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City Managers Pensions Not Included In City Managers Compensation Survey

City Managers Pensions Not Included In City Managers Compensation Survey

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Published by wmartin46
As events in Bell, CA continue to reveal the depths of corrupt, heretofore unaccountable, local government in California, the League of Cities (a service organization for California City Governments) has released an informal compensation survey for around 90% of the towns and cities in the state. This survey is not "official", reporting to the public the amount of compensation that appeared in “Box 5” of the Federal W-2 form for Calendar Year 2009.

Other sources of compensation exist which are not found in this report.

This short paper (actually a letter to local San Francisco Bay Area Governments) suggests that a "total compensation model" needs to be created, which would identify future pension payouts as a component in yearly compensation determinations.
As events in Bell, CA continue to reveal the depths of corrupt, heretofore unaccountable, local government in California, the League of Cities (a service organization for California City Governments) has released an informal compensation survey for around 90% of the towns and cities in the state. This survey is not "official", reporting to the public the amount of compensation that appeared in “Box 5” of the Federal W-2 form for Calendar Year 2009.

Other sources of compensation exist which are not found in this report.

This short paper (actually a letter to local San Francisco Bay Area Governments) suggests that a "total compensation model" needs to be created, which would identify future pension payouts as a component in yearly compensation determinations.

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Published by: wmartin46 on Sep 23, 2010
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09/23/2010

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To: Elected Bay Area Government Officials San Francisco Bay Area, CA Subj: Pensions Not Considered In City Manager

Compensation Survey Date: 09.23.10 Elected Officials: As events in Bell, CA continue to reveal the depths of corrupt, heretofore unaccountable, local government in California, the League of Cities (a service organization for California City Governments) has released an informal compensation survey for around 90% of the towns and cities in the state: http://www.cacities.org/resource_files/29185.CompensationSurveyReleaseSept10FINAL. pdf
League of California Cities Releases Manager Compensation Survey Survey Demonstrates Compensation in Bell is Extreme Outlier Today the League of California Cities announced the release of a recently completed voluntary International City/County Management Association (ICMA) survey of the compensation of city and town managers across California. The survey results are available on the League’s website at www.cacities.org/opengovernment. Below is a brief summary of the survey’s key elements: • Of the 468 cities and towns with managers, 90 percent responded to the survey, with more In order to secure a quick but complete response, city managers were asked to report the amount of compensation that appeared in “Box 5” of the Federal W-2 form for Calendar Year 2009. Although not perfect, this is a uniformly available compensation figure that includes salary and a variety of fringe benefits (e.g., car allowance, deferred compensation, payouts of unused leave, life insurance greater than $50,000, etc.). It does not include health insurance or employer payments to defined benefit retirement programs, however. This latter information will be collected in the upcoming report from the State Controller’s Office, which the League and CalICMA (the California Affiliate of ICMA) have both offered comments on to the State Controller’s Office.

Survey Results: http://www.cacities.org/resource_files/29179.FinalSurveyResult92010.pdf

Pension Payouts Not Considered Compensation The league of California Cities is not a public agency, and can not be expected to provide a complete, full, accounting of the costs of City government. Nonetheless, these outlays of public funds exist, and need to be identified for the public to fully understand the cost of local government. While there are no doubt many “benefits” that City Managers enjoy, such as housing allowances, car allowances, and travel budgets, post-retirement “benefits” are not considered in these sorts of surveys. The most significant dollar amount that needs to be considered is the pension payout that Cities guarantee their employees. Rather than being considered as “deferred compensation”, the current pension system sees these payouts as “defined benefits” (without any consideration for the magnitude of the “benefit”). Given that the Compensation Survey provided by the League of Cities identifies a number of Bay Area City Managers/Executives as having salaries over $300,000, what kind of post-retirement “benefit” (ie-pension) has been offered to these already highlypaid government employees? The following table provides estimates of the payouts for City Managers/Executives making at least $300,000 a year at the time of retirement:
Exit Salary $300,000 Years of Employment 10 20 30 Multiplier 2.50% Years of Pension Payouts Base Pension Payout $75,000 $150,000 $225,000

10-Years $837,654 $1,675,307 $2,512,961

20-Years $1,858,749 $3,717,498 $5,576,246

30-Years $3,103,458 $6,206,916 $9,310,374

In this example, the table estimates the payouts for an employee retiring from a government agency that offers a 2.5% per-year pension. The table points out that pension payouts are dependent on the number of years worked, and the lifetime of the employee during retirement. The “multiplier” could be larger, or small, than the 2.5% used in this example, based on the pension program selected by the government agency and CalPERS. Finally, COLAs have been included in the payout calculations. The yellow zone in the table highlights pension payouts that most City Managers/Executives might expect to receive, based on their possible years of employment and their possible lifetime after leaving active employment. As can be seen, retired City Managers/Executives can easily expect to see between $3.7M and $9.3M in retirement. Yet, “compensation surveys” do not include these dollars, even though it is possible that these pension payouts are larger than the retiree received from his government job when he/she was actively working.

Total-Compensation Model Needed The public has every right to know how much it costs to hire every person employed by the government. This means that a “total-compensation” model needs to be developed, that is imposed on every government agency. This model would necessarily need to include the likely pension payouts that government sector employees will receive during retirement years. The premise that these vast sums of money are “benefits” needs to be replaced with the idea that pensions are actually compensation, not a “gift” that does not need to be accounted for when determining employee compensation, as currently seems to be the case. Conclusion The situation in Bell, CA may not be found to exist in other California City Governments, but without full transparency of all expenditures of government agencies (including the full and accurate reporting of employee compensation), how would anyone know that Bell-like corruption does not exist in other cities? Because almost all government agencies have “outsourced” their pension management to CalPERS (or CalSTRS for the schools), most government agencies seem to “play dumb” when queried about the future liabilities that government jobs have created under the current system. The current pensions system has become so lavish for government sector retirees, that traditional government services will be threatened in the future, or taxes will have to be radically increased to pay these multi-million dollar pensions. The current system is out-of-control. Some visibility has been thrown on this problem at the State level, but the real problem exists in the other government agencies: schools and local governments—which employ about 1.7M full- and part-time employees, who will soon be swelling the CalPERS $100K retiree “club” within a decade. At the present, these multi-million dollar payouts are “off the table”, and not obvious to the public as a cost-of-employment of public sector employees. Local governments need to take the lead in the area of expenditure transparency by utilizing “total-compensation” models, which include every source of income that an employee enjoys—including the pension that will come after retirement. Wayne Martin Palo Alto, CA www.twitter.com/wmartin46 www.scribd.com/wmartin46 On the NET: www.pensiontsunami.com

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