Jan. 15 (Bloomberg) -- Newport Beach, California, where four ranking lifeguards earned more than the town’s $109,677 median household income in 2012, may partially disband its municipal ocean rescue to deal with rising pension costs.
The Orange County city of 87,000, where Zillow.com says the median home value is $1.5 million, is weighing bids from other governments and private companies for lifeguard services at Corona del Mar State Beach, which the municipality patrols.
Newport Beach’s oceanfront, including the state park, draws about 1.6 million visitors a year and averages 800 rescues annually, according to bid documents. With about 14 percent of Newport Beach’s general budget going toward employee pensions, municipal lifeguards may be a luxury the town can’t afford forever, City Manager Dave Kiff said by e-mail. The home of Pacific Investment Management Co. isn’t alone, said Michael Coleman, fiscal adviser to the League of California Cities.
“The escalating cost of pensions, especially public-safety pensions -- of which lifeguards are part -- is putting more pressure on cities,” Coleman said by telephone. “If this continues, we’re going to see more and more cities outsourcing these functions.”
California cities from the Mexican border to the San Francisco Bay have confronted rising pension costs as they contended with post-recession unemployment and strained property- and sales-tax revenue. Local governments have struggled to support six-figure lifetime benefits for some retirees even as they cut police and fire services for city residents.
Newport Beach officials haven’t estimated the possible cost savings on patrols at Corona del Mar, Kiff said. Nor is outsourcing the work a foregone conclusion, he said.
Newport Beach’s bids were due yesterday, the day after the California Public Employees Retirement System, the pension fund for city employees, reported gains of 16.2 percent last year, its best showing in 11 years, as global stocks and private equity soared. On Jan. 9, Governor Jerry Brown proposed boosting state spending 8.5 percent this year, crediting revenue from the state’s economic recovery and from tax increases approved in 2012.
Coleman said the good news from Sacramento means little to cities struggling with pension costs. Steve Maviglio, spokesman for the union-backed Californians for Retirement Security, countered that pensions are being made a “scapegoat” for governments’ fiscal woes.
Orange County, the birthplace of President Richard Nixon and where registered Republicans outnumber Democrats by more than 100,000, has been at the forefront of efforts in California to move governmental functions to private operators.
Costa Mesa, which borders Newport Beach, moved to fire 200 city employees in 2011 as part of a plan to turn over street sweeping, jails, fire protection and other functions to private companies. City Council members cited pension costs, according to an article in the Voice of OC, a nonprofit news site. The city, blocked by a judge from firing the workers, decided to seek a private operator only for the jail. The regional John Wayne Airport is considering dropping the Orange County Fire Authority in favor of the private Pro-tec Fire Services Ltd. for fire protection there. The county last year began allowing private ambulance companies to use paramedics to transfer patients between hospitals.
Newport Beach’s wealth masks the municipality’s self-inflicted fiscal problems, said Orange County Supervisor John Moorlach, a former county treasurer whose district includes the city. Full-time lifeguards hired before November 2012 are eligible to retire with full pensions when they turn 50. The city has the highest per-capita unfunded liability among Orange County’s 34 municipalities, Moorlach said. Eight city lifeguard managers made more than $100,000 in 2012, according to compensation data on state Controller John Chiang’s website. In all, 357 of the city’s 1,234 employees were paid more than $100,000 that year, the data show.
Transferring responsibility for lifeguards on Corona del Mar State Beach would do nothing to alleviate Newport Beach’s pension burden, nor would it make much difference in the city’s total budget, said Boyd Mickley, a lifeguard captain who heads the Lifeguard Management Association, the union for the city’s 12 full-time lifeguards. The city also employs as many as 200 part-time seasonal lifeguards for about $20 an hour without retirement benefits.
“The savings they’re talking about is simply not going to make a dent in the pension deficit,” Mickley said by telephone.
Only about 10 percent of the city’s $4 million annual budget for lifeguards goes toward Corona del Mar State Beach, and private lifeguards still would need to be paid, Mickley said. He said the city’s real agenda is to test the waters for outsourcing lifeguard services for other areas and ultimately other city functions.
Newport Beach is reviewing a range of services that could be turned over to private operators “with an eye towards 2020 or so when past decisions’ pension impacts will hit all cities very hard in California (unless something happens to change state law),” the city manager said by e-mail.
“We have been trying to make sound decisions now -- without a gun to our heads -- that will put us in much better stead five to 10 years from now.”
At Corona del Mar State Beach, where a strip of sand is framed by a jetty and the San Joaquin Hills rising from the ocean, a group playing beach volleyball lamented the possible end of municipal lifeguards there.
“I wonder if the qualifications would be the same as a Newport lifeguard,” said Cliff Bonner, 84, of neighboring Huntington Beach. “There would be some questions about the quality of the services vs. what we have now.”
Added Dan Hoover, 59, of Irvine: “It adds to the sense of community to have city lifeguards.”
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