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Retirement obligations spurring debate

By Staff | Feb 11, 2012

Some say the city’s financial obligations to retired workers are an onerous burden put on the taxpayers.

Others say the city has done a great job of tinkering with the way they handle the workforce and its ability to keep costs down.

Regardless, there has always been some confusion about how Cape Coral handles its Other Post Employment Benefits – OPEB – and whether it’s nothing more than a ticking time bomb ready to explode.

The controversy reared its head again during Monday’s City Council Meeting when the council approved the police and fire budgets.

“It should be addressed. We saved $4 million with the two contracts,” said District 2 Councilmember John Carioscia. “It depends on how you look at the numbers.

Some look at the pure numbers and see an overall drop in staff/benefit funding. Others look at the percentages and see a number that looks as though the sky is falling.

Connie Barron, the city’s information director, said the OPEB issue has been at the forefront of city news for a while, especially since the Government Accounting Standards Board said it needed to account for future liability for retirees.

“Until then, municipalities paid its insurance premiums to retirees. The GASB said we needed to account for future liability,” Barron said. “It’s a huge number because anyone eligible for retirement hadn’t retired yet.”

That meant hiring an actuary to predict how long each retiree would live and what it would cost, Barron said.

Barron said the cost controls go back to 2001 when they city changed the benefit, where new hires after Oct. 1, 2003 no longer got the entire insurance premium but rather a subsidy.

“We took steps to address this 11 years ago and put aside money when GASB said we needed to account for it,” Barron said.

Barron said another step was to offer pension buyouts to general employees in 2002 and 2008 to reduce staffing and decrease payroll. More than 250 workers – nearly a quarter of the workforce -accepted the 2008 buyout.

“The purpose was to realize immediate gains in expenses,” Business Manager Michael Ilczyszyn said. “The rate in decrease in salary was more than the rate of pension went up.”

Before that buyout, payroll costs were $43.8 million. Last year, they were $35.5 million, a decrease of $8.3 million.

Pension costs, $6.1 million in 2007, were $10.4 million last year, a $4.3 million increase, Barron said, which includes increases from the 2008-09 market crash.

The percentages are what drive people batty. But Ilczyszyn warned not to look at the numbers out of context.

“If you look at it in a one-year snapshot instead of the whole picture, you assume the pension isn’t working,” Ilczyszyn said.

“You hear the detractors say pension costs went up $4 million. A 60 percent increase? Oh, my God,” Barron said. “But look at the whole picture. You saved more in payroll.”

“(Financial Services Director) Victoria Bateman said not many buyouts work. This did,” Carioscia said. “You have to praise the work of the previous administration.”

Finally, the city and employees got together to negotiate pay cuts and pension fund increases over the past year. Police and fire personnel took a 2 percent pay cut and a 3 percent bump in pension benefits, with a “3-2” cut/raise plan for other employees.

It was a contract negotiation that most marveled at because of the mutual cooperation.

Mayor John Sullivan and Councilman Chris Chulakes-Leetz rejected the measure, but they were the lone dissenters.

All that, Carioscia said, has added up to a leaner budget where OPEB costs are kept minimal.

“The amount we pay into the pension is 2 percent of the budget. If we worry about that, we have other things to address,” Carioscia said.