The number of Gilroy retirees earning $100,000 or more annually
in retirement jumped from three to 17 individuals this fiscal year,
driving home the point for many city council members that
retirement costs must be curbed.
The number of Gilroy retirees earning $100,000 or more annually in retirement jumped from three to 17 individuals this fiscal year, driving home the point for many city council members that retirement costs must be curbed.
It represents an increasing trend that retirement costs are rising to a point where the cost will be unaffordable to the City of Gilroy.
While the California Public Employees’ Retirement System will pay the bulk of those pensions, the city plans to pay $4.73 million in retirement during fiscal year 2010-11 alone.
“This train has been coming down the tracks for awhile,” Councilman Perry Woodward said Monday. “We like other cities and the state have to recognize that this is a serious problem and that it’s going to get worse before it gets better.”
Nine of the 17 employees on the list compiled by the nonprofit group California Foundation for Fiscal Responsibility worked for the Gilroy Police Department, while four worked for the city fire department.
The council approved the police and fire retirement plans in rosier economic times when CalPERS officials promised many cities they would not have to pay any of the increased costs because of the strength of the retirement system’s investments.
However, after CalPERS’ investment portfolio took a massive dive in 2008 many cities such as Gilroy were left facing a gap between the amount of money the city promised it would pay its employees in retirement benefits and the amount the city actually had in its CalPERS account.
For Gilroy, it’s a $30 million gap.
While City Administrator Tom Haglund said in January the gap may lessen as CalPERS’ investment situation changes, other council members remain concerned.
“We’re like a family that is living off their credit card and making minimum payments to stay afloat, but that does not approach long-term viability,” Woodward said.
CalPERS officials did not return calls Monday seeking comment about the $30 million pay gap and whether the city will see more retirees join the $100,000 club next year.
The city sought to address pension costs with the city fire union in a new concessions agreement it reached in June with the International Association of Fire Fighters Local 2805, although Woodward said it will be more than a decade before the city experiences the full impact of those changes.
That fire plan included cheaper retirement plans for new hires and mandated firefighters begin to contribute 9 percent toward their pensions, an amount the city formerly paid. Largely as a result of that agreement, the city’s contribution to CalPERS this fiscal year is down about $211,000 compared to last year, according to City Finance Director Christina Turner.
Council members say they hope for similar concessions from the Gilroy Police Officers Association. The police union’s contract expired June 30, and the council was scheduled to discuss a new memorandum of understanding with GPOA during Monday’s council meeting.
Mitch Madruga, president of the Gilroy Police Officers Association, would not comment on retirement matters Monday because of the council’s upcoming closed-session discussion. However, he expressed hope the city and union would come to an agreement.
“We’re as tired of (negotiations) as they are,” Madruga said.
Gilroy police officers now have a “3 percent at 50” plan retirement plan, meaning retired police receive 3 percent annually of their highest yearly salary for each year they worked. They can start collecting these benefits at age 50 and can collect up to 90 percent of their highest annual salary.
The city also pays employee contributions on behalf of police, totaling about 9 percent of their salaries – or $800,000 for all police annually. That is in addition to the 26.25 percent employer contribution the city makes toward police pensions, which totals about $2.3 million each year.
By contrast, all newly hired firefighters under their new pension plan, which will last through June 2013, will receive a scaled back “2 percent at 55” plan.
The maximum percentage of their salary firefighters will be able to collect under the new system is about 75 percent of their top wage. The earliest firefighters could collect these benefits is at 55 years old.
Under the old system – which still applies to current employees – firefighters received 3 percent yearly of their highest annual salary starting at 55 years of age, and could collect 90 percent of their top wage.
Regardless, council members say they are doing what they can to rectify the situation. In response to a report from the Santa Clara County Grand Jury calling for cities to rein in unsustainable employee costs, Mayor Al Pinheiro wrote last month that the city’s safety costs used to be among the highest in the county, but changed with the new agreement with Local 2805. The letter also stated Gilroy’s nonpublic safety costs were the second lowest in the county.
The city also cut its CalPERS contributions by $645,000 between fiscal year 2009 and 2010 after laying off 71 workers.
“I think it’s important to note that the City Council is working very hard to reduce the overall costs of the retirement system to the Gilroy taxpayer,” Haglund said.
Pinheiro said he was not surprised to see the rise in people receiving high-dollar retirement amounts, and he did not lay blame on those who reaped the benefits of the city’s plans. However, he said more work needs to be done to make those plans affordable.
“These people were looking out for their families,” Pinheiro said. “They tried to get as much as they could. Now, it’s time for us to look at things differently at every level. We may need to adjust this to be more sustainable.”
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$100K club
(M): Monthly salary
(A): Annual salary
* Artruro Amaro, Fire Captain: $9,323.90(M), $111,886.80(A)
* Jay Baksa, City Administrator: $11,818.34(M), $141,820.08(A)
* Clay Bentson, Fire Division Chief: $9,442.89(M), $113,314.68(A)
* David Bozzo, Fire Division Chief: $8,789.09(M), $105,469.08(A)
* Lanny Brown, Asst. Police Chief: $10,851.14(M), $130,213.68(A)
* Robert Connelly, Community Services Supervisor: $9,169.57(M), $110,034.84(A)
* Daniel Crumrine, Police Sergeant: $8,640.11(M), $103,681.32(A)
* Michael Dorn, Admin Services Director: $11,540.16(M), $138,481.92(A)
* Charles Ellevan, Police Sergeant: $8,500.52(M), $102,006.24(A)
* Gregory Giusiana, Police Chief: $12,028.32(M), $144,339.84(A)
* Gilbert Horta, Police: $10,424.03(M), $125,088.36(A)
* Morris McHenry, Fire Captain: $8,496.45(M), $101,957.40(A)
* Debbie Moore, Police Captain: $12,096.80(M), $145,161.60(A)
* Rhonda Pellin, City Clerk: $8,622.40(M), $103,468.80(A)
* Joe Ramirez, Police Segeant: $8,682.87(M), $104,194.44(A)
* John Robinson, Police: $10,387.60(M), $124,651.20(A)
* John Sheedy, Police Sergeant: $8,900.54(M), $106,806.48(A)
