Providence police, fire retirees say they offered pension cuts

May 2nd, 2012 at 1:12 pm by under Nesi's Notes, On the Main Site

The Providence Retired Police and Firefighters Association is not happy with the Taveras administration.

City officials have failed to publicize the retiree association’s “counteroffer or alternative suggestions at helping the City of Providence save face and avert bankruptcy after years of fiscal mismanagement and failing to properly fund the retiree’s [sic] pension fund,” according to a letter from the group distributed to reporters on Wednesday by Andrews Law Offices in Providence.

The retiree group says its plan would have suspended all retirees’ cost-of-living adjustments (COLAs) for multiple years and eliminated the compounded 5% and 6% granted in 1989, saving the city almost $5.65 million per year, according to an actuary they hired.

The retirees also say they offered to settle a lawsuit headed to trial this month by allowing the city to move current retirees to Medicare at age 65, “while essentially keeping retiree health benefits intact.” They say the offer would have saved more than $2 million but the city rejected it.

Based on the retirees’ estimates, the two measures combined would save the city almost $8 million a year. Mayor Angel Taveras had said retirees needed to match the level of savings reached under the City Council plan he signed on Monday, which saves an estimated $16 million to $19 million a year.

However, the retiree organization acknowledged that because it is “not a bargaining agent, it cannot bind its members or non-members, though it can negotiate with the city and make recommendations.” The letter also claims the mayor’s chief of staff was considering increasing city taxes by $10 million as of April.

Separately, the deep-pocketed advocacy group Engage Rhode Island that gave crucial support to last November’s state pension overhaul came out in support of the changes in Providence. “We believe that the new ordinance constitutes a comprehensive approach to reform,” EngageRI said in a statement.

Update: A closer look at the numbers shows the retirees are only offering about a third of the savings Taveras said he needed. The letter lumps together pension and Medicare changes for almost $8 million in savings. But the pension changes on their own only save $5.65 million, an the mayor said he needed $16 million to $20 million in pension savings to balance the budget. He also originally wanted as much as $12 million in Medicare savings, while the retirees here say they offered about $2 million.

Update #2: David Ortiz, a spokesman for Taveras, issued this statement responding to the retirees:

We’ve negotiated in good faith with police and fire retirees to reach an agreement that protects the pensions retirees currently receive while achieving the savings needed to prevent Providence from eventual bankruptcy. The representatives that police and fire retirees designated to negotiate on their behalf have not presented an offer that comes close to achieving these savings.

The Taveras administration is moving forward to address Providence’s structural budget imbalance and put Providence on a sustainable fiscal path before it is too late. Providence’s taxpayers, active employees and largest tax-exempt institutions have all reached agreements that have the savings needed to help save the city. We have been unable to reach such an agreement with retirees. If Providence is forced into bankruptcy because of a failure to act, retirees would lose much more than annual raises.

The full text of the retirees’ letter is posted after the jump. If the city responds, I’ll post it here.

PROVIDENCE POLICE AND FIREFIGHTER RETIREES OFFERED CITY PLANS THAT WOULD SAVE $7.5 MILLION

Plan Would Eliminate 5% and 6% COLAs And Switch Retirees to Medicare

Though the Providence Retired Police and Firefighter Association (PRPFA), like its active brothers and sisters, does not believe in negotiating in the media, the City’s recent leak of its “offer” regarding the COLA issue and other concessions, has necessitated a public response. The City alleges it was not the source of the leak, but it is clear why they would want the offer to be made public.

Because the PRPFA is not a bargaining agent, it cannot bind its members or non-members, though it can negotiate with the City and make recommendations, as was suggested by Mayor Angel Tavares. It is interesting that the City would leak its “offer” and not the PRPFA’s counter-offer or other alternative suggestions at helping the City of Providence save face and avert bankruptcy after years of fiscal mismanagement and failing to properly fund the retiree’s pension fund.

The PRPFA has, at its own expense, hired an actuarial consultant who formally worked for Buck Consultants, to provide insight on various concessions and the savings it would generate for the City. The City fails to tell the media that we have made generous and substantial offers of concessions to the City to help not only in the short term, but begrudgingly, in the long term as well.

After consulting with its actuarial consultant, the PRPFA offered the City a plan that included a multi year suspension of all retiree COLAs, as well as a significant reduction in the percentage amount of the COLA once reinstated. Once reinstated, the retiree COLA would mirror what the City recently negotiated with active Police and Firefighter unions. Had the City agreed, the PRPFA plan would have immediately eliminated the 5% and 6% COLAs that the City consistently trumpets as reason for its “Black Hole”.

According to its figures, had the City accepted the PRPFA plan, it would have immediately saved the City upwards of $5.65 million dollars per year this year, and in perpetuity.

And although the PRPFA and the City head to trial on the City’s attempt to switch retirees to Medicare later this month, the PRPFA also offered to settle that lawsuit. After consulting with healthcare cost and plan experts, the PRPFA devised a plan whereby the City would be allowed to switch current retirees to Medicare at age 65, while essentially keeping retiree health benefits intact. That would have generated over $2 million dollars in savings. The City summarily rejected that offer as well.

The City has consistently said that it needs $22 million dollars to avert fiscal disaster. The PRPFA plans alone would have immediately generated nearly $8 million dollars of that amount. We should not be asked to sacrifice more, nor will we. Especially in light of the fact that the City does not intend to put any portion of the $8 million dollars back into the pension fund to reduce its unfunded pension liability, but instead into its General Operating Fund.

The Mayor also hails the recently announced deal with Brown University as historic. The PRPFA disagrees with the Mayor’s exuberance. An additional $3 million dollar payment from an entity that owns over $1 Billion dollars—yes $1 Billion dollars—in tax exempt property is quite the deal for Brown University, not the City of Providence. Brown does, however, get to maintain its continued status as Top Tax Evader in the City of Providence.

During a negotiating session with the PRPFA on April 17, 2012, the Mayor’s Chief of Staff told the PRPFA that the City was not ruling out a tax rate increase, admitting that the City had looked into the feasibility of a $1.00 tax rate increase that would immediately generate $10 million dollars for the City. We now question why the Mayor’s Chief of Staff made that remark in light of the Mayor’s alleged promise not to raise taxes.

Understand that the PRPFA stands firm behind not only valid contracts but more importantly numerous Rhode Island Supreme Court decisions that have cemented the benefits of our members and non-members, all of whom served with pride for the City of Providence for many years often sacrificing their health, family, and as we so recently know, their lives. The City’s continued attempt to balance its past (and probably future) fiscal mismanagement on its Public Safety Retirees and their widows is not only unfair, but also a betrayal to each of us who laid our lives on the line.

And though the Mayor consistently calls us Public Safety Retirees, he should really call us what most of us are—Senior Citizens. The vast majority of whom are not eligible for Social Security or have the ability to work any longer. Providence Police Officers and Firefighters have always sacrificed for the City of Providence. We are willing to do so in retirement also. We are not the reason the City is in dire financial straights—that would be because of fiscal mismanagement—but we are being asked to sacrifice the most.

Because the City has rejected our nearly $8 million dollar offer and The City Council has passed legislation to eliminate the COLAs, we have no choice but to take our fight back to Court. The PRPFA does not want to return to years of litigation, but the City once again has left us no choice. Instead of making the difficult decision to take our offer, the City and the City Council did what past administrations have done—kick the can down the road for the next administration to try and solve. One thing is for sure, the City’s actions have halted any attempt to reach a deal with the PRPFA.

We would therefore urge every voter in the City of Providence and statewide to call your Local and State Legislators to suggest that they reach an agreement with the PRPFA instead of costing the City hundreds of thousands of dollars in legal fees and years of litigation.

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16 Responses to “Providence police, fire retirees say they offered pension cuts”

  1. Vinny Sheehan says:

    The city, rather the mayor would blame anyone but the real persons. Like you said any savings from taking monies away from retiree’s and widows, will go into the General treasury, That is our money by law and by CBA, I vote it be placed to offset the UNDER FUNDING by all the previously mayors and staff’s. If the city goes bankrupt, remember the state capital is on Providence property, hence can be closed tight by any action like that. Also all federal buildings, police,fire,hospitals , schools until resolved, 2week 10 years, what do the citizens want ? Speak up and LOOK at the reality of the course that YOUR mayor has put YOU on.
    Fire & Police retired personal have paid every week for a pension with a small cola, over the past 38 years Social Security has realized people need raises to keep up with prices. During that 38 years they averaged 4.68%, we had 3% until Cianci got involved to get votes and gave 5 & 6% cola’s by Executive order, and CBA. Had he waited 4 months the Court that found for the city had no choice but throw it out and give us what Cianci gave away.
    All we want is to be left alone and receive what is FAIRLY our’s , if the mayor turned down an offer by some , then I have to call him a total JERK, he is penny wise and dollar foolish. He could get 8 million from us ,but he took 3 million from a school, why do you think he wants a 10million dollar tax increase next April,2013.
    People take a long hard look at the real story, then you make up your mind without influenced from Police/Fire retiree’s or the city hall members. YOU DECIDE where YOUR best interest lie.

    1. Ed says:

      Vinny you were over compensated when you showed up at the place you were assigned. You got more than you are worth, accept the fact that your union con game is now over. Now as you and the rest of your brethen can take you hat and check out, you have outlived your usefulness.

  2. Doug from South County says:

    If the Tavaras administration rejects the kind of offer that the pensioners allegedly made, they are only lining the pockets of their fellow lawyers at the expense of the taxpayers of Providence. Why aren’t the savings being plowed back into the pension system. Seems like more theft and deception from crooked politicians which is how the problem got to where it is.

  3. booobooboo says:

    But…but…but….always after the fact are these unions!

    1. Doug from South County says:

      But this was not a union!!!!!!!!!!!! It is a group of retirees. So what’s your point?

  4. ProvLawyer says:

    $5.6 million is only a real number if they represent all of the retirees. Which they don’t. So, $5million – which is already short of the $20 million requested – is actually much less. What an offer!!!

  5. Downsized54 says:

    Bankruptcy then close the city

    1. Ed says:

      End all the these contracts and stop payments to all these overcompensated rejects.

  6. Thetruth says:

    Its sad this finger pointing is towards those who make a middle of the road salary risking their life for all of you. Yet if brown university paid roughly 1/4 of their taxes just on their properties that are not directly uaed for educational purposes, the city would be in a surplus. Its a shame these bloated big headed ignorant billion dollar “schools” force this upon the rest of us who protect them. Get your heads out of your asses.

    1. Ed says:

      You were not worth the compenstaion you recieved. What you got was more than your life was worth.

      1. Ben says:

        Who are you to tell someone what there life is worth? Police and fire risk there life either it be physically or as a whole every time they are on duty for the people in the town or city they serve. I love how people bad mouth the service sector in this country, 99% of the people like you could never do a ounce of the job that these people do everyday.

  7. [...] You would have to ask him.” The police and fire retirees issued a statement earlier Wednesday saying they had offered concessions, but their estimated savings fell short of the city’s [...]

  8. John Tavares says:

    Someone help me figure these numbers out:

    City retirement fund has over $400 million in it now. They get 7.5% compounded interest on that money. They are complaining about paying some retirees 3%, 5%, and 6% COLA’s. The way I see it, doing basic math, the fund is getting a positive return of 4.5%, 2.5%, and 1.5% above and beyond what they are paying out. The have unfunded this fund by over $300 million over the years, and in affect have that amount in IOU’s to the retirement fund ….. But unstead of paying these IOU’s off they want to continue shorting the fund the fair share they’re contractually required to contribute each year. I don’t see any Court upholding this violation of contract law, because they aren’t bankrupt when they can increase their budget over 4% this year and give it to a school system over burdened with many here illegally. Yes I used the I-word, because the budget, or City Council passing ordinances, does nothing to address this problem while demanding “shared sacrifice”. Tax Brown University and the other tax exempts 25% of their property and you would have a surplus …….. This Brown deal is a copout, while trying to balance the budget on the backs of retirees.

    1. Ed says:

      John, no one is paying 7.5% compounder interest. They are not getting 7.5% compounded interest. What the 7.5% was the rate of return if this money was invested properly. That was the expected return of the growth of the money. The maximum that is usually allowed to be paid out to have the money to continue to grow and accumulate is a 4% payout of all assets. If the fund is getting a 7.5% return, they most they can pay out is a little over $18 million in pensions a year. The fund is not making the 7.5% return it is lucky if it is returning 3% which means, the max payments are approximately $12 million dollars a year which leaves no room for error or bad years. The fund is broke. Give a prorated amount of the pool to whoever participated and say the fund is closed and is being paid out. Let these people worry about their own retirement.

      1. John Tavares says:

        The whole retirement fund thing is like a big Ponzi scheme. When we were active employees, we paid for those retired in the past. These active people now pay for those retired now, and on and on it goes. Then the next group of active people pay for this group of active people when they retire. We were paying for people that paid into the fund the amount required for them to get 3% simple on the first $10,000 only, until their COLA was changed to 6% compounded, which was NOT what they paid for. We also paid an amount weekly to pay for the 5% COLA we were guaranteed. Now they want to say I ain’t entitled to that ……. NO …. The people getting 6% compounded now only paid into the fund the amount required for them to get 3% simple of the first $10,000 ONLY, NOT 6% on total …… so they got what they didn’t pay for ……… I WANT WHAT I PAID FOR !!!!!

  9. oreo says:

    Ed the talking horses A** says no union member is worth the pay they receive. Uneducated Ed is very jealous of college educated union people beware! Unfortunately for Ed he doesn’t understand the LAW. Yes, Yes Ed please tells everyone how I’m in a union and I’m a parasite. I do not belong to any union by the way. Please Ed prove my point, let’s see how intelligent you are…