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October 15. 2012 11:05PM

Manchester severance account $108k in red due to run on retirements

MANCHESTER — The Board of Mayor and Aldermen will be presented with more ominous financial figures when it meets this evening: only three months into the fiscal year and the city’s severance account is already running a deficit.

The city has paid out more than $808,000 in severance, primarily due to 12 retirements in the fire department. There were also six retirements in the Highway Department and seven in other departments, for a total of 25 since July. This compares to eight retirements at this time last year. The severance reserve account for the 2013 fiscal year had $700,000.

Part of the reason for the spike in retirements in the Fire Department was a pay-out incentive in the current contract.

“I think the aldermen wanted firefighters to retire and they put that incentive out there,” Finance Director Bill Sanders told the Committee on Accounts and Revenue Administration Monday. “I think in some ways we have to be careful what we wish for. We could spend $1.3 million on severance this year.”

Sanders said while it’s unlikely that there will be a significant number of retirements in the Fire Department during the rest of the year, there will likely be several retirements in other departments, with at least seven in the Police Department. Retirement forecasts for the various departments are expected to be presented at tonight’s meeting.

There is a potential silver lining. The retirements will allow the departments to hire younger employees at lower pay grades and lower anticipated benefit costs. These savings won’t be realized immediately, Sanders said.

While the recent retirees were likely motivated by pay-out incentives, Sanders said the city can expect a steady stream of retirements due to the age of its workforce. “There’s no question people have been deferring retirement, and there’s a large demographic section of city employees who are approaching their sixties,” he said.

Sanders estimated that a third of city employees — 250 people — could be in their sixties.

The committee approved a motion to have the Human Resources Department compile a demographic report on city departments.

tsiefer@unionleader.com


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