ALPENA - City of Alpena employees have sacrificed a lot over the course of the last several years as the city battles through economic difficulties. Perhaps nobody has bitten the bullet as much as the administrative staff.
After forfeiting their annual longevity payments, it was discovered the loss of income could have a negative effect on the amount of retirement benefits retiring employees receive. Alpena City Manager Thad Taylor said longevity is determined by the amount of time employed by the city.
"A person who has worked for eight years gets 2 percent in addition to the salary and at 15 years 4 percent and then at 20 you would get 6 percent in addition," Taylor said. "From what I understand the intent was to retain people and reward them from staying and doing a good job."
In 2011, Alpena Municipal Council elected to do away with the longevity payments for the administrators, but without knowing didn't take into account the ramifications it would have when average salaries were calculated before retirement. Clerk Karen Hebert said when a person retires, part of their retirement compensation is determined by an average of compensation in years leading up to their last day. With the loss of longevity the total wages will be smaller, thus resulting in a lower retirement compensation.
"To figure out retirement, we used to take the average of the best two compensation totals from a five-year period," Hebert said. "Since we lost longevity, which was a part of our overall earnings, we asked the council to let us go back and use the highest two years over the last 10 years. If there are no wage increases you are actually are losing."
Taylor said when the city chose to do away with longevity for the administrative staff, it never intended it to interfere or have an adverse effect on retirement. He said he didn't think it was fair the employees would take not only one cut, but two.
"It really was an unintended consequence," Taylor said. "There wasn't any consideration given to that when we eliminated longevity. It became apparent that we were sacrificing immediately, plus long term. That was my rationale for presenting this to the retirement board, and getting the recommendation to the council was that I didn't want to see them penalized twice."
During Monday's meeting, the council voted 3-2 to grant the request to extend the period the highest average salary is extracted from from five years to 10. Councilmen Mike Nunneley and Dave Karschnick voted in opposition of the change, while Shawn Sexton, Sam Eiler and Mayor Matt Waligora voted to approve. Taylor said when the savings from the stoppage of longevity payments are figured into the equation, there should be no significant financial impact to the city when workers retire. He said there are nine people who would be eligible to retire and take advantage of the 10-year benchmark.
"This will have no significant impact to the retirement fund. There are people who still have to work more than 10 years, and they will never be able to go back and use the years when they received longevity. Those kind of people won't benefit from this. There may be some older workers who may benefit from it or not. That was one of the reasons I brought this to the council, because there would be little or no impact on the city."
Hebert said the administrative staff isn't asking for more money. She said the request was made so more won't be lost.
"We're not asking for a benefit, we're just asking not to lose what we have earned," Hebert said. "It has been frustrating over the years. You work, work, work and take on more responsibilities, but everything has been take, take, take. So when we were able to preserve some of our pension, there was a relief."
Taylor said all of the city employees know the challenges the city faces in terms of finances and budgets. He said that is why they try to help the city as much as possible when painful cuts or wage freezes need to take place.
"All of the administrative staff and other city employees realize the financial straits of the city," Taylor said. "They are going to do what they can to help out, but it still hurts them. For this they made their sacrifice, but I didn't feel it was fair they would have to sacrifice twice for the same thing."
Steve Schulwitz can be reached via e-mail at sschulwitz@thealpenanews.com or by phone at 358-5689.