By Tim Reid
LOS ANGELES (Reuters) - Voters in bankrupt San Bernardino, California, will decide next week whether to scrap a budget rule that sets pay for police and firefighters based on salary levels in wealthier cities.
A hotly contested ballot initiative is asking voters to amend Section 186 of the city's century-old charter. It mandates that base pay for police and fire personnel must equal the average salary of such workers in 10 other similarly sized California cities.
Proponents of the measure argue that the rule ties the hands of city budget managers and has led to inflated pay for police and firefighters, whose costs, including pension benefits, amount to more than 60 percent of San Bernardino's general fund.
The judge overseeing San Bernardino's bankruptcy has said the result of next week's vote will be a significant factor in determining how the city proceeds in acrimonious salary and benefit negotiations, particularly with its firefighters, as it struggles to come up with a bankruptcy exit plan.
Of San Bernardino's 210,000 residents, a third live below the poverty line, according to U.S. Census data, making it the poorest city of its size in California. Yet the charter automatically calculates safety worker wages based on wealthier cities with larger tax bases.
The cities San Bernardino is currently using to determine the increases are: Irvine, Santa Rosa, Daly City, Lancaster, Norwalk, Palmdale, Santa Clarita, West Covina, Fontana and Fairfield, according to its city manager Allen Parker. All of them have higher median household incomes than San Bernardino.
San Bernardino, 65 miles east of Los Angeles, filed for bankruptcy in August 2012 with a budget deficit of $45 million.
The city is one of a handful of municipal bankruptcies being closely watched by the $3.7 trillion U.S. municipal bond market. Bondholders, public employees and other state and local governments are keen on understanding how financially distressed cities handle their debts to Wall Street, compared with other creditors like large pension funds, during Chapter 9 protection.
Of California's 482 cities, none sets pay for public safety workers in the way mandated by San Bernardino's charter. Proponents of the Nov. 4 ballot measure, including San Bernardino's mayor, want to allow the city to negotiate salaries with safety workers through the collective bargaining process, as most cities do.
"It has been bad policy that has contributed to our city's budgetary difficulties," proponents of the measure argued when placing the measure on the ballot in September.
San Bernardino's police and fire unions oppose the measure. They say a cut in pay will force safety workers to seek jobs elsewhere. They also argue that they have accepted significant pay and job cuts in recent years as the city's financial crisis intensified.
In 2013, the city council voted down a similar proposal to amend what detractors call the charter's "autopilot raises," after fierce opposition from police and fire unions. This year, the council opted to let voters decide.
The next hearing in the city's bankruptcy has been set for Nov. 6, two days after the vote.
(Reporting by Tim Reid; Editing by David Gregorio)