Friday, November 16, 2007

Nov. 13th Agenda Item 9

Regarding Item 9, the proposal is, in my opinion, unnecessary. There are better ways to save the City money in payroll and benefits.


Employees are suddenly faced with what seems like a dream come true: The City wants to pay you to quit working. Sounds like an easy decision, right? Not so fast! First of all, this issue does not pass the smell test. The decision should now be in the employees' hands. But how do you know if this buyout option is a good deal?

Unfortunately, the city does not want to, nor intends to trim its work force. If we did, this Commission would have been previously informed with a plan of action. Employees faced with making a decision about a buyout offer often feel that they may be laid off, at least eventually, if they don't take the offer. That is absolutely not the case here. So why is this all of the sudden an issue since it was not discussed at any previous meeting or budget hearing? One word…politics.

What important information should a person have in hand before deciding whether to accept an early-retirement buyout? We Need To Look at the numbers! There are so many issues to dealwith, such as Social Security benefits, health insurance, inflation, spouse benefits, early retirement penalties including the fact that you shouldn't count on latching onto a similar-paying job anytime soon.

A recent study by Fidelity Investments estimates that a 65-year-old couple retiring today without employer-provided health benefits would need a nest egg of $200,000 just to finance out-of-pocket medical costs, such as Medicare premiums, co-payments and medigap insurance expenses. And that outrageous estimate does not include long-term health care costs.

Has our pension plan administrator (Michelle Alvarez) determined if spouses would or would not continue to receive your benefits if you die first? Is she willing to testify about certain facts before this Commission?

And if you choose the pension, do you take a larger amount with no survivor benefits or a smaller amount during your lifetime that would pay benefits, usually at a reduced level, to your surviving spouse?

Of course, you’ll need to evaluate the financial pros and cons of accepting or rejecting the offer. That means more than just the bottom line cash. Employees will have to consider bonuses, stock options, paid time off and insurance premium subsidies that they will no longer receive. Have any of the employees consulted a tax specialist about the impact of receiving a lump sum or stretching it out over time? Severance or early retirement pay is considered taxable income.

The employees legally have 45 days to consider a buyout package, and most people wait until the last minute. By signing any buy-out agreement, they forfeit their right to sue the City at a later date on any employment and compensation-related issues, so they must resolve those very important issues before time runs out. Has the City Attorney advised anyone on this?

The bottom line is that this pension-early retirement buyout agenda item simply does not have enough supporting information and documentation for the employees much less the Commission for us to make a fully informed decision on this item. I don’t think the ‘Blue-collar’ employees and their families best interests are being observed in this matter. And, I don’t think that this proposal is clearly in the residents and 'taxpayers' best interests. Whay happens if everyone accepts the offer? What level of services can we as a city provide at that point?

In addition, the huge amounts of money distributed to the city manager and department directors will cause those employees who are left in the city, drastically increased payments toward their retirement plans.

I also think that the current pension system for many employees is gobbling up huge amounts of our budget and some drastic changes are needed. This will be fought tooth-and-nail by them, but the current situation is untenable.

There's one final consideration -- the emotional impact of leaving your job. The decision is rarely just about money. Many long-tenured workers don't want to leave a job they love or are afraid to try something new. The unknown is scary, and we don't have a button on our calculator for that.

In closing, a more complete evaluation of the results and other options are required before I would approve such an incomplete, political and haphazard proposal. This is a perfect example of inadequate preparation, and this is intolerable. The issue of options is very important. There are options available that may be a lot better. The City Manager has shown us none. This leaves the Commission in an "either/or" position, with no other reasonable options on the table.

I would like to instruct the Manager, to come back when you had done a good bit of homework by way of option development, information and analysis and at that point in time, the Commission would be in a much better position to decide among several reasonable options the fate of all of our employees’ and their families future. Further, if my staff ever presented me with this kind of “take it or leave it", "no other option" type of recommendation, I would seriously question their abilities, let them know in no uncertain terms, and instruct them of what is required, and how long they had to straighten their act up. If they complied within that time, fine. If they didn't, I'd start looking to replace those responsible immediately, if not sooner. But of course I don’t have that option just yet, at least until January 29th, which leads me to wonder exactly why this proposal has all of the sudden been brought before us.

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