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Business group presses L.A. City Council for details on early-retirement proposal

As Los Angeles leaders discuss a deal that would let about 2,400 city employees retire up to five years early, the Chamber of Commerce and financial analysts say more details should be made public.

June 25, 2009|David Zahniser and Phil Willon

Two days before the Los Angeles City Council is expected to vote on an early retirement package for thousands of workers, the city's largest business organization warned the proposal would contribute to a "massively unfunded and unsustainable" pension liability.

The Los Angeles Area Chamber of Commerce sent Mayor Antonio Villaraigosa and the City Council a letter demanding that taxpayers receive more information on the financial consequences of the proposed five-year labor agreement with the Coalition of L.A. City Unions, which represents 22,000 workers.

Chamber president Gary Toebben warned in the letter that the agreement is poised to "deliver the kind of short-term political gain and long-term financial pain that has contributed to California's fiscal implosion."

"When city residents and businesses are struggling to live within their means, taxpayers deserve a detailed analysis of the future financial ramifications of this proposed agreement," he wrote.

Council President Eric Garcetti said the package is still being crafted. Garcetti also said that during negotiations, he had seen estimates showing that the cost of the plan would be covered by additional pension contributions from the employees who would remain. "People should not jump the gun with analysis that says this is bad," he said.

City officials are planning a closed-door council meeting at 8:30 a.m. Friday to review the proposed agreement with leaders of the labor coalition. If an agreement is not reached, city officials could proceed with plans to lay off 1,200 workers and shut down many city services every other Friday.

Councilwoman Wendy Greuel called the plan the "quickest, most humane, most cost-effective way" to reduce the size of the city's workforce. "We have always indicated that any plan that comes forward must pay for itself," she said.

The deal would delay pay raises for two years for the coalition's members, then give six increases between July 2011 and January 2014, as well as two cash payouts.

To reduce the city's salary costs, officials hope to provide early retirement to roughly 2,400 workers, some of whom would otherwise be up to five years away from eligibility. Some employees also would receive cash incentives to leave.

To help pay for the cost of the agreement, workers hired before 1983 would immediately be required to pay a larger pension contribution. Other workers would see their pension contribution increase from 6% to 6.75% in July 2011, according to a draft proposal.

"This is the best deal we're going to get for both sides, and I think everybody knows that," said Bob Schoonover, president of Service Employees International Union Local 721, which belongs to the coalition.

For months, the city's financial analysts have warned that retirement costs could swamp the two main pension systems -- the Los Angeles City Employees' Retirement System and the L.A. Fire and Police Pensions -- starting in fiscal year 2010-2011.

With both funds experiencing large financial losses last year, the city's required contribution is expected to increase annually from approximately $660 million next year to more than $1.6 billion by 2013-2014 -- or more than a third of the city's discretionary budget, according to a May 12 analysis by Acting City Administrative Officer Ray Ciranna. That increase "far exceeds any projected revenue growth" and is not sustainable, Ciranna wrote.

Sally Choi, who heads the City Employees' Retirement System, said the city is required by law to complete an actuarial analysis of the early retirement plan. Choi said she has not seen such an analysis. "I've only seen what's been reported through the unions and in the papers," she said

Once the council votes on the agreement, it would need to be approved by the labor coalition's 22,000 members. Changes to the city's pension benefits also require a vote from active members of the City Employees' Retirement System.


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