Colorado Springs Utilities cuts jobs, but doubles money spent on temps, many of them retirees

As Colorado Springs Utilities has eliminated 200 jobs in the past three years, it has doubled the amount it spends on temporary labor, using Utilities retirees for nearly half the positions.

Utilities officials say using temporary workers saves money for rate-payers, but critics contend it is a hidden cost and that retirees who return as temporary workers are skirting pension benefit rules.

The city-owned utility is on track to spend $6 million this year on temporary labor, twice what it spent three years ago, when the work force cuts began. And, according to the documents obtained last month under the Colorado Open Records Act, nearly half of the temporary positions — 70 of 150 working in August — were filled by Utilities retirees, who likely are already collecting a pension.

“It appears that they reduce the number of positions and it appears they reduce labor costs by a certain amount of dollars, but they’re still paying it out. They’re just paying it out from another pot,” said Terry Manns, a critic of the practice, who formerly oversaw the temporary staffing program at Utilities and retired last year.

Utilities has long relied on temporary employees to work on special projects or fill gaps in its regular work force, the documents show. The number fluctuates, from an average of 85 in 2006 to 116 in 2009. According to Utilities’ contract with Colorado Springs-based staffing agency Add Staff Inc., signed in June 2008, the firm provides temporary employees for particular jobs on 48 hours’ notice.

Add Staff is the only temporary staffing agency Utilities contracts with. The competitively bid contract was signed June 1, 2008, after Utilities’ contract with another local firm, Manpower Inc., expired.

Utilities spokesman Dave Grossman said temporary employees are a cost-effective way to fill jobs that require technical skills but not full-time workers.

“They’re not working full time. When a project is over, they don’t need to work with us anymore and you don’t have the expense of ongoing labor you would for a full-time employee,” he said.

They are employed by Add Staff, and Utilities pays a mark-up to the agency, 25 to 51 percent, depending on the job, for their services. For a meter reader earning $10 an hour, the lowest-paid of the temporary workers, as of the end of August, Utilities paid $15.10. The highest paid, a retired chief customer service officer serving as a trainer, received $75 an hour, at a cost of $94.80 with the mark-up.

Manns said it is a well-known but not officially sanctioned practice that retirees quickly sign up with Add Staff when they leave.

Utilities spent $3.2 million in 2006, $3.6 million in 2007, $4.4 million in 2008 and $2.9 million in the first half of 2009.

“It was intended for short-term labor needs, staffing a project, somebody on family medical leave,” said Steve David, former human resources manager, who retired in 2004. “What we found is it was beginning to be used for long-term employment.”

The retirees, because they are employees of Add Staff, get around Public Employees' Retirement Association rules, David said. Those rules say a retiree can’t work more than 110 days or 720 hours a year for a PERA-affiliated employer, and they must make contributions to PERA.

“PERA’s getting short-changed, in my opinion, by bringing these retired people back and not having a corresponding contribution for the work they’re doing,” David said.

The Colorado PERA office has been aware of the practice at Utilities for several years, and general counsel Greg Smith said he is not aware of any other public agency in the state that uses retirees for such a high percentage of its temporary labor.

“To some degree, the PERA system is dependent on replacing old employees as they retire with new people in those positions and that rotation over time,” Smith said. But he said it is such a small number of retirees in the overall PERA system, it has no effect on its fiscal health.

“If all of our employers were doing it and we weren’t getting new people into the system that were continuing to perpetuate the rotation, then that would become more of a significant issue,” Smith said.

“We don’t make a judgment on that,” Grossman said of the PERA contributions question. “We try to do what’s in the best interests of our customers and this brings us the best possible talent and expertise for the least amount of money.”

He said a big reason for the increase in recent years is the switch to automated meters in the city. The meter-reading staff dropped from 70 to seven, and temporary workers are needed through 2010 for homes that haven’t been switched to automated readers. According to the August temporary worker payroll documents, 28 of 150 positions were related to the meter program.

Temporary labor was also used for other work Utilities says does not require full-time, year-round staffing, but does require specialized skills, including power plant maintenance, repairs in unplanned power outages, water and sewage system maintenance and seasonal work, such as water system flushing.

Utilities does pay a mark-up, but doesn’t have to pay benefits, so Grossman said the arrangement amounts to a savings for rate-payers. He said Utilities is saving $14 million in annual salary expenses by eliminating 200 positions since 2006.

Employee benefits cost, on average, 26.6 percent of an employee’s salary, so even with the agency mark-up, the program saves money, because they aren’t employed full-time, Grossman said.

“The amount saved on the 200 positions is much higher than the small increases we’re seeing on temporary labor,” he said.

Still, the former officials interviewed said Utilities shouldn’t boast.

“It basically is having labor off the books. It doesn’t show up (as labor in the annual budget) and it tends to understate the organization’s true labor costs,” David said.

There has been a mixed reaction among city council members, who oversee the utility as the Colorado Springs Utilities Board, to the temporary labor program.

“If we can bring him on board and bring his unique set of skills on board and save the rate-payer money, as opposed to hiring somebody new and bringing him up to speed, it saves money,” said Councilman Scott Hente.

“We can use them when we need them and when we don’t need them we don’t have to pay for them. Plus we don’t have to pay any vacation or sick leave or pension,” said Councilman Larry Small. the vice-mayor. He added, though, he would like to see the use of temporary labor phased out as Utilities adjusts to a smaller work force.

Councilman Tom Gallagher called the practice a “shell game,” and questioned whether supervisors are training people to replace people who retire.

“They’re counting a retiree as a lost position but then they bring him back and say they have the knowledge base and all that wonderful stuff,” he said.

He said he will ask Utilities officials at the next Utilities Board meeting, Oct. 21, about the practice.

Grossman said Utilities officials expect the reliance on temporary labor to decrease as the automated meter project is completed in 2010, but other spots will continue to be filled by temporary workers.