"Our officers are some of the best in the country. They provide a skilled and unique service that is in demand. They're not leaving because they're listening to me. They're leaving because of straight supply and demand issues. This department is understaffed, underpaid and overworked," he said. "We've been telling the Mayor's office this for four years but they haven't wanted to listen. They're destroying this department, and it has nothing to do with job fairs, and everything to do with basic economics."

The contempt between the two leaders, which could be characterized as personal, is the result of San Jose's $3 billion pension liability. Layoffs, resignations and retirements have cut the SJPD from 1,400 officers to around 1,000, far short of what experts say the city's nearly 1 million residents need. 

Complicating the matter is that the City of San Jose, long-admired for its low crime rates and policing efficiencies, has suffered significant spikes in crime across nearly all categories in the past four years.

Anatomy of a staffing crisis

San Jose's budget woes result from a perfect storm of inept political stewardship, opaque accounting standards, unfunded promises, and unbending case law.

In the late 1990s, San Jose, the "capital" of the Silicon Valley, was flush with cash. The dot-com boom was creating paper millionaires as fast as Wall Street was willing to overvalue companies with no revenue. The private sector flourished and land values increased. City revenues were solid.  And pension funds benefited from stock markets' swollen value. 

Unions like the POA of San Jose wanted in on the profits, and through binding arbitration were able to win increased pension benefits that were implemented retroactively. So an officer who had spent his career funding a retirement at 75 percent of his salary was all of a sudden eligible to receive 90 percent. That the 90 percent was unfunded was fine, because the stock market would always rise and cover what real accounting didn't.

Mayor Chuck Reed, serving his last year in office because of term limits, was elected in 2006. A registered Democrat, he won without much support from fellow council members or public unions. Once elected, Mayor Reed's administration, and the budget it oversaw, was subjected to new federal rules imposed by the Governmental Accounting Standards Board. 

In essence, the GASB rules placed new accounting standards on municipalities. San Jose was now required to account for future pension liabilities, and fund those future liabilities accordingly. Prior to GASB, future liabilities were not disclosed on the city's balance sheet. The retroactive benefits received by members of San Jose's police department had not only not been funded by employee contributions, but they hadn't been accounted for in city budgets prior to following GASB rules in 2006.

Then the financial crisis hit. City revenues dried up. The upshot: San Jose's funding responsibility for all retirees in fiscal year 2002-2003 was $73 million; in order to fund its current and future obligations to all retirees, the city suddenly now has to plunk down $272 million a year to keep pensions solvent.

Obligations to the San Jose Police Department's retirement fund increased $100 million over a 10-year period, while nearly a quarter of the department's staff was shed.

As revenues evaporated in the wake of the Great Recession, and the pension crisis set in, drastic spending cuts were required. Layoffs and a 10 percent pay cut were levied across the board, including the SJPD. There are now 2,000 fewer city jobs (for all services) than there were in 2002.

But the cuts weren't nearly enough to adequately address San Jose's unfunded retirement obligations. Retroactive, unfunded benefits, promised over a decade before the city was even required to disclose its future obligations, created a scenario where services once taken for granted by San Jose residents couldn't be delivered. Pitched negotiations between city hall and POA ensued, and quickly deteriorated.

"I've said from the start we need to do something about pension costs. But it has to be legal. And we have to be compensated competitively. Or else officers aren't going to stay," said Sgt. Unland, who will retire this year after 25 years on the force.

The police union offered to go into CalPERS, the California agency that administers the pension plans of 1.6 million public employees. The deal would have raised SJPD's retirement threshold to 55 from 50. The union was willing to agree to 16 percent pay cuts—not pension cuts—for those members not willing to move to CalPERS.

The POA's concessions weren't nearly enough to address the funding crisis, according to Mayor Reed's policy advisors, speaking on background. The administration's options, according to the mayor's public statements, were to underfund the city's pensions and ultimately go the way of bankruptcy; fully fund the pensions at the cost of budget cuts that would reduce services even further, or, as Mayor Reed preferred, reduce the costs of guaranteed benefits so services to the city could be maintained near pre-crisis levels and SJPD retirees could still receive benefits.

"When I first served on the City Council, no one knew how big of an issue this would become," said Mayor Reed in his email. "Elected service requires commitment to honesty, fiscal responsibility and open government, which has meant being honest with both employees and our residents about the real magnitude of our pension problems and the true costs of decisions the Council makes every day."

The mayor led a ballot initiative seeking to reduce pension costs—Measure B—brought to San Jose's voters in June of 2012. Among the primary cost-saving measures were limits on cost of living increases to pensions and the option to ask employees to pay in more or to opt in to a lower cost plan. The ballot passed with nearly 70 percent of the vote.

The POA sued, and last December the Santa Clara County Superior Court ruled on Measure B, upholding 12 of 15 provisions, but not allowing the city to lower cost-of-living increases or increase employee contributions.

Still, Mayor Reed regards Measure B as a success.

"We're already saving more than $20 million per year from the elimination of bonus pension checks and changes to retiree health care plans. And we're saving from lower cost benefits for new employees. Over time these savings are worth hundreds of millions of dollars," he said.

But at what cost? Sgt. Unland faults the Tier 2 component of Measure B, which addresses pension obligations for new department hires, claiming it incentivizes officers to leave the force and new recruits to look elsewhere. The SJPD continues to struggle with retention. Demographic realities are pushing officers into retirement while surrounding municipalities offer more attractive compensation. Once some of the best-paid cops in the Bay Area, cuts averaging about $14,000 have pushed SJPD down to No. 32 on the compensation list in that region.

The raw data on crime is hard to refute. Arrests are down by half, and response times are twice what they should be, according to City Hall's own data.  

What has been rebutted is the correlation between SJPD's staffing and the rise in crime. City Hall is quick to note both the quality of the existing force and the nature of some of the increased criminal activity have little to do with force levels.

But decoupling crime rates from what Mayor Reed recognizes as a staffing shortfall is not a hand he seems willing to play, at least not any more. Early in the debate, City Hall was openly dismissive about the correlation, but they're now acknowledging the problem.

"When the POA agreed to compensation reductions we were facing the layoff of 150 more police officers," Mayor Reed said. "With Measure B we've slowed the rate of retirement costs, which has allowed us to begin to restore pay and services.

"I acknowledge how difficult that has been for our dedicated employees. We know that we've lost a lot of good people because of the pay cuts, often to cities that are wealthier or haven't yet felt the impact of their unfunded pension liabilities."

Is there a solution?

Negotiations continue between the city and SJPD. Sgt. Unland claims the stalemate would end if the city would agree to the pension modifications offered under the CalPERS plan. 

Reforming pension reform, were both sides willing to find agreement, could require another ballot intiative.

Increases in local sales taxes are being considered as well. 

Meantime, there are not enough cops patrolling San Jose's streets. And crime continues to creep up.