Holyoke officials at odds over additional pay for retirees

from The Republican, Sunday, August 31, 2008
By KEN ROSS

HOLYOKE - City officials are at odds over whether 61 retirees should receive additional money for last fiscal year, which ended June 30.

If the appropriation is approved, the increase will not affect all 61 retirees the same, according to records from the city's retirement board.

One retiree would receive $360 more. Another would receive $6,311 more. A third retiree would receive $17,014 more. And that's just for one fiscal year.

In the case of one retiree, due to similar adjustments made in years past, the retiree has received $513,921 extra on top of the regular retirement payments the retiree would have received if such adjustments had not been made each year in years past, according to city records.

Such statistics are the reason why Mayor Michael J. Sullivan has refused to approve an additional increase for 61 retirees last fiscal year.

"I don't think it can go any farther," Sullivan said earlier this month.

On Aug. 5, the Holyoke City Council voted 14-1 in favor of three separate agenda items related to the additional money for the 61 retirees. Councilor Rebecca Lisi cast the sole dissenting vote.

But there's confusion over whether the raises can go into effect. That's because a previous order signed by Sullivan contained the phrase "subject to appropriation," something Sullivan has said he will not do since he believes the appropriation would be financially disastrous to the city. Sullivan has not signed the Aug. 5 order.

But City Councilor Kevin A. Jourdain speaking at an Aug. 14 retirement board meeting insisted

Sullivan cannot qualify his signature. Therefor, the additional raises for the 61 retirees can already go into effect.

"You can't put conditions on your signature," Jourdain said. "Either you sign it or you don't sign it."

The retirement board tabled a motion to grant the additional retirement benefit for the 61 retirees. Specifically, the board wanted a legal opinion from the city solicitor on whether Sullivan can qualify his signature on the appropriation for these retirees. The retirement board's next meeting will be held on Sept. 11.

Currently, there are 909 municipal retirees, Sullivan has said. All of them receive a cost-of-living increase each year. For last fiscal year, that would be a 3 percent increase.

But among the 909 retirees, 61 may be eligible for additional money for last fiscal year if the dispute over Sullivan's signature is resolved. Specifically, the 61 retirees would be paid 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.

The additional money the 61 retirees would receive for last year varies from $47.04 to $17,014 for one year, totaling about $58,000.

Such figures are deceiving, though, since the additional money would be added to the base salary every year in the future for such retirees, according to Daniel R. Owens, executive director of the Holyoke Retirement Board.

So in the case of the person who stands to receive an additional $17,014 last fiscal year, that retiree would receive $17,014 extra every for the rest of their life, plus any additional cost of living increases or similar additional one year adjustments. The $17,014 is on top of $30,800 they would receive under the standard retirement benefit.

In another case, one employee stands to receive an additional $6,311 for last fiscal year on top of the $31,188 they would receive even without last fiscal year's added benefit. And the $31,188 already includes $3,630 in additional added benefits due to similar increases approved in years past.

Another retiree would receive an additional $1,800 next fiscal year on top of the $42,894 they would receive even without the added benefit. The $42,894 figure includes $26,098 in additional added benefits due to similar increases approved in years past. And since this person retired, they have received an extra $513,921 in retirement benefits on top of the $328,323 they would have received without the added benefit.

As a result of the recurring costs in future years due to a single increase, Owens said providing the additional funding for last fiscal year's proposed raise for the 61 retirees would cost the city a one-time set-aside 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 last fiscal year and not future years, Owens has 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 earlier this month.
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 out of 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.

Officials split on payments to 61 retirees

from The Republican, Sunday, August 10, 2008
By KEN ROSS
kross@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.