UPDATE: Mayor Bill Finch issued a statement Thursday to “fully fund obligations for Pension Plan A” for uniformed services. The mayor’s primary opponents have criticized him for deferring payments while questioning an assortment of administration spending practices. The mayor says he’s offering a long-term solution without raising taxes, and adds a reminder that city pension investments sagged on a gamble by former Mayor Joe Ganim. This is one of those issues that requires an accountant or actuary. The Connecticut Post take on this: www.ctpost.com/local/article/Finch-has-new-plan-to-delay-pension-plan-1407536.php.
Joel “Speedy” Gonzalez who served with Finch on the City Council says he’s offended by Finch’s criticism of former Mayor Joe Ganim’s pension investment gamble. Writes Speedy: “Finch seems to have forgotten that he not only voted in favor of just about all of Joe Ganim’s proposals and projects, but that he was the Chairman of Contracts and Appointments Committee during the Pension negotiations. John Stafstrom was one of the key advisers for Ganim and the council during that period. I recall Councilmen Bill Finch voting (with no questions or objections) in favor of all matters related to Pensions and bonding alike.”
Speedy says if Ganim gets into the mayoral mix he may support him. From Finch:
Comprehensive City Pension Payment Plan to be included in budget implementer With Support of State OPM and State Treasurer
The state Office of Policy and Management and the State Treasurer are supporting the City of Bridgeport’s pension payment plan which offers a tiered approach to fully fund obligations for Pension Plan A.
This comprehensive legislative proposal calls for accelerated payments beginning in FY2011-2012 with an increased payment of $7 million, to be re-calculated thereafter using actuarial methods and assumptions based on Actuarial Standards of Practice, and a level percent amortization of the unfunded actuarial accrued liability using a 5% growth rate.
“This plan offers a long-term solution and extends the life of the fund through its conclusion without causing extreme burden to taxpayers at a time that we can least afford it,” said Mayor Finch. The plan we have developed is a fiscally responsible and comprehensive approach to addressing the challenges of fully funding Pension Plan A. I would like to personally thank Gov. Dannel P. Malloy, State Treasurer Denise L. Nappier, OPM Secretary Ben Barnes, OPM and Treasury staff, and our state delegation led by Rep. Andres Ayala for all of their hard work on this important issue for Bridgeport residents and our retirees.”
Pension Plan A covers only police officers and firefighters who were employees of the City on or before October 15, 1981. The plan offered retirement and disability benefits, including escalating annual payment benefits based on the pay scale of current police officers and firefighters, and a 3-percent annual COLA. Pension Plan A was closed in 1981 in an effort to reduce future pension costs. As of July 2010, there were 612 retired and disabled participants in pay status, 254 beneficiaries and 33 active contributing participants.
In 2000, under the Ganim administration, the City received a loan for 30 years by selling $350 million of pension deficit funding bonds to partially fund the Pension Plan A liability. As a result of the collapse of the “tech bubble” and recently, the securities markets, Pension Plan A’s market value plummeted while its liabilities remained substantially unchanged. Over the last two years, however, Pension Plan A’s market value has risen from $148 million to $164.7 million as a result of favorable investment returns.
The City was granted a waiver to pay its obligation in fiscal years ending June 30, 2009, 2010 and 2011. In 2009, under the terms of the waiver the City was not required to pay more than $6 million, but contributed $6.2 million to the fund. In 2010, the City contributed $4.7 million satisfying its required minimum $4 million contribution. For fiscal year ending June 30, 2011, the City is again required to pay at least $4 million, but will be contributing $5 million.
As the CT Post earlier reported, “The issue has been lingering a dozen years, back to when Mayor Joseph P. Ganim gambled on selling bonds and making profits in the stock market, which fell a couple times before finally tanking precipitously in 2008, costing the city half of a $350 million investment. In 2009, legislation that would allow the city to delay further contributions for two years failed in the last days of the General Assembly, but it was added to the state budget approved in early September after a summer of partisan wrangling.”
The City has two other major, active pension plans, which cover police officers and firefighters hired after October 1981. The Police Pension Plan B is managed by UBS, and the Firefighters Pension Plan B is managed by the Fire Board. Both plans are independent of Pension Plan A and each other, and are performing well due to the fact that they are open plans and have active participant plan contributions and few retirees.
Most other municipal employees participate in the state MERF pension fund. The City and employees contribute to this fund on a quarterly basis.
Below is the legislative language as submitted:
Sec. ___. (NEW) (Effective July 1, 2011) (a) Notwithstanding the provisions of section 7-374c of the general statutes, the City of Bridgeport, having previously issued pension deficit funding bonds pursuant to section 7-374c of the general statutes, shall not be obligated to make any appropriation to fund, or make any contribution to, any pension plan funded with the proceeds of such bonds, unless otherwise required pursuant to the provisions of subsection (b) of this section.
(b) The City of Bridgeport shall make a minimum required contribution (1) of seven million dollars to such pension plan for the fiscal year ending June 30, 2012, and (2) for each subsequent fiscal year, a contribution to such pension plan as follows: (i) at the beginning of each fiscal year, the City of Bridgeport’s actuary will determine the unfunded actuarial accrued liability for such pension plan using actuarial methods and assumptions based on Actuarial Standards of Practice, and a level percent amortization of the unfunded actuarial accrued liability using a 5% growth rate; (ii) the amortization period will be twenty-four years for the fiscal year ending June 30, 2013 and will decline by one year annually for each subsequent fiscal year; and (iii) the amount of contribution will be recalculated each fiscal year, so that any gains and losses experienced by such pension plan are taken into account in the determination of unfunded actuarial accrued liability for a particular fiscal year and are amortized over the remaining period.