Watsonville, California – Another Tax That's Really Just For Pensions

Edward Ring

Director, Water and Energy Policy

Edward Ring
September 16, 2014

Watsonville, California – Another Tax That's Really Just For Pensions

The city of Watsonville lies nestled among some of the most verdant farmland on earth. Just a few miles inland from the Pacific Ocean, the moderate, moist air nurtures endless fields of strawberries, apples, fresh flowers, cauliflower, broccoli and artichoke. Fragrant forests of redwood carpet the Santa Cruz Mountains to the north; some of the most abundant and diverse marine life in the world spawn in the Pajaro estuary to the immediate south. Watsonville is surrounded by agricultural abundance and scenic beauty. But like many other agricultural towns in California, Watsonville’s economy has struggled. The average household income in Watsonville is $47,442 per year, well below the California average of $58,328, and the city’s 17.8% unemployment rate is nearly twice the state’s average.

None of this stopped Watsonville’s civic leaders from putting onto the June 2014 ballot a Public Safety Sales Tax, Measure G, which in an election with 30% turnout, squeaked through with just over the required two-thirds majority. Shoppers in Watsonville will now pay 9% sales tax.

As reported in the Santa Cruz Sentinel, “about $2.8 million is expected to be collected annually for seven years, and the city’s police and fire departments will split the money 60-40, respectively.” The problem with this assertion, however, is that $2.8 million is roughly how much CalPERS intends to increase Watsonville’s annual pension contribution.

According to posts on the respected financial website CalPensions.com, and shockingly unreported elsewhere, is the grim fact that CalPERS, who manages pensions for Watsonville along with hundreds of other California cities and counties, will be increasing its annual required pension contribution by 50% over the next few years. This is documented by CalPensions editor Ed Mendel in a 2013 post entitled “CalPERS rate hike: 50 percent over six years,” and reiterated in a report posted earlier this year entitled “CalPERS plans rate hike, third in last two years.” The key word in the title of Mendel’s 2nd post, by the way, is “plans.” The rate hikes actually imposed onto California’s cities and counties so far by CalPERS are negligible compared with what’s to come.

According to the California State Controller, $4.4 million was spent on pensions in 2012 by the city of Watsonville – not including employee contributions via payroll withholding. That is, the taxpayer’s share was $4.4 million. A 50% increase to this amount of required pension contribution is $2.2 million – leaving $400,000 from Measure G’s proceeds to actually replace police cars, add another team of paramedics, and hire more police officers. That’s not nearly enough to go around. Single moms and unemployed farmworkers, who can’t afford to drive to a city with lower sales taxes are going to be paying for pensions. That’s what Measure G really did.

At this point it’s relevant to expose just how much Watsonville’s police and fire personnel actually make, in a town where the per capital income $16,837 and the household income is $47,442. Using the raw data from the State Controller’s website, which permits eliminating from the calculation part-time or partial-year employees, the average full time police officer in Watsonville during 2012 made, including overtime, $105,817; the average firefighter, an even more impressive $123,287. And that does not include employer paid benefits.

When you include the cost of benefits – bearing in mind that the employer pension contributions are going to increase by at least 50% over the next few years, which is not reflected in these numbers – the average police officer in Watsonville made total compensation of $140,978 during 2012; the average firefighter, $151,156. Put another way, the average firefighter in Watsonville makes nearly ten times the per capita income in that town.

These numbers become even more visceral if you review the payroll information for Watsonville on the TransparentCalifornia.com website. Of the 100 top paying positions in Watsonville in 2012, 71 of them were either police or firefighters. Equally visceral is Watsonville’s pension data, also available on Transparent California, which includes fields denoting years of service and year of retirement. For city employees who worked 30 years or more, and retired since 2000 when benefit formulas were enhanced, the average pension in 2012 was $83,648. And this average pension amount does not include benefits with a value that averages around $10,000 per year, because CalPERS would not provide that information.

The average private sector worker living in Watsonville earns about one-third as much money per year in their active employment as the average retired Watsonville city worker collects in annual pension payments based on a 30 year career. And the average private sector resident in Watsonville can expect to work for at least 45 years, if they are lucky enough to have a job.

So why can’t Watsonville’s city employees take meaningful reductions in pay – along with city workers throughout this financially battered state? Why can’t they accept meaningful reductions to their pension benefits? Wouldn’t that allow sales taxes to be lowered instead of raised? Wouldn’t that permit more money to be spent on replacing worn out equipment and hiring new employees? Is this crass fixation on maintaining financially unsustainable union “negotiated” pay, dramatically in excess of private sector norms, all that public service means anymore?

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Ed Ring is the executive director of the California Policy Center

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