Retirement costs hit Slidell hard

There were no smiling faces at a special meeting of the Slidell City Council Monday afternoon.

Mayor Ben Morris, who called the meeting, told the council that he had recently been given some bad news about the city’s share of paying for the benefits of the employees’ retirement system.

According to Morris, the actuarial experts in the state government told him Thursday that the city’s share of contribution to the Slidell Police Department’s retirement system is going up to 32 percent in 2011, up from the 18.5 percent the city is paying for in 2010. The municipal employees retirement system contribution is not going up that much, up to 23.5 percent for 2011 from 22.75 percent in 2010.

However, the raise in the police retirement system contribution will go up $612,0000 and an increase to $56,000 for the municipal employees, for a grant total of $668,000

“This puts a real crimp in the 2011 budget,” Morris said. “We really got hammered.” The 2011 budget is to be presented to the council April 1.

“This was a hit we were not expecting,” the mayor said.

Add to that the estimates that city sales tax collection will decrease by $1.7 million and the mayor and his administration are faced with a lot of hard choices.

For instance, the mayor is looking into policies that would decrease the number of take home cars, the possibility that the city will go on a four day work week, reducing city cell phone use, and instituting a hiring freeze, except for six much-needed positions in the police department.

Morris told the council he is still studying the effects of a hiring freeze. Director of Public Operations Mike Noto said he is compiling numbers on take home cars, but he said reducing the number of such vehicles is on the horizon.

“Having less cars will happen in the future,” Noto said.

The administration is also thinking of using money from its reserve funds to plug up holes in the budget.

State Rep. Kevin Pearson, who was at the meeting explained that the state has nine separate retirement systems that cover police, firefighters, sheriff’s offices and other government employees. When the stock market collapsed in 2008, a lot of the retirement systems took a big hit as their investments lost millions of dollars. Then when the retirees in these separate systems asked for cost of living adjustments, that put even more strain on the systems.

“When you get a lower rate of return on your investment, that means the cities pay a higher share,” Pearson said. “You either have to increase membership in the system or increase the contribution of the city.”

Both Morris and Pearson said Slidell is not alone with this problem. Morris said that other cities in the parish that have police departments are facing huge increases in their share of contributions to retirement systems. Pearson warned that with the shaky national economy, things might get worse.

“If the market declines again, it won’t be pretty,” Pearson said.

Morris wondered if things could not get worse with the new federal budget introduced Monday by the Obama administration.

Police Chief Freddie Drennan said that retirement issues have been central to the Association of Police Chiefs for the past eight years.

Council members like Joe Fraught and Ray Canada were upset with the type of investing done by the retirement systems, and said something has to be changed on the state level.

Canada said the state should look at the federal government retirement system, where the future retirees, combined with investments, share the contribution costs. With that system, if the market fails, at least the system still has revenue coming in to fund the retirement program.

Morris said there was some good news in the city’s finances. He said the cost for health insurance benefits has decreased and stabilized.

“Nobody will see an increase in their health insurance premiums,” Morris said. He also said that utility costs by the city have also decreased, and the money used for travel expenses barely makes up 1 percent of the city’s overall budget.

Morris and Finance Director Sharon Howes said that there would be a balance budget for 2011, despite the extra expenditures.

“I’m not predicting doom and gloom,” Morris told the council. He said that even with all the rebuilding after Katrina it was done without any debt to the city.

“Come hell or high water, we will not go over budget,” Morris claimed.

However, Councilman at-large Landon Cusimano was worried that dipping into the city’s reserve funds would handcuff the incoming administration in July. He said that if the city uses $4 million in reserves to plug the budget holes that will leave only $1 million in the reserves for the new mayor and council.

“I just want to know how are they going to replenish the reserve funds,” Cusimano said.

Howes said that there is enough money in the reserve funds.

Everybody agreed that the council and administration should meet for a series of budget workshops before a final 2011 budget was presented. Howes said with the new problems, she would need extra time to get the budget ready for introduction to the council.