INSIST ON FACTS

Katherine Heerbrandt stated in her October 30th column that Alan Imhoff’s and my support of the buyout was a “blunder that will burden city coffers for years to come.” Her condemnation of Alan and me is unmistakable, but she gives neither facts nor reasons to support her opinions.

The Aldermen attending and voting in 2008 were unanimous in support of the buyout because they believed the recommendation of the City Budget Director that it would bring substantial savings. The City’s retirement benefits counsel (from Whiteford, Taylor & Preston) was present during our deliberations and did not dispute Mr. Angel’s projections. No one presented arguments that identified any flaws in the facts and rationale offered by Mr. Angel. Two Democrats and one Republican voted unanimously for the Buyout. If we were to do it again, it is true that I would vote for a one-year salary payment, rather than the overly generous, two-year payment. However, just because I would have done it differently, does not mean that the buyout is a “blunder that will burden city coffers.”

Ms. Heerbrandt does not mention the primary benefit from the buyout—that is the difference between what the salaries would have been, and the new, lower salaries. Now that 67 employees have accepted the buyout, and 60 employees have taken their places at reduced salaries, the City is in a better position to project what the actual financial benefits of the buyout might be. The salary savings to the City is now ascertainable–$1.6 million for FY2009, $1.36 million in FY2010 and $1.22 million in FY 2011. The new Budget Director’s current projections (including the adjustments identified by the MKSH audit) are that the City is on track to have net savings of $4.5 million in 30 years.

It is true, as Ms. Heerbrandt says, that “most voters don’t have the patience for the gritty details of pension liabilities, actuarial evaluations and bond ratings.” But Ms. Heerbrandt clearly is among those without the patience to get such details. If she had obtained these details, she would know that the City improved its bond rating after passing the buyout.

Ms. Heerbrandt’s impatience in seeking out details apparently gets worse after she finds a few details that support her pre-disposed views. She has no patience whatsoever for details that might qualify or undermine her views. For example, she points out that the City’s contribution to the buyout pensions is $456,472/year (for the 30-year plan) and $704,891/year (for the 25-year plan). But Ms. Heerbrandt ignores the other side of the leger, which is the savings to the City on the salary reductions—e.g., $1.36 million for 2010. Because Ms. Heerbrandt’s analysis totally ignores the buyout benefits, her conclusions and incomplete analysis are of no value.

The buyout may save the City $4.5 million over 30 years, or it could bring some losses, or something in between—but the City still has the opportunity to obtain the maximum savings. It is not accurate to say that the buyout will cost the City $10 million or any other amount. The buyout is on track to save the City money.

The next time someone asserts that the buyout was a terrible financial mistake, that person should be challenged to state the dollar figure that he/she projects for such a mistake, and then explain how that figure was determined. Failing to do this, such opinions are of little value.

Alderman C. Paul Smith

The BUYOUT is on schedule to save the City money!

(See below (and in the blog) Paul’s Response to Katherine Heebrandt’s Column of 10/30/09.)

A common accusation of current city candidates and of some people from the media is that the City’s Early Retirement Incentive Program (ERIP or the “Buyout”) was a financial disaster for the City. I dispute this. No candidate has analyzed the Buyout issues and reached a conclusion as to how much the Buyout will cost the City. Except for mayoral candidate Jason Judd, I have not heard any candidate express an oninion as to an amount of money the Buyout would save or cost the City. Mr. Judd opinined that it would cost the City $10 million. For the reasons expressed below (and in the attached evalauation writings), Mr. Judd’s opinion is erroneous, and is not based upon either facts or reason. Mr. Judd has not explained the basis for his opinion, and therefore his reasoning cannot be examined–his conclusions are unsupported by facts or reason.

Analyzing the Buyout is complex, so I understand why neither Jason Judd nor any other candidate who is critical of the Buyout has undertaken to do his/her own analysis of the Buyout. But I have studied the analysis done by Jon Angel, by the MKSH auditors, and the current City projections–and they show that the Buyout could save the City over $5 million in 30 years. I have seen no support for Mr. Judd’s opinion that the Buyout “will” or “may” cost the City $10 million.

The Buyout is easy to criticize because the generosity of the 2-year-salary payments was more generous than City residents can stand. For that reason, I would have voted differently if I were to revisit the issue. But in 2008 the projections were that it would save the city $8 million over 30 years, and the current projections continue to show that it could save the city over $5 million in 30 years. So, if we are going to make a responsible analysis of the costs and benefits of the Buyout, we need to analyze the many factors that are involved. It is of no help to merely give a gut reaction and then to ridicule the importance of making a thorough financial analysis. After a thorough review of this matter for a year-and-a-half, I have concluded that it may save the City $5+ million over 30 years, or that it could bring some losses, or something in between—but the City still has the opportunity to obtain the maximum savings. It is not accurate to say that the Buyout WILL cost the City $10 million. The Buyout is on schedule to save the City money, despite the fact that 26 employees who took the buyout were rehired by the City. Consider the following facts and analysis, which support the conclusion that the Buyout is on schedule to SAVE the City monty.

Former City Budget Director Jon Angel concluded that the Buyout would save the City approximately $8 million over 30 years. The MKSH audit report found two flaws in Jon Angel’s analysis of the savings that the Buyout would bring to the City. Based upon their corrections, MKSH reported that the Buyout was not likely to save the City anything. However, MKSH specifically declined to consider that Mr. Angel’s savings were based upon his projection that the City would leave unfilled FOUR city positions. This factor is worth at least $7.5 million in savings over 30 years (assuming the average salary/benefit cost to be $60,000 per employee). The City currently has 7 unfilled positions. Therefore it is currently on a faster track to generate savings than what Mr. Angel projected. Until we know how long the city will go forward with a smaller work force, we cannot determine what the total savings will be, orwhether there will be a net loss. However, the City still has the opportunity to achieve savings of more than $10 million over 30 years. If the City is able to pay-off the retirement payment loans in 25 years, instead of 30 years, then this will increase the savings even more. The tight economy is giving the City to keep its work force at a reduced number. Thus, the timing of the Buyout was actually very good because it led us to reduce our work force without having to layoff workers. Nevertheless, I believe that over time the City would have had the opportunity to make some reductions in work force every time someone left the City employ for reasons other than for retirement. It is difficult to estimate what this would be and when it would occur, but it should be considered as an offset to the figure of the 7 current unfilled positions.

Another factor to consider is that the cost to the City for the 26 rehirees is less than what the cost would be for new hires BECAUSE the City does not have to provide duplicate health insurance benefits for the rehirees. The annual savings from this would be $156,000 (@ $6,000/yr x 24 rehirees). Thus, while the return of those who took the buyout was not wanted by the Board of Aldermen, nevertheless, their return does generate some savings to the City.

For the first 4 years, the Buyout will save the City a lot of money every year. It saved the City $1.6 million in FY2009. For the middle years (5-17, I think), the Buyout is projected to generate annual losses. Then, for the remaining years, the Buyout will again bring annual savings. For the short run, the Buyout has been a big help to the City–it will save the city $2 million in the first three years ($1.6+ million in 09, $0.235million in ‘10, and $0.06 in ‘11). The current financial problems have nothing to do with the Buyout; it would have been worse without the buyout. But making projections for whether the Buyout will ultimately save or cost the City money 30 years from now is an extremely complex exercise. And contrary to what Mr. Judd asserts, the City is currently on track to save millions of dollars. The primary savings comes because actual salaries paid is substantially less than the salaries that would be paid. Over 30 years, the City projects that the net savings are projected to be over $5 million. Thus, the Buyout is not projected to cost the City money, but rather the Buyout gives the City the opportunity to save, if it continues with the reduced work force.

Nevertheless, if I were to do it again, I would have voted for a 1-year salary payment. The 2-year payment was too generous for the citizens–that is the principal problem, not that it will cost the City too much. I think it is clear that 67 people would not have taken the buyout if it was only for one year’s salary. But perhaps that still would have been beneficial.

The next time someone asserts that the Buyout was a terrible financial mistake for the City, that person should be challenged to state how much he/she has determined that it will cost the City and to explain the basis for this conclusion. Except for mayoral candidate, Jason Judd, to my knowledge, no one has dared to offer any such figure. Unless someone can give his opinion about the amount of savings or loss–and with analysis to support it–their opinions are baseless rhetoric. With regard to Mr. Judd’s projections, at the October 27th debate he stated that the Buyout would cost the City $10 -11 million in 20 years. His website states that the Buyout “may end up costing us $10 million.” His use of “may” is much more accurate. As I stated above, the City’s current projections are that it may save us over $5 in 30 years. Mr. Judd’s use of the 20-year analysis period is either a mistake or misleading. Because the City is financing the Buyout over 30 years, that is the time period that must be considered–not 20 years. And even if the loan is paid off over a shorter period of time, the 30-year evaluation period should be used, because of the intial loan period and because of the actuarial projections (e.g., how long retirement payments will be paid to retirees [until they die]).

In the year and half since the BUYOUT was approved by the Boad of Aldermen, I have published the following writings on the Buyout, which the reader can access by linking to them. Some of my analysis has changed during the last year-and-a-half, but for the most part it still applies today.

The YouTube video below is one of several radio ads from Paul. If you are having trouble viewing the video, click here Commitment to Keeping Your Taxes Low.

The YouTube video below is one of several radio ads from Paul. If you are having trouble viewing the video, click here Limited Government and Economic Growth.

The YouTube video below is one of several radio ads from Paul. If you are having trouble viewing the video, click here Relieve Traffic Congestion through Road Improvements.

PROGRESS ON ROADS
DURING THE HOLTZINGER ADMINISTRATION

The Holtzinger Administration has made tremendous progress on many road projects in and around the City. The accomplishments include agreements and plans that will save the City $20-25 million. I have been a part of this, and this writing will summarize these impressive accomplishments, which will benefit the City for years to come. (See the list on the back page.)

As the City’s representative to Washington Council of Government’s Transportation Planning Board (TPB), for 3 ½ years I have worked closely with legislators from the entire Washington, D. C. region in planning and securing funding for regional transportation matters. This participation is essential in order for the City to get our share of funds that come from the federal government to the State. For four years I have chaired the City’s Streets & Sanitation Committee, and I participate in the regular meetings of the Frederick Area Committee on Transportation (FACT), the City’s Airport Commission, and the County’s Transit Services Advisory Council (TSAC) (which addresses local and regional bus and train issues). The FACT and TPB meetings are especially important because it is there that I regularly interface with the people who influence the funding and decision-making for regional transportation projects.

In a few weeks, we will celebrate the opening of the new East Street interchange on I-70. This will culminate over ten years of work, beginning with the work to convince the State how important it was to fund and build this new entrance into the city. This $90+ million project is funded by the State (and indirectly by the federal government). This will alleviate the terrible congestion on South Market Street that for years has extended all the way to Route 85 and has plagued citizens. East Street will now provide a new way to get into the downtown, in addition to South Market Street.

The City is already moving forward to lobby for the State (and federal government) to plan, fund and build other projects that are needed. The City is currently working with the County to move forward with the Monocacy Boulevard interchange on US 15 and to improve the Meadow Road interchange on I-70. The City continues to lobby the State to build a North/South Parallel Road east of the City, which would alleviate traffic congestion in the city. The City shows this road on its Comprehensive Plan. It is my sincere hope that in the future the County will also take an active role in advocating for this regional (federal) project that can ease the congestion that occurs on US 15, as this road daily becomes a bottleneck that clogs traffic south to Washington and east to Baltimore.

Important transportation work remains to be done for the City. But here (on the back) is a list of some of the major accomplishments in the area of roads and transportation that I have been a part of during the past four years.

Continued work on roads and transportation issues is extremely important for the City so that the City can benefit from the growth that is coming rather than being stifled and damaged by growth. Planning and work on transportation issues is some of the most important work for the city to do. I believe I am the candidate with the best vision and understanding of these issues, and the candidate best able to help the City to make progress in this area.

ROAD/TRANSPORTATION IMPROVEMENTS

October 2009

–The City just broke ground on the center section of Monocacy Boulevard. This will create for the first time an eastern route around the city. The road was re-aligned by the Holtzinger administration to take advantage of previously acquired property—a change that will save the City $5 million. The road will also include a prefabricated bridge that the City purchased, and which will save another $1 million on this project.

–Improving the section of Gas House Pike just east of the Monocacy River.

–Continued working with the County to fund the planning for the Monocacy Boulevard interchange on US 15 so that the State will make this road improvement a priority break-out project on the I-270/US 15 Multi-Modal Corridor Project. The annexation of the Thatcher Property created a substantial and valuable incentive to that property owner to contribute to the building of this interchange. The completion of this project will enable the State to close the Hayward Road intersection.

–Acquiring the Sanner farm (north of the city), to enable the City to build the critical, missing link in the Christopher Crossing/Monocacy Boulevard loop around the city.

–Approving a special taxing district agreement for property on the west side of town that will require the developer of Waverly View to make $10 million in improvements to Shookstown Road, Christopher Crossing and Waverly View Drive.

–Annexing the Crumland and Thatcher properties, will obtain 50-60 acres of land to build the US 15 interchange at Biggs Ford Road. In addition these annexations will provide valuable incentives for these land owners to make additional contributions to the building of this interchange, so that this interchange can be built. (This would be the northern terminus of the North/South Parallel Road.)

–Through the Crumland annexation, obligating that land owner to build a one-mile extension of Willowbrook Road, which will save the City $5-8 million;

–The City is urging the State to make priority break-out projects for the 3 bridge-widening improvements planned for the Patrick Street, Rosemont Avenue and Seventh Street bridges on US 15. These improvements should be scheduled before others on the I-270/US15 Multi-Modal Corridor Project because their cost is relatively minor and their impact on alleviating traffic congestion is very great.

–Acquisition of the Hargett Farm enabled us to start planning for a new alignment of the Butterfly Lane-Route 180 intersection, one of the worst intersections in the city.

–Completion of the extended left turn lane from Opossumtown Pike (north) to TJ Drive.

–Working with the SHA to plan for extensive, additional changes in the Opossumtown Pike-TJ Drive intersection—so that this, the worst intersection in the city, will be vastly improved when (in the next 3-4 years) the State rebuilds the Motter Avenue Bridge over US 15.

–The City will shortly celebrate the opening of the new East Street interchange on I-70 and the completion of East Street Extention (to connect East Street to I-70).

–The City is planning to add a turn lane at the intersection of East Street and East Patrick Street so that when the new, East Street interchange at I-70 opens, the traffic will flow smoothly, without congestion.

–The City is also prepared to build a perimeter road inside of, but around the Municipal Airport that will be accessible to emergency vehicles and provide a quick way around the east side of the city. This road will be funded 95% by the State.

By authority of the Candidate, C. Paul Smith, Donna N. Robison, Treasurer.

The city has now released the buyout analysis report by McLean, Koehler, Sparks & Hammond (MKSH)(dated December 1, 2008) on the city’s Early Retirement Incentive Program (ERIP or “buyout”). The MKSH report does not conclude that the city will lose money on the buyout. Yet this is a conclusion that some have already embraced.

The study by MKSH did not undertake to determine whether or not the buyout would save the city money; it only analyzed the validity of the assumptions that city staff presented as a basis for projecting savings. The MKSH analysis did not conclude any specific amount of savings or loss—it did conclude that the projected savings of $7.58 million should be reduced to $3.38 million to correct an actuarial assumption that Mr. Angel had used. MKSH further concluded that if the rehires were hired at an average of 10% above the lowest Base pay, then the projected savings would be only $1.48 million; and that if the rehires were hired at an average of 20% above the lowest Base pay, then the projected savings would become a loss to the city of $0.41 million. The MKSH had other qualifications and concerns as well, but their report declined to make their own savings/cost projections. What the MKSH report did was analyze Mr. Angel’s analysis, and MKSH found some flaws in it. Worst scenario for the city appears to be that by correcting Mr. Angel’s projections, the buyout would be a wash, with no substantial savings or extra costs.

However, the MKSH analysis specifically declined to consider at least one factor that can lead to substantial savings for the city—that is the effect of not filling every position that was vacated by the buyout. Mr. Angel estimated that if the city would not replace 4 positions, then this could result in an additional savings of $14.5 million to the city. MKSH declined to analyze or even consider this factor, because it was not a part of the Executive Summaries that Mr. Angel submitted on 3/28/08 and 4/9/08. But the city has the opportunity to obtain these savings through the buyout, whether or not this factor was addressed in Mr. Angel’s executive summaries. In fact, this is the primary reason that buyouts are occasionally offered by large businesses. The city now has this option (or card) to play. And, in light of the economic downturn, there are multiple reasons for the city to play it, which could yet bring millions of dollars of savings to the city through the buyout.

Therefore, it is erroneous and premature for anyone to conclude that the buyout is projected to cost the city money. The city is in a position to save several million dollars from the buyout. The biggest way for the buyout to save the city money is through not filling certain positions. The city must now carefully evaluate its workforce to see if there are positions that need not be refilled at this time. A buyout provides this possibility without having to fire or furlough people.

The city should make this evaluation and should make appropriate restructuring of the city work force. Based upon this, the city should make specific projections of what savings or costs are expected to result from the buyout. Until then, the MKSH report will likely serve as fodder for those who will misuse that report to argue that the buyout will cost the city. The city can help prevent this misuse by quickly completing and publishing projections on what savings/cost it expects will result from the buyout.

In his June 15th column, Bill Brosius wrote that he was “trying to figure a logical rationale” for the employment buyout offer. He concluded that it was a “misuse of taxpayer money.” He is wrong. Mr. Brosius failed to consider the substantial savings that would be generated by the reduced salaries that the City would pay to the new, replacement employees in lieu of the higher salaries. For example, in place of a department head earning a hypothetical salary of $80,000, the City could hire a new employee for a salary of say $50,000. When this savings is multiplied by the number of employees leaving (say 67), the savings could be over $2 million per year. And this savings would be generated every year for several years. This would be a major cost-savings for the City.

Some complaints have been voiced that the City acted too hastily in approving the buyout, but no one has offered any cogent arguments that challenge the economic savings to the City from the buyout.

The economic analysis of the buy-out program is admittedly complex, but the financial benefits to the City were the reason that the Aldermen voted 3-0 to offer the buyout. This type of wide-spread buyout also presents the opportunity for the City to eliminate some positions or consolidate others without having to let go any existing personnel. This could generate additional savings

After my review of the MKSH analysis (dated December 1, 2008), I present this summary and analysis of the MKSH report.

I. Scope of the MKSH Report.
While the MKSH report does not explicitly define the scope of their analysis with the

clarity that I would have liked, nevertheless, after reviewing the report, it became apparent that they were evaluating the accuracy and validity of the ERIP proposal itself that was presented through the staff’s Executive Summary dated April 9, 2008.

It is important to understand the scope of the MKSH review because there will be those who will misinterpret this report to draw conclusions that are not warranted. To appreciate the importance of identifying the scope of the MKSH review, it should be pointed out what the review was not intended to do:

A. The review did not take into consideration the oral comments and reasons given by staff and by the Board of Aldermen at public meetings as to the purpose and application of the ERIP, prior to passage of the ERIP. (This is a significant point because the comments showed that the Board of Aldermen had additional reasons that supported the ERIP which MKSH did not consider.)

B. The review did not take into consideration the actuarial letter dated April 11, 2008 (from Bolton Partners, Inc.)(Appendix E).

C. The review did not make an ultimate conclusion as to whether the ERIP would ultimately save the city money or cost the city money.

D. The MKSH review did not make its own cost savings analysis of whether or not the ERIP would save money; rather they only critiqued the various components that were in the staff’s projections. In fact, MKSH identified other factors that could affect the cost savings analysis, but without making any study or finding as to what specific cost/savings would result because of such factors. (For example, without specific analysis or reasoning, MKSH stated its concern on pages 3 and 8 that “The additional cost to the retiree medical plan (the OPEB plan) under GASB 45 has not been addressed.”)

E. Without analysis, the MKSH review concludes that amortizing the buyout over 25 years would cost more to the city than amortizing it over 30 years (page 8). Similarly, at pages 6 & 9, MKSH concludes that amortizing the buyout over 10, 15 or 20 years would increase the city’s costs. No explanation is given for this conclusion, but some is required because the shorter amortization period would decrease the total interest costs. The shorter amortization periods would increase the costs during the years of amortization, but this would not affect the benefit side, and in the long run this would be a factor that could increase the overall cost savings to the city. Regardless of how short a period is used to amortize the buyout, the benefits to the city must be considered over a longer period. MKSH did not acknowledge this, and it appears that MKSH may not have taken it into consideration.

F. At the bottom of page 7, MKSH specifically excludes from its analysis the impact on the city that would result from not replacing 4 positions. In a May 20, 2008 email from Mr. Angel, it was estimated that over a 30-year period this could result in a $14.5 million savings to the city. I think it is because this email was not generated until a month after the ERIP was passed (April 17, 2008), and therefore was outside of the scope of the MKSH analysis. However, when the ultimate analysis is done to determine whether the ERIP saved or cost the city, this is a legitimate factor to consider. When such analysis is done, it would be unlikely and unrealistic to estimate that an unfilled position would continue for 30 years; it is more likely that an unfilled position would later be reinstated or would reappear in a different department. Nevertheless, even the temporary elimination of city positions can cause a substantial savings to the city. And it is for this very reason that major corporations do sometimes offer the buyout options to employees.

G. The MKSH did not undertake to study the effects of the buyout on employee morale, efficiency and productivity. This is not to imply that the MKSH review should have attempted this. But there can be increases in efficiency and productivity from such a buyout, and I have heard that there have been some such benefits noted.

The MKSH report cannot be properly understood or utilized if one does not first identify the scope of the report. And in this case, where MKSH was only evaluating the legitimacy of the assumptions used by the City in the two Executive Summaries (date 3/28/08 and 4/9/08), then the analysis will have extremely limited value. The MKSH review did not address whether, as implemented, the ERIP is on track to either save the city or cost the city. As such, the report will serve only to fan the flames of debate on this issue, and will do little if anything to answer the question of whether or not the ERIP will result in a savings or a loss to the city.

II. MKSH Conclusions.
Many people, including myself, will be looking to the MKSH report to find a quantified

conclusion about the cost-savings (if any) of the ERIP. The MKSH declined to make such a comprehensive and conclusive finding. However, MKSH did include two specific deductions that it said should be taken from the City’s projections, whatever they might be.

The only savings projections mentioned in the MKSH report are those that were stated by Mr. Angel in his May 20th email (Appendix F). Mr. Angel projected that the net savings to the city over the 30-year period would be $7.584 million. The MKSH report did not take issue with this projection, other than mentioned in its Findings/ Conclusions (page 8). Those conclusions were that two reductions should be made to the $7.584 figure: (1) MKSH concluded that reductions should be made to account for the expectation that all rehires will not be made at the lowest Base pay; and (2) MKSH concluded that the actuarial costs used by Mr. Angel ($775,000/year) should be changed to ($990,000/year), which MKSH stated were the actual costs (after it was determined that 67 employees would take the buyout. Mr. Angel could not

There has been considerable discussion of the City’s Employee Buy-Out plan that was passed by the Board of Alderman on April 17, 2008. The discussion that has ensued for almost four months since has included considerable criticism, and in part because of Budget Director Jon Angel’s sudden departure, the City has not been able to immediately respond with the degree of precision and thoroughness that the questions merit. However, those answers will be coming. Since the moment of truth has passed, and the decision has already been made, the short wait to obtain the economic analysis of whether and to what extent the buy-out will save the City will not cause any harm to anyone.

Prior to the City’s passing the Buy-out program, the undisputed analysis of the City Budget Director and of outside counsel, Whiteford, Preston & Taylor (who has some expertise in these matters) was that the 2-year buy-out proposal would save the City money. No one disputed this. I was personally in favor of the Buy-out proposal because it offered significant potential savings to the City. Jon Angel’s projections were that over 30 years, with 75% participation it would save the City a net of $8 million. We now are in a better position to determine what the projected savings will be—although it will still be a projection, because the actual savings are subject to multiple variables. At this point, until the new projections are completed, it doesn’t help to speculate on the matter. We’ll just have to be patient. I do expect the new projections to show that the 2-year buy-out will be a net economic savings for the City.

The major issue of debate was whether the buy-out should be a 1-year or 2-year deal. I supported the 2-year buy-out because Jon Angel’s projections were that the City would have 75% participation (versus 25% participation in a 1-year buy-out) and that this would result in significantly greater savings for the City. As it turns out, there was about 90% participation.

Much of the criticism of the buy-out program is directed at what are called the “double dippers,” that is people who accept the buy-out and then return to work for the City. While a majority of the Board of Aldermen expressed the thought that NO ONE WHO ACCEPTS THE BUY-OUT SHOULD COUNT ON BEING REHIRED by the City, we also pointed out that the City should retain the right to make such arrangements as it deems best for the City with respect to departing employees. For example, the City might want to contract with or rehire certain employees with critical institutional knowledge.

As it turns out there have been a number of employees who took the buy-out and who then have returned—but these are for varying reasons, for varying times and under varying arrangements. While there is in the eyes of many people a feeling that such “rehires” or “double-dippers” results in an unfair and wasteful expense on the part of the City—I would point out that this is a generalization that is not correct.

Additional comments added June, 2009: Those who have been re-hired have come back at the lowest pay level for their grade. This results in a year-by-year savings to the City. Also, for as long as they work, the City does not have to pay additional health insurance benefits for a new employee. The City can also benefit from the institutional knowledge that is retained. Some of those who returned to the City will only be here for a short time. Currently, I understand that 24 of the 67 employees who took the Buy-out have returned to work for the City. This number is greater than I expected, but the Mayor is charged with determining which of the retirees to rehire and why.

One of the reasons why the ERIP was projected to save the City money is projection that the City would not be rehiring for all of the positions that were to be vacated by the retirement. Mr. Angel projected 4 positions would remain vacant. In fact this has happened. When this factor is included in the financial analysis of the Buyout, the Buyout is projected to save the City over a million dollars. The MKSH Report does not dispute this. At this point in time, I have not seen any analysis that refutes this.

Having said all of this, at this point in time I understand that all of the Board of Aldermen have said that if they could do it over, they would not have approved the two-year buyout. Why no one has made the case that it has cost the City money, the ERIP was too generous. If I were to consider it again, I would have supported a 1-year buyout. The buyout has caused a lot of promotions within the City, and has had a positive effect on the morale and performance of city employees.