DHS Staff Report Blasting latest Hansen Contract

Dear all concerned citizens

Below is the DHS Staff Report I scanned blasting Jerry Hansen's latest contract.  I seems that staff is verifying if past Hansen contracts where indeed also null and void because they may not have been correctly ratified in public.  I highlighted said language in red.

Gabriel

CITY OF DESERT HOT SPRINGS  CITY COUNCIL STAFF REPORT

REPORT TO:  Mayor and Council

FROM: Patricia A. Larson, Interm City Manager

DATE: September 7, 2005

SUBJECT:   Pursuant to the Closed Session action of August 18, 2005, the letter of request for public action on June 7, 2005, Employment Agreement of Jerry Hanson is hereby placed on the agenda

RECOMMENDATION:

That the City Council (a) make a finding that its previous action in Closed Session on June 7, 2005, adopting the Employment Agreement by and between the City and Jerry G. Hanson, was not completed per the requirements of government code, hence, there was no valid action; (b) therefore declare that prior action is null and void at its inception; (c) consider the June 7, 2005, Employment Agreement in open session;
(d) reject the proposed Employment Agreement.

ANALYSIS:

(a) and (b). The June 7, 2005 Action Was Not Completed and Must Be Declared Null and Void.

On June 7, 2005, during the term of the previous City Manager Jerry Hanson, he presented to the Council a new Employment Agreement whereby he proposed to change his compensation and benefits (June 7,2005, Employment Agreement, a copy of which is Attached as Attachment 1). This presentation was made in Closed Session. The Council took action on the June 7, 2005, Employment Agreement, approving the contract, and
reported that action to the public when the Council reconvened in open session.

The Acting City Attorney has advised that The Brown Act prohibits the Council from taking action on an employee's compensation in closed session (except for a reduction resulting from the imposition of discipline, winch exception does not apply in this instance) Califorma Government Code §54957.6(a) ["Closed sessions. . shall not include final action on the proposed compensation of. . . employees. ..

Pursuant to the provisions of The Brown Act, and in my capacity as Interim City Manager, an interested party,I have made a written request that the Council cure this Brown Act violation. (See Attachment 2) The violation is cured by setting aside the prior approval as a void, ultra vzres act ("Ultra vires" means an action that is in excess of the power or authority of the Council.) Thereafter, any consideration of the June
7, 2005, Employment Agreement must be in open session.

Another Attorney and the Acting City Attorney have further advised that the prior action on the June 1, 2005, EmplOyment Agreement in Closed Session does not constitutc final action since it also violates California Government Code § 53262. That Section mandates that "All contracts of employment with a. . . city manager. . . shall be ratified in an open session. . . ." Although the June 7,2005, action was reported in open session, the Council did not ratify the action in open session. Ratification requires the Council to approve a motion made in
open session to ratify the contract. The failure to ratify the adoption of the contract is another basis pursuant to which the prior adoption is not in compliance with the law. Indeed, legal counsel is now researching the issue of the legality of prior contracts that were not ratified in open session.

Certain terms of the June 7, 2005, Employment Agreement are illegal and, therefore, void pursuant to other provisions as well. For example, the City's Municipal Code provides for a limited amount of severance (Section 31.20) and permits reimbursement of expenses only upon proper documentation of the expenditure (Section 3121).

Given the above authority, staff recommends that the City Council (a) find that the action taken on June 7, 2005, in Closed Session, to adopt the June 7, 2005, Employment Agreemefl~ was not a legal act and (b) enter an order setting aside and declaring the action to be null and void at the inception.

(c) The Matter Here Returns to the Council for Consideration.

(d) The City Council Should Reject the June 7, 2005 Employment Agreement

If the City Council wishes to consider the June 7,2005, Employment Agreement, staff recommends that it be rejected.

First and foremost, it has come to staff's attention that the cost of the proposed Agreement * as asserted now by Mr. Hanson - is significantly more than has ever been understood or intended by the Council. Indeed, I have now confirmed that the cost is significantly more than was ever disclosed to the Council when the June 7,2005, Employment Agreement was presented.

As an example, Mr. Hanson has acknowledged that the series of contracts was an intentional effort on his part to shift benefits to salary in order to spike his salary for purposes of calculating his retirement benefits. This was never a result sanctioned by the Council.

Further, the June 7,2005, Employment Agreement includes a paragraph whereby the City could be obligated to "guarantee" a PERS estimated monthly retirement benefit of $20,000 per month. Mr. Hanson has recently ~knowledged that a majority of the Council would never approve such a provision, yet such a provision is contained in the June 7, 2005, Employment Agreement. The language appeared innocuous until recently 'when Mr. Hanson's intent in this regard was made clear.
(See Attachment 3, the postscript on Mr. Hanson's letter to PERS.) In my opinion, this is t~ unconscionable and a gift of public funds. As now asserted by Mr. Hanson, such a provision was never understood, intended, or approved by the Council.

Pursuant to the provisions of The Brown Act, and in my capacity as Interim City Manager, an interested party, I have made a written request that the Council cure this Brown Act violation. (See Attachment 2) The violation is cured by setting aside the prior approval as a void, ultra vzres act. ("Ultra vires" means an action that is in excess of the power or authority of the Council.) Thereafter, any Employment Agreement must be in open session.

Another Attorney and the Acting City Attorney have further advised that the prior action on the June 1, 2005, EmplOyment Agreement in Closed Session does not constitutc final action since it also violates California Government Code § 53262. That Section mandates that "All contracts of employment with a. . . city manager. . . shall be ratified in an open session. . . ." Although the June 7,2005, action was reported in open session, the Council did not ratify the action in open session. Ratification requires the Council to approve a motion made in
open session to ratify the contract. The failure to ratify the adoption of the contract is another basis pursuant to which the prior adoption is not in compliance with the law. Indeed, legal counsel is now researching the issue of the legality of prior contracts that were not ratified in open session.

Certain terms of the June 7, 2005, Employment Agreement are illegal and, therefore, void pursuant to other provisions as well. For example, the City's Municipal Code provides for a limited amount of severance (Section 31.20) and permits reimbursement of expenses only upon proper documentation of the expenditure (Section 3121).

Given the above authority, staff recommends that the City Council (a) find that the action taken on June 7, 2005, in Closed Session, to adopt the June 7, 2005, Employment Agreemefl~ was not a legal act and (b) enter an order setting aside and declaring the action to be null and void at the inception.

(c) The Matter Here Returns to the Council for Consideration.

(d) The City Council Should Reject the June 7, 2005 Employment Agreement

If the City Council wishes to consider the June 7,2005, Employment Agreement, staff recommends that it be rejected.

First and foremost, it has come to staff's attention that the cost of the proposed Agreement * as asserted now by Mr. Hanson - is significantly more than has ever been understood or intended by the Council. Indeed, I have now confirmed that the cost is significantly more than was ever disclosed to the Council when the June 7,2005, Employment Agreement was presented.As an example, Mr. Hanson has acknowledged that the series of contracts was an intentional effort on his part to shift benefits to salary in order to spike his salary for purposes of calculating his retirement benefits. This was never a result sanctioned by the Council.

Further, the June 7,2005, Employment Agreement includes a paragraph whereby the City could be obligated to "guarantee" a PERS estimated monthly retirement benefit of $20,000 per month. Mr. Hanson has recently ~knowledged that a majority of the Council would never approve such a provision, yet such a provision is contained in the June 7, 2005, Employment Agreement. The language appeared innocuous until recently 'when Mr. Hanson's intent in this regard was made clear.
(See Attachment 3, the postscript on Mr. Hanson's letter to PERS.) In my opinion, this is unconscionable and a gift of public funds. As now asserted by Mr. Hanson, such a provision was never understood, intended, or approved by the Council.

Yet another example is the "compounding" nature of this and prior contracts. Although there has been much publicity surrounding the issue, this City Council has never approved a contract with the expectation that benefits would be compounded in the manner that Mr. Hanson has directed staff to process his paychecks. Indeed, I have discovered a huge gap between the Council's understanding of the terms of this and other contracts as distinguished from Mr. Hanson's
direction to staff. It is now clear to me that the Council never
approved, intended or understood, by virtue of the June 7, 2005, Employment Agreement or other prior agreements, the level of compensation that Mr. Hanson subsequently demanded. Staff cannot be criticized for any such misunderstanding because staff acted only
pursuant to the instruction and authority of Mr. Hanson in his prior capacity as the City Manager.

Second, there is no point in adopting the June 7, 2005 Employment Agreement in light of Mr. Hanson's declination to serve as Interim City Manager. The primary purpose of the June 7, 2005 Employment Agreement was to provide for Mr. Hanson's services as Interim City Manager until a new city manager was in place. On June 30,2005, Mr. Hanson gave the City written notice that he would not serve as Interim City Manager effective August 1,2005. Thus, one of the primary purposes of the June 7,2005 Employment Agreement has been lost.

Although Mr. Hanson has represented to PERS that he continues to work for the City, I have never assigned Mr. Hanson any duties since my appointment as Interim City Manager.

In conclusion, staff is of the opinion that adoption of the June 7,2005 Agreement is not in the City's best interests. Staff recommends that the Council reject the June 7, 2005 Employment Agreement offered by Mr. Hanson.

FISCAL IMPACT/LEGAL IMPLICATIONS:

Should the Council adopt i1, the cost of the June 7, 2005 Employment Agreement, is huge. Mr. Hanson has threatened litigation in the event that the City does not acquiesce to Mr. Hanson's demands. If litigation were to ensue, the City would incur litigation expenses including attorney fees.

A1TACHMENTS:

1. June 7, 2005 Employment Agreement

2. Letter Requesting Brown Act Violation Be Cured

3. Hanson's August 15, 2005 Letter To PERS

Approved by: Patricia A. Larson, Interim City Manager

Submitted by: Patricia A. Larson, Interim City Manager

Date Submitted: August 29,2005

Meeting Date: September 7,2005

Legal stuff here!

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