BY LIONEL EMDE, RIPTIDE CORRESPONDENT
The City of San Bruno provides health benefits for its City Council members, as do most of the 20 communities in San Mateo County. San Bruno pays council members $500 a month in salary and provides health insurance up to a maximum of $1,160 a month. San Mateo, second-largest city in the county, pays council members $600 a month in salary and provides health benefits up to a maximum of $1,064 a month. Pacifica pays its council members $700 a month in salary and provides $1,020 a month in benefits. Although these figures seem roughly in line, a benefit option allows Pacifica council members to collect much more in taxable income than in San Mateo and San Bruno, and most other cities in the county.
Pay SpikeIn San Bruno, a council member who doesn’t take advantage of city health insurance receives no in-lieu cash payment. In San Mateo, in-lieu cash is $100 a month if no health benefit is taken. Pacifica has quite a different plan; any council member who already has his/her own health insurance and does not need city health insurance can take up to $920 of the $1,020 benefit amount as in-lieu cash—taxable income. This is possible through the IRS 125 benefit program, known as the "cafeteria" plan, which is what city staff's management unit receives. According to the City of Pacifica, all council members have taken this taxable income from the benefit package since the benefit's inception in July 2006. This total yearly amount does not include the $8,400 annual salary:
Taxable Cafeteria Plan Distributions
Source: City of Pacifica
Combining a yearly salary with an in-lieu cash payment for a council member who already has health insurance and doesn’t need a city-run plan yields this total yearly taxable income for five cities in San Mateo County with the richest salary/benefit packages:
Salary + In-Lieu Payments in 2008
Pacifica provided council members' health insurance for years before 2006. When the council unanimously voted in this new benefit package in July 2006, the council’s benefits were tied by resolution to the management unit’s benefits, and had yearly increases mimicking the union contract. The council reduced the benefit package in June 2009 to $1,020 per month, down from the $1,122 level it had reached with automatic yearly increases. Council benefits now cannot be increased from that $1,020 level without passage of a resolution at a public meeting.
Lack of Transparency
The original resolution enacting this health benefit appeared on the consent calendar of the July 24, 2006 meeting, meaning that there was no public discussion or staff report other than the agenda summary report. This and other items were dispensed with in a single vote. The "Fiscal Impact" was described as "...no additional impact as benefits have been included in the FY 2005-06 budget."
This follows a pattern identified in a PACIFICA RIPTIDE STORY that examined two years of Pacifica council agendas in a near-futile attempt to assess employee contracts and their fiscal impacts on the city. Also missing from this 2006 agenda summary report was any comparative analysis with other cities in San Mateo County as to what their health insurance plans for elected officials looked like. The same lack of comparative analysis was in evidence when the Pacifica council increased its monthly salary from $400 a month to $700 in 2001. The staff report offered nothing in the way of comparison with other cities. Even though the $700 monthly salary has been in effect since November 2002, a survey conducted by this writer in summer 2008 found that it was still the fourth-highest in San Mateo County. That survey also found that only one other city (Belmont) let its council members take the entire health benefit amount as in-lieu cash.
The net effect of skimpy staff reports and lack of comparative analysis is a civic vacuum of knowledge. Any plan might be acceptable if a community has no idea what other cities are doing, and it’s the wrong way to run a city. It’s important to emphasize that Pacifica’s council benefit plan is entirely legal. And no one is suggesting that providing health insurance to elected officials isn’t the right thing to do. But the question about this benefit package feature is: How reasonable is it to pay in-lieu cash when health insurance is not needed? Can a city as poor as Pacifica, with one of the smallest commercial tax bases in the county, support such generosity?
(Former Pacifica City Council member Vi Gotelli contributed research to this story. Leslie Davidson contributed technical assistance on uploading the charts.)
Lionel, thanks for writing this timely article. You have concisely stated one issue that has troubled me for years and you have gotten to the root of the problem for me. The "skimpy staff reports" is the bottom line. I love the phrase about no additional fiscal impact, too.
I have some concerns about how the IRS Benefit 125 includes elected officials, who are not employees. Perhaps that's an article for another day. Thank you for your diligence in bringing this information forward.
Posted by: Flo Derby | October 28, 2009 at 10:15 AM
It would be interesting to see what the city allows its employees to take as "in-lieu" cash when they do not need health insurance.
Posted by: Bruce Hotchkiss | October 28, 2009 at 09:15 AM