Goldsmith Quietly Drops DROP Appeal

On June 15, City Attorney Jan Goldsmith quietly dropped an appeal that he had filed with the 4th Appellate District of a case against allegedly excessive employee benefits that had been lost at the trial level by his predecessor, Mike Aguirre.

Aguirre had two major cases against employee benefits. He won one, against purchase of service credits (the ability of employees to purchase years of service at a discount price). That was upheld on appeal.

The second case was against benefits that were given to city employees in 1996 and 2002. These benefits included DROP, or Deferred Retirement Option Plan, a classic double-dipping arrangement. At age 55, employees say they will retire in 5 years; they continue drawing their salaries, and also get 90% of their highest one-year salary plopped in an account that grows at 8% a year, plus a cost-of-living benefit. Thus, they retire with their monthly annuity payment plus a fat lump sum.

During the campaign in which Goldsmith ran against Aguirre, there was a fracas on the issue. Aguirre charged that Goldsmith was soliciting support from labor unions representing police, firefighters, and other city employees, thus undermining the appeal of the case. Goldsmith got the backing of those unions. Goldsmith waited three years before appealing the case, but then quietly dropped it.

Pictured: Goldsmith

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Many of the benefits you've outlined in this piece were done away with in July 2005. Furthermore, in a separate court case, brought by SDCERS, the court ruled that even though Mike Aguirre failed to bring the proper ordinances forward to the City Council for passage in timely manner, the intent of the Council to end those benefits was enough in the eyes of the Court.

Additionally, to clarify what you've written, City Employees earn a defined benefit pension as part of their total compensation. If an employee chooses to enter the DROP program then their pension payment is deposited into an interest bearing account at SDCERS. Some employees have retired without entering the DROP program.

While in 1997 when DROP was created eight percent(8%) was SDCERS expected rate of return. Please remember SDCERS only administers these programs for the City. It was the City Council who not only approved the program, but set the initial rates. Since then the rate of return, along with SDCERS expected rate of return has changed. Additionally, SDCERS in an ministerial role, separated the rates. DROP accounts currently earns 2.3% not 8%. The rate is now tied to the composite of the bell weather indices and adjusts annually. 1. 100% of the five‐year U.S. Treasury Rate; and 2. 50% of the five‐year HQC Bond Rate; and 3. 100% of the five‐year composite IRA CD rate

During many of the years since 1996, but not all, SDCERS earned substantially more than the rate of return. For example while SDCERS was paying 2.3% this year, it earned 23.8% (as of June 30, 2011) tens times as much as it was paying to active DROP account holders. SDCERS keeps the difference which helps to lower the UAAL to the City.

Finally when the employee ends their DROP participation they can select one of four options. Lump sum distribution, a life expectancy annuity, a 20 year annuity, or partial lump sum distribution and 20 year annuity on the remaining balance. Currently the annuity choice is paying 4.8 and is also tied to three indices. No cost of living adjustment is made to any of the options. A COLA is only applied to the pension as set forth by Ordinances approved by the City Council.

Mr. Goldsmith, in looking out for the City taxpayers, made a common sense decision after the Cal Supreme Court rules against Orange County's litigation against it deputies. San Diego litigation mirrored some the Orange County case. With Orange County losing at at all three levels, trial, appellate and Supreme Court on Supervisor Moorlach's unique legal theories, Goldsmith saw the writing on the wall.

In July 2005, these benefits were eliminated for NEW employees. The lawsuit concentrated on existing employees. Second, when the lawsuit was brought, the interest rate was 8%. The Orange County case was significantly different from the San Diego case. The Orange County Employees Retirement System is governed by a 1937 law. Also, retroactive increases were permitted in Orange County under the government code. Best, Don Bauder

Many of the benefits you've outlined in this piece were done away with in July 2005.

Only for new hires.

DROP is a scam and should have NEVER been allowed, it was a give away plain and simple.

If you don't want employees "retiring" at age 50 or 55 you simply raise the retirement age, not give away billions in free money that was never earned.

DROP is double-dipping at its worst. Best, Don Bauder

During many of the years since 1996, but not all, SDCERS earned substantially more than the rate of return. For example while SDCERS was paying 2.3% this year, it earned 23.8% (as of June 30, 2011) tens times as much as it was paying to active DROP account holders

And while SDCERS was paying 8% in 2008 it lost 35% of it's value, or a loss 20 times the amount it was paying into DROP. / Mr. Goldsmith, in looking out for the City taxpayers, made a common sense decision after the Cal Supreme Court rules against Orange County's litigation against it deputies. San Diego litigation mirrored some the Orange County case ================= GoldenHair was not looking out for taxpayers, he was looking out for his public union buddies, the ones who bought and paid for his election. The OC deputy lawsuit had NOTHING in common with the DROP program, entirely different issues, not one which was "mirrored".

Agreed. In particular, Goldsmith wooed the city employee unions when he was running. He got their support -- not surprisingly, because his opponent was trying to get the excessive benefits under control. My supposition is that Goldsmith had promised those unions that he would not pursue an appeal of the case. His appeal was a delayed and half-hearted one. Then he dropped it. Best, Don Bauder

You guys are absolutely full of it. Talk about revisionist history of facts well documented in the media.

Goldsmith is in the Union's pocket. That is one of the most ridiculous claims you made in a long time. If that's the case, why has he been suing and winning cases against the unions and city employees. Goldsmith said this: “We pursue cases that have a chance of success,” Goldsmith said in a statement Tuesday. “That’s why we have won every pension case during the past two years.”

If he was a puppet of the unions as you two claim, why is he litigating against their interests? Oh and by the way, as a competent attorney, bringing claims with arguments the courts are agreeing with.

Mr. Aguirre's work was shoddy at best, incompetent and corrupt at worst. Please explain why he paid $127,000 to one of his friends for the pension case. Aguirre hired Orange County accountant Steven Gabrielson as an expert witness in 2006 even though Gabrielson, by his own admission, had never done any professional work related to a public pension plan. $127,000+ taxpayer dollars to Aguirre's paid to Gabrielson who served as volunteer treasurer for Aguirre's city attorney campaign in 2004. He was also treasurer for Aguirre's unsuccessful 2002 campaign for San Diego County district attorney.

Then there is the amended complaints. How many amended complaints does it take? What did he do? Six, Seven? There were so many, Judge Barton was ready to sanction him. Of course Aguirre KNEW previous legal case settlements (Gleason, Corbett and Macguian) gutted the core of his arguments. NEVERTHELESS he wasted millions of taxpayer dollars on outside counsel and his so called experts.

Aguirre's work was not shoddy, he was litigating issues that were novel- they were new, they had never been litigated before. THAT is why there were amended complaints.

Judges do NOT allow you to keep amending complaints unless the issues are unclear-new, novel.

In a regular case you will get ONE chance to amend in most cases-every now and then you may get lucky and get to amend a second time, but that is unusual. The fact that Mike's complaints were allowed to keep gettign amended so the courts could narrow the issues and get it right. Nothing wrong with that. BTW- judges do not "sanction" the lawyers for filing amended compaints-they simply dismiss the lawsuit on the oppositions motion to dismiss/demurrer.

Mike tried his best to fix the upside down ship known as San Diego. He was not successful, but that does not mean his lawsuits were meritless.

I think GoldenHair may not be 100% in the unions pocket, but he is certainly deferring to them in this case.

Golden hair? Since when have the stores sold golden rugs? Best, Don Bauder

Disagree on all points, JW, but I don't think we will ever agree. Best, Don Bauder

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