The City of Annapolis and its four employee unions have reached a historic 4-year agreement. These negotiations addressed the City’s unfunded liabilities, restoring full funding to the Police Fire Pension Plan and putting in place a solution for previously unfunded retiree healthcare.
Under the agreements, Police and Fire employees and the City will increase contributions to the pension fund, creating a cost neutral Deferred Retirement Option Program (DROP) for current employees and establishing a fixed Cost-of-Living-Allowance (COLA) of 2% for retirees. These changes immediately result in a fully funded pension plan.
There will also be an annual contribution of 3% of total payroll to fund future retiree healthcare. 1% of the total payroll cost will be funded by savings realized from healthcare plan design changes and contributions from future hires. For Sworn Police and Fire and existing employees who elect to, the contribution would be to an OPEB (Other Post Employment Benefits/retiree healthcare) Trust. For those employees who elect and for future non-public safety employees the funding will go to a Voluntary Employee Beneficiary Association (VEBA) for individuals to fund future medical premiums.
The VEBA is a new benefit to both the City and its unions. Prior to February 28, 2014, current non-public safety employees will have a one time option of electing to participate in VEBA or remain in OPEB as described in the existing collective bargaining agreements with AFSCME. The City will contribute 2% of total payroll annually for Civil or Exempt Service and AFSCME personnel to VEBA. The employee contribution will be the equivalent of 1% of gross base pay.
The City’s firefighters, represented by the International Association of Firefighters Local 1926, Police officers represented by United Food and Commercial Workers International Union Local 400, AFSCME Clerical and Technical Employees Local 3162 and Trades, Maintenance and Labor Force Employees Local 3406 will see cost-of-living increase for the first three years, which will be retroactive effective July 1, 2013. Any wage adjustments for the fourth year of the contract will be subject to future negotiation.
“This agreement goes a long way to shore up the police and fire pension system and begins to fund retiree healthcare, while providing a wage increase for the first time in several years,” said United Food and Commercial Workers International Union Local 400 representative John Lee.
“I would like to promote one specific aspect of this agreement, AFSCME Special Assistant to the Executive Director Kory Blake said. A proposal that was originated by the Union will save the citizens of Annapolis nearly 16 Million Dollars over the next 20 years. More than that, it will eliminate a large portion of the city’s OPEB liability by transitioning employees from a traditional retiree health care model, to a new VEBA trust. This trust will not only give our employees a better, portable, and longer lasting benefit, but will save the city tens of millions of dollars in post-employment liabilities.
This was the first year the City entered into agreements using the Interest Based Bargaining (IBB) process. The City and representatives from all four union locals met regularly for 14 months in a process that involved sharing and reviewing information, meeting with outside experts and discussing priorities and interests. During the process, the group reached tentative agreements in 5 subject areas which they had agreed to focus on, Pension, Retiree Healthcare, Wages, Healthcare and DROP. The City team included two members of the City Council, a representative of non-union employees and from the Financial Advisory Commission.
‘The Financial Advisory Commission is grateful that so many of our recommendations were incorporated into this agreement,” Vice Chair Lee Finney said. “We are pleased to have been an active participant in solving these challenging problems.”
“I brought the IBB concept to the City and while there was some skepticism when it was first introduced, I think we all realized the historic relevance it could have by changing the way we negotiate union contracts in Annapolis,” Ward 4 Alderwoman Sheila Finlayson said. “This process was an exercise in respect, fairness and collaborative thinking. It is win-win bargaining because it is less adversarial, less confrontational and more collaborative. It is all about the good of the City and its employees and I feel everyone involved is better for the experience.”
“We were able to make so much progress addressing our long-term liabilities and the Police and Fire pension fund and retiree healthcare because of the trust level established by all of the participants,” Ward 8 Alderman Arnett said. “The result of the IBB process is a real accomplishment and I am glad to let our citizens know the City is financially sound.”
“14 months ago, we took a risk and embarked on a new, collaborative approach for our union bargaining process, Mayor Joshua J. Cohen said. Our primary goal was clear: reduce our long-term liability for the Police and Fire pension fund and retiree healthcare. This agreement helps the City to recruit and retain high quality employees. I commend Alderpersons Finlayson and Arnett and the Entire IBB team for sticking with it and getting the job done.”
The City Council is expected to ratify the contacts tonight, Monday, October 28, during the City Council meeting.
“This agreement resolves the remaining questions from the credit rating agencies, regarding the unfunded OPEB and pension liabilities,” City Manager Michael Mallinoff said. “I am confident that this process will strengthen our financial footing, promote the valuable services offered by our employees, and increase the awareness of the IBB negotiating process.”
To view the documents, please click here.