WATERFALL ITEM AT CITY COUNCIL
Monday, 2:00pm on July 21, 2008
Reported by Patricia Karnes

Patti's Notes

(See re-play Saturday, July 26, web streaming, etc.)
Notes are my understanding of what happened from attending the meeting and watching the replay on television.

SUMMARY:
First Reading of Ordinance to correct the Waterfall: Version A passed 6-1, with instructions to pay Corbett, 13th Check and Supplementary COLA determined by a similar formula but not using surplus earnings as the funding source.
SDCERS to be invited to answer questions before the second and final reading of the Ordinance. Council on legislative recess in August. No date yet.

BACKGROUND:
Mr. Keller, overseeing San Diego for the Securities and Exchange Commission, requested the City Council  remove the Waterfall's source,  "surplus earnings" from the Municipal Code by July 21st. (Using the words from a past City meeting: Changing the City of San Diego from a culture of expediency, to a culture of compliance.)

  Special benefits are now listed as a liability when calculating the City's Annual Required Contribution.  SDCERS must follow the City's pension plan document as it appears in the Muni Code. (Example: Non-industrial disability retirees have no Corbett because there is nothing in the Muni Code that allows it.)

SDCERS and the City Council's Independent Budget Analyst submitted a correction Ordinance, know as Version A which includes instructions for paying the 13th Check, Corbett and the Supplementary COLA ( pre-1980 retirees).
Aguirre has maintained  that instructions were not necessary, struck out the old instructions, and submitted Version B.

Eight City Council continuances, many revisions, and 15 months later, Version A and Version B looked increasingly similar, except for instructions.

COUNCIL DISCUSSION:
Retiree comment: Joe Flynn spoke in favor of continuing Supplemental COLA which benefits our older retirees on meager pensions. Virginia Silverman spoke for CSDREA President Nancy Acevedo and used minutes from Ty Rogers. I offered views of retirees not able to attend. Our comments focused on the two  versions, especially CSDREA's concern for older retirees depending on the 13th Check, Corbett and/or the Supplementary COLA if Version B was passed.

There was no one from SDCERS, but Wescoe,  SDCERS Administrator wrote a letter.
(Note: Chris Waddell, SDCERS General Counsel, is not no longer with SDCERS and Elaine Reagan, taking over from Waddell, was not involved in this issue.)
Aguirre was not present.

Goldstone, announced the Mayor preferred Version A.
(Sidebar- Goldstone said the Mayor may be back with further amendments regarding the unfulfilled MOUs with unions, to purchase $600 million in Pension Obligation Bonds, leveraged via extra contributions being made by current employees, and deposited by the City in SDCERS.)

The IBA noted that the City Attorney's opinion was that directions, to pay special benefits, were not necessary. He maintained that no votes were required by retirees, employees, and/or public, in his Version B, even with adjustments in benefit amounts.

Madaffer moved Version A, seconded by Hueso. He noted it was a major change to clarify that there is no such thing as  "surplus earnings".

Frye kept asking where the directions were in Version A. She suggested trailing the item until answers were available. Peters refused, explaining that Mr. Keller wanted the item passed today. Mr. Keller would accept Version A or Version B, Peters said.

The City Attorney's representative said they supported Version B and had concerns about Version A (using the formula from the waterfall distribution order?). IBA said new directions were established in Version A.

Frye pointed out that only the funding mechanism was changed. She asked if the Waterfall was a separate active account at SDCERS. Goldstone didn't know. Frye asked if anyone was concerned about how SDCERS administration can know what to do, if they can't write an understandable letter. She referred to obtuse language. (Note: Letter was written before the Version A and Version B both agreed to credit interest to the Supplemental COLA account.) Peters walked Frye through the strike-out draft of Version A.

In response to Frye, Madaffer recommended inviting SDCERS for the second reading of the Ordinance for Version A, have SDCERS replay the recording of this July 21st  meeting and answer all of Frye's questions.

Frye pointed out that her follow up questions depended on SDCERS' answers to her first questions. She was concerned that:
1) What SDCERS would say to her in private, may not be what they say in public.
2) Important to understand what they were voting on.
3) The IBA was answering questions, but she was not SDCERS Administration.

Peters announced there would be no second reading until SDCERS' people were there to answer questions.  In the meantime, he asked Frye to provide her questions in writing to make a shorter meeting.

Council voted 6-1. Young was excused and Frye voted no, with her comments  noted that she would be happy to support it after an explanation.