THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, April 3, 1996 TAG: 9604030399
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY TONI WHITT, STAFF WRITER
DATELINE: PORTSMOUTH LENGTH: Medium: 75 lines
Council members seemed stunned Tuesday at the rising costs of the city's 2-year-old police and fire retirement system.
The plan, set up to help cut costs by trimming city employee rolls, has been so popular that 85 employees have retired since it was approved - many of them younger than city officials had expected.
The unexpected surge, the council was told Tuesday, will force the city to contribute an additional $1.4 million this year to the police and firefighters pension fund. The city will also have to spend another $400,000 for the Portsmouth supplemental retirement fund - an older and now defunct retirement fund that had been used by a variety of city employees.
The extra $1.8 million has been included in the city budget.
``This is just a dramatic increase,'' Councilman James C. Hawks told Peter Tieg of the city's finance department. ``How did this happen?''
The answer: a large number of employees took advantage of the plan all at once - many of them younger employees who will be on the retirement rolls for longer than the average retiree. The plan is no longer available to new employees.
Among those who jumped at the opportunity were former City Manager V. Wayne Orton and Deputy City Manager Roy Cherry.
The council also is considering offering a 2.8 percent cost-of-living adjustment for city retirees, which would cost an additional $2.2 million this year. That money has not been included in the city's proposed budget.
Since 1984, the council has given the city's retirees the same cost-of-living increase that state retirees receive. This year that increase will be 2.8 percent.
But benefits for employees who retired under the new police and firefighters plan are better than those of state employees.
So the council has asked the city staff to explore other options, including a smaller raise and a 2.8 percent increase for employees who retired prior to 1994, when the more lucrative plan was approved.
The police and firefighters unions are fighting for the proposed 2.8 percent increase for all retirees, including the most recent batch.
Before 1994, the city allowed its police and fire employees to retire, regardless of age, after 20 years of service. Their retirement benefits equaled half of their pay, calculated on an average of three years of their highest salary, including overtime, and supplements for weapons, uniforms and education.
Under the new system, employees were still allowed to retire after 20 years, regardless of age, but 20-year employees were given 60 percent of their salary; 25-year employees received 70 percent and those who stayed with the city for 30 years received 75 percent.
Deputy City Manager Cherry, who bought into the plan, retired as soon as the new policy became official - he will earn between $70,000 and $75,000 a year in retirement benefits.
In the first year, 1994, 56 police officers and firefighters retired. The average age was 51 - not 59 as city officials estimated, driving up the costs.
But several union members reminded the council on Tuesday that council members had approved the plan based, in part, on savings it would provide in lower personnel costs and through the elimination of a team of firefighters.
``It's not our fault if you spent that money in the budget,'' one retiree told the city manager on Tuesday.
Soon after the council approved the plan, it voted to prevent any future city managers or deputy city managers from joining the plan.
Last year, the council decided to close the city police and fire retirement plan to all new employees - opting instead to bring them into the state's more affordable retirement plan for law enforcement officers. At the same time the city has begun raising the salaries for city employees so they are more competitive with other cities in the region and across the state.
KEYWORDS: PORTSMOUTH CITY COUNCIL PENSION BUDGET by CNB