The San Diego City Council made a good-faith settlement of its long-running lawsuit over the meaning of a requirement that the municipal government and employees make substantially equal retirement contributions, a judge ruled Friday.

The finding by Judge Joseph Zimmerman satisfies a key provision of a pension reform initiative passed by voters in 2012.

San Diego City Council chambers. Credit: Wikimedia Commons.
San Diego City Council chambers. Credit: Wikimedia Commons.

Because the “substantially equal” lawsuit against the San Diego City Employees Retirement System was pending, the nature of its outcome was specified in the ballot measure.

“The good faith settlement was required by Proposition B,” City Attorney Jan Goldsmith said after a short hearing.

Goldsmith filed suit three years ago, contending the City Charter clause didn’t mean the city had to make up for SDCERS investment losses or actuarial changes. The litigation was designed to save the city tens of millions of dollars through lower annual contributions to the pension system.

However, the City Council decided in October to settle the case. Interim Mayor Todd Gloria said at the time that settling was appropriate, given that the city was implementing Proposition B and finalized a five-year labor deal with employees.

Goldsmith said that, in exchange, the city will accept investment losses or gains by SDCERS that could require elevated pension contributions at times. If the city had won, employee contribution levels would have risen beyond those specified in the labor contract.

“You don’t want to pile on,” Goldsmith said. The City Attorney explained the situation in open court so there would be a public record in case the council’s settlement decision was questioned in the future.

Gloria and other city officials filed declarations with the court that said they were concerned they would lose employees if the case was not settled.

San Diego police Assistant Chief Shelley Zimmerman said in one of the declarations that more than 200 officers would have retired or left for other jurisdictions if city had prevailed in the lawsuit. The SDPD is already facing a chronic shortage of officers.

Mark Hovey, the CEO of SDCERS, said that under the terms of the settlement, the city is required to enact an ordinance ratifying SDCERS’ past, current and future allocations of unfunded liabilities. The ordinance cannot be amended or repealed unless city officials confer with its employee unions first, he said.

“SDCERS will continue to allocate 100 percent of any investment gains and losses to the City,” Hovey said. “The settlement agreement puts an end to years of litigious spending and marks the first time in more than a decade that there is no open litigation between SDCERS and the city of San Diego.”

The judge tentatively scheduled a June 6 hearing in case either side wished to pursue attorney’s fees.

— City News Service

Chris Jennewein is Editor & Publisher of Times of San Diego.