Substantially Equal and Substantially Secret?

Written by; Just Wondering
A hearing was held this morning, May 11, 2010, in Department 65 regarding San Diego City Attorney Jan Goldsmith’s new litigation against SDCERS. This new theory, “Substantially Equal”, is designed to attack your pension benefits and relieve the city of its financial responsibility. Goldsmith believes SD Charter Section 143 requires you to pay for a substantially equal portion of SDCERS investment losses even though the City, the plan’s sponsor, has paid for those losses, when they have occurred, since the inception of the system. In addition to the issue of losses, Goldsmith suggest that System profits, ones made six out the last ten years are not yours to share on an equal basis. No those should be negotiated via the meet and confer processes. More on this later.

Why was this hearing held in Chambers

A funny thing happened today, the hearing, which was more about scheduling than anything else was held in chambers, NOT in open court. No one but the City’s three attorneys, Elaine Reagan, SDCERS’ general counsel, Judge Lewis and a court reporter were present. We can only speculate as for the reasons for a private hearing in chambers. I can report Ms. Reagan, was surprised when Brian Marvel told her the hearing would be held in chambers out of the public’s view. Marvel, who was there to observe on behalf of the POA, was, himself surprised when the Judge’s bailiff, informed him the hearing would be in chambers. As to who wanted this hearing held in private we can surmise it was the Plaintiff, Jan Goldsmith, or the City, not SDCERS by Ms. Reagan’s reaction to the news it would not be held in open court.

At the end of the hearing Judge Lewis denied the City’s request for an expedited hearing. The City sought a June 28th hearing date, claiming the City will be irreparably harmed if it is forced to pay its full required contribution, the actuarially required contribution or ARC of $231 million dollars. Goldsmith’s deputies argued they could save $40 million dollars. What they really want permanently shift the responsibility for investment losses onto your back and for you to pay the $40 million under their substantially equal theory. Some say this amount is about $4,000 for each current City employee.

So what does this mean for now?

With Judge Lewis’s denial, the City will be responsible for the payment. But the City is NOT require to pay the full amount, 231 million on July 1st, they can, if they choose, delay it or make installment payments, according the Mark Sullivan, SDCERS Board President, who was also present in the courtroom, but not part of the hearing in chambers. The installment or delayed payment option has always been available to city, but just like your mortgage, or personal credit cards, if you choose to delay or spread the payments over time, interest accrues increasing the overall cost.

The next hearing on this matter is scheduled for July 16, 2010 at 0830. This could change as the parties strategize for tactical advantage or others, such as the POA or MEA decide whether they want to join in on the litigation.

Danger WILL ROBINSON… Danger

Remember I mentioned substantially equal sharing of investment gains. Goldsmith suggests gains are not part of his “substantially equal contribution” argument. He’s said they should be the discussed in the meet and confer. But how would that work, especially in years where labor groups and the City reach multi-year contracts and no meet and confers are scheduled?

Here’s another warning about “gains”. Remember Proposition B? Overwhelmingly passed by the voters it mandates a vote of the electorate to approve any enhancement to pension benefits. In fact the City Attorney’s own in partial analysis says, in part, “The ballot question states that voter approval is required for “any increases.” The text of the measure states that increases in benefits due to cost of living adjustments would not require a vote of the electorate.”

Any number of arguments can be made that sharing investment gains, and lowering your required contribution to the system could be viewed as a pension enhancement. Thus requiring a vote of the people. Do you really think San Diego will pass anything, yes ANYTHING, that even remotely sounds like it improve your pension? If you do, I have a bridge and waterfront property for sale at a good price and I’m looking to unload it.