Monday, Nov. 27, 2006 | Re: Retired city employee Joe Flynn’s op-ed calling for higher city taxes because we greedy taxpayers pay too little.
Sorry, Joe, that pig won’t fly.
If you really think we need to raise city taxes, first explain why San Diego is the only city in California (that I know of) that has two deluxe pension plans for its non-safety employees. The resulting combined pension payout is absurdly high – and costly.
Consider: Suppose a general city employee starts with the city after 1982, receives only 3 percent total annual raises and then retires thirty years later at age 55 (55?!).
Further assume that this employee fully participates in the city’s second, little-known SPSP pension plan (essentially a dollar-for-dollar matching 401k plan for up to 6 percent of the employee’s income) and the contributions earn an average of only 8 percent a year in his mutual funds (the average annual return for the city pension fund for the last 20 years has been 10.62 percent).
Assuming he opts to pay out only the 8 percent future earnings on his SPSP plan (not even dipping into principal), that employee will receive a combined total pension of about 140 percent of his highest year’s salary!
Plus a lavish lifetime health care plan and annual cost of living pension raises.
To top it off, there’s a big chunk of money in the SPSP plan for the worker’s beneficiaries or charities. For instance, using the above parameters, if the city employee’s final salary was $59,000, upon the employee’s death, his or her beneficiaries could receive a lump sum survivor payout of over $475,000!
We can run the city just fine with the taxes now being collected. Indeed, these revenues have risen dramatically these past few years.
But our employee expenses have soared. Our problem is that we now pay our non-safety city workers salaries often higher than the private sector, while committing to an opulent double pension plan which simply is unsustainable.
As the cliché says – it’s not a revenue problem; it’s a spending problem.
We must hold the line on higher taxes – and fees.