Pension fight docks in Newport Beach
Newport Beach’s public employee unions and city officials normally keep quiet about contract disputes — a more restrained, “Newport” way of doing business.
Not this time around.
As police, firefighter and lifeguard contracts expire at the end of the month, city officials have asked employees to contribute more to their pension funds, and unions are striking back publicly.
Union officials sought to rally residents with a mailer last week, and city administrators countered with an open letter explaining why they think employees should pay more toward their retirements.
“While the city is in fairly good fiscal shape today, if the current pension practices don’t change, we are concerned that it won’t stay in such good shape,” City Manager Dave Kiff wrote in a statement to residents.
The city faces the question of who should pay for city employees’ retirement, and if city funds would be better spent on infrastructure.
Unlike Costa Mesa and other cities experiencing pension problems, Newport officials find themselves defending their decisions with nearly $90 million in reserves.
“A city does more than just pay its employees,” Kiff said Monday. “We have medians to repair and buildings to replace … It’s the quality of our infrastructure that drives our prosperity.”
“We want to keep doing that while still being competitive in the labor market,” he added.
Firefighters and police officers have a retirement plan that allows them to retire at age 50 with a pension that equals 90% of their largest annual salary. They contribute 3.5% of their base pay toward their retirement fund, which is managed by the California Public Employees’ Retirement System (CalPERS).
Lifeguards had a similar contract until this past summer, when they faced a massive public outcry about their salaries and pensions, which critics called generous.
Guards agreed to contribute 9% of their total salary to their retirement funds and to a less generous formula for new hires.
City officials have said they would like police and firefighters to make the same concessions.
“The public sector must contract with the economy, just as the private sector has contracted with the economy,” said Councilman Rush Hill, an architect and businessman.
On Friday, fliers were distributed to Newport Beach residents to rally public support for public safety services. They read: “When one of the most prosperous cities in the country unnecessarily targets public safety for cuts, it’s time for Police and Fire to sound the alarm.”
“I’m a little disappointed because those types of discussions usually happen at the negotiating table, and not in public,” Hill said.
Brian McDonough, president of the Firefighters’ Assn., believes the suggested jump in public safety pension contributions could result in good employees being drawn to other cities.
“If there are other agencies that are paying more money, and they no longer feel a draw to the organization, then sure,” he said. “Just like with any other business, if some other company is paying better and treating their employees better, you’re going to want to go work for them.”
Newport Police Chief Jay Johnson said the re-examination of public safety pensions isn’t unique to Newport Beach but is happening statewide.
The outcome on competitive hiring remains unknown, he said.
Hill said Monday that employees must concede some, otherwise the city might have to resort to layoffs. His opponent in the 2010 City Council race criticized him for accepting an endorsement and donations from the firefighters union.
“As far as I’m concerned, I’m protecting them by agreeing to a sustainable compensation package,” Hill said.
Other municipalities with a public safety retirement plan like the one in Newport Beach typically have a 9% employee contribution, according to a CalPERS report.
After Newport officials saw CalPERS investments take a nose dive and the city’s required contributions ratchet up, Kiff and the council took a harder stance on pensions.
Cities pay for pensions through a combination of investment returns, and contributions from the employer and employee.
The council hired a new labor negotiator and adopted a new compensation policy this summer. As a goal, the policy seeks to have the city and its employees split the total retirement cost.
Newport Beach is not alone in seeking reduced benefits or higher contributions from its employees. In Santa Ana, a proposal released last week calls for firefighters to contribute 9% of their salaries toward their pensions — a steep jump from the 1.4% they contribute now. Gov. Jerry Brown wants public employees to eventually pay half of their pension costs, according to a reform plan he released in October.
Newport Beach pays about $11 million annually to CalPERS for its public safety employee pensions, and about $8 million for other employees. The city’s unfunded liability — the difference between what it owes to retirees and what it has set aside for pensions — is about $98 million for public safety employees.
Newport’s public employees who don’t fall into the “public safety” category, like recreation supervisors and planners, already agreed to pay 8% of their salary toward retirement costs.
Both McDonough and Dave Syvock, president of the Newport Beach Police Assn., said public safety associations are at the bargaining table with the city to reform pension contributions.
“We [police and fire] have been working together for over a year now to try and meet the city goals of pension reform,” Syvock said. “We’re no strangers to what the issues are.”
Johnson said in an email that the department has recently restructured to save the city $2 million in the 2011-12 fiscal year and that some positions were replaced by less expensive, non-sworn employees. He also said it outsourced some services, although the savings from such measures isn’t enough to shore up the larger structural problem the city said it is undergoing.
mike.reicher@latimes.com, lauren.williams@latimes.com
Twitter: @mreicher and @lawilliams30