Evaluate both options and come up with the financial impacts of each of the decisions.

The information provided was:

The City of River City is a small, low-income, rural, retirement community of approximately 70,000 people. The Town incorporated (became a city/town) 30 years ago. At incorporation, the City formed its own Police department - believing that it would provide better service than contracting with the county. The Police department currently has a sworn staff of 70 officers and 40 non-sworn personnel. Most of the police department (senior officers, management) are within 3 years of retirement. The Chief is 55 years of age.

The City participates in the CalPERS retirement system, with a 3% @50 retirement benefit for current employees. Current employees do not contribute anything towards the cost of their retirement. The City has implemented pension reform such that all new employees are enrolled in the 2.0%@55 retirement benefit. The new City Manager has examined the financial records of the police department and is concerned that it is overspending on an annual basis. He hired an outside consultant, over the objections of the police union and the Chief, to examine the cost effectiveness of outsourcing police services. A staffing audit is underway. The Mayor's son-in-law is the Police Chief, and he has publicly defended the integrity of the man who married his daughter. The Mayor has scheduled a Public Hearing for 5/3/23. The Mayor is going throughout the community raising fear among the City's senior citizens that the new Town Manager wants to contract police services which will increase crime and fear within the community. Concerns to be addressed: There really are only two options for the City to consider: Contract for Police Services with the County Sheriff Keep the police services in house.

Strategies for each option: Contracting Out (Outsourcing Police Services) to the Sheriff's Department Employees could be offered early retirement incentive / severance package -assume that each of the employees would accept an early retirement incentive of 6-months' salary. The Police Chief will not be offered an incentive - he is an at- will employee and will be given the option to retire with dignity or be released (with cause: mismanagement). The council will need to authorize a contract proposal (Schedule A) from the Sheriff's Dept. Retaining the department - Chief of Police is terminated for cause (no severance) The City will have to recruit a new police Chief Current retirement costs are 25% of salary (paid to CalPERS). The employees contribute 0% to those costs. The Town is negotiating with the current union and is pushing employees to cover 9% of those costs. Assume that is accepted to keep the service in-house. New employee retirement cost is 10% of salary (paid to CalPERS) and new employees will pick up those costs.

This is the answer one of the experts provided, however I am confused as to how they got these numbers. I would appreciate it if someone can explain the math and formulas used to get each of these numbers.

In terms of financial impacts, outsourcing police services is the more cost-effective option for the City of River City. While there are upfront costs associated with early retirement incentives and severance packages for current employees, the long-term savings from lower labor costs and reduced pension obligations are significant. Additionally, contracting with the county sheriff's department will provide the city with access to a wider pool of qualified law enforcement personnel and specialized resources that may not be available in-house.

Here is a detailed breakdown of the financial impacts of each option:

Outsourcing Police Services

Upfront costs:

• Early retirement incentives/severance packages for current employees: $1,050,000
• Contract proposal from the sheriff's department: $500,000

Long-term savings:

• Lower labor costs: $2,500,000 per year
• Reduced pension obligations: $1,250,000 per year

Total net savings: $2,200,000 per year

Keeping the Police Department In-House

Upfront costs:

• Termination of Police Chief (no severance): $0
• Recruitment of new Police Chief: $250,000

Long-term costs:

• Increased labor costs: $1,500,000 per year
• Increased pension obligations: $625,000 per year

Total net cost: $2,375,000 per year

As you can see, outsourcing police services will save the City of River City an estimated $2,200,000 per year. This is a significant savings that can be used to fund other important city services or to reduce taxes. Additionally, outsourcing will provide the city with access to a larger pool of qualified law enforcement personnel and specialized resources.

While there are some upfront costs associated with outsourcing, these costs are outweighed by the long-term savings. I believe that outsourcing police services is the best financial option for the City of River City.

Explanation:

Approach to solving the question:

• Identify the relevant information from the provided text
• Analyze the financial implications of each option
• Evaluate the different factors involved in the decision
• Recommend the most cost-effective option

Detailed explanation: The question asks to evaluate the financial impacts of two options for the City of River City: contracting for police services with the county sheriff or keeping the police services in-house. The detailed explanation should provide a breakdown of the costs and savings associated with each option. It should also consider the upfront costs of early retirement incentives, severance packages, and contract proposals, as well as the long-term costs of labor and pension obligations.

Examples:

• The cost of early retirement incentives and severance packages for current employees is estimated to be $1,050,000.
• The cost of contracting with the sheriff's department is estimated to be $500,000 per year.
• The savings from lower labor costs are estimated to be $2,500,000 per year.
• The savings from reduced pension obligations are estimated to be $1,250,000 per year.

Key references:

• The City of River City's budget
• The cost of police services in other cities
• Studies on the cost-effectiveness of outsourcing police services