Mezzo Fire Fighter Contract Negotiation Results - So the best way to represent this is with the numbers. The numbers used are extremely conservative and show the merits of this contact change from a worst case scenario or least advantageous to the Borough. Further, many of the particulars of the contract and their calculations have been incorporated into the standardized figures below. The pre-Mezzo contract would have allowed for the each firefighter (FF) to retire with a 70-75K annual payout. On an estimated 25yr payout cycle with a 70K payout (low end estimate) that amounts to a $1.75 Mil package per FF. The Mezzo contract boosted the annual payout for existing FFs to 85-90K annual payouts. On an estimated 25yr payout cycle with a 90K payout (high end estimate) that amounts to a $2.25 Mil package per FF. This is an additional payout of 500K per 25yr retirement per FF before FF contributions are deducted thus a high end figure. Under the pre-Mezzo contract, current FFs contributed 4% of gross pay to the Defined Benefits Plan (DBC or pension) while under the new contract they contribute 8%. It is difficult to calculate into this summary the exact impact of the contributions due to each individual’s time in the plan and the weighted amount of contributions over that time. There are also various expenses pertaining to interest on FF contributions that are associated with the defined benefits plan that are not present in a defined contribution plan. I will estimate average FF annual earnings over a 25yr period at 115K per year (high end as the starting step 1 salary is about 61K) and the FF contributions impact as such: Pre-Mezzo plan = 115K x 25yrs x 4% = 115K total contributions (Monthly 115K ÷ 12 x .04 = $383) Mezzo Plan = 115K x 25yrs x 8% = 230K Total contributions (Monthly 115K ÷ 12 x .08 = $767) For the 34 of 41 current FFs the total cost of all retirements is estimated at 76.5Mil up from 59.5Mil prior to the Mezzo negotiations For a total additional investment of 17 Mil before FF contributions are deducted. Actual additional investment with FFs contributions figured in is probably between 13 – 17 Mil. For the concessions given to the current FFs, all new FFs starting after 07/01/12 will only be eligible for a Defined Contribution Plan (DCP or 401 style plan) at a rate of 3.75% of their annual gross pay contributed by the Borough. The 25yr payout by the Borough per new FF will drop to 108K total cost opposed to the current $2.25Mil. To put it into a better prospective: A Pre-Mezzo current FF cost to the Borough would be roughly (1.75 Mil - 115K FF Contribution) ÷ 25yr ÷ 12mths = $5450 per month contribution to the pension plan. A Mezzo contract “current” FF cost to the Borough would be roughly (2.25 Mil – 230K) ÷ 25yr ÷ 12mths = $6733 per month contribution to the pension plan. A Mezzo “new” FF cost will be roughly 108K ÷ 25yr ÷ 12mths = $360.00 per month contribution to the pension plan. Investment: $6,733 - $5450 = $1,283 per month Savings: $6,733 - $ 360 = $6,373 per month ROI: $6,373 ÷ $1,283 = 497% Cost reduction: ($6,733-360) ÷ $6,733 = 95% There are currently 7 “new” Mezzo FF on the job in Naugatuck. Though the Mezzo plan forces us to “feel the pain” up front with increased payout amounts to current FF’s, we are at the same time recognizing incredible savings monthly as we cycle to the “new” FFs. The savings dollars from this configuration only increase in perpetuity with each new hire because the investment portion was only required for the 34 current FFs. These figures and resulting cost benefit calculations are worst case scenario and very conservative. They do not take into effect the medical concessions given by the current FF’s going from fully paid by the Borough to a phased in 5-25% cost share to finally a 50% cost share for the new FFs. With the Skyrocketing costs of medical coverage, which was the primary cause of the increase to this year’s Municipal & BOE budgets over last year’s, the additional cost savings are at the very least substantial and received with no additional investment other than that which was indicated above. Overall the cost saving benefits to the Borough of the new contract contains both short term and long term benefits whose total cost savings moving forward is staggering.
Posted on: Sun, 10 Aug 2014 00:46:14 +0000