Retirement Board Governance

Last week, I chose to attend both outreach meetings regarding the issue of retirement board governance, so I could hear concerns first- hand instead of reading a staff report. The possibility of changing the makeup of the current retirement board was presented by the consultant. The biggest change, if adopted, would be to remove city councilmembers from the board and add “independent” board members with a finance background.

Discussion about changing the amount of pension contributions or starting a second-tier retirement system for new employees was not part of the report. If you want to review the entire report by Cortex then go to this website.

Since 99.95 percent of city residents did not attend the meetings I thought I would share a synopsis of the comments that were made by attendees:

• Ken (City retiree and former retirement board trustee)
Status Quo is fine. Like none of the report

• Yolanda (union leader)
City employees have a stake in the pension, independent people would not.
Leave the the Councilmembers on the board. Why fix what is not broken. More outreach to city employees is needed. City is taking advantage of the recession. City wants to implement a two-tier retirement system.

• Jerry (SJ taxpayer)
Change pensions to 401K’s

• David (SJ taxpayer)
Thinks Council appointment of “independent” finance experts would be political and council would appoint union approved experts. The taxpayers are on the hook for pension fund losses. Cortex should have studied current board system.

• Steve (City retiree)
The report is a slap in the face. The City is stingy. Picking of Cortex was biased. There is no problem with current system.

• Brad (City retiree and 12-year trustee of retirement board)
Report is flawed. Only people that live in SJ should be on retirement board, currently not the case.
Council in the past appointed people the board that were Union favorites and not the most qualified.

• Carmine (City retiree and 13-year trustee of retirement board)
The current pension losses is not due to current governance model.
Council would appoint “independent” experts that serve their wishes and possibly not the employees.
How can we look to financial experts when many financial institutions have people in jail?

• Ben (union leader)
It would be bad policy to exclude elected councilmembers from the board. People with fiscal experience will not solve problems-not a cure all.

• Pete (City retiree)
Changing board will do nothing. No trust of financial experts. San Jose retirement plans should be a model of the nation. Yale lost 25 percent last year in pension fund and they are a Cortex client. Ontario teacher fund lost 18 percent last year and they are a Cortex client. You are awaking a sleeping giant of city workers that will go out and inform the public of the real story.

• Mary Sue (spouse of city retiree)
Feels that the “independent” experts represent city management and not the unions.
Unions should have a majority control of board not “independent” experts.
Life experience more valuable than education and expertise. City Councilmembers themselves are against us because they do not get retirement benefits.

• Rodney (SJ taxpayer)
No protection for taxpayer.

• Dan (union leader)
The board has done a wonderful job.
The theme is that there is a lack of trust. More outreach needed to Labor.

• Susan (SJ taxpayer)
Small business owners should be on retirement board. Investments should strive for safety and security and not be invested in risky assets. SJ needs pension reform. Taxpayers are not an ATM.

• Michael (city retiree)
I am a taxpayer too. City management is the problem.

• Naomi (spouse of city retiree)
This is not the time to make changes

• Bob (city retiree)
Suspicious of city management. Why hire a firm from Canada? Don’t trust people in suits.
Posting reports on website is no good-we want paper.

• Linda (union leader)
Concerned about the option of active employees electing a non active employee representative.

• Ashok (SJ axpayer)
Pensions are a structural problem.
Totally disappointed that SJ not considering true pension reform
Why should SJ residents have to pay for pension losses?

• Jeffrey (city employee)
This is a power grab by city management.

• Gail (spouse of city retiree)
Against any changes. People invested in the plan have a stake in the plan. Wrong time to make changes. Don’t trust the Council they make bad financial decisions like funding Mexican Heritage Plaza.

• Bill (union leader and former neutral retirement board trustee)
The reports touts “flexibility” but he does not see “flexibility” this is more of a concession.
Would give too much power to the Council

• Don (City retiree)
City management has been after our money for 30 years.Banker and attorneys are not experts.
We are not broke since we control it. We don’t need your expertise.

• Joyce (SJ taxpayer)
Mercury News is not favorable to business interests.
My 401K is a 201K. Add SJ taxpayers to retirement board.
Heads of Unions have conflicts of interest.

• Dorothy (city retiree)
All people should have guaranteed pensions. 401K’s bad.

• John (union attorney)
Likes removing veto power of council on board trustee nominations.
Prefer Florida model of pension boards which is 3 from employees, 3 from city/council and then 7th person is appointed by the 6 board members for a neutral member.

• Dave (city retiree)
Gave King Solomon analogy.
Mayors and Council will go but the benefits need to stay.
Bankers getting big bonuses. Something about selling Tulips in Holland.
Experts have nothing to bring to the table.

• Craig (SJ taxpayer)
Thank city employees for their work.
Former CFO. Nearly all companies have 401K’s. Pensions are the same as Social Security and are destined to go bankrupt. Why does not the city do a comprehensive pension overhaul. Taxpayers are the guarantee on pension losses.

• Walter (city employee)
Against report. No need to make changes.
Concern of removal of trustee and how super majority would work for pension fund investing in SJ projects.

• Bob (city retiree and president of retired employees, 2900 pensioners and 4600 with spouses/partners)
City councilmembers are good to have on boards. Board should stay the way it is.
Majority vote by non union trustees is not good. Next decade may have modest investment returns and if we pay “independent” experts that will raise the cost to administer the pension funds.

• Paul (city retiree)
I vote and pay taxes. Why fix what is not broken.
City management power grab that last 30 years. Leave it alone. Cortex is the low bid-it is a sham.
We want elected councilmembers on the board.

• Tony (city employee)
We do not have to support your proposal.

• Bobby (union leader)
City Management and staff lie. Police union only given two hours to give input.
Distrust of city manager over the years, lies. We are all taxpayers. Not broken-no trust.
City wrong in facts and makes financial mistakes.
Councilmembers on the retirement board safeguard the system. Want fairness

• Gay (union leader)
Concerned how budget will pay for “independent” financial experts.

• Eric (union leader)
Nothing broken. City Mgr trying to mess around with benefits. Do not agree with the report.

• Tim (city retiree and former retirement board trustee)
City management trying to control. We have experts already. I have a vested interest in pension and only people with vested interest should serve on the board. Companies like Apple and Intel get in trouble for options backdating. Unions need to be the majority on pension board.

• Tom (city retiree)
Not paid enough. Proposed governance model is a charade.
Mercury news is biased and not telling the whole story. It is my money.

• Mike (city employee)
Current systems is not broken. More experts will overkill board. Prop 162 split government from pension boards.

This topic will come to the Council in late September/early October.

9 Comments

  1. My gosh, it’s a bargain with the devil either way!  Lemme’ see now – would I rather have Nora on the Board or an “independent” voted upon by Nora… der, der, der….

    • Pardon my skepticism, but why don’t we just have Cortex come in and replace the entire city council and mayor too? After all, what financial expertise do they have to manage a city budget that is almost a billion dollars a year. Why are they willing to pay $40,000 a year for a Cortex employee to sit as an executive on the retirement board? What vested interest does Cortex have in this as $40,000 a year doesn’t cover their costs? Pierluigi again takes an opportunity to demonize city employees who have contributed a great deal of their own money into their retiremnt system and are asking very legitimate questions, and are concerned enough to show up to these meetings.

  2. I too was at the pension meeting Aug. 26th but chose to leave to do my school homework rather than watch what I considered unnecessary grandstanding by some speakers.

    The City employee pension fund situation is a sad one for many: Retired/existing City staff, taxpayers and the City. Of course retired City employees and soon-to-be retired City employees are protective of their retirement, rightfully so. Who wants to have to eat dog food in their “golden years”? The City as well as the taxpayers have a scary situation before them which is how to make up for the fund shortfalls.(And more “service cuts” is NOT an answer. City of SJ residents have had to put up with year after year of service cuts. In addition to that we’re told to maintain our sidewalks and parkstrip trees, encouraged to enter into public/private partnerships, buy new cars to keep the local economy going… in addition to continuing our normal volunteer activities. Additionally, many of us have lost a LOT of retirement money during these poor economic times with no way to recoup our losses in addition to our falling home values.) The whole economic situation stinks.

    I was also embarrassed to see when during the meeting the consultant, at the City’s request, gave the report he was asked to give/present, and the disrespectful manner of some speakers toward him. What a great impression of the good citizens of San Jose. Jeez. Also, I’m scratching my head as to why some City employees had such a limitted time to respond to the report as it was sent to “All City Employees” on Aug. 6th 2009.

    For me, the bottom line is as a taxpayer I fear that the current pension model is not sustainable. Many meeting speakers said (paraphrased) ‘if it’s not broke, don’t fix it.’ Well, it IS broken if taxpayers have to make up these enormous losses. I’m no expert and don’t know the ins/outs of a city declaring bankruptcy, but I wonder if everyone has more to lose if we continue on the path we’re on. Perhaps one answer is to outsource the City’s retirement function altogether and only focus on our core competencies which is obviously not managing pensions. Again, I’m no expert but I do feel that ALL the stakeholders must have an equal voice in how to correct and manage this situation.

  3. Pierluigi,

    Thank you for sharing what was said at the meetings. As a working parent I cannot attend meetings at city hall so you have given me a sense of what goes on in city government. Thanks for your support of the crossing guards.

  4. Pierluigi, My position at the meetings was that we should all do whatever we can to minimize risk and maximize returns.  That goal can only be accomplished with input and cooperation from all stakeholders.  I do not feel that a system that gives the city council the authority to appoint a majority of the trustees will do that.  The management of the pension plan must be by an independent board of trustees.  Industry experts belong on staff where their opinions and research can be conveyed to the board of trustees. 

    The consultants didn’t bother to interview any of the current employee representatives on the retirement board. Although they interviewed the city attorney, they didn’t interview the retirement plan attorney.  If you interview only those individuals who have already indicated that they want council persons off the board, then the result is pretty easy to predict. 

    The issue of administration of the plan should be about balance.  There should be representatives from the employees, retirees, city administration, and citizens.  The current model provides that representation.

  5. The Grand Jury just came out with a scathing report over the city owned golf courses, saying they are costing the city at least $2 million dollars a year out of the general fund.

    In response to the “consultants” and “experts” hired by the city to build and run the golf courses Councilman Sam Liccardo said, “I was just really troubled on how bad these consultant recommendations were…. This whole thing just seemed to go south at every turn.”

    Maybe, just maybe those who voiced their concern at the above mentioned pension meeting have very legitimate worries, and should not be mocked as Pierluigi has done. Certain members of the city council seem to want to rush this process through without much due diligence or input, and this is cause for worry. Wasn’t it back in the 1980’s that the city lost $65 million dollars taking the word of financial consultants because of a lack due diligence?

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