Archive for the ‘budget’ Category
October 21, 2014
A Change In Pension Changes
Just when I thought things were moving in a fiscally responsible direction, here comes another pension change proposal. I do not want to prejudge the proposal but just by reading a description of the plan, it sounds more expensive than what was previously proposed by the Administration. I hope that City elections being less than a year away are not a part of this change but we will see. Here is the information on the proposed new plan that I have to date.
- A letter to employees
- Plan for unvested employees to be sent to a cash balance plan
- Plan for a cash balance plan and a defined contribution plan
What we need is a look at the detailed cost analysis by Segal Consulting, the actuary consulting firm hired by the council. This will be given to the City Council at the private executive meeting today.
Stay tuned as this is only the beginning of a fight to save Memphis and don’t be surprised if the taxpayers are called upon to fill any fiscal gaps caused by coming election thoughts.
October 19, 2014
The November 4th Ballot
The upcoming ballot is important from a national, state and local level. As usual I will tell you how I am going to vote and give you my reasons as succinctly as possible. You, of course, will vote as you see fit based on your own conscience and principles.
For Governor I am voting for Bill Haslam.
For Senator I am voting for Lamar Alexander.
For the 8th Congressional District I am voting for Stephen Lee Fincher.
For the 31th Senatorial District I am voting for Brian Kelsey.
For the 83rd Representative District I am voting for Mark White
If I was in the 9th Congressional District I would vote for Charlotte Bergmann.
If I was in the 30th Senatorial District I would vote for Dr. George Shea Flinn.
Now as to the Wine at retail food stores, City of Memphis, I am reluctantly voting in favor as I have seen this as inevitable and it seems to work in other states without putting individual liquor stores out of business.
NOW THE FOUR CONSTITUTIONAL AMENDMENTS
Amendment #1(Gives Tennesseans back the right to legislate on abortions) – I am voting YES. The US Supreme County has already ruled that abortions are legal. This Amendment would allow the enactment of reasonable medical safety and sanitary provisions to prevent the terrible situation that occurred in the Gosnell clinic in Philadelphia which resulted in the murder conviction of Dr. Gosnell. Also remember that the Planned Parenthood v. Sundquist case (TN Sup Ct 2000), effectively prohibited any TN regulation, even for the safety of the mother. That’s why the approval of this amendment is crucial.
Amendment #2(Changes the way the Supreme Court or Appellate Judges are appointed) – I am voting NO. This is a close call but I trust informed common sense voters more than I trust the legal profession. I could go along with this amendment if it had a term limit provision limiting judges to one eight year term. Then at the end of a distinguished private legal career, outstanding fair minded lawyers could finish their career on the bench. Otherwise I would rather let the voters decide rather than lawyers and politicians.
Amendment #3- (Prohibits any Tennessee tax on payroll or earned income). YES, YES, YES
Amendment #4- (Empowers the General Assembly to permit lotteries). I am voting NO. I am against gambling in general and there has been corruption in these lotteries in the past.
FINALLY- For City of Memphis voters there is a little understood Memphis City Ordinance change to Ordinance #5512 to Improve Effectiveness of Civil Service Hearings. I am reluctantly voting YES for the amendment as I have been assured by the proponent of this amendment (City Council member Kemp Conrad) that it will help reduce the backlog of civil service cases and make it easier to discharge non productive employees of the City. It seems strange that this proposal is adding 7 members for a total of 14 members of the Civil Service Commission and asking to pay them $400 per day (or more) whereas the Shelby County’s civil service merit board has 5 members who are paid $50 per day and seems to be quite efficient. I think the difference is the culture of the City versus the County. The City has a history of tough union agreements and the unions support keeping their members employed by the City regardless of their job performance and history.
I will be glad to answer any questions that you might have about the election. Vote your preference but please vote.
October 13, 2014
The Upcoming Election on Tuesday, November 4, 2014
You are probably aware that a very important election occurs on the first Tuesday in November this year. The composition of the US Senate and House is a critical issue as we struggle to restore the constitutional balance between the executive and legislative branches. Early Voting begins October 15, 2014 at ALL 21 Satellite Sites and continues through October 30, 2014. Please get out and vote.
I will be publishing my thoughts on the local and state issues by next Monday, October 20th. There are four proposed Tennessee constitutional amendments involving abortion (#1), electing or appointing Tennessee Supreme Court Judges and Appellate Court Judges (#2), income taxes in Tennessee (#3) and lotteries (#4).
But today I am curious about another item on the ballot and that is Memphis Ordinance No. 5512. This proposed ordinance would increase the number of civil service commission members from 7 to 14. Brian Collins (City Director of Finance) certifies that the net cost to the City of Memphis will be $0.
Here is what channel 3 said about this proposed change in 2013.
(Memphis) With a back log of more than 70 cases, Memphis City administration and employee unions said they have come up with changes to the Civil Service Commission that will make the system more efficient. (more…)
October 7, 2014
Finally A Defined Contribution Pension Plan
Today the City Council will consider a defined contribution pension plan for City employees with less than 10 years of service (as of July 1, 2015) and new employees hired after that date. I have been recommending this for years and finally the City Council will consider this reasonable plan. Here are the proposed ordinances.
I have been recommending a defined contribution pension plan for years ever since I was on the Shelby County pension revision committee. This is fair for the private sector taxpayers who generally have no defined benefit retirement plan. It will probably be better for those City of Memphis employees in the future if the City’s pension investments perform as they have over the last 25 years (over 9% return).
Will the City Council and the Administration follow through and pass these ordinances? We will see but you have to consider that a year from now there will be an election for the new City Council and the city Mayor. What do politicians do when faced with an upcoming election? You have to look no further than the upcoming November 2014 national election. These changes are needed and should also apply eventually to the MLGW. Shelby County should adopt a similar plan but only for new employees, not those currently employed but not vested. This exception is in recognition of their past good fiscal responsibility as compared to the City of Memphis.
September 18, 2014
There Are Promises And Then There Are Promises
Promises are only as good as the character of the promiser and laws to back up the promise. The City of Memphis made promises in the past about pension benefits and also about retiree health care benefits. The pension benefits were backed up by law and generally could only be changed by bankruptcy (look at Detroit). However retiree health care benefits are not protected by law and are subject to change by the governing body.
Recently certain publications have pointed to Nashville as the model that Memphis should emulate. Therefore I decided to look at Nashville (Metro Davidson) and see what their numbers look like.
The first thing that struck me was that the Nashville Metropolitan Council consisted of 41 members. Our 13 is bad enough. Imagine a meeting where all 41 want to get their opinion on the record.
Then I looked at the pension and OPEB numbers. Their pension liability was funded to 84.6% as compared to 72.6% for Memphis. However their OPEB unfunded liability is $1.88 billion compared to $1.29 billion for Memphis. Therefore the state of Tennessee looked at Memphis and said that you are low on gas for the pension fund and also the OPEB fund and therefore you have to do something. However Nashville gets a pass because they can always cancel the OPEB promise in the future if they get in a pension contribution bind. Would you want 41 metro council members rather than the 26 we now have (13 City and 13 County) representing the City and County especially when the County has been doing a good job compared to the City.
Nashville is certainly vibrant and has grown whereas Memphis has been basically stagnant. However, you should be careful about claiming that the difference between Memphis and Nashville is the result of a metro government versus two separate governments in Shelby County.
September 8, 2014
Confusion At City Hall
It was interesting to watch the confusion at the committee discussions Tuesday (a week ago) about the budget. The following was in the budget document.
The proposed FY 2015 Operating Budget includes an increase of approximately $15 million to help fund our pension system. Combined with a FY14 contribution of $20 million, pension payments will be approximately $35 million. Since 2008, financial constraints have prevented us from paying the full Actuarially Required Contribution (ARC) needed to maintain solvency long-term. The current ARC is approximately $95 million.
Under newly enacted Tennessee law, the City will be required to ramp up our annual contributions until we reach 100%, no later than 2020.
The FY 2015 Operating Budget includes fundamental changes to medical benefits provided to current and former employees. First, the FY 2015 Budget assumes that the city will no longer pay 70% of the health care premium of retired, Medicare-eligible employees, their spouses and dependents. These retirees will have options: remain on the City’s plan; join plans offered by either their current employers or their spouses’ employers; purchase Medicare supplement plans; or join the new Affordable Care Act’s health insurance exchanges or private exchanges. This change will save approximately $27 million in FY 2015. Also, it will be the first step toward eliminating the $1.3 billion unfunded OPEB (Other Post Employee Benefits Programs) liability. Second, the Budget assumes that we implement long overdue changes to the base health plan that will result in an additional $4 million savings in FY 2015.
The City Council and the Administration are looking for ways to save money to increase the pension fund contribution. The easy target was the health insurance costs for active employees and retirees. However the real problem is the pension structure itself. We have too many retirees from the City when compared to the County. The ratio of retirees to active employees at the City of Memphis is 79 per 100 versus 57 per 100 at the County. This of course means more retirees on the City health care plan. Then consider that the average City pension is $31,000 versus $19,000 at the County. Also the average health care cost for retirees at the City is $10,900 versus $7,100 at the county. The whole pension fund at the City needs an independent study to determine why more people proportionally are retired at the City than the County. This and the past refusal to take needed reforms is the root cause of the current problem.
September 2, 2014
Return On Investment
The City of Memphis pension board voted to change their investment strategy to raise their return on investment. I hope they are successful but they are taking a chance like the gambler at Tunica on the crap table. Seven come Eleven.
Look at this Asset Class Return Chart. These sectors rotate from very good to average to bad to very bad. Anyone that says they know what the future will be, will be very rich or very poor if they are risking their money. If they are risking someone else’s money, they will be very sorry but well paid for their advice.
Now here is what I would like to see. What is the return on the investment for the $43 million dollar development known as the Beale Street Landing? I went there a few days ago and below are some pictures. I would like to see a financial report on the return on investment for this structure. This is not like spending money for roads, sewer lines, parks, street lights, public safety and criminal justice. We must have that for a civilized society. But the Beale Street Landing must produce a return on the investment. Give us a report on RETURN ON INVESTMENT and a reason to continue to hire the high priced staff that brought us this investment. Here are some shots from our $43 million dollar investment. Parking $5.00 minimum, $15.00 maximum. Nice restaurant and bar with average lunch prices but they cannot get a professional restaurateur to operate it so they are running it themselves. Hours, 9 AM to 4:30 PM Monday through Thursday, 9 to 7:30 on Friday, 11 to 7:30 on Saturday and 11 to 5 on Sunday. Where is the romantic nighttime supper watching the boats on the mighty Mississippi?
August 25, 2014
Recently I was scrolling around the City of Memphis website and I clicked on the office of talent and human capital and this is what I found.
I congratulate the Mayor for printing this information and pointing out that we have a long way to go. In looking at the chart, we are 47th out of 51 for people 25 and older who have completed a four year college degree. If you restrict that to 25 to 34 years old, we move from 47th to 46th. We are 51st out of 51 for mathematicians and scientists etc. We are 45th out of 51 as a percentage of metropolitan workers that have a college degree and are employed in private sector businesses but excluding health care and education. Lastly we are 43rd out of 51 as a percentage of metropolitan population 25 and older that have completed a four year college degree and were born outside the United States.
This last number is interesting as Memphis is at 7.7% and the leading city is at 49.6%. I would take a guess that the leading cities are places like San Francisco, San Jose, Dallas or Boston.
The person in charge of the office of talent and human capital is Douglas Scarboro and in a recent news article it was stated the following.
“In March 2010, Wharton hired Douglas Scarboro to serve as the head of the city’s new Office of Talent and Human Capital, designed to attract talented workers. After a staffer said Scarboro’s initial salary of $125,000 a year would be funded by a local nonprofit group, Wharton issued a public apology and said the city was funding the position.”
If Mr. Scarboro can bring these numbers up he is certainly earning his salary. What do you think?
August 18, 2014
Property Developer With Other People’s Money
A recent CA article stated the following “After a delay of several months, Robert Lipscomb said recently that his team is ready to move forward with a long-standing plan to redevelop the Mid-South Fairgrounds into a sports complex and retail center.”
What a remarkable statement. Most professional property developers risk their own money or gather together other investors based on their good track record. However Mr. Lipscomb uses government programs such as TDZs (Tourist Development Zones), TIFs (Tax Incremental Financing) and various State and Federal programs paid for by the general taxpayers. Bonds are issued with the promise of payment from a fund of incremental taxes over and above a predevelopment base tax rate. If the incremental taxes are there to pay off the bonds then everything works out fine. If they are not there, then the local taxpayers pick up the load.
My question is who appointed Robert Lipscomb as chief Memphis property developer? If the City of Memphis is his property development company, then we need to study the financial records of his company. The State of Tennessee through the office of (more…)
August 4, 2014
A Smoking Gun
I have a reluctance to throw out old files that I have from 2001. So I decided to start cleaning out and throwing away old files. The first one I came across was an open records reply from 2007. It was a Mercer Health and Benefits report dated July 24, 2006. The title was “City of Memphis Retiree Medical Landscape 2006 and Beyond”.
Take a look at this report. It was a warning of what was coming from GASB (Government Accounting Standards Board 43 and 45) concerning OPEB reporting, Medicare Coordination, Service Based Contributions and Future Hires.
Why was this report Important?
- It will be a required part of the annual audit statement
- This will impact bond rating
- Unfunded liability is potentially 50 times current retiree health-claim cash flow
The report recommended plan changes such as
- Coordination of benefits on medical and surgical coverage with Medicare (Parts A & B) for all post 65 retirees.
- Adopting an age and service based contribution rate structure.
- Plan design changes to the retiree medical plan that will reduce costs to some reasonable level and help manage the liability.
- Medicare coordination will mean the City of Memphis will provide coverage for post-65 retirees only on a secondary basis and all post 65 retirees will be required to buy Medicare coverage.
- The City of Memphis will adopt separate rates for pre-65 and post-65 retirees.
- Retirees will contribute different amounts depending upon their length of service in active employment.
Is it any surprise that the City of Memphis ignored these recommendations and the County took the warnings to heart and adopted a similar recommended plan? This lack of action by the City in 2006 explains the current crisis we have at the City of Memphis.