HUNTINGTON BEACH : Councilman Defends Vote on ‘Spiking’

Councilman David Sullivan has sought to explain his vote earlier this month to permit some city employees to inflate pensions because their union contracts allow the practice.

“I received a lot of phone calls indicating that people misunderstood my vote,” said Sullivan, who said he fiercely opposes the practice called “spiking.”

Spiking occurs when an employee gets the city to inflate his final year’s wages--on which a pension is based--by allowing the employee to forgo vacation days, car allowances and other benefits and take them as wages.

At last week’s City Council meeting, Sullivan said that an attorney hired by a council subcommittee, which he chairs, advised officials not to stop the processing of the “spiked portion” of employees’ pensions because their contracts allow it. To disallow it would be a breach of the contract, the attorney advised.

Sullivan and three other council members voted July 5 not to stop the processing of the spiked portions of these pensions.

“This City Council thinks that spiking is illegal,” Sullivan said, but he added that it “would not be wise to stop spiking yet.”

“As of this time, legally speaking, spiking is legal until determined otherwise,” he said. “I felt that to take the proposed action to unilaterally stop the spiking at this time would be a violation of the collective bargaining process. Therefore, we’d be sued for breach of contract and the city would be exposed to unnecessary financial liability.”

The city estimates that pension spiking by some city employees could cost a total of $13 million in additional pension benefits because those pensions are unfunded.

Of that amount, about $10 million is for 153 city employees who have said they plan to retire with spiked pensions. These employees applied to inflate their pensions before the most common aspects of spiking--converting unused vacation and car allowances into income--became illegal July 1.

The council also had prohibited spiking as of January. Spiking had been a common practice agreed to in city employees’ contracts since the mid-1980s.

Sullivan, who investigated spiking before being elected to the council in 1992 and brought the issue to the public forefront, added that the subcommittee “has a plan to attack the salary-spiking problem . . . and in my opinion, it’s not wise to deviate from that and expose our citizens to the financial liability.”

He said the first step of the plan involved sending a letter last month to the state Public Employees’ Retirement System asking them whether spiking is illegal and requesting a response by July 22.

The council last month also voted not to pay PERS $743,632 to cover a portion owed for 39 employees who already retired with spiked pensions, which totaled about $3 million in unfunded pensions.

“If PERS says spiking is illegal, the city is out from under the bill,” Sullivan said.

But Sullivan said that if PERS says that spiking is legal or gives no response, the subcommittee plans to ask the court whether spiking is legal.

Sullivan also pointed out that the $13-million price tag of spiking will cost each Huntington Beach family about $240.