Published August 19. 2012 4:00AM
My recent support of the Tentative Agreement between the city of New London and the firefighters' union has left many wondering why I changed my vote. While my vote may have changed, my position never did. Since having voted against it originally, I have been very clear and very public about my concern with the original language. Specifically, while it may have provided some near term savings, it contained no protection for the city against potential cost growth.
The main provision of the agreement held that the union would be transferred into Connecticut's Municipal Employees Retirement System, a defined benefit pension that has seen its contribution rates almost double since I've been on the City Council and more than triple in just 10 years. Any savings that the city would obtain as a result of the agreement could quickly evaporate if MERS rate increases were to continue unchecked.
Ultimately I supported the agreement because, as a result of further negotiations between the city administration and the union, a requirement was added that satisfied my concern about potential cost growth. That requirement provided that if the contribution rates paid by the city to the MERS plan increase to 18.5 percent or higher, or decrease to 12.5 percent or lower, the parties will bargain the impact of that increase or decrease and that this bargaining would be subject to binding arbitration.
This new language means that pension cost changes beyond a certain amount would be offset by changes from additional bargaining thereby providing some consistency of cost for the program. Since the state administers the MERS program, New London is not responsible for paying the pension benefits themselves, only the contributions while an employee is working, which with the new language are now capped. While I would have preferred that cap to be at the current 15.35 percent, I believe 18.5 percent is manageable, sustainable, and not so high as to have caused me to again vote against ratification.
Overall the financial impact of the provisions within the agreement will be positive for the city. I came to this conclusion after having completed my own cost/benefit analysis of its conditions over the term of the contract. The original savings estimate provided by the city administration suggested that once all wage categories were factored into the increased cost of MERS payments, after the first year, only a modest annual savings would result. By evaluating the savings for each contract year and replacing conservatism with realism in the city administration estimate, the savings projections become more advantageous for New London.
Total cost increases from the current fiscal year through the contract term at the end of fiscal year 2016 are approximately $2.8 million. These increases are the result of increased pension contributions, debt service payments as a result of having to bond supplemental money for the union to "buy-into" the MERS program, and additional 2 percent raises in each of the last two years of the now extended contract.
The total cost decreases over the term of the contract are approximately $3.7 million. These decreases are the result of the reduction of minimum staffing from 18 to 16, elimination of raises in 2013 , reduction of raises in 2014, elimination of a position, and reductions in workforce through attrition. This yields a savings of approximately $900,000 over the four-year term of the contact. If the MERS contribution rate was to immediately reach its cap of 18.5 percent, approximately $475,000 would still be saved over the contract term.
While a less tortuous path to approval of the agreement could certainly have been taken, ultimately what was approved will benefit both New London and its firefighters. The city's firefighters will have the peace of mind of a secure retirement, the city will save money, and we can feel confident that through this unprecedented agreement, potential future cost increases will be offset through additional savings.
A Republican, Adam T. Sprecace is a New London City Council member.