Officials in Atlanta Mayor Kasim Reed's administration said Friday they are preparing legislation to dramatically reduce pension benefits for city employees to the level of benefits a decade ago. The move would save  millions for the city but is expected to set off an alarm among city workers and their unions.

Peter Aman, Reed’s chief operating officer, said during a council budget planning retreat at City Hall that the administration wants to roll back benefits for employees with fewer than 10 years of service and increase the time they must work before qualifying for those benefits.

Aman said the city was sending out notices to city employees to warn them about the proposed changes.

Changes would mean a city worker would have to work 15 years to get full benefits as opposed to 10 years now. The money they will get would be reduced dramatically. What each employee is paid varies for years of service, rank and other factors, but the factor used to calculate benefits could drop by as much as one-third.

Union leaders roundly criticized the proposals. Police Lt. Scott Kreher, head of Atlanta's police union, said it would sue the city if it rolls back the calculations and changes the vesting period.

"We certainly don't feel like any changes to current employees are legal," Kreher said.

Lt. Jim Daws, president of the International Association of Firefighters Local 134, agreed.

“This is a really unfair and cruel thing for the mayor to do,” he said.

Aman said the mayor felt the city had “to put the tourniquet on the patient” and reduce pensions costs. Those costs ballooned since in 2002, the city increased pensions benefits for police, and 2005, when it bumped up pension benefits for firefighters and general employees. Atlanta's annual pension spending has risen since 2001 from $55 million to a 2011 projected total of about $125 million.

In a meeting Friday with The Atlanta Journal-Constitution's editorial board, Reed said the city must spend less on pensions if it wants to survive financially.

"The city is on a trajectory to either reform or have some hard conversations by 2017 or 2018 of whether it continues to exist providing the same services," the mayor said.

Reed also confirmed that he will push to get the city into the Social Security system.

Atlanta’s police officers and firefighters, who have the best pension benefits, would take the biggest hit. The rollback would affect all city employees in pension plans with fewer than 10 years' experience and any new hires who join the pension plans. Reed estimated the changes would affect about 2,400 current employees.

If approved by the council, the reductions are expected to save between $8 million and $12 million in fiscal year 2011 alone.

The police, fire and general employee unions are expected to lobby the council to oppose the reductions. Under the previous administration of Mayor Shirley Franklin, the unions successfully sought the dramatic increases in pension benefits in 2002 and 2005. The unions argued then that the city needed to provide better benefits because it does not participate in Social Security.

Aman said that the argument at the time was that the increases would help attract and keep employees.

Some employee leaders now say the reductions would drive employees from City Hall.

“We did not notice commensurate improvement in being able to attract and retain employees,” Aman said.

Aman said the administration plans to propose other changes to worker pay and benefits soon. He said further changes are going to be proposed, and he expected the process to take about a year.

“This is only the first step,” he said.

City Council President Ceasar Mitchell told the AJC he wants to know if the proposals have been reviewed by the panel Reed created earlier this year to study pension problems . Kreher is on the panel and said he was unaware of the administration's plans. The panel is scheduled to meet next week.

Reed officials said the changes discussed Friday are one of the necessary pension reforms and the panel will be asked to come up with other solutions.

Reed is scheduled to unveil his overall proposal budget Wednesday. The council must adopt a budget by June 30.

Mitchell said that while the council and mayor agree on the major goals of the budget, there is some disagreement on some Reed ideas, such as giving raises only to police officers. Some council members worry that would hurt morale among other city workers and they want to delay any raises until the economy improves.

Budget proposal

Other highlights in a preliminary draft summary of the city’s fiscal year 2011 budget obtained by The Atlanta Journal-Constitution:

• Property tax revenue is expected to drop about $6 million from this year to $185 million in 2011.

• The city expects a budget gap of about $37 million for the 2011 budget, which begins in July. The administration proposes to close the gap with the sale of the jail and City Hall East, and increases in many fees and licenses for businesses.

• The administration proposes budget reductions in numerous departments including police, parks, corrections, public works, finance, and planning and community development.

• Despite cuts, the administration plans to hire 100 police officers. One of Reed’s main campaign pledges was to hire 750 officers in his four years in office.