Approved Costa Mesa employee contract includes higher pay and lower pension contributions

A divided Costa Mesa City Council approved a new contract with a municipal employees union Tuesday night, saying its terms will better enable the city to attract and retain workers.

The contract, OKd on a 3-2 vote, will provide higher pay for the 236 members of the Costa Mesa City Employees Assn. while lowering the amount they pay toward their pensions.

The union represents non-public-safety employees.

"Residents and the business community demand services because we all pay taxes and we all expect our taxes to pay for improvements to our roads, to pay for maintaining our parks, to pay for safety and security in our neighborhoods and homes and our businesses," Mayor Katrina Foley said. "So this contract, to me, is fiscally conservative but functional. It addresses these retention, recruitment issues head-on."

Council members Allan Mansoor and Jim Righeimer voted against the contract.

The deal will run through June 30, 2020. During that time, CMCEA members will receive steady pay increases — 2.5% in each of the first two years of the deal and 2.75% in the third and fourth years.

Currently, members pay about 17.04% of their salaries toward their pensions, but that number will decline to 12% by the third year of the new pact.

"We look forward to partnering with the council to begin the process of rebuilding the city workforce, remaking Costa Mesa into the highly regarded municipal employer it had historically been and providing superior services to the residents of Costa Mesa," CMCEA President Robert Gonzalez said in a statement Wednesday.

Boosting pay and reducing retirement contributions will help the city offer more competitive compensation packages to attract talented employees and keep them around for the long haul, officials said.

Doing so has been a challenge in recent years. As of Tuesday, the city had 90 vacant positions, according to Assistant City Manager Tammy Letourneau.

"Every few weeks, one of our employees goes to Irvine, goes to Newport, goes to Laguna — it's ongoing," Mayor Pro Tem Sandy Genis said.

Those departures, she added, "basically has to do with people having to take care of their families and not being able to do it with what Costa Mesa is offering."

Mansoor and Righeimer, though, raised concerns about the financial impact — pegged at $5.65 million more over the life of the agreement than the previous CMCEA contract, which expired in June.

The additional spending is troubling, they said, given budget forecasts discussed Tuesday that show the city could face growing annual budget deficits ranging from less than $50,000 in fiscal 2017-18 to almost $8.3 million in 2021-22.

They also questioned how the new CMCEA contract could affect the city's unfunded pension liability, which stood at about $246 million in 2015.

A city staff report said the contract is not expected to affect that figure, as the outlined salary bumps fall within California Public Employees' Retirement System assumptions regarding payroll increases.

That did little to assure Mansoor, though.

"CalPERS has been wrong many times," he said.

Righeimer pointed out that the new deal eliminates a provision in CMCEA's previous contract that required union members to pay 60% of any increases in the city's mandated contributions to CalPERS.

Striking that component and reducing employee contributions could add up to long-term problems, he said.

Councilman John Stephens, though, described such requirements as "a confiscatory contribution."

Starting in 2018, the California Public Employees' Pension Reform Act stipulates that cities can't require non-public-safety employees to contribute more than 8% of their pay toward their pensions. CMCEA members have agreed to pitch in at a higher rate.

"In my opinion, we're the best city in Orange County, we're the best city in the state of California," Stephens said. "We should not have a recruitment and retention problem in the city of Costa Mesa."

Spending a surplus

Though the city could see budget deficits in future years, council members Tuesday voted on how to spend a nearly $10.7-million surplus left over from fiscal 2015-16.

On a 4-1 vote — with Mansoor opposed — council members opted to apply about $1.2 million of the surplus to meet the city's goal of having $55 million in reserve.

An additional $500,000 will go toward reducing pension debt, while $1.9 million will be used for improvements at local police and fire stations; a new trail system along Arlington Drive that will filter urban runoff; and protection, restoration and master plan implementation efforts at Fairview Park.

luke.money@latimes.com

Twitter: @LukeMMoney

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