Anaheim City Council Tuesday night approved a contract with its police union that saves the city about $1.6 million in the short run and includes new pension formulas that reduce for new hires the generous retirement benefits that officers have enjoyed in recent decades.

Under the contract, the pension formula for new members of the Anaheim Police Association is 2.7 @ 57, which means that upon turning 57 an officer can receive a pension equal to 2.7 percent of their salary for each year served.

This means that after 30 years of service, officers can retire with 81 percent of their final salary. Current members of the Anaheim force are covered by a 3 @ 50 formula that allows them to collect up to 90 percent of their salaries after 30 years of service.

The contract runs through July 3, 2015, with two options for the union to extend it by six months. It will likely have an effect on police labor negotiations in neighboring Santa Ana, where city leaders are about to begin discussions with the Santa Ana Police Officers Association.

According to Anaheim Human Resources Director Kristine Ridge, the agreement saves approximately $1.6 million over the term of the contract, mostly by eliminating the “pers-on-pers” benefit by which the city paid the employees’ 9 percent contribution to the state’s public employees retirement system, then reported it as part of employees’ salaries.

With this benefit in place, the pension calculation of a retiring officer earning $100,000 would be based on $109,000.

Members will be contributing toward their retirement, beginning at 4 percent in February 2014 and reaching 12 percent in January 2015. Corresponding salary increases, however, will offset those contributions.

Council members said that the labor contract was a step toward pension reform.

“Does more need to be done? Yes,” said Councilman Jordan Brandman. “But you cannot let the perfect be the enemy of the good. And this is a good agreement.”

However, Mayor Tom Tait, the only council member to vote against the contract, said that the agreement doesn’t go far enough. Like other cities, Tait said, Anaheim’s police budget has been growing over the years but the number of officers has gone down, a result of the increasing average cost of officers, which he said has reached $200,000 per officer.

“The reason we don’t have enough police officers is the cost is so high,” Tait said.

Tait said that allowing members to retire with 81 percent of their salaries in perpetuity is an unsustainable burden to the city budget. He advocated a 2 @ 57 formula, saying that members retiring with 60 percent of their salaries is still a “very good pension.”

Councilwoman Kris Murray argued that she hadn’t heard of neighboring cities reducing police pension formulas to that level. Without competitive retirement plans, the city would have trouble attracting quality officers, she said.

But Tait said that the city of Long Beach adopted it, something Long Beach Mayor Bob Foster told him saved the city “tens of millions” of dollars.

Ridge said city officials had “explored” lower pension formulas with the police association, but the demands made by the labor group in exchange were too costly, she said. Under recent state pension legislation, the city doesn’t have the authority to unilaterally impose the lower formulas, she said.

The police association heavily increased its City Council campaign spending in advance of negotiations, spending tens of thousands of dollars promoting Brandman, who along with other council members have formed an alliance against Tait.

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