Archive for the ‘Pension’ Category

FEW (family/education/work) IS THE SOLUTION

Monday, July 20th, 2015

July 20, 2015

FEW (family/education/work) IS THE SOLUTION

 

There have been lots of articles last week, both locally and nationally, about income inequality, middle class wages, poverty percentages and solutions. It must be the upcoming elections, locally this year and nationally next year, that has politicians spouting out their solutions.

One local article cited a study that pegged Memphis as a national leader in both income gap and economic distress. The four local leading candidates for mayor were asked the question “How do we fix that?”

Here is a recap of what the four said.

HAROLD COLLINS

Collins, a City Council member, said the city needs better-paying jobs before it can reverse poverty trends and close the income gap, and took incumbent A C Wharton to task for not doing more to get those jobs. Collins said he also plans to “force” the Greater Memphis Chamber to recruit businesses in technology, engineering, finance and other industries with higher average salaries. For instance, he said, the city should be targeting companies fleeing California because of the drought there.

JIM STRICKLAND

Strickland, also a council member, said wage gap and poverty issues “run hand-in-hand” with population loss. Keeping people and jobs in Memphis is the best way, he said, and the city needs a mayor who “has the strength to fix things.”

Getting into the specifics of his plan, Strickland said he would focus on the “basics of government,” which he said are “not being done.” That includes “drastically” reducing crime and cleaning up the city, he said. “We must have a city government that is run effectively to create a safe and clean community where businesses and people want to be,” he said.

A C WHARTON

Wharton, the incumbent, said his administration has worked on reducing unemployment and income inequality in a number of ways as part of his Blueprint for Prosperity plan and with the recently announced Jobs Plus grant.

“If we are successful in getting Choice Neighborhood Implementation grants, this will provide significant support for my strategic priority of prosperity and economic opportunity for all citizens,” he said.

Wharton said the city already has some of the best workforce-readiness programs in the country at the Workforce Investment Network and through the Greater Memphis Alliance for a Competitive Workforce, which equip people with the skills needed for current and future jobs so they can “become more marketable and command higher salaries as businesses compete for top talent.”

“The Choice Neighborhood grant funds would help us leverage and maximize all of these efforts to address poverty, unemployment, income inequality and depressed neighborhoods,” he said.

MIKE WILLIAMS

Williams, the president of the Memphis Police Association, said the key was to invest in quality of life and public services instead of giving property-tax breaks to businesses.

“The profits are not being shared,” he said. “That’s why you have the (Greater Memphis Chamber) raping the city coffers. And that has to stop. Until it stops, we’re going to continue to generate poverty in this city.”

Drawing a distinction between himself and Wharton, Williams said he is opposed to “putting a clamp on excessive spending” — which, under Wharton, has translated into health care and pension changes that resulted in city retirees protesting at City Hall.

Instead, Williams said, the government should increase spending on services to make Memphis more attractive to both employers and employees.

So here is what I get out of these answers.

Collins-Get high tech companies from California but we do not have a skilled high tech workforce.

Strickland- Reduce crime, clean the city and reduce taxes.

Wharton– Get federal grant money for short term training programs and neighborhood programs.

Williams– Stop Pilots, stop cutting expenses and employee benefits which translates into higher taxes and more people leaving Memphis.

The truth is that there is no immediate solution to the problems in Memphis. The only answer is FEW, (FAMILY, EDUCATION, WORK) and it is a long term solution. Since the end of the Second World War we have been digging this hole (family breakdown, poor education and welfare dependency). Look at Detroit, Baltimore and unfortunately Memphis. Raising the minimum wage, income redistribution, unsustainable pensions and health care benefits will not solve the problem. Politicians will tell you otherwise but there is no one year or even four year solution. Restore your family, educate your children and take any job to start up the hard economic ladder. Any other solution is a lie. What is your opinion of the candidates and their solutions?

Why OPEN RECORDS Is SO Important

Monday, June 22nd, 2015

June 22, 2015

Why OPEN RECORDS Is SO Important

You may have read a front page article last Saturday in the Commercial Appeal by education reporter Jane Roberts. The article announced the creation of an open records reading room (Room 121) in the SCS Coe building at 160 S. Hollywood St. here in Memphis.

I have been working to open local public records since 2004 and have been greatly aided by many local citizens, particularly John Malmo, Eddie and Eve Settles (backinrivercity.com) and Ken Welch. I want to thank these people and many others who have contributed to this effort.

As Ken Welch has said many times, all public records are technically open to the public unless specifically named and restricted by state law. Then why can’t we get all this information easily? The answer is that public bodies and the leaders (Presidents, appointees, Governors, Mayors, Superintendents, etc) can make life difficult and expensive if they want to. The Tennessee open records law clearly states the following. However the particular public organization can drag their feet, threaten big charges paid in advance, refuse you entrances to offices without an appointment and then refuse to make an appointment. What has happened at the SCS system offices is different and significant.

Therefore this is why our agreement with Supt. Hopson and Chris Caldwell is so important. They have shown that they are open to making all legally open records actually open to the public. After all, we (the taxpayers) paid for all this bureaucracy and we are the employers. We recognize that we need good education, good fire and police services, good roads, efficient water, gas and electric services and many other public facilities. However we paid for them and we expect answers to all our reasonable and legally available questions.

Open Records is so important because without transparency there is often corruption, favoritism, waste and inefficiency. The sunshine of OPEN RECORDS and vigilant citizen can prevent this. There are many details to work out and our open records group is willing to work with the Shelby County System to make access easy and convenient. If we can make this work efficiently, we would look forward to using this as a template for other public bodies. Any suggestions from the you, the public, would be welcomed. We need to join together for full open records access.

What’s another $13.5 million among friends or taxpayers?

Wednesday, March 4th, 2015

March 4, 2015

 

In a recent CA article, it was pointed out that the cash strapped City of Memphis will have to come up with another $13.5 million to cover the underestimated cost of City of Memphis retirees OPEB cost. This is because of the City’s liberal policy differences versus the County concerning what health care policies are available to retirees.

I have attached a resolution dated June 18, 2007 entitled “RESOLUTION TO PROVIDE FOR OPEB BENEFITS AND APPROVE CHANGES TO HEALTH INSURANCE BENEFITS PROVIDED TO EMPLOYEES AND RETIREES”

It is signed by none other than A C Wharton, then County Mayor.

The main difference is that County retirees over age 65 that are eligible for Medicare (either the retiree or spouse) will only be eligible for a Medicare supplemental plan, not the regular county plan. Also the retiree’s share of the premium will be based on years of service. This saved the county millions of dollars since 2007.

Meanwhile the City of Memphis did none of this even after County Mayor Wharton became City Mayor Wharton. It took a city pension and OPEB financial crisis to get the City to change and then they got the numbers wrong to the tune of $13.5 million. Then add to that the millions they could have saved between 2007 and 2015 had they followed the County example, but they did nothing.

More Scoop And Toss

Tuesday, February 24th, 2015

Last Tuesday I braved the ice (black and otherwise) and went to the City Council committee meetings at City Hall. There were two particular subjects in which I had an interest and they were the Pension Funding Policy chaired by Jim Strickland and the Executive session on Debt Restructuring chaired by Myron Lowery.

These two subjects are related because due to the 2010 scoop and toss bond refinancing and the State of Tennessee demanding that the City of Memphis increases its pension ARC (annual required contribution). It turns out that the 2010 refinancing created a bubble starting in 2016 making it difficult to pay both the increased ARC and the bond payments at the same time. The answer, scoop and toss again. The City (Brian Collins) claims that this is reasonable due to low interest rates. Jim Strickland, Harold Collins, Wanda Halbert and Shea Flinn raised questions as did the Commercial Appeal. Here is the presentation given at the meeting.

I decided to investigate some past bond financing so I asked the City of Memphis for some bond information on recent bonds such as the stadium project and the Pyramid and Pinch District redevelopment. All I got from them was a computerized reply with answers to follow SOME DAY. So I went online and got the following Moodys financial analysis report.

https://www.moodys.com/research/Moodys-assigns-Aa3-to-Memphis-Center-City-Revenue-Finance-Corporation–PR_288005

Here are some of the things that the report says about Memphis.

  • The current issue is ultimately secured by all non-tax revenue that is legally available other than ad valorem revenues in the city’s general fund.
  • The Series 2011B and 2011 C subordinate are secured by a second lien on TDZ revenues with a pledge from the city to replenish the debt service reserve in the event of a draw on non-ad valorem tax revenues.

 

The negative outlook on the Series 2013A&B and 2011B&C reflects Moody’s expectation that the city’s financial position will remain challenged as fixed costs, including debt service, pension and other post-employment benefits represents 42% of operating expenditures in fiscal 2012.

In spite of all this the City continues to spend on questionable projects like the Raleigh Springs Mall renovation and to talk about the fairgrounds project as if these will all be paid for by tax incremental financing and fairy dust.

Cost of pensions/ City Versus County

Wednesday, February 18th, 2015

February 18, 2015

Cost of pensions/ City Versus County

I recently asked for and promptly got a copy of the Shelby County Pension Actuarial Report dated June 30, 2014. I also asked for the City of Memphis report and have yet to get it. However I have the June 30, 2013 report from the City of Memphis.

I first read the Shelby County report and it was like reading a financial report from, your favorite profitable well run private sector firm. Not exciting but very comforting. Not racy but secure.

Then to add spice to my day I took up the City of Memphis pension report. Talk about “A Tale of Two Cities”. Here are some comparisons.

Active Employees, City of Memphis- 6280; Shelby County 5302

Retirees, City of Memphis- 4782; Shelby County 3469

Unfunded Liability, City of Memphis- $709 million; Shelby County $243 million

Retirees on disability, City of Memphis- 635; Shelby County 80. Most  of the County  disability retirees are regular, not line of duty. Most of the disability retirees from the City are line of duty. They get 60% of their highest average salary tax free for life. The problem is the composition the approving pension board at the City made up of their fellow employees. Shelby County gives approval to a disability insurance company. This is costing the City $14 million per year.

Total annual pension payments, City of Memphis $155 million; Shelby County $66 million

Average pension per retiree, City of Memphis- $32,518; Shelby County $19,273

Do I need to say more?

Pension Reform At The City Of Memphis

Thursday, December 4th, 2014

December 4, 2014

 

Pension Reform At The City Of Memphis

Finally the Memphis City Council has taken action to address our unfunded pension liability. Eight members decided that we needed reform and took decisive action to get this under control. The unions are not happy and will probably take this action to court in a lawsuit.

Mayor Wharton originally proposed that the City of Memphis go to a defined contribution system for all new employees and those unvested employees with less than 10 years of service. There were, of course, objections to including those unvested employees and later on a different proposal came out from the administration which was a cash balance plan. A cash balance plan needs some explanation and you can read about cash balance plans in the attached article.

In the City Council meeting it appeared that Myron Lowery’s plan which would include only new employees and would have the least savings for the City of Memphis would get the seven votes. However the City Council voted for the Hybrid cash balance plan (8 YES, 5 NO) and only those with more than 7.5 years of service would be covered under the old expensive defined benefit plan. Everyone else as of the start of the plan in 2016 would be under the new plan.

The impact on the unfunded liability of the approved plan in year one would be a savings of 6.8 million dollars and would reduce the unfunded liability in the first year by 60 million dollars. This is as compared to the Myron Lowery plan of zero savings the first year in dollars and unfunded liability reduction.

Again this is not the final decision and according to the commercial appeal this approval will be discussed again in committee in two weeks. Stay tuned. Attached are the Hybrid pension options.

The MLGW Island

Monday, October 27th, 2014

November 27, 2014

The MLGW Island

There was a very good and interesting article in a recent issue of the Memphis Flyer. It was written by Les Smith, a reporter for WHBQ Fox-13 News. The point of the article was his belief that the MLGW is and always has been tone deaf to its customers. The most recent example of the deafness, according to Les, was MLGW announcing the need for a 2 percent hike in the residential water rate just after receiving a tongue lashing from City Council member Wanda Halbert.

As a former member of the MLGW Board of Directors and a long time observer of their services, I have the following observations.

  1. Over the past years MLGW has been a well run organization delivering electricity, natural gas and clean water in a professional manner. However there have been times when politics caused problems with the management, specifically when Mayor Herenton put Joseph Lee in charge.
  2. The employees generally are well trained and they respond to weather related outages in a prompt and professional manner.
  3. With the exception of Lee, the top job at the MLGW has been filled by professionals with the highest integrity.
  4. Utility rates are competitive compared to other cities of similar size.

I have studied the MLGW financial statements over the years and they are clear and complete. I have in the past contested the surplus in net worth as inconsistent with their constitutional nonprofit status. However they contend that they need a certain percentage of unrestricted assets to cover unpaid bills and expenses. You can argue about the size of the unrestricted cash but I do not think it is unreasonable.

(more…)

A Change In Pension Changes

Tuesday, October 21st, 2014

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.

  1. A letter to employees
  2. Plan for unvested employees to be sent to a cash balance plan
  3. 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.

Finally A Defined Contribution Pension Plan

Tuesday, October 7th, 2014

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.

Ordinance #5554-Adopt a defined contribution pension plan.

Ordinance #5553- Transferred participants to the defined contribution plan.

Ordinance #5552- Five or more years of service and age 65.

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.

There Are Promises And Then There Are Promises

Thursday, September 18th, 2014

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.