[December 21, 2012]

City of Pensacola, Fla. Mayor Hayward Announces Landmark Pension Reform

Pensacola Mayor Ashton Hayward announced today a landmark contract agreement with the police union which includes several major pension reforms, including the closure of the Police Pension Plan to new entrants. The closure, along with the other reforms included in the contract, is expected to reduce the City's more than $100 million unfunded pension liability by as much as $7 to 10 million or more.

The contract was ratified by union membership earlier this week, and the City Council approved the deal in a special session this afternoon.

"Over the last ten years, the City's annual pension costs have increased five-fold to more than $16 million a year," said Mayor Hayward. "That's more than we collect in ad valorem taxes, and that's simply not sustainable. Cities across the nation are struggling with this same issue. Those that haven't acted quickly have been forced into bankruptcy, or in some cases simply stopped sending pension checks. I refuse to accept those outcomes for Pensacola. Taking action on pension issues was a central theme of my campaign and has been major priority of my administration. Today, I have delivered on that pledge"

The Police Pension Plan will close to new entrants on January 1, 2013, and new hires will be eligible to participate in the statewide Florida Retirement System (FRS). In addition to the plan closure, the new contract includes several key reforms regarding benefits. The employees remaining in the plan will increase their contributions by 4.7% over three years, and overtime will no longer factor into pensionable income. Spousal benefits will be conformed to the more modest benefits offered by the state retirement system. The contract also alters the Deferred Retirement Option Plan (DROP), reducing the interest paid on benefits and eliminating the cost of living adjustment employees receive while in DROP.

In exchange for the reforms, Mayor Hayward agreed to make several concessions, including wage increase spread over the three-year term of the contract. "As I've said before, when we ask our employees to accept changes to their benefits, it's only fair that we return some of that savings to them," said Hayward.

"We've worked very hard to come to a fair agreement with Mayor Hayward and we are ready to help move the City forward," said Erik Goss, President of the Fraternal Order of Police Lodge 71. "Protecting the City's long-term financial stability will help protect the future benefits our officers were promised."

The new police contract marks the second such agreement Mayor Hayward has reached during his term of office. An agreement with the general employees union earlier this year is expected to cut the unfunded pension liability by more than $5 million.

"This agreement and these reforms are a testament to the value of our strong mayor form of government, and the change that is possible with leadership and cooperation," said Hayward. "Together, we can face any issue, and meet every challenge. I want to thank Erik Goss and the police union's leadership for negotiating in good faith and continuing to work toward a solution. I also want to thank my team, including Dave Penzone and Rob Larkin, for their hard work and trusted counsel. Finally, I want to thank our City Council for their unwavering support throughout this process and for their vote today to ratify this agreement."

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