Pension Costs Force Costa Mesa, California to Restructure, Outsource

Published June 16, 2011

The city of Costa Mesa, population 117,000, in Orange County California, is looking at reorganizing its police department and outsourcing other services—including fire protection—to eliminate budget deficits caused by rising pension costs.

Costa Mesa’s pension tab in 2011 is $15 million of the city’s $93 million budget, and city officials expect pension costs to grow to more than $25 million a year within five years, according to The Los Angeles Times.

The local employee association is crying foul because 40 percent of city jobs may be affected. It has gone to court to block the city’s efforts but has been rebuffed so far.

The city’s CEO appears fine with the ideas, as long as the taxpayers ultimately benefit with lower costs and similar services.

Would ‘Significantly Reduce Expenses’
City CEO Tom Hatch on June 10 released a restructuring plan for the Costa Mesa Police Department that would add 10 new positions and subtract 12 current positions, likely through attrition. There would be no drop in city police services to the community, according to Hatch’s memo.

According to the memo, “the net reduction to the police department would be the equivalent of four full-time positions.” The plan would save $1.35 million annually in taxpayer funds, while maintaining similar levels of service hours.

“Through months of study and analysis, we’ve found a way to reorganize the police department that significantly reduces expenses but gives residents and businesses a similar level of service hours,” Hatch said. “A key to the plan is the additional sworn reserve officers.”

Other suggestions in the memo include “outsourcing of animal control services, expanding the police department’s volunteer program, implementing a succession plan for department personnel, and reviewing the department’s traffic bureau.”

Council Solicits Outsourcing Proposals
The Costa Mesa City Council voted in March to “explore outsourcing as a way to provide similar services to residents while reducing long-term pension costs, among other benefits to taxpayers.”

In early May, Costa Mesa sent out a Request for Proposal (RFP) to outsource jail operations to the county.

“This is the first of 17 RFPs and bids that will be sent out to test the viability of shifting delivery of some city services to other government agencies and/or private companies,” said city spokesperson Bill Lobdell.
“Contracts with employee associations required six-month notices to any worker whose job will be outsourced, and in March the city gave 213 employees layoff warnings—more than 40 percent of its workforce,” added Lobdell.

County Could Handle Fire Duties
More than 90 of the affected employees are firefighters, according to city documents, who have been promised help finding jobs if the fire department is outsourced to the Orange County Fire Authority.

In the RFPs, the city has asked potential vendors to “give interview and hiring preferences to affected city employees.” Costa Mesa also has asked vendors to “disclose any personal or business relationships with city staff and elected and appointed officials,” to keep the process above board.

On May 18, Orange County Superior Court Judge Tam Nomoto Schumann denied a request by the Costa Mesa City Employees’ Association for a temporary restraining order to halt the city’s exploration into outsourcing services. However, the court also scheduled a hearing for July 5 to consider the association’s motion for a preliminary injunction to stop the city’s outsourcing process.

“As we have said since the very beginning, the city did not have legal authority to take this [outsourcing] action,” said Nick Berardino, the association’s general manager, in a statement.

City Attorney Tom Duarte countered in a statement of his own, “The law allows for outsourcing of city services, the City’s Memorandum of Understanding (MOU) with the Costa Mesa City Employees’ Assn. specifically contemplates outsourcing, and we are proceeding in compliance with the MOU and the law.”

Councilman’s Car Vandalized
Emotions are running high, with taxpayers on one side of the issue and labor unions on the other—and politicians caught in the middle. Recently, City Councilman Steve Mensinger found a “cancel the layoff” sign posted in his yard. “After they put a sign in my yard, they applied paint to my car,” Mensinger wrote on his Facebook page. The councilman declined to file a police report.

“If you’re not on the [cutting] edge, then you’re taking up too much room,” said County GOP Chairman Scott Baugh in a recent talk with local residents about the need to rein in government.

“We need a new course for our communities, and our state is severely broken,” he added. “It’s not about Republicans or Democrats; it’s about the principles of freedom and accountability. We can’t continue to spend forever. We need to call a time-out. The ground zero is here in Costa Mesa for the new revolution.” 

John W. Skorburg ([email protected]) is a visiting lecturer in economics at the University of Illinois at Chicago and associate editor of Budget & Tax News.

Internet Info

A detailed review of the Costa Mesa Police Department reorganization proposal: