More on Townes buyout

As I mentioned earlier, former HRT President & CEO Michael Townes and the HRT governing board reached an agreement to buy out the remainder of his contract for approximately $300,000, supposedly saving the taxpayers approximately $140,000.  Townes is retiring 15 months earlier than in the original agreement, on July 1, 2010 instead of October 1, 2011.  I’ve obtained a copy of the agreement and it is comprised of the following:

1. A lump sum payment of $225,000. This is the salary that would have been paid to Townes for those 15 months.
2. A lump sum payment of $34,716, which is the present value of the credits toward his retirement he would have earned had he waited til 10/1/11 to retire.
3. A lump sum payment of $19,500, which is 15 months of his monthly vehicle allowance.
4. A lump sum payment of $1,710, which is 15 months of his long term disability premium coverage.
5. 15 months of health and dental coverage, the value of which is $10,551.

Adding all of these up totals $291,447 – rounded to $300,000. So where, you may ask, are the savings?

Every penny is in item 2.

If Townes had stayed on the payroll the additional months, his retirement benefit would have been approximately $7,240 more per year. Over a 24-year period (his life expectancy), he would have received $173,760. The net present value of that amount is $34,716. The difference is $139,044, or approximately $140,000.

The other items probably should have been adjusted to their net present value as well, but given the short time frame (15 months), the amount would have been negligible.

Philip Shucet, who took over the reins of HRT in January, told me this morning that the renegotiation of Townes’ retirement package as been underway since late April, a fact that remained under wraps until it was voted on Thursday. Via email, he said that “this amended retirement agreement is the appropriate conclusion to this matter. ”

“HRT moves on and Michael moves on.  The TDCHR keeps the commitments they made in the initial agreement, and MT receives the benefits he anticipated when he offered his retirement, ” Shucet wrote.

I agree. Townes’ retirement has been a distraction.  Perhaps now we can turn our attention to figuring out how Norfolk is going to come up with the $20-30 million needed to fund the rest of the light rail project. Time is getting short – Shucet told us in our meeting that the rubber meets the road around the end of December, unless we get some money from the Federal government.