from The Republican, Sunday, August 10, 2008
By KEN ROSSkross@repub.com
HOLYOKE - A proposal to provide additional money to 61 city retirees has strongly divided city officials.
On one side, city councilors support the additional appropriation, saying the retirees deserve the money since they have received it in years past.
"There's something not quite right here," City Councilor Patricia C. Devine said Tuesday. "These retirees need to be taken care of pronto."
On the other side, Mayor Michael J. Sullivan insists providing additional money for these retirees would cost $580,000. Otherwise, the city would not have the proper funding for future increases due to this raise, something that would be financially disastrous and add to the $9.7 million the city already appropriates each year to pay for similar increases in years past.
"I don't think it can go any farther," Sullivan said.
The City Council voted 14-1 on Tuesday in favor of three separate agenda items related to the additional money for the 61 retirees. Councilor Rebecca Lisi cast the sole dissenting vote
Currently, there are 335 municipal retirees, Sullivan said. All of them receive a cost of living increase each year. A bill pending before the state Legislature would give these retirees an additional 4 percent.
But among the 335 retirees, 61 retirees are eligible for additional money since city officials voted to accept a state provision which pays city retirees 50 percent of the current salary for an employee performing the same job. Such retirees also had to have worked for the city for at least 25 years, according to the state provision.
One of the agenda items approved Tuesday by the council by a 14-1 vote was to accept this state provision for fiscal year 2008, which ended June 30.
But the raises will not go into effect until Sullivan appropriates the funding for them, according to Daniel R. Owens, executive director of the Holyoke Retirement Board.
Providing the necessary funding for the fiscal 2008 raises for the 61 retirees would cost the city a one-time payment of $580,000, Owens said. That's because the city would need to set aside enough money to invest and pay for raises in future years due to the higher payments made to retirees.
If the city were to simply provide the necessary funding for only fiscal 2008 and not future years, Owens said that would be fiscally irresponsible and would simply add to the debt created by similar financial practices in the past.
"These costs are being pushed off to future generations," Owens said.
Currently, the city has accumulated $94 million in debt due to similar retirement practices in the past. As a result, the city must pay $9.7 million extra this fiscal year in its annual budget to pay for such so-called unfunded liabilities. In contrast, the amount of money the city must appropriate for its normal retirement costs is $2.3 million this fiscal year.
"The pay as you go method is what has gotten us into this mess," Owens said. "It's fiscally naive to add to the unfunded liability of the city."
Owens met June 16 with the City Council's Finance Committee and explained these issues to them, he said Thursday.
Such issues were not discussed Tuesday before the council voted on the three related agenda items. Rather, several councilors stressed the importance of immediately approving the raises, citing numerous calls they have received from frustrated retirees who have not received the raises for last fiscal year.
"I don't understand this," Devine said. "We've never gone to this length to get the half pay. There's something really not quite right here."
City Councilor Kevin A. Jourdain also expressed confusion about why retirees were not receiving the raises. According to Jourdain, the council had already approved the raises. Therefore, the 61 retirees should be receiving them.
City Councilors John P. Brunelle, James M. Leahy and John E. Whelihan agreed.
"Holyoke should be proud to take care of its retirees," Whelihan said. "They're entitled to the money. Pay them."
But providing additional money for the 61 retirees without properly funding such raises for future years would be disastrous, Sullivan said. "Our increases have outpaced what we could realistically expect to make," Sullivan said.
"The taxpayer has to know they're paying the difference," Sullivan added.
And while Sullivan acknowledged he has approved similar increases in years past, the city simply can no longer afford to do so, he insisted. "All of those (raises) have a cumulative effect," Sullivan said.
Labels: costs to future generations, enhancements, retirees