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Pensions for Rizzo, 40 other Bell employees will be larger than first estimated

The former city administrator, who is facing corruption charges, will receive a pension of nearly $1 million a year from a plan he designed for himself and the workers. The plan circumvents retirement limits set by California.

September 30, 2010|By Jeff Gottlieb, Los Angeles Times

Then-City Administrator Robert Rizzo designed a supplemental pension plan for himself and 40 other Bell city officials that will provide them far larger taxpayer-financed retirement packages than previously estimated, according to interviews and documents reviewed by The Times.

The supplemental plan was paid for entirely by Bell tax funds. It allowed Rizzo, who was charged last week with public corruption, and other city employees and all City Council members to circumvent retirement limits set by California. Over the last seven years, the City Council approved increases in the retirement pay for those 41 officials that could raise pensions about 85%.

The increases mean that Rizzo could receive a pension of nearly $1 million a year, according to Times estimates, rather than the more than $600,000 previously estimated. Former Assistant City Administrator Angela Spaccia could receive more than $375,000 a year, compared to the previous estimate of $250,000.

Rizzo earned nearly $800,000 a year and Spaccia about $375,000, making them among the highest paid city officials in the state. But the supplemental pension plan also included rank-and-file workers who made more modest salaries.

An employee who worked in Bell for 25 years could retire at age 55 and continue receiving more than 90% of his or her final pay. By contrast, most employees who work for the city of Los Angeles for 25 years would have to wait until they were 60 for full retirement and then would get a pension of just more than half of their highest year's pay.

Experts said they had never heard of public employees receiving such generous pensions, saying those perks are typically reserved for private-sector executives.

"It's outrageous," said Steve Kreisberg, collective bargaining director of the American Federation of State, County and Municipal Employees, the nation's largest public employee union. "It follows a pattern of what these officials have done with compensation, complete irresponsibility at the expense of taxpayers."

Pedro Carrillo, Bell's interim city manager, said he had recommended ending the supplemental pension. "It's not normal, obviously," he said. "It's inconsistent with best practices."

James Spertus, Rizzo's attorney, called estimates of Rizzo's retirement payments "grossly inaccurate."

While most public employees contribute a portion of their paychecks toward their retirement, Bell funds its entire pension package, including the supplemental retirement.

In 2007, the Bell City Council increased the city's "retirement tax" rate to cover rising pension costs. But last month, the state controller said the tax had been increased illegally and ordered Bell to refund $2.9 million and roll back the tax.

The supplemental pensions promise to hurt Bell's future finances for years to come, as the city struggles to pay the generous benefits packages without the tax revenues it expected to help defray the costs.

Currently, the supplemental pension costs Bell $600,000 to $650,000 a year. Even before the state deemed the 2007 retirement tax illegal, the city's overall retirement fund had been running at a deficit for the last seven years, reaching $1.2 million last year.

The supplemental plan also covers City Council members, who approved it in 2003, guaranteeing them minimum payments of $2,000 a month if they quit as early as age 52 and had spent five years in office, in addition to their normal payments from the state retirement fund.

According to Times calculations, George Cole, who spent 24 years on the council and was charged along with Rizzo, Spaccia and five other Bell officials, is receiving a combined pension of more than $80,000 a year for the part-time job.

Bell began sweetening the pensions seven years ago.

In 2003, Bell's workers were covered by a pension benefit known as 2% at 55. That means that the pension for an employee retiring at 55 would be calculated by taking 2% of the worker's highest 12-month salary and multiplying it by the number of years in the California Public Employees' Retirement System.

After two increases, the 41 employees now get what experts say is the unheard of rate of 3.7% at age 55. Of that figure, 2.7% is the CalPERS limit, the remainder comes from the city's supplemental plan.

"I don't think you'll find another city with that kind of benefit. There's no rationale for it," said Dave Mora, West Coast regional director of the International City/County Management Assn., who previously worked as a city manager.

Even with the supplemental pension plan, Rizzo and Spaccia unsuccessfully pushed for an even sweeter deal for themselves, according to documents obtained through the California Public Records Act.

E-mails obtained by The Times indicate that the two discussed the program with a financial consultant for a Wells Fargo and Co. subsidiary and how it could be funded with $7 million to $14 million of city funds.

Their proposal prompted the consultant, Alan Pennington, to warn them about a potential backlash if the plan became public.

Pennington sent Spaccia a May 2009 e-mail noting that a Times article reported that the former city administrator in neighboring Vernon was receiving a pension of $500,000 a year, then the highest in the state retirement system.

"I guess with the spotlight on, City of Bell could show up [once] you and Bob have retired. Not sure there's anything you should do or anything anyone else could do (to reduce future benefits) but thought you might find it interesting none-the-less."

Spaccia replied: "Yes we have discussed it as well. You are right, there is nothing to do than watch and see how it plays out."

Pennington and Wells Fargo declined to comment.

On July 19, four days after a Times article revealed Rizzo's salary and prompted his resignation, Rizzo signed an IRS form to set up the fund.

jeff.gottlieb@latimes.com

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