City answers critics of pay spike

Watchdog group says council ‘duped’ over manager Urrutia’s pay
By: Jon Brines, Placer Herald Correspondent
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City of Rocklin officials are trying to stamp out controversy sparked by the recent report of the 42-percent increase in City Manager Carlos Urrutia’s salary over the last five years, prior to his retirement. A local watchdog group calls it “pension spiking,” and says it’s unethical. According to the city, nearly half of Urrutia’s increases from 2005-2008 came from periodic cost of living adjustments and longevity salary adjustments, per his negotiated employment contracts. He was also paid for service credits that were bought back from previous work experience. However, the reasons behind the remaining periodic contract increases during that time are raising concerns. Current city councilmembers Brett Storey and Peter Hill helped to negotiate those amounts with Urrutia directly. “We want good service at a fair price,” Storey said. “Carlos’ pay is for his performance. You could argue we’re paying him too much, I could argue we are paying him too little.” Hill said they wanted the city manager’s salary to be competitive. “It was our feeling that Carlos was not up at the level he needed to be,” Hill said. “We wanted to treat him fairly.” In 2005, the city approved a 7 percent increase that took his monthly pension contributions to the California Public Employees’ Retirement System away from the city and put it directly into the hands of Urrutia to pay himself. According to Rocklin Director of Administration Services Judy LaPorte, the option took his salary from $158,880 to $170,000 at that time. The city has a policy of not only paying the city’s portion of the monthly pension payments to CalPERS but also picking up the employee’s portion. “In Rocklin, we pay the full retirement,” Hill said. “I don’t agree with it, but that’s the way we do it.” LaPorte said for Urrutia, there was an additional increase in salary for other things the city used to pay directly. “In January of 2006 he exercised his option(s) to receive his cell allowance ($1,800/year) and auto allowance ($3,600/year) as salary,” LaPorte said. Hill explains the change didn’t affect the city’s bottom line. “We gave him the money and he paid it,” Hill said. “There was no net cost difference to us.” Marcia Fritz, president of the California Foundation for Fiscal Responsibility, said the practice is called “pension spiking.” “This is a classic case,” Fritz said. “He took money the city was paying on his behalf and put it in compensation specifically so he could retire with that money for the rest of his life.” CalPERS pensions are often based on the highest annual total pay received on the job. A variety of ways can be used to “spike” pay shortly before retirement, thus boosting lifelong pensions that increase annually with inflation. CalPERS established a Compensation Review Unit to check pensions for mistakes and spiking abuses. The spiking practice is legal but some, like Fritz, consider it unethical. Fritz estimates, based on her limited knowledge of the city’s deal with Urrutia, that the 42-percent increase in salary at the end of his career could amount to an extra $1 million over the life of his pension. Urrutia said the salary increases were warranted and designed to keep his salary competitive with salaries for other city managers. “It appears that the commentator may not fully understand the situation,” Urrutia said. “PERS compensation is based on complex rules established by PERS. My compensation and that of the other 14 employees who retired under the retirement incentive plan is in compliance with the PERS regulations.” Hill admits giving him the allowances helped Urrutia’s pension, but said it was a minor increase. “There is a little bit of increase there,” Hill said. “During our negotiations, (Urrutia) wanted to pay his own PERS and what that does, obviously, is increases his salary.” Fritz said that’s where the city council failed to do the right thing. “City council was duped,” Fritz said. “Anytime you get a recommendation from an individual on staff where that directly affects that staff member you should ask for an outside independent finance expert.” Hill said hiring a consultant was not an option for him. “We didn’t hire anybody; that would be a waste of money,” Hill said. “That’s what the city council is for. The council hires (the city manager).” Hill rejects Fritz’s allegations and said the watchdog group is just using media attention on Rocklin’s early retirements as a forum to push their own agenda. Storey said the practice of bumping salaries to let employees pay their own PERS contributions has since been eliminated for any city of Rocklin employee. According to CalPERS, Urrutia’s gross taxable monthly retirement allowance is $15,463.42. Urrutia officially retired from the city in December 2009 but returned to his position as city manager on a part-time bases at $111 per hour without PERS contributions or benefits, according to city documents. In exchange for Urrutia’s early retirement the city has agreed to buy two years of service credits through PERS. According to the city, the benefit is paid over 20 years beginning in 2012-13 at an annual cost of $6,749 or a total cost of $134,984. Rocklin City Manager Carlos Urrutia’s salary history July 1, 2004 — $76.39/ hour; $158,891.20 annually* April 4, 2005 — $81.73/ hour – 7 percent contract increase July 1, 2005 — $88.27/ hour – 8 percent increase (3 percent COLA; 5 percent longevity increase) May 27, 2006 — $90.87/ hour – 3 percent contract increase July 1, 2006 — $95.93/ hour – 5.57 percent increase (3 percent COLA; 2.5 percent longevity increase) Feb. 3, 2007 — $99.21/ hour – 3 percent contract increase July 1, 2007 — $102.19/ hour – 3 percent COLA Jan. 8, 2008 — $108.65/ hour – 6 percent contract increase July 1, 2008 — $111.91/ hour – 3 percent COLA; $232,772.80 annually* Dec. 10, 2009 — $111.91/ hour – retired — Information provided by Judy LaPorte, Rocklin’s director of administration services * based on 40-hour work week