Oregon City Council at a committee of the whole meeting on Nov. 15 agreed to consider on Monday the creation of a special revenue or payroll stabilization fund for payments to former employees.
The establishment of the fund is in line with the city’s financial and debt policy, which addresses the need to fund unpaid vacation, sick leave and compensatory time payments at the termination of employment or retirement and the additional payroll period that occurs every 11 years.
“At different times through the course of the year, we have different retirements of different people leaving the city for different reasons,” Mayor Mike Seferian said at the meeting. “Those do come to some fairly substantial payouts dollar-wise. To properly be prepared for those payouts, this is one of the reasons we have come up with this fund.”
Administrator Mike Beazley said the fund is recommended by the city’s bond rating agencies and auditors.
“The city should plan for the eventuality of employees’ departure a little bit better, with a little change in accounting practices,” said Beazley. “Also, it’s for the 27th payroll that happens once every 11 years or so. I know many organizations have a little spike in their budget that year to cover that 27th payroll. It is now considered best practice to load 1/11th of the payroll into your budget every year. So that’s a more consistent number as opposed to an aberration that’s going to tag the general fund or other funds for a higher hit. By setting up this fund, the notion is that we will populate it with dollars with a contribution each year so that it will have dollars for things like payouts, as the mayor pointed out, that cities tend to do, but not budget for traditionally.”
Councilman James Seaman asked Beazley how quickly the fund would be endowed, and what kind of formula would be used to determine the amount that would go into the fund.
“Ultimately, it will be up to city council to decide how much money to put into it,” said Beazley. The next 27th payroll will be in 2015.
“We’re already a little short of where we should be,” said Beazley. “The best time to have started this fund was about seven years ago. We have to go through a process apportioning a certain amount of dollars into it because we’re going to have this expense in 2015. We don’t have to fully capitalize it in a three year period. But we’re going to start the process of loading dollars into it. In 2015, we’ll absorb a pretty significant portion of that hit in a one year period. But we’ll begin to set some money aside for it. Again, it’s up to the council to decide how much based on our revenue and expenses.”
“I think it’s good planning,” said Seaman, “to do something like this, to be prepared, so that when different severance packages come up for long-time employees, we’ll have the money set aside already. It’ll show good planning on our part,” said Seaman.