Menlo Park pension reform initiative sparks debate

June 23, 2010 7:15:02 PM PDT
Cities across California are struggling with budget problems, and there is growing focus on those expensive employee retirement packages. But a voter initiative that could limit pension benefits for some city workers in Menlo Park is now the subject of a lawsuit.

A battle for benefits: Public employees go to court to scuttle a move by voters to roll back their retirement. A citizen's group wants to rein in what it calls runaway retirement benefits for Menlo Park city workers. Wednesday two unions fired back with a lawsuit to stop the pension reform initiative from getting on the November ballot. The lawsuit says the voter initiative is illegal because only the City Council can negotiate contract terms.

"It's in the constitution that the City Council is the authority that has the right to negotiate and they also have the right to say no, and they have said no plenty of times when we've been at the table with them," said SEIU union leader Muriel Frederick.

Henry Riggs is the co-chair of the pension reform measure. He says the initiative only applies to new hires and asks voters to raise the retirement age from 55 to 60 and reduce the pension payment formula for those employees.

"The promises that we've made obviously are unsustainable and you don't have to look very far to see all the cities and towns that are struggling with this," said Riggs.

The City Council voted last month to allow the reform initiative to go before voters in November. Mayor Richard Cline is not surprised some citizens are demanding change and the unions are fighting back. Cline says this is one for the courts to decide.

"This is the natural tension of a community going through an economic depression, but the fact is we've got a lot of work to do and we need to keep our eye on the horizon," said Cline.

The unions argue any savings from pension reform on new hires would be decades away. They sent a letter to the mayor Wednesday asking that instead, the city renegotiate a bank deal it made years ago that locked in a 4 percent interest rate on a redevelopment bond.

"I really believe that Menlo Park should be able to get out of this deal that's costing us $2.5 million a year without any penalty at all, and this would really help the city as a whole," said resident Katy Rose.

Given the bank bailouts, a number of cities are challenging what they call bad bank loans. The Fed rate is now near zero, but Cline says that when Menlo Park swapped out its high-risk variable rate for a fixed rate, it did so with its eyes wide open. Still, he says he is willing to look at that contract and seeing if it can be renegotiated for the benefit of the city.


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