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Manager offers Longboat pension remedy

STEVE REID
Editor & Publisher
sreid@lbknews.com

Town Manager Dave Bullock unveiled Friday, May 4 what will likely soon become a new employment era on Longboat Key.

Dave Bullock

In the face of a $27.5 million unfunded pension liability in the Town’s three classes of employees, Bullock is proposing to freeze the current defined benefit plans and convert all employees going forward into a 401(A) plan.

But the act of converting the Town’s pension plans is not unilateral. Bullock must successfully negotiate a contract with the firefighter’s union first since that contract is up for renewal in September.

The Police contract would be next and General employees have no union so the 401(A) can simply be imposed.

Bullock said he realized when hired last fall that the Pension system represents a runaway cost that needs to be reigned in. Part of the effort, said Bullock, was to come up with a plan that he believes will allow employees more control of their finances, is affordable to the taxpayers and allows the Town to remain competitive in the public servant market.

In short, the proposal mandates a 10% contribution from the Town and a 3% contribution from the employee. The Town will then match up to an additional three percent, making the maximum town contribution totaling 13%.

To put the cost into perspective, Bullock said the pensions currently cost the town about 60% of payroll — “a simply unsustainable number, ” said Bullock.

Bullock details the state of the current pension dilemma and his case for the 401 (A) conversion in a 33-page report sent to the Commission on May 4.

Bullock wrote the following goal and objectives for the Fire Department:

• Maintain a high level of public safety for our citizens.

• Provide most the effective service delivery model at an acceptable cost.

• Align desired service levels with citizens’ willingness to pay.

Bullock said it is the last of these three that is currently not being met. His presentation then goes on to address these three goals:

• Provide a fair and reasonable pension for Town employees.

• Design a predictable and sustainable solution for taxpayers.

• Pay off the unfunded liability.

 

The grim reality

The presentation then goes on to describe just how out-of-control the pension has grown according to Bullock. And the events leading up to the $27.5 million in unfunded liability read like a stark and grim economic novel.

Bullock says the total ad valorem taxable value for the Town of Longboat Key is at the same approximate level as 2004. Since 2008 there has been a 30% drop in property values from $6.6 billion to $4.6 billion.  That drop has had the ripple effect reducing the general budget by $1,839,411 since 2007.

And then Bullock notes: “As revenues have declined, pension costs have increased – dramatically. Under-performing investments, expanding benefits with increased costs, and other actuarial assumption losses result in unfunded liability growing to almost $28 million even with the Town making 100% of the annual actuarial contribution.”

Bullock then buttresses his case with some very important points: First, the Fire Pension payroll is now $2,476,609. The budgeted Town contribution for 2013 will be $1,492,652, or 60.27% of payroll.

 

Costs can be capped

Bullock says that in his 401 (A) plan the cost to the Town will be capped at a maximum of 13% of payroll instead of the 60-plus percent being paid today.

In fact, the Town’s annual contributions to the Fire Plan have increased 430% in eight years, from $347,0000 to $1,493,000. As a percentage of payroll, the Town’s contribution has grown from 16.80% to 60.27%, an increase of 359% since 2005.

Meanwhile, Bullock notes, the employees’ contribution rate has remained the same, at 10%. Bullock notes that the employees’ contribution stays level while the community is currently assuming all of the risk.

Bullock met with the bargaining unit from the firefighters’ union and went over the presentation. He expects some back and forth before any contract is reached. If he reaches an agreement, the next step is to take a contract to the Town Commission for ratification. If he cannot reach an agreement, impasses hearings are set. If an impasse fails, then the Town Commission is the final arbitrator and can impose the contract.

Read below the salient details of the Town Manager’s proposal:

 

Town Manager’s 401(A) proposal

• All benefits in the current Fire Pension Plan would be frozen.

• All employees keep all vested benefits.

• No new benefits would accrue beyond the date the plan is frozen.

• Employees hired after the date the plan is frozen would not be eligible to participate in the Chapter 175 Defined Benefit Plan would have no impact on the retirees or employees who retire before the Plan is frozen.

• A new defined contribution retirement account is established for every employee in the bargaining unit.

All current and future employees would participate in a new Town Section 401 (A) Defined Contribution Plan

• The Town would contribute 10% of the fire employee’s base salary.

• There would be a mandatory employee contribution of 3% to the 401 (a) plan.

• The Town would match the next 3% of employee contribution dollar for dollar.

• Maximum Town contribution is 13%.

• Employees may contribute up to the maximum legal limit.

• The Town will continue to pay Social Security for the employee.

• Vesting in the Town’s contribution would be 100% after five years of continuous service.

• Current employees would receive past service credit toward the five-year vesting requirement.

• If an employee leaves before five years, he/she would get all of his contributions back, including interest, and can take it with him/her when they go to work for another employer or cash it in and pay the required penalties.

• Employees would control the investments of their accounts by selecting from a wide range of Funds.

• If an employee leaves who is fully vested (five or more years of continuous service), the entire amount, including all Town contributions and interest, are under the employee’s control in accordance with applicable law.

• Since the mandatory contribution for the plan is lower (3% instead of 10%), employees who make only the mandatory contribution will see an increase in their pay.

• The balance in the employee’s account upon death is inheritable by the employee’s beneficiaries.

 

Read Town Manager Dave Bullock’s entire 33-page proposal online at www.lbknews.com

 

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7 Responses for “Manager offers Longboat pension remedy”

  1. randy fowler says:

    be carefull what you ask for you may get it.
    the make up sex with the fire and other employees can come at a cost ,it is part of how we got to the high cost of pensions , manager wanted to keep the buget low for the years that the funds made good returns and failed to see the long range results of short funding. WHO KNEW it would happen ? is not a question who should have plan for it ??.
    Don`t be mad at the employees they did there part!

  2. Robert G. Smith says:

    Former Employee sounds like she got the boot—lots of luck with that attitude.

  3. Former Employee says:

    No step plan, no raises, no pension, all in which every other community around here has.. Good luck with recruitment. LBK used to want the best employees. Now they will get the leftovers. Hope you enjoy your savings when your life comes to depend on people who are rejects from every where else. No individual worth anything will come here with the worse compensation package in the state. I have enough experience and education to find a job with no problem. However, you can replace me. Good luck LBK, and good riddance.

  4. John Wild says:

    I should think that our new town manager needs to be given a chance to resolve an issue the past town manager and prior commissions simply could not come to grips with. Militancy by the LBKFD only serves to create a venue where a more radical solution – elimination of the department with replacement by adjacent emergency services agencies in Sarasota and Manatee counties. Concerned LBK Firefighter does his brothers no good by his words above. McFarland (above) is correct – eight percent returns haven’t been viable since the second term of George W. Self reliance is the future, government “benefits” come with a price – a loss of personal liberty.

  5. Georgie McFarland says:

    Defined benefit pensions are not sustainable as today a return of 8% which is necessary to fund the plan’s obligation is only about 1.8% which creates a short fall on the ability to payout.

  6. ConcernedLBKfirefighter says:

    Seems pretty clear to me that this Town administration cares less about it’s employees!! I took a pay cut to come work for the Town of Longboat Key because of a promise of better pay and benefits. Well, I have yet to see better pay, because after I was hired the Town decided to freeze the current pay plan I was promised (a plan very similar to the military time and grade where an annual STEP increase in pay is given). I continue to be paid the exact same as a new recruit being hired today (which no other agency in this area has done).

    All I’ve ever heard before working here was how the Town of Longboat Key surpasses all other cities, counties, and town’s by taking care of it’s employees. This is SO far from the truth! Now the Town wants to take away the pension that was promised to all employees because the Town only made the required MINIMUM payment on it’s pensions. The Town created this problem by not paying more than the minimum, just like me complaining about why my credit card balance isn’t being paid off fast enough when I am only making a minimum payment. If the Town Manager or Commission thinks this is going to solve any problem, they are sorely mistaken! It will only create much worse problems. The citizens and visitors of Longboat Key will have to rely on the majority of it’s seasoned/experienced Firefighter/Paramedics not being here anymore and being replaced with people who are fresh out of school or rejects from elsewhere that can’t get hired anywhere else. Is that worth betting your life on? I guess we will see! In the meantime, I’ll start my active job searching again.

    ~Concerned LBK Firefighter

  7. William E Chapman says:

    Finally some sanity on this issue. The proposed 401A plan is still very generous by private plan standards, but starts the Town on a sustainable path.

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