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Questions Arise Over Labor, Entrance Costs

A demand by administrators of the California Public Employees’ Retirement System (Calpers) to raise retirement contributions from employers as much as 50 percent over the next seven years has already been factored into city budget planning and labor negotiations, according to the city manager.

Without first determining the financial impact of Calpers’ looming hike in retirement contributions locally, Laguna Beach’s city officials would be reckless to pursue a planned 500-car parking garage and park that requires bond financing, resident Tom Halliday said at a recent City Council meeting.

“By draining our cash reserves, and by taking on $29 million in debt, this proposal would leave us exposed to unexpected financial shocks,” said Halliday earlier this month and in a recent letter to the editor. “I hate for the city to have to face these annual bills having already exhausted our best financing resources on a parking garage,” he wrote.

Halliday called the suspension of any further spending on the proposed village entrance project, estimated at $42 million, until an analysis of Laguna’s ability to meet Calpers new stipulations is reviewed.  The City Council approved the proposal next to City Hall by a 3-2 vote in June.

Then as now, impassioned residents continue to debate the merits and disadvantages of the project, placed on and off the table for over 30 years. Now, organized opposition is building momentum, raising objections over size, cost and potential environmental issues as well as possible alternatives. Let Laguna Vote spokesperson Rita Conn, for example, aims to pressure city officials to reverse their decision.

On another front, resident Paul Merritt now says he seeks to put a citywide initiative on the project before voters in November. City Attorney Phil Kohn informed Merritt he had failed to meet the statutory deadline for a referendum, which protests the adoption of an approved ordinance. Instead, Merritt shifted gears and this week proposed a ballot initiative, which proposes a new ordinance, also on the project. He expects to start collecting signatures next month after the city attorney titles and summarizes the proposed measure, Merritt said.

As currently configured, the entrance project taps the city budget for $13.3 million and raises the remaining $29 million with a 25-year revenue bond. The existing city portion draws $7.8 million from a parking fund, $5 million from a capital improvement fund and $500,000 from the sewer fund.

The proposed bond would require an estimated $2.1 million in annual debt service to be funded by raising $2 million annually through citywide meter rate hikes of $1per hour and another $300,000 a year from the new parking structure.

City Manager John Pietig said the Calpers policy changes, announced in April, have been factored into this year’s labor negotiations. The city recently reached an agreement with the Municipal Employees Association for its members to contribute to their retirement benefits for the first time, at a rate of 8 or 9 percent over the next three years. Similar talks are under way with firefighters and will begin soon with police.

State legislation cuts retirement benefits for future public employees and stipulates that existing city employees must contribute between 8 and 12 percent of their salary toward retirement costs by January 2018, Pietig said.

These hikes in employee contributions should cover at least 65 percent of the increased Calpers’ costs by January 1, 2018, he said. “The balance of increased retirement costs will be covered by additional concessions reached through the collective bargaining process or city funds,” he added.

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