By Jorge Casuso

August 13, 2019 -- The City of Santa Monica this year will make separate payments to 28 retired employees whose pensions were so large they exceeded IRS limits, an analysis of pension data by The Lookout found.

In fact, Santa Monica had more retirees whose pensions exceeded the federal limit than any other city in the state, according to data obtained from the State pension fund under the Public Records Act.

Based on the City's most recent invoice from the California Public Employees’ Retirement System (CalPERS), Santa Monica will pay the fund a total of $680,488 in Replacement Benefit Plan (RBP) costs to cover the excess amount this year.

One former employee received more than $83,000 last year from the City, according to the CalPERS data. Another received more than $63,000.

The annual RBP payments are not included in the pension debt paydowns the City has been making.

And as top City officials reach retirement age, Santa Monica's RBP costs are expected to escalate over the next few years, although City officials believe the costs "are nearing the peak."

Santa Monica Tops List

There are some 596,000 public pensions in the California system, which includes about 3,000 local governments and school districts, as well as state workers. CalPERS estimates the average pension is about $35,000.

According to CalPERS data, Santa Monica had 24 employees on a list of 1,206 public pensions that exceed federal limits.

The list is based on the retiree's last place of employment, accounting for the discrepancy in the total number of Santa Monica employees who receive RBP payments.

Santa Monica's two dozen employees was four more than Oakland, which was second on the list with 20.

The 45th largest city in the country, Oakland had an estimated population of 432,897 in 2019, compared with approximately 93,000 for Santa Monica.

The only other California cities in double digits were Riverside with 19, Anaheim with 17, Long Beach with 12, Burbank with 11 and Beverly Hills with 10.

Among Westside cities, Culver City had two and West Hollywood had one.

The Santa Monica-Malibu Unified School District and Santa Monica College had none.

Pension amounts are based on salary and the number of years an employee has worked for a city

Santa Monica's ranking at the top of the list is largely due to the salaries the City pays its employees, which are among the highest in the state ("Santa Monica Municipal Budget Among Highest Per Capita in California," November 16, 2016).

Santa Monica also "has lower turnover and longer tenures among staff than other cities," said Finance Director Gigi Decavalles-Hughes.

"As a result, many employees spend a large part of their career in Santa Monica, promoting to higher level positions here, and therefore the pension benefit is less likely to be apportioned to other cities," she said.

In addition, several of the 28 pensioners included in the City's 2019 RBP payment retired from higher-paid positions in other agencies, Decavalles-Hughes said.

"Their higher salary in a new city triggers the RBP apportionment for their years in Santa Monica," she said.

The federal limit that triggers the RBP was imposed in 1996 to prevent public pensions from being used as tax shelters.

CalPERS uses the RBP to administer the above-limits portions of the pensions separately from the main portions, according to Calpensions, a website that monitors California public employee pension funds.

The Retirement Benefit Plan "provides a different way of paying the part of the pension that exceeds the federal limit," according to Calpensions.

"CalPERS sends a bill for the amount over the federal limit to the government employer," the website said.

Santa Monica's Top Pensioners

Former Santa Monica police Chief Jacqueline Seabrooks topped the list of the City's biggest pensions with total earnings of $317,738 last year. Of that amount, the RBP amount paid by the City was $51,992.51.

Of the other 23 employees on the list who retired with the City, 15 collected more than $200,000 each in total pensions.

Other top pension earners were former Police Lieutenant Mohamed Marhaba with a total pension of $297,246.12; former Assistant City Manager Joe Lawrence with $287,147, and former Chief Information Officer Jory Wolf with $273,922.95.

Near the top of the list were former Deputy City Attorney Jeanette Schachtner with pension payments totaling $268,199.93; Barbara Stinchfield, who headed Community and Cultural Services, with $272,797.4, and former Police Chief Timothy Jackman with $260,871.

Those receiving the highest RBF amounts from the City were Schachtner with $83,433.57, former Public Works Director Martin Pastucha with $63,056.31 and former Assistant City Manager Gordon Anderson with $54,489.33.

City finance officials expect the number of retirees receiving RBP payments to drop after escalating over the next several years.

"While the RBP costs will likely escalate in the next few years, we do believe that we are nearing the peak for how much these costs will increase," said Decavalles-Hughes.

That's because the Internal Revenue Code caps the amount of pensionable compensation for employees who enter the CalPERS system on or after July 1, 1996, she said.

In addition, employees entering the CalPERS system on or after January 1, 2013 are subject to the California Public Employees' Pension Reform Act (PEPRA) that places compensation limits on members, Decavalles-Hughes said.

The City also has taken steps to lower future pensions by requiring employees to pay larger portions of their pension contribution and giving employees hired since July 1, 2012 lower pension benefits, she said.

Santa Monica -- along with other cities in California, as well as nationwide -- is facing looming pension costs that are forcing it to tighten its fiscal belt.

The current budget approved by the City Council in June includes a $9.3 million payment towards Santa Monica's estimated $448 million in unfunded pension liability.

The biennial budget calls for a similar $7.3 million pension payment in the next fiscal year ("Council Approves Nearly $713 Million Belt-Tightening Budget for Upcoming Fiscal Year," June 26, 2019).

The payments are part of a plan to pay down the City’s current unfunded pension liability over 13 years instead of 30, saving an estimated $100 million in interest, Decavalles-Hughes said ("City Should Immediately Boost Annual Pension Payments," April 23, 2019).

Over the past nine years, the City has paid $79 million in additional paydowns towards its unfunded liability, she said.

"Rising pension cost is one of the most important issues that the City is proactively addressing," Decavalles-Hughes said.

To pay down the debt, the budget leaves 29 unfilled full-time positions vacant, cuts back several City programs and increases parking rates and other fees.