I thought an interesting discussion developed below my post.
Writer "Bystander" had this question:
Did anyone at the forum cite existing California case law where a municipal corporation was able to "tear up agreements with employees no matter what anyone says about them being vested benefits or not"? I've not seen such an expample, and question whether California courts would ever allow such an outcome. This issue is critical, because if a bankruptcy proceeding does not modify vested pension benefits, it doesn't seem there's much to be gained from it.
And Taxpayers Association CEO Lani Lutar responded with this:
Bystander: Yes, the question was addressed at our forum and you'll be able to hear the panel response for yourself by Wednesday when we post our video at link Perhaps Scott might be kind enough to also post on his blog? That said, quick answer to your question is YES if it's part of the labor contract (Mojdehi). Mann cited Vallejo and OC cases as setting precedent and noted that "vesting provisions of California state law are in essence trumped by bankruptcy code assumption and rejection"
And then there was this from former Assistant City Attorney Don McGrath:
what a super panel. too bad jerry sanders was not there for he would have heard what mike aguirre,pat shea and i have told him and the city council over and over for the past five years...'' IT IS TIME TO SEEK RELIEF UNDER CHAPTER 9 OF THE BANKRUPTCY CODE.the city of san diego will never get out from under its present debt problems and it will only get worse...especially for the taxpayer who will get less and less service from the city. the chief of police has said over and over that he cannot cut anymore and one only need to look at our streets to realize the city of san diego cannot pay its debts as they come due. all you ever hear is " not on my watch". i believe that is what the captain of the titanic said?........don mcgrath,former assistant cityattorney.
What McGrath leaves out is how his boss, former City Attorney Mike Aguirre fired him for a day (Aguirre did this from time to time) for advocating bankruptcy passionately. Actually, they probably just yelled at each other and in the heat of the moment, he got "fired." But to say Aguirre was a steadfast supporter of bankruptcy is leaving out some things.
Aguirre, the man who said everything that came to his mind, never took a public position in favor of bankruptcy. He may have alluded to it at times and he may have been, in private, an advocate, but he was just as reluctant to have the public conversation as the mayor.
The City Attorney's Interim Report 3 dated April 9, 2005 states the following: link -On an ongoing basis, the options available to solve the pension deficit are: increase plan assets, decrease plan liabilities or a combination of both... However, if these hurdles are not overcome the only option remaining is bankruptcy... Benefits can only be changed through labor negotiations or a Chapter 9 reorganization. A very public position on bankruptcy was taken on November 17, 2008. See Agenda Item CS-9 on Page 4 of the City Council's Close Session Agenda . link Last year, the City Council and the City Attorney Don McGrath discussed the matter of the City of San Diego filing Chapter 9 bankruptcy proceedings using Vellejo's bankruptcy counsel Orrick, Herrington.
During the last mayoral election, Pat Shea, an attorney who was involved in the OC bankruptcy, proffered bankruptcy as the only way out of San Diego's fiscal crisis. Back then, we only (only?) had a pension deficit of $1.4 billion. Now it's up over $2 Billion with no end in sight. The general fund deficit is projected to be over $200 million and some experts think that's optimistic. Shea said in one of the debates that bankruptcy was "inevitable;" that eventually, whoever was elected would have to acquiesce to that avenue of resolution because there simply was no other. He was right. Between the out of control city employee benefits and the council's reluctance to curtail the unions and make it easier to outsource services, we are circling the drain.
Aguirre's job was not to create policy and he very carefully did not publicly attempt to do so regarding bankruptcy. He advised the city on the different options and what the legal ramifications, but he did not try to set policy by picking one. That was completely appropriate and he should be given credit for that, not chastised. In the current outsourcing discussions, the mayor's spokesperson just blamed Aguirre as the reason the city hasn't adopted the county outsourcing guidelines suggested two years ago by the MEA. It is comical that the mayors office hides behind Aguirre when they like and want to follow his opinion, and hired their own counsel and ignored him when they didn't (e.g. Jim Waring and Sunroad). The mayor's office seems to really miss their designated scapegoat. It was so convenient to blame him for all of their failures.
"existing California case law" There really is no case law. Ch 9 filings are very rare, and normally involve very small even tiny municipalities. Orange Co is the only case of a 'real city' in the state of California. Vallejo has not be resolved yet so who knows what will happen.
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Scott Lewis on Politics
The Scott Lewis on Politics blog, abbreviated cleverly as SLOP, is a collection of observations, insights and the occasional scoop on public affairs in San Diego. Please feel free to e-mail Scott at scott.lewis@voiceofsandiego.org.
Listen to voiceofsandiego.org's radio program on AM 600 KOGO: Latest Episode (November 8): Scott Lewis and Michael Zucchet talk about the city's budget
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