Budget Committee: City Pay, Benefit Practices Are 'Unsustainable'

Piedmont's pay and benefit structure for city employees is "unsustainable, " and "an uncontrollable risk to the City's financial well-being," members of the Budget Advisory and Financial Planning Committee say in a letter that will be formally presented to the Piedmont City Council tonight.

"Between the funding status of the current CalPERS [California Public Employees Retirement System] retirement plans, the side fund, and the unfunded healthcare retiree benefits (as enhanced by State law), the City has unfunded liabilities relating to benefits of almost $40 million – or over $400k per full time equivalent employee – which continue to grow," the committee said.

While the city has taken some steps to control the future costs of employee benefits — a two-tier retirement plan and a cap on the percentage of city contributions — those are not enough, the commitee said.

Members recommend a long-term study of pay practices, with the goal of a major shift — from defined benefits to defined contributions.

The two-tier system itself may create future problems in hiring, committee members said, because it could discourage more experienced people from changing jobs and losing the higher benefits they have at their current jobs.

Some 40 current city employees are likely to retire in the next 5 to 10 years, and Piedmont may find its pool of experienced applicants shrinking, the report said.

The relatively new budget committee, formed at Mayor John Chiang's urging following the February 2012 municipal election, tackles several other issues in its report: employee healthcare benefits, sanitary sewer replacement and long-term maintenance of city facilities among them.

The committee's report is available on the City of Piedmont website.

The city council meets at 7:30 tonight in the City Hall council chambers, 120 Vista Ave.