The Atlanta City Council late Wednesday approved a bill to remake the city’s pension program for municipal employees, possibly saving Atlanta from years of escalating costs and tightened spending.
By a vote of 15-0, the council approved sweeping pension changes aimed at paying off the city’s $1.5 billion unfunded pension liability and saving about $25 million annually.
The plan requires all current police officers, fire fighters and general employees to take a 5 percent pay cut in the form of a higher pension contribution. It also reduces the so-called “multiplier,” used to calculate pension benefits of future workers to 1 percent, and reduces the maximum cost-of-living adjustment of pension benefits of future employees to 1 percent.
And at the last-minute insistence of Councilman Howard Shook, the legislation also establishes a cap to protect the city from another financial meltdown.
Actuaries have said that over the next 10 years the overhaul will save taxpayers more than $270 million and more than $500 million over the next three decades. n.
When Mayor Kasim Reed was elected less than two years ago, he called the city's pension situation a "train wreck."
"Now I am breathing easier. Everybody is breathing easier," Reed said Wednesday night. "This is a good day because we have stopped the bleeding in Atlanta."
With every member at the council at his side, as well as city workers, who in the end backed the plan, Reed praised the collaborative work it took to get the deal done. The final plan was the fifth version to be considered by the council, which included two proposals by Reed, one by Councilwoman Yolanda Adrean and one by Councilwoman Felicia Moore. The final plan was a hybrid.
"I do think it is better," Reed said of the final plan. "My goal was to solve the problem. I wasn't wedded to a specific ideology. We ended up with a plan that saved more money than any of the other plans once we stopped arguing and went to work."
In pushing for a pension overhaul, Reed and the council did what other mayors, governors and policymakers across metro Atlanta and the country have been trying to do -- spare the pocketbooks of their governments.
Similarly situated cities such as Chicago, Los Angeles and Philadelphia are considering major changes in pension structure.
"This pension reform legislation can serve as a model across the country as to how to work collaboratively to address this pressing issue," Moore said. "I'm extremely proud of how Atlanta has continued to prove itself as a leader and model of other cities to follow."
Going into last week, it appeared that Adrean’s plan would survive vetting and win the council's approval. But when she was unable to secure the necessary 10 votes, a plan that weighed heavily on proposals by Moore prevailed.
Shook, who initially signed onto the Adrean plan, said there was “much to applaud” with Wednesday’s vote.
“The reform I had to have -- and probably wouldn't have been in the legislation otherwise -- was a safety net protecting taxpayers from continuing to foot the bill for poor market returns or any other flawed actuarial assumptions," Shook said. "If the city contribution exceeds a certain threshold, a plan to correct the imbalance is required, and half of any sustained funding shortfall must be borne by the employees. The plan thus earned my vote.”
Wednesday's vote capped a process that at times strained relations within City Hall, including public spats between Reed and City Council President Ceasar Mitchell over the pace the council should take in approving a plan. Reed had pushed for final approval by Thursday, to coincide with passage of the city's budget. Mitchell had pressed for a more deliberate speed.
Mitchell eventually emerged as one of the key deal brokers in winning the plan's approval. He called Wednesday's vote a "win-win for taxpayers, city workers and the long-term financial health of the city of Atlanta."
“In adopting a plan that is fiscally prudent, legally defensible, functionally sustainable and humane, we have demonstrated a reform model where both common ground and high ground can be reached when people work together in an atmosphere of mutual respect,” Mitchell said.
Reed said he will sign the bill, and for current employees, the changes will go into effect Nov. 1.
Now the council must vote Thursday on a $545 million budget for 2012 that had called for as many as 200 layoffs to close an $18 million spending gap. With approval of the pension overhaul, about 130 of those proposed layoffs are expected to be canceled. Three percent pay cuts for city employees making more than $80,000 annually are also expected to be removed from the budget.
Atlanta’s pension overhaul
What was approved
The plan requires all current employees to take a 5 percent pay cut in the form of a higher pension contribution. It also reduces the so-called “multiplier,” used to calculate pension benefits of future workers to 1 percent and reduce the maximum cost-of-living adjustment of pension benefits of future employees to 1 percent.
The issue
Atlanta has a $1.5 billion pension liability that is eating up 20 percent of its annual budget. Mayor Kasim Reed said that if the liability had been allowed to go unchecked, it could have grown to $4.5 billion in a decade.
Why it’s important
Atlanta becomes among the first of several major U.S. cities to tackle pension overhauls.
What it means to city residents
Atlanta’s ability to provide services -- from hiring police officers to opening recreation centers -- was potentially at at risk if its pension obligations were allowed to continue to eat a large share of the city’s budget.
What it means to the city
Right now, the city’s pension liability is $1.5 billion and consumes 20 percent of the annual budget. Actuaries said the approved plan will allow Atlanta to save about $25 million a year.
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