The $250 million question: Did Mayor Chuck Reed and other city officials knowingly lie about the worst-case scenario for San Jose’s pension crisis?
An ethics complaint that included almost 800 city employee signatures was turned into the Elections Commission Thursday. The complaint states that Reed, Director of Retirement Services Russell Crosby and former city actuary Michael Moehle knowingly used false information to bolster the mayor’s push to declare a fiscal emergency, which may have also had an adverse effect on pension reform negotiations.
Christopher Platten, an attorney for the firefighters union Local 230, filed the complaint a day after NBC Bay Area reported that Crosby and Reed exaggerated the pension crisis by throwing out an arbitrary number—$650 million—as a worst-case scenario for the city’s unfunded liability to retirees. That number was then repeated many times over by Reed and other city officials, who have stated that retirement costs will rise to $400 million by fiscal year 2015-16 and “could jump” to $650 million. That caveat might prove to be important in any defense against the complaint.
According to the NBC report, “In one correspondence from Russell Crosby to the City of San Jose’s actuary, Crosby refers to comments made about ‘no back-up for 650’ adding, ‘let’s do damage control.’”
The television station also reported, “Crosby tells us he wrote that email because he believes 650 should never have been used in the first place.”
Below is the entirety of that email, which was included in the ethics complaint and refers to a meeting between Crosby and Alex Gurza, the city’s chief labor negotiator.
——- Original Message——
From: Crosby, Russell
To: Moehle, Michael
Sent: Wed Jun 15 15:50:04 2011
3:45 just got done w Alex. Pis send Alex and me a copy of the
spreadsheet that calculated the $400 million contrib rate in 3 yrs. It
also shows that with fixing demographics and other issues the rate is
FYI- it seems an offhand comment to Scott’s people regarding no back
up for the $650 number has caused them to challenge even $400MM. These
are not good players. You have to assume everything said will be twisted
into something else.
Anyway, let’s get that old spreadsheet out and do some damage control.
Crosby was the first person to use the number of $650 million at a Feb. 14, 2011 meeting, and NBC says he flippantly came up with it off the top of his head.
In an interview Thursday, Mayor Reed, who will be delivering his State of the City address Thursday night, defended the worst-case scenario projection.
“It’s not an arbitrary number; it’s a reasonably good ballpark number of what could happen if we ignore the problem,” he said. “I do know what (Crosby) said to me is that $650 million is not the worst-case scenario. It could be higher than that.”
Despite Crosby’s email to discontinue the use of $650 million as a worst-case scenario, the mayor said no one ever told him to stop using $650 million.
“Well, it’s good to see he got his memory back, because that’s not what he said on the report last night,” said Jim Unland, president of the Police Officers Association. “Now he recalls that he never was told. I’m not buying it. But I’m glad to see his amnesia is cured.”
David Vossbrink, the city’s communications director, downplayed the NBC report, saying he was in the room with Crosby when NBC’s investigative reporter, Jenna Susko, interviewed Crosby on Jan. 24.
“It’s so embarrassing to be in the news business if that qualifies as news,” Vossbrink said Thursday. “The only numbers that were used for budget purposes and making decisions for service levels and staffing levels, were the $400 million projected costs. We don’t do projected costs for staffing decisions.”
He added: “When the reporter met with Russell Crosby, it was clear to me that she had her story in mind. The tone was more prosecutorial rather than fact finding.”
City Manager Debra Figone put out a memo late Thursday evening disputing the NBC Bay Area’s report.
The mayor’s spokesperson, Michelle McGurk, also supplied San Jose Inside with a list of dates Reed cited the number $650 million. According to McGurk, there were only four examples in the last year, between an April 13 press release and a July 3 op-ed in the Sacramento Bee. One of those examples was a high-profile piece written by Michael Lewis in Vanity Fair, which was later included in Lewis’ bestselling book, Boomerang.
“I don’t think it was misleading to the public,” Reed said. “You can read the words I used. I clearly caveated so no one could say it was sufficiently misleading.”
Tom Saggau, a political consultant with the firefighters union and three others unions representing management and supervisors as well as engineers and architects, disputed the city’s side of the story.
“If I was on their side I’d be dishing this bull——as well,” Saggau said, “but the fact is they were stupid enough to say this in email.”
What resolution can come from an ethics complaint is unclear at this point, but Unland said negotiations are sure to be hampered.
“I have no idea where we go now,” he said. “I don’t know how to go back to the membership when the trust has been broken like this.”