Pension, Medical Plans Will Bankrupt City
(The following letter was addressed to the Ocean City Mayor and Council with a copy forwarded to this publication.)
Ocean City’s public employee pension and retiree medical plans will bankrupt the city eventually unless you make changes soon. Last summer I was reading about the advice you were receiving from various consultants and advisors, and I remember thinking that you were being fed a load of crap. A defined benefit plan is simply unsustainable as more and more retirees fill the rolls and live longer and longer.
For-profit businesses discovered this long ago and most have dropped defined benefit plans and replaced them with 401-K’s or defined contribution plans. Elected government officials catering to public employee union lobbyists and their votes haven’t figured it out yet. It’s much easier to waste taxpayer money than shareholder money, but union-sponsored pension and medical plans have even bankrupted companies as well, witness General Motors, Bethlehem Steel and several airlines.
As a human resources executive for nearly 30 years, I know that this is really quite simple, but your internal and external advisors have tried to make it complicated in order to confuse you and prevent change. One of the dumbest things Ocean City government has ever done was to allow its employees to unionize. It has been shown time and again that this is the best path to lower productivity and higher costs. Unions are more than willing to destroy the source of their income in their never-ending quest for higher pay and benefits.
Just consider our former automotive, steel, textile, mining and airline industries. Unfortunately, governments don’t go bankrupt; they just increase taxes and continue to build bureaucracy. Non-union city management employees have an incentive to support their union employees’ pay and benefit increases because that insures commensurate increases for themselves as well. And don’t try to convince me that these benefits are necessary to attract and retain good employees. City employee pay and benefits already exceed comparable jobs in the private sector and there are many competent people who would love to have a city job, especially in this economy. Just look at your voluntary employee turnover rate.
Since I only spend the summer months in OC, I haven’t kept up with council activities this winter, but I would be very surprised if they have done anything to address this problem. It could be very easily solved by ending the pension plan and implementing a 401-K plan for all new employees. Current employees should support this as well, since it will help insure the long-term viability of their pension.
Eventually taxpayers will revolt, especially non-resident property owners such as me, who don’t even get a chance to vote on these matters. When I can afford to sell my OC condo, I will be looking to buy further south where the taxes are more reasonable and the businesses and governments are not so supportive of union thievery. I know many other non-resident OC property owners have and will continue to do this as well. When the resident taxpayers of OC see their taxes begin to soar and their property values plummet, perhaps they will elect council members who are willing to fulfill their fiduciary responsibilities.
You who can do something about this had better wake up and start thinking longer term. You are supposed to be representing all of the residents, not just the city employees. I suspect that Joe Hall and Margaret Pillas may be the only council members who understand this.