published: Wednesday, January 30, 2013

Neither side budges after special magistrate meeting

By SAMANTHA GHOLAR

sgholar@newssun.com

SEBRING - City officials sat down Monday with the Sebring Fire Department representatives, local union members and a special magistrate for the first time since the negotiations between the city and its fire department began two years ago.

International Association of Fire Firefighter Local Chapter 3210 Fire Union President Ross Edmunds spoke on behalf of the union members and Sebring Fire Department personnel during the meeting. Sebring City Administrator Scott Noethlich was joined by the city's labor attorney, Brian Koji.

Several items were brought to the attention of Special Magistrate Leonard T. Helfand, a retired Florida State University professor and former judge. The two biggest issues between the two sides are the removal of certain disciplines within the fire department's contract and, of course, the pension plans.

Noethlich previously stated that the bargaining contract includes the removal of the department's arbitration process. Noethlich and the city feel that an outside voice is unnecessary when it comes to the issues between the fire department and the city.

"There is a lot of issues and tension coming from the chief, union and administration. It's more than ironic that they're wanting to remove all of our liberties to find justice after we successfully win our first arbitration," Edmunds said.

Koji replied to Edmunds statements, explaining the thought process behind the city's proposal to remove the discipline.

"I certainly understand where they are coming from but we're not proposing anything that's not common. In the private sector ... there is no arbitration. Now I understand that the public sector is a little bit different, but there's no reason that system wouldn't work here in the same fashion that it works in 90 percent of the rest of the world," Koji stated.

Koji stated that the first arbitration won by the fire union was not necessarily an issue that should have ever made it to an arbitrator. According to Koji, the city wants to remove the arbitration discipline completely from the contract and "have it go to the person most responsible to the elected officials and have it go to the electorate."

The two sides were unable to come to a happy medium; pension plan was up next for discussion.

"We are proposing to change the pension plan to go to a defined contribution plan for all future hires and for anybody not currently vested," Koji explained. "They will be required to contribute 2 percent of their salary into the plan. They may then elect to contribute more, up to the legal maximum ... the city will match them dollar for dollar up to either 4 percent or a maximum of $4,000 per employee."

According to Koji, under the proposed plan the city will lose its state funding for the Chapter 175 plan but is willing to do that because the savings from the change over will "dwarf the state funding." The city's main goal of the change in plans is to accomplish more certainty in the costs in present time as well as the future.

Testimonies began following Koji's brief overview of the city's proposal. City Finance Director Mike Eastman as well as Noethlich were questioned by both parties to get a better understanding of the city's plan of action.

Eastman testified that 48 percent of the city's 2012 pension costs goes to the fire department, though the fire department makes up only 10 percent of the city's employees.

The current rate of return under the present plan is based on an 8 percent rate of return. The current cost to the city for the plan is $544,000. Eastman explained the report created by Matthews Benefit Group, which outlined and predicted the costs for the city in the coming years under the current plan.

"Actually over the last 20 years or so the return has been closer to 5 percent ... if the rate is reduced from 8 percent to 5 percent you can see how a significant impact the plan is," Eastman said, describing the report findings. "The city has no control over the investments of the pension plan funds."

The estimated cost of a 5 percent rate of return under the current pension plan will be $1,293,000 in fiscal year 2013, a difference of more than $700,000. The projected 8 percent rate shows a cost of $611,000 (for 2013), a difference of over $70,000.

City's financial health

Following Koji's questioning, Edmunds spoke to Eastman regarding the fire departments and unions concerns.

Edmunds asked Eastman to explain the city's financial health currently hoping to get a better idea of why the city is fearful of spending the funds for the current plan.

"Are we doing OK," Edmunds asked. "In your opinion, is the city doing well or are we in financial dire straights?"

"We are not in financial difficulties," Eastman said.

Edmunds continued his questioning, asking about the city's general fund. Edmunds stated that the fund would be a sign of financial struggles for the city. Eastman stated that the city's general fund balance was just more than $5,000,000.

Eastman agreed that the number was important and did show a sign of a healthy financial state for the city.

"So in your opinion the city has been pretty conservative with their spending? We have money to maintain the current retirement plan if necessary," asked Edmunds.

"I don't think I'd say that. We're in sound financial state and we want to stay that way. The costs to maintain these defined benefit plans, we are not going to be able to sustain that," Eastman replied.

Noethlich's testimony was next. During his testimony, Noethlich was asked several detailed questions about the decision-making processes within the city, and the history of the contract bargaining between the city and the fire department. Noethlich explained briefly the city's stance behind the proposal to change the plan.

"Council would like to see some quantitative definition in order to be able to budget. With a defined benefit plan it would appear that we don't have that ability because you can't predict what's going to happen in the economy. It has an effect on the plan and an effect on the city," Noethlich said.

The city's worries that the current defined benefit plan is not meeting 8 percent rate of return has caused the council to approve the allocation of additional funds to be set aside to help fund the plan. The council has long felt that the 8 percent rate will not be earned. The pension board - made up of two city officials, two fire union members and single outside individual - makes the decision to set the rate of return, makes investments and tells the city what it is expected to pay under the plan. The city (taxpayers) pays the difference in the event the rate is not met or the projections are incorrect.

"If the plan was to be getting 5 percent return, theoretically, under the current plan structure we should be contributing $1.263 million and we're only contributing $544,000. So there is a deficit there of roughly $700,000 ... There is a valid concern that the plan will be unfunded at some point," Noethlich said.

Other options?

The fire union's rebuttal voiced concerns of why other options for the plan have yet to be explored and why proposals from them have been denied by the city.

"Can you explain to me why the last offer accepting everything, raising the starting pay and keeping the current non-vested personnel, which is six people, why that was denied," Edmunds asked.

"Essentially it was denied because we have concerns about the pension plan going forward ... There are variables here that we don't have any control over with a defined benefit contribution plan. With the proposed plan we have those variables," Noethlich said.

Edmunds stated that another option that has yet to be explored is the changing of the fire fighters pension plan to the other public employee's pension plan - the FRS (Florida Retirement System) plan.

"As far as moving everybody to FRS, that's not as easy as you think," Noethlich said. "You can't just move new members; you have to move everyone. You have to buy yourself into the FRS system. It's a huge number."

"Astronomical?" Edmunds asked.

"Yes. Numbers were thrown out when we first looked at it, not an actual study, but the numbers were so large that it just was not financially affordable," Noethlich said.

Following testimonies, Helfand discussed what he thought the key points of the meeting were and advised both parties - the city and the fire union - to prepare briefs. Briefs must be delivered to the magistrate by Feb. 27 to be reviewed by Helfand. Helfand will have 15 days to then make his recommendations to Noethlich and the city council, and a public meeting will be set by the city.

The city will then decide what action to take next regarding all of the issues between itself and its fire department.