HUNTINGTON BEACH : City Seeks to Halt ‘Salary Spiking’

City Council members have directed City Atty. Gail C. Hutton to begin a legal search for a way to halt a new round of “salary spiking” by city employees before a new state law prohibiting that practice goes into effect on July 1.

Last year about 100 employees exercised their “benefit conversion rights,” which allow them to artificially inflate their salaries to get higher pension checks. But not all are actually expected to retire within a year, an official said.

Councilman David Sullivan warned Tuesday that the expected surge in retirement costs is “a fiscal time bomb,” though no estimates were available on the cost to the city and its taxpayers.

Sullivan said he hopes the city can find a way to legally avoid processing and sending to the California Public Employees’ Retirement System the inflated part of the employee salaries.

Mayor Linda Moulton-Patterson said before the vote that she couldn’t “emphasize (her) disgust enough” about spiking. “This kind of practice makes people mistrust government,” she said.

The city was billed in November and February by the Public Employees’ Retirement System for more than $900,000 to cover spiking costs for 10 retirees beginning July 1, 1992. However, the total cost of spiking in the city has been put at $2.7 million for a total of 34 employees. Most of the cost was paid in the form of higher retirement rates charged by PERS, a city official said.

“Had there been no spiking,” Sullivan said, “there would be money for a youth sports complex in the park or for more police officers. The reason we don’t have the money is this damned practice of spiking.”

Deputy City Administrator Bob Franz said that salary spiking, in which vacation time, car allowance and sick pay are added to base salary to increase it for retirement purposes, initially had the blessing of PERS officials.

Employee representatives made spiking a bargaining goal, and the practice was accepted in their labor contracts, Franz said.

About 30% of the city’s 1,100 employees, including policemen, firefighters, marine safety officers and management officials, have given up spiking privileges in a current round of negotiations, Franz said.

Franz said he believes that the PERS historically overcharges cities, and the recent bills it submitted to the city may be too high.

The council will look into estimated costs for future retirees on March 21. Officials are also expected to consider whether to pay the current bill in a lump sum, in yearly payments or an increase in retirement rates.