When the TriMet board of directors voted unanimously Wednesday to sweeten General Manager Neil McFarlane’s paycheck, it approved a two-piece package that will contribute to one of the most generous retirement deals in the transit agency’s history.
First, there was the 3.4 percent pay increase — the 62-year-old transit leader’s second in two years — boosting his annual salary to $229,000. On top of that, the board awarded McFarlane two more weeks of vacation during the life of the new two-year contract.
Why does a transit executive who already receives nine weeks of vacation a year need an extra 80 hours?
At TriMet, the general manager is not eligible for annual bonuses. However, in a system where McFarlane is allowed to stash and cash out up to 1,500 hours of unused vacation at retirement, paid time off can wind up being a bonus by another name.
In fact, McFarlane, who worked at the transit agency for 19 years before becoming general manager in 2010, has already saved up 889 hours — or 20 weeks — of unused vacation. That would amount to a lump-sum pay out of $97,179 on the day he retires.
Valued at $8,800, the contract’s extra two weeks of vacation will be added to McFarlane’s vacation bank. “The intent is to see him take some time off,” said Bruce Warner, the TriMet board president. “But it’s his to use however he wants to use it.”
Over the next two years, McFarlane is now due a total of 800 hours of vacation, any of which he can use or deposit for a future pay off. If he somehow stockpiles the maximum 1,500 hours, which is highly unlikely, he could cash it out for $165,000.
Of course, among TriMet’s managers, McFarlane isn’t known for taking extended vacations. They say he hardly takes a break from his duties of running the $450-million-a-year agency.
All non-union employees who are vested can retire with full benefits at age 62.
“Who’s to say he won’t use that vacation?” Warner said following the board vote.
Meanwhile, if McFarlane were 65 and retired this month with his new salary, his monthly pension would be about $12,800, with cost-of-living increases. Only former General Manager Fred Hansen, who receives $16,455 a month, would receive more in retirement.
Retirees under TriMet management’s defined benefit plan have several options to choose prior to calculation of their pension, Fetsch said.
“There are variables that can change up to their retirement date,” she said in an email. “We don’t know until the employee applies for retirement what the specific pension benefit calculation for that individual will be. An example would include whether an employee adds a beneficiary. Because of this, we do not have a specific calculation that is responsive to your question regarding Neil’s pension figure.”
However, Fetsch and Randy Stedman, TriMet’s executive director of labor and human resources, confirmed the accuracy of The Oregonian’s math based on McFarlane’s new salary.
The general calculation for Neil’s pension on a monthly basis works like this: one-twelfth of his final average salary multiplied by his “credited service” years multiplied by 2.75 percent. His pension benefit is capped at 68.75 percent of final salary plus any unused sick leave rolled into the pension.
McFarlane also has accumulated 1,790 hours of unused sick leave. If McFarlane were 65 and retired this year with his current pay, his monthly sick-leave stipend would add up to about $918, according to The Oregonian’s calculations.
Fetsch said McFarlane will be the last of the TriMet executives to retire with the generous pension multiplier of 2.75 percent. (As part of his contract, Hansen, who was general manager for nearly 12 years, received 3.25 percent as part of his contract.)
All executives hired before April 27, 2003 and employed as an executive after Dec. 31, 2007 now have the same multiplier as all non-executive administrative staff — 1.75 percent.
TriMet is not part of Oregon’s Public Employees Retirement System.
Non-union employees hired after April 27, 2003 are no longer part of the defined benefit pension plan. Instead, they participate in a defined contribution plan.
Before voting on McFarlane’s new compensation package, board members took turns praising his job performance, saying that he had steered TriMet out of one of the agency’s darkest times.
McFarlane took over in the heart of the Great Recession, when TriMet was stung by $56 million in budget shortfalls over four years. In 2012, the board gave McFarlane a 3 percent raise, even as the agency slashed bus service for the fifth time in four years and instituted the biggest fare increase in the agency’s 45-year history.
At the same time, the agency has weathered a series of controversies involving management pay raises and overtime-hungry bus operators dozing off during marathon shifts.
But board member Craig Prosser said McFarlane should be judged on how he has responded with “corrective measures” to the agency’s problems. “He has been excellent at doing that,” Prosser said. “We’re fortunate to have Neil.”
Other board members praised McFarlane’s work on restoring bus service that was lost during the recession, overseeing construction of the nearly completed 7.3-mile MAX Orange Line and updating what was once one of the nation’s oldest bus fleets.
McFarlane has shown “phenomenal leadership,” said board member Travis Stovall.
With $11,580 in health-benefit costs and the $57,134 annual actuarial value of his retirement benefits added to the equation, McFarlane’s total yearly compensation will be an estimated $290,164 until the contract expires at the end of 2016, according to a third-party consulting firm hired by the TriMet board.
