Board of Port Commissioners Holds Workshop on Status of Pension Plan

Presentations were made by the Port’s Chief Financial Officer Jeffrey B. McEntee, a representative of the Port’s employee retirement committee, and consultants hired by the Port to provide information on the process required to change the pension system.

After the presentations and discussion by the commissioners, the Board of Port Commissioners authorized top administrators to do the following:

1. Meet with employees and retirees to discuss terminating the contract with SDCERS as administrator of the Port’s approximately $145 million retirement fund.
2. Survey and take a vote of employees and retirees to determine if they want to terminate the agreement with SDCERS.
3. If a majority of Port employees and retirees elect to terminate, then give notice to SDCERS.
4. Continue ongoing negotiations with SDCERS.
5. Develop a timeline and plan of action for the employee and retiree meetings, surveys and decision meetings.

The Port of San Diego contracts with SDCERS to administer its approximately $145 million retirement plan for its approximately 600 employees and 215 retirees.

Beginning in 2003, the Board began evaluating options to ensure the security of the Port’s retirement system. Since late last year, the Port has done a "full-court press" in advocating with SDCERS for changes that would shelter the Port’s retirement funds should SDCERS go bankrupt, Commissioner William A. Hall said during the workshop.

Despite the Port’s compliance with all of the deadlines requested by SDCERS board and staff, Hall said, SDCERS has failed to do the same for the Port. "Amidst management turmoil and turnover, the indictments of former board and staff members, it is not surprising to me that they (SDCERS) are having difficulty in

supporting your needs and protecting your interests," said Hall, addressing Port employees and retirees during the workshop.

"If this was a private company overseeing our pension plan, we wouldn’t keep them on for a moment longer," said Hall. "It is unconscionable that this has gone on for so long and I know that those are harsh words. But we have given them every opportunity to perform on your behalf."

Hall said that the Port was seeking three changes to clauses in the contract with SDCERS. They include an indemnification clause that would make each party liable for their own negligence; a termination clause that would require six months notice of termination rather than one year; and a fair and equitable process for valuation and separation of the assets should the contract be terminated.

Hall made the motion to authorize termination of the SDCERS contract if the employees and retirees elect to terminate the agreement with SDCERS. While that determination is being made, the Port will continue to work with SDCERS on the items currently under negotiation.

"We have been well served by the system since the Port was created in 1963," said Commissioner Stephen P. Cushman. "But because of the intense state and national scrutiny on public and private pension systems and how they are administered, we have been compelled over the last few years to reexamine options to ensure the sustainability of our pension system for future generations."

The resolution passed on a 6 to 0 vote. Commissioner Victor A. Vilaplana recused himself because of a conflict with his law firm.

Last year, Sen. Denise Moreno Ducheny (D-San Diego) carried legislation for the Port that was signed by Governor Schwarzenegger in October. Senate Bill 1007 provides the Port with the ability to establish its own system. Before the bill passed, the Port could only contract with SDCERS or the State Public Employees Retirement System (PERS).

"As you can see by our actions over the last three years, we are not acting in haste," said Port President Bruce Hollingsworth. "We will continue to build a package of options in order to protect our employees and retirees. And one of those options is to continue to work with SDCERS on an on-going basis."

The Port of San Diego is a public benefit corporation and special government entity. Created in 1963 by an act of the California legislature, the Port manages San Diego harbor and administers the public lands along San Diego Bay. The Port has five member cities – Chula Vista, Coronado, Imperial Beach, National City and San Diego.

The Port oversees two marine terminals, a cruise ship terminal, 16 public parks, various wildlife reserves and environmental initiatives, a Harbor Police Department and the leases of over 600 tenant businesses around San Diego Bay.