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Monday, July 31, 2006 | Recently, the Union-Tribune’s Tony Manolatos published a story about police leaving the city of San Diego to go work for the city of Chula Vista.
“SD cops flee city’s fiscal mess, seek jobs at other departments. No raises, cost of benefits leave some with little choice,” was the headline.
In the story – although he documented well that cops were indeed leaving the city of San Diego – Manolatos never proved that, as the U-T’s headline put it, the police officers had “little choice” but to leave.
The one officer Manolatos specifically focused on, a San Diego detective named Gary Lawrence, in fact, had a clear choice.
Lawrence had applied to work for the city of Chula Vista. He wasn’t forced to. He chose to.
The story discusses Lawrence’s difficult decision: He would take a pay and status cut in Chula Vista, but his “take-home” pay would be greater because the city of Chula Vista pays for things that the city of San Diego doesn’t.
Lawrence, according to the story, made up a spread sheet and crunched the numbers long enough to determine that his family would be better off if he worked for the taxpayers of Chula Vista rather than those of San Diego.
He made his choice. And I think it was a really shortsighted one.
One of the biggest mistakes people outside the city of San Diego have made recently is to assume that San Diego’s pension crisis somehow occurred in a vacuum – that wise and righteous leaders, in contrast, govern the surrounding municipalities of Chula Vista and San Diego County. Only the slovenly greed mongers of San Diego City Hall could have made the decisions necessary to thrust the city into this present cesspool of confusion and alleged corruption.
The bureaucrats in other local governments assume that they are better and wiser, that they make different decisions than San Diego officials did, and that they have nothing to learn from what happened at City Hall other than to maybe get a few more lawyers on board or something.
But if a police officer like Detective Lawrence is going to “flee” San Diego to go work for Chula Vista, he should do more than predict the future weight gain of his wallet. He should assure himself that the “fiscal mess” plaguing the city of San Diego could never happen in Chula Vista.
And if he were to try, he would probably have trouble finding that assurance.
Let’s look at the facts.
The main reason Detective Lawrence wanted to transfer to Chula Vista wasn’t a higher salary – his salary would be lower, as would his rank. The main reason was the fact that he wouldn’t have to put any money toward his pension in Chula Vista. As everyone who has a pension knows, both employee and employer are supposed to contribute to the employees’ pension system. In Chula Vista, officials have decided that rather than give higher salaries, what they’ll do is “pick up” the pension contributions of their employees. The city of San Diego only picks up part of their employees’ required contribution.
In other words, Detective Lawrence wants to move to the Chula Vista Police Department because he doesn’t want to pay his pension costs.
Makes sense, I suppose, but you have to assume, then, that Chula Vista will always be able to provide this generous benefit for its employees.
You’ll also have to assume that Chula Vista won’t ever find itself in the kind of pinch San Diego does now where it might ask to cut some of these benefits.
That’s not easy. Since 2002, because of its high employee pensions and its skyrocketing salaries, Chula Vista’s required payment to the California Public Employees’ Retirement System has tripled – leaping from $4.45 million in 2002 to $13.6 million in 2005. If your home mortgage payment tripled in three years would you be able to handle it?
If you were Chula Vista, you’d say yes, as the city has recently received a windfall in tax revenues. With the massive housing buildup in Eastlake and adjacent developments, Chula Vista has been a boomtown.
So the city has met the increased debt payment to CalPERS, but the hike in pension costs to taxpayers doesn’t stop there. Last year, in order to cover the pension contributions of its employees (to provide the benefit that attracts officers like Detective Lawrence) Chula Vista shelled out $6.4 million – 12 percent more for that benefit than the city paid the year before.
And that’s not all. Chula Vista is no stranger to pension debt. In 1994, faced with a mounting pension deficit, the city took out a few loans and invested the revenue in its employee pension fund. The interest the city paid on the loans was outrageous: between 7.75 and 8.34 percent. Chula Vista taxpayers are still paying off the interest on the loan and they will face a balloon payment at the end of this decade.
You’d think that all this investment in the employees’ pension fund would have left Chula Vista’s retirement system flush with cash. But every year, with more and more funds streaming into the pension system, Chula Vista falls deeper and deeper into its own pension deficit.
In 2001, Chula Vista actually had a surplus in its retirement system for general employees. It had 105 percent of the assets it would need to make good on promised employee pensions. By 2004, it had 75 percent of the assets necessary. The “funding ratio” as it’s called had plummeted by 30 percent in four years. And it continues to fall.
Now, Detective Lawrence, if you’re reading this pay attention. While Chula Vista proudly claims it has 91 percent of the assets it needs to make good on its promises to public safety employees like the police, that percentage is declining as well. In 2001, the city had 119 percent of the assets it needed to make good on its promises to police.
In other words, Chula Vista is on a spending rampage, making promises to potential recruits like Detective Lawrence that the city will struggle to fulfill as the bills come due through the rest of the decade.
Government officials have trouble saving money. When a cash windfall like the one that hit Chula Vista comes, they spend, spend, spend. In future years, if the housing market cools (it will) and people find themselves less excited about living in uber-suburban Eastlake, Chula Vista’s revenues will deflate.
Last year, Chula Vista’s general fund budget grew by 8.3 percent. It won’t always grow so quickly.
But the city’s debt will. It will cost more and more each year to pay the benefit that is luring Detective Lawrence to Chula Vista – the pension “pick up.”
Remember, last year it cost taxpayers $6.4 million to give their employees that benefit. That’s 12 percent more than the year before. If the payment grows 12 percent every year – or even just 4 percent every year – it will turn into an unsustainable benefit. And then that benefit will eventually be gone.
Recently, San Diego made its employees again pick up more of their share of the pension costs. That’s one of the reasons people like Detective Lawrence are looking for new jobs.
All the while Chula Vista is doing something else that San Diego did in the late 1990s and the early part of this decade: it’s living it up. It built a fancy new City Hall. The city just last week inked a deal to build a massive convention center and hotel complex along the bayfront. And it is trying to lure the Chargers with thoughts of a new stadium.
Ahh! But could the new Gaylord Convention Center help Chula Vista pay for the promises it’s making employees now? Nope. That’s because any extra tax revenue the Gaylord facility produces will go to pay for the Gaylord facility.
Look, if you’re a cop, or any other public employee in San Diego looking for greener pastures in Chula Vista, go ahead. But don’t do it to escape the problems now burdening San Diego.
The city of San Diego is right now facing the consequences of what happens when leaders don’t anticipate the consequences of their promises. Because city leaders made promises in such a shady and potentially illegal way – and because they decided to “delay, deny and deceive” for so long – San Diego is facing political and legal crises even harsher than its financial one. But the city didn’t make any promises that were fundamentally more ambitious than those Chula Vista made to their employees.
And if Chula Vista shows the same unwillingness to ask taxpayers for more funds, that shiny new City Hall is just a few years away from facing the same fiscal problems San Diego has now.