ST. PETE BEACH — The city hopes to save about $28 million in future pension costs by changing the retirement plans it offers to its employees.
Last week, the commission met separately with three employee unions to consider and subsequently approve new hybrid plans that would reduce the growth of future guaranteed pensions for existing employees while instituting contribution-based 401(k) investment plans.
The action followed a tentative decision last month to raise the property tax rate about 18 percent to $3.37 for every $1,000 in assessed, taxable property value.
The increase is expected to generate an additional $800,000 in revenues. A final decision on the rate will be made in September.
The commission also will ask voters in November to give it the power to disband the city's Police Department and contract with the Sheriff's Office for law enforcement.
If that happens, the city expects to save about $1.3 million in annual law enforcement costs.
These financial moves are all geared to fix next year's anticipated budget shortfall of more than $1 million — and growing future red ink caused primarily by rising pension costs.
"Everybody knows the challenges we have been having," said City Manager Mike Bonfield during the commission's meeting with the police union.
Without changing the police pension plan, that cost will be close to 20 percent of the budget next year, he said.
"We put less than 10 percent of the budget toward infrastructure (such as repairing streets),'' Bonfield said. "The pensions eat up an inordinate amount of the city budget."
What is even more of a problem for the city's finances is what is called the "unfunded liability" — or the amount of money the city owes but does not have for pensions the city is obligated to pay for current retirees and current and past employees who will eventually retire.
Bonfield said the city's current pension liability is more than $7.5 million for the Police Department alone.
When the pensions due firefighters and other city employees is factored in, the unfunded liability grows to a whopping $23 million.
After months of negotiations, the city and its unions have been unable, even with the help of a mediator, to reach an agreement on the pension plans.
Reynolds Allen, the labor attorney representing the city during last week's impasse meetings, said the current pension plan for the police department is "unsustainable and risky" with a future unknown cost to the city.
Bonfield's proposed hybrid pension plan, he said, would reduce costs to city taxpayers, while offering a "good retirement plan" that would not be based on unknowns or unmet investment assumptions.
Implementation of the commission-approved plans are pending contract ratification by the employee unions, actions that must be taken by early September.
According to city officials, if the unions fail to ratify the plans, they would still go into effect.
The new police pension program would be delayed, however, until after the November referendum.
Under the new plans, there would be no change for already retired employees.
"There was a fear that the city was trying to take away the pension for the Police Department. That was not, is not the intention," said Commissioner Lorraine Huhm. "You are never going to be stripped of your retirement."
Commissioner Jim Parent, commenting after the meetings, said asking the city to "take all the risk" for returns on pension plan investments "didn't seem quite right to me".
Vice Mayor Marvin Shavlan, in an email to his constituents, said the plans approved by the commission would help the city avoid bankruptcy that rising pension costs have forced on other cities.
"The commission felt that it was important to be proactive in order to avoid such an event," he said.
"We have had to make decisions that are tough," said Mayor Steve McFarlin. "It affects families and futures. It is certainly not fun, but it is common sense."