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City faces 10 percent drop in revenue; retiree benefits loom large as council begins budget work

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Posted on: March 18, 2013

BY SUSIE CURRIE — Heading into the annual budget negotiations, city officials are looking at a 10 percent drop in overall revenue. Most of that is due to the triennial real-estate property assessments, which are down 12 percent in Hyattsville despite new commercial and residential development that expanded the tax base.

Although newer properties kept most of their value, some owners of older homes saw their assessments drop by 40 percent or more. But all residents will see the city’s tax rate remain at 63 cents per $100, where it has been since 2005, according to Mayor Marc Tartaro.

“I have no intention of changing the current tax rate,” said Tartaro. He has, however, asked city department heads to trim between 13 and 15 percent from their current budgets.

The belt-tightening is part of an effort to address mounting costs of health insurance benefits for retirees, which in legislative language is called OPEB (Other Post-Employment Benefits).

Under the current plan, the city pays employees who retire with at least 16 years of service the same amount per month toward their health insurance as they received before retiring.

This includes prescription and dental coverage. Employees become eligible for some retiree health benefits after five years of service, at which point the city would contribute 8.33 percent of its prior rate of contribution. It increases by the same amount for each year of service. Spouses who are covered before retirement remain so afterwards.

But Tartaro says the city can’t afford to continue this scenario. Recent actuarial estimates project that the plan would cost $10.7 million over the next 30 years.

“If we continue the current health insurance at the current levels, it’s 6.3 percent of the city’s annual budget [in fiscal year 2013],” said Tartaro. “It is a significant liability for us.”

That percentage is at least three times that of Bowie, Greenbelt and Laurel, according to City Treasurer Elaine Stookey’s presentation during the March 4 council meeting.

The council heard details about an alternate scenario: the $12.50/$6.25 plan. At retirement, the plan would pay $12.50 per month per number of years in service until age 65, when the worker is eligible for Medicare. At that time, the payment would be cut in half to help defray the cost of gap insurance.

So a city employee with 20 years of service who retired at age 60 would get $250 a month for five years, then $125 per month afterwards.

This month, the council will consider two variations of the plan – neither of which would cover a retiree’s spouse. Under the first, the employee would be eligible for the $12.50/$6.25 plan at 10 years of service. The second follows what’s called the Rule of 80: Eligibility is reached when the employee’s age and number of years of service adds up to 80.

Once the OPEB decision is made, the council can tackle the rest of the budget. Tartaro has set the deadline for passing the budget for May 6, the day before the upcoming city election in which at least four of the 10 council seats will change hands.

But that date has already slipped once – an earlier schedule called for passing the budget on April 18 – and at least one council member would like to see it happen again.

“I think it would be more appropriate to wait until after the election to approve the budget,” said Tim Hunt (Ward 3), who added later that he would “most likely” abstain from a budget vote that happens before the election.

But other councilmembers advocated passing it before the new council is seated on May 20.

Council Vice President David Hiles (Ward 2) recalled that “as a brand-new councilmember, one of the very first things I had to do was sign off on a budget. That’s one way to do it. Another way to do it is to actually use the experience that you have on the dais.”

Fellow Ward 2 Councilmember Shani Warner agreed. “It’s somewhat problematic … to have people come in, new to the process, and just blindly rubber stamp whatever comes before [them],” said Warner, who described a similar vote shortly after she was elected in 2011.

Noting that there were weeks left before the deadline to file as a city council candidate in the upcoming election, she said, “it’s a realistic concern that some people voting on this won’t have been paying attention to every minute of the discussion.”

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