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City calls PARS program 'humane' way to save money

Some question cost savings of early-retirement incentive program
By: Sena Christian, The Press Tribune
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The City of Roseville is banking on an early-retirement incentive to save more than $3.36 million over the next five years.

But the savings will come at a cost.

The program will cost $1.6 million in the first year alone. More than $840,000 of it will be paid as the bonuses that encouraged top-step employees to retire, although many positions will be refilled — albeit at a lower pay rate.

Forty people have agreed to take part in the Public Agency Retirement Services (PARS) supplementary retirement plan.

Following Roseville City Council’s unanimous approval of the program Nov. 3, the Press Tribune received several e-mails from readers dissatisfied with this vote. Some commentators on the Press Tribune website question the actual savings involved and suggest the plan exemplifies “management taking care of each other.”

This response surprises city staff, who say this is a way to prevent layoffs.

“These programs trim labor costs in a humane way and at the same time save the city money,” said city spokeswoman Megan MacPherson.

After retiring, an employee enrolled in the plan receives a cash payment equal to 7 percent of the employee’s final annual base salary. The employee chooses the payout option, which might be over the course of five years, for instance, or his or her lifetime.

Employees in the first window of the program retired by Dec. 23. Those in the second window must resign between March 14 and April 28.

The city has used early-retirement incentive programs to accelerate cost savings to balance the budget. In the last two years, 100 positions have been eliminated through three rounds of the California Public Employees Retirement System’s (CalPERS) early-retirement program and the PARS program.

As with most government entities nowadays, saving money is critical. In 2007, Roseville had expenses of about $130 million. The city will finish this fiscal year with $105 million in expenses, said City Treasurer Russ Branson. That’s nearly a 20 percent cut.

“So we’ve made significant reductions,” Branson said.

The retirement incentive also means cuts to public safety as six fire personnel and one police officer position won’t be rehired.

Why PARS

In May 2010, as the city crafted its budget for the 2010-11 fiscal year, the City Council directed staff to cut costs in the fire department, primarily by closing a fire engine company and reducing personnel. But the city didn’t want to lay off people or wait for natural attrition to occur.

So they proposed the PARS option — a program considered less restrictive than CalPERS’ Golden Handshake program.

“It really hit a population that found PERS to not be what they wanted or flexible enough,” Branson said. “It’s intended for people who could retire but weren’t quite ready.”

The PARS program differs from the Golden Handshake program in that it provides retiring employees with additional cash compensation, not additional service credit to be used to calculate the employees’ benefit.

This means the program can be tailored to personal financial goals, rather than offering a cookie-cutter approach.

The city had two windows for eligibility in order to not have everyone leave at once, said Human Resources Director Stacey Haney. (The Press Tribune failed to mention in the Nov. 10th article that the program included a second window).

The first timeframe included most employee classifications and the second timeframe includes the police chief, police captain, police lieutenant, police sergeant and police officer.

City manager, city attorney, assistant city manager, administrative services director and International Brotherhood of Electrical Workers-represented employees were excluded from participating in both windows.

Some have questioned why Police Chief Mike Blair was allowed to participate in the program, given that he announced his retirement — set for April 2011 — prior to the City Council’s approval of the incentive. The city could exclude classifications of employees, but couldn’t “pick and choose” certain employees, Haney said.

Legally, they had to offer the option to Blair, who accepted. He will make a gross annual pension of $151,812, not including the 7 percent retirement incentive.

Following the retirements, the city can leave vacated positions empty or hire people at lower pay levels, unlike PERS, which requires spots be left open. Out of 40 spots vacated, Branson said the city will eliminate 19.5 full-time-equivalent positions and fill 20.5 at a lower salary to achieve its targeted vacancy rate of about 50 percent.

For instance, the central services director position will be filled with an administrative technician. In environmental utilities, a senior engineer will replace the utility manager spot.

In the fire department, 11 people took the incentive, including Fire Chief Ken Wagner, four fire captains, two senior fire inspectors, a fire division chief, a fire engineer and two firefighter paramedics. Six positions will remain vacant — including three captain spots — three will be filled and two will be filled with lower-paying positions.

Cutting the fire department was part of the City Council’s plan during budget talks for the 2010-11 fiscal year. At that time, the Council voted to close the three-person engine company at Fire Station No. 7 but keep the four-person truck company operational. The station has a low call volume.

In the police department, six people took the option. The police chief, police captain, police lieutenant, police sergeant and police officer position will be filled. The correctional officer position will remain empty. While there is a cost to offer the program to sworn police, overall, the department achieves a small savings.

Savings to the city

With the PARS program, the city will save an estimated $740,516 for the first year of the program and expects to save at least $3.36 million over five years. Branson calls that a “conservative projection.”

That’s after the annual cost of $1.6 million, which includes natural attrition, retiree medical benefits, payment of benefits and a 5.5 percent annual fee to PARS to administer the program, which amounts to about $47,000.

Over the life of the program, that fee totals about $235,000, Branson said. This fee includes program setup and administration, including sending out checks and communicating with retirees.

Ultimately, savings depend on the resulting vacancy rate of staff positions.

“The key to success is managing the vacancies,” Haney said.

Technically, a rehired annuitant can come back and work part-time — less than 50 percent — for the city, but Haney said Roseville limits this practice and only rehires people to fill a need, primarily during a temporary “bridge period.”

For instance, the city has a part-time meter reader who took a PERS early-retirement incentive who comes back periodically to work. This is a technical job and he doesn’t need training. But some residents call this “double-dipping.”

“Oftentimes, someone who has been there might be the best fit,” Branson said. “So do you choose the less-suited person for the job because perceptually it looks better?”

Meanwhile, local resident Jack Wallace said Friends of Roseville — a grassroots community action committee — will be discussing the PARS program at a future meeting.

“I am concerned about the long-term effect of the program on taxpayers,” Wallace said. “But I need to research it further to better understand the effects.”

Sena Christian can be reached at senac@goldcountrymedia.com.

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First year gross savings from PARS program:

Rehired positions at lower pay: $1,099,261
Unfilled positions: $1,272,197
Total: $2,371,458

First year cost of PARS program:

Administrative costs: $47,668
Natural attrition: $187,079
Retiree health care: $552,640
Payment of supplemental benefit: $ 843,554
Total: $1,630,941

First year net savings from PARS program:

Management: $76,278
Sworn police: ($84,809)
Non-sworn police: $53,226
Local 39: $7,851
Fire: $687,970
Total: $740,516

Source: PARS

Number of employees taking PARS incentive by department:

Fire: 11
Environmental utilities: 7
Police: 6
Parks, recreation and libraries: 4
Roseville Electric: 3
Public works: 3
Central services: 2
Finance: 2
Information technology: 1
City clerk’s office: 1
Total: 40

Source: City of Roseville