A compromise on Chattanooga's police and fire pension plan announced Thursday seems to be a win for city workers, a win for the mayor, and perhaps most of all, a win for taxpayers.
City workers incrementally will contribute more toward their retirement -- 11 percent of their income rather than 8 percent -- and their cost-of-living raises will drop from 3 percent to 1.5 percent. Meanwhile, a first-ever minimum retirement age of 50 takes effect. For new hires, the minimum retirement age will be 55. And deferred retirement lump sum options, known as DROPs, will be available to workers longer -- from their 28th year until their 33rd year of service.Most of those future, three-year lump sum payments won't include interest.
These are small changes for employees, but on the whole they mean big savings for the city and taxpayers. They also may contribute to a safer, better managed city.
The city will save as much as $200 million over 26 years, according to a staff estimate. That's $200 million that won't have to come from taxpayers, and it is a savings that could lower the city's pension contribution level by $4 million to $5 million yearly. This year's city contribution was $14 million, and with no changes it would have tripled by 2038.
Another big victor is Andy Berke. Still in his first year as mayor, he tackled pension fund reforms and formed a task force in August to research ways of reducing the city's unfunded liability to the pension fund. The task force had to accomplish that while keeping the plan attractive to current and future city workers.
This success, accomplished in fairly short order, underscores Berke's emerging profile as a leader who understands the value of compromise.
The proposal emerged Wednesday night after task force members negotiated for 13 hours behind closed doors. It still must pass a vote of the pension board and the City Council, but pension board spokesman Vince Butler said the board is pleased an agreement has been reached that could avoid putting the proposal to a public referendum.
Uncertainty over the pension's future had created fear among police and firefighters.
A total of 43 officers and firefighters retired early last year, double the number in an average year. Among them were Police Chief Bobby Dodd and most of his command staff.
But the structure of the current pension plan also has for years hurt the city by sapping the police and fire departments of accumulated wisdom and much-needed career knowledge. The current plan has no minimum retirement age and allows officers to retire any time after 25 years of service. Further, it encourages retirement before 30 years. As a result, the average officer retires with 28 years. In most careers, that's a management worker's best, most productive period.
The city has had four police chiefs in 16 years, and all retired before age 59. Dodd is 49.
And currently, 25 senior police officers -- many of whom have the experience to be considered as the next chief -- can retire today, according to the Police and Fire Pension Board. Eight more will become eligible in 2014.
So perhaps the best benefit of this new pension plan compromise may be the city's future safety.
With a new violence reduction initiative on the table, Berke's choice of a new police chief to shape training and enforcement is likely the most pivotal decision he will make as mayor.
This plan seems to put at least one ace in his pocket.