Saturday, August 21, 2010

Some Interesting Bills & Another City - Vernon

As of this date the State does not have a budget.  They do not have time to work on a budget, but plenty to deal with local agency compensation.  And some cities are great in giving our Legislatures a lot of reasons to react.  Well, today, LA times is reporting another City that is amazing all of us--City of Vernon, next to the City of Bell.  I thought you might like to read the article and some of the bills that are in the process!
I saw these bills yesterday and I thought you might like knowing about them.  The Speaker of the Assembly and President Pro Tem of the Senate (including Jerry Hill) held a news conference and introduced more legislation on local agency compensation and pensions. By my count there are now eight bills. Two are not yet in print. The Speaker committed to get them all through the legislative process by adjournment on 31 August. That's 10 days from now.

Here's what we have right now:

AB 1955 (De La Torre): This is an urgency bill that would take effect immediately. This is the "excess compensation cities" bill. It has been amended to shift oversight responsibilities from the Attorney General to the Controller. This bill also requires the posting on the web site of any contract or amendment to a contract of employment of an employee of a legislative body of a local agency. It must be updated annually and include salary, benefits, retirement and any other forms of compensation.

AB 827 (De La Torre): This bill places severe restrictions on any employment contract between an employee and a "local agency employer." It prohibits automatic extensions of contracts, any increase in compensation above COLA, or severance payments greater than 12 months. It also requires that a performance evaluation be conducted prior to any compensation increase greater than a COLA be given and that the evaluation be made public and a public vote be taken on the compensation increase.   If signed into law it would take affect on 1 January 2011.

AB 2064 (Huber): Requires the annual posting and update of the annual salary of the chief executive of every city, county, special district, school district, and JPA. Requires the same of every member of the Legislature, legislative staff and the constitutional officers.

SB 501 (Correa): Somewhat similar to AB 2064 but applies to anyone in a city, county, special district, school district or JPA who is also required to file a Form 700. Appears to cover total compensation not just salaries (as in AB 2064).

AB 192: This is purported to be another related bill that was introduced yesterday but is not yet in print.

AB 194 (Torrico):  This bill was introduced yesterday and not yet in print. It sets limits on local agency pensions by prohibiting public retirements to be based on salaries exceeding 125% of gubernatorial pay (currently $173,987).  
SB 1425 (Simitian): Limits items included in final compensation and prevents final year spiking. Applies to employees who retire after 1 January 2012.

AB 1987 (Ma): Similar to SB 1425 but also attempts to prevent "double dipping." Takes effect on 1 January 2011.

These are all in a great deal of flux and it is expected there will be multiple amendments as they move through the process. 
In addition, I have posted the LA article at the bottom of my email.  You might not believe what you read!

Hefty paychecks for Vernon officials rival those in Bell

The ex-city administrator who now serves as a legal consultant earned seven figures in each of the last four years, records show. Others in Bell 's neighboring city got $570,000 to $800,000 last year.

By Kim Christensen and Sam Allen, Los Angeles Times
August 20, 2010
Bell isn't the only city that has paid huge salaries: In neighboring Vernon , a former city administrator who now serves as a legal consultant has topped the $1-million mark for each of the last four years, records show.

Eric T. Fresch was paid nearly $1.65 million in salary and hourly billings in 2008, when he held the dual jobs of city administrator and deputy city attorney, according to documents obtained by The Times through the California Public Records Act.

Described by city officials as an experienced finance attorney, Fresch was paid nearly $1.2 million last year, records show. Through July 31 of this year, he has earned about $643,000 as "outside legal counsel."

Other highly compensated employees include Donal O'Callaghan, who was paid nearly $785,000 last year as city administrator and director of light and power, overseeing Vernon 's city-owned utility. He now earns $384,000 a year overseeing capital projects for the utility after stepping down July 20 as city administrator.

Former City Atty. Jeffrey A. Harrison earned $800,000 last year and City Treasurer/Finance Director Roirdan Burnett made $570,000, records show. The year before, Harrison was paid $1.04 million.

Disclosure of Vernon 's hefty salaries follows The Times' recent report that Robert Rizzo reaped total annual compensation of more than $1.5 million as city administrator in working-class Bell . That report sparked public outrage among Bell residents and prompted the resignations of Rizzo and two other highly paid managers.

Although Vernon and Bell share a border in Southeast Los Angeles County , they are very different cities. Bell is a working-class, largely immigrant city with 38,000 residents. Vernon has fewer than 100 residents and is largely a business and industrial hub.

But municipal government experts said they were taken aback Thursday by word of Vernon 's big paychecks.

"They are beyond anything that I could imagine for a local government manager," Dave Mora, west regional director of the International City-County Management Assn., said of the sums paid to Fresch and O'Callaghan.

Kenneth Pulskamp, president of the City Manager's Department of the League of California Cities, agreed.

"Over 99% of city managers make well below that amount of money," said Pulskamp, who also is city manager of Santa Clarita. " So that seems way out of the ordinary."

Fresch told The Times on Thursday that he has performed complex legal services for Vernon , mostly related to its energy businesses. He said he gradually accepted more and more work from the city since he first started working for it in 1986.

Once he joined the city staff, Fresch said, his services cost Vernon less than what his private-practice "peer group" would have billed for similar work.

He said Vernon saved money through the arrangement. Fresch now serves as "special counsel" to the city, at $525 an hour.

"If people think that I am a city guy making that kind of money, they would have every right to be outraged," he said.

"I'm not trying to say that municipal compensation should be at the level that I'm doing. I'm saying that if you bring a guy like me in, and do transactions for several hundred million dollars, this would not be out-of-line compensation."

Vernon officials defended the salaries Thursday, saying that Fresch, O'Callaghan and others brought a level of expertise the city otherwise would not have had.

They also noted that the City Council has done away with a two-tiered pay system that allowed some officials to bill for hours worked beyond a normal 40-hour work week. The extra pay did not count toward retirement benefits, they said.

New contracts, which have been phased in over the last year, call for straight salaries for employees.

"Vernon's goal continues to be to bring to the city the most highly trained experts in the field with the best, most creative thinking to solve its challenges," interim City Administrator Mark Whitworth said in a letter with the city's response to The Times' records request.

Whitworth said "the benefits of this high-quality team are evident," noting that " Vernon businesses bring hundreds of millions of dollars in revenue to the region, and support 50,000 jobs."

Vernon City Council members are paid $68,052 each year, far greater than in most cities in Los Angeles County , according to a Times survey.

Founded as an industrial city, Vernon has built its economic well-being on a base of about 1,800 businesses.

Its municipally owned power plant provides electricity at rates consistently lower than those elsewhere, Whitworth said, and the city provides top-tier services, including a fire department that is one of only 60 Class 1 departments nationwide.

Vernon has long been dogged by accusations that it is a fiefdom run by a family that has held sway over the town for generations.

In January, former Mayor Leonis Malburg was ordered to pay more than $500,000 in fines and reimbursements to the city after his conviction for voter fraud and conspiracy charges, bringing an ignoble end to his lengthy reign as Vernon 's patriarch.

Malburg, the grandson of Vernon 's founder, served on the council for five decades.

Although prosecutors had asked for jail time, Superior Court Judge Michael Johnson cited Malburg's age — 80 — and his medical history in deciding against incarceration.

Malburg's wife, Dominica , 83, was ordered to pay more than $40,000 in fines and fees.

In December, the judge found the couple guilty of engaging in an elaborate scheme in which they pretended to live in Vernon while actually living in a Hancock Park mansion.

Former City Administrator Bruce Malkenhorst Sr., who according to the records obtained by The Times made $911,563 in 2005, was later indicted on public corruption charges.

Still, Malkenhorst retired with a then record state pension of $500,000. Malkenhorst, who rode to work in limousines, is accused of taking $60,000 of city money for personal use. He is awaiting trial.

On Thursday, Whitworth, who also is Vernon 's fire chief, singled out Fresch and O'Callaghan for praise for their work on behalf of the city.

Both had been brought in initially as consultants, he said, but so impressed council members at the time that they were asked to join the payroll.

But the League of California Cities' Pulskamp said that, no matter how many hats the two wore, their salaries were "many times the norm" for city managers — probably five times the going rate for a city of Vernon 's size, he said.

"Typically, city managers have some expertise in some area whether that be finance or personnel or one of the other departments," he said. "Typically that is just part of being a city manager — you don't get paid extra for that type of expertise."

State Assemblyman Hector De La Torre (D-South Gate), who has proposed legislation that would penalize cities with "excessive compensation," said Vernon's business base does not justify such high pay for its officials.

"You cannot defend these kinds of numbers," he said. "A city government is not a private business. Period. This is not a private company."

Submitted by Jim Wagner


Anonymous said...


Kathy Meeh said...

Jim, don't you wonder why these AB provisions didn't already apply? Doesn't it seem that over the past 30 years government should have followed social security rules, and similar to private enterprise offered 401 (k) or 403 (b) options?