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Monday, July 17, 2006 | Two points of clarification on [Friday’s] story about my role in the city’s pension issues and litigation (“Peters’ Power Play“):
Evan McLaughlin correctly reports that my motion to disqualify Mr. Aguirre from the pension case has been postponed until this fall. I would add that the City Attorney and I agreed to move the date until after a decision on the Municipal Employees Association motion for summary judgment is heard. Contrary to the suggestion that I am interfering with Mr. Aguirre’s ability to have his day in court (he has in fact had several), this will give Mr. Aguirre one more chance to argue against the benefits he claims are “illegal.”
Also, it is true that I believe that the upper limit on recovery from the pension litigation is approximately $48 million, rather than the $700 million figure used by the City Attorney, because of a 2000 settlement between the previous City Council and the employees. This “Corbett settlement,” raised benefits significantly in order to resolve a lawsuit, and was necessarily unrelated to any underfunding agreement made in 1996. Since the City Attorney’s lawsuit does not challenge that 2000 settlement contract, there is therefore no challenge to the benefit increases that settlement caused. That means that only the 2002 benefit vote could be voided by the court, accounting for about $48 million of the $1.4 billion pension deficit.
And that’s the point: taxpayers should realize that the $48 million savings from a City Attorney court victory would come not from any one annual City budget, but from the $1.4 billion dollar pension deficit. Since the deficit is financed over approximately 30 years, the annual savings from a deficit reduction of $48 million is about $2 million. While that’s not chump change, it is much less than the City, the retirement system and the employees are spending on legal fees each year on this very case! And the hoped-for annual savings do not compare favorably with the $17 million annual savings the City Council and employee unions agreed to in the 2004 labor negotiations.
That’s why more and more people are wondering what all the City Attorney’s lawsuit is buying us, beyond more legal expenses, lowered employee morale and police officer defections. Maybe after the September motions are heard, we might find once again that we get more from the bargaining table than the lawyers can get us in court.