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Monday, March 06, 2006 | San Diego Mayor Jerry Sanders has asked city labor unions to agree to mediate key legal disputes about their pensions, but accepting the mayor’s invitation would be a departure from the unions’ long-held belief that there is no ground to give.
Sanders suggested Friday that four of the city’s employee labor unions meet with the city outside of court to settle the question of whether pension benefit enhancements granted in 1996 and 2002 are legal. Such a conference would help the city and unions avoid lengthy and costly litigation and reduce the “circus-like atmosphere” that has consumed the ongoing controversy over those benefits, he said.
If the unions accept the mayor’s invitation, the very contentious legal battle over retirement benefits would be relocated behind closed doors. Sanders said retired federal Judge Lawrence Irving would preside over the proposed hearings, which would begin March 22.
Under the plan, after weighing the arguments, Irving would enter a non-binding judgment about the legality of retirement benefits the unions says are constitutionally protected and City Attorney Mike Aguirre believes were granted illegally.
The invitation symbolizes a hope by Sanders and Aguirre that the unions will soften their hard-line stance on the benefits, which would make the city’s efforts to pay down it’s nearly $2 billion deficit more manageable. Annual payments to reduce the retirement fund’s shortfall threaten to further strain the city’s already-thin operating budget, which also pays for police officers, libraries and park maintenance.
“These lawsuits raise many unresolved issues and are impeding the city’s financial recovery and the rehabilitation of the city’s reputation,” wrote Sanders, who was elected mayor in November on a platform to repair the city’s beleaguered finances. “The unresolved nature of this litigation creates uncertainties for all parties concerned.”
At stake are about $700 million worth of benefits that were granted in 1996 and 2002, which City Attorney Mike Aguirre argues were doled out on the condition that the retirement board allowed the city relief from its pension bill those years. Aguirre contends the underfunding-for-benefits deals were illegal because they were approved by retirement trustees who had a conflict of interest in agreements that fatten their own retirement pay.
He also contends that it was illegal for the city to promise pension benefits to employees when it had no money to fulfill those commitments.
Union attorneys said they are unsure what leverage the city has in a mediation setting, saying the benefits are guaranteed until a court determines otherwise.
“At this stage in the case, it is difficult for me to see whether mediation is a useful tool,” said attorney Ann Smith, who represents the Municipal Employees Association, the 6,000-member union representing white-collar workers. “At this point, [the city and MEA] are at polar-opposite positions in the legality of benefits that many retirees are already getting.”
The attorneys said they did not know whether they would participate in the mediation because they have not yet reviewed the mayor’s request with their clients, but acknowledged that mediation is successful in many instances.
“If the city is willing to pursue mediation to solve all the problems, I don’t see why any intelligent person wouldn’t want to solve those problems,” said Greg Petersen, the Police Officers Association’s attorney. “They’re going to have to understand that the law is the law – I think they know that – but that doesn’t mean there aren’t legal ways of accomplishing our goals in mediation.”
The City Council would ultimately have to approve any change to the employee benefits plan that would result from mediation, Aguirre said.
The unions representing the city’s police officers, firefighters and white- and blue-collar unions are currently involved in lawsuits with the city of San Diego that are playing out slowly in federal and state courts. Sanders said mediation could potentially save the city and the unions from courtroom battles that are expected to cost millions of dollars and take five or six years to complete.
“I think the people of San Diego would like to see this solved sooner, and that everybody would like to see this solved sooner, including the city employees,” Sanders said at a Saturday press conference. “If we can arrive at certain ground rules … we can have productive process that will allow us to move forward much more quickly and much more cheaply.”
The first mediation meeting would come five days after the March 17 release of an actuary’s snapshot of the retirement plan’s financial health. City officials have warned that the actuarial report will contain a requirement for a hefty contribution by the city into the retirement fund, possibly twice the $163 million payment it made last year. Whatever the sum, the bill will play a significant role in the shaping of the next fiscal year’s budget, and the city will have to make the payment by July 1.
Aguirre, who filed his first lawsuit challenging the 1996 and 2002 pension benefits in July, said he favored mediation as a way to more quickly determine the legality of the benefits.
“Ultimately this conflict and the underlying problem will only be resolved in a settlement anyway, and what we would like to do is try to short-circuit the protracted litigation and move into mediation mode,” Aguirre said.
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