Citizen fiscal observer John Marshall Lee asks in a commentary “Remember Elmer Fudd? The little guy, with a funny voice, and a shotgun pursuing his rabbit stew recipe? ‘First you need a rabbit.’ And there was Bugs Bunny looking on, laughing at Fudd, the mighty hunter.”
It reminds me of each of Mayor Ganim’s bonding proposals. Was he really ‘ready,’ before he aimed and fired in 2000? He got the City to borrow $350 Million to be repaid from Police and Fire operating budgets through 2029 totaling $30 Million annually. $900 Million was the expected total price to fund retirement incomes for public safety employees with interest rates around 7.5%. The plan has returned less than 8% assumed. Today net of actual plan assets around $60 Million in the trust Plan A still shows a net pension liability of $250 Million. Paying out $30 Million annually from Plan A to retirees has forced the City to acknowledge increasing expenses, current and deferred because of inadequate earnings. And two major market crashes since 2000 have lost tens of millions that will never become retirement benefits. The taxpayer has to make those up for any amounts required for Plan A. How does that rabbit stew taste today? Were all the costs on the menu and understood? Or was Fudd simply too trigger happy?
City employees have been a part of the CT Municipal Employees Retirement System for many years. The City forwards funds each year to the State-managed MERS plan. The State makes no contributions. MERS tells the City each year what percentage of City Payroll must be paid by the City to MERS to be actuarially current. That funding exceeds 16% of City payroll today. (Teachers are part of a different State plan, Teachers Retirement System and the City makes no contributions.)
However, the City contract with Police and Fire personnel changed in 2015 for the period since 2012. Active public safety employees were moved to MERS from our local Plan B. Because 50% or greater of highest three-year earnings includes overtime, rather than just base pay as previous, MERS indicated that a “past service liability” was created. (Fire $72 Million and Police $135 Million came with a level 28 year schedule.) Bridgeport taxpayers must fund. What is the real MERS amount, based on what MERS is actually able to earn? $90 Million, $270 Million, or is it even closer to $500 Million? Can we get Elmer Fudd to look at this with 20/20 vision?
Like the silly Elmer Fudd, Mayor Ganim is taking aim once again before getting ready with his Bonding shotgun. He has told the public that by bonding $90 Million, a number that does not fully represent our City past service liability today at current 4-4.5% bond rates; he will eliminate all obligations but current ones. That is not true. He has left that impression in Hartford where he has been quoted: “By doing this, Bridgeport would also make the municipal employee retirement fund whole and eliminate any unfunded pension liability in one lump sum.” That sounds wonderful, especially when the bond is sold as a way to save interest because 4% guaranteed interest expense of a bond is better than 8% assumed earnings rate on pensions. But no such savings will occur while Bridgeport is earning 3% on average on its Plan A trust amounts. Nor will the State 10-year earned average on MERS that show a 4.74% return as of April 2017.
What this means is that every year the plans do not earn 8% our current assessment will grow in order to eliminate each new increase to past service liability. Since that is the case, then the expense of bonding that includes $100 Million of interest over the proposed bonding period is funding the taxpayers cannot afford. It clearly does not help us. Just costs.
Elmer Fudd cannot have it both ways. If the City cannot afford to fund our obligations, are we discovering that now? Why did the City agree to the plan in the first place and never share the amount and method with taxpayers? Negotiate again through labor relations with realism and transparency in mind. A bond payment is non-negotiable, once adopted. But labor contracts are always negotiable according to President Trump. And the inclusion of overtime earnings as a part of a base for retirement earnings is not yet five years in practice. Mayor Ganim, why not call on the actuaries we pay to publicly find a way to eliminate $100 Million extra expenses that has you touting bond interest payable as a savings rather than calling them an extra expense as they are? Time will tell.