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Friday, Nov. 10, 2006 | City Attorney Mike Aguirre has dedicated the bulk of his first two years in office on an ambitious legal attack against two past pension deals that cost the city hundreds of millions of dollars, steadfastly working despite the cries of skeptics that his case is a long-shot.
But for all of the attention Aguirre has focused on ripping the city’s past pension dealings in the press and in various courtrooms around town, he has lagged until now in assembling the paperwork needed to bring to a halt two controversial benefit programs that he has blasted time and again.
The City Council is expected to vote Monday on the legal tweaks needed to eliminate two controversial pension programs – 18 months after the council and former Mayor Dick Murphy negotiated the closure of the benefit opportunities. The paperwork is described as being just a formality, although it has left the door open for new employees to partake in benefit programs that they are not supposed to enjoy.
Aguirre claims the delays are the result of a conscious decision to prevent a potential landmine that could blow up his landmark pension case. The city attorney argues that the employee groups he is battling in Superior Court could construe his office’s legal work on the labor deals, which set pension benefits, to mean the city approves of the very benefits he is challenging.
“The reason we were not interested in moving forward is we thought that there was some kind of ulterior motive from the other side,” said Aguirre, implying that he thought the unions agreed to the concessions in 2005 in order to bait the city attorney into endorsing the labor pacts.
Council members, however, say the holdup is typical of the delays they’ve experienced when seeking documents, such as legal opinions or drafts of legislation, from Aguirre and his staff.
“Come on, we’ve done a lot these things, we need to nail down these things,” Council President Scott Peters said at his press briefing Thursday.
In May 2005, the council approved contracts with the city’s unions that eliminated new hires’ ability to purchase “service credits” and participate in the Deferred Retirement Option Plan, known as DROP, two of the more controversial benefits in San Diego’s pension saga.
The City Attorney’s Office has also been criticized for failing to produce a legal opinion to eliminate another long-condemned pension practice.
Last month, the retirement board, which Aguirre alleges covered up the city’s pension problem, eliminated an accounting method known as the “waterfall” that hid some of the city of San Diego’s pension obligations. Aguirre and outside consultants have condemned the accounting gimmick, although Aguirre has also not prepared the companion documents the council needs to shutter that bookkeeping method.
In memos dating back to May, Peters has urged the Aguirre to draft the documents needed to rectify the municipal code to reflect the labor deals and to eliminate the waterfall.
“We can’t do the legal things ourselves; it’s clearly his duty under the charter,” Peters said.
Aguirre said Thursday he has now familiarized himself with sections of the city law dealing with pensions in preparation of the ongoing trial. He said he knows it well enough to craft the legislation that will allow the programs to be discontinued without jeopardizing his ability to attack the rest of employee benefits.
“I now know what can and can’t hurt us,” Aguirre said.
He said the waterfall ordinance will be drafted at a later date. He had previously promised a legal opinion on the waterfall would be delivered in May.
The labor pacts barred employees who were hired after July 1, 2005 from entering the service credit and DROP programs. But officials at the San Diego City Employees’ Retirement System said the door remains open for those workers to apply for the program because the municipal code hasn’t been altered to include the provisions.
SDCERS spokeswoman Rebecca Wilson said three employees who requested applications about the service-credit program would have been barred if the contracts were enacted. Those employees eventually decided not to join, she said.
Aguirre said the city’s inactivity in hiring new workers played into his decision.
“We haven’t been hiring a lot of new employees, so it doesn’t seem to be very serious problem,” he said.
The service credit plan permitted employees to purchase years of service for the purposes of calculating their future retirement checks. By buying up to five years worth of service credits, a worker can substantially increase his or her retirement income.
For instance, a white-collar worker who retired after 20 years of service and a high salary of $100,000 could earn an extra $10,000 per year in pension pay if he or she purchased five years of service.
Aguirre is challenging the service credit plan in his ongoing pension lawsuit, claiming that SDCERS officials who benefited from the program priced the service credits at a deep discount. The program now accounts for $100 million of the city’s $1.4 billion pension debt.
The 2005 labor deals also barred new employees from entering the DROP program, which allows employees to collect a pension – which is held in a savings account – while they are working beyond their retirement age. Workers can participate in DROP for up to five years.
Aguirre said he estimates DROP has cost the city nearly $200 million, while union officials have contended that the program saves the city money by freezing an individual’s potential retirement income.
The city attorney derides both benefits as being too costly for the city. He also argues that they were ill-gotten by officials who had a conflict of interest in their creation.
But Aguirre’s decision to not draft the legal documents illustrates the fine line he walks in attacking pension deals forged by the city – the entity he represents in pension litigation. He said his reluctance to touch the labor deals, or any part of them, is because his legal argument can’t afford to have his name attached to it in anyway.
The city attorney contends that his involvement with those labor deals could tamper his efforts in court, or hold the municipal government to its promise to pay $600 million into the pension fund by 2008 – a pledge the council made to the blue-collar union in exchange for pay cuts.
“I didn’t want to do anything that would lock us in,” he said.
His union opponents in the pension litigation have argued that Aguirre cannot attack benefits that they say the city recognized when approving pension-related legal settlement in 2000 and 2004. Those settlements may derail his whole case or diminish the $500 million stakes that he says he can erase from the pension debt if his lawsuit succeeds.