Revenue From New Shopping Centers Will Go to Pensions, Not Services, Councilman Says

The revenue generated by the two new shopping centers in Petaluma will go to pay increasing pension costs for city employees instead of bringing back more city services, according to Council Mike Healy.   

“It will most likely mean that the bump the city was expecting from the Target and Friedman’s shopping centers will likely get chewed up by retirement and rising employee healthcare costs,” Healy told the Argus Courier. "We realistically don't have the ability to bring back city services."  

Although next year’s budget is balanced, by 2014-15 Petaluma is facing a $142,000 deficit. By 2017, the deficit is expected to rise to $2.3 million, according to a story in Thursday’s Argus Courier.   

The deficit is driven not by salaries, but the rising cost of pensions. That’s partly because people are living longer—city employee get retirement benefits for life— but also because the pension packages are a lot more generous, following legislation passed by Gov. Gray Davis in 1999, according to the article.   

The increases were not problematic while the economy was booming, but have now plagued many California cities who now have been forced to pay more into the California Employee Pension Retirement System (CalPERS). For example, in 2003, Petaluma spent about 6 percent of its general fund on pension obligations, today it spends 16.6 percent, with spending to increase even more in the coming year, according to the Argus.   

San Jose and San Diego recently passed reforms to their cities’ pension plans. In San Jose, workers will have to pay up to 16 percent of their salaries to keep their retirement plan or accept more modest packages. In San Diego, Proposition B will eliminate pension spiking, put a five-year pay freeze on the pensionable pay of current employees and switch all workers except police into 401-K type retirement plans.   

Both measures were proposed by mayors and council members who watched their budgets come up short year after year, despite laying off workers and advocating for new tax measures.   

Click here to read Patch’s previous coverage of Petaluma’s pension costs.   

Then sound off: Should Petaluma put pension reform on the agenda?