Wednesday, September 21, 2005 | Voice Special Report
When former City Councilman Mike Gotch read in the newspaper in 2000 that the City Council had boosted the retirement benefits for elected officials, he called the retirement system to see how much his future pension would increase.
It wouldn’t, he was told.
The council had increased the benefits for current and future city politicians. Gotch, who served on the council from 1979 to 1987, was excluded.
So Gotch set out to change that. In early 2001, Gotch enlisted the help of City Councilman Jim Madaffer, who had just begun his own tenure in office.
For several months, according to e-mails and records obtained by Voice of San Diego, Madaffer diligently pursued Gotch’s case. Despite objections from staff and city attorneys, Madaffer pushed ahead and eventually secured a generous enhancement to the pensions of the ex-councilman and 17 other former city leaders.
Gotch’s pension allowance jumped 48.6 percent when the council formalized the ordinance without debate on Jan. 8, 2002. No former legislator benefited more than Gotch. In total, his annual pension increased $9,982.20 a year to $14,829.24 a year, according to a 2001 city report.
The new provision also allowed Gotch and his former colleagues to begin receiving pension checks at age 55 rather than 60 – a detail that gave Gotch the opportunity to collect more than $71,000 than he previously was to receive.
Other former city politicians, such as county Supervisor Ron Roberts – who had been a city councilman – and former Mayor Maureen O’Connor, saw their pension benefits enriched as well. On average, the change boosted ex-council members’ benefits by 15.7 percent.
The e-mails show that Madaffer and Gotch worked together to push the pension ordinance with the sole purpose of wrapping Gotch into a newer, richer level of retirements than had been offered when he served two decades earlier.
The move came at a time of unprecedented generosity in a pension system that routinely grew more accommodating to legislators and workers in the mid-1990s and early 2000s.
At the same time the two worked on the retirement issue, Madaffer persistently lobbied Gotch – then a top aide to former Gov. Gray Davis – for state funding to help the city buy a swath of precious undeveloped land for Mission Trails Regional Park.
The two rarely communicated about anything but the retirement and the land acquisition, routinely switching between the two topics in their e-mail conversations – often in the same message.
Ultimately, Madaffer’s attempts to secure a sizable portion of $100 million in conservation bond proceeds from the state for the acquisition of 2,000 acres of the East Elliott property didn’t fully come to fruition.
The city did receive $5 million in Proposition 12 funds from the Wildlife Conservation Board in February 2003 to purchase a small plot of the East Elliott lot.
Robert Stern, who served as legal counsel to the California Fair Political Practices Commission for nine years, issued a harsh criticism when told of the actions of Gotch and Madaffer.
“It is clearly inappropriate to be discussing both of those things together. In a sense it looks like a quid pro quo. You scratch my back and I’ll scratch yours,” said Stern, now president of a non-partisan research organization in Los Angeles.
He added, “I’m not sure there’s anything illegal about it, but the timing is just inappropriate.”
What’s more, Stern, the co-author of the California Political Reform Act of 1974, said the idea of granting benefits to someone who’s already left employment is a novel idea.
“It’s probably the first time I’ve heard about something like this. It’s pretty unusual to be speaking about retirement benefits for (former and) retired officials. I wish my old employers would do this,” he said. “It’s almost unheard of.”
Today, the pension system is saddled with a deficit of at least $1.37 billion and it is the focus of local, state and federal investigations.
The deficit is largely attributed to increased retirement benefits. Through every turn of the late 1990s and early 2000s, politicians and employees received the benefit of the doubt when it came to legal interpretations and the bestowment of benefits related to the pension system.
During the same time council members increased benefits for themselves and employees, the city entered into contracts with the pension system in 1996 and 2002 that allowed it to annually contribute less than was necessary to cover its pension costs.
Gotch and Madaffer certainly didn’t sink the pension plan. But their story shows how even officials who had long since left the city maneuvered to squeeze personal benefits from a pension fund that appeared healthy during a booming stock market.
But the stock market, like the pension system, was headed for a free fall. The crash that followed revealed the consequences of such generosity.
Madaffer dismissed criticism of his 2001 actions, saying he thought he was only cleaning up a miscue that failed to include Gotch in the council’s 2000 benefit increase.
“This is well before any red flags about our pension system were noted to anyone,” Madaffer said. The first concerns surrounding the pension plan went public in late 2002.
He said it was ridiculous to connect his actions on Gotch’s retirement and the lobbying for state funds.
“I think people can spin things a lot of different ways for their own motives,” Madaffer said. “… I think if anything Gotch was simply providing perspective to the city and I was just trying to provide some assistance.”
Gotch said he talked to the mayor and a number of council members about the change.
“Each of them said it sounded like it was fair,” Gotch said. Although he said at the time he thought it was fair, Gotch admitted in an interview that, in hindsight, “perhaps it wasn’t.”
Madaffer and Gotch meet to discuss land
A couple of months later, a new mayor and a batch of new council members, including Madaffer, took office. Gotch said around that time, he first approached former Mayor Dick Murphy about including past city officials in the pension changes. He said that Murphy supported the idea.
Since resigning in July, Murphy has not been available for comment.
For pensions, city employees receive a fixed percentage of their salary multiplied by the number of years they worked. The multiplier for council members normally totaled between 3.1 percent and 3.2 percent prior to the council changes in 2000. That year, the council voted to increase it to 3.5 percent.
Gotch, who was working as the governor’s legislative secretary, recognized the personal benefit that would come if that formula were applied to his own city retirement. At the same time, he was already meeting and communicating with Madaffer, who was trying to win $15 million from the state to help acquire a piece of prized property that runs along the Mission Trails Regional Park in his district.
Madaffer represented the city of San Diego in the League of California Cities and it was during a trip to Sacramento in that capacity that he and Gotch first discussed the idea of applying the benefit increases to former council members.
A month later, Gotch wrote an e-mail to Madaffer the morning of April 5, 2001. “Hi Jim: Do you have any good news to report on the issue we discussed during your visit to Sacramento? I’m hopeful the Council will see the equity of treating present and former members alike, as long as they are not already collecting their … retirement.”
Later that afternoon, Madaffer responded, first touching on the pension issues and then on his hopes of receiving state money.
“Nothing ‘good’ to report as of yet. I last discussed this with the City Manager about a month ago and was given the impression things were far more political and complicated than just dealing with a few retirees. I told him that wasn’t the answer I wanted and to keep working on it,” Madaffer wrote.
“I noted to Dick that he would have been in the same situation had he not returned to the system as Mayor,” Madaffer wrote, explaining that Murphy became interested in the issue. “I just sent the Manager another email asking for clarification in writing. I’ll keep you informed.”
Murphy served on the council in the 1970s prior to becoming a judge.
After updating Gotch on the progress of the retirement change, he switched topics to the East Elliott acquisition.
“I understand (Murphy’s then chief of staff) John Kern visited you last week. … I want to remind you of my desire to acquire 2,000 acres for expanding Mission Trails Regional Park into the area known as East Elliott,” Madaffer wrote. “As you may recall, I mentioned to you the possibility of this acquisition being included as part of the Governor’s May revised budget. … I’d like to follow up further on this matter with you. Do you think we have a shot at the Governor taking the lead to expand Mission Trails Regional Park?”
Gotch sent back a quick reply. “I am very much on top of the East Elliott issue trying to jump start Fish and Game,” he wrote.
The conservation funds were managed by the Wildlife Conservation Board, an independent board within the Department of Fish & Game. The board is comprised of three appointees of the governor.
Gotch then suggested that Madaffer speak with council colleagues Brian Maienschein, Scott Peters and Toni Atkins to gauge their reaction on the retirement ordinance.
During the middle of this exchange, Madaffer wrote Gotch a separate e-mail. This one was also copied to Ron Saathoff, president of the firefighters’ union, who until recently was an influential member of the pension board. He was charged by the District Attorney’s Office of felony conflict-of-interest violations in May for votes he took on the pension board in 2002. He has pleaded not guilty.
“I met with Ron Saathoof (sic) at lunch today, a member of the City’s Retirement Board,” Madaffer wrote. “I briefly explained your situation to him and he indicated the legislative changes rest with the Council and the Board generally stays out of things (you may already knew that) (sic).
“I told Ron I’d copy him on this email to you with the hopes you could reply back with specifics on what changes are needed. … Please keep me in the loop so I can continue to offer assistance at my end,” Madaffer continued. “Ron is quite an expert on retirement matters within the City and perhaps he can figure a way we can make this happen for you.”
The next time the two wrote was April 17, 2001, when Gotch e-mailed Madaffer.
He explained that the state had already offered the city $3 million in matching funds for the East Elliott property. Gotch said it was his understanding that another property, Del Mar Mesa, was higher on the city’s priority list than the property in Madaffer’s district. He then advised Madaffer to seek federal funding for the project.
“Thanks for your note,” Madaffer responded. “I plan to do some checking at my end and I will get back with you. I still want to push for more than the lousy $3 million with a match requirement (and the matching requirement was never part of the ballot measure).”
The councilman was referring to Proposition 12, a state bond measure passed by voters in 2000 that specifically gave the Wildlife Conservation Board $100 million to distribute to local governments for conservation projects in San Diego County and northern Orange County.
Madaffer followed up with an e-mail to Gotch on April 26, 2001, that contained information about illegal grading that had taken place at the East Elliott property.
“I am still dreaming I’m sure that some how, some way the Governor could find a way to include a major chunk of funding toward East Elliott acquisition,” he wrote, putting the cost of purchasing 2,000 acres of the East Elliott lot at $40 million. “… Thanks Mike for taking the time to read this and understanding the City of San Diego’s concerns.”
The two men then exchanged a series of short e-mails about the East Elliott property. Gotch explained that he had met with other officials regarding the property.
Moving ahead
“You can appreciate what it is like to steer the bureaucracy in a different direction. However, I’m meeting with Fish & Game and Resources agency on the issue soon … Also, as I previously mentioned, the staff told me the City’s higher priority (perhaps the city staff) priority (sic) is $7M for Del Mar Mesa. It would be helpful to know what the Council priorities are.”
He then switched topics. “Are you making any headway on the retirement issue,” Gotch asked, going on to state his case for the retroactive benefit.
“The Manager isn’t going to support this action and their argument that if Council does it for past serving councilmembers they would have to do it for all employee classes makes no sense. The action the prior Council took only was for councilmembers,” he typed.
Gotch argued that all council members should be treated equally, regardless of when they served on the City Council, as long as they are not yet drawing retirement and served the proper amount of years. He noted that those ex-council members already drawing a pension are arguably in a different category.
“If there is going to be support for this, it seems the best time is when the Council adopts the employee compensation package,” he advised Madaffer.
In early June, Madaffer and Gotch continued to communicate over e-mail, discussing different options for acquiring the desired land. Gotch planned a trip to come to San Diego to view the parcel, which was formerly the U.S. Marine Corps’ Camp Elliott.
They settled on June 29 for the San Diego trip, planning to meet at City Hall after Gotch’s 9:40 a.m. airplane landed and he rented a car.
“Should I bring change of clothes for hiking?” Gotch asked.
Madaffer hoped that Gotch would also be able to meet with Murphy and Kern on the trip, and offered to pick up Gotch at the airport or lend him a city car. Gotch politely declined and chose to rent a car.
The two toured the East Elliott lot in a helicopter.
Before Gotch arrived, Madaffer continued working to secure the benefit. He wrote former City Manager Michael Uberuaga an e-mail on June 14, 2001, with the subject line “GOTCH RETIREMENT MATTER.”
“We heard this matter in closed session and I was curious as to a followup (sic). Anything new? Last I recall this matter was going to return to closed session once we had a plan. I’d like to get this into the FY02 Appropriation Ordinance (or wherever appropriate – similar to the other actions we took in closed session on related matters),” Madaffer wrote.
It was a suggestion Gotch himself had made to Madaffer.
The ordinance
Madaffer forwarded him a copy of the ordinance they hoped would boost the former councilman’s pension. It was the morning of July 20, 2001.
Gotch scanned the document and replied later that afternoon: “Jim, the language in the proposed ordinance is nice for the city attorney, but my reading is it does nothing for council members left out of last years (sic) action.”
Indeed, Madaffer had forwarded an ordinance that did change the parameters of the retirement program for elected officials – just not for former council members.
The amendment, scheduled to be heard five days later at the City Council rules committee, brought the city attorney into the retirement plan that had previously only been open to council members and the mayor.
Officials said that the ordinance was enacted to allow the city attorney to collect a pension after serving four years. Previously, the city attorney had to work 10 years like all non-elected city employees to become eligible for the pension system – a stringent plateau after voters restricted the number of years a politician could serve to eight.
The day after Gotch’s reply, Madaffer sent an e-mail to Deputy City Attorney Theresa McAteer, who was handling the retirement changes. He was curious if the amendment before him included the retroactive benefit for Gotch.
“One question: will this take care of Mike Gotch and can you indicate in what section? I think he left office in 1987?” Madaffer wrote to the attorney.
McAteer responded the following day, telling the councilman that the ordinance only applied to the city attorney. Cathy Lexin, former human resources director, and McAteer were putting together a report on Madaffer’s desired amendment, she wrote.
Lexin was charged in May along with Saathoff in the pension board conflict-of-interest case. She has also pleaded not guilty.
Madaffer replied later that morning. He expressed his desire to incorporate both the city attorney and the Gotch amendments at the same time. The city attorney piece was slated to be heard on July 25, 2001.
“I think both (committee consultant) Bill Baber and the Mayor (as was I) are under the impression this amendment was taking care of the Gotch situation as well. … I would like to take care of the Gotch situation ASAP,” Madaffer wrote.
However, the two items were substantially different. The retroactive benefit for former politicians carried with it distinct legal consequences, she wrote, because it tried to “reach back and affect people who already left the City.”
McAteer continued: “There are significant issues associated with changing the benefits of someone who already retired.”
Madaffer responded with a one-line e-mail minutes later. “For me personally, I would rather have the two heard at the same time.”
To be sure, Gotch had articulated his desire only to affect the pensions of those council members who had left the city but weren’t yet drawing a retirement check. In the end, 12 former council members received the benefit Madaffer helped craft; six former council members who were already retired benefited as well.
The councilman said Tuesday he was given the impression by Gotch that the former councilman was unintentionally excluded from the council’s 2000 action. He said he believed that some other already-gone council members had been retroactively granted the benefit.
“This was simply fixing what had been left out,” he told Voice.
City officials said the 2000 council action wasn’t granted retroactively and only applied to current and future elected officials.
Madaffer has to date often defended his actions related to the growing questions surrounding the city’s pension and wastewater system by saying he simply followed attorneys’ advice.
However, his e-mail exchanges with staff paint the picture of a councilman active in issues of the pension system. Indeed, even when presented with legal questions surrounding his proposed ordinance, Madaffer appears to show little concern – instead focusing on getting the ordinance done quickly and with as little political harm as possible.
Minutes after his e-mail conversation with McAteer ended, Madaffer composed a message for Baber and Kern with the subject “CONCERN FOR RULES / CITY ATTY MATTER.”
“Politically, this and the retirement matter should have been together,” he wrote of the city attorney amendment. “Did you know this was not the Gotch matter I have been waiting for? Now we will have to have two bites at the apple. Hopefully we can bring both to Council at the same time.”
Moving ahead
“Jim: Was there something I missed in the proposed ordinance you sent last week. What became of the retroactive application of the council package to past serving members currently not collecting?” Gotch asked.
About 12 minutes later, Madaffer responded, telling Gotch the process was moving along.
“You are late for Council,” Gotch replied.
“I’m sitting at Council right now!! You know, we finally arrived with technology – or at least a few of us did!!” Madaffer wrote at 2:30 p.m. while seated in council chambers.
Two minutes earlier, he’d written McAteer and Lexin asking for their recommendation on how he should proceed with the proposed amendment. He copied Baber on the e-mail.
McAteer responded first. She told the councilman that she and Lori Chapin, retirement system general counsel, were working on resolving a number of issues, such as if the retroactive benefit would be considered a gift of public funds – something disallowed under California government code.
In an interview, McAteer said that under the law, it must be determined that the public would benefit from such an allocation of funds. However, she said the interpretation of the law isn’t very narrow.
McAteer suggested in the e-mail that Madaffer simply bring up the idea during that Wednesday’s rules meeting and direct attorneys to study the issue.
“Thereafter, if we confirm some of our concerns with trying to do what you’ve requested, we can brief you in full and you can decide whether as a policy matter you want to pursue it … ultimately your call, but I would really appreciate (and I think Retirement general counsel would also appreciate) the chance to do our research (the answer is not clear-cut) and explain to you in detail our conclusions,” she said in the e-mail.
Madaffer showed little concern for the legal issues. Rather, he repeated his earlier worries: “I guess Bill Baber was not aware of the retroactive matter for former Councilmembers as it had been heard in closed session. I have no problem with the City Attorney matter, I just don’t like having to do retirement things like this more than once.”
Lexin echoed McAteer’s concerns, saying there were outstanding legal issues that couldn’t be resolved in the two days before the scheduled committee meeting.
“We want to be sure you know what the ‘criticisms’ will be, and in fact, be sure we can legally implement a retroactive change in vesting and formula before we go public with a recommendati8on (sic)….we can go forward with the amendment re: including the city attorney [in the Legislative Officers Retirement Program], bring the second issue after the recess?” Lexin said in the e-mail.
She expressed her concern that the retroactive benefit could draw a lot of “public attention and publicity before we are ready to answer some tough questions we are sure to get, like: 1. why are we doing this? 2. would this action jeopardize the ‘defined benefit’ nature of our plan? etc.”
“They were basically saying there was no basis for the retroactive benefit because the retroactivity wasn’t agreed to as part of a contract. This was something that was more like a Christmas gift,” said City Attorney Mike Aguirre, who has accused politicians and senior city officials of treating the retirement system as a personal slush fund.
No legal opinion answering the legal questions posed by McAteer and Lexin could be located among city records.
Chapin said she was never asked to opine on the issue. She said she remembered the issue because the retroactive nature of the benefit surprised her.
“When you make something retroactive, you go back to the time the plan began, that’s unusual,” Chapin said. “Legislation is presumed to be prospective unless you make it retroactive.”
McAteer is now in private practice and represents Kern, the mayor’s former chief of staff, in connection with the ongoing federal investigations.
McAteer said retirement counsel would generally write such an opinion. She said she was focused on ballpark work at that time and doesn’t recall working on any follow-up legal analysis to Madaffer’s proposal.
“I don’t know that there was any resolution to it,” she said.
The issue passed with little concern – or record – months later.
The council rules committee voted 4-0 to approve the retroactive benefit for their long-gone predecessors Nov. 21, 2001. Murphy and Madaffer were joined by former Councilmen Byron Wear and George Stevens in approving the measure.
The audio tape of that hearing is missing from the City Clerk’s Office.
Madaffer said that he and the council never would have approved the ordinance had the city attorney not approved. “My recollection is they must have given an oral report in closed session,” he said in an interview.
“Obviously, they did their due diligence,” Madaffer said.
The full City Council approved the measure on consent on Dec. 10, 2001 and Jan. 8, 2002 to make it official. The consent calendar is reserved for mundane and housekeeping items. Items are bundled together and voted on as a package, without discussion.
Gotch got the benefits he desired.
He entered the retirement system in January 2003 at age 55. He would not be eligible to receive a city pension until October 2007 had he not been awarded the retroactive benefits that allowed former council members to retire at 55 rather than 60.
By the time he turns 60, he will have drawn more than $71,000.
The city never secured most of the funds that Gotch and Madaffer had sought for the East Elliott acquisition.
“It just kind of fizzled out,” Gotch said.
In February 2003, the Wildlife Conservation Board did allocate $5 million to the city to assist with the East Elliott project.
In total, the city has acquired about 645 of the 2,100 acres city officials hope to acquire in the East Elliott area. Another 70 acres are in escrow.
Al Wright, executive director of the board, said a local advisory group figures largely in the board’s allocation decisions. The conservation board is comprised of the director of the Department of Fish & Game, the state finance director and the president of the Fish and Game Commission.
He said it isn’t unusual for the governor’s office to lobby its appointees for projects.
Legal challenge
In a report released in May, Aguirre said the creation of a whole host of benefits for elected officials was legally flawed because no funding was provided to cover the expenses, the benefits needed to be approved by a vote of the people, and the ordinances were enacted by officials with conflict-of-interest concerns.
He said the retroactive amendment championed by Madaffer didn’t make sense because salary and benefits are normally increased in order to attract and retain employees.
“When someone’s already left the employment of the city, it’s hard to rationalize increasing your benefits, because you’re not going to be attracting them to come to the city or stay,” Aguirre said in an interview.
The city attorney has already filed a legal challenge to benefits granted to city workers in 1996 and 2002. He applied many of the same legal theories to these benefits as to the benefits for elected officials.
If successful, his legal challenge will knock out about $700 million from the pension deficit, he estimated.
Although the pension system itself is the focus of numerous investigations, the system’s deficit is expected to continue to grow significantly in the years to come and threatens to dominate city budgets annually.
It took more than four months for Madaffer’s office to release the e-mails after they were originally requested under the California Public Records Act by the Voice of San Diego on June 7. Though they were made available to a Voice reporter Friday, the stamp on the pages show they were printed out on June 14, June 15 and June 16 – nine days after the request was first made.
Madaffer’s staff had told a Voice reporter throughout the summer that the information was being compiled and that federal subpoenas and staff shortages had delayed the search for the documents.
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