VERO BEACH — The Vero Beach City Council Tuesday unanimously approved a measure to change the policy for use and banking of employee sick and vacation time going forward for non-union employees.
Mayor Pilar Turner has been pushing for more than one year to do something about the city’s huge liability for this paid time off.
“Over the past five years, the city has paid out $2 million in sick and vacation time payouts,” Turner said.
The liability on the books for the accrued time currently owed to employees is $2.8 million. The city only collects about $4 million per year in property taxes.
The problem with the banking of paid time off for cash payout at retirement, Turner said, is that the city does not budget for the cash payouts. The city only budgets for the annual salaries and, if the sick and vacation benefits afforded employees were actually used during the course of the year, that would be budget neutral. Banking the time causes cash payouts of tens of millions of dollars when employees retire and departments often do not budget for these payouts of $40,000, $50,000, even $70,000 in some cases when an employee has long tenure with the city and is earning a high rate of pay.
The other problem with the banking of time for cash payout, Councilwoman Tracy Carroll pointed out, is that employees do not get paid the value of the time in the year that it is earned, but instead the employee receives the payout at their top, retiring rate of pay.
For example, an employee could be hired on with the city at $8 and earn sick and vacation time at that rate. Over the course of a 25- or 30-year career, that employee’s rate of pay might rise to $30 per hour or more. Instead of paying out the time at the $8 rate of pay at which it was earned, the employee would receive $30 per hour for the banked time at retirement. This can be a budget-buster for the employee’s department when he or she retires.
“This is an unfunded liability that we need to address,” Turner said.
If the department can do without the employee for several months, the city has often kept a position open to fund that payout instead of running over budget. But some employees must be replaced quickly, forcing the department to run way over budget.
Even if individuals had problems with curtailing benefits for employees who they feel are doing a great job for the city, council members agreed that the current practice is unsustainable going forward.
City Manager Jim O’Connor, in response to a question from Carroll, told the city council that they cannot take away any time that current employees have already banked. They can only change the policy for time earned going forward and for new employees.
The council’s hands are also tied with regard to employees covered by the Police Benevolent Association and the Teamsters Union. Changes for those employees must be negotiated into union contracts. The city and the PBA are in negotiations now, but the Teamsters contract does not open up until 2013, according to O’Connor.
The new policy would allow a carryover of only five days of new vacation time — with approval by the city manager. All vacation time already accrused would still be carried from year to year, but newly earned vacation time would fall under the new policy.
With regard to sick time, employees earn one day of sick time per month. Employees will still be able to bank newly earned time — to provide a transition before which the employee’s disability insurance would kick in, in the event of an injury or major illness — but newly earned, banked sick time would no longer have cash value at retirement.
O’Connor recently attended a conference of city and county managers and he said, “Virtually every city is going through the same issue.”
