Huntington Billed for Salary Spiking : Government: City must pay the state retirement system nearly $1 million. Councilman says cost will stop the practice.

The state retirement system has billed Huntington Beach nearly $1 million for allowing city retirees to artificially inflate their final-year salaries to boost their retirement benefits.

City Councilman David Sullivan, a leading critic of the practice known as “spiking,” announced Tuesday that the city had received the bills from the Public Employees’ Retirement System following an audit.

“I estimate that the city has already ripped off the state retirement system for at least $2.5 million,” Sullivan said. “At least now there will be a price tag for spiking. I cannot find words strong enough to express my disgust for the salary spiking process.”

Salary spiking became a heated issue in Huntington Beach in January, 1992, after state Controller Gray Davis charged that 16 Huntington Beach city retirees had inflated their final-year salaries. The controller’s office said that although spiking wasn’t illegal, such practices drain the state’s retirement system.

Davis had singled out Huntington Beach and Anaheim as cities where retirees improperly counted sick leave, vacation days, car allowances and other perks to boost their salaries, from which pension payments are calculated.

In Anaheim, the retirement packages of two former city managers were listed as examples of pension spiking. The most dramatic of those was the case of former Anaheim City Manager William O. Talley, whose salary was increased from $97,390 yearly to $159,109 within the year before he resigned in 1987.

Anaheim City Manager James D. Ruth said Tuesday that the city has not received any recent bills from the state retirement system.

Kenneth W. Marzion, a spokesman for the state retirement system, said Tuesday that bills totaling $24 million have been mailed to California cities for spiking. It was not immediately known which ones.

Sullivan said Huntington Beach received the first bill in November for $447,413. He learned Tuesday from City Administrator Michael T. Uberuaga that the city received another bill Feb. 14 for $471,000, he said.

“I have been waiting for the city to disclose this $447,000 bill to the public,” Sullivan said at a news conference. “Since it has been . . . months since this bill arrived, I can only assume that the city does not intend to disclose this information. It therefore becomes my duty as a councilman to inform the public.”

Personnel Director William Osness said the city had been expecting the bills following an audit.

“We didn’t know when or how much,” he said.

The city’s surplus in the Public Employees Retirement System, from state overcharges of previous years, covers all but $11,000 of the first bill, Sullivan said. But the city will have to pay the second bill from the general fund, he said.

Sullivan said that city employee unions have had provisions in their contracts allowing spiking for a number of years. In previous cases, employees have increased retirement pay as much as $11,000 a year, he said.

About 30% of the employees have agreed to drop the practice in recent contract negotiations, but remaining employee groups are trying to retain it, he said.

New state legislation taking effect July 1 will prohibit the computing of unused vacation for salary and retirement purposes, he said. Employees will still be able to use city retirement contributions if the city and labor association agree, he said.

Sullivan said he was pleased that the state was charging the cities that allow spiking.

“Now that people know that there is a price to pay, there won’t be anything such as spiking,” he predicted.

Employees who participate “are taking money out of the retirement fund from all other state and city employees who don’t spike their salaries, and ultimately from the taxpayers who will have to pay the bill,” he said.