Learn more about how the proposed fire union contract would address key issues. omaha.com/firecontract
Two Omaha mayoral candidates and a fiscally conservative think tank criticized the city's latest proposed fire labor contract on Monday, the eve of an expected City Council vote to approve the deal.
The proposed contract “makes strides” compared with the current fire contract by eliminating pension spiking, increasing employee pension contributions and producing additional savings on health care costs, says a memo by the executive director of the Platte Institute for Economic Research, Jim Vokal.
“Unfortunately,” Vokal wrote, “the contract is still significantly lacking in several areas.”
“Despite great salesmanship by the council,” Vokal wrote, the contract would save the city's battered police and fire pension a negligible amount of money over the next decade, compared with an agreement reached by Mayor Jim Suttle's administration.
The Suttle deal was ultimately rejected by the council. A vote to approve the new agreement is expected today.
“It doesn't do much to relieve taxpayers now,” Vokal said, and the agreement “falls well short of meaningful reform.”
Vokal's comments came as businessman Dave Nabity and lawyer Dan Welch — both challengers to Suttle in next year's mayoral election — issued their final criticisms before the council's scheduled vote.
City Councilwoman Jean Stothert, also a mayoral candidate and the head of a council team that negotiated the new fire contract, dismissed the criticisms.
“I understand that some politicians want to score points in the race for mayor, but recent attacks on the pending fire contract show a willful disregard for the taxpayers,” Stothert said in a statement issued by her campaign. “While there are certainly provisions in this contract that I will push to change in future negotiations, the health care and pension reforms save taxpayers millions from day one.”
The pending deal, supporters say, would save the city's police and fire pension fund $822 million over 50 years.
The deal would guarantee annual wage increases through 2014. Firefighters would pay a larger share of their health care and pension costs, though they would keep their current prescription drug coverage, which is more generous than that in the city's civilian health care plan.
New hires would get lower pension benefits and would have to work longer to draw full retirement benefits.
The council agreement asks employees to contribute an extra 1.75 percent of their pay to the pension fund, bringing the total employee contribution to a little more than 17 percent. The contract also calls for the city to pay about 33 percent of payroll toward the pension system.
Welch said the differences in pension contribution rates would violate the City Charter, which says the city and its employees must make “substantially equal contributions” to the pension fund. The city's additional pension contributions also would cost taxpayers millions of dollars, he said.
“This contract is in violation of the City Charter and comes at too high of a cost to taxpayers,” Welch said Monday.
City officials have said the “substantially equal” provision can be met by employees' agreeing to a combination of pension benefit reductions and increased contributions.
Nabity said figures from the city's Finance Department show that annual returns for the pension fund have been roughly between 5 percent and 7 percent for the past 10 to 25 years. A financial analysis of the new contract's impact on the fund assumes an 8 percent return, which Nabity and Vokal said was an overly optimistic assumption.
“What they are suggesting going forward defies the laws of financial physics,” Nabity said. “In my opinion, this plan is going to fail.”
Stothert said the pension board's investment consultants disagree with that assessment. The assumed rate of return is set by the city's police and fire pension board, in consultation with its actuaries and investment advisers.
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