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Pension costs bust Fremont budget

By Matt Artz
Tuesday, November 16th, 2010 at 8:44 pm in Uncategorized.

Fremont leaders gave a big budget presentation this evening.

City expenditures are forecast to jump by about $5 million next fiscal year. The biggest culprit ($3.5 million) is rising pension costs.

The state pension system has told the city that pension contributions for police and firefighters next year will jump from 30 percent to 36.5 percent to make up for prior investment losses and incorrect assumptions.

That means next year for every police officer and firefighter making $100,000, the city will have to pay an additional $36,500 to fully fund their pensions. For non sworn employees, who don’t have as generous pension benefits, it will jump from 18.4 percent to 22.9 percent.

The city expects to pay $15.7 million to fund its pension obligation this fiscal year. Next year it’ll be $19.2 million. In 2000, when the market was great,the city paid just about zilch. The more Fremont pays for pensions the less it has for restoring jobs and services.

In better news, sales tax revenue was up a bit, property revenue only went down a drop, and the city spent less money than expected, mostly by keeping positions vacant and being frugal.

But city leaders said that to stay on reasonably solid financial footing, Fremont will have to either reduce more positions, raise taxes or get more employee givebacks.

More on that below

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  • Matt Zinger

    Here we go, Fremont.

    Get ready for utility tax in the next year election.
    How will the present City Council negotiate with the Fire/Police department who sponsored their campaigns
    Everything is disclosed only after the election.

  • Fazlur Khan

    The City Council have to rubber stamp the proposals of the Fire/Police Departments as they got them elected. Get ready for a bankrupt City like BELL CITY!.

  • http://fcnisbacon.wordpress.com/ Marty

    The 36.5% the city pays toward pensions is based on a projected 8% return on investment, which is delusional. Once reality sets in an it becomes apparent that 6-7% over the next 10 years is te best they’ll get, expect the city to be on the hook for up 50% of an employees pay.

    Quite the bind you’re in, Fremont. I suggest doing nothing this year, and not renewing the contract next year. Public safety is no longer a growth industry. They took advantage of 9/11 and a boom economy to double their pay in 8 years. It’s time for the public to take advantage of a poor economy to get that compensation back into check.

  • VOR

    “Public safety is no longer a growth industry.” Marty, I don’t mean to be argumentative, but based on the cop reports Martz has been putting on TCB, including the most recent Niles incident, it appears it is in a growth mode until the economy improves and more people find employment.

  • skumar

    This is no surprise. The Fremont council has been trading favors with the cops and firefighter unions for years. Unless the council grows a pair Fremont is going to end up like Vallejo. Bankrupt. The days of pandering to the Fremont public unions is done. Deep service and pension cuts are long overdue. Of course our council wimps would rather focus their collective efforts on plastic bag bans.

  • west

    Get ready for a Utility Tax to fund the bloated Pensions for Government Employee’s.
    In the mean time, middle class families are struggling to survive.
    Government Employee’s deserve a decent pension, but not the bloated Pensions, that are going to
    cause a loss in city services.
    The Police and Fire department employee’s spent thousands of dollars on Fremont politics, to insure more of the same.
    Just remember who elected the present council, who will roll over and give them what they want.
    I wish the residents of Fremont received the same representation as the police and fire department, from our City Council.
    Oh, most of the police and fireman do not even live in Fremont!

  • Audrey

    I know I said I wouldn’t comment anymore, but I had to. I agree 100% with SKumar’s comments!!!

  • http://fcnisbacon.wordpress.com/2010/11/03/parting-gifts-for-election-losers/ Marty

    VOR #4. I cant think of a city in the region who is expanding their fire or police forces. Job supply and demand has to come in play here.

    I’m not privy to crime stats, but if they are up, then cities better figure out a way to hire more cops for less money.

  • VOR

    Marty, I’m with you on your comments in #8. It just seems like people are getting a lot more desperate, especially with what seems to much more brazen, mid-day, strong arm robberies.

    Your right, cities are not expanding their public safety departments. In fact there seems to be a rush to turn them over to other entities as a way of saving money.

    Public Safety personnel will need to make concessions just like everyone else. To think otherwise is foolish. And local politicos who don’t demand that of them will be subject to the scrutiny of the voting public.

  • bbox231

    Hmmm . . .

    Is it really more crime ?

    OR

    Perhaps a greater preoccupation by our media in reporting crime ?

    How could we know ?

    Increased frequency and detail of crime reporting is always good for fanning the flames of community insecurity. Just the thing needed to help grease the skids between a taxpayer and their pocket book.

    A quick check on the HAYWORD blog and you gotta go back to 9/22 before space on the BLOG is used to rehash criminal activity.

    But, in the spirit of trying to solve the original problem – here’s another idea -

    Let’s file BK – Chapter 11 – dissolve the outstanding debt and restructure.

    Bye bye future pension obligations.

    Corporate America has been using this tactic left and right for years now ror exactly the same purpose and reasoning . .. . why not the municipal sector?

  • Jen

    Public safely personnel have always thought themselves above the rest of us and deserving of some special priveledge because of a profession they CHOSE.

    It should be like everywhere else, your employer matches up to a certain point (seems like it’s usually around 5%) and then it’s on you to provide for your retirement. Take your extra money and invest it just like the rest of us have to and hope you make intelligent choices and hope for the best.

    Why we should all be paying for cops and firefighters to retire at 55 with a majority of their pay is beyond me. They were paid for the time they worked. Why should they be paid for NOT working??

  • Robert

    I just hope all of you saying this will stand up and support the council after making these tough decisions when it comes to re-election time when the police & fire unions start negative campaigning with hit pieces.

  • http://fcnisbacon.wordpress.com Marty

    Robert, Many of us wait for the PE union mailers to decide who not to vote for. And I can say confidently that if Bacon and McDonald were to have taken a stand on this issue I would have supported them with enthusiasm. Their silence meant to me that they are content with the status quo, though McDonald did dance around the issue with her comments on a residency requirement.

    I support the direction Jen is going with defined employer contributions and the employee making up the balance based on market conditions. But 5% is too low. Remember these employees do not pay into social security. The starting point should be 12-15% employee.

    The thing that needs to be realized is that it’s an employers market. No agency is hiring. I am not saying sworn employees should be thrown to the wolves. But unless these issues are dealt with, even if the economy booms there will be little room for a city to invest in capital or retain a surplus because all excess revenue will be marked for making up investment gains below 8%.

  • bbox231

    Post # 12 – all you’ll see between now and next election is miniscule and ineffectual concessions aimed at convincing folks that there is a sincere effort to meet half way – - concessions like mandatory time off.

    Meanwhile, back on the farm – our “lone voices” will be speaking softly in soothing tones, trying to explain to their constituency why they need to contribute a greater share of their unemployment or retirement benefit to the Fremont general fund.

    And we’ll all stand around the BLOG-fire nodding knowingly while we all mutter “Yup – yup – nuthin’ we can do ’bout those existing pension obligations.”

    And in 2012, when the public safety marketeers send out their election fliers expressing their relative dissatisfaction for the inconvenience caused to their esteemed membership by a handful of unpaid vacation days, you want me to “stand up and support” Anu and Bill and Bob and Bob ?????

    Umm – wait a minute – these ARE the very same folks that kinda got us where we are today, aren’t they Robert ?

  • Jen

    Well, they should pay into social security. Why should they be exempt from paying into the system? I understand that they have their own PERS system they pay into and so don’t pay SS, but get rid of PERS to the extent it is now. Make PERS like a 401(k) and have them pay into SS just like the rest of us working stiffs.

    I’m for eliminating SS as a mandatory contribution, myself. Take that extra money and invest it. The system is going to go broke long before I get a chance to retire (which will likely be after I’m 55 because I’m not a cop or firefighter).

  • VOR

    Jen, in theory your suggestion that SS be eliminated as a mandatory contribution is a good one. But if you don’t make retirement savings of some sort mandatory you know many people would have nothing. As it is that is all some do have. The fable of the ant and the grasshopper comes to mind.
    http://en.wikipedia.org/wiki/The_Ant_and_the_Grasshopper

  • Jon Simon

    Jen,

    You’re a sucker for corporate robber barons. When you’re destitute and in the streets after the market collapses the day after you retire, you’ll pine for the good old days of Social Security. Executives take immense salaries far greater than their actual worth. Corporate boards are packed with buddies enriching each other at shareholder and often taxpayer expense. Just look at the disasters that most retirement portfolios have become. The only winners were the ones who bet against the house.

    The end of Social Security will mean our elderly and disabled kicked out onto the streets, sick, hungry, and dying.

  • Jen

    The end of social security would mean that I would no longer be paying into a system from which I will most likely never receive benefits.

    I am not a sucker for corporate robber barons. I am just not an advocate of a welfare state. And since I’ve worked for those corporate robber barons in investment banks for years, I’ve learned how to diversify my portfolio and decrease my exposure to risk the closer I get to retirement.

    It’s called personal responsibility. An odd concept for some apparently. VOR, you’re right, you should be forced to set aside money for your retirement – but it should be up to you whether you put it mutual funds or in the mattress.

  • Fazlur Khan

    Jen,
    You are advocating people to invest in Mutual Funds.
    Which company you work?

    Do you know the collapse of the world’s biggest Mutual Fund company Lehman Bros, made hundreds of thousands of of the investors HOMELESS.

  • Fazlur Khan

    The City lost millions of dollars of the public money
    it invested in Bear Stern, including San Mateo County.

  • Jen

    Fazlur,

    I now work in venture capital. And I wasn’t “advocating” that people invest in mutual funds, merely using that as a comparison – either they can do “this” (at one extreme) or “that” (at the other).

    Buy gold with your money for all I care. Just don’t make me pay into a system I will never receive benefits from AND use my tax dollars to pay public employee pensions. Most people only DREAM of putting $36,500 into their retirement funds each year, let alone having their employer put in that entire amount.

    This whole situation is made even more egregious by the fact that the public safely employees act entitled. In the Argus this morning the guy from the fire dept. union said ‘we’re not trying to bankrupt the city…”. Sorry, that’s exactly what you’re doing.

  • http://fcnisbacon.wordpress.com Marty

    Personally, I can do much better with my SS contribution than the return projected in my statement. Others can’t, so I think it’s a good program.

    Jon, it’s hard for me to get on board with your robber barron position when it is the SS administration who states in plain English that I’ll be lucky to get 75% of what I contributed back. Read your yearly statement.

    At least investment banking has mandated warnings of risk, past performance not predicting future performance, etc.

  • Jen

    Oh, and I forgot to add that the full pension amounts will be paid out regardless of fund performance. In other words, the fund can be broke and it still has to pay out.

    Guess who pays for that? Us, again.