City officials say cost to the city of retirement package sought
by firefighters would increase over time
Gilroy – A retirement package firefighters have demanded as part of an ongoing labor dispute would cost the city an extra $515,000 annually, according to estimates by city officials.
The request for a benefit known as “3 at 50” allows firefighters to retire at age 50 and receive 3 percent of pay for each year worked, up to 30 years. It represents one of the most contentious and potentially expensive issues at the heart of a year-long labor deadlock between City Hall and Fire Local #2805.
City Administrator Jay Baksa predicted that the half-million dollar figure would increase over time. Barring any investment windfalls from the state retirement system, the city can expect the retirement package to cost $3 million or more over the next five years.
An outside arbitrator today will wrap up hearings detailing the considerations surrounding the 3 at 50 request and will spend coming months deciding whether the 36-member fire union should receive the retirement package.
If granted, it would spell an immediate 13-percent increase in the city’s retirement contributions, raising it from $4.4 million this year to nearly $5 million.
Retirement contributions have spiraled in recent years as the city has been forced to cover lagging returns from the California Public Employees’ Retirement System, or CalPERS, according to Baksa.
“We have seen that (contribution) rate vary dramatically over the years,” Baksa said. “This is what got us in trouble – when the portfolio was going well with the dot-com explosion, the percent we paid was low.”
It was during those times that the 60-member police union negotiated the 3 at 50 program for themselves. Earnings by the CalPERS investment portfolio far exceeded projections and provided enough to cover even the 9 percent employee contribution, which by contract the city pays on behalf of public safety employees.
In 2002, the first year police received the 3 at 50 benefit, their retirement costs spiked by more than $1.3-million. Around the same time, the tech bubble burst and CalPERS returns tanked, forcing the city to pick up a bigger share of the contribution, according to Baksa.
In 2001, the city paid just 12.78 percent, or more than $900,000, of the public safety payroll to CalPERS. This year, those figures exceeded 30 percent and $3 million, respectively.
Now firefighters demand the same retirement benefits given to police.
On Monday, the union sought to demonstrate to arbitrator John Kagel, of Palo Alto, that Gilroy’s financial health lies far from the dire picture presented by city officials, pointing out that the city’s reserve funds have consistently come in higher than predicted.
“It’s more of a policy decision to not grant us the benefits and the wages than an inability to pay,” fire union representative Jim Buessing said. “They’re not denying their ability to pay.”
Baksa admitted the budget picture has improved in recent years with the return of hundreds of thousands in local tax dollars plundered by the state, combined with voter-approved safeguards against future raiding. But he said other considerations fuel the city’s reluctance to extend 3 at 50 to firefighters.
Speaking before the arbitrator Monday, he pointed out that Gilroy also faces spiraling health care costs for its 270 employees and more than $40 million in “unfunded liabilities” such as cracked sidewalks and backed-up storm drains.
“It would be too simple to say we have enough money in (the reserves), so let’s build sidewalks or put money into a specific department,” Baksa testified. “It all has to be looked at as the sum of the parts.”
The three-person arbitration panel headed by Kagel is expected to issue binding decisions on 3 at 50 and other fire union requests within the next three months. The city and union are free to negotiate their own settlement before Kagel issues a final decision.
