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NewsmakersJanuary 12, 2021

Restoring Pensions from 401(k) Plans Could Cost San Diego Millions

The city might have to retroactively create DB plans for some 4,000 city workers.

San Diego could be required to spend millions of dollars to retroactively create new pensions for thousands of city employees after a Superior Court judge invalidated a 2012 pension reform proposition.

Proposition B, which passed with 66% of the vote just over eight years ago, eliminated defined benefit (DB) pensions for nearly all new city employees and replaced them with 401(k)-style retirement plans. But in August 2018, the California Supreme Court ruled that San Diego had illegally placed Proposition B on the ballot because the city did not first negotiate with unions representing city employees.

State law requires public officials to meet and confer with public employee unions about changes to wages and other terms of employment. The justices said then-Mayor Jerry Sanders had neglected his duty as the city’s chief labor negotiator to do this. However, the city argued that it was it was exempt from the requirement to meet with unions because the measure was sponsored by citizens, not the city.

However, in March 2019, a state appeals court ordered San Diego to financially compensate city employees who did not have pensions because of Proposition B. The court decided that the financial compensation for the workers would be the difference between the value of a DB pension and the value of the defined contribution (DC) plans plus 7% interest.

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The city appealed and took the case to the US Supreme Court, arguing that the state Supreme Court’s ruling ignored Sanders’ First Amendment rights because it held that he was supporting the measure as a private citizen not as mayor. But in March 2019, the US Supreme Court denied San Diego’s request to review the legal fight.

If the most recent ruling isn’t appealed or overturned, San Diego will have to retroactively create pensions for the approximately 4,000 workers who have been hired by the city since the cuts took effect in 2012. Despite the costs the city would have to bear, current San Diego Mayor Todd Gloria lauded the Superior Court ruling, saying Proposition B had cost taxpayers millions of dollars and made it easy for other cities to lure away city workers.

“Proposition B was a disaster for our city long before it was invalidated,” Gloria said via Twitter. “Proposition B promised to save money and that cities throughout California would follow our example by ending pensions. Neither happened.”

However, City Councilmember Chris Cate, the only Republican representative on the council, criticized the ruling saying it “overturned the voices” of 154,000 San Diegans.

“In a duly held election, two-thirds of voters decided the city of San Diego’s pension system needed to be reformed. Unfortunately, San Diego took a gigantic step back today,” Cate said on Twitter. “Furthermore, this is a dangerous precedent to overturn the will of the voters over process technicalities. San Diego voters were crystal clear when they voted to reform the city pension system.”

‘Zero Cars, Zero Streets’: Saudis Hatch a Plan for Future City Living

Backed by the state sovereign wealth fund PIF, the idea to build a carbon-free city called ‘The Line’ at business hub NEOM was unveiled by the crown prince.

By Sarah Min

A new plan to build a carbon-free city at NEOM—the ambitious $500 billion urban project at the center of Saudi Arabia’s plans to diversify its economy and backed by the country’s sovereign wealth fund Public Investment Fund (PIF)—was announced by the nation’s crown prince on Sunday.

Called “The Line,” the smart city will have “zero cars, zero streets, and zero carbon emissions,” feature 100% clean energy, and stretch 105 miles in a straight line from the coast of the Red Sea, through desert and mountain regions, until it reaches the upper valleys of northwest Saudi Arabia, Crown Prince Mohammed bin Salman announced.

“We need to transform the concept of a conventional city into that of a futuristic one,” the prince said during a video appearance.

It’s a bold enterprise aiming to be part tourist destination, part global business and investment hub, part model for green urban living. The plan is expected to create 380,000 jobs and contribute as much as $48 billion to the country’s domestic product by 2030, which is when the NEOM project is expected to be completed.

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The smart city is part of the goals outlined in the country’s Saudi Vision 2030 manifesto, which was first unveiled in 2016. The concept is supported by PIF, the roughly $350 billion sovereign wealth fund that supports the government’s commercial projects. The kingdom intends to wean off its dependence on crude oil, as well as to increase the role that the private sector has in the country.

Still, NEOM has also been criticized as a “vanity project,” and faces various challenges, including whether the city can attract enough residents, and whether bin Salman, who faces criticism from many world leaders, can raise the foreign capital needed to complete construction.

In 2018, the crown prince faced backlash from the business community after Saudi agents murdered Washington Post columnist Jamal Khashoggi. The crime sparked international backlash from world leaders and the global press, and it also prompted several leaders to withdraw from the NEOM advisory board. The prince’s war in Yemen has also been criticized as the world’s worst humanitarian crisis.

Walkability will be a major feature of the pedestrian-first city. The framework contends that 1 million residents living in communities built along The Line would be within a five-minute walk of schools, health clinics, and entertainment centers.

Meanwhile, under the plan, commuters would use a high-speed public transit system powered by artificial intelligence (AI), which includes autonomous cars. They would reach their destinations along The Line within 20 minutes.

“The Line is a project that is a civilized revolution that puts humans first,” bin Salman said.