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Palo Alto City Manager set to receive 25% raise in supplemental retirement income

Original post made by The Shadow Knows, Downtown North, on Apr 1, 2013

No, this is not an "April Fools" joke, except perhaps one foisted upon the taxpayers and employees of the City of Palo Alto. City Manager James Keene is scheduled to receive a $13,500 per year or $1125 per month raise in a special retirement fund that the City has established for him. This after have successfully spent the past 3+ years negotiating and mandating reductions in the cost to the City of other employees' retirement funding.

That increase will take place this coming September on the 5th anniversary of his employment with the City, and is in addition to his PERS retirement and 457 eligible deferred compensation as provided to other employees. This increase will bring the total amount of the annual contribution by the City to this special fund up to $51,000 per year, in addition to his published salary of $247,187.20, or a total monetary compensation, not including benefits, of $298,187.20 per year!

The details are as follows. When Keene was hired by the City in 2008 an "Employment Agreement" was negotiated and executed. That agreement provides, in section 5.2, for establishment of a "Government Money Purchase Retirement Plan" under the provisions of IRS code section 401(a). This allows the creation of a separate deferred compensation account whereby the employer (City) pays the allowable funds DIRECTLY into an account without it having to pass through the employee's base salary, paycheck, or deductions - as would a regular 457 plan or IRA.

The agreement was signed by then Mayor Larry Klein on August 26th, 2008.

The Employment agreement provides that Keene will be paid 50% of the allowable 401(a) annual maximum in years 1 - 3 of his employment, 75% in years 3 - 5, and 100% after 5 years, which will occur this September. The maximum contribution for 2013 is $51,000, and the 25% increase from the 2012 maximum is the aforementioned $ 13,500 per year raise.

Interestingly, no mention of this supplemental retirement account or funding can be found in the City's web site published list of "Salary Rate Sheets" for "Council-Appointed and Elected Officers" dated 10/6/12, nor in the City Budget as a distinct line item. The rate sheet is where the $247,187.20 salary is found.

Why would a City and a City Manager who claim to pride themselves on openness and transparency choose to provide such an significant amount of compensation in such an obscure, undisclosed, and seemingly intentionally hidden fashion? It would seem to be a classic case of "do as I say, not as I do".

One significant clue as to the motivation involved may be to look at Keene's employment history over the past 17 years or so:
* 1996 - 2000 City Manager of Berkeley CA
* 2000 - 2005 City Manger of Tuscon AZ
* 2005 - 2007 California Association of Counties
* 2007 - 2010 International City Managers Association
* 2010 - 2013 City Manager of Palo Alto
When one looks at these and other prior employment stops in Arizona and on the east coast one finds that Keene has no vested interest in the California PERS system (which requires a 5 year minimum tenure), and will not do so until his vesting upon his 5th anniversary with Palo Alto this September.

No wonder he said when he first started that he wanted to stay with Palo Alto for 10 years - even that would only give him a 27% retirement at an age in his late 60s!

It would appear that Palo Alto negotiated a deal with him creating the 401(a) supplemental retirement fund in order yo make up for his prior failures to vest in a system, possibly so as to attract him to employment there at all. If he stays the full 10 years that fund will total over $500,000.00, not including interest and appreciation! High risk and high stress are sometimes commensurate with high rewards - just not usually at taxpayer expense in the public sector!

Comments (8)

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Posted by The Shadow Knows
a resident of Downtown North
on Apr 1, 2013 at 3:36 pm

Edit to above post.

Keene's employment history should say:

* 2007 - 2008 International City Manager's Association
* 2008 - 2013 City Manger of Palo Alto

Also, the "yo" in the first line of the last paragraph should be a "to".

My apologies. apparently this system does not allow the original poster to edit their mistakes.

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Posted by Dorx
a resident of Another Palo Alto neighborhood
on Apr 1, 2013 at 4:55 pm

palo Alto keeps claiming that they are nearly broke, and have no money for extras.

What liars these dorks are!

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Posted by resident
a resident of Barron Park
on Apr 1, 2013 at 11:13 pm

Stockton Bankruptcy - Stockton city management and its cozy relationship with its unions are the real culprits. This is true in Stockton as well as numerous other cities and school districts in California. Corrupt politician and political hacks solicit union donations and payback with unsustainable salaries, pensions and Cadillac medical coverage. Low information voters perpetuate the disaster by continuing to reelect the bums and approving endless bond issues. Palo Alto is not immune from these same forces.

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Posted by Dorx
a resident of Another Palo Alto neighborhood
on Apr 2, 2013 at 8:59 am

It is sickening that at a time when most people are losing retirement benefits completely, this guy not only gets a posh one, but then he gets a big increase! What did he do to deserve that, end world hunger?

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Posted by The Shadow Knows
a resident of Downtown North
on Apr 2, 2013 at 9:32 am

@ Dorx

No, he didn't "end world hunger" He earned it by balancing the City Budget, primarily by means of cutting benefits for other City employees. Thus the irony and hypocrisy of his own increases......

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Posted by Tim
a resident of Another Palo Alto neighborhood
on Apr 2, 2013 at 10:46 am

Wouldn't his fifth year with Palo Alto be Sep 2015, if he started in 2010?

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Posted by CrescentParkAnon.
a resident of Crescent Park
on Apr 2, 2013 at 11:29 am

Can anything be done about this particular situation, I don't think this is right or fair, at least from the explanations here. Any significant expenditure for the city that we all pay for should be explained clearly with detail and justified.

Why is it that virtually anything I see an article about something concerning the city it is a negative story about incompetence or favoritism?

Anyone who works hard to screw regular citizens out of money sure seems to be rewarded big time these days ... and we can see where that has led to.

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Posted by The Shadow Knows
a resident of Downtown North
on Apr 2, 2013 at 3:37 pm

@ Tim :

My apologies, read the edit which is the first post under the story. He started in 2008; five years is 2013.

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