To save money, Payson plans to offer both Water Department head Buzz Walker and Acting Community Development Director Ray Erlandsen buyout packages and then rehire them as private contractors.
Each man could get a payment equal to five or six months salary, in return for accepting a less generous retirement benefits package than they could have qualified for if they’d continued working, said Payson Mayor Kenny Evans.
Evans said that despite the big up-front payment, the town would actually be saving money after about the first year.
Both men will go to work for Educational Service Incorporated (ESI), which will effectively “lease” them back to the town — where they will be doing the same work they performed as town staff.
Evans depicted the unusual arrangement as a creative way to modify retirement benefit packages promised to workers years ago that the town can no longer afford.
The buyouts and the new employment contracts are both on the agenda for this Thursday’s council meeting.
Evans said, “We would not have considered this if there had not been substantial savings: the bottom line is that with the employer contributions plus the legacy cost, it takes less than a year to be in the black.”
Under the terms of the proposed contract, Walker would retire, collect his pension and go to work for ESI. The town would then “lease” Walker from ESI for $86,300 annually — of which Walker would receive $76,600. ESI would charge a $3,000 management fee and pay for unemployment, Medicare and workman’s compensation.
The same arrangement would apply to Erlandsen, except payments to ESI in his case would total about $76,000 annually.
At the state level, salaried employees cannot report to contract employees as supervisors. However, Town Manager Debra Galbraith said no such restriction exists at the town level.
Currently, Erlandsen runs the community development department and Walker runs the water department, which means both have employees who report to them. Galbraith said that as contract employees, they will no longer write annual reviews for town employees nor sign agreements or documents that bind the town legally.
Galbraith said the contracts will not restrict other outside contracts either man can enter into nor require them to disclose other contracts or financial relationships. State law tightly regulates any potential financial conflicts of interests involving public employees.
However, Galbraith said that Payson’s a small enough town that she would quickly find out about any conflicts of interest and could then terminate the contract or ask for changes.
Evans said the council has been working with Galbraith for nearly a year, trying to figure out some way to contain the town’s spiraling retirement and benefit costs.
Evans said, “There are some really strange things that have happened over the years” when it comes to retirement and benefit packages for town workers “and we’ve created a legacy cost that is simply unsustainable.”
Evans said for newly hired town workers, benefit and retirement contributions amount to 20 or 30 percent of a worker’s salary. But for workers hired when Walker and Erlandsen went to work for the town, the benefits cost is more like 60 percent of salary.
As a result, a senior employee making a $100,000 salary actually costs the town $160,000 annually, when retirement and benefit costs are included.