The topic of this commentary is Piedmont's public employee benefits. The city's fire department serves as a good example of a problem facing Piedmont. With a staff of 24, the Piedmont Fire Department runs with eight firefighters per shift -- three for the engine, three for the truck and two for the ambulance -- though considering leave and disability, shifts mostly operate with seven firefighters.
Given these staffing levels and Piedmont's small area, 911 response times are less than three minutes. Contributing to this short response time is the frequency of calls to the Piedmont Fire Department. There were fewer than 600 calls for service to the fire department in 2012, or less than two calls a day. Fortunately, we don't hear many sirens in Piedmont -- knock on wood.
The problem is that while Piedmonters enjoy rapid 911 service, we are not paying for it. The city has not set aside sufficient savings to pay for the pensions and retirement benefits of our current workforce. This is a problem common to many municipalities, partly due to bargaining agreements made in the past decade but also to the "boomer" wave of retirements -- 40 percent of Piedmont's staff is estimated to retire in five years. CalPERS, the state pension system, is not fully funded, and the contribution from cities is likely to increase in the coming years. Piedmont is responsible for employee health benefits and, like CalPERS, is underfunded. Just how badly depends who you ask, the auditors or accountants.
According the city's 2012 audit, the city needed to contribute $1.25 million for the "Other Post Employment Benefit (OPEB) retiree health care benefit costs" and contributed only $366,000 (page 30, http://www.ci.piedmont.ca.us/html/govern/staffreports/2013-02-04/FY11-12audit.pdf). Using an actuarial approach that determined costs over 30 years, the auditors estimate an $800,000-to-$1 million annual contribution is needed to meet these benefit costs of current employees.
The midyear budget report to the City Council took a different approach. OPEB projected 30-year contributions were replaced by annual projected medical premiums to be paid over the next five years (page 12, ww.ci.piedmont.ca.us/html/govern/staffreports/2013-03-04/mid_year_report.pdf). That number rises to $500,000 by 2017 but doesn't really capture the expenses we know are coming. For example, my high school senior's college tuition was not that much this year, so why worry? Talk to me at this time next year.
There is some good news -- a city pension fund in existence before CalPERS has a $10 million surplus that upon voter approval can be applied to medical benefits of current and future retirees. That buys the city some time but only 10 years -- medical premiums are expected to average $1 million a year for 30 years, so other sources of revenue will be needed to pay for the benefits of current employees.
Which brings me back to the Piedmont Fire Department. What are the options for the city to start saving money to pay for the benefits of its current employees? One could be to streamline city services and put the savings into the benefits fund. Going from seven to six firefighters a shift could save almost $500,000 per year. Chief Ed Tubbs presented an argument against this to the City Council, (http://www.ci.piedmont.ca.us/html/govern/staffreports/2013-02-04/firedeptstaff.pdf), but the Municipal Tax Review Committee showed how the fire department is overstaffed when compared to other cities (page 22, http://www.ci.piedmont.ca.us/html/govern/staffreports/09-06-11/mtrc.pdf).
Another option could be to have employees pay more into their retiree medical plan. Staff currently pays $1,000 a year, and there may be ways to alter current benefit plans to increase that or at least cap the city's contribution. The council is considering this in negotiations with the employee unions. Finally, there is always the parcel tax that could be increased at some later date, but having future taxpayers pay for the benefits of current employees doesn't seem fair.
I am hopeful that this year's Budget Advisory and Financial Planning Committee will provide the City Council with some long-term guidance.
Garrett Keating is a Pied- mont City Councilmember.