car dealerships flowed in.

For the pension debt, Mansoor blames the unions and previous council members for approving some of the most generous pension plans, especially those for police and firefighters.

CalPERS declines

Another reason for the climbing pension costs is the retirement fund's declining investment returns. The city's pension fund is in a large investment pool managed by CalPERS. As with other investments, most local governments' assets lost much of their value during the recession.

That increased the amount the city must pay today, to make up the difference and ensure its employees will get pension checks in the future. The so-called unfunded liability — the amount for which the city is obligated to pay but has not yet set aside — is approximately $131 million.

That CalPERS estimate assumes investments will perform well during some of the years Costa Mesa is paying it off. A more stark number — the amount the city would have to pay today — is approximately $207 million.

It wasn't always this bleak. For the better part of the last decade, CalPERS investments grew with seemingly no end in sight, often more than the current 7.5% projected annual return, and governments had to pay less because of the investment successes. For the past 30 years, the system's average annual return was 9%.

In the early 2000s, many cities' pension funds were actually "super-funded," meaning there was more than enough money to cover the liabilities. Costa Mesa paid next to nothing those years.

"[The unfunded liability is] a number that caught people by surprise," city Finance Director Bobby Young said, as the city was climbing out of the recession in late 2011. "Not many people had seen it."

Council members certainly acted as if they didn't foresee the consequence. From the late '90s, to just before the recession, they approved the pay increases, improved retirement packages and increased specialty pay for learning new skills, without wringing significant concessions from employees.

One retirement perk allowed employees to inflate the ultimate figure CalPERS uses to calculate their pensions. The city's annual pension payment was counted toward the employees' total pay. For example, if an employee makes $100,000, but Costa Mesa covers his or her retirement contribution — say, $8,000 per year — then his or her final pension would be based on a $108,000 salary.

It wasn't until 2007, when Costa Mesa's annual pension costs had climbed to more than $14 million from just above $5 million at the beginning of the decade, that its city employees began paying toward their own retirement.

But those payments were temporary. In November of last year, the firefighters' contribution stopped three years ahead of the end of their contract. General employees are set to end in February, and police are scheduled to pay through February 2015.

Public safety costs

Spending on police officers and firefighters accounts for about 70% of the city's salaries and benefits.