Council to ask voters to raise sales tax to fund pensions

BY EMILY MIBACH
Daily Post Staff Writer

Redwood City Council decided last night to ask voters in November to increase the sales tax a half-cent to cover spiraling pension costs despite objections from residents.

Resident John Blackmore said he would like to see more budget cuts.

“A good (financial) program would be well balanced, but one that relies on tax increases to solve most of the problem would be unsustainable and shameful,” Blackmore said.

Claire Felong, who used to work as a CPA, called the sales tax hike regressive because it takes a larger percentage of a low income family’s income than it does a high-income family.

Felong also suggested that the city ought to look into taxing businesses, since employers are not paying the sales tax, but benefit from city services that would be cut if the tax weren’t passed.

In all, five residents went to the microphone at the meeting last night to object to the tax hike.

If the sales tax passes, it will boost the city’s sales tax rate from 8.75% to 9.25%. The sales tax might go to 9.75% in the same election if San Mateo County voters approve another sales tax measure for SamTrans and other transit projects.

City has been running surpluses

The new Redwood City tax will bring in about $8 million annually. The city ran surpluses of $26 million in the fiscal year ending June 30, 2017, and $31 million the previous year.

But City Manager Melissa Stevenson Diaz told council the city’s payments to CalPERS, the state pension program, are expected to double in the next five years, plunging the city budget into a $12 million annual deficit that year.

The tax proceeds would go directly into the city’s general fund and could be used by the police, fire, library and parks and recreation departments, which represent 80% of the city budget. Those departments would have to be cut if the tax doesn’t pass and the city has to shift more money into CalPERS.

Councilwoman Janet Borgens said she sees the tax hike as both fair and unfair.
“Those who can’t afford it have to spend more, but it’s also fair because everyone gets (to pay) it,” Borgens said.

Council blames CalPERS

Council members blamed the city’s increasing pension costs on CalPERS and the state government. Councilwoman Shelly Masur said that when Gov. Jerry Brown was attempting to balance the budget during the recession, he reduced state payments to CalPERS, which forced cities and current employees to pick up the slack in the payments.

Councilman Jeff Gee also blamed CalPERS, say- ing the agency made some incorrect assumptions about how much it would have to pay pensioners, and now the program is so messed up nobody in Sacramento wants to reform it.

However, the amounts the city pays its retirees were determined by the city and its unions during contract negotiations in years past.

Cities had the leeway to make the pension programs spartan to avoid the problems they face today. But instead the city opted for generous programs. For example, Redwood City police and fire retirees who were hired before 2011 are eligible for a pension at age 50 (after 30 years of employment) that is equal to 90% of their salary in their single highest year of compensation.

4 Comments

  1. I’m not going to vote to raise my taxes so they have more pension money. Thank you for putting out the truth about this. I’m voting NO!!!

  2. Could the Post print a list of RWC’s top pension recipients? You did this a few years ago. I think it would open people’s eyes when they see people who are pulling down 200K a year in retirement.

  3. Those unfunded pension liabilities are SUPPOSED to continually increase due to the cause of those unfunded liabilities, DEFINED BENEFITS. We’re constantly trying to put band aids over the wound, but the only way to heal the wound is to change Defined Benefits to DEFINED CONTRIBUTIONS, like the rest of the business world. With Defined Contributions ONLY, there would be no need for CALPERS that already pays more than 640,000 retirees their DEFINED BENEFITS.

    The international business community is intelligent enough to know that DEFINED BENEFITS, neither capped nor precisely quantifiable in advance, are financial disasters to any business, thus all businesses focus on the known, i.e., DEFINED CONTRIBUTIONS alone.

    Since the public pension system is severely underfunded, city governments need to fund the retirements of former employees by taking money from government services as the increasing pension costs will likely continue to crowd out resources that otherwise would go to public assistance, recreation, libraries, health, public works, and public safety.

    The young generations who are unable to vote today, will bear the costs of many enacted “Defined retirement benefit” pension programs requiring the younger generations to pay higher taxes and work later into their lives to pay for those promises, to subsidize older Americans.

  4. Redwood City Council (RCC) is NOT taking responsibility for their actions. RCC promised these extravagant pensions to city workers. RCC choose to use Calpers. Don’t blame others for your poor decisions. Grow up!

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