The city’s high cost of severance: Recruiting tool or waste of tax dollars?

QUICKREAD

SEVERANCE PAY IN OTHER COMMUNITIES

In the iast three years the city of Grand Junction has given severance pay to two former city managers and two former department heads who resigned from their jobs. The following is a look at how other Grand Valley governments handle severance pay:

• Mesa County spokeswoman Jessica Peterson said the county doesn’t have an official policy dictating who is eligible for severance pay and said it’s handled on a case-by-case basis. She acknowledged that such compensation probably would be written into the contracts of very few employees, including the county administrator, and would apply only when an employee is terminated. Previous top-level administrators who were terminated received six months’ pay.

• Fruita City Manager Clint Kinney is the only employee eligible for severance pay and only in the event he is terminated. The city manager would receive four months’ pay if terminated within a year of employment, five months’ pay within one to three years of employment and six months’ pay after three years of employment.

• Palisade Town Administrator Tim Sarmo is the only employee eligible for severance pay and only in the event he is terminated. He would receive six months’ pay.

SEVERANCE PAY AND THE LAW

The Colorado Legislature enacted in 1993 and amended in 1996 a law intended to restrict how much severance pay public entities could give to employees.

Known officially as Colorado’s Postemployment Compensation Act but more commonly referred to as the “Golden Parachute” statute, the law dictated that government employees who left their employment could receive up to three months of salary and three months of benefits if they were employed for less than five years.

As justification, legislators wrote in the statute that severance pay to public employees “creates unnecessary costs.” The law reads that such payments limit state and local governments’ abilities to provide services and have caused “grave damage to the trust of the citizens of this state in their state and local government officials.”

Yet the last portion of the statute excludes large groups of public workers from those pay limitations, including any employee within an employment system denominated as civil or classified service, tenured college faculty or any employee of a local government whose governing body is elected by voters. That last group includes, among others, city, county and school district employees.

The statute doesn’t indicate why these groups of workers were exempted from the law.



When Grand Junction Police Chief Bill Gardner resigned abruptly last month, he took with him pictures of rafting the Grand Canyon and other memorabilia, and assurances that he will receive three months’ pay, health insurance through the end of the year and car and cell phone allowances.

In terms of employees who have remained on the city’s payroll after resigning, he’s not alone.

The city has doled out nearly $270,000 in severance pay and benefits to four administrators who left their jobs in the last three years.

That sort of financial cushion helps draw top-quality employees, say city leaders and the International City/County Management Association. And it provides security for a class of workers who can be terminated at any time for no reason.

Government watchdog groups and others, on the other hand, claim severance pay constitutes a questionable use of taxpayer money and places public employees in a class above private-sector workers, many of whom receive far less or nothing if they find themselves out of work.

“It reminds me very much of the golden parachutes that CEOs have,” said Jon Caldara, president of the Independence Institute, the Golden-based think tank. “We all get very upset when a CEO gets a massive amount of severance pay, but that’s private companies, and that’s between their stockholders and the company. This is (taxpayer) money.”

Through a series of interviews and submissions of Colorado Open Records Act requests, The Daily Sentinel learned the city of Grand Junction has been less restrictive in issuing severance pay than other local governments. Although most give severance pay only to their top administrators, and only when they are fired, Grand Junction paid Gardner, city managers Kelly Arnold and David Varley and Interim Community Development Director Sheryl Trent after they left. None was terminated; all resigned.

One of them, Arnold, was given six months’ pay as part of an agreement that he would work for the city as a consultant. Arnold, however, never provided consulting services.

There is no state or federal law that requires a public or private employer to pay severance pay. In fact, Colorado legislators in the 1990s enacted a law expressly intended to limit public employee severance pay. But the law exempted large groups of public workers, including city and county employees.

The Fair Labor Standards Act requires employers to pay employees who have been terminated their regular wages through their last day at work and for any time they’ve accrued. That normally includes unused vacation time.

Betty Bechtel, a Grand Junction attorney who represents public and private employers and has practiced labor law for 30 years, said there could be an array of reasons why an employer would offer post-employment compensation to an employee. The most common include pay for employees laid off through no fault of their own or for employees who are terminated and compensated to negate the possibility of them filing a lawsuit that could be costly to the employer.

Bechtel said employers generally don’t offer severance pay to employees who voluntarily resign or retire.

She also said she would expect public employers to be more judicious with severance pay than private employers.

“In the public realm, you’re dealing with taxpayer money, so there’s probably more caution taken on when you would give severance and when you wouldn’t,” she said.

Yet Grand Junction hasn’t always followed a predetermined policy or contract on severance pay. In the cases of three of the four city employees who received severance, taxpayers footed the bill based on action taken by the City Council or city manager.

Arnold received more than $63,000 in severance salary, plus other benefits, after resigning in 2006. The City Council agreed to give him six months’ pay in exchange for him working as a consultant. Arnold, though, didn’t perform any consulting work.

Varley, who succeeded Arnold, garnered $70,000 in severance upon resigning after only six months as the city manager. Varley’s contract called for him to be compensated in the event he resigned “following an offer (by the council) to accept resignation.”

Chief helped find replacement

City Manager Laurie Kadrich said she offered Gardner three months’ severance pay to give him an opportunity to look for another job and allow him to assist in the search for a new police chief. She said Gardner wouldn’t have received severance if he hadn’t helped recruit his replacement.

It’s unclear why Trent received a severance package that included auto and cell phone allowances. City human resources officials were unable to find a contract that stipulated severance pay.

Arnold, the manager who hired Trent and who is now the town manager of Windsor, didn’t return a call last week seeking comment.

Trent became the town administrator in Milliken less than a month after leaving Grand Junction. She is now the community and economic development manager for the town of Evans. She was out of the office last week and couldn’t be reached for comment.

Other local governments have both mirrored and differed from Grand Junction in how they have handled post-employment compensation for upper-echelon employees.

Mesa County gave six months’ severance each to County Administrator Bob Jasper (roughly $54,000) and Department of Human Services Director Jim Garrett (roughly $48,000) when commissioners terminated them in 2005 and 2006, respectively. DHS Director Tom Papin, who preceded Garrett, didn’t receive severance when he resigned in 2005 to take a job in Florida.

Montrose County didn’t give County Manager Joe Kerby any money when he resigned last month to take a job in Douglas County.

Michele Frisby, spokeswoman for the International City/County Management Association in Washington, D.C., said in the past 20 years employment contracts for city and county managers that include a severance provision have gone from a novelty to something that’s commonplace. She believes it’s because the job has increased in complexity.

“Managers won’t look at a position unless they’re able to have that severance,” said Frisby, whose organization provides assistance and training to nearly 9,000 members.

Highly specialized positions

She said severance pay is justified in cases of termination because city and county managers work in highly specialized positions. If they have to leave their job, they most likely have to move to find comparable work because a similar position doesn’t exist in the same community, she said.

“Managers need some kind of safety net, some kind of security,” Frisby said.

Grand Junction Mayor Bruce Hill said such compensation offers a certain peace of mind for managers who can be subject to the political whims of the boards that hire them.

“If I’m going to relocate my family, I would like to have some guarantee of being there a while or, if I’m not, some assistance in relocating again,” Hill said.

Gene Kinsey, a former mayor and City Council member, said it’s difficult for cities to negotiate contracts that don’t include a severance clause for city managers. But he said he doesn’t understand why department heads would receive severance.

Leslie Paige, spokeswoman for Citizens’ Against Government Waste in Washington, D.C., said the organization monitors government spending at the federal level and doesn’t track severance pay at the local level. But she said that sort of compensation fuels taxpayers’ frustration and anger and creates the perception — real or not — that government employees don’t have to worry about losing their jobs or economic downturns.

The Independence Institute’s Caldara said severance often represents “the polite way of firing somebody and paying them to go away. In these times I don’t think we can afford that any longer.”

He said government leaders should be more forthright about why an employee is receiving severance.

“This ought to be done in front of the taxpayer. How much is he getting paid? Did he resign, or was he fired? If he really resigned, he shouldn’t be getting severance,” he said.


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