Retiree Incentive Proposed To Reduce OC Payroll Costs

OCEAN CITY — A one-time offer to 84 town employees could see many of them opting for retirement as early as late April in some cases, and in turn, helping the town save almost $1 million in payroll this year.

At the end of a City Council work session on Tuesday, City Manager Dennis Dare outlined his proposal of a retirement incentive plan for 84 of the town’s 600-plus employees, which if done, would be another step in “right-sizing” the town’s workforce and be another feather in the cap in Dare’s cost saving initiative, which he has been putting into action since October 2008.

Dare’s plan would be in three categories – one for public safety workers who have served the town for more than 30 years and are over the age of 55; one for general employees with the same age and employment tenure; and one for employees over the age of 65 but haven’t accrued 30 years of service to the town.

In all three cases, the town would give half of the annual salary as the incentive for early retirement for the employees who would, in turn, start collecting their pensions after their retirement.

“This proposal is a retirement incentive plan, not an early retirement proposal, and I have to stress that this is a one-time offer for those who have earned their pension and are eligible to retire so we can reduce our workforce voluntarily,” said Dare.

Dare noted that although many in the town’s workforce are eligible to retire but have chosen to continue to work, his projections for the next few years has created the necessity to consider this move, which hasn’t been offered to town employees in over two decades.

Since the town has instilled the hiring freeze, there are currently 54 positions that sit vacant in the town of Ocean City, or 9 percent of the workforce, according to Dare.

“We basically have 91 percent of the workforce doing 100 percent of the work,” said Dare. “This gives us an opportunity to reorganize how and what we provide in the resort, and this proposal would allow us certain things, like payroll savings, but we will lose senior personnel, lots of experience and institutional knowledge.”

The Mayor and City Council thought Dare’s plan was good one and voted unanimously to allow the proposal to move forward and either eliminate positions or reconsolidate the structure of town government by promoting people to vacant positions internally.

“In these financial times, if your workforce gets too big, instead of dangling a very nice carrot like this retirement incentive, we might have to end up using the stick,” said Dare. “When we looked at the snapshot in September and we saw real estate values continue to decline, and the stock market going back down this week, it doesn’t give me a lot of hope that there’s going to be a quick turnaround.”

The real estate information that apparently concerned Dare enough to make this proposal was a statistic of property settlements in the resort during September 2009, which saw 88 properties sold and settled on in Ocean City. However, those properties had declined in value 13 percent after the most recent assessments, and sold for an additional 6 percent less than the lower assessment.

Since 58 percent of the town’s budget is made up of property tax revenue, Dare felt this program was prudent to save costs going into the upcoming budget. Some officials have conceded privately it will be tough to hold the tax rate for residents at 39.5 cents per $100 assessed valuation.

The public safety workers eligible for this program would have to choose to sign up for it by June 30, but would have to retire by Oct. 31, so that the town would not be depleted during the busy season.

As for general employees, the proposal would ask for a decision by March 31 and a retirement by April 30.

For the employees eligible for the program that are over 65 but haven’t worked more than 30 years, they will receive their pension, but their benefit will be prorated according to number of years worked, Dare said.

“This is a good plan”, said Councilman Jim Hall. “I support this 100 percent.”

Although most estimations from town officials seem to believe that the percentage of eligible employees that will actually sign up for the program is probably less than half, and more than likely close to 25 percent, Public Works Director Hal Adkins is worried the town might be backing the town’s workforce up against a wall as far as operational efficiency goes.

“There are 31 of my staff stretched out in the entire public works division that are eligible for this,” said Adkins. “So, I’m going to have to restructure our departments again and although I believe that rightsizing is fine, there’s going to come a point where we must pause and realize that we are quickly approaching a level in which our workforce is so depleted that we can’t continue to provide the same level of services that the town’s residents and visitors are used to.  Honestly, we are quickly approaching that level.”

Adkins said that almost half of the 54 current vacant positions, as a result of the hiring freeze, are in his department, and his crews could potentially be the hardest hit from a manpower standpoint with this retirement incentive plan.

“I do know that some of the vital positions will be filled, and others will be eliminated, but I guess we are going to have to wait and see who signs up for it to see how this is really going to effect operations,” Adkins said.

Last year, Dare’s cost-cutting and revenue enhancements helped the town end the fiscal year with a $2.7 million surplus. This year, with much of that $2.7 million being one-time cuts, Dare feels that the large sum of money that could be saved with this program could fill the void.

“We are looking at $1 million in savings the first year, and that includes payment of incentives,” said Dare. “The second and subsequent years, you are probably looking at double that.”

Finance Administrator Martha Lucey is expected to be sitting down with all 84 candidates for the retirement incentive program in the next few weeks to thoroughly explain the program.

“People have been asking us for years if we would consider doing a retirement incentive program and for years we’ve always said no. Well this is their one-time chance,” Dare said.

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