On June 6, 2011, the City of Foster City may become the only agency in the Bay Area to roll back the pension benefits offered to its Police and Fire personnel to pre-1999 levels. Starting January 1, 2012, the City will afford a 2%@50 benefit for new safety hires, which would be a significant reduction from the current formula of 3%@50. The City Council will vote on two union contracts, one with the International Association of Firefighters, Local 2400 (representing Firefighters and Fire Captains) and one with its Police Officers Association (representing Police Officers, Corporals, Sergeants and Dispatchers). The City’s Safety Managers would also be offered this reduced retirement benefit to new hires. This would lower the pensions for all Safety personnel from a 3%@50 retirement benefit to the levels available before 1999, when the State Legislature passed generous enhancements to safety pension options in the CalPERS statutory code. Currently, approximately 85% of the California government agencies providing police and/or fire services offer the richer benefits of 3%@50 or 3%@55 to their safety personnel.

The City would also end another post-retirement benefit for new hires by eliminating a separate post-retirement annuity benefit available only to its safety personnel called “longevity pay.” Under the proposed contracts, the Units would not receive any wage increases, which is consistent with the 2010 City-wide wage freeze. Although some health benefit increases were granted to the City’s eight dispatchers to bring them closer to other employee benefits in the City, the remaining members of these units did not receive increases to their health benefits.

According to City Manager Jim Hardy, “this approach is consistent with the City’s staunchly held conservative fiscal values and focus on the long term financial health of Foster City.” The City’s employees all pay their entire portion of the employee member contribution to CalPERS for its post-retirement annuity payment. Safety Personnel pay 9% of their salaries to CalPERS, while the Non-Safety members pay 8%. The City only offers the legal minimum for retiree CalPERS medical benefits of just slightly over $100 per month. The City abandoned a market based approach to setting salaries several years ago and froze wages last year.

The Council’s vote comes at the conclusion of several months of labor negotiations between the City’s negotiators and the employees’ respective Labor Representatives. The City has enjoyed a long history of cooperative relationships with its unions. The City’s unions have long been strategic business partners, with a shared vision of a City that has a secure financial future. The City and bargaining units recognized not only the need to secure the City’s long term future by scaling back the post-retirement benefits but also working to secure the City’s present by curtailing employee costs with the wage and benefit freezes.

Both Unions ratified with strong majorities. The City Council will be voting on these contracts this evening. According to Mayor Linda Koelling, “we cannot sit by the sidelines and wait for the state to do the right thing on pension reform -- Foster City started as a visionary community and we continue to emulate that with this move tonight.” Vice Mayor Art Kiesel is also proud of the potential accomplishment noting, “Foster City is perhaps the only entity to make a step of this significance toward true pension reform in a two hundred mile radius.”

The significant roll back of the safety formula to 2%@50 will result in a savings of approximately $9 million over the next 30 years. The elimination of longevity pay will also result in long term savings of approximately $3.4 million over the next 30 years. The action of eliminating these plans for new hires will save the City millions beyond thirty years as well.