Former City Manager’s Retirement Pay Slashed : Manhattan Beach: City Council cuts $60,000 a year after learning official made far more in retirement than on the job.

Declaring that further efforts to reach a settlement “would be futile,” the Manhattan Beach City Council on Tuesday cut the annual retirement pay of former City Manager David J. Thompson by nearly $60,000. It also directed him to repay close to $79,000 in money he has received since leaving the city in May, 1990.

The council’s action by a 4-1 vote ended more than three months of negotiations between the city and its former manager that began after the stunning disclosure that Thompson’s annual retirement pay far exceeded what his salary had been.

Thompson, 62, made $88,968 in his last year with the city. But in retirement, he was receiving more than $139,000 annually, according to city records.

As a result of the council’s decision, his overall retirement pay will be reduced to about $79,500. And a state investigation could lead to a further cut in that figure.

The council action targeted the $82,281 Thompson has been getting annually from the city retirement fund. The council’s vote reduces that figure to $22,442 a year, together with an annual 2% cost-of-living increase.

The former manager, who continues to reside in the city, also gets $57,156 from the state Public Employees Retirement System (PERS), which is not affected by the council’s decision. PERS, however, is auditing Thompson’s retirement income and could lower it in the future.

In a resolution Tuesday, the council held that Thompson--who served as city manager 16 years--inflated his final-year compensation to $237,875, the amount upon which his retirement pay was based. He accomplished that by including such benefits as cash for accrued vacation and sick leave, factors PERS regulations do not permit.

Because of the improper calculation, the resolution states, Thompson has received excess payments of $78,941 from the city since he retired 15 months ago.

Blame for the retirement fiasco was laid squarely at Thompson’s feet in the resolution and in sworn statements by the four officials who approved the final-year contract on which the retirement income was based--Mayor Bob Holmes and council members Connie Sieber, Pat Collins and Steve Barnes.

Those documents assert that Thompson withheld the details of his retirement package even though he had a duty to disclose them. City officials termed his retirement package “a completely unjustified expenditure of city funds.”

“Had it been explained, (the package) would not have been approved by the council,” the resolution said.

Last-ditch settlement efforts Tuesday delayed the start of the 7:30 p.m. council meeting by half an hour. At 7:40 p.m. Thompson rejected the city’s “improved final offer.” The city approved it anyway.

The former manager--who has yet to publicly comment on the controversy--also failed to appear at a scheduled administrative hearing on the issue Tuesday night.

Neither Thompson nor his attorney could be reached for comment Wednesday about whether they intend to take legal action to block the retirement reduction. Officials said they have 90 days to decide.

Holmes called the city’s decision “the best possible resolution to this.” But Collins voted against it because Thompson is allowed to pay back the excessive retirement benefits over a five-year period without interest through deductions from his city check.

She called it a “freebie” and “a reward to Thompson for his duplicity.”

City Manager Bill Smith said PERS, like the city, has taken issue with some items Thompson used to calculate his retirement, including cash payments for car allowance, health and dental benefits and a lump-sum bonus he received. A decision to disallow them has not been made, he said.

Other council members also objected to the concessions to Thompson but supported the final decision. “We were bending over backward in an attempt to settle it,” said Councilman Dan Stern, who was not on the council when Thompson’s retirement agreement was negotiated.

Although council members hope the Thompson issue is behind them, they are still reeling from accusations that they were negligent in not knowing the financial ramifications of his retirement.

“The resolution blames Thompson for all of this, but I still feel there had to have been other people who were aware of what happened and how it happened,” said Jan Dennis, a former councilwoman and a founder of the watchdog Manhattan Beach Residents Assn.

Activist Roger Kohn said he is “upset by what has happened, the breakdown in financial control over the Thompson salary matter.” He said the council “has to take some of the flak” for what people on the staff level did.

“This has been the most disturbing and distressing matter of my entire period of public service,” said Mayor Holmes, an 11-year council veteran.