Modesto picks leader for pay panel

Retired Stanislaus County Superior Court Judge Hugh Rose III will lead a five-person commission charged with recommending salaries for Modesto City Council members, Mayor Jim Ridenour announced Tuesday night.

Rose and his colleagues on the commission can raise the council's pay from $9,600 a year to a cap of about $26,000. The commission can recommend the mayor's pay be increased from $9,600 a year to about $88,800.

Voters agreed to create the salary-setting commission with those caps last month when they approved Measure M, a package of reforms written to improve accountability in City Hall.

The council voted to appoint Rose; Community Hospice Chief Financial Officer Rick Dahlseid; League of Women Voters Stanislaus President Ellen Meyer; mobile home rent control advocate Ray Newman; and taxpayer advocate Dave Thomas to the commission.

Later this year, the council is expected to vote on approving the commission's pay recommendations or on setting a lower salary.

In other business, the council on Tuesday voted to pull its stakes out of a volatile bond market, aiming to save public cash on rising interest rates.

One of the city's bonds is in a market suffering from doubts about banks that bought repackaged subprime loans. Those questions drove up the city's interest rate on a $46.3 million bond by 4.5 percentage points, costing Modesto $107,000 a month.

The council's vote signaled the city's intent to get out of that market, but it doesn't necessarily mean Modesto will pursue a traditional, fixed-rate financing plan.

Instead, the council by a 5-1 vote hired lawyers and directed its financial adviser to consider three methods of restructuring the bond. Two of the options would put the bond in a different variable-rate market.

Councilwoman Janice Keating was in the minority. She wanted to steer the bond to a fixed-rate plan. Doing so would cost Modesto about $1.3 million upfront, and it would secure a rate of about 4.79 percent — about 1.3 percent more than the city was paying on the bond before last month.

"I don't think there's a ratepayer out there who's going to feel cheated because we didn't risk it and try to save them a percentage point," Keating said.

Her colleagues said they wanted to look at ways of saving the city money over time.

The fixed-rate plan would cost Modesto $93.7 million over the life of the bond. The other options would cost the city $82.8 million to $83.2 million over the next 29 years, about $4 million more than the city planned to spend when it took out the bond.

"I just don't want to see us lock into something that's going to cost the taxpayers a lot of money," Ridenour said.

The Modesto and Turlock irrigation districts were hit with similar interest rate increases on certain bonds in the past month. Like Modesto, they placed bonds in auction-rate securities. Banks set interest rates on those bonds during weekly auctions.

Bee staff writer Adam Ashton can be reached at aashton@modbee.com or 578-2366.