Pay Now, Save Later?

A new city firefighter contract will cost taxpayers an extra $10 million in salary, but save money in other ways.

How much money? City officials didn’t have that answer as the proposed contract was fast-tracked to approval.

That happened at Thursday night’s Board of Alders Finance Committee meeting in the Aldermanic Chambers on the second floor of City Hall, where alders held a two hour-plus public hearing on the fire union contract. Dozens of city firefighters filled the room’s wooden pews and lined up standing along the walls in support of the new labor accord that members ratified on Sept. 6.

The committee took no action on the proposed six-year labor deal, passing it instead to the full Board of Alders. The committee chair can now move to discharge the item from committee at the next full board meeting, so that the full board can take a final vote. The timeline laid out in state law mandates that the Board of Alders vote on the member-ratified agreement no later than Oct. 21.

Click here to download a summary of the contract.

At the center of Thursday night’s presentation of the proposed contract details and subsequent questioning from committee alders was the impact that the latest labor deal might have on the city’s pension obligations.

The answer? For now, uncertain.

But city Acting Budget Director Michael Gormany and city Labor Relations Director Thomas McCarthy assured the alders that, even though the city’s actuaries won’t have an estimate on the pension impact ready until early next week, certain measures in the contract regarding minimum retirement age, capped sick time buyback, and increased employee pension contributions will have a long-term salutary effect on taxpayer-funded pension obligations.

“You’re going to see an increase in the ARC,” or the actuarially recommended pension contributions, Gormany warned. ​“No question about it.”

That’s because the proposed contract, which would be retroactive to July 1, 2018 and would extend to June 30, 2024, includes an 11 percent cumulative wage increase, totaling roughly $10 million over the six-year term. Higher salaries mean, come retirement, higher pension payouts.

“What we’re trying to do,” he continued, ​“is have a minimal impact on the ARC itself. We’re looking at cost avoidance.”

McCarthy described the contract provision that would require newly hired firefighters to reach a minimum retirement age of 52 or to have 25 years of active service with the department before they can start collecting their pensions as ​“maybe the most significant thing in the entire contract. It’s a long term, enormous gain for the city. Long term, that sustains the pension.”

City contributions to the two public pension funds, the City Employee Retirement Fund (CERF) and the Police & Fire (P&F) fund, already make up $66.03 million, or 11.8 percent, of this year’s general fund budget. And those two public pension funds have roughly $700 million in unfunded liabilities, with CERF currently funded at around 35 percent and P&F at around 40 percent.

With the recently approved new police union contract, alders found out only on the day of the vote that city-hired actuaries expect that labor deal to increase the city’s annual pension payments by $834,000.

Although Gormany didn’t have on Thursday night an actuarial estimate on the potential impact that the proposed fire union contract might have on city pension obligations, he and McCarthy and Fire Chief John Alston walked the committee through the various ​“cost avoidance” measures included in the deal.

First, Alston explained, the contract would increase employee pension contributions from 11 percent to 11.5 percent of their salaries each year. Taking into account the wage increases included in the contract, Gormany said, that would add an extra $1.8 million in employee contributions over the term of the contract than city firefighters would otherwise have had to pay based on the current salary and employee contribution rates.

Second, the contract limits the number of firefighters who can retire each year to 30. The department had previously allowed up to 45 members retire each year, Alston said, but the actual number during his three years helming the force has always been closer to 20 to 30. Now there’s a firm cap on that number.

Third, officers will now only be able to accrue 12 sick days each year (or one per month), rather than at the current rate of 15 a year (or 1.5 per month).

The new contract also expands the amount of sick time and military buyback available to all employees hired before Aug. 28, 2013 to a maximum of nine years, all employees hired between Aug. 28, 2013 and the passage of the new contract to a maximum of 8 years, and all future hires to a maximum of six years. Under the current contract, employees hired before Aug. 28, 2013 are able to use take advantage of up to five years of sick time buyback (with 150 sick days squalling five years of pension eligible service.) Employees hires after that 2013 date, meanwhile, are not currently allowed to use any sick
Time buyback.

Fourth, union members with 30 years of service can increase their pension payments upon retirement by 2 percent each year if they choose to work an additional five years.

And finally, the new contract requires that firefighters reach a minimum retirement after of 52 years old or work for 25 years for the department, not counting any sick time or military buyback, in order to start collecting their pensions. Firefighters can currently start collecting their full pensions after 25 years of service, but that includes using buyback time.

“Does this contract commit the fire department to grow or to shrink or to stay the same?” Westville Alder and Finance Committee Vice-Chair Adam Marchand asked as he tried to suss out other factors in the proposed deal that would have long-term implications on city pension payments.

“What we see and what we’re projecting is that it’s going to grow,” Alston said. More members will stay likely stay longer, he said, and the department will likely be able to fill current vacancies due to higher salaries and pay incentives for newly hired paramedics.

“When you think about the pensions,” McCarthy said, ​“you have to think long term. These are long-term questions.”

Frank Ricci, the president of the firefighters union, Local 825, praised the proposed contract as potentially balancing out a department that has too many junior officers and junior firefighters by encouraging union members to stay with the department for longer.

“We need to take care of our firefighters,” he said, ​“because our firefighters take care of our residents.”

The one member of the public who spoke critically of the proposed agreement, Westville alder candidate Dennis Serfilippi, said that, without an actuarial estimate of the potential pension impact of the contract, the alders simply do not have enough information to evaluate the fiscal soundness of the proposed deal.

“I don’t know how the city in good conscience can sign an agreement without know what the ARC is going to be in the future,” he said. He called on the city to release the underlying financial data it provided to the actuaries, so that citizen accountants can take a look and put together their own assessments of the wisdom of the contract.

Drug Tests, Chain Of Command, And Staffing Levels

Outside of pensions and pay, the new contract would implement a Health Incentive Plan (HIP), a preventative healthcare measure that would require union members to designate a primary care physician, get an annual checkup, and receive age-appropriate inspections like colonoscopies and mammograms. ​“We have now complete the circle,” McCarthy said. ​“Every single bargaining unit [in the city] has now accepted the HIP.”

The new contract would also increase the department’s drug testing breadth from a five-panel test to a 10-panel test, with the latter covering steroids and opioids. It would also allow the department to administer random drug tests not just during the day on weekdays, but also on weekends.

It would clarify the chain of command in the department, clearly establishing the fire chief as the first in charge, the assistant chief of administration as the second in charge, and the assistant chief of operation as the third in charge. Furthermore, per the contract, once the current occupant of the assistant chief of operation retires, that position will go from being within the union to executive management. Disputes over the chain of command are currently at the center of a lawsuit that one assistant chief recently filed against the chief, a fellow assistant chief, the fire union president, and a former admin assistant in the department.

Not included in the contract, but alluded to throughout Thursday night’s public hearing, are any changes to the department’s minimum staffing levels.

Both the current and the proposed contract set the required minimum staffing level at 72 on-duty firefighters at any given time of day. A recent Memorandum of Understanding signed by the union and the city independent of the contract, however, gives the chief flexibility to reduce that minimum staffing level to 69.

On Thursday night, Alston said the chief is allowed to exercise that staff reduction option only if and when the department has 60 trained paramedics on staff. Currently, he said, the department has 38, with many of those expected to retire or leave the department in the not-too-distant future.

The new contract includes a pay incentive for new paramedics, he said, bumping up their base pay to what is currently the second step for non-paramedic firefighters.

The full MOU, alders promised, would be the subject of a future aldermanic public hearing.