Council OKs secret suit settlement

Eron Ben-Yehuda

HUNTINGTON BEACH -- The City Council secretly authorized its outside

attorney to settle a multimillion dollar lawsuit involving salary

“spiking” by city employees.

“The public doesn’t know what’s going on, and they have to pay the

price,” Councilman Dave Sullivan said.

While a majority of the council gave its approval in July, Sullivan said

he grew concerned after a meeting was held Sept. 10 to discuss a

potential settlement in the case, which could cost taxpayers roughly $15

million.

“Spiking” refers to the once-common practice of retiring city employees

inflating their pension by adding such perks as unused vacation pay and

car allowances to their final year of salary.

Retirement income can be based on pay in the last year of employment.

That option allowed city employees as much as a 20% increase in their

monthly pension.

Courts, as early as 1994, ruled spiking illegal, said Councilman Tom

Harman, who along with Sullivan were the only council members opposed to

a settlement.

“There’s no way I will ever vote to pay for an illegal benefit,” Harman

said.

The millions of dollars at stake come from estimates of pension payments

covering about a 20-year period, said Steve Berliner, an attorney

representing the city. He said the settlement conference this month

resulted in no breakthroughs.

“It doesn’t appear that we’re that close at this point,” he said.

According to the Brown Act, the city doesn’t need to notify the public

until a settlement has been reached.

But about 150 employees covered before 1994 should still receive the

benefits the city agreed to provide, said attorney Paul Crost, who

represents the labor unions. It would be unfair to those workers, some of

whom joined the city in the late 1980s and perhaps gave up a higher base

salary offered by other cities in return for greater benefits, he said.

If the money must be paid, the city argues in the suit filed July 1997,

the Public Employees’ Retirement System should foot the bill because the

city signed off on labor agreements during the 1980s, based on

“misrepresentations” by PERS, Sullivan said.

“It was PERS’s fault for advising us incorrectly and, therefore, it’s

their obligation to take care of employee spiking,” he said.