The city of San Bernardino will eventually save itself $2 million per year in pension costs alone by contracting its fire service to an outside agency or company, San Bernardino City Manager Alan Parker and assistant city manager Nita McKay have calculated.
In total, city officials believe dissolving the San Bernardino Fire Department and contracting for the provision of fire services in the county seat will provide savings to the city in the neighborhood of $7 million annually.
In 2012, after years of financial challenges and dwindling revenues, San Bernardino filed for Chapter 9 bankruptcy protection, citing $180 million in ongoing unfunded liabilities and a $49 million annual operating deficit. The city filed its bankruptcy exit plan on May 29 of this year, but that strategy calls for continuing to defer or delay the city’s payments to most of its creditors and vendors.
Previous civic leaders have been undone by San Bernardino’s financial morass. City managers Charles McNeely and interim Andrea Travis-Miller and finance directors David Cain and Scott Williams were casualties of the city’s economic slide. The current team at the top of San Bernardino City Hall – Parker, McKay and Mayor Carey Davis – are attempting to cinch down, constrict and eventually plug up the financial black hole that is sucking San Bernardino toward oblivion. Davis is a corporate controller and certified public accountant by profession, someone who fully understands income and outgo, expenditures and revenue, and the need to balance an organization’s books. A major issue in San Bernardino’s financial dilemma is its commitment to paying what are considered “competitive” wages to one particular class of its work force, i.e., its public safety employees.
Provisions put into the charter by means of a citywide vote in 1939 – which became known as Section 186 – require that the city’s public safety employees – firefighters and police officers – be paid on a scale equal to the average pay of police officers and firefighters in ten similarly-sized California cities.
Section 186 effectively locks in salaries for San Bernardino’s public safety employees that are at par with or greater than those salaries received by their counterparts in ten similarly-sized California cities. San Bernardino, the county seat and the largest city in the county, has a population of 213,708. Yearly, city officials and police and fire union heads start with a list of California cities with populations between 150,000 and 250,000. In turns, each removes a city from that list until ten remain. Salaries are then computated upon the average pay to that particular group – firefighters or fire department management or policeman or police management – in the remaining ten cities.
Despite the city’s bankruptcy filing it has continued to give firefighters and police officers raises in keeping with the provisions of Section 186 of the city charter. During his first year in office, Davis called for a referendum to remove Section 186 from the city’s charter. In response, the city council voted 4-3 with councilmen John Valdivia, Henry Nickel and Benito Barrios dissenting, to place two measures on last November’s ballot, asking city voters to repeal Section 186 as well as Charter Section 254, which requires that fired employees who are appealing their terminations to the civil service commission continue to be paid until the commission makes a decision on whether or not to reinstate the employee.
The city’s police and fire unions strongly opposed the measures, and in the face of their spirited campaign against them, the initiatives were defeated.
In the current fiscal year, police department and fire department operations represent 68 percent of the spending out of the city’s general fund. Salaries make up the lion’s share of those departments’ operating budgets. With a majority of the city council remaining convinced that the continuation in the escalation of public safety employee pay in a city that has declared bankruptcy and is stiffing its other creditors is not only unseemly but unsustainable, Davis, Parker and McKay formulated a strategy that included dissolving the city-run fire department and contracting with another local governmental agency or a private company to provide fire protection to the city.
The San Bernardino County Fire Department and a Florida-based private firm, Centerra, responded to the city’s request for proposals and an analysis of the two bids by a consultant, Citygate, is being carried out. Citygate’s recommendation will be provided to the council late this month or next month. It is unclear whether the city’s firefighters will be laid off or whether they will be taken on by whatever entity lands the contract with the city. If they are brought aboard by the fire service contractor, the level of benefits they are now being provided will be discontinued. This includes the generous pensions firefighters are eligible to receive at the age of 55.
If the county fire department is awarded the contract, a new law recently signed by Governor Jerry Brown, AB 868, would allow city firefighters, now in the state-run California Public Employees Retirement System, to keep their pension credits while transferring to the San Bernardino County retirement system.
For that reason, the city may be viewing an arrangement with Centerra more favorably. Lessening the pension obligations burdening the city – or getting out from underneath them altogether – is a prime goal of San Bernardino city management.
To drive home the point as to how the millstone of pension obligations is weighing San Bernardino down, city officials released actuarial projections showing pension costs for the next nineteen years.
In 2014-15, the city had $14.2 million in pension costs, equal to 11.9 percent of its general fund. According to the projections, in 2015-16 pension costs will be $19.3 million or 15.6 percent of the general fund; in 2016-17 pension costs will be $21.2 million or 16.3 percent of the general fund; in 2017-18 pension costs will be $23.5 million or 17.8 percent of the general fund; in 2018-19 pension costs will be $25.5 million or 18.6 percent of the general fund; in 2019-20 pension costs will be $27.5 million or 19.3 percent of the general fund; in 2020-21 pension costs will be $28 million or 18.8 percent of the general fund; in 2021-22 pension costs will be $28.7 million or 19 percent of the general fund; in 2022-23 pension costs will be $29.4 million or 18.9 percent of the general fund; in 2023-24 pension costs will be $30.1 million or 18.9 percent of the general fund; in 2024-25 pension costs will be $30.8 million or 18.9 percent of the general fund; in 2025-26 pension costs will be $31.5 million or 18.9 percent of the general fund; in 2026-27 pension costs will be $32.2 million or 18.8 percent of the general fund; in 2027-28 pension costs will be $32.8 million or 18.7 percent of the general fund; in 2028-29 pension costs will be $33.5 million or 18.6 percent of the general fund; in 2029-30 pension costs will be $34.3 million or 18.5 percent of the general fund; in 2030-31 pension costs will be $35 million or 18.4 percent of the general fund; in 2031-32 pension costs will be $33 million or 16.9 percent of the general fund; in 2032-33 pension costs will be $33.7 million or 17.1 percent of the general fund; and in 2033-34 pension costs will be $32.3 million or 15.9 percent of the general fund.
Eliminating the city’s obligation to continue to defray firefighters’ pension costs will assist it in turning a corner on the municipality’s runaway spending, Davis, Parker and McKay insist.
Pay for firefighters, who are generally perceived as blue collar workers, has moved into the financial stratosphere formerly reserved for middle and upper echelon white collar workers. The bottom third of the firefighters employed by San Bernardino receive an average total annual compensation package of $130,000, according to a consultant who audited the fire department for the city last year. The middle third of San Bernardino’s firefighters received an average of $160,000 in pay and benefits yearly. And the top 40 firefighters employed by the city bring in $197,000 in pay and benefits each year.