Santa Fe Irrigation District board approves employee pay raises, reduces pension benefits for new hires

By Joe Tash

Santa Fe Irrigation District directors raised the pay of employees and managers by 8 percent over the next three years, reduced pension benefits for new hires and discussed a potential increase in water rates for 2013 at their meeting on Thursday, Oct. 18.

The board voted 3-1, with director John Ingalls voting no and director Andy Menshek absent, to approve both a new, three-year labor agreement with district employees, and a separate raise for managers.  The agreement also calls for employees to increase the amount they pay into the state’s retirement system from their current contribution of 3 percent of their salary to a total of 8 percent over the next three years.

The agreement also provides “stipends” totaling 11 percent over the next three years, which are not added to base pay, for a smaller group of employees not eligible for the pay raise, and allows employees who opt out of health insurance coverage to receive a payment of $500 per month.

Two speakers — including board candidate Greg Gruzdowich — urged the board not to vote on the new employee agreements until after the Nov. 6 election, when at least one new member will be elected to the board.  Gruzdowich said he opposes the pay increases and opt-out payments and argued that the new board should be allowed to consider those agreements.

Board members defended the agreements, and said they were the product of nearly a year’s worth of negotiations with employees.

“It’s a good (agreement).  The long-term savings are significant, the immediate savings are less obvious,” said board member Robert “Bud” Irvin, who will step down from his seat in December after serving on the board for 15 years.  Holly Jones Smith and Alan Smerican are running to replace Irvin.

Director Ken Dunford, who is running against Gruzdowich, said district employees have not had a raise for five years.  In addition, he said that over the next 10 to 20 years, due to the changes in employee pension benefits and contributions, “the savings are going to be measured in the millions of dollars.”

As for the healthcare opt-out payments, Dunford said, “On the surface, that may look like a giveaway.”  But he said the payments make financial sense because  the district saves about $15,000 for each employee that it doesn’t have to cover.

“We’ve taken a principled approach to containing employee salaries and benefits,” said board president Michael Hogan.  “I realize the rate of change hasn’t been fast enough for some people but progress has been made.”

According to a report by district staff, the new agreements with employees and managers won’t increase the district’s labor costs over the next three years, because the costs will be offset by staff reductions and “other management actions.”  This year, the report said, the district is spending $6.164 million on labor costs, and the labor budget in 2015 is projected to be $6.101 million.

“Therefore, during the term of the MOU (memorandum of understanding), no rate increases will be required to fund labor costs,” the report said.

The board also voted Thursday to raise the retirement age and cut pension benefits for employees hired after Dec. 13.  Currently, employees can retire at age 55 and receive 2.7 percent of their pay for each year of service with the district.  Under the change adopted by the board, new hires will receive 2 percent per year of service, and can’t retire until age 60.

The state Legislature has also passed new retirement rules, which allow public employees to retire at 62 with 2 percent per year of service.  The state rules will apply to any employees hired by the Santa Fe Irrigation District who have never been part of the state retirement system before, while the rules the district approved Thursday will apply to new hires who have been part of the state retirement system at a previous job.

In other discussion Thursday, the board considered potential water rate increases that could be imposed next year.

The district’s current budget includes a 3 percent rate increase starting Jan. 1 to cover an anticipated increase in the cost of imported water, which is water the district buys to serve its 22,000 customers in Rancho Santa Fe, Solana Beach and Fairbanks Ranch.

However, according to a staff report, even with the 3 percent increase, the district will be $14 million short of the $60 million budgeted for capital improvements over the next 10 years.  To close the gap, district staff said, an additional increase of 7.1 percent is needed, for a total of a 10.1 percent hike on Jan. 1.

Directors could either implement the full increase at their November meeting, or close part of the funding gap by selling bonds, which would require debt payments but allow for a smaller rate increase.

Irvin said the board is struggling to keep rates low while maintaining its water delivery and treatment system.  “How are we going to do both?  That’s the bottom line.”

If the district doesn’t fund its capital improvement program, said Dunford, “We’re not doing our job, we’re abdicating our responsibility.  We need to step up and support that program.”

General manager Michael Bardin said he will bring the board a rate proposal to consider at its November meeting.

The district has raised rates a total of 68 percent over the past five years, citing increasing costs for imported water as the main factor behind the rate hikes.

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