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Re: Pension reforms bode well for Pleasanton's future

Original post made by To: Jeb, City management, City Council on Jun 4, 2013

According to Mr. Bing: "a new three-year agreement Tuesday with the union representing 220 regular city employees that will raise individual pension contributions and reduce floating holiday hours while also granting a modest wage increases over the life of the new contract, the first pay increase these employees have had in three years. Overall, the new agreement conforms to sweeping pension changes made last year by Governor Jerry Brown that reformed pension benefits for public employees hired after last Jan. 1. That change raised the retirement ages from 55 to 67 and trims their pension benefit from 2.7% to 2.5%. Additionally, for those employees hired after Jan 1, the city changed retirement medical benefits from two-party coverage to one-party coverage, with an additional sunset at age 65 when the employee becomes eligible for Medicare. These changes move the city closer to long-term pension sustainability as "legacy" employees eligible for benefits under the pre-2013 plan retire from the system."

Mr. Bing,

Your comments couldn't be further from the truth. There are/were no "Sweeping Reforms". Most people paying attention consider the current pension reforms as nothing more than a baby step. They certainly have little if any impact on the current group of 220 workers. But I want to challenge your assertions and accuracy regarding your above comments, and also a comment you about this contract on a previous post.

* First of all reducing holiday pay from 14 days to 11 paid holidays doesn't save 500,000 dollars, as you have claimed (in a previous article). It doesn't save a nickel from an accounting perspective. The real question is why employees were receiving 14 PAID HOLIDAYS to begin with. This PAID LEAVE excess seems to be consistent with soooo many other provisions in the contract. Is there a benefit to the consumer/taxpayer, probably? The consumer receives an additional 24 of service per employee. Right? Well I'm not so sure but more on that later.

JB says: "The Pleasanton City Council is likely to ratify a new three-year agreement Tuesday with the union representing 220 regular city employees that will raise individual pension contributions".

* Raising individual pension contributions by 4%, and then providing 7% in raises doesn't save money. It costs money, and it costs more than the three percent difference.

JB says: "Additionally, for those employees hired after Jan 1, the city changed retirement medical benefits from two-party coverage to one-party coverage, with an additional sunset at age 65 when the employee becomes eligible for Medicare".

* Sorry Mr. Bing, but that contract language was already included in the 2011 contract and, therefore, it isn't a concession as far as this contract is concerned.

JB says: "These changes move the city closer to long-term pension sustainability as "legacy" employees eligible for benefits under the pre-2013 plan retire from the system."

* Not true. In FY 2011-12, CalPERS earned 0.1% which is a far cry from the 7.5% they claim they'll earn. Those numbers are NOT yet reflected in any CalPERS actuarial report. The result is yet another increase in "employer contributions/taxpayer contributions" that will be reflected in the actuarial report the city will receive in November/December of the current year.


JB says: "It's not a perfect solution to the city's concern of unfunded liability for both the California Public Employees Retirement System (CalPERS) and retiree medical benefits that total $131 million or $162 million depending on the formula used."

* The correct formula to use is always the Market Value of Assets. The Actuarial Values hide debt by only recognizing that debt in future years; in many cases thirty years out. That will change soon when the new pension accounting rules become a requirement. In the meantime even the Market Value numbers are suspect, and understated. When the new rules become a requirement both numbers will increase, but the MVA numbers are still king. For today's numbers please use the 161 million dollar unfunded liability number, which is now much greater due to CalPERS pathetic returns of 0.1 percent in FY2011-12 (as explained above). Jeb, did you even attend the two presentations (or watch the video) when Pleasanton paid for a CalPERS expert/pension actuary to present on the topic of Pleasanton pensions? I'm just curious.

JB: says: "But with city employees contributing a full 8% of their wages starting Dec. 31".

* Jeb, they do NOT start contributing 8% on January 1st. City employees haven't contributed toward their pension since 1982 (except for the four percent that was phased into the most recent pcea contract). Until then they haven't contributed toward their pension and they don't pay anything into Social Security, but for some reason they get some very large pension checks that start as early as age 50, or 55, depending on the bargaining unit. The take home pay must be nice.

* According to Emily Wagner the average PCEA employee was earning 87K per year back in 2010. That number should have been adjusted to reflect the 8% the city/taxpayers were contributing on behalf the employees, which increases the average compensation to $94,000. But when I looked at the CalPERS data that claimed pensionable compensation of 25 million as of their last report dated June 30, 2011, and see where Jeb claims there are 220 employees, that averages out to about 113K per employee in salary, and that doesn't include pension costs and many other employee costs.

How is that this city can claim cost savings when the overall cost of this employee contract is escalating rapidly. Does city management think - for one second, that articulating cost savings while ignoring known cost increases makes for a "Fiscal Impact Statement"?

The Fiscal Impact Statement is both shameful and self serving.

Comments (7)

Posted by Re: Pension reforms bode well for Pleasanton's future, a resident of Another Pleasanton neighborhood
on Jun 4, 2013 at 5:42 pm

Taken directly from the contract covering the period November 1, 2002 – October 31, 2010. These are the employee contract raises that apply to every employee, and are separate, do not include,the 5% step raises many employees received during this time period which increased salary by 9-10 percent for many employees in multiple years:

"Salary Adjustments

Effective the first pay period after November 1, 2002, the salary ranges of all
classifications represented by the Association shall be increased four percent
(4%).

Effective the first full pay period after November 1, 2003, the salary ranges of all
classifications represented by the Association shall be increased five percent
(5%).

Effective the first full pay period after November 1, 2004, the salary ranges of all
classifications represented by the Association shall be increased five percent
(5%).

Effective the first full pay period after November 1, 2005, the salary ranges of all
classifications represented by the Association shall be increased five percent
(5%).

Effective the first full pay period after November 1, 2006, the salary ranges of all
classifications represented by the Association shall be increased four percent
(4%).

Effective the first full pay period after November 1, 2007, the salary ranges of all
classifications represented by the Association shall be increased four percent
(4%).

Effective the first full pay period after November 1, 2008, the salary ranges of all
classifications represented by the Association shall be increased four percent
(4%).

Effective the first full pay period after November 1, 2009, the salary ranges of all
classifications represented by the Association shall be increased four percent
(4%)."

This same contract increased the pension formula from 2.5@55 to 2.7@55, changed the pension calculation from average 3 year salary to highest 12 month salary, while also adding other perks that also cost money and have added to the unfunded pension liability.


Posted by hiding raises, a resident of Another Pleasanton neighborhood
on Jun 4, 2013 at 5:59 pm

The good old step raises. Just like the school district, the city says that step raises are not really raises. In my books, if you give somebody more money for doing the same job, it is a raise. Don't care whether you call it a step raise, cost of living adjustment, or what.

The school district was (and probably still is) paying an additional $1.5M each year to pay for step and column raises. Since it is cumulative, the first year costs $1.5M, second year $3.0M, third year $4.5M, forth year $6.0M; for a total cost of $15M increase in four years.

Does anybody have the dollar amount that step raises cost the city?


Posted by To: Jeb, a resident of Another Pleasanton neighborhood
on Jun 4, 2013 at 6:10 pm

Jeb, I said I would get back to the "floating holiday" issue. And I don't remember any significant person in US history named "floating", not a one let alone three, but maybe they were triplets that made a significant contribution I'm not aware of.


From the current (proposed) contract:

"During 2013, seven floating holidays will be credited to each employee additionally each employee will be credited for an additional three and one-half (3.5) hours of floating holiday for 2013. Effective January 1, 2014, floating holidays will be reduced to 32 hours per year."

* (profanity omitted) how is that both Jeb and the city can claim "floating" holidays are being eliminated when the contract seems to be stating the opposite. The above text is directly from the proposed contract that SHOULD NOT BE APPROVED TONIGHT. Why were employees ever granted 14 paid holidays to begin with. Who gets 14 paid holidays? And, while I'm at it, why are people making over 100K getting paid overtime?


Posted by Really?, a resident of Another Pleasanton neighborhood
on Jun 4, 2013 at 7:09 pm

Hiding raises....so clear this up for me, cumulative raises.... the school district has had a salary schedule for at least the last 20 yrs. Are you saying the exponential growth is now 40 million dollars increased? Sure dont see that is the school budget though, or in the increase in the teachers salaries.

Is this fear logic? Because the last 20 yrs dont seem to show what you claim. Also, not a word of complaint about this until the last three years. Where have y'all been if the tsunami was supposed to roll over us anytime now?


Posted by To: Jeb, a resident of Another Pleasanton neighborhood
on Jun 4, 2013 at 7:29 pm

In the course of eight years PCEA members received 41% in contract raises, and probably an additional 20 percent (on average) in promotional and step increases, for a total compounded salary increase of 69%. On top of that their pension formula was increased by 3.2 percent of payroll to provide the 2.7% enhanced retirement benefit, and another 3% percent of payroll to cover the additional cost of allowing members to switch from averaging the highest three years of compensation for pension calculations to the highest 12 months - that costs money and the employees paid zero toward that benefit. Allowing for unused sick leave payouts and/or its use as service credits that apply to additional years of pension service credit also add to the cost by .2-.4 percent of payroll. Providing extra survivor benefits, which is also included in the 2002 - 2010 contract adds additional costs, as do the chiropractic services that were added. Medical costs are increasing at an average annual rate of 7.5%.

While the above costs are very large, especially when they're tallied up, they do NOT include the rapidly rising health care costs, life insurance costs, disability insurance costs, long term care costs, increased survivor costs, increased dental insurance costs, vision costs, or the cost to run the employee deferred compensation plan. And I thought the Rolls-Royce pension plan was a deferred compensation plan. Silly me! Unfortunately I'm yet to get the biggest ticket item; unfunded pension & healthcare costs.

That is huge number. The unfunded pension liability really represents what we owe employees for work prior to June 30 2011, and even CalPERS understates the number. But here is what CalPERS claims we owe for service provided prior to June 30, 2011: **** 71.5 million dollars ****. That is a conservative number that does NOT include the millions more for unfunded retiree medical benefits.

While 71.5 million might sound like a lot of money to be owed to 220 current employees and 254 retirees that may have worked anywhere from 5 to 35 years, CalPERS states that the cost of getting out of the pension plan, just for this one bargaining group (excludes police & fire as do all the other numbers I've provided) is:

*** 150 MILLION DOLLARS ***

That number comes from the very same CalPERS Report that the city received in December. And that number represents the exit cost for work consumed, and employees we thought were already paid in full, prior to June 30, 2011.

That money is currently being paid in very small amounts over a rolling thirty year amortization schedule, a deferred 15 year smoothing policy, and a 20 year schedule for pension plan changes. What that means is we have very extended terms, at 7.5% interest, to pay for costs we could never afford in the first place (they were based on the stock market (DOW) reaching about 30,000 in the current year).

That is about to change drastically and nothing in this proposed contract does one single thing to soften the blow.

Taxpayers beware.


Posted by Bad Management, a resident of Another Pleasanton neighborhood
on Jun 4, 2013 at 8:28 pm




While compensation has increased by about 69% since 2002, and the employee retirement age has shrunk from age 60 to 55 while the pension formula has increased (from 2%@60, to 2.5@55, to 2.7@55), and healthcare benefits have doubled, the employer paid pension cost has increased from increased significantly.

According to CalPERS, the current cost for the 2.7@55 pension plan is a 9.9 percent employer contribution and an 8% employee contribution, for a total "normal cost" contribution of 17.7 of payroll. Unfortunately, with the cost of increasing wages faster than what CalPERS actuaries assume, and lowering the pension age from 60 to 55, and then increasing the pension benefit from 2.5@55 to 2.7@55, and the stock market crash/recession, the cost to Pleasanton taxpayers has increased at an alarming rate.

Now, according to CalPERS, the cost to the city/taxpayers is 25% of payroll. In addition to that the taxpayers/city pay 4% of payroll toward the employee cost, for a total employer cost of 29% of payroll. I know some people that get a three percent match on their 401K. Unfortunately that 25% of payroll that calPERS charges Pleasanton is grossly understated, as will be quite apparent in the near future.

The good news is that the PCEA employees will increase their contribution to the full "employee contribution rate" of 8% over the next three years (is called employee contribution rate because the employees were always expected to pay it). The bad news is that the city is giving the employees a 7% raise to cover their additional 4%, while also providing ann additional 3 percent in increased compensation. That additional 3% in compensation actually costs closer to 4%, which may sound small, but when added to all the other additional costs & compensation brings us to where we are today.

But, the really bad news is the 25% employee pension contribution will most likely be 35% of every 100k in payroll in just a few short years. And increasing wages increases pension costs. No budget can continue to sustain these rapidly rising costs without reductions in service or increased demands for tax dollars. Not even Pleasanton.


Posted by Arnold, a resident of Another Pleasanton neighborhood
on Jun 5, 2013 at 1:08 am

Yes, I realize that many of you may be thinking that I'm personally responsible for all of the above posts. But I'm not, I swear. Really. This small matter aside, I want to stress that the crisis we are facing is going to add up either to reduced service or increased taxes. As a freedom fighter, my job is to protect all Pleasantonians who own really huge houses from public workers who want to take those homes via raised taxes and convert them into union re-education camps.

Some people are worried that our children will live in a world that is burning up, with rising sea levels, apocalyptic storms, and annoying sunburns. All that is, of course, useless prattle. REAL freedom fighters want to make sure they're not forced to give their huge houses over to the city on account of not being able to afford higher taxes for servants of us.




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