New 3-year labor contract includes pay raises of 4%

POTTSTOWN >> Borough council is scheduled to vote Monday on a new three-year contract with its municipal workers union that provides raises of 4 percent and more.

The proposed contract was attached to the agenda for Monday’s meeting that was posted on the borough web site at 4 p.m. Friday.

Borough Manager Justin Keller did not immediately respond to queries Friday evening.

The members of the American Federation of State, County and Municipal Employees have been working under the terms of an expired contract since Jan. 1.

The new contract covers 2019, 2020 and 2021.

The new pact would provide no 2019 raises to employees hired before 2014, and 4 percent raises in each 2020 and 2021. It also provides for a $1,500 cash payment for fulltime employees and $750 for part-time employees in 2019.

For those hired after 2014, things are a bit less clear-cut.

A cursory look at the contract salary tables indicates those employees would get raises of between 3 and 5 percent, depending on their job classification and how many years they have worked for the borough.

Perhaps more significantly, the contract makes

“From 2014 to 2018, retiree benefit expenses have increased by 46 percent. Retiree benefits are predominately comprised of retiree health insurance costs. The benefits awarded to future retirees are anticipated to closely track the rate of growth of the majority of personnel expenses at 2.3 percent.” — According to the report from Econsult Solutions Inc. and McNees, Wallace & Nurick LLC

a major change in pensions for any union employee hired after 2020.

Those employees will no longer be covered by the traditional “defined benefit” plan now in place, which promise a specific monthly payment.

Such pensions are becoming increasingly rare and require municipalities to make additional payments into the funds, depending on how well they are doing in the markets, to ensure the promise of those benefits can be met.

Instead, employees hired after 2020 will be enrolled in “defined contribution” plans which promise only how much money the borough will pay into a fund, which will be a tax-deferred 401 (K) retirement account.

Current AFSCME employees contribute 5.75 percent of their compensation to the pension plan. They are vested after 10 years.

And like the police, the defined benefit pension provides 50 percent of the average salary calculated from the last 36 months of employment upon retirement, which can occur at age 55 after 25 years of service.

Current salaries range from a low of $18.98 per hour ($39,478 annual) to a high of $27.30 per hour ($56,784 annual).

The pension change is significant given the borough’s required pension payment in 2019 for both the AFSCME and police pensions of more than $1 million.

Wednesday night, Keller informed council the required minimum payment for the two pension plans in 2020 will be a payment of nearly $680,000.

Negotiations with the borough’s police union are ongoing.

A report on Pottstown’s financial challenges issued in May identified retirement costs, and, in the case of the police contract, health costs for retirees, as among the primary drivers of tax hikes in the borough.

The 153-page report from Econsult Solutions Inc. and McNees, Wallace & Nurick LLC was delivered at the May 13 council meeting and is part of the Early Intervention Program, often referred to as EIP, offered by the Pennsylvania Department of Community and Economic Development.

According to the report, unfunded pension liabilities for both the police and non-uniformed pension plans had risen to $11.1 million by 2017.

“The Police (Collective Bargaining Agreement) has rich healthcare benefits for retired employees,” the report found.

“From 2014 to 2018, retiree benefit expenses have increased by 46 percent. Retiree benefits are predominately comprised of retiree health insurance costs,” the authors wrote. “The benefits awarded to future retirees are anticipated to closely track the rate of growth of the majority of personnel expenses at 2.3 percent.”

As of Dec. 31, 2017, the liability for police retiree health care was $28.9 million with an annual required contribution of $2.3 million, according to the report.

Property taxes went up 9.5 percent in the 2019 budget.