TRAVERSE CITY — The city commission set a new compensation standard for its employees through a collective bargaining agreement that slashes future pension benefits by a third.
The city created a blended retirement system that replaces a portion of the traditional pension plan with a defined contribution to a 401k or similar retirement savings account. The defined contribution equals 4 percent of an employees pay. Newly hired clerical employees will also forego lifetime health insurance, replaced by a 2 percent contribution to a health savings account.
“This is the direction we’ve been trying to move for a long time,” said Mayor Michael Estes. “Now we know it can be done. We are not going to negotiate a better deal with any other bargaining unit in the future.”
The contract covers about 15 clerical and technical employees in city hall whose contract expired June 30, 2012. They will receive no pay increase in the current year. Raises for the next three years will equal the rate of inflation used by the state to cap increases on taxable values used to set property taxes. Those workers will get a raise of about 2.4 percent on July 1 when the city’s next fiscal year begins.
The city has a $27 million unfunded liability in its pension plans created by the stock market collapse of the last decade. The change in the pension formula will reduce the unfunded liability, said City Manager Ben Bifoss. How much won’t be known until the next actuarial report is done.
The lone vote against the contract came from the commission’s most outspoken advocate for reducing the unfunded pension liability, Commissioner Mike Gillman.
The contract met the financial parameters set by the commission and met their pension goals, Gillman said. He voted no because workers who don’t want to belong to the union, Teamsters Local 214, “will be held hostage for three more years.”
The new contract maintains a standard clause that requires all employees to pay fees for union representation. Gillman wanted to delay a vote on the contract until after Michigan’s new right-to-work law to goes into effect.
The law Republican Gov. Rick Snyder signed in December bars mandatory union fees under new labor agreements. It applies to contracts reached after March 27.
The March 27 deadline has created a rush across the state to negotiate new contracts to skirt the law, Gillman said.
Commissioner Mary Ann Moore disagreed.
“We’ve been working on this since last summer,” Moore said. “I don’t think there’s a rush because of what’s happening in the state.”