Newly selected Manhattan Beach city manager Dave Carmany knows a thing or two about retirement pensions.
It was a huge selling point in his appointment to the city’s highest staff position before a unanimous vote by the City Council on Tuesday. The city next year will negotiate new contracts with its labor unions — including police, fire and teamsters — and pension reform could very well be up for grabs, according to Mayor Richard Montgomery.
“There are a lot of options we want to take a look at,” said Montgomery in an interview last week. “Everything is on the table this time for everybody to be aware of. Dave, having just done negotiations, gives us a leg up.”
Carmany, who has worked as Seal Beach’s city manager since 2007, previously worked for four years as a consultant and pension plan administrator for Public Agency Retirement Services (PARS), a private firm that provides post-employment benefits to some public sector employees. At PARS, Carmany structured pension programs and helped public agencies create retirement programs consistent with their fiscal constraints and bargaining requirements.
As city manager of Seal Beach, he recently negotiated three-year collective bargaining agreements with the Seal Beach Police Management and Police Officer associations, establishing two-tier retirement pension plans with each — a practice becoming more common as city and county officials struggle to contain the exploding costs of public pensions.
Because local governments cannot break pension promises to current employees, more are opting to offer less generous retirement plans to new workers in the two-tier system. Instead of using the common “three-at-50” formula – in which a 30-year employee retires with 3 percent of his highest salary for each year of service — some cities reduce percentages or increase the retirement age.
“[Carmany] earned the right and honor to sit across from the police department in Seal Beach and establish a two-tier system that will save Seal Beach substantially going forward,” said Councilmember Mitch Ward at Tuesday’s City Council meeting, at which Carmany was approved as Manhattan Beach’s new city manager starting Jan. 10.
The plan is expected to ultimately lower Seal Beach’s contribution rate from 20 percent to 13 percent, saving the city $5,100 per new public safety employee annually.
The labor agreements for the Manhattan Beach Police Officers Association, Manhattan Beach Firefighters Association and Manhattan Beach Teamsters will end within a few months of each other next year. Last July, MBFA extended its agreement for an extra year in order to bargain around the same time as the other unions, according to City Attorney Robert Wadden.
“We’re going to have to hit the ground running in January really quickly,” said Mayor Pro Tem Nick Tell of preparing for negotiations.
Carmany stressed that the decision whether to revise pension formulas within a two-tier system is unique to each city, and said it’s too early to tell whether it would be a good decision for Manhattan Beach’s collective bargaining agreements.
“It was a long process of interspace bargaining in Seal Beach,” Carmany said, referring to a newer form of labor negotiations designed to be less adversarial. “I was concerned the higher pension formula was not sustainable for the city. We found a solution that works for that particular community.”
Throughout the state, unions have raised concerns that the system might create two classes of employee and limit departments’ abilities to attract and retain top talent.
“We’re not dead-set for or against anything,” said MBPD Detective Michael Rosenberger, lead negotiator for the Manhattan Beach Police Officers Association, which has 57 members. “A concern for a two-tier system is hiring. Would we get the best possible applicants coming to our city?”
Manhattan Beach police and fire retirees receive the three-at-50 formula – which equates to up to 90 percent of their salaries at retirement — as do all Seal Beach public safety workers who started before their recent contract was adopted.
Public safety employees hired since Seal Beach negotiated its recent contracts will receive a reduced formula of two-at-50, or, in other words, retirements up to 60 percent of their salaries. Both labor groups also received increases in salary, medical cost coverage and vacation accrual, as well as 5 percent salary increases after 25 years of service with the SBPD.
“We bargained for the 2 percent at 50 formula for future hires because we trust our City Manager David Carmany and we think it’s to the betterment of the municipal organization long term,” said Seal Beach Police Sgt. Joe Miller, president of the Seal Beach Police Management Association.
Carmany headed negotiations for Seal Beach, which began in February, rather than hiring an outside firm to represent the city. Both unions began working out contracts in July, and in November the city approved their respective agreements.
Miller agreed that the reduced pension could draw future applicants away from Seal Beach and toward other departments, but said that most officers recognized the benefit to the long term financial integrity of their retirement system.
“Obviously, we’d love to keep 3 percent at 50,” he said. “I’m hoping that Manhattan Beach maintains its position and they don’t lose their 3 percent at 50. But we came to an equitable agreement for the long term of our city and the guys understood that.”
How quickly a city using a two tier system feels the savings depends on the structure of its workforce, Carmany said. In Seal Beach, 50 percent of its police force will be eligible to retire within the next five years and the half hired to replace them will be on the lower formula.
Carmany is the fifth city manager Miller has worked with during his 23 years with the SBPD.
Miller described Carmany as “the most fair, family-oriented and caring city manager that we’ve ever had.”
“When Mr. Carmany tells you ‘We don’t have the funding for this’ or ‘We don’t have the ability to pay for that,’ we believe him and that’s not always the case with city managers,” Miller said. “He’s done a lot for us. Our relationship with him has been great.” ER