As the police union contract heads to arbitration, see story here, citizen fiscal observer John Marshall Lee asks about the price tag for the 2015 retroactive contract.
Did I miss something in the CT Post headline article this morning? Brian Lockhart provided some of the Police Department contract history but missed the price tag for the 2015 settlement? In 2015 the Finch regime agreed to terms with the Police that included the transfer of pension responsibilities from Bridgeport Plan B to State of CT Municipal Employee Retirement System (MERS). MERS allows retirement benefits to be based on highest three year earnings including OVERTIME. Plan B did not. The State merely administers and keeps records. It makes no contributions for MERS. All contributions are local responsibilities. What was the cost of the transfer of responsibility?
In 1999-2000, Ganim wrestled with public safety pension benefits representing a $350 Million liability at the time. His solution was to trade that obligation, assuming that the City could invest the borrowed money and meet retirement obligations. And it may have looked like it was working for a year or two but investment markets are not guaranteed. More than $30 Million of expense from Police and Fire budgets each year began and continues until 2029 to pay Pension A bond cost. That is $900,000,000 repaid to bondholders over 30 years because the City had not regularly set money aside to fund retirement liabilities incurred when the City entered labor agreements.
Today the City has only $60 Million of the original $350 Million left invested. Is that enough to pay out $28-30 Million annually in the near future to Plan A retirees? Obviously, NO. How do we fund this? We contribute from current taxes up to another $15 Million or more (especially when the fund becomes exhausted) PLUS we continue to repay the 30-year pension obligation bond. Has Joe Ganim revealed how his bonding idea from 2000 has developed flats and that we need to pump up the tires with new funds every year? What will the cost of Plan A funding total when we are through? Since it depends on how much those funds earn year-in and year-out, it remains an unknown, but actuaries can show us the range of costs, if we were to ask them.
Today Mayor Ganim wants to bond again for a pension liability, and we must ask what’s the story because of the Plan A track record above. He says it is a no-brainer because he compares the current 4% borrowing rates for a bond that will last 26-28 years to the absurdly elevated assumed interest earning rate for the MERS (or Plan B pensions). If a pension plan assumes 8% but only earns 5% or less as has happened on average for both City plans and MERS, then EXTRA FUNDS have to be added in future years as demanded by the actuaries. So Ganim has gotten legislative approval to fund over $90 Million to settle the 2015 public safety agreements but still needs City Council approval. Bonding will add over 25 years of interest expense to our City payment schedule of nearly another $90 Million. Has he asked the actuaries to provide the City with a likely required flow of taxpayer dollars if MERS earns an average 4.74$ in the next ten years as it did since 2006?
Why not pay one of the schedules provided by MERS to meet the past service liability created by overtime credit at $7.5 Million annually and see if rising markets over coming years bail out our largesse to public safety? In any case don’t taxpayers deserve to know the price tag of municipal contracts? Three weeks ago I asked several respected observers what the cost of the 2015 negotiation was. There have been no answers, yet.
Did the contracts obligate us to $93 Million (if MERS earns 8% in the average future), to $270 Million (if actuaries lower the interest rate realistically to 7% assumed for the future) or a lot more if the next 10 years call for added City payments above and beyond the suggested Ganim2 bond amounts annually? The Mayor has said we are a poor city to those in Hartford who listened. Why is a poor city providing such amazing and expensive benefits to about 400 employees? Why vote for something we cannot afford in any balanced analysis? Why keep everything so secret? Is it time for OPEN, ACCOUNTABLE, TRANSPARENT and HONEST response? Time will tell.