Thompson Case Likely to Lead to Retirement System Review

In the wake of controversy surrounding the retirement package for a former Manhattan Beach city manager, the City Council is expected this week to call for an extensive review of the city’s retirement system.

David J. Thompson, 61, whose $139,000-a-year retirement package shocked council members when they learned of it last month, met with city officials last week to negotiate a pension reduction. Neither side would discuss Thursday’s two-hour session, but the dispute remains unresolved. City Manager Bill Smith said another meeting will be held this week.

It also was disclosed last week that the day before he left his city job on May 1, 1990, Thompson granted pay raises of between 6% and 8.5% to eight city department heads. Those hikes, coming on top of raises granted earlier in the fiscal year, put the pay increases above the 10% cap permitted in a fiscal year without council consent. As a result salary boosts for those managers ranged up to 18%.

“It should not have been done,” Councilwoman Connie Sieber said.

Although they have called the Thompson situation unique in city history, council members want to study whether retirement benefits for employees are being determined in keeping with state law and city regulations. They also want to look into the financial ramifications of the city’s retirement system.

“We want to have an assurance for the council and the community that retirements are fair and equitable,” Smith said.

Astonishment over Thompson’s retirement package stems from the fact that it is $50,000 more than the $88,968 in salary he earned during his last year at City Hall.

However, officials say, Thompson’s retirement was calculated under terms of a final-year employment agreement approved by the council. It provided for cash payment for a variety of benefits, including more than $105,000 for unused vacation and sick leave accumulated during his 18 years with the city.

Thompson ended his last year with $237,875.14 in compensation, which became the basis for his pension under a complex state Public Employees Retirement System formula based on age and years of service.

The city pays $82,281 a year to Thompson from its own retirement fund. The remainder comes from the state.

Officials acknowledge that the council and city staff knew the provisions of the agreement. But how those terms would translate into Thompson’s retirement income, particularly the vacation and sick leave provisions, was never analyzed.

The council contends that the city’s share of the payment is “substantially in excess” of what the council intended and “is inconsistent with state retirement law.”

State regulations prohibit reporting payments for unused vacation, sick leave or compensated time off as salary for retirement purposes. However, Smith said that in its agreement with Thompson, the council permitted him to take the dollar value of his past vacation and sick leave as salary.

Payment for this portion of Thompson’s retirement comes from the city’s retirement fund, Smith said, adding that no one else in the city has ever had such an agreement.

In the wake of the Thompson controversy, Smith said he is preparing an ordinance prohibiting employees from getting more retirement benefits than are permitted under state law.

Smith said that under state law governing public employees, the city must negotiate with Thompson as it would with any bargaining unit. However, he said, the city wants Thompson’s pension reduced and could take unilateral action if negotiations reach an impasse.

In another development, the state will send auditors to examine city payroll records for compliance with state reporting regulations at the end of June. Smith said the visit is fallout from the “Thompson thing,” but Sandra Lund, assistant executive officer for the Public Employees Retirement System, said it is part of the agency’s standard procedure.