Don't delay police contract

Omaha Mayor Jim Suttle said Wednesday that the city will pay a steep price if the City Council votes down the proposed police union contract.

In an interview with The World-Herald, Suttle said putting off a new contract would end up costing taxpayers more money.

For every year that the city delays putting additional money into the pension system, he said, the cost will go up by more than $1 million annually.

Taxpayers would have to come up with $13.5 million annually to shore up the fund if the council approves the contract and funding is in place this year. That funding source, if Suttle has his way, could come in the form of a sales or property tax increase, or a new garbage collection fee.

But if nothing is done until 2015, for instance, the pension burden on taxpayers would rise to nearly $19 million annually.

“It doesn't take a rocket scientist to figure it out,” Suttle said.

Two council members said they agree that not doing anything will cost the city money. But they question whether the police contract is fair to taxpayers.

“I believe that the mayor is giving up too soon, that he's not staying in the game and fighting more for the citizens,” said Councilman Franklin Thompson.

Thompson has said he will vote against the contract.

Councilwoman Jean Stothert, who is undecided but skeptical of several contract provisions, said she agrees that an agreement must be reached with the police union. However, she said, “Is this the best they could do? I doubt it.”

Council members are concerned about the disparity between the city's contribution level to the pension fund and police officers'. Under the deal, the city would contribute nearly 34 percent, while police would kick in about 15 percent.

Some council members also are uncomfortable with Suttle's proposed options to fund the city's contributions.

Even so, Suttle said that if council members don't get behind the police contract, the city will be saddled with higher costs, spiking will continue and officers could receive wage hikes this year.

Spiking is a practice allowed under the current contract that lets officers work extra overtime in their last years of employment to boost their pensions, sometimes to levels higher than their regular pay.

“If they vote this down, this contract stays in place,” Suttle said, referring to the current agreement, which allows spiking.

The new contract instead calculates pensions based in part on a career average of overtime.

Suttle has said that the proposed contract is a step toward shoring up the troubled police and fire pension fund, which has an estimated long-term shortfall of about $500 million.

Councilman Chris Jerram also said he's worried that the city would pay more if the contract is voted down.

“Allowing people to continue to spike ... keeping benefits where they're at ... what's that costing us, and how much is it diminishing the pension fund?” Jerram asked.

“What is the cost of doing nothing and keeping a system that the public has demanded we change?”

Suttle pointed out these financial consequences to the city if the council doesn't approve the contract.

— Spiking continues, creating a $30 million hit to the pension fund.

— The city could receive a lower bond rating. Currently, Standard and Poor's rates Omaha at AAA; Moody's Investors Service has downgraded the city to Aa1.

Suttle said both ratings agencies have said the city must fix its pension problems.

If not, the city's bond ratings could be lowered, meaning as much as a $37 million impact on the city's budget in the form of higher interest rates, Suttle said. The city's borrowing power would decrease substantially.

— The proposed contract includes wage freezes for 2009 and 2010. If the contract is voted down, the mayor said, the Nebraska Commission of Industrial Relations could order the city to give a raise to police. If the raise was 3.5 percent, Suttle said, that would cost the city an extra $3 million in 2010.

— The pension fund would run dry in 20 years, meaning an estimated $173 million in annual pension payouts would have to come directly from the city's general fund. That, city officials said, could bankrupt the city.

Stothert said she understands that a contract must be approved. She said she just isn't sure she can vote yes on this version.

If she can't, she said, she hopes the city and police would return to the negotiating table to fix the provisions that are of concern to her and other council members.

“I'm not talking about starting all over,” Stothert said. “I'm talking about doing something better.”

However, Officer Aaron Hanson, president of the police union, said that if the council turns down the contract, it would be tough to go back to his members and pitch a new agreement. Members of the police union narrowly approved the contract last month.

A trip to the state labor commission might be “our only option,” he said.

Contact the writer:

444-3100, maggie.obrien@owh.com

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