Despite a personal appeal from the mayor, the City Council appears wary of a proposal to start giving firefighter pensions annual cost-of-living increases as part of a labor agreement reached with the firefighters union.

City and union negotiators have come to an agreement to improve pensions rather than give the typical salary increases this year (although some employees will still get step salary increases). But the City Council must sign off on the deal, and the council is clearly not sold, judging from its reaction to the plan during a public hearing on Monday.

Firefighters, who do not receive Social Security benefits, say their pensions don’t keep up with inflation because they don’t increase annually, as other pension plans do.

Firefighters’ pensions are 64 percent of employees’ highest annual base salary. The average monthly benefit for retired Lincoln firefighters is about $1,400.

Under the proposal, the city would begin paying COLAs in 2010 at a rate of either 1.5 percent or the increase in the Consumer Price Index, whichever is less. The city would help pay for the COLA by transferring about $8 million out a fund established in 1991 to eventually start giving COLAs. Firefighters would also fund the COLA by increasing their contribution to the pension plan from 8 percent to 12 percent of their salaries.

The mayor says this plan saves the city money because salary increases could have cost the city $304,000 more if the city had given firefighters a 4 percent raise (they wanted 8 percent). The mayor asked city unions to hold raises to 2.4 percent this year, and called the COLA plan a “big concession” by the firefighters union because it’s the equivalent of a 1.7 percent raise.

“Why would the city pay an additional $300,000 this year if we don’t have to?” Beutler asked the council. “It is far more expensive to the city in the long run to pay the salary increase.“

The agreement includes a provision specifying that the city’s contribution toward the COLA will count toward wage comparisons in future labor negotiations.

Dave Engler, president of the Lincoln Firefighters Association, said his union voted overwhelmingly in favor of this plan, because they’re “fairly satisfied” with their wages but very concerned about their pensions. He said many retirees work odd jobs to make ends meet.

“The pension has proven to be a very difficult thing for our members,” Engler said.

But Councilmen Jon Camp, John Spatz and Ken Svoboda all expressed concern about the cost of the proposal over time, and whether it would really be cheaper. Camp, who said he once owned an actuarial consulting firm, was most critical of the proposal and the pension fund’s projected earnings, given the current economic turmoil.

The Lincoln Independent Business Association took a neutral position on the proposal. LIBA head Coby Mach said the council should “exercise caution,” citing a memo from the city’s actuary saying the plan could create additional liabilities and expressing concern about firefighters contributing 12 percent of their pay into their pensions. Mach said such high contributions might make it difficult to recruit qualified firefighters.

But Scott Holechek, director of client services for Ameritus retirement plans, said the proposal was “very reasonable.” He said a 1.5 percent COLA is small, and most are between 3.5 and 4 percent.

The council will vote on the proposal, and firefighter labor contract, at its next meeting, on Monday.

Reach Deena Winter at 473-2642 or dwinter@journalstar.com.