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City Manager Offers More Detail to Pension Agreement

Michael Frank irons out some the questions that might pop up about the city's new agreement with its bargaining units.

  • Editor's Note: Novato City Manager Michael Frank shared the notes he was to read before the Novato City Council on July 17 regarding the tentative agreements reached with the city's bargaining units on new employee contracts. The council unanimously approved the agreements Tuesday. For another story about the agreements, click . 

I would like to clarify a couple of things regarding the tentative agreements with our unions this evening at Council. 

At this time, the City has done absolutely everything legally possible with regard to pension reform. To restate, there is nothing additional that the City could legally implement with regard to pension reform right now.  The only remaining change is to reduce the benefit formulas for new employees below the current 2 percent @ age 55 for miscellaneous employees and 3 percent @ 55 for safety employees.  However, this change needs to be considered carefully and strategically since there are implications and impacts.  The City Council chose not to pursue this change at this time for the following three reasons.

* 3-Year Window for PERS Contract Changes Closed for Novato until September 2014. PERS only allows a public agency to change their contract with PERS every three years.  Based on the prior pension reforms that the City implemented with the last set of negotiations, the earliest that the City can modify the current contract and consider a reduction in the benefit formula is September 2014.  The proposed two-year agreements that Council will consider tonight will end in June 2014 which allows Council to consider a benefit formula change at that time.  So, at this time, the City Council cannot legally change the benefit formula and must wait until September 2014.

* Negligible Immediate Savings. While a reduction in benefit formula is an important long term reform consideration, it provides only minor savings until there has been sufficient staff turnover, which is generally 10 years from the point of adoption.  The projected savings are outlined below. 

  • Year 1 = $7K savings
  • Year 5 = $36K savings
  • Year 10 = $72K savings

* Hiring of Talented Employees. The City needs to be cautious about moving forward with lower benefit formula ahead of our neighboring cities and the region overall, since we believe that it will limit our ability to hire talented employees.  If Novato’s PERS benefit formula is lower, packaged with lower salaries and a more modest benefit package, then prospective employees (especially technical, professional, and management employees) will not come here.  Other communities that have moved to 2 percent @ 60 for miscellaneous are already finding this scenario to impact them. 

Council worked diligently in these contracts to shift EPMC to employees and eliminate the reporting of EPMC as reportable compensation.  This is significant pension reform that creates short terms and long term cost savings. These contracts partially backfill an employee’s salary which attempts to mitigate some of the impact on employees with the shift of EPMC but not completely. 

The take-home pay of a City employee paying full family health care is the same at the end of this contract as it was seven years prior. If one’s goal is a reduction in compensation for City employees, then one could argue that there should have been additional concessions. There are consequences, however, to such actions both short term and long term.

These contracts produce ongoing savings to the City. Using the February forecast as the starting point for labor negotiations, the City has reduced the projected deficit by $800,000 per year and $1.6 million over the two year term of the agreements. In year 5 of the Forecast, this savings increases to just over $1 million.

Novato has historically been fiscally prudent and taken deliberate cautious actions to protect the tax base of this community. Novato entered this recession with lower PERS benefits, lower salaries, minor legally mandated post retirement benefits, and a lower benefit package.

With this context, Council’s goal is to reduce expenses, complete pension reform and yet build an excellent organization with talented employees. We believe this contract meets Council’s goals.

Tina McMillan September 27, 2012 at 04:11 PM
Dave Have you been to San Rafael lately? I wouldn't trade Novato for San Rafael. Having had businesses in both cities I agree San Rafael seems better equipped to handle development. Many years ago when they rebuilt 4th Street we only had to close our shop for a day. When Novato rebuilt Grant it was a nightmare. The difference between the two cities is that San Rafael has been developed as a mini urban transportation hub. It has more crime, it has more congestion, it has two PDA's that will further increase its population and it continues to move in the direction of replicating the infill development associated with the One Bay Area Plan. Novato is still Novato. With resident input it can remain a more suburban/rural setting. Vote after vote that is what people have asked for. Lower density housing, fewer big box stores, more friendly to local business, maintaining its character as a town more likely found in Sonoma. I agree that the sales tax increase does little good if we live beyond our means but if we use the time to reign in spending and find alternate revenue streams we can stay on track. Novato is a wonderful town. There are many people who selflessly volunteer time, like Toni and Trish, on Pennies for Police Dogs. California may be in a dire mess but with help, Novato does not have to move in that direction.
Bob Ratto September 27, 2012 at 04:40 PM
Tina You are entirely correct. Having grown up in San Rafael (mother still lives in same house since 1966), it has dramatically changed over the years, and not all for the better. With their embrace of PDA's, more density/fiscal problems will ensue, even if they are given funding from ABAG/MTC..the funding given simply will not match the costs incurred. Novato needs to simply remain Novato.
Dave Robertson September 27, 2012 at 08:23 PM
Mainly no one participates because Novato is really not worth the bother.
Dave Robertson September 27, 2012 at 08:36 PM
Tina, Novato is really a "small town" place to live. It belongs in Oregon, not California. Yes, I understand your frustration with doing business in Novato or SR. This is Marin, not the South Bay. The South Bay may be overdone but it has a level of sophistication that is commensurate with San Francisco, Berkeley, etc. Marin does not. As you get closer to SF in Marin (Mill Valley, Tiburon, etc.) you get more arrogance but no more substance. Now Napa, St.Helena, etc, are quite a bit more sophisticated than Marin without the attitude. I guess what I am saying is that Novato has the least to offer in Marin, but still has the attitude. Frankly I am missing Palo Alto these days. Yes, you pay $2M for a tiny shack, but it has a life of its own. All we have are small town politicians and small town politics. Frankly, I expected this place to "grow" a lot more when I moved here over a decade ago. Instead it turs into a small town strip mall with attitude. Sorry, I am not trying to anger people, but Novat really seems to be stuck in quicksand. Mayberry at least had some country charm, but that was only a TV show!
Tina McMillan September 28, 2012 at 01:37 AM
Dave While I can appreciate that this is how it is for you, I have a completely different feeling about Novato. I have lived here for over 30 years. I love it here in spite of the conflict over schools or housing or city government, I think Novato is one of the most beautiful places I have ever lived and I find the people here are wonderful to get to know. Many are transplants like me from other parts of the country that came to northern California and wound up in Marin and then when it came time to buy a home moved to Novato because it was affordable and a great place to raise kids. My folks lived in Walnut Creek, my Uncle in Piedmont, and my cousins in San Francisco, Mill Valley, Sacramento and so on. I have friends in Palo Alto and Redwood City. These places all have their own charm but Novato is my home. I see us going through growing pains. We need leadership that will challenge regional agencies without having to strong arm the council to get there. I don't agree with Mr. Frank's vision of Novato and worry that he will continue to create ill will even with a newly hired PR director to run interference for him. Why is it that Novato can't hire local talent to help with any of the recent projects from Wayfinding Sineage to the City Offices? Regardless, Novato for me, continues to be a beautiful place to live and I hope to be able to help make it astronger community by raising issues and being involved in local government.

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