Expert Frowns On OC Pension Changes

OCEAN CITY — The town brought in an expert to basically tell the Mayor and City Council that a massive overhaul to Ocean City employee’s pension packages would be a dumb move.

Pat Donahue, President and CEO of Municipal and Financial Services Group (MSFG) and 10-year veteran of the Anne Arundel County Pension Oversight Committee, was invited to inform and advise the council on the rather complex issue of altering the town’s pension packages for new employees to the town.

“The objective is always to hold down costs and improve the product and benefit that you offer to your employees,” said Donahue, “but if you are really serious about making big changes to your pension program, I would advise, and you probably won’t like this, to spend a few hundred thousand dollars and do an actuarial study to ensure that there are no unintended consequences.”

Donahue told the council that the city is in good standing as far as the funding of the employee plan, which he called “pretty thrifty” compared to the city of Pittsburgh’s “grossly under-funded” pension program.

“If you change your plan a great deal, you might save in the short term, but you need to look at what those changes are going to mean to salaries, and recruitment and retention of your workforce,” said Donahue. “Certainly, your salaries don’t compete with those on the Western Shore, but part of the draw of the Eastern Shore is to get away from the Western Shore.”

During the budget cutting process, a few council members seemed more anxious than others to explore the idea of a defined benefits pension package for future employees to the town of Ocean City, making it clear that their intentions were not to change any employee’s current plan.

“I took his presentation as very valuable information and that’s what I had asked to get,” said Councilwoman Margaret Pillas. “I left with a feeling that we maybe shouldn’t alter the plan drastically right now, but he agreed that we should consider some changes. We’ll have to keep exploring what those changes might be.”

Councilman Joe Hall, who was also in favor of major changes to the plan, said that he is not against the rather expensive actuarial study that Donahue advised the council to conduct, despite the economic times.

“Sometimes, you have to spend money in order to save money in the long run,” said Hall. “It might be hard to swallow to spend that kind of money on an actuarial study, but these types of studies have saved the town a ton of money over the years. The promises we make to our employees today when it comes to pensions, aren’t really going to be seen for 25 years, so it’s a hard thing to forecast.”

Donahue also noted that if the town was looking to save money they may want to look somewhere else.

“Right now, everyone is in a bad spot, and it is going to be like this next year too,” said Donahue. “Even if the economy turned around tomorrow, the next fiscal year is going to be tougher than this fiscal year and you have to make sure that you can sustain the services that you provide to your residents, your visitors and your employees with your revenue, which is essentially funded by tourism and non-resident property owners. I think your pension plan should be pretty far down on your list of changes.”

Council President Joe Mitrecic said that there is a misconception that town employees are overpaid and receive more than generous benefits.

“Many of our employees have dedicated their lives to the town of Ocean City and I think that they should be able to make that money in their pensions,” said Mitrecic. “So, to be frank, I thought that the most powerful thing Mr. Donahue said on Tuesday was that we needed to look somewhere other than the pension plan to make cuts and changes.”

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