From 2010-2013 Number of City Employees With Six-Figure Compensation Packages More Than Tripled

by P.D. Lesko

Since the hiring of City Administrator Steve Powers, compensation for city employees has risen sharply. In 2010, 13 employees earned six-figure base salaries. After three years of Powers’ at the helm, that number has doubled. One-quarter of all city employee total compensation packages now $100K and above—up from 6.5 percent of staffers in 2010.  

“BEISBOL BEEN BERY, bery good to me!” With this sentence, 70s Saturday Night Live comedian Garrett Morris brought the lingustically-challenged ball player Chico Escuela to life. While “beisbol” was “bery good” to Chico, Escuela might have said the same thing about working for the City of Ann Arbor.

Since the hiring of City Administrator Steve Powers, the number of city employees who earn six-figure base salaries has risen from 11 to 26. The number of city employees whose total compensation packages cost taxpayers $100,000 and above increased from 49 individuals in 2010 to 189 in 2013, according to data provided by city officials in response to a Freedom of Information Act request.

When former City Administrator Roger Fraser was in the job, 6.5 percent of the city’s 800 staffers had total compensation packages of $100,000 or above. Under Steve Powers, one-quarter of all of Ann Arbor’s 686 regular FTEs in 2013 had total compensation packages worth $100,000 or above.

Powers is the second highest paid city employee with regular pay totalling  $163,865.40 in 2013. He earned slightly less in pay than did City Attorney Stephen Postema, who brought in $165,534.76 in regular pay. However, in total compensation, including salary, benefits, severance pay and allowances, in 2013 Powers’s total compensation was $234,010.69. Postema’s compensation totalled $196,436.19.

Between 2009-2013 total FTEs decreased from 800 to 686. In 2009, taxpayers spent $50.91 million in salaries for those 800 full-time FTE city staffers. In 2013, taxpayers paid $80 million to a total of 686 regular FTE employees and 1,089 part-time and full-time temporary FTEs. A list of part-time and full-time temporary FTEs revealed that some have been employed annually in full-time jobs without benefits for almost a decade.

One full-time temporary city employee, who asked not to be named out of fear of being retaliated against, described being employed for several months each year, fired, then forced to reapply for the same position. This is done, the employee said, so that Ann Arbor avoids paying unemployment, health insurance and pension benefits.

[private] Not only has the amount paid for base salaries, allowances, overtime and severance pay risen. The cost of benefits has increased even as officials cut the number of FTE workers and turned to employment tactics for which Wal-Mart has sharply criticized over the past several years.

Between 2009 and 2011, according to data from the city, the cost of benefits for FTE employees rose from $24.8 million to $28 million per year. In other words, taxpayers paid out significantly more in total compensation to regular FTEs even as the total number of regular FTEs was cut. Those who remained, saw their total compensation packages increased by as much as 40 percent with overtime.

While Ann Arbor officials frequently argue that overtime paid to a smaller workforce produces savings, records show that in 2009, when Ann Arbor employed 800 regular FTE employees $2.87 million in overtime was paid out. In 2013, when the city employed 114 fewer regular FTE employees, City Administrator Steve Powers paid out $2.98 million in overtime pay to 567 of the city’s employees.

Paying $42,000 in overtime to regular employees serves to increase the employees’ pensions—a tactic called “spiking.” Through overtime pay, an employee can bring in hundreds of thousands of dollars in additional pension income over the course of the pension payout.

Typically, police and firefighters are criticized for raking in overtime pay to boost base pay and, ultimately, pensions. However, in Ann Arbor, it’s not just those workers who are boosting their salaries by 10-57 percent.

Field Operations Tech. Ronald Odom earned a base salary of $50,294 in 2011 and took in $18,575 in overtime pay for a total salary of $68,869. By 2014, Odom’s base pay had risen to $55,148, about nine percent. However, his overtime pay rose to $31,823, raising his total salary to $86,971, a boost in earnings of 57 percent.

Field Operations Supervisor Mark Cozart earned a base salary of $66,498 in 2011 and brought in $28,825 in overtime pay, boosting his salary to $95,323. Overtime compensation raised Cozart’s pay by 43 percent. Three years later, Cozart’s base salary had been raised to $73,043 and he had brought $31,782 in overtime, a total of $104,825 in salary and a boost of 42 percent from overtime pay. Add Cozart’s allowance of $1,420 and his benefits, worth $22,689, and Cozart’s compensation package totals $128,934.

Water Utility Supervisor Michael Culpepper earned a base salary of $69,722 in 2011 and was paid $21,524 in overtime, for a total of $91,246. By 2014, his base pay had been raised to  $72,079 and he brought in $31,048 in overtime pay, a total of $103,127 in pay. Adding in Culpepper’s benefits, $22,429, brings his compensation package up to $125,556.

The city’s pension obligation is unfunded to the tune of over $80 million and growing. In 2010, the city’s pension obligation was 90 percent funded. Today, it is 82 percent funded. For Ann Arbor, unfunded debt equals 30 percent of the city’s total annual general revenue, according to MSU economics professor Eric Scorsone’s 2013 study of municipal legacy debt in 311 Michigan cities, townships and villages.

Jim McDermott is a board member with the Ventura County Taxpayer’s Assn. in California, and says the tax burden from spiking is too large for local officials to ignore.

“This is becoming an increasing drain on taxpayers … which will have to lead to cuts in service or additional taxes,” he said. “Managers have their entire careers to refine spiking. And there is not a nook or cranny that they don’t manipulate.”

But in bad economic times, pension systems can take a beating. Higher benefits and lower market returns put a squeeze on city treasuries, as is happening in Ann Arbor.

In May 2014, Phoenix, AZ contracts were renegotiated with that city’s employee unions and ended the controversial practice of pension spiking for police officers and firefighters. It was also capped for other city workers. It’s a move expected to save taxpayers in that city an estimated $233 million over 25 years.

In 2011, Michigan Rep. Douglas Geiss (D) introduced legislation to prohibit the “average final compensation” on which local government police and firefighter pensions are based from exceeding the employees base pay by more than 55 percent (due to overtime, fringe benefits, sick leave, bonus pay and other extras). It would apply only to employees hired beginning in 2011. The legislation died in committee.

Ann Arbor City Administrator Steve Powers was contacted for a comment, but did not reply by press time. Below are the city’s top five highest paid pensioners: Name, date of retirement, annual pension and projected lifetime payout.

SCHMID  THOMAS

8/3/2002

$126,224   $3,930,617

WHEELER  WILLIAM

5/1/2010

$121,861  $4,321,177

WALLACE JAMES

9/22/2001

$119,891   $3,668,673

BRESLIN JAMES

7/18/2001

$113,078   $3,460,173

BRENNER CHRISTOPHER

2/25/2006

$107,240   $3,571,093

SKRYPEC MICHAEL 2/3/2004

$103,322  $3,329,036[/private]