Archive for the ‘History’ Category

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.

The Upcoming Election on Tuesday, November 4, 2014

Monday, October 13th, 2014

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…)

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.

Confusion At City Hall

Wednesday, September 10th, 2014

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.

Talent Rank Of Memphis

Monday, August 25th, 2014

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.

From the City of Memphis Website

From the City of Memphis Website

 

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?

Property Developer With Other People’s Money

Monday, August 18th, 2014

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…)

A Smoking Gun

Monday, August 4th, 2014

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.

Work Time Versus Time Off

Wednesday, July 30th, 2014

July 30, 2014

 

Work Time Versus Time Off

 

The CA has been on the case of certain judges concerning the amount of time they are working versus their time off. While this criticism seems to be justified it also applies to the City of Memphis, Shelby County and most other public employees.

First look at the salaries of the various officials we are currently voting on.

MAYOR

$142,500

ASSESSOR

$108,617

REGISTER

$107,975

TRUSTEE

$107,975

COUNTY CLERK

$107,975

CHANCERY COURT CLK

$117,453

CIRCUIT COURT CLERK

$117,453

CRIMINAL COURT CLERK

$117,453

GENERAL SESSIONS COURT CLERK

$117,453

JUVENILE COURT CLERK

$117,453

PROBATE COURT CLERK

$117,453

JUDGES

$167,686

 

I am conflicted in my opinion about judges. I am very much in favor of term limits. I think the people should elect the judges but it (more…)

An Important Election

Thursday, July 24th, 2014

July 18, 2014

 

There is a very important election coming up. Early voting starts today (only

downtown at the election commission). General early voting starts Monday July

21st and early voting ends Saturday August 2nd. The last voting day is Thursday

August 7th but only at your normal local voting site.

 

The ballot is huge. I have attached the ballot with my selections. I want you to

make your own choices but I want you to get out and vote.

 

I have been working with Eve and Eddie Settles and they have done a wonderful

job in researching the candidates. Be sure to go to www.backinrivercity.com and

read about the research they have done.

 

You will have to declare that you want to vote in the democrat or republican

primary. This is for the Governor, United States Senate, United States House of

Representatives, the Tennessee Senate, the Tennessee House of Representatives,

and the State Democrat or Republican executive committee people. This party

declaration will not prevent you from voting on the rest of the ballot which is

 

The final page of the ballot is interesting. It is to vote to Retain or Replace the

Tennessee Supreme Court judges (3 ea.), Court of Appeals Judges (10 ea.) and

Court of Criminal Appeals judges (10 ea.).

 

The Tennessee legislature voted recently to let the Judicial Nominating

Commission to expire and in November 2014 we will vote whether to adopt a

constitutional amendment for Tennessee, a system like the one set forth in the US

Constitution. I believe that an 8 year term is sufficient and should be at the end of

a distinguished legal career or the justice should go back to his legal practice to

earn his living, not be a career justice. Therefore I support the REPLACE vote.

I will be glad to answer any questions. 7540699

Joe Saino