Police chiefs in California getting huge final paychecks

El Monte Police Chief Thomas Armstrong oversaw a modestly sized department, with 120 officers patrolling a city of 113,000 residents.

But when Armstrong stepped down last year, he was paid nearly $430,000 — significantly more than Los Angeles Police Chief Charlie Beck or Los Angeles County Sheriff Lee Baca.

The payday was possible thanks to a clause in Armstrong’s contract that allowed him to accrue unlimited sick and vacation hours and sell them back to the city at the end of his career. By the time he retired at age 56, Armstrong had amassed a bank of more than 1,500 unused hours, city officials said, which he cashed out for roughly $200,000.

And he’s not alone. Similar payouts have been made in city governments across the state. A database published by the state controller shows 23 city employees who made more than $400,000 in 2009 or 2010. The Times found that more than half had their total pay boosted through a sick- or vacation-time cash-out.

Those employees include Roy Campos, Downey’s former police chief, who was paid $594,000 in 2009 after cashing out more than 3,300 hours of unused sick and vacation time. The same year, Monterey Park’s outgoing chief, Jones Moy, earned $531,000, including cash-outs of about 2,700 unused hours. In 2010, Santa Clara’s police chief, Steve Lodge, left his job with almost $600,000 in total pay thanks to a variety of cash-outs.

In contrast, Beck earned $297,000 last year and Baca made $334,000.

Cashouts of unused time of have long been a controversial issue in local governments because they can significantly increase the compensation of employees, especially top executives. Many cities have placed limits on how much general employees can accrue, but those rules don’t always apply to top managers or workers who started before the caps were instituted. That leaves hundreds of high-ranking officials able to build up hefty compensation.

Supporters say the system provides an incentive for diligent work habits; it also enables public agencies to avoid situations in which their employees skip work simply because they don’t want to lose their vacation hours.

But in the extreme, the system inflates the compensation of top managers beyond what is noticeable to the public or even elected officials, said Geoff Rothman, a consultant at the Public Law Group, a San Francisco firm that advises cities on labor issues.

“If you don’t drill down reading the benefit statements and resolutions, you’ll miss it,” Rothman said. “Often city council people or members of boards won’t realize it until a big, huge check has to be written.”

Dwight Stenbakken, a deputy executive director at the League of California Cities, said cities have become more sensitive about compensation transparency issues in the wake of the Bell scandal. Robert Rizzo, Bell’s city manager, allegedly drafted phony contracts in 2008 indicating he made slightly more than $220,000 in base salary. In reality, he was making nearly three times that amount.

“That’s a legitimate argument and a lot of cities are looking at it right now,” Stenbakken said.

El Monte’s situation shows how generous rules can significantly inflate the compensation of top officials. For years, the city placed no limits on how much unused time employees could accrue.

Over his thirty-plus years with the department, Armstrong was permitted to bank unused hours without limit, then cash them out at the hourly rate he made as police chief. Some of the unused sick hours also counted toward his CalPERS safety pension, which at $229,000 a year is among the largest in the entire state. Armstrong’s pension is also higher than the largest base salary he earned, $217,000.

His predecessor, Ken Weldon, cashed out about $90,000 worth of unused time when he retired in 2008, El Monte’s finance director said. Before that, outgoing Police Chief James Ankeny received a $121,000 cash payment when he left the city in 2001.

Like Armstrong, both former chiefs draw CalPERS pensions worth more than $200,000 a year. Weldon was also awarded more than $100,000 in deferred compensation.

Weldon’s and Armstrong’s contracts permitted more than three months off each year. That total covered one month of vacation, about three weeks of leave, as many as 12 sick days and 14 holidays (including Admissions Day, a September holiday that celebrates the date California became a state).

Most of the hours off that were not used could be cashed out at the end of each year. Sick and vacation hours could be carried over year to year.

Julio Morales, a former municipal financial consultant who was hired to be El Monte’s finance director in 2009, said the back-end payment methods were favored by some city councils because they are less noticeable to the public than straight salaries.

The city is now trying to “clean up” compensation structures that enabled the payouts, Morales added, but is still liable for about $6.5 million in unused sick and vacation time accrued by current employees.

“I don’t think there’s any doubt this was not the most efficiently run place,” Morales said. “They paid too many people too much money.”

Some officials in the San Gabriel Valley suburb expressed frustration over the sums Weldon and Armstrong took home during a period when El Monte struggled financially and 17 police officers were laid off. The city’s tax revenues have fallen sharply since the start of the 2008-09 recession, officials said, and its credit rating was recently downgraded to “junk bond” status.

In an interview, Armstrong acknowledged the benefit package he received was “very gratuitous” and said the city should change its compensation system.

“These were contractual obligations in place for police chiefs for over thirty years,” Armstrong added. “We played by the rules.”

But Armstrong refuted the notion that city politics played a role in his compensation, saying he simply asked for the same contract his predecessors had received. He also pointed out that he took at 10% salary cut in 2009.

Weldon did not respond to an interview request.

Experts said many cities have trimmed back the total amounts employees can accrue. In Irwindale, for example, employees can rack up no more than 300 vacation hours total, and unused sick days become less valuable as they build up. Laura Nomura, Irwindale’s finance director, said the system was designed to reduce the city’s liabilities.

“The caps are definitely coming down in some places,” said Michael Colantuono, a municipal law expert who is city attorney in Calabasas. “All of this stuff is getting tightened up, post-2007 crash. It’s not that it’s necessarily corrupt, it’s just really expensive.”

sam.allen@latimes.com