Firefighters agree to forgo pay raises

This corrects an earlier version of the story.

In a move that will save the city more than $500,000 a year, Newport Beach Firefighters have agreed to shoulder part of their pension costs.

The City Council is slated to vote Tuesday on whether to approve a new contract with the city’s firefighter and lifeguard union.

A key part of the agreement calls for the union to forfeit a scheduled 3.5% pay increase in favor of having the raise go toward paying part of employee pension costs.

It would be the first time firefighters and lifeguards would be asked to pay for a portion of their pensions.

The union volunteered to forfeit the pay increase in favor of paying part of their pension costs in a tight budget year for the city, City Manager Dave Kiff said.

“It was really big of [the union] to step up and help,” Kiff said. “It means a lot.”

Combined with about $4 million in savings the council cut out of the budget last month, along with a hiring freeze and early retirement program for city employees, the savings from the new deal with the firefighters’ union would bring this fiscal year’s budget deficit down to about $1.5 million.

Kiff hopes to close the gap completely by the end of the budget year with little cuts ranging from slashing travel and training expenses to eliminating the police department’s contract for the music callers hear when they’re put on hold.

City officials are also still in contract talks with the city’s police unions.

“We’re hopeful the negotiations there will be fruitful as well,” Kiff said.

As part of the city’s new agreement with the Newport Beach Firefighters Union, new hires would have to pay an additional 5.5% of their retirement costs for the first five years of service on top of the forfeited 3.5% pay increase.

“Pensions are a serious issue for our city and every city in the state,” Mayor Keith Curry said. “It’s important to bring these costs under control. For the fist time, personnel are picking up a portion of their pension costs, which is an important first step for getting those cost under control.”

City officials announced earlier this year that Newport was staring down a $8-million, mid-year budget gap, largely due to slumping sales and hotel tax revenues.

Newport Beach anticipates starting the next fiscal year with its biggest source of revenue, property taxes, down about 2.5%.

Sales tax revenues are down 16%, which accounts for a $5-million revenue shortfall this year. Hotel taxes are down 15% to 25%.

Newport Beach also will have about $8 million less to spend next fiscal year compared with last year’s roughly $200-million budget because of slumping tax revenues, city officials said earlier this month.

In 2012, the city will have to match a $4-million grant for dredging in parts of Newport Harbor, which will also widen the budget gap.

Newport also faces rising pension costs.

Two years from now, the city will see an additional $6-million spike in what it pays into California Public Employees Retirement System, because the troubled financial markets of 2008 wreaked havoc on the public retirement system.