Money & Politics | Daily Report

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While most of the state's roughly 480 cities and towns are entangled in a heated debate about future pension costs, three small cities in Contra Costa County are quietly sitting on the sidelines.

Most public employees in California receive a defined-benefits pension, which guarantees an employee a specific monthly payment upon retirement.

But the town of Danville and the cities of Lafayette and Orinda don't offer one.

It’s a relief not to be grappling with the pension issue on top of other financial issues, said Joe Calabrigo, town manager of Danville. 

Instead of a pension with guaranteed benefits, each of the three municipalities offers a retirement plan similar to the private sector. Employees and employers contribute to the plan, but the annual return is dependent upon how the market performs and isn’t guaranteed.

“We've always operated the same way,” Calabrigo said. “It's the way that this organization was established. We didn't get there by accident, and we didn't convert from one system to the other."

Lafayette, which incorporated in 1968 – more than a decade before its two neighbors – may have served as a template. All three were small when they initially formed and contracted out for most of their services. Starting with few employees and a small operating budget made it hard to support a pension.

All have historically strong property values and have avoided many of the fiscal troubles other cities face. Lafayette has a reserve that nearly equals its annual budget. 

Steve Falk, city manager of Lafayette, said the City Council is committed to providing a fair retirement program, but also wants to make sure it does not bankrupt the city in the process.

Lafayette’s contributions to employee retirement plans are substantial, he said, and its retirement plan has ensured that, over the long term, the city does not have any unfunded obligations.

In contrast, cities like Oakland, San Jose and San Diego are grappling with hundreds of millions of dollars in unfunded pension liabilities.

Over the past decade, employees in Orinda, Danville and Lafayette have considered switching to a pension that would guarantee benefits. A few years ago, a provision in the Orinda employee union contract required the city to explore the option. But the city decided against it because of concerns about rising pension costs and an uncertain financial landscape, said Trish Raver, the city’s human resources manager.

Mike Moran, an engineer and member of the Association of Lafayette Employees, said employees have asked to buy into the California Public Employees' Retirement System, the state-managed retirement system.

“Within the employee association, I think people are mixed. There are definitely some people who have always wanted our city to join PERS because it’s just a more lucrative retirement,” Moran said. But given the tight budget situation for the past few years, he said he doesn't expect the conversation to come up again soon.