San Diego City Attorney Calls Pension Credit Purchase Illegal

The upshot of Aguirre’s legal position is that the pensions of Murphy – who announced this week that he is prematurely stepping down from his post (See  San Diego’s Murphy: ‘The city needs a fresh start ‘)  – and the council members could drop in value by thousands of dollars annually, according to a San Diego Daily Transcript news report.

According to the news story, members of the city general service and legislative employees have been able to purchase one year of service credit for 15% of their annual salary. For example, under the plan, an employee making $100,000 per year is able to buy a year of pension service for $15,000.

Murphy purchased the maximum five years of service credit for $14,352 per year, which will boost his pension by about $17,000 annually.  Council members Toni Atkins, Jim Madaffer and the late Charles Lewis also purchased the maximum of five years for about $10,770 per year, which will boost their annual pensions by about $13,000.

On November 1, 2003, the city boosted the purchase rate from 15% to 50% of a legislative employee’s annual salary, the Daily Transcript said. .

In any event, Aguirre wrote in a memo to Murphy and council lawmakers that city taxpayers are shouldering the cost difference.  “The previous purchases of service credit were subsidized by the taxpayers of the city of San Diego by at least 70%,” Aguirre wrote. “This subsidy is not permitted under law.”

In another memo to city officials, Aguirre alleges that the mayor and council acted improperly when they passed a municipal code ordinance allowing city employees to become vested in the city’s pension after working five years and purchasing five years of pension credits.

The San Diego City Charter requires that an employee work 10 years in order to become vested and collect pension benefits. On December 3, 2002, the City Council approved a change to the city’s municipal code to allow the pension credits to count toward the vesting period.

Aguirre argued that these benefits are voided because the municipal code ordinance approved by council conflicts with the voter-approved City Charter.

“While the City Council is empowered to enact retirement ordinances, it is not empowered to enact retirement ordinances that conflict with the Charter,” the report states. “Neither the City Council nor the SDCERS (pension) Board may enact ordinances or adopt rules circumventing the San Diego City Charter.”