Wednesday, May 20, 2009

Six Days and Counting

Six days ago SDCERS told the mayor and all that would listen they would not follow the mayors lead and violate the law by implementing the changes proposed for DROP. SDCERS followed the Charter and the law when they told the mayor the changes to DROP could not be done without a vote of the membership of SDCERS. This decision was made public on Friday morning and as of Thursday morning, has anyone heard or seen the mayor? The mayor's staff appeared at the City Council meetings on Monday and Tuesday. They took a beating for failing to provide the financials for the mid-year budget changes. The mayor was noticeably absent and the Council was not pleased. Not a peep from the mayor. The questions are beginning to mount.

I spent time reading a Confidential Memorandum addressed to Mike Rivo of the San Diego City Attorney's Office from Jeffrey Sloan of the Law Firm Curiale, Dellaverson, Hirschfeld, Kraemer and Sloan. The memo was dated September 23, 2003, and was in response to questions asked by the City regarding DROP. The City asked, "If and how it may lawfully lower, or mandate SDCERS lower the 8% interest rate currently paid on DROP accounts. The City requested advice regarding four (4) groups; New Hires; Current Employees who have not yet entered DROP; Current DROP participants; and Retired who have DROPPED and are currently receiving non-lump sum distributions. In addition the memo addressed; Employees/retirees currently or at the time of their retirement represented by the SDPOA or Local 145 Fire."

The short answers provided said, "Under the current Municipal Code, discretion over the interest rate for DROP participation accounts lies with the Retirement Board. The City's influence is essentially limited to the votes of City appointed Board members. The City can re-negotiate the DROP benefits of future hires at any time; Current employees who have not yet elected to participate in the DROP probably have an interest, vested on their first day of employment, in being eligible to participate in a DROP program under the terms offered. Those terms may be modified, but only if necessary to ensure the survival of the overall system, in a manner related to the theory of the pension system and if any disadvantage created is balanced by a new contravening advantage." Plain language; DROP is a vested benefit!!!

"It is almost certain that current DROP participants have a vested interest in the current provisions related to interest rate, such that the current rules set forth in the Municipal Code provisions may only be re-negotiated on an individual basis." Plain language; the mayor cannot change the interest rate for DROP accounts nor can SDCERS chose some arbitrary manner to determine the rate.

"In the case of police and fire employees, MOU language arguable controls over Municipal Code to give such employees a vested right to receive DROP participation account interest at the same rate as that assumed for employee accounts under the City retirement plan." Plain language; The MOU for SDPOA members spells out again the manner DROP interest will be paid and cannot be changed by the mayor or SDCERS without the members approval.

Jeffrey Sloan went on to say; "It is almost certainly within the City's authority to terminate the program entirely as to new hires." He continues later, "The availability and terms of a DROP may be viewed as either a term and condition of employment or a retirement right comparable to a pension. If the DROP is a term and condition of employment, it is subject to negotiation consistent with the bargaining requirements imposed by the MMBA. However, if it is analogous to a pension benefit then it is a form of deferred compensation and a right to receive the benefit on the terms offered vests on the very first day of employment. Such rights are not subject to forfeiture." Plain language; DROP is a vested benefit and cannot be taken away from current employees.

"City Charter Section 143.1 putatively allows changes to the vested defined rights of retirees if approved by a majority of such retirees." Sloan went on to say, "We would note that vested rights are personal in nature and we do not believe they may be waived by majority vote." Plain language; ANY changes to the vested benefits must be approved by the person who holds the benefit.

"Lastly, current and retired members of the bargaining units represented by the SDPOA and Local 145 Fire have language in their MOU'S that probably limits the Board's (SDCERS Board) discretion. Those MOU'S have consistently stated since July 1, 1998, that interest will be credited to the members DROP account in the same manner and at the same rate as that interest is credited to employee CERS accounts." Plain language; PD and Fire employees will be paid interest on their DROP accounts based on the accrued rate set by the actuary; currently 7.75%. The City is on the hook for anything less than this.

So what does all of this mean? The SDPOA is headed to court to litigate these issues. (I will talk about Retiree Medical tomorrow night) The basic premis is DROP is a vested benefit. What I find appalling is the mayor had this information and chose to ignore it. There is more information on these issues from other legal experts the mayor was provided and was well aware of the law when he took this city's employees down this path with the latest imposed contracts and illegal changes to DROP. The actions of the mayor in light of the information starting to surface; when he knew it; and what he knew, if true, is criminal. The absolute destruction of America's Finest Police Department in a span of months; entirely created, orchestrated and directed by the mayor who knew what he was doing was contrary to the law, is unconscionable. How he can look in the mirror is beyond me. How he shows his face in public; with sworn police officers doing their jobs by his side; all the while knowing what he did was contrary to ALL legal advice is beyond description or explanation.

The taxpayer needs to know the mayor is taking on fights his legal experts opine he has little if any chance of winning. They need to know he is not being honest with them about the benefits of City Employees. They need to know his actions are politically motivated and not in the best interest of the taxpayer. The facts need to be shown in open light for all to see. The imposed contracts, forced upon members of the San Diego Police Department and Local 127, are in jeopardy of being ruled null and void because of the mayor's deceit and flaunting of the law. The money the mayor was demanding from employees to close the budget deficit is in danger of not being provided by the employee if these imposed contracts are undone. Then what? The State propositions were soundly defeated and the Governor will no doubt be raiding what money the City does have. The $60 million dollar deficit will no doubt grow to over $100 million. I shudder at the thought of what the mayor will do next.

The mayor will punish City Employees even more; layoffs; explaining it is the only way. He will blame unions and employees for his failures and further turn the unknowing public against us. The house of cards the mayor has been building is now beginning to cave in. There is little chance the mayor is going to prevail when the SDPOA gets these issues before a judge. In the interim, employees will make life changing decisions necessitated by uncertainty created by the illegal changes forced upon City Employees. A once proud police department is being decimated by the exodus of over 150 senior, experienced officers and over 50 experienced, senior, civilian support personnel, all leaving to preserve retiree medical insurance and maintain the 7.75% interest to their DROP accounts.

When the mayor surfaces, the spin will no doubt be working overtime to "explain" why SDCERS is wrong. When this occurs, will anyone point to the legal opinions he has been given by several legal experts to the contrary? Will the mayor be taken to task for his ethical lapses? Will anyone put the facts together and figure out the mayor is taking this city for a ride? Who will be the first fatality when officers are unable to respond in a timely manner to an emergency; where the caller first had to wait for communications to answer the call for help; then dispatch has to wait for officers to clear so they could respond; and the citizen has to wait while the officers responded from the other end of the division do to a lack of staffing in all areas of the department? Will it be your son, daughter, mother, father, brother, sister???


Secretsalmon said...

Another "HOMERUN" Sparky! Thank you ever so much for exposing the devious,unprincipled,villainous,immoral conduct of the mayor and city council! You've managed to clarifty what I believe was going on in the dark back rooms of San Diego's city government. The mayor, and his band of unethical simpletons, are destroying this city's infrastructure, by lying and circumventing the law and their moral obligation to fullfill the legal contracts they entered into. Kudos to you Sparky for shining the spotlight of truth on their illegal shady tactics. If in fact the mayor and simpletons were aware of the information you presented before, or during, labor negotiations then I believe there is sufficient evidence of a criminal conspiracy to deprive city employees of their rightful compensation in the form of retirement and/or salaries. Let's see if the Federal and County prosecutors are willing to prosecute them as vigorously as they've prosecuted the poor individuals who were unfortunate enough to set on the SDCERS board when the city started stealing the retirement funds from the employees! Bonnie Dumanis it's time for you to start an investigation and prosecution!

Anonymous said...

Your comments are interesting but it sounds like we, once again, find ourselves with dueling opinion from counsels. Here's my point:
In the January 23rd SDCERS Board of Administration meeting SDCERS Fiduciary Counsel, Ashley Dunning opined the Board was NOT bound by any MOU agreement, i.e. Police and Fire represented groups on the DROP interest crediting rate. Later, SDCERS counsel, Elaine Reagan, specifically says, they are not “bound” by MOU agreements. Then, Board President, Tom Hebrank, wonders out loud if the Board’s action will have repercussions. If members haven't seen this video for themselves they should go to the SDCERS website ( and view the online video of the Jan 23 board meeting. The relevant minutes occur between 19:00 and 25:40. Of interest, SDCERS administrator, David Wescoe, mentioned existing rates and contract periods. More specifically, and without saying it outright, it eludes that the coming changes will not, or should not occur before the existing contracts expire thus avoiding the issues relating to breech of contract.

In addition to this video, members should review the Board Meeting of March 20th, more specifically minutes 44:50 to 45:50 where a city of San Diego Labor Relations Officer Woo-Jin Shim delivers a letter to the board and paraphrases parts from it for the record.
This letter was simultaneously delivered to the affected labor groups.
In it the City explains that in no way does the City intent to change rates before the end of the existing contracts AND “…[t]he City will honor the contractual commitments now in effect.” .

This makes me wonder was the city bargaining in good faith during negotiations all along? It already knew the Board lower the DROP and Annuity interests rates? Strangely, Mr. Shim specially mentions meet and confer responsibilities with the labor groups.. but how does one negotiate if a benefit is set by an outside entity?

Of course the new imposed MOU changes the language of the contract to match the NEW rate effect July 1st. What, if any, good faith negotiating happens when the rates are set by a body outside of the negotiations influence?

SparkySanDiego said...

Anonymous; you are right on with your comments. Here is what people miss; THE CITY is obligated to meet its obligation and promise under these contracts. If SDCERS pays 3% and the assumed rate of return is 7.75% the CITY would be on the hook for the difference; 4.75%. The plan document for DROP (San Diego City Employees' Retirement System (CERS) Deferred Retirement Option Plan Effective Date; April 1, 1997) states on page 1; "Your DROP benefit account will equal the accumulation of: earnings on these amounts, calculated at the CERS actuarial interest rate, as determined by the Board." Your analysis of those who are NOT currently in DROP would be accurate. Those people ALREADY IN DROP have a signed contract that states: "The Retirement System and your employer will rely on the following facts. Each is important because it demonstrates you have carefully considered your election to participate in DROP." Then on page two of the contract; paragraph eight (8) "I understand that if benefits are improved or otherwise changed after I enter DROP, through meet and confer or any other process, I will not be eligible for an of these benefit improvements or changes." So, the MOU would trump the Municipal Code and those in DROP have a legal contract; thus the City would be required to make up the difference if the SDCERS Board chose to change the rate paid to DROP accounts.

You hit the nail on the head when you ask about the good faith bargaining. The City put these items on the table because they already knew they were on the hook for the difference. The City is making a move to cover it's ass and will then codify it's actions by changing the Municipal Code to reflect these changes. They are playing fast and furious with MMBA and flaunting the Charter in the process.

SDCERS Counsel Reagan is correct to a certain extent. They are bound by the Municipal Code and the Charter which gives them authority. The MOU'S are codified in the Charter and thus have the same affect and require SDCERS to recognize the benefits provided in them. They don't like that which is the problem.

City Employee in Crisis said...

Holy Gotham City Batman; the mayor is out of control. The lives he has affected in such a bad way; this all being true he needs to resign and go away. He is a pathetic example of a man.

Anonymous said...

I will await your comments on the Retiree Medical situation. What the City decides to do will accomplish one of two outcomes. 1. It will cripple SDPD for the next few years in terms of the depth of experience in all of the various areas of law enforcement. Or 2. The city decides it's not in the best interest of the public safety for BOTH police and fire services and terminates the effort to CAP retiree medical benefits. It's time to wait and see, but there is a critical time factor quickly approaching for many involved. June 12th is a very significant date.

Anonymous said...

I hear the POA and city met today for talks. Do you know what was discussed Sparky? Rumor is the city offered the same deal fire and mea signed. Is this true? They are only going to cap retiree medical for two years then give it back? What can you tell us?

sparky.sandiego said...

The SDPOA and City did meet; I cannot tell you what if anything was discussed. I will not speculate. Call the POA and ask one of the Directors if they can discuss with you any changes or discussion.