Outsourcing pension costs: Costa Mesa hits snag

Costa Mesa voters last week rejected a proposed city charter, a switch to home rule from state general law that would have allowed the city to bypass a court ruling blocking the outsourcing of some services to private firms.

The city of 110,000 in Orange County drew national attention last year when a 29-year-old city employee jumped to his death from the five-story city hall as nearly half of the city workers received pink slips, a six-month notice of possible outsourcing.

Now a ruling last August by a three-judge appeals court panel, upholding a superior court stay on Costa Mesa outsourcing, has some worried that outsourcing to private firms by other general law cities could be blocked or even rolled back.

The Costa Mesa city council, which reportedly has spent more than $1 million on the legal battle so far, voted 4-to-1 last month to appeal the panel’s ruling to the state Supreme Court.

“It matters more to other cities than it does to us,” Jim Righeimer, Costa Mesa city councilman, told the Orange County Register newspaper. He said other cities urged Costa Mesa to appeal.

The League of California Cities plans to request “depublication” of the appeals court ruling (preventing citation in other lawsuits) and to file a letter of support for the Costa Mesa appeal to the high court, said Eva Spiegel, a League spokeswoman.

Soaring public pension costs have helped renew interest in an old issue: attempts to cut government costs by contracting for services. Along with the work, governments can outsource some of the risky long-term debt of pensions and retiree health care.

Bankrupt San Bernardino, more than $5 million behind in payments to the California Public Employees Retirement System, is considering outsourcing police services. The city council voted last week to ask the sheriff’s office for a cost estimate.

When the Costa Mesa outsourcing plan was unveiled last year, Righeimer pointed to an estimate that city pension costs could soar from $15 million to $26 million in five years, a projection disputed by others.

The Costa Mesa charter proposal, Measure V, was rejected 59 percent to 41 percent. Voters also may have cut support on the city council for the sweeping outsourcing plan approved last year on a 4-to-1 vote.

Outsourcing opponent Wendy Leece remains on the council. One outsourcing supporter, Mayor Eric Bever, was replaced by former Mayor Sandy Genis. Another supporter, Gary Monahan, had a 319-vote lead with many ballots still uncounted.

Costa Mesa Councilman Jim Righeimer
(OC Register photo by Rose Palmisano)

Costa Mesa has been an outsourcing battleground. A private investigator reportedly trailed Righeimer from Monahan’s bar and restaurant last August and phoned police to report that the councilman might be driving drunk.

A Costa Mesa policeman went to Righeimer’s home and gave him a sobriety test in front of his family. Righeimer, who said he only had a diet Coke, passed the test. A union denied involvement, but fired a law firm that has employed the private investigator.

The private investigator told the Register last week that he was in the bar to catch Monahan in a compromising situation with a woman operative sent into the bar. An attractive woman wearing a low-cut top is said to have flirted with Monahan.

The district attorney’s office reportedly is investigating. The private investigator told the Register he was “hired to get dirt” on several council candidates supporting outsourcing, but he declined to identify his client.

Labor unions opposing Measure V reportedly spent $500,000, ten times the $50,000 reported by supporters. One of the objections was the lack of public participation in the creation of the proposed charter.

The charter had several provisions aimed at curbing union power: voter approval required for pension increases, no requirement for union “prevailing” wages on public works contracts, and a ban on the use of union fees and dues for political activities.

Righeimer was the author of a failed forerunner of Proposition 32, a statewide initiative rejected by voters last week. Proposition 226 in 1998 would have required public employee unions to get individual consent to use dues for political purposes.

After the vote last week, Righeimer said he would work on another proposed city charter, this one drafted with the aid of a citizen’s committee. “It was loud and clear from the public that they want to be more involved,” he told the Register.

Some think the appeals court ruling last August may set a new precedent by saying that general law cities are only authorized to outsource “special services” to private firms that are mentioned in state statutes.

The limit does not apply to contracts with other local governments, as considered in San Bernardino, or to cities that operate under their own charters, about 121 of the 482 California cities.

Costa Mesa was urged to appeal because the ruling may conflict with some current city contracts and prevent others in the future. A few cities contract for nearly all services, among them Lakewood, a pioneer in 1954, and more recently Maywood.

But cities contract for a variety of services. The California Contract Cities Association lists 67 members, ranging from Los Angeles to the troubled small cities of Bell and Vernon, where high salaries and pensions have been rolled back.

The appeals court ruled in Costa Mesa City Employees Association v. the City of Costa Mesa that the superior court’s injunction against outsourcing should continue because the union may prevail in its lawsuit and would be harmed if the stay is lifted.

The three-judge panel agreed with the union that the city did not discuss outsourcing with the union, as required by a labor contract, and more importantly that contracting with a private firm for anything but “special services” is prohibited.

The ruling said several cases “make clear that courts will not hesitate to invalidate a service contract between a local agency and a private entity if the contract involves services that are not considered special.”

So, what are “special” services?

One of two similar state statutes cited says a city “may contract with any specially trained and experienced person, firm, or corporation for special services and advice in financial, economic, accounting, engineering, legal, or administrative matters.”

In the case of Costa Mesa, said the appeals court panel, there is statutory authority for only two of the many services the city wants to outsource: operation of the jail and administration of payroll services.

The Costa Mesa outsourcing plan also includes street sweeping, graffiti abatement, animal control, special event safety, information technology, graphic design, reprographics, telecommunications, employee benefit administration, building inspection, and park, fleet, street and facility maintenance.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 12 Nov 12

39 Responses to “Outsourcing pension costs: Costa Mesa hits snag”

  1. Tough Love Says:

    Quoting …”state general law that would have allowed the city to bypass a court ruling blocking the outsourcing of some services to private firms”

    The simply fact that there exists a State law to do this is incredulous …….. for what reason would our elected officials approve such a law (placing roadblocks in the way of providing service in a value-based way) OTHER THAN as payback to the Public Sector Unions for their campaign contributions and election support ?

    “Public Sector “Collective Bargaining” should be outlawed and campaign contributions from Public Sector Unions should be barred ……… CA’s Citizens were incredibly stupid to vote down Prop. # 32.

  2. SeeSaw Says:

    TL, is so naive. Evidently he never heard of Bell and Vernon.

  3. Tough Love Says:

    SeeSaw, Really?

    “Naive” are are Public Sector workers (and retirees) who believe they will actually get all that they have been “promised”.

  4. SeeSaw Says:

    We are getting what the law allows–promises have nothing to do with it. A contract is a contract, is a contract.

  5. Tough Love Says:

    SeeSaw, You should read this article:


    While it only one City’s story, the same situation exists throughout California and in many other States and Cities.

    Your having blinders to the root cause (which the article very succinctly describes as …” a vicious circle of self-interests among city workers, local politicians and state pension overseers”), doesn’t change it.

  6. SeeSaw Says:

    I had already read the Rueters article TL. I am no, “Babe in the woods”. The Rueters article is very one-sided. If you want balanced reporting, read the articles by Wayne Lusvardi on CA Watchdog.

  7. SeeSaw Says:

    One thing though, TL. I agree that salaries have gotten out of control. As one who worked in the public sector, I saw it first-hand. My City was not in the stratosphere, salary-wise, of those like SB. Those astronomical salaries and pensions you read about belong to people who had reached the upper levels of management. The people with those salaries and pensions don’t belong to the unions that you so-hate. (My former CM’s pension is six+ times more than mine.)

  8. spension Says:

    Well, the root cause is really innumeracy on the part of the managers of the pensions; they were ignorant that the securities markets go down for periods of many years. Assumption of 7-9% return rates forever miss the big point: you have to plan to survive 30 year periods with only 1-4% returns.

    Which is also the true Keynsian doctrine: when the economy is good, that is the time to pinch pennies. Benefits never ever should have been raised because the 1980’s and 1990’s were bull markets. Quite the contrary: that is when Keynes would have said be a penny pincher, because you have to sock in resources to survive the downturn later.

    Instead our pension system managers were ignorant. Even though DB systems are more economical when well run, they upped the benefits so high during the 1980’s and 1990’s that now the systems are bankrupting cities. And more ignorance has now followed, like, know-nothing anti-DB screeds.

    On the private side (and a close friend of mine has a private DB pension from GE) benefits are much more realistic, or, the pension funds were raided by corporate takeovers. In the latter case, DC plans (which I have) are a pale fig leaf for retirement benefits. Since I figured that out in 2000 or so, I’ve been putting every last penny I could into my DC plan… usually 30-40% of my gross salary. And I’m still on track to get not much more than social security would (or will) provide… particularly since the save withdrawal rates are now only projected to be 2% or less. DB plans are simply better, when well run.

  9. Tough Love Says:

    Quoting Spension …”Well, the root cause is really innumeracy on the part of the managers of the pensions”

    Innumeracy my foot.

    Certainly a dose of incompetency & stupidity, but much more a serious case of greed, avarice, disregard and contempt for the Taxpayers who they demand top-up Plan shortfalls when the all-in bet on red goes wrong.

    I have no argument with the rest of your comment, although as we’ve discussed before, while there are indeed some mortality-sharing benefits of DB (vs DC) Plans, I believe that DB Plans cannot be effectively managed & controlled in the PUBLIC Sector arena due to our untrustworthy, self-serving, vote-selling, contribution-soliciting elected officials ….. ALWAYS more than willing to accept campaign contributions and election support in exchange for favorable votes on pay, pensions, and benefits.

    With DC Plans all your cards are ALWAYS on the table.

  10. spension Says:

    In the end, Tough Love, you are anti-democracy. Because it was really the *voters* (who are also Taxpayers) who elected all the folks who made the decisions you rant about.

    Sure, DC plans have `cards on the table’. But they were *never* intended to be the sole source of benefits, they were meant to be a supplement to DB plans. And there is not a single financial analysis in the USA who says DC has been successful… fewer than 5% or 3% of people in the USA save a sufficient amount in their DC plans.

    An *abject failure*.

    If *all* of the financial analysts had uniformly said, `we simply cannot afford 3% @50, etc’ it (and other excesses of the California pension system) would never have happened. Those analysts are the ones who really could have stopped it all.

    Pretty much everyone else in public life can’t add 2+2. They are utter numerical incompetents. But they relied on the pension analysts’ advice. Oh, by the way, ever check the salaries of he financial people in CalPERS, CalSTRS, UCRP? They greatly exceed that of all the prison guards, firefighter, cops, etc that we complain about. And they lobby for truly amazing pension benefits for themselves, the very people who caused the nightmare.

  11. Tough Love Says:

    Quoting …”In the end, Tough Love, you are anti-democracy. Because it was really the *voters* (who are also Taxpayers) who elected all the folks who made the decisions you rant about.”

    Do you think the voters expected the collusion between the Public Sector Unions and these Elected Representatives when we elected them ?

    Their self-serving, vote-selling, contribution-soliciting activities which resulted in the granting of these excessive Public Sector pensions & benefits must rightfully be rejected by the Taxpayers.

    As the DB Plan, you’re living in a dream world. The politicians will never change and cannot be trusted. DC Plans are the ONLY option (WITH all their shortcomings) in the Public Sector arena.

  12. spension Says:

    “Do you think the voters expected the collusion between the Public Sector Unions and these Elected Representatives when we elected them ?”

    Of course they did! When was it ever *not* that way?

    The only comparable fleecing of the public is that conducted by private sector business interests who grow fat on government contracts (like Ross Perot) and bailouts (like the $10 million bonus contracts honored by taxpayer money to Wall Street Executives. Whoops, I mean a total liability of $24 trillion according to SIGTARP Neil Barofsky, although *so far* the upfront costs have only been a few trillion).

    The voter and taxpayer knows all this, and knows that anyone who only complains about one side or the other is shilling.

  13. Tough Love Says:

    spension, I shill for nobody. Being well versed in the design and funding of pensions, I’m just disgusted at how the Taxpayers have been (and are continuing to be) financial raped by Public Sector pensions multiples greater than what their Private Sector counterparts get, and far far greater than what is necessary to attract and retain a qualified workforce.

  14. spension Says:

    But you rarely complain about the $ trillions of taxpayer money to Wall Street, or the vast executive golden parachutes, of the $100,000 toilet seats private contractors charge on military procurements, etc, Tough Love.

    Only the high public pensions bug you. They bug me too, and I consistently say they must be reduced, for both current retirees and current employees.

  15. Tough Love Says:

    Spension, We have addressed that issue before as well…short memory?

    Yes, corporate CEO’s are indeed pigs, but 1,000 big CEO pigs EACH getting (on average) $5 million unnecessarily … totaling $5 Billion … won’t bankrupt the corporation’s shareholders (and certainly not “taxpayers”), but 20 Million Public Sector workers (spread throughout this country) EACH getting $500,000 in pensions both greater than necessary (and greater than their Private Sector counterparts) … totaling $10 Trillion, will certainly bankrupt this country … and likely cause a Civil War (ala Greece) as THEY demand payment and taxpayers say “HELL NO”.

  16. spension Says:

    As we’ve discussed before, according to Neil Barofsky, then the special inspector general for TARP, liability for the Wall Street bailout totals $24 Trillion. The upfront cost was in the trillions. Cost of the Iraq/Aghan war is up in the trillions. Short Memory?

    Indeed the cost of those two adventures with taxpayer money would make quite a dent in the public pension debts… but I wouldn’t ever agree that paying off the public pension debt in the same manor we bailed out Wall Street and conducted unfunded wars is proper. We must reduce public pension costs.

    Letting the CEO’s off without the same continuous criticism you give to public employees shows you do not indeed think that CEOs are pigs. You give them a pass day after day. Put another way, if one CEO got a $50 billion golden parachute on the taxpayer dime you’d say, `no big deal’.

    You also won’t acknowledge: the voter in California is completely responsible for electing the people who voted to put California into terrible pension debt.

  17. Tough Love Says:

    Spension, If you’ve been paying attention to the news, most of that money has already been recovered.

    In any event, it was given out (actually loaned or given in exchange for equity positions in most cases) under a true crisis scenario … a VERY near collapse of the entire US financial/banking system.

    The past and CONTINUED excesses accrued daily via pensions promised to Public Sector workers is hardly an appropriate comparison.. There is ZERO justification for it’s continuation …. at taxpayer expense.

    And quoting …”Letting the CEO’s off without the same continuous criticism you give to public employees shows you do not indeed think that CEOs are pigs. ” Because I don’t focus on the piggish (criminal ?) activities of corporate CEO’s doesn’t mean I support “letting them off” the hook. On the contrary, I would like to see quite a few of the worst offenders jailed. It just means that I’ll leaving that battle to someone else.

    Since it bugs you so much, why don’t YOU head the fight ?

  18. spension Says:

    `Recovered’ by new loans (backstopped by the taxpayer) being issued. And if you or I borrowed money on an emergency basis, we’d pay 5-30% annual interest. In the 2009 bailout, was any interest paid? Not that I know of in TARP, or the $8 trillion Fed Reserve bailout.

    So you’re saying: if the public pension system can figure out a way to bring the world economy to the brink of a meltdown, you’d support bailing them out too.

    Personally, I think the contracts held by pension systems are just as valid as the bailout provisions sneaked into federal law for investment banks. It is inconsistent to honor one and not the other.

    But of course all of those bad decisions were made by officials *ELECTED BY US TAXPAYERS*. That is where the buck stops, an issue you consistently avoid, Tough Love.

    Your are quite simply anti-democracy.

  19. Tough Love Says:

    Quoting …”So you’re saying:” There you go again telling ME what I’m saying. Get a grip. And like I previously said, I agree that “Wall Street” bigwigs need to be knocked down a notch (and quite a few prosecuted), but that’s a fight for others to purse.

    I choose to pursue the DESPERATELY NEEDED Public Sector reform.

    And for what it’s worth, might you be a shill for the Public Sector Unions? While you profess to support pension reform, you conveniently sneak in comments such as this … “Personally, I think the contracts held by pension systems are just as valid as the bailout provisions sneaked into federal law for investment banks. It is inconsistent to honor one and not the other.”

  20. spension Says:

    You clearly favor bailouts like TARP if the world economy is threatened.

    I’d have defaulted in 2009 and I’d have a sovereign default now for public pensions.

    You favor paying off the Wall Street tycoons with taxpayer money. QED.

  21. Tough Love Says:

    Spension, So first you tell ME what I “say” and then you ME what I “favor”.

    Have you seen your therapist lately ?

  22. spension Says:

    What do you say TL? Do you oppose the TARP & related Fed Reserve bailout or support them, yes or no? You certainly imply that you support them:

    `In any event, it was given out (actually loaned or given in exchange for equity positions in most cases) under a true crisis scenario … a VERY near collapse of the entire US financial/banking system.’ (TL November 19, 2012 at 4:04 am).

    If you were clear, you could remove all doubt concerning your position on taxpayer bailouts of Wall Street. So you tell all of us.

  23. Tough Love Says:

    Spension, I opposed the TARP & bailouts … but in hindsight believe they may have been a necessary evil. Like it or not, peoples’ immediate impressions of the market ARE indeed important, and at the time of the TARP and Bailouts, those “impressions” were so bad that our financial system could have indeed collapsed. Like I said, it was a necessary evil. I neither benefited from it THEN or SINCE.

  24. spension Says:

    I oppose and opposed the bailouts. I think California should break its contracts with pension systems through sovereign default, if the pension systems don’t voluntarily reduce financial obligations from California to them. Take your medicine early and avoid the long slow collapse.

    But you, TL, have just said you supported the honoring hundreds of $10 million bonus contracts to Wall Street executives that were part of TARP. But you don’t want to honor the contracts to public pension systems. I find you to be inconsistent… you are practicing relative ethics and situational morality.

  25. Tough Love Says:

    Quoting spension ,,,”But you, TL, have just said you supported the honoring hundreds of $10 million bonus contracts to Wall Street executives that were part of TARP. ”

    I don’t recall saying that. I didn’t support it then, and I don’t today. I said the “bailouts” were a necessary evil … not bonuses to the executives.

    So please quote the date & time I said what you quoted above (a link would be nice). Can you muster up enough courage to admit you misspoke.

  26. Tough Love Says:

    Spension … I’m still waiting.

    What … you can’t find it ?

  27. spension Says:

    The bonus contracts were part of TARP. You said:

    “Like I said, it [TARP] was a necessary evil.” – Tough Love Says:
    November 20, 2012 at 5:40 am

    You seem to think you can pick and choose which parts of TARP to support and which not to support. Why don’t you be more clear… either you were up or down, one vote, for TARP or against it. Don’t prevaricate and obfuscate.

    I’m against it, period.

  28. Tough Love Says:

    So …. you’re WAY WAY WAY extending my statement ““Like I said, it [TARP] was a necessary evil.”” …. and you feel my saying that THIS justifies your saying (quoting from your earlier comment) …”you supported the honoring hundreds of $10 million bonus contracts to Wall Street executives that were part of TARP.”

    Did it take you the full 3 days to come up with this BS answer ??

    Is it THAT difficult to admit you were WRONG and just so … OK you DIDN’T say that ???

  29. spension Says:

    Do you support TARP or not? Yes or no? Stop the prevarication and dissembling.

  30. Tough Love Says:

    Spension, Frankly, when I said I supported “TARP”, I meant the various company bailouts. I was not even aware the executive bonus were part of the same package. I didn’t support the BONUSES then and don’t today.

    Now go ahead and pick apart my words, as doing so seems far more important to you than the actual issue.

  31. spension Says:

    So, add it all up on TARP… yes or no? What is your final judgment?

  32. Tough Love Says:


    I’m not sure exactly WHICH it is, but you either have a psychological, behavioral, or personality disorder.

    Have you considered therapy ?

  33. spension Says:

    Wow, TL, ask you for a simple yes or no answer, and you start your usual non-sequitur insult regimen.

    How refreshing it would be for you to just answer yes or no to the simple question: do you support TARP, all things considered.

  34. Tough Love Says:

    spension … Please seek therapy. A good therapist might be able to lesson that anger problem.

  35. spension Says:

    Any perceived anger lives merely in your head, TL. In fact, you are just evading giving a simple yes or no answer to the question:

    Do you support TARP?

  36. Tough Love Says:

    Spension (not sure why I bother continuing to respond to you, but), I supported the bailouts (because they were necessary at the time), but I did not (and do not) support the executive bonuses.

    That’s all you’re gonna get. If you insist on more … seek therapy, as you clearly need it.

  37. spension Says:

    Therapy? For trying to understand whether you would vote up or down, yes or no on TARP?

    What you’re saying is you support parts you like of TARP, and not other parts of TARP you don’t like. OK, I get that.

    But TARP was not a chinese menu. It was an all or nothing affair. For me, the honoring of excessive bonus contracts to executives at AIG and elsewhere poisoned the whole deal… yes, to me the `bailout’ portion was worth stopping if the executive bonus contracts were included.

    But you won’t say what you would do *with the whole thing*, and instead make personal attacks repeatedly.

    It is quite fair to conclude that for you, the bailouts were *SO* important that you accept the flaw of the excessive executive bonuses. True or not?

    The logical consequence is… if the public pension systems in the US could figure a way to bring the US/World economy to the precipice, like the banking executives did in 2008, you’d accept bailing the pension systems in order to save the world economy.

  38. Tough Love Says:

    Spension, You just proved my point. You need therapy … big time.

  39. spension Says:

    Another non-sequitur, Tough Love. Why not just answer the question, do you support TARP or not?

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