As Hollister officials plan a cut of the city’s workforce by
July, yet another budget riddle awaits.
Police officers and firefighters get a major boost in retirement
benefits starting in 2005, which could cost the city an additional
shortage of about $1 million annually, according to officials.
As Hollister officials plan a cut of the city’s workforce by July, yet another budget riddle awaits.
Police officers and firefighters get a major boost in retirement benefits starting in 2005, which could cost the city an additional shortage of about $1 million annually, according to officials.
Contracts signed by the two unions during the past couple years – when the budget situation was much less gloomy – included those enhancements.
City Manager Dale Shaddox said the amendment would likely elevate those departments’ payrolls – which total about $4 million a year – by 25 to 30 percent. And the annual cost could be even higher than the $1 million projection because the public safety departments also have “cost of living” raises coming, too.
“It’s one more cost that’s going to go up,” Mayor Tony Bruscia said. “And it’s a big hit.”
“That’s scary,” Councilman Robert Scattini said when told this week about the potential $1 million annual hit. “Wow.”
The dreaded change is known at City Hall as “three percent at 50.”
Police officers and firefighters will be eligible to retire once they turn 50 years old. The “three percent” pertains to a complex formula that determines the amount of each employee’s benefits.
It takes into account age, number of years under the California Public Employees Retirement System (CalPERS) and a final-year salary, according to Clay Lee, management services director.
A 10-year veteran police officer earning $75,000 a year in his or her final year would receive $22,500 a year in retirement – compared to $15,000 a year under the current system. That’s in addition to any retirement funds saved by workers through their careers.
All other city employees – aside from the two public safety departments – are eligible to retire at 55. Those employees are not scheduled to receive a retirement package boost in the coming years, according to Finance Director Barbara Mulholland.
Though CalPERS also contributes to each retired employee, the city’s share is enough to cause serious maneuvering by senior officials – starting now.
“We need to plan now for anything (in the future) that’s going to be hitting our budget,” Councilman Tony LoBue said.
The city agreed to the Police Department’s contract in July 2002 and the Fire Department’s in February 2003, Lee said. The new retirement package starts for police officers in July 2005 and for firefighters in July 2006.
Any employee working for the departments at the time of the change or after would be eligible for the raise, Lee said. But they must be employed for at least five years before retiring.
Bruscia said the Council approved the amendments for two reasons: The financial outlook was healthier at the time, and Council members received public pressure as officers and firefighters continually left for other cities’ departments.
The package to be used by Hollister has become much more common for California cities’ public safety departments, Lee said. Hollister abided, he said, to keep up with the competition.
“We were going to have to offer what other local agencies were offering,” Lee said.
Now, though, a question remains – will the city ask the two departments to rescind the retirement enhancement? Otherwise, even more cuts of services and employees are inevitable.
Union presidents Sgt. Ray Wood of the Police Department and Bob Martin Del Campo of the Fire Department did not work Wednesday or Thursday. They could not be reached for comment.
Shaddox suspects the public safety unions would not be open to discussions about foregoing the raise, he said. Legally, though, it is possible.
“Anything and everything is eligible for revisiting,” Shaddox said.
Bruscia and Scattini both said they think such an approach should be considered.
“Frankly, we definitely need to talk about it,” Bruscia said.
LoBue, however, doesn’t view that as a likely scenario.
“I don’t think it’s even feasible,” LoBue said. “I don’t think they’re going to go for that.”
The city has functioned in deficit since 1999, and its once-mighty General Fund reserve has dropped by 40 percent during that same span.
An already lean operation plans to cut about 25 percent of its 175-person workforce before the next fiscal year begins in six months.
At a meeting Jan. 12, the Council plans on reviewing the city’s bleak financial status, while discussing possibilities for alternative revenue sources. One under consideration is a “public safety property tax” measure for the November ballot, Shaddox said.
“We better start having some good luck,” Scattini said.
