Leap into the unknown

The staff report recommending City Council approval Tuesday of a contract amendment that will allow 15-20 Alameda firefighters to boost their pensions by buying “service credits” acknowledges that the amendment will increase the City’s future pension costs.  According to the report, however, the amount of the increase is “unknown.”

Maybe so.  But it can be argued not only that the amount is at least estimable but also that state law requires the City to determine the cost and disclose it before Council approves the amendment.

The staff report identifies the variables relevant to analysis of the impact of the amendment on the City’s employer contribution rate: how many firefighters buy the credit and how much credit they buy.  But once those variables are known – or assumed – it should be possible to perform an actuarial valuation that will produce a cost estimate.  At the very least, one would think a “worst case” – or “best case” if you’re the firefighters union – scenario could be computed on the assumption that every eligible firefighter buys every available credit.

Of course, the considerable talents of City Finance Director Fred Marsh may not include actuarial valuations.  But, if so, why not ask CalPERS to do it? According to the CalPERS Website, when a CalPERS member proposes to provide an “optional” benefit, CalPERS itself will perform the actuarial valuation and furnish an estimate of the increase in the employer contribution rate – for a fee of $300.  The member can even submit its request online.

So how come the City hasn’t done so?

More significantly, Government Code section 7507 provides that

  • When a local legislative body is “considering changes in retirement benefits or other postemployment benefits,” it shall “secure the services of an actuary to provide a statement of the actuarial impact upon future annual costs, including normal cost and any additional accrued liability, before authorizing changes in public retirement plan benefits or other postemployment benefits.”
  • In addition, “the future costs of changes in retirement benefits or other postemployment benefits, as determined by the actuary, shall be made public at a public meeting at least two weeks prior to the adoption of any changes in public retirement plan benefits or other postemployment benefits.”
  • And, finally, the “adoption of any benefit to which this section applies shall not be placed on a consent calendar.”

So how come the City hasn’t complied with this statute?

There may be good answers to these questions.  But City Manager John Russo doesn’t like, and Mayor Marie Gilmore doesn’t permit, questions from ordinary citizens at Council meetings.  Let’s hope that one of the Council members will be curious enough to inquire about the cost issue.  If not, the City appears determined once again to rush headlong into the unknown.


CalPERS memo on “Contract Amendment Procedures”: http://www.calpers.ca.gov/eip-docs/about/pubs/employer/er-pubs/misc-pubs/pers-con-41.pdf.
Government Code section 7507: http://codes.lp.findlaw.com/cacode/GOV/1/1/d7/21/s7507

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Firefighters, Pensions and tagged , , , , . Bookmark the permalink.

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