The city housing authority has saved about $1 million in quasi-public funds by renegotiating a severance package for employees at Marine Drive Apartments.
Buffalo Municipal Housing Authority lawyers also have made legal headway in fending off a claim by the former managers for $376,408 in severance pay.
Under the original severance package negotiated by the complex's former managers, 17 unionized workers would have received an average of $67,111. And employees would have gotten severance even if they kept their jobs -- payment was due simply because a different operator took over in January 2004.
Under the new arrangement, workers receive severance only if they are laid off, and the average payout is estimated at $5,800 per worker. So far, no one has been laid off.
"The settlement agreements are much more related to the real world standards of severance," said Gillian Brown, acting executive director of the BMHA, which owns the 616-unit apartment complex near Memorial Auditorium.
The complex's seven high-rises were built in the 1950s as public housing and converted to a tenant co-op in 1965. The co-op's admission practices -- which resulted in a tenant population that was predominantly white, some of them politically connected -- were the source of controversy for years. City officials cited that history when they decided not to extend the co-op's lease when it expired 15 months ago.
With the co-op's 40-year lease winding down, managers at Marine Drive negotiated what experts later said were generous severance packages for itself and 17 union employees.
In September 2001, Barbara and Edward Smith, who managed the complex, negotiated a severance package with the co-op's board worth $376,408 for themselves and their niece, who worked with them in the front office.
Labor contracts with two unions were later amended to give employees eight weeks of pay for each year of service, with a minimum payout equal to 40 weeks of salary. Severance would have averaged about double annual pay, with one employee in line for more than $150,000.
Severance pay is unusual, if not unheard of, for employees of state-regulated housing companies. Such pay in the private sector is usually one to four weeks for each year of service, with the high end usually reserved for top executives.
As with the Smiths' package, severance for rank-and-file workers was not contingent on the loss of jobs, but merely on a change in management.
The deal would have cost $1.14 million for the union workers, with the money coming from a reserve fund built up with tenant rents that otherwise would have been used to maintain and improve the complex.
The severance packages were approved by the co-op's governing board, but an investigation by The News revealed the process ignored state laws and regulations. Both the authority's governing board and the state Division of Housing and Community Renewal initially said they intended to honor the union severance packages, but had second thoughts after The News reported on them in January 2004.
Mayor Anthony M. Masiello termed the payments "totally unrealistic, irresponsible and unacceptable," and pressed both state and authority officials to fight the payments, which they eventually did by filing suit.
The two unions decided to negotiate a settlement, while severance pay for the Smiths remains a legal matter. In early March, State Supreme Court Judge Eugene M. Fahey ruled that the Smiths and their niece were not entitled to the $376,408 in severance, but said the two sides should discuss whether a smaller payment was in order. Both the Smiths and the authority appealed.
The two unions -- Local 200 of the Service Employees International Union and Local 17 of the International Union of Operating Engineers -- agreed to severance only in the event employees are laid off. If that comes to pass, those losing their jobs with under 10 years experience will get eight weeks pay; those with 10 to 14 years will receive nine weeks; and those with more than 15 years will get 10 weeks.
"We're satisfied with the outcome. It's a standard type of severance package," said Dominic Teti, business agent with the operating engineers.
The new managers who took over Marine Drive in January 2004 did not lay off any of the 17 union employees. Four have since been fired, for cause, and were not entitled to severance. That means the total possible severance payout, if the others were laid off, would come to about $75,000.
"The potential liability of the authority is a tiny fraction of the amount first sought," said the BMHA's Brown.