This article first appeared in the Daytona Beach News Journal on June 05, 2007. For those of you who do not read this newspaper on a regular basis, we thought the information would be helpful in your analysis of the current tax situation as it applies to New Smyrna Beach.
PORT ORANGE BALKS AT POLICE PENSION HIKE
By SCOTT WYLAND
Staff Writer
PORT ORANGE -- Looming property-tax cuts have prompted the city manager to question the cost of police pensions, which are estimated to leap by $371,000 this year.
The city last year chipped in $1.15 million to the pension fund and could wind up contributing more than $1.5 million this budget cycle.
In a memo to the police chief, City Manager Ken Parker called the $371,000 increase "unacceptable," saying it was enough money to pay the wages and benefits of seven police officers.
"It would be reckless and irresponsible of me to recommend to the City Council any additional funding," Parker wrote. "In my opinion, it would be equally as irresponsible on the part of the police officers to ask the City Council to pay the continual increase in cost."
Parker said he wasn't as concerned about firefighters' pensions because the city's contribution will probably be the same as last year.
An actuary estimated the increased cost for police pensions. The next step is to dissect the report to ensure the figures add up, Parker said.
If the rising price proves to be correct, then city and police officials must explore ways to reduce the expense or at least curb the inflation, Parker said. He noted that the city is locked into a three-year labor contract with police, and any changes to the pension must be negotiated with the union.
One union leader said everyone should wait until state lawmakers roll back taxes before changing the pension plans.
"It's premature to make any drastic calls because you don't know what's coming out of Tallahassee," said Detective John Jakovenko, a representative for the Coastal Florida Police Benevolent Association.
Police deserve decent retirement benefits, because their jobs are high-stress and high-risk, Jakovenko said. "Most people don't go out there and put their lives on the line for a complete stranger."
Port Orange employs 86 police officers, he said. They qualify for a pension equal to about 30 percent of their pay after 10 years, 60 percent after 20 years, and 90 percent after 30 years.
To offset costs, Parker suggests:
· Members of the plan contribute 6 percent of their wages.
· During years when funds fall short of estimates, members agree to make up half the loss. However, they wouldn't pitch in more than an additional 3 percent of their pay.
· The normal age to retire would be 55. Officers who retire at a younger age would receive reduced benefits.
· A person must work 10 years before being eligible for a pension.
The main goal is to reduce costs without paring benefits, said Cmdr. Tim Girard, who sits on the city's pension board.
A committee is forming to study the problem more closely, Girard said.
A sudden wave of officers retiring can cause pension costs to spike, he said. Weak money markets can also deplete funds, requiring more dollars to replenish the funds, he said.
The city invests 60 percent of the pension's incoming funds into equities -- such as stocks -- and 40 percent into bonds, Girard said.
Pension costs have escalated since 2003, when the City Council approved a more competitive retirement plan, Girard said.
Financing the police pension plan cost $314,000 in 2002, about a fifth of what it could cost in the coming year, he said.
Girard argued that skimping on retirement benefits creates high turnover on a police force because officers have less reason to stay for the long haul.
Inexperienced officers are more likely to make mistakes that can lead to lawsuits, he said. "You can't see the hidden costs that are involved in a high turnover rate."
Editor’s note: Mr. Parker does not mention that he, the personnel director, and the city attorney negotiated these pay and pension agreements and recommended their approval to the city commission!