Cape Elizabeth police officers are refusing to shave their facial hair in protest over stalemated contract negotiations with the town, saying the town has refused a request for a better retirement plan.

Negotiations may have reached an impasse, with Officer Mark Dorval, president of the Cape Elizabeth Police Benevolent Association, saying “we’ve drawn the line in the sand,” while Town Manager Mike McGovern said “the town has gone as far as it can go.”

A similar dispute in Westbrook has resulted in the police working without a contract for three years, and the dispute continues there. In both departments, shaving is required under the dress code.

Dorval said the Cape union wants to buy back into the Maine State Retirement System, which the town left in 1994.

The union, which represents eight police officers, three sergeants and four dispatchers, has been without a contract since their previous three-year contract expired June 30. They have asked for the dispute to go to mediation.

In a written statement issued Monday, Town Manager Mike McGovern said the town offered a 3 percent pay increase in each of the next two years to the officers and sergeants and 2.5 percent increase to dispatchers, as well as providing credit for service in prior law enforcement jobs in determining steps on the pay scale and vacation time. But the union did not accept the offers because they wanted a better retirement plan.

The new plan the union is requesting with the Maine State Retirement System would allow police department employees to retire after 25 years and draw two-thirds of their pre-retirement pay as a pension, regardless of their age at retirement.

“That’s all we’re looking for,” Dorval said.

Budgets and aging officers

McGovern said the town has given the police union an “extremely generous offer.”

The current retirement plan for police department employees has the town matching a 7 percent contribution to a 401(a) pension plan. The funds go into each employee’s account, at which time each employee makes personal investment decisions from more than a dozen possibilities.

In negotiations, according to McGovern’s memo, the town offered to increase their match for police officers and sergeants to 10 percent in the second year of a contract.

“I believe that this amount of an increase is merited as the officers do a fine job in a complicated world and we need to be competitive in recruiting and retaining officers,” McGovern wrote. “As I also agree to continue to live within the imposed spending and tax caps, this increase will need to cause sacrifices elsewhere.”

Currently, police department employees face penalties on benefits if they retire before age 59-and-a-half.

“You can’t be a police officer until you’re 70 years old,” Dorval said. “You can see the light at the end of the tunnel with a 25-year, no-age plan.” One officer in the department is 64.

According to Dorval, the plan they want would make the department more competitive as they transition to a younger police force. With the current plan, “everything is stagnant,” he said. The new plan would offer potential for quicker turnover and would make room for advancement for the younger officers. The process for hiring the last officer to join the department took six and a half months, Dorval said.

Dorval also said the current plan is “unsteady.”

“A lot of guys lost a lot of money on 9/11,” he said.

McGovern said the plan the union is requesting with the state retirement system would be too expensive, would favor a small number of employees, and would be very risky.

Handling risk

With a defined contribution plan such as a 401(a) or 401(k) the risk is placed completely on the shoulders of the employee. But a defined benefit program, such as the MSRS plan the union is requesting, places the risk completely back onto the town. That is because no matter what happens with the stock market or other contributing factors the employee is still guaranteed a certain amount in benefits, McGovern said.

He said the cost to the town for the police department employees to rejoin the MSRS would be $748,985 up front, with the town required to pay 12.6 percent of each employee’s wages over the first three years, which would then drop to 7.3 percent.

“In the private sector the national trend is to move away from defined benefit plans, such as the Maine State Retirement System, to defined contribution plans, such as contributions to 401(k)s and 401(a)s,” McGovern said. “The question is, when the private sector is moving from defined benefit plans, why should government be doing the opposite?”

Dorval said the cost to the town to move to a better retirement plan for police department employees would not be “astronomical.” He also pointed out that after the first three years the town would start saving money in terms of their contribution, versus the 10 percent McGovern has offered to contribute to their private accounts.

Before 1994, Cape Elizabeth town employees were in the Maine State Retirement System, but it was very expensive, leading a lot of communities to pull out in the early 1990s, McGovern said. At that time the police department employees were given the option to leave the MSRS and start a private 401(a) plan.

System surplus

According to Gail Wright, executive director of the Maine State Retirement System, Cape Elizabeth still has an account with MSRS because there are eight current Cape Elizabeth employees enrolled in MSRS plans and 64 retired employees collecting benefits.

The Cape school department has a separate MSRS account from the town. The state requires all teachers and school administrators be enrolled in the MSRS.

The most recent numbers Wright had available for Cape Elizabeth’s account were from June 30, 2004, and were a pair of projections. The first projection, of past and expected future contributions into the plan, plus future investment earnings, is $7.2 million. The second projection, of the amount needed to provide benefits to the eight enrolled employees and the 64 retirees, is $6.6 million.

That means there was a surplus in Cape Elizabeth’s account of around $600,000, she said.

Wright said numbers for 2005 were not available yet, but she happened to know that the surplus would be higher this year. “There is probably enough there to put towards the additional cost for the special plan for the police,” she said.

‘Not real money’

The town currently uses the surplus to decrease the amount they have to pay every month for the eight active members still part of the MSRS. If that surplus were used towards buying the police back in, the town would have to pay the full amount for the eight employees each month, Wright said.

McGovern said it was inappropriate to transfer that amount of money, which may be needed for potential benefits for the employees who stayed with the MSRS plan in 1994. He also said the amount needed to pay for those benefits will not be known until all benefits have been paid out, which could be 60 years down the line.

McGovern said the money isn’t really there because the projections fluctuate so much. He used as an example the projection from MSRS for June 30, 2003, which put Cape Elizabeth’s projected assets $41,285 below the projected benefits owed, meaning there wasn’t enough in the account on that exact day to cover all benefits that would need to be paid out for the life of all currently enrolled participants. McGovern said the estimation from 1999 put the town “$2 million in excess.”

“It’s not real money. It’s a guess and a guess at a long, long term, a guess at 60 years out,” McGovern said. “For them to pretend that $800,000 is in that account is just not true.”

Dorval said the officers’ refusal to shave is only one of the actions they are taking to get the word out about their requests. “We’ve dug our heels in,” Dorval said.

The union plans to wear pins on their uniforms and drum up support from the public with fliers.

Cape Elizabeth Police Capt. Brent Sinclair, who as a supervisor in the department is not a union member, said the union’s refusal to shave or other possible methods of protest will not “impact services or their duties in any manner.”

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