Commentary: City and firefighters forged an economically sound pact

On Oct. 17, the Costa Mesa City Council approved an agreement with the Costa Mesa Firefighters Assn. on a 3-2 vote, with myself, Mayor Katrina Foley and Mayor Pro Tem Sandra Genis voting yes, and Councilmen Jim Righeimer and Allan Mansoor dissenting. I proudly made the motions that approved the agreement, and I would like to explain why.

The agreement followed 10 months of intense bargaining between the City Council and the CMFA. Ultimately, the agreement was fair to the city and to the firefighters. To paraphrase Mick Jagger, neither side got everything they wanted, but both sides got what they needed.

Long-term deal: Importantly, the term of the new agreement is four years, so it does not expire until 2021. Labor agreements with such a long term are unusual. The benefits to the city are stability and certainty and the ability to accurately budget our future costs.

Overdue Salary Increases: The agreement includes four salary increases of 3% spread over 18 months. The last time our firefighters received a salary increase was July 2008. During that time, their compensation dipped to among the lowest in the county. A private sector company would have sustained substantial turnover if it did not raise pay for 10 years.

Our firefighters stepped up during the recession, paying 5% of their salaries in pension contributions, despite their salary freeze. They continued to stick with the city while rising costs ate away at their net wages. If we didn’t include salary increases in this agreement, we risked losing highly skilled firefighters, in whom we have invested tens of thousands of dollars, to other agencies. That was a risk not worth taking.

Increased Pension Contribution: In the agreement, the firefighters agreed to contribute an additional 9% of their salaries to their pension, making their contribution 14%, which is in line with our police and non-safety staff. The 14% pension contribution is well in excess of the amount the city could have imposed by law, and among the highest pension contributions in the county. The increased pension contributions will be phased in to coincide with the first three salary bumps.

Increased Healthcare Benefits: The agreement increased the firefighters’ monthly healthcare allocation to $2,119; furthermore, if the firefighters waive their city healthcare benefits, they will only receive $1,060 per month in lieu of insurance.

So why this increase? Previously, firefighters received only $556 per month to spend on healthcare. As a result, some firefighters spent $1,600 or more out of pocket to cover their families. Rising healthcare costs further eroded their net compensation. Considering the health risks our brave firefighters face, they should not have to worry about whether they have adequate healthcare for themselves and their families.

Other Savings/Benefits: The firefighters agreed to reduce their maximum vacation accrual by 15% (78 hours), substantially reducing the city’s accrued liabilities. They also agreed that sick days would not count as work days when calculating overtime, providing additional savings.

No Increase to Unfunded Pension Liability: The agreement will not increase the underfunded pension liability. This is because California Public Employees’ Retirement System (CalPERS) calculates the city’s pension obligation based upon an actuarial analysis that assumes a 3% annual salary increase whether or not salaries actually go up. According to CalPERS, the agreement “resulted in no factors that would be outside the scope of what CalPERS has already included” in its calculation of Costa Mesa’s unfunded liability.

To illustrate this point, since 2008 when our firefighters last received a salary increase, the underfunded pension liability for our firefighters has been as low as $290,000 and is now $61 million. Obviously, the increase had nothing to do with salary increases because none were given. Other factors that increased the pension debt include unprecedented investment losses during the Great Recession, changes in actuarial assumptions, such as life expectancy, and an increased formula for calculating retirement benefits.

Likewise, because healthcare benefits are not counted when calculating retirement pay, the increased healthcare benefits do not spike Costa Mesa’s pension debt.

Budgetary Perspective and Fiscal Health: During the Oct. 17 meeting, Righeimer and Mansoor raised the specter of municipal bankruptcy, invoking specifically financially troubled cities, such as Stockton, Vallejo and San Bernardino, as cautionary tales. In response, some perspective is in order.

Over the course of its four-year term, the agreement increases Costa Mesa’s costs by about $4.9 million. This increase amounts to approximately 0.7% of our budget. That’s hardly going to drive us into bankruptcy.

Moreover, Costa Mesa was recently rated AA+ (the highest possible) by Standard & Poor’s. To protect against an unlikely financial calamity, the firefighters agreed that there is no minimum staffing required, nor is there layoff protection in the agreement.

Although the council bargained aggressively and effectively with the CMFA, we value our brave firefighters who rescue Costa Mesans from fires, medical emergencies, hazardous substances, car accidents and other hazards.

Our firefighters put their lives on the line. The just and reasonable (and fiscally responsible) compensation included in the agreement represents a meaningful gesture of appreciation from a grateful community.

JOHN STEPHENS is a Costa Mesa city councilman.