published Tuesday, July 23rd, 2013

Mayor Andy Berke eyes Chattanooga fire, police pensions to address shortfall

FIRE AND POLICE PENSION COSTS

• $11.8 million - City contribution in 2012 to the fire and police pension fund

• $13.3 million - Recommended city contribution in 2013 to the fire and police fund without reforms

• 35.86 - Percent of payroll paid into the retirement fund by the city

• 8-9 - Percent of payroll paid by employees, depending upon when hired and plan benefit

• $218 million - Assets in the pension fund, or 63.4 percent of what actuaries is needed to fully fund the plan.

FUND BENEFITS

• $37,524 - Average yearly benefits paid to police and fire retirees

• 68.75 - Percent of the average final three years of pay provided in retirement benefits

• 3 - Percent of annual cost of living increases given beneficiaries

• 733 - Retirees and beneficiaries

• 818 - Active police and fire department employees eligible for future benefits

Poll
Should the city scale back police and fire pensions?

Faced with a $125 million shortfall in the Chattanooga Fire and Police Pension Fund, Mayor Andy Berke said Monday he will create a task force and hire an outside consultant to look for ways to reform and replenish the city employee retirement plan.

"We have work to do," Berke said. "Without looking at ways to reform the fund, the city's contribution is expected to be $14.4 million this year after being at roughly $6 million a few years ago. Increases are expected to continue."

Berke said he wants the task force to recommend changes to control the escalating costs of the fire and police pension fund.

"This is something you want to address before the crisis escalates beyond repair," he said.

Actuaries for the police and fire pension fund said the city needs to raise its annual contributions for the retirement account to nearly 36 percent of the police and fire payroll. To fully fund the fire and police pension account within 25 years, the city's annual contributions will need to triple by 2038, according to the fund's actuaries, The Segal Co.

Although city contributions could drop significantly once the plan is adequately funded, City Council Chairman Yusuf Hakeem said the city can't continue to absorb such a high rate of increase in pension expenses.

"From 2006 to present, the city's costs have doubled and it's projected to go up by more than million dollars a year every year for the next quarter century," Hakeem said. "Economically, we can't continue on that path."

The council is expected to vote tonight on a proposal to hire the Philadelphia consulting firm Public Financial Management Inc. to work with a new task force on ways to limit city expenses. The PFM team recently worked with a task force in Lexington, Ky. -- another city with its own police and fire pension fund -- and helped cut that city's pension expenses by 45 percent.

In Chattanooga, the city operates two pension funds -- one for fire and police employees and one for all other city employees.

Chattanooga police officers and firefighters can retire with more than two-thirds of their pay, plus health benefits, after 25 years of employment. The average policeman or firefighter retires at age 53, although many retire earlier. The average pension beneficiary is paid $37,524 and the pension includes a 3 percent cost-of-living increase every year.

Any change in Chattanooga's fire and police pension benefits will have to be approved by both the City Council and the Fire and Police Pension Board, or adopted by voters as a charter change in a citywide referendum.

The eight-member Chattanooga Fire and Police Pension board includes three elected police officers and three elected firefighters.

Frank Hamilton, the fund administrator for the pension board, said the pension fund is on a sustainable path and the pension board is eager to work with any task force to look at future options. Hamilton said he hopes the pension board has several seats on the study group to ensure their voices are heard on the study panel.

"We want to cooperate with the task force, and we hope this will be an open and transparent process that protects our public servants," he said.

So far, however, there has been limited communication between the mayor's office and the pension board, Hamilton said.

Tim Bryant, secretary-treasurer for the Chattanooga Fire Fighters Association IAFF Local 820, said his union "has serious reservations about the task force and who the mayor plans to appoint.

"This issue is very complex and has a significant impact to local firefighters and their families, Bryant said. "It's our opinion that the pension board must have greater representation on the task force to ensure we have a process that is open, transparent and fair to all stakeholders."

In an email statement Monday night, Berke said the task force "will be made up of active and retired police and fire department employees, as well as community leaders." He hopes it will meet for the first time next month.

Berke said the fire and police pension fund should help the city attract and retain motivated public safety workers, be solvent, live up to the plan's obligations and be financially responsible.

"The task force will come to a consensus on how we can achieve these goals and report back to me by the end of the year," Berke said.

Contact Dave Flessner at dflessner@timesfreepress.com or Beth Burger at bburger@timesfreepress.com.

about Dave Flessner...

Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...

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