Town Square

Post a New Topic

Palo Alto sees spike in retiree medical obligations

Original post made on Jan 31, 2012

A surge of retirements, shifting demographics and rising health care costs are greatly inflating Palo Alto's obligations to its retirees and prompting a debate among city officials about how much money the city should set aside to meet its gaping liability.

Read the full story here Web Link posted Tuesday, January 31, 2012, 12:05 AM

Comments (40)

Posted by unbelievable, a resident of Crescent Park
on Jan 31, 2012 at 7:24 am

"You can't absorb an increase like that . . . You won't have money to do anything else," Scharff said.

They've only just worked this out?


Posted by Peter Carpenter, a resident of Atherton
on Jan 31, 2012 at 7:48 am

Peter Carpenter is a registered user.

The Council does not seem to understand that these retiree health care costs are an OBLIGATION and therefore must be paid for BEFORE any discretionary spending. That those costs are an unwise obligation does not change the facts that they are an obligation.

A good start for fixing the problem is to make no new hires until this benefit has been removed for new hires.


Posted by Bob, a resident of Community Center
on Jan 31, 2012 at 9:40 am

Remember that most of the employees including many top brass do not live in Palo Alto - some as far away as the north East Bay, Santa Cruz, and the Valley. Their retirement income will not be returned to Palo Alto in the way of purchasing power and taxes, and also through community involvement, but rather to the communities in which they live. It would interesting to know the statistics on this. Other places thank us very much.


Posted by Peter Carpenter, a resident of Atherton
on Jan 31, 2012 at 10:08 am

Peter Carpenter is a registered user.

Palo Alto needs to start its annual budget with paying its legal obligations first, then putting funds into depreciation accounts for each of its existing capital assets and then deciding what to do with the discretionary amount that is left over.

Currently Palo Alto does exactly the reverse - it spends all of its income on discretionary items and then wrings its hands as to how it is going to pay to repair its infrastructure and how is it going to meet its legal obligations for pensions and retiree health care - crazy!


Posted by Time-To-Regionalize, a resident of Another Palo Alto neighborhood
on Jan 31, 2012 at 10:12 am

Remember folks, last week the so-called "Infrastructure Commission" announced that the City should be setting aside 35% (or thereabouts) of its general fund for infrastructure. Someone at City Hall needs to come up with a "straw-man" budget that contains all of these new charges, or at least changes.

Rational people have been saying for a long, long, time--Palo Alto can not afford itself. The City needs a good operational audit, it needs a technology plan. and it needs to consider "regionalizing"/merging some of its functions with neighboring cities. There is no reason every City needs to duplicate every conceivable "service" for populations as small as 30,000. Menlo Park and Palo Alto could merge, or Palo Alto and Los Altos. Then after a bit, when the dust has settled, another nearby town could be added, or at least its services redistributed to regional service units.

It is madness to continue down the path we are currently on.





Posted by Stewart, a resident of Another Palo Alto neighborhood
on Jan 31, 2012 at 10:16 am

Time to fix this issue with the current and new employees. Many companies are making their employees made more in medical costs. Palo Alto should be no different. All employees should be paying 25% of their medical costs if they are not doing it now.


Posted by Peter Carpenter, a resident of Atherton
on Jan 31, 2012 at 10:20 am

Peter Carpenter is a registered user.

Note that what Palo Alto is struggling with is NOT the medical costs fro current employees but for retired employees - a benefit that has disappeared elsewhere in the economy.


Yes, have current employees pay more or all of the medical costs.

Yes, quit paying any of the retirement medical costs for new employees.


Posted by Time-To-Regionalize, a resident of Another Palo Alto neighborhood
on Jan 31, 2012 at 10:40 am

> Palo Alto is struggling with is NOT the medical costs
> fro current employees

The ratio of benefits to salary in Palo Alto has been as high as 47%. It's hard not to see the City struggling to pay these benefits, for so many people it has hired in the past--to provide "services".


Posted by Taxed Out, a resident of Old Palo Alto
on Jan 31, 2012 at 10:53 am

I assume that the comp structure has changed for new hires to include a self funded 401k type plan and a contribution to health coverage similar to what most equivalent staffed valley company provides. Clearly with the level of unemployment, basic supply and demand would indicate a strong supply of qualified individuals..

Can anyone confirm the current comp plan for our city's finest?


Posted by Timothy Gray, a resident of Charleston Meadows
on Jan 31, 2012 at 11:05 am

This is the third illustration of where the current residents are being asked to fund prior mismanagement. The first two were unfunded retirement benefits and failure to fund infrastructure reserves. Good financial management would have fully funded obligations as they were earned.

It is a farce for the City to act surprised. Just like Infrastructure, we didn't set aside the appropriate funds that prudent financial management would dictate. Now we are being asked to bail out the past failures of the Council from the past 20 years.

Truth is not criticism, but simply information: and what are the truthful facts pertinent to this topic?

1. Larry Klein was a Council member and Mayor during those years. Larry, where did you put the money?

2. Liz Kniss was a Council member and Mayor during those years. Liz, where did you put the money?

Either our past leaders were naive or they were deceptive, although neither reflects well on the past. Time for a change before we dig a deeper hole for ourselves. I hope those who have participated in the past failure have the dignity to offer a sincere apology and step aside.

How many years to we have to watch everyone congratulating themselves on what a wonderful job they are doing, but for the important things, the job is not getting done.

I take no joy in delivering these truthful observations, as it much easier to participate in providing accolade for smart leadership -- to do that now is to participate in a lie. Time for some tough love.

Respectfully,

Timothy Gray ( Timothygray@sbcglobal.net )


Posted by Timothy Gray, a resident of Charleston Meadows
on Jan 31, 2012 at 11:13 am

One more thing:

Please don't try to float a bond to pay for health care benefits. Silly concern you might think? Well, that is exactly what is being considered for the infrastructure deficit, so don't be surprised if the leaders try to deny the crisis they have created and push it off to a future generation,

Tim Gray


Posted by Joseph E. Davis, a resident of Woodside
on Jan 31, 2012 at 12:25 pm

As financial reality rears it ugly head, the instinct of politicians is to jam their fingers into their ears and go "LALALALALA". The only thing we can be certain of is that these cost estimates vastly understate the problem.

It's unfortunate that those who disgraced their office by negotiating these ruinous benefits at the expense of the common citizen are mostly long gone. They deserve criminal sanctions.


Posted by unbelievable, a resident of Crescent Park
on Jan 31, 2012 at 1:40 pm

It's worth repeating: Web Link
"By 2014, Reed had calculated, [San Jose], the 10th-largest city in the United States, would be serviced by 1,600 public workers. "There is no way to run a city with that level of staffing," he said. "You start to ask: What is a city? Why do we bother to live together? But that's just the start." The problem was going to grow worse until, as he put it, "you get to one." A single employee to service the entire city, presumably with a focus on paying pensions. "


Posted by Rajiv Bhateja, a resident of Southgate
on Jan 31, 2012 at 3:45 pm

Here's what got us into this mess:

Web Link

And here was my rant at the time:

Web Link

Let's ask Ms. Cordell what she thinks we should do now.


Posted by Kevin, a resident of Midtown
on Jan 31, 2012 at 5:25 pm

Rajiv,

LaDorris Cordell was a disaster for the city of Palo Alto. She wasn't the only one, for example Larry Klein, but she led the charge in favor of unmitaged union demands and contracts. She had her own agenda, and it did not include the majority of PA citizens. The majority is now paying the price.

Good post, Rajiv.


Posted by unbelievable, a resident of Crescent Park
on Jan 31, 2012 at 5:59 pm

The LHC report is also a fun read: Web Link

"[cities] face the prospect of increasing required contributions into their pension funds by 40 to 80 percent of their payroll costs for decades to come. It is practically enough money to fund a second government, and it will – a retired government workforce."


Posted by Don't believe it unbelievable , a resident of Barron Park
on Jan 31, 2012 at 7:47 pm

The LHC was seriously flawed and misleading. Here's what the State Treasurer had to say:
Web Link

The 40 to 80 rise is a complete lie.


Posted by Sorry Rajiv, a resident of Barron Park
on Jan 31, 2012 at 8:10 pm

You misunderstood LC's comment about health benefits and casting the first stone. That comment was directed towards her fellow Council members only, not you. Council members, like Klien now, will receive lifetime medical benefits. While she was on City Council it only required 5 years and 50 years old to get the benefit.


Posted by Bob, a resident of Community Center
on Jan 31, 2012 at 8:38 pm

If I remember correctly, LaDoris turned down the life-time benefits.


Posted by unbelievable, a resident of Crescent Park
on Jan 31, 2012 at 9:10 pm

And the Grand Jury report reaching the same findings are also seriously flawed? Web Link


Posted by Ugly Dump, a resident of South of Midtown
on Jan 31, 2012 at 9:56 pm

Time to return Cubberley to the School District and get our $6.1 Million annual donation to the PAUSD back.


Posted by Time-To-Regionalize, a resident of Another Palo Alto neighborhood
on Jan 31, 2012 at 10:01 pm

> Cordell turned down the life-time benefits ..

Not exactly. She didn't qualify--

The following article appeared in the SJ.Mercury:
-----
Posted on Sun, Oct. 16, 2005

Cordell, who said she learned of the perk only recently -- almost two years after she was elected -- also accused the city of deliberately keeping the program quiet. ``It's been very secretive,'' said Cordell, one of the only city council members who won't qualify for the perk after a 2003 rule change assured no future council members will receive the benefit. ``Nobody's been saying anything.''


Posted by why, a resident of Downtown North
on Jan 31, 2012 at 10:32 pm

She did not qualify then,she does not qualify now,then what the heck this topic involves her.


Posted by JT, a resident of Crescent Park
on Feb 1, 2012 at 2:02 am

And nobody on council knew that they were digging the city into this kind of hole? Oh, come on. They all knew. They just figured they wouldn't get caught.

We're going to be bankrupt in about five years. Think Vallejo. The numbers show it. Guys like Klein and Keen will jump ship before it happens, but it's happening

I've got to think Scharff was holding back laughter when he said what he said.

With bankruptcy, us property owners will be stuck with a lein for the debts the city has rolled up, regardless of the city's attempts to discharge them. The way I calculate it is that the city's 24,000 property owners will owe about $97,000 each. I could be off one way or another, but it will be a lot of money to cover those pensions for cops who retire at 50 and get 90% of their pay every year for the rest of their life. And librarians who get 70% of their pay for the rest of their lives. Who do us, in the private sector, pay our public servants way more than we make?


Posted by Time-To-Regionalize, a resident of Another Palo Alto neighborhood
on Feb 1, 2012 at 8:09 am

> She did not qualify then,she does not qualify now,then
> what the heck this topic involves her.

Cordell ran for City Council (as do all the rest) claiming, in essence, to be better educated than the rest of us, to be smarter than the rest of us, to know more about the management of large organizations than the rest of us. But all Cordell did, once elected, was to constantly try to increase the cost of running the City by increasing the cost of labor, as this snippet of an article about the incident illuminates--

The following article appeared in the SJ.Mercury:
-----
Posted on Sun, Oct. 16, 2005

---
FREE HEALTH INSURANCE: SOME COUNCIL RETIREES GET IT, BUT TEMPORARY WORKERS DON'T:

By Dan Stober

Mercury News

For years, it's been a nice perk for many Palo Alto City Council members: free health insurance for life after just five years in office. Some past and present council members defend the quietly touted benefit, which costs the city at least $4,800 per year for each retiree who signs up.

But few California cities offer the pricey privilege. And the council's lifetime benefit was news to Rebecca Swanson, a part-time teacher at the Junior Museum and Zoo who has been trying to unionize the city's 300 temp workers, who get no benefits at all.

``I find that somewhat appalling, considering they can't even provide their employees with health care,'' she said. ``I've been working for the city for almost 10 years now and I've got nothing.''

City council member LaDoris Cordell agreed. ``I think its unconscionable. We're not employees in the same sense that the city workers are employees,'' she said. ``It makes no sense to me. Particularly when we have temp workers who have been with the city for years and still don't have benefits.''
---

In/around the same time, the City ended up providing health care benefits to part time workers. The impact of this expenditure, and possibly future expenditures, such as post-"retirement" benefits for part-time employees, was never considered. If Cordell had been doing the job that needed to be done, at a minimum, she (and the others) would have demanded to see a cost/impact analysis for such a "benefit" over a thirty-year period (at least). As it is, all we got was some twaddle about "fairness and equity" for part-timers.

Cordell was a disaster as a City Council member. She had no idea what an organization was, or what kinds of management frameworks needed to be in place. She was not alone is being a disaster, however. There also was Jim Burch, Peter Druckmeier, Dena Mossar, Judy Kleinberg, and Larry Klein, to name a few.

There is no such thing as a free lunch. The majority of those working for the City, and those elected to Council--don't seem to get that fundamental point.


Posted by Jo Ann, a resident of Embarcadero Oaks/Leland
on Feb 1, 2012 at 11:51 am

Hey, just give us ANOTHER utilities rate hike to pay for it. At this rate it's going to equal non-government retirees ENTIRE month Social Security payment.


Posted by John, a resident of Esther Clark Park
on Feb 1, 2012 at 2:03 pm

Why are we paying for dependent/family medical for active or retired employees? In addition to costing twice as much, it discriminates against single employees.


Posted by Lazlo Toth, a resident of Old Palo Alto
on Feb 1, 2012 at 3:47 pm

....and so the incompetence of the palo alto city council continues. Take the low bid, fund for the low bid, and then when the real numbers emerge, claim ignorance, and blame the employees. Jeez, who woulda thought inflation would figure into retirement costs. The large exodus of current employees can be blamed on an incompetent city manager with no people skills and who considers employees as a liability, a city council that goes above and beyond to belittle current employees value, and a Director of Administrative Services who is basically a "yes" man with no financial skills who was hired by council and city manager to put a negative spin on every expenditure that involves employees. Palo Alto continues to hoard taxpayer money away in reserve funds all the while claiming deficit budgets. Truly a ship of fools!


Posted by MP1, a resident of Menlo Park
on Feb 1, 2012 at 4:50 pm

"Currently Palo Alto does exactly the reverse - it spends all of its income on discretionary items and then wrings its hands as to how it is going to pay to repair its infrastructure and how is it going to meet its legal obligations for pensions and retiree health care - crazy!"

As Peter carpenter knows, Menlo park operates the same way. They budget to spend every dime the expect top receive each year, then run for the hills when extraordinary events occur.


Posted by What an embarrassment, a resident of Midtown
on Feb 2, 2012 at 12:07 am

Why in the world are we paying any health benefits for retirees?-- much less a huge portion of our city budget-- Defined benefit pensions and lifetime health benefits are a scam.

The Democrats running this city have stolen from the residents for decades-- but on the other hand since most residents seem to be too ignorant to throw the bums out, its hard to argue they aren't getting what they deserve.

Too bad the rest of us have to pay dearly for our neighbors stupidity.


Posted by Lazlo Toth, a resident of Old Palo Alto
on Feb 3, 2012 at 12:56 pm

MP1 (a Menlo Park resident) gloats that he and Peter Carpenter (an Atherton resident) have it all figured out how the Palo Alto budget works. Never mind that retirement health benefits for Palo Alto employees were never funded and retirement benefits were underfunded by past and present city council's and city managers. MP1 and Carpenters message is to promote negativity and blame the problem on employees. Guess they must be running for city council positions in their respective jurisdictions. Politicians claiming ignorance to contractural obligations and agreements seems to be the new scapegoat for this illterate breed. Still waiting for the Palo Alto print media to investigate the "skyrocketing" and "unsustainable" amount of taxpayer money that Palo Alto hoards away each year to put in multiple reserve funds and the current amount of these collected "reserve" funds.


Posted by Ryan, a resident of College Terrace
on Feb 3, 2012 at 4:08 pm

MP1 and Peter Carpenter are advocating responsible fiscal practice.

The pensions and benefits the city offers are way out of line with the private sector that pays for them. The city should be reducing staff and outsourcing to the private sector as much as possible, instead of, as they recently did, hiring more overpaid city workers to bail out underperforming staff (see the chronically slow, expensive, difficult to deal with planning department).

Either that, or greatly lower city salaries to compensate for the out-of-market benefits.


Posted by Peter Carpenter, a resident of Atherton
on Feb 3, 2012 at 5:29 pm

Peter Carpenter is a registered user.

I certainly don't blame the employees who have been given excessive wages and pension benefits - I blame the elected officials who approved those wages and benefits.

And I am NOT running for office in my jurisdiction - in fact, I just 'retired' after serving 9 years as a Director of the MPFPD. Those 9 years were a harsh education into the problems of excessive wages and pension benefits and the reason why I have long been outspoken on this issue:

Web Link

The Fire District's firefighters have gone without a labor agreement and any wage increases since 2008 because I and my fellow Board members refused their demand for an 11% wage increase.


Posted by Bob, a resident of Crescent Park
on Feb 4, 2012 at 7:00 am

So Liz Kniss wants to honor us with her presence again by running for City Council, and Joe Simitian wants to take her place on the Board of Supervisors....and Anna Eschoo still doesn't plan to retire which fouled up Simitian's long time plans to go to Washington. So we are in danger of getting the retreds, who helped get us into a lot of trouble in the first place, playing political musical chairs. Next thing you know Jim Baer will be City Manager and Peter Drekmeier will become Parks and Recreation Manager or maybe Public Works.


Posted by Dana, a resident of Southgate
on Feb 4, 2012 at 7:04 am

I wanted to ask the firemen about their pensions at Starbucks, but my husband said "don't bother them, there on their coffee break".


Posted by neighbor, a resident of another community
on Feb 4, 2012 at 9:29 am

Dana
Your husband was absolutely right. YOU were inappropriate....that was not the forum for you to start a political discussion with the firefighters.

BTW, when they are resuscitating someone in your family or putting out a fire in your neighborhood, it is also not the time or place for you to --- excuse the expression -- grill them.


Posted by Michael, a resident of another community
on Feb 6, 2012 at 5:57 am

Let's all remember...we will never be able to make everyone happy. No decision will be the perfect one on all sides. However, there are solutions but they require compromise. While there is an "Obligation" to provide these benefits; times, health plans, costs, funding,and options have changed. Everyone needs to be open to change. There are options available but it requires reasonable minds that can recognize that continuing to do the same thing and expecting different results is truly insanity. It's time to do what is necessary and having worked on solutions like these I know it's not easy, but change is necessary.


Posted by PA Resident & Employee, a resident of South of Midtown
on Feb 6, 2012 at 6:56 pm

..."A surge of retirements, shifting demographics and rising health care costs are greatly inflating Palo Alto's obligations to its retirees and prompting a debate among city officials about how much money the city should set aside to meet its gaping liability."

The "surge" is largely because the City of Palo Alto drove out workers and management because the employees who retired did not want to have to pay increasing healthcare costs during retirement.

AND many managers knew that because there was little succession planning that they COULD retire with full retirement, and healthcare -AND return to work 1000 hours a year...so called the "double dippers"
who were then rehired by City of Palo Alto City Management.

Palo Alto had the greatest number of "double dippers"(retirees returning to work 1000 hours)last year according to the Santa Clara Grand Jury regarding numbers of "double dipper" employees per city in Santa Clara Coiunty. See the Santa Clara County Grand Jury Report on this topic.

Where was the succession planning? How much money does the city now lose on inexperienced employees and managers? How would you even know?

WHY if the city can band togetherer in the "League of Cities" to attack employee benefits and drive out employees...("surge") - Why can't the "League of Cities" lobby the healthcare providers?

The Weekly is a reflection of City of Palo Alto Press releases and not investigative journalism.


Posted by noBenefits, a resident of Barron Park
on Feb 20, 2012 at 7:29 am

We all know this would happen. We have to change the law to everyone including the new hires, only benefit would be 401K. No more free money. the Federal Employees already have that and are doing fine. Cities and the State of California need to abolish the pension system, but that is not enough, also cut prop 13 benefits to Commercial buildings.


Posted by David Pepperdine, a resident of Another Palo Alto neighborhood
on Jul 20, 2012 at 10:39 am

@Sorry Rajiv:
Here's what Rajiv did not take out of context. Cordell was asking taxpayers to foot the bill on ever-increasing benefits which Rosenblum warned about. She used the pretext that Rosenblum was one of the beneficiaries of the system to justify her advocacy of ill-affordable, unsustainable benefits (read: made matters worse, not better). Good attorney, negotiating for her client (labor union). Not a steward of our city's fiscal health.


If you were a member and logged in you could track comments from this story.

Post a comment

Posting an item on Town Square is simple and requires no registration. Just complete this form and hit "submit" and your topic will appear online. Please be respectful and truthful in your postings so Town Square will continue to be a thoughtful gathering place for sharing community information and opinion. All postings are subject to our TERMS OF USE, and may be deleted if deemed inappropriate by our staff.

We prefer that you use your real name, but you may use any "member" name you wish.

Name: *

Select your neighborhood or school community: * Not sure?

Comment: *

Verification code: *
Enter the verification code exactly as shown, using capital and lowercase letters, in the multi-colored box.

*Required Fields

Scottís Seafood Mountain View to close, reopen as new concept
By Elena Kadvany | 12 comments | 3,702 views

Who Says Kids Donít Eat Vegetables?
By Laura Stec | 9 comments | 1,889 views

Breastfeeding Tips
By Jessica T | 11 comments | 1,699 views

How Bad Policy Happens
By Douglas Moran | 20 comments | 1,197 views

The life of Zarf
By Sally Torbey | 8 comments | 821 views