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    City Hall May Get Temporary Break On Pension Payments Starting Oct 04, But Deferral Will Increase Future Payments

    (April 1, 2004) -- LB City Hall may get a one time, one year break on money that LB taxpayers must pay the CA Public Employee Retirement System (CalPERS) starting in October 2004 (i.e.FY 05) but it will have the effect of increasing annual contribution costs thereafter.

    In a March 30 memo to the Mayor and Councilmembers, LB CFO/Director of Financial Management Bob Torrez advised that CalPERS staff now seems "willing to consider options that would provide some limited short-term relief to Long beach as well as other government agencies who contract with CalPERS for their employee pension plans."

    The news came following a March 29 meeting with CalPERS staff in Sacramento attended by LB City Controller Barbara Hennessy, Dave Elder (under contract with the city), a representative of the LB Firefighters union and other local government agencies and statewide labor groups. The memo notes that previous attempts by LB's City Auditor, his staff and financial management staff that attempted to negotiate relief with CalPERS staff had been rebuffed. Mr. Torrez's memo states in pertinent part [with emphasis as indicated in original]:

    CalPERS staff indicated they could support a one-year deferral of a portion of the GY 05 employer cost. The City's CalPERS costs for FY 05 [are] currently projected at $32 million for the General Fund...

    The Employer portion of the City's FY 05 PERS costs is roughly half of the projected $32 million General Fund cost. The City's share of the Employee portion of the cost will not be affected by this negotiation. Therefore, the gesture by CalPERS, could potentially reduce FY 05 costs to the City by up to 50 percent.

    I must caution you that this is a one-time, one year, rate relief. Beginning in FY 06, the City will be paying the full cost of PERS which is estimated to be approximately $40 million.. Moreover, there is still much to negotiate to determine if the City qualifies for rate relief. City staff will continue to work closely with CalPERS to define the parameters of this program. Also, please be reminded that this proposal by CalPERS is not a waiver; it is simply a deferral of part of the cost. We do not know how the deferred costs will be amortized, but it will have the effect of increasing annual contribution costs for Long Beach for years subsequent to FY 05.

    LB taxpayers' costs have ballooned significantly due in large part to Council votes that boosted city employee pensions to increased maximum levels invited by state legislators.

    LB taxpayer costs under the separate, lucrative CalPERS pension system (created by the CA legislature for itself and other CA government employees) are now estimated to consume $32 million dollars starting in Oct. 04 (i.e. FY 05), amounting to roughly 10% of all General Fund costs for nearly all city services and accounting for nearly a third of City Hall's currently projected deficit (the difference between Council spending and revenue).

    Two fateful Council votes which raised pensions for LB's non-public safety employees were scheduled for the last Council day of former incumbents Grabinski and Shultz and first day for newcomers Uranga and Lerch. No Council incumbents dissented on the votes.

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