A San Jose cop could retire after 30 years on the force with a pension worth 90 percent of his salary.

With pension reform on the city’s June ballot, police are looking at having to pay a lot more for that pension — or being forced into a cheaper plan.

A deputy sheriff with Santa Clara County also has a pension that would pay 90 percent of his salary when he reaches 30 years. But the county isn’t facing a public revolt over pension reform.

One of the reasons? Since 1945, Santa Clara County is the only county in California where taxpayers have been subsidizing those retirements through a special fund that appears on your property tax bill. That fund also helps pay retirement costs for the county’s other 14,550 employees.

The tax in the upper right hand corner of the county property tax bill is listed simply as “Co Retirement Levy,” and has been capped for about 30 years at 3.88 cents per $100 of assessed property valuation. A homeowner with a home assessed at $500,000, for example, would pay $194 to the special retirement tax annually, said Santa Clara County Chief Operating Officer Gary Graves.

But that’s in addition to the overall property tax revenue that already helps pay for county pensions.

“I didn’t know about that,” said Steve Nguyen, 32, a San Jose resident who was at the county building last week paying the second half of his annual property tax bill, which is due Tuesday. “That doesn’t seem fair. I don’t see the point of having an additional tax rate on top of other property tax.”

An obscure tax

Asked if he thought taxpayers realize they have been supplying hundreds of millions of dollars over the decades to pay for employee pension payments, Graves said that some people “look at their property taxes very carefully, and some don’t. It’s hard for me to say. There has been no attempt to hide this.”

Unlike San Jose, which runs its own pension program, many cities and counties in California belong to the California Public Employees’ Retirement System that administers public employee pensions. Both Graves and County Supervisor Mike Wasserman said the county’s employees have made concessions in both pay and benefits to help address budget shortfalls.

In fiscal year 2010-11, Graves said, the county owed $310 million in retirement costs, of which $99 million came from the special retirement fund included in the property tax bill (another $11 million from that fund went to redevelopment); $151 million came from the county’s general fund, and the remaining $60 million was contributed by employees.

“In one way or another, we all pay for compensation for public employees, and if it didn’t come from this (retirement tax) it would come from somewhere else,” said Wasserman, the board’s lone Republican who has pushed to cut costs and increase efficiency.

County employees contribute from one-half percent to 12 percent of their own retirement costs, said Graves. He said the county will be negotiating for increased employee pension contributions in the coming years.

Without the $99 million special retirement tax, however, “it’s $99 million worth of reductions we would have to make,” he said.

Critics say the obscure tax that two-thirds of county voters approved almost 70 years ago to provide for employee pensions likely wouldn’t win over residents today, when cash-strapped cities and counties are being forced to cut workers and reduce services because of crushing pension obligations.

In San Jose, for example, employee pay and benefits continue to outpace revenues. The city’s employee pension bill has ballooned from $73 million to $245 million in a decade. And despite revised estimates that shrank the tab for next year, pension costs are expected to keep climbing, forcing more layoffs and service cuts.

Changing times

It’s the reason Mayor Chuck Reed and his council allies are backing a June 5 ballot measure that would reform pension costs, though the exact ballot language has been temporarily put on hold by an appellate court.

Even Reed, however, was surprised by the amount of pension taxes collected in the county’s special retirement fund.

“I’m paying more for the county retirement levy than I am for the San Jose city general obligation bonds that built our community centers, libraries, fire stations and police substation,” he noted.

In California, only residents in 24 cities and Santa Clara County pay extra property taxes for retirement programs, according to a Senate Committee on Local Government report. Bay Area cities include Albany, Cloverdale, Fairfax, Richmond, Watsonville and Oakland.

Locally, the special retirement tax traces its history back to the last election of President Franklin D. Roosevelt.

According to county documents and Mercury News articles from the time, the county’s tax was passed Nov. 7, 1944. It asked voters if the county’s employees should join what is now CALPERS, and whether the county could annually collect “a special tax” to raise the money needed to meet the county’s payment to the retirement system. It was meant to be the sole source of pension funding for county employees, said Graves.

“At the end of the day, it’s legal, but a lot of people are revolting against these taxes,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association.

Controversy over the tax surfaced after 1978, when Proposition 13 capped property taxes at 1 percent of assessed value. The California Supreme Court in 1982 ruled that these retirement fund taxes could be grandfathered in. The Legislature later capped the tax rates at the 1983-84 level. Since then, the county has had to make up the difference to fund its entire pension bill, said Graves.

But Coupal, whose group’s namesake helped pass Prop. 13, said at a time when property taxes are high, and pension benefits are generous, voters should still challenge these taxes.

“Prop. 13 was never intended to provide this exception, and I think if people were aware of it today, they would be quite angry about it,” he said.

Contact Tracy Seipel at 408-275-0140.