City Tried to Free Its Manager From ‘Double-Dip’ Law : Government: Records show unsuccessful effort for legislation to let Dana Point’s Talley collect $90,600 pension, $99,500 salary.

Dana Point officials tried to get legislation passed last year that would have allowed City Manager William O. Talley to continue drawing a $90,600-a-year state pension while holding down his $99,500-a-year municipal job, records and interviews show.

The maneuver died in a state Assembly committee, but retirement officials and the lawmaker who helped block the legislation say it was an attempt to get around a law that prevents “double-dipping” by public employees.

“The arguments for the bill were, ‘Oink, oink, oink,’ ” said Assemblyman Dave Elder (D-San Pedro), echoing recent accusations that Talley and a number of local government retirees manipulated the state’s $67.4-billion Public Employees Retirement System to “pig-out” at taxpayer expense.

As chairman of the Assembly Public Employees, Retirement and Social Security Committee, Elder said, he helped kill the provision when it came before his panel in August.

“It was typical of high-level bureaucrats who attempt to manipulate their situation to their own advantage,” Elder said about the bill. “There needs to be a watchdog on high-level bureaucrats because city councils, frankly, are not sophisticated enough to understand what’s going on.”

But Talley and Dana Point Councilwoman Karen Lloreda defended the city’s attempt to change the law, saying they sought a revision that was designed to help the fledgling municipality keep an experienced administrator. Without the change, current law would eventually force Talley to choose between holding onto his retirement or completing the job of setting up Dana Point’s government, they said.

Meanwhile, Talley said both the city attorney and his personal lawyer have filed formal appeals with PERS to get the kind of exemption from the double-dipping laws they sought last year. The law requires the city manager to either quit or give up his retirement payments by June.

“I haven’t decided what I’m going to do yet,” said Talley, who continues to draw both a pension and a paycheck. He said he would discuss the pension question with council members in closed session Tuesday night.

Talley’s name has figured prominently in the “pension-spiking” controversy that came to light last month with release of a state controller’s audit of Anaheim, Huntington Beach and six Los Angeles County cities.

The audit showed that several high-ranking former officials artificially inflated their final years’ salaries, upon which pension payments are based, by including disputed items such as car allowances, expense accounts, vacation days and retroactive pay increases.

In a press conference last week, state Controller Gray Davis was particularly critical of the case of Talley, former Anaheim city manager whose salary increased from $97,390 to $159,109 before he resigned in 1987. Davis called for tougher criminal and civil penalties against officials who knowingly inflate their salaries for pension purposes, and Elder on Tuesday agreed to introduce such a bill.

Talley acknowledges that he converted a retroactive pay raise and $40,000 in expenses into straight salary before he left but said the transaction was approved by PERS in advance.

The issue at Dana Point, however, is not how much Talley receives in retirement but whether he can continue to collect it at all. PERS administrators say he is receiving $7,558 a month.

Although he holds the title of city manager, Talley claims he is actually a “contract employee” in Dana Point, since he was hired as a consultant through his wife’s management firm to set up government operations from scratch after the South Orange County city of nearly 32,000 people was incorporated January of 1989.

As part of that effort, Talley applied last year to have the city join the PERS system but left his name off the list of employees who would have to pay into the system.

State retirement administrators, however, ruled that Talley is not a contract employee but a city administrator who has to be included on the list, said Sandra Lund, PERS assistant executive officer.

As such, she said, Talley would fall under a state law that would allow him to collect his pension from Anaheim while receiving a paycheck from Dana Point for only six months from the time the new city was admitted to PERS on Dec. 21.

“What he’s going to have to do is resign, just work the number of hours permitted (under the six-month rule), or reinstate to PERS membership, which means he can’t get his retirement,” Lund said.

To get around that law, Dana Point officials hired Sacramento lobbyist Judith Larson to have language inserted in a bill last summer extending the grace period for Talley from its current six months to two years.

Although it did not name Talley, it was written to apply only to chief administrative officers of newly incorporated cities with at least 20 years of retirement service, who are more than 55 years of age.

“It was for Mr. Talley but it was not a personal bill,” Larson said Tuesday. “It was kind of a general bill but . . . he was one of the beneficiaries. We weren’t sure there were others.

“(Dana Point officials) had gone to PERS first and said, ‘Can we do this?’ and PERS said ‘No.’ And that’s why we wanted to get this into legislation.”

Elder said he stopped the bill in his committee. While Dana Point said it needed the exemption to hold onto an experienced public servant, Elder said he thought that it would open the way for aging local administrators to quit their jobs, find similar work in another public agency and and take home two hefty checks.

“The concern we had in the pension world is that it is essentially double-dipping,” Elder said. The language was introduced July 15 but failed for lack of votes on Aug. 20, records show.

Elder and Larson said there was additional reluctance to approve the loophole as well: Word was already out that state auditors were questioning Talley’s salary figures from Anaheim, as revealed in last month’s report.

Talley, however, said he believes that the legislation failed in part because the issue was “personalized” by Elder, who once worked for Talley as a budget analyst at the city of Long Beach. Talley said he didn’t know until the bill was killed that Elder apparently has “a big problem with me.”

In the wake of the foiled legislation, Talley said the Dana Point city attorney has filed an administrative appeal with the PERS governing board protesting the ruling by retirement officials in Talley’s case.

The city manager said he has also hired a personal attorney to file a second appeal. Neither has yet been addressed by PERS, Talley said.