Details Regarding Tentative Agreement between the City of New London and the Firefighters Union Local 1522

Guest Editorial by Adam Sprecace submitted to The Day:

    My recent support of the Tentative Agreement between the City and the Firefighters Union has left many wondering why I changed my vote. While my vote may have changed, my position never did. Since having voted against it originally, I have been very clear and very public about my concern with the original language. Specifically, while it may have provided some near term savings, it contained no protection for the city against potential cost growth.

    The main provision of the agreement held that the Union would be transferred into Connecticut’s Municipal Employees Retirement System, a defined benefit pension which has seen its contribution rates almost double since I’ve been on the City Council and more than triple in just 10 years. Any savings that the city would obtain as a result of the agreement could quickly evaporate if MERS rate increases were to continue unchecked.

    Ultimately I supported the agreement since as a result of further negotiations between the City Administration and the Union, a requirement was added which satisfied my concern of potential cost growth. That requirement provided that if the contribution rates paid by the City to the MERS plan increase to 18.5% or higher, or decrease to 12.5% or lower, the parties will bargain the impact of that increase or decrease and that this bargaining would be subject to binding arbitration. This new language means that pension cost changes beyond a certain amount would be offset by changes from additional bargaining thereby providing some consistency of cost for the program. Since the State administers the MERS program, New London is not responsible for paying the pension benefits themselves, only the contributions while an employee is working, which with the new language, are now capped. While I would have preferred that cap to be at the current 15.35%, I believe 18.5% is manageable, sustainable, and not so high as to have caused me to again vote against ratification of the agreement.

    Overall the financial impact of the provisions within the agreement will be positive for the City. I came to this conclusion after having completed my own cost/benefit analysis of its conditions over the term of the contract. The original savings estimate provided by the City Administration suggested that once all wage categories were factored into the increased cost of MERS payments, after the first year, only a modest annual savings would result. By evaluating the savings for each contract year and replacing conservatism with realism in the City Administration estimate, the savings projections become more advantageous for the City.

    Total cost increases from the current fiscal year through the contract term at the end of FY2016 are approximately $2.8M dollars. These increases are the result of increased pension contributions, debt service payments as a result of having to bond supplemental money for the Union to “buy-into” the MERS program, and additional 2% raises in each of the last two years of the now extended contract. The total cost decreases over the term of the contract are approximately $3.7M dollars. These decreases are the result of the reduction of minimum staffing from 18 to 16, elimination of raises in FY2013, reduction of raises in FY2014, elimination of a position, and reductions in workforce through attrition. This yields a savings of approximately $900K over the four-year term of the contact. If the MERS contribution rate was to immediately reach its cap of 18.5%, approximately $475K would still be saved over the contract term.

    While a less tortuous path to approval of the agreement could certainly have been taken, ultimately what was approved will benefit both New London and its Firefighters. The City’s Firefighters will have the peace of mind of a secure retirement, the City will save money, and we can feel confident that through this unprecedented agreement, potential future cost increases will be offset through additional savings.

    Adam T. Sprecace, PE
    New London, CT


Financial Implications of Tentative Agreement (TA) between New London and the Firefighters Union (per fiscal year and for current and capped MERS rates)

    Each of the spreadsheets below are a cost/benefit analysis for a given fiscal year and for two different MERS contribution rates (the 15.35% rate in effect at the time of TA approval and 18.5%, the highest MERS contribution rate possible without requiring offsetting savings from additional union concessions). The left side of each spreadsheet identifies the cost increase expected as a result of the TA. The right side identifies the savings expected. The boxed value toward the bottom of the savings side identifies the the total savings (or cost) to the city for a given fiscal year and MERS contribution rate. Assumptions, notes, and supporting figures are included in the "NOTES" section below the total savings (or cost).

      The spreadsheet below illustrates the financial impact of the TA on the City in FY2013. The MERS rates for FY2013 have already been set at 15.35% so no potential "18.5%" version is applicable for FY2013.

        Financial Implication of Firefighters TA in FY2013 (current year) (.pdf)

      The spreadsheets below illustrate the financial impact of the TA on the City in years FY2014 through FY2016 and for a MERS contribution rate of 15.35%. This rate is the current rate at the time of TA approval.

        Financial Implication of Firefighters TA in FY2014 (.pdf)
        Financial Implication of Firefighters TA in FY2015 (.pdf)
        Financial Implication of Firefighters TA in FY2016 (.pdf)

      The spreadsheets below illustrate the financial impact of the TA on the City in years FY2014 through FY2016 and for a MERS contribution rate of 18.5%. This rate is the maximum rate the City would have to pay before the Firefighters Union would be required to negotiate additional concessions to offset higher rates.

        Financial Implication of Firefighters TA in FY2014 w/ 18.5% MERS Rate (.pdf)
        Financial Implication of Firefighters TA in FY2015 w/ 18.5% MERS Rate (.pdf)
        Financial Implication of Firefighters TA in FY2016 w/ 18.5% MERS Rate (.pdf)

    A summary review of all the spreadsheets will show that over the term of the contract between the City and the Firefighters Union, the City will save approximately $900K given the current MERS contribution rates. If the rates were to increase to 18.5% in FY2014 and remain at that lever for each year thereafter, the City would still save approximately $475K.


    Tentative Agreement between City of New London and Firefighters Union Local 1522

      Firefighters Union Tentative Agreement (.pdf)