(July 2, 2013) -- Although the City Council is singing its own praises for changing city employees' pension contributions (with city management not included), taxpayers shouldn't let Council incumbents easily spend the $58 Million one-time revenue windfall from city oil and redevelopment's demise because bad news is on the way.
The true status of the City's finances likely won't be revealed until October 2013, one month after the Council enacts a FY 2014 budget and Council incumbents aren't eager to discuss how they plan to deal with the uncertainty facing City's future finances that will hit in 2015. For over 18 months, City Hall and CalPERS have been quietly devising a plan to have taxpayers pay the City's unfunded pension liability of $800 million over a 30 year period. The City will see a 30% to 50% increase in pension costs even after last year's highly touted "pension reform" labor agreements, a costly example of "too little, too late." Promises are meant to be kept, but the City did an inexcusable disservice to the taxpayers by knowingly signing new contracts with the IAM, POA and Firefighters, while at the same time discussing options how to have the taxpayers pay down the unfunded pension liability with CalPERS. During the time the City was talking with CalPERS, management extended the POA and Firefighters contracts until 2016, and the IAM contract until 2014. By doing so, management has prevented any serious pension reform while facing increased pension costs. It is now impossible for the City to renegotiate new contracts without the consent of the unions, or put pension reform on the ballot until 2016. One of the conditions the IAM demanded in exchange for signing a new contract was a promise not to put an initiative on the ballot for pension reform. Even though the promise to the IAM was reinforced by a ‘gentleman’s agreement’, the taxpayers are owed an explanation, because even bad promises are required by law to be honored. It wasn’t enough that the IAM was given a pledge of ‘no pension reform’, the Mayor and City Management threw in extra perks to cement the deal; i.e., no layoffs during 2013 and an extension of one year of their contract. For roughly thirty years, Long Beach officials agreed to city employee contracts in which taxpayers effectively subsidized city employee pensions, covering as much as 90% to 100% of the pension costs; now a new burden will be put onto the taxpayers for thirty years. That means real, not partial, pension reform is needed to cover the ballooning pension payments starting in 2015. If real pension reform isn't seriously pursued and implemented, Long Beach taxpayers will end up absorbing 100% of the increased cost caused by the unfunded pension liability. Instead of issuing self-serving press releases, or calculating who is ahead in the polls for various contested offices, the City Council should get busy devising a plan to protect taxpayers from these costs, notwithstanding promises during labor negotiations by city management and Mayor Foster not to put pension reform on the ballot if the labor groups signed new contracts. So, the question remains: what to do with the $58 million in one-time revenues? Here options that the City should present to taxpayers.
Because we won't know the full extent of pain the taxpayers will sustain starting in 2015 and beyond, it's premature to decide how to spend the $58 million. That decision should take place after October, when we learn the true extent of the burden Long Beach taxpayers will face.
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Contact us: mail@LBReport.com