Archive for the ‘Pension’ Category

OPEB-City of Memphis vs. Shelby County and MCS vs. Old Shelby County Schools

Tuesday, April 15th, 2014

April 15, 2014

OPEB-City of Memphis vs. Shelby County and MCS vs. Old Shelby County Schools

This is a very interesting subject and shows how badly the City of Memphis has been run, both the school systems and the general administration.

Look at the following attachments

A)    Shelby County CAFR from 2013 showing an unfunded liability of $306 million. DOWN $13 million from 2008 to 2013.

B)    Shelby County CAFR from 2008 showing an unfunded liability of $319 million.

C)    City of Memphis CAFR 2008 showing an unfunded liability of $857 million.

D)   City of Memphis CAFR 2013 showing an unfunded liability of $1.29 billion dollars. UP $433 million from 2008 to 2013.

E)     Old Shelby County Board of Education 2011 showing an unfunded liability of $334 million (June 2010)

F)     City of Memphis Board of Education 2011 showing an unfunded liability of $1.16 billion dollars.

So it is obvious that Shelby County has been much better run than the City of Memphis and congratulations to past Shelby County (more…)

What Memphis Must Do

Monday, April 7th, 2014

April 7, 2014

What Memphis Must Do

We are coming down to crunch time at the City of Memphis concerning the 2015 budget. I have researched and written on the City finances ad nauseum. Now is decision time. Do we kick the can down the road (the past favorite for many years) or step up to the plate?

Shelby County is the model for what should have been done in past years. However the leadership from the past and present city mayors and city councils has been abysmal. Too many people on the pension rolls (remember the January 2001 pension resolution which gave pensions to elected and appointed people with just 12 years of service regardless of age), too many people on retiree health care, too many people with line of duty disabilities, too many people on the payroll, too many days not working due to excessive sick days, vacations and paid days off. The county and the city have much the same governmental formats (except in the case of line of duty disability) but in the past, the county just made the hard unpopular decisions and had a clear vision of what future costs would be. The City’s vision was the next election, not future cost control.

Here is what must be done at The City. Health care reform for active and retired employees by lowering the city’s costs dramatically. Pension reform by going to a defined contribution plan for all unvested employees. Turn line of duty disability (more…)

Line Of Duty Disability Reform

Thursday, February 13th, 2014

February 13, 2014

There are lots of things that need reform in the Memphis pension system and we have talked about the need for going to a defined contribution system rather than the current defined benefit system. Hopefully we will get there if the Mayor and the City Council do the right thing.

However I have often spoken about the need for line of duty disability reform. The Memphis pension board regularly approves applications for line of duty disability applications and has ten times more former employees on line of duty disability than Shelby County government or the MLGW. (These people on line of duty disability get 60% of their final average salary for their lifetime tax free).

Now I find out from Jeni Diprizio (a great reporter for Channel 24) that last month (January 30, 2014) Jason Webb applied for and (more…)

A New Idea, Trust Free Enterprise

Wednesday, February 5th, 2014

February 3,2014

A Hybrid Pension Plan Proposal

I have been following Mayor Wharton’s proposals in his state of the City speech and in the PFM group’s 5 Year Strategic Fiscal And Management Plan for the City of Memphis. I congratulate the Mayor for hiring this group and for the well written and realistic facts in the plan. I will be commenting on the plan over the next months as the debate rages in the City and the city council.

I have attached here part of the 182 page plan that concerns pension reform. They are recommending various pension plans for unvested (less than 10 years of service) and future new employees. The recommendations include a defined contribution plan or a combination of a defined contribution plan and a limited defined benefit plan similar to what the state of Tennessee has done for teachers and state employees.

Several years ago I participated in a pension reform study for Shelby County which ended up in Plan D for the county for new employees. The City adopted a similar plan for new employees only basically doing away with the disastrous 25 year retirement (more…)

DROP, The Pension Bomb

Tuesday, January 28th, 2014

January 28, 2014


For a number of years I have received the agenda for the monthly meeting of the City of Memphis Pension Board. I have attended a number of these meetings. Here are a few things that you need to know.

1)    The board consists of the Mayor, the Comptroller and five employees with at least ten years of service, a retiree and only one citizen member. So it is obvious that this is rigged to approve whatever the employees want within the pension ordinance. Temporary Mayor Myron Lowery tried to appoint me to the board a few years ago and the Council voted it down.

Being familiar with meetings and agendas, I noted the agenda for the next meeting this Thursday, January 30. There were listed 30 DROP applications which will cost the City $1.62 million dollars per year in pension payments over the next three years while the DROP applicant is still working. Then I remembered that there were four periods during the year for DROP applications and January was one of the four. I went back to January, April, July and October 2013 and looked at those agendas and there were a total of 116 DROP applications amounting to $4.8 million dollars per year.

I need to explain the DROP (Deferred Retirement Option Plan) provision of the pension system. This provision allows an employee to continue working for one, two or three additional years (most if not all choose 3 years), and to receive salary and pension at the same time. The pension payment goes into a special account and at the end of the drop period the employee will receive a lump sum payment which can be rolled over into a retirement account. The pension is frozen at the level that the employee starts his final retirement years (1, 2 or 3). The employee’s and the City’s pension contribution cease as of the start date of the DROP program.

The County does not have a similar program.


Chickens Coming Home To Roost

Thursday, January 23rd, 2014

January 23, 2014

More Info From the Memphis CAFR

Pick up the CA and you will get more articles than you can read over your morning coffee. They all point to the upcoming decisions of the Mayor and the City Council. The chickens are coming home to roost as they have been disturbed by the noise of the cans that have been kicked down the road.

As I sift through the current 2013 Comprehensive Annual Financial Report (CAFR) of the City of Memphis, I decided to compare several pages from the 2008 CAFR with the same pages from the 2013 CAFR.


Paying For Memphis Pension Reform

Thursday, January 16th, 2014

January 16, 2014


I have been comparing the past financial policies and results of the City of Memphis with Shelby County. Past Shelby County financial management has been much better than Memphis and the results are obvious when you compare the past and present Comprehensive Annual Financial Reports (CAFR) and the pension and other post employment benefits reports (OPEB).

Here is another example of where the County acted and the City did nothing. Both the City and the County have personnel policies concerning vacation, sick days and personal day policies that are well beyond what the private sector offers. Concerning vacations they both grant 5 weeks’ vacation after 25 years. The private sector is generally 3 to 4 weeks after 25 years.

Now the biggest difference is in sick days. Both the City and the County used to grant up to 2-1/2 days per month (30 days per year) (more…)

Compare Memphis Pensions Versus Shelby County

Thursday, January 9th, 2014

January 9, 2014

Compare Memphis Pensions Versus Shelby County

I could and probably will write for weeks about needed reforms at the City of Memphis. But I like to keep it simple and understandable. Let us look at some comparisons between the City of Memphis and Shelby County governments.

How many active employees do they have?

Memphis      6020                          Shelby County         5668

How many pensioners do they have?

Memphis      4782                          Shelby County         3260

What is the average annual pension payment per pensioner?

Memphis      $32,518                    Shelby County         $19,218

The problem is obvious. Memphis has 79 retirees for every 100 active employees. Shelby County has 57 retirees for every 100 active employees.

Memphis pension payout is 69% higher per retiree than Shelby County.

There are some obvious reasons.

1)    The January 2001 pension resolution allowing elected and appointed people to retire after 12 years regardless of age.

2)    The number of line of duty disability retirees is 10 times higher than the county costing Memphis $12 million dollars per year.

Rather than hire a third pension consultant, I recommend that we get some retired County pension experts and have them compare the County’s pension ordinance and practices with the obviously loosey goosey City system. I am open to other suggestions from the public. After all, you are paying for this expensive   underfunded system.

Mayor Wharton Says Spend! Spend! Spend!

Monday, December 16th, 2013

December 17, 2013

Mayor Wharton Says Spend! Spend! Spend!

In a very interesting article in the Daily News by Bill Dries, the Mayor is quoted from a TV interview in July on the WKNO-TV program “Behind The Headlines” as saying the following.

“ projects like the Mid-South Fairgrounds renovation and the Bass Pro Shops move into The Pyramid are necessary ingredients in an administration he has vowed will not be about austerity measures. It has failed in Europe … this idea that austerity will cure all ills. It has not worked globally. It will not work locally. … Who is focusing on growth? Everything is cut, cut, cut. Anybody can say that. Forrest Gump can say that.”

This sounds like a statement coming from the White House, not City Hall. He may be repeating talking points. However it sounds like someone who has run out of other people’s money and is fishing for more. I hate to sound old fashioned. As someone who has run a business and has had to meet a payroll, spend, spend, spend is not a good long term strategy unless you can show investors from past successes and a well thought out plan, that there will be future revenue, revenue, revenue to cover the debt, debt, debt. But I repeat myself.

Now as to the pension reform mentioned in the CA, I like the framework of the plan but it does not go far enough. Going to a defined contribution pension plan for future employees and non vested present employees is fair and puts them on the same risk level as the private sector taxpayers. The “for profit” private enterprise market generally has been good to investors for the last 25 years with the exception of 2008. Why should public sector employees be insulated from the risk that private sector taxpayers take?

However we also need to consider that it may be necessary to look at current vested employees and consider freezing their earned pension credits at their present levels and also put them on the same future defined contribution plan for their future years before retirement. However he retired pensioners should be protected short of city bankruptcy like Detroit. These considerations and plans are necessary to avoid another Detroit in the future.











A Backdoor Tax Increase

Sunday, December 15th, 2013

December 12, 2013

A Backdoor Tax Increase

The City Council has passed another backdoor tax increase by unloading street lighting electric cost and maintenance on the MLGW. You already see a sewer fee, a solid waste fee, a storm water fee and a mosquito/rodent control fee on your utility bill.

The utility expects the fee to raise a total of $12.9 million per year, of which roughly half would go toward electricity for the streetlights and half would go toward maintaining them. This is an expense that is covered by the services paid for by property taxes. Now the City Council wants to take it out of their expense budget and bill it directly to the taxpayers through the MLGW billing process.

Here is what I investigated and found out. If you will look at the 2012 operating budget. The City shows an actual cost of $4.3 million for street lighting in 2010 but a 2012 adopted budget of $12.1 million. Then look at the 2014 operating budget and they show an actual (more…)