Costa Mesa’s Pension Crisis – Phony as a $3 bill.




Well we now know that Costa Mesa’s pension crisis is phony as a three dollar bill.

Like most cities, Costa Mesa certainly has a long-term pension problem, but Lies, Damn Lies, and Powerpoint in Costa Mesa debunks Jim Righeimer’s outlandish claims that “CalPERS has projected that Costa Mesa’s pension cost will go from 15 million a year to 25 million in the next five years.”

Even by Costa Mesa’s own numbers, their actual pension costs are going down in Fiscal Year 2011-2012 because the employees are picking up 3.6 million dollars more a year in the City’s pension costs.

What happens in the two following years? CalPERs  has projected rates for 2011-2012 based on investment returns for 2009-2010, and a range of investment returns for 2013-2014 based on investment returns for 2010-2011.

As the Calitics article shows,   Costa Mesa’s pensions won’t rise steeply unless you assume that Righeimer and his team are going to completely fail in negotiating with public employees, and that when current contracts end, the City will start picking up a larger share of pension costs.

Maybe Riggy and his gang realize that they have no skills as negotiators and are assuming that they will be pantsed by the unions when contracts are up. But unless you make that assumption, Costa Mesa doesn’t have a pension crisis, at least not for the three years that we can legitimately project.  And as City revenues continue to recover from their drastic plunge during the Great Recession, the modest increases in pensions costs won’t break the budget.

It’s not rocket science, and it would have been obvious that the City’s PowerPoint had some bogus assumptions if there had been any kind of staff report that showed the numbers. But there wasn’t. There was just poor Bobby Young mumbling and stumbling as he tried to defend a projection.

Riggy likes getting on TV with his talking points, and it appears that he’s bullied staff into making  projections to support his agenda. Riggy wants to  get rid of  paramedics, firemen, police officers, and the people who clean up and maintain Costa Mesa. Is it ideology or ambition or a long-standing grievance against the unions that fought him so bitterly during his failed Assembly campaign? Who knows.

But let’s get to another question, one that the City Council of Costa Mesa should have started asking before they started issuing pink slips and spending hundreds of thousands of dollars on over-paid consultants and lawyers.

What happens to Costa Mesa’s $37 million in unfunded pension liability for their miscellaneous employee pool (everyone except sworn police and fire) if Costa Mesa’s outsourcing plans go through?

Do they think it just goes away?

As of June 30, 2009, Costa Mesa their contract for miscellaneous employees  included liabilities for 400 active employees, 283 transferred members, 262 terminated members, and 300 retired members and their beneficiaries.

And there’s a pesky legal document we call a “contract”. This isn’t like being upside-down on your home loan and being able to send your keys back to the bank and walk away. And it’s not like an LLC for a development where you can file for bankruptcy.  It’s a city, and there is an entire section of law called the Government Code that determines what is legal and what is not when it comes to “contracts”.

Which brings us to the REALLY BIG QUESTION; have Righeimer and his gang even asked what happens to their PERS obligations for each of the 18 departments they will be laying off?

I’ll bet they haven’t.

And I’ll also bet that they don’t know how their PERS obligations will be affected by the number of employees who transfer out to other agencies, and what the PERS payments will be for those employees in the future.

With over 500 cities in California, it’s not like Riggy is the first City Council member who has ever looked at outsourcing jobs performed by public employees. And there’s a reason why most cities move gradually and judiciously with outsourcing, absorbing current employees into other departments or using attrition to reduce head count.

We know that Righeimer has lied about the pension crisis, and that the actual documents from PERS show that he is a liar. Before we believe anything else he says, shouldn’t we demand that the City of Costa Mesa requests information from their PERS actuaries regarding these costs?   And the city doesn’t  have to waste money on another over-priced consultant to do this as Council Member Mensinger suggested at a recent meeting. You can just have staff send an email to the actuary who is designated to work with the City of Costa Mesa.

When you ask this question, you might find out that outsourcing will create a fiscal crisis for the city,  by locking the City into losses that were incurred during the Great Recession, and missing the gains from the recovery. Or you might find out something else.

But it’s the height of folly to rush headlong into a series of expensive actions without bothering to learn anything about your responsibilities under the law.

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