CANDIDATE FORUM REPORT
The Daily Bulletin's Wes Woods II had an article Saturday about the first candidate forum for the 2009 Claremont City Council election. The forum, hosted by Active Claremont, took place last Thursday.
Woods described the three-person race as bunched, with no one breaking out from the pack. He picked out one area where he reported the candidates were of different minds:
The candidates reacted differently to a question about statements made by Councilman Peter Yao that the city could face the prospect of bankruptcy because of the struggles of the state Public Employees' Retirement System pension plan.
"This is on our priority list," Calaycay said. "PERS is going to expect a higher contribution. It's on our priority list to come back for action."
Healy said she would like to see Claremont band together with a group of other cities to find alternatives to the current PERS plan.
The group would then bring its idea to lawmakers in Sacramento.
Trying to address the issues alone would not work because if the city's contribution to the pension plan is lowered it would impact the city's ability to retain or recruit staff, Healy said.
Schroeder said he was a system retiree and the city has to keep a certain amount of wages and benefits to retain employees. Next year, if the state pushes the PERS rates up 5 percent, every city will have to deal with the matter.
The candidates also differed on council salaries.
Healy and Schroeder said they would not accept the council salary of $400 a month as well as health benefits.
Calaycay said he does accept the monthly compensation and $30 for redevelopment meetings, because it is a fair amount. He said he declines health benefits and does not take money for trips.
One of our readers who was at the Active Claremont forum wrote in to correct Woods' description of what the candidates said:
DATE: Sunday, January 18, 2009, 9:53 AM
SUBJECT: candidates forum thursday night
TO: Claremont Buzz
I don’t know if you heard any of the questions and answers given by the three Claremont City Council candidates at Active Claremont’s forum Thursday night (Jan. 15th) but the Daily Bulletin’s report on the answers given by the candidates to the question “Will any of you take the council benefits, the medical benefits or the deferred compensation?" was incorrect. Both Healy and Schroeder said they would decline the medical benefits, but did not say they would also decline the $400 per month salary as the Daily Bulletin misreported.
Another question that was addressed was the PERS (Public Employee Retirement System) that all the candidates are vested in. Since both Schroeder and Healy are retirees, they are getting it now, but only Healy has worked for Claremont and is therefore drawing on Claremont’s share of her pension. Is there a possible conflict of interest there if she votes on anything to do with PERS? Just wondering.
We're not sure if there's any conflict. But it does seem to argue against having a high-ranking staff member run for the a council seat in the same city that person recently left.
DOING THE PENSION MATHSchroeder's and Healy's takes on Claremont's CalPERS (California Public Employees Retirement System) account are mighty interesting. Both are in the enviable positions of receiving some very generous CaPERS retirement benefits. For example, for Healy, who retired October, 2008, from the city of Indio making about $220,000, that pension amount would be around $150,000 a year with cost-of-living increases built in. So, whether she accepts it or not, the council pay of $400 per month is chump change to her.
In Healy's case, Claremont's portion of her pension is 2.5% of her salary in her highest earning year, $220,000 from Indio, times 18 (the number of years she worked in Claremont). That's equal to 45% of $220,000, or $99,000 a year for her pension.
Healy would also get 2.7% for each of her three-plus years in Indio (that city has an even more generous pension plan that was $30.2 million in the red as of two years ago - when the stock market was still up). So Indio would pay Healy 2.7% times three years, or 8.1% of $220,000, which equals another $17,820. And then Pomona would pay Healy 2% (its multiplier) times nine years, for another 18% of $220,000, or $39,600.
Schroeder worked for Lakewood, which has a CalPERS benefit that pays 2% for each of Schroeder's years at that city. Schroeder also worked for Glendora, which pays 2.5% for each year Schroeder worked there. Schroeder, though, at least sounds as if he'd be willing to consider changing the current City pension plan if CalPERS' outlook doesn't improve.
It's probably natural that Healy would be loathe to alter Claremont's employee pension. After all, she was on the Claremont staff under Glenn Southard that increased the non-police employee pensions from 2% at 55 years old to the current 2.5% that Healy enjoys. That increase, by the way, added an instant $10 million in unfunded pension liablities to Claremont's CalPERS account because the change was retroactive back to each employee's date of hire. Claremont, not CalPERS and not the employees, is on the hook for that extra .5% of retroactive retirement. You may remember that change was pushed by Southard and Healy in January, 2005. By April that same year, they were both gone to Indio.
According to the Wes Woods article, Healy defends her unwillingness to change Claremont's current pension plan by introducing the false notion that Claremont could not compete in the employee marketplace if it gave out lower pensions. What she ignores, perhaps by design, is the fact that the job market has changed, as have financial markets. She's thinking like a staff person protecting her pension and not like a councilperson. Really, what good does it do to have the best employees in the state if Claremont is bankrupted by its pension obligations?
Instead of Claremont taking control of its pension problems, Healy would have us wait until the state sets limits on what cities can promise future retirees. We've seen what a great job California has done with its own budget. Now, Healy wants us to defer to Sacramento on pensions. This strikes us as nothing more than a convenient way of avoiding an imminent threat to Claremont's financial health.
As it is, Claremont will either have to layoff staff or reduce services to balance its budget, assuming there is no significant improvement in the economy in the next 12 months. And, as Woods alluded to, the cost of Claremont's CalPERS pension plan payments are likely going to rise from the current 13% of payroll to 18% or more.
Ed Mendel at Calpensions.com explained why:
...CalPERS warned that the annual pension contribution that must be paid by state and local governments could increase by nearly a third — starting July 1, 2010, for the state and schools and July 1, 2011, for local government agencies
It’s exactly what wasn’t supposed to happen when CalPERS adopted an unusual “smoothing” policy in 2005 that changed the three-year period for calculating investment gains and losses to 15 years, well beyond the average for most pension funds.
“This plan will help end the whiplash employers experience when contribution rates dramatically increase and decrease year to year,” the CalPERS board president, Rob Feckner, said in a news release.
Now CalPERS is waiting to see what happens to the value of its investment portfolio by the end of the current fiscal year, June 30, the period that will be used to calculate a new contribution rate.
The average CalPERS contribution rate paid by state and local governments is currently about 13 percent of payroll.
If the investment loss is 20 percent for the full fiscal year, CalPERS estimates that contribution rates could be increased by 2 to 5 percent of payroll. If the loss is more than 20 percent, the increase would be even higher.
That is one big hit that Claremont is set to take come June. This all comes at a time when city revenues are off by large amounts. Claremont Toyota sales tax revenues may be off by over 50%, for example, and Claremont Toyota accounts for about 53% of the city's total sales tax revenue. Other businesses are suffering as well. How will the candidates deal with a seven-figure loss in revenue and continue to pay out into a pension plan that is millions of dollars in the red? We await the answers.
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