The Longboat Key Town Commission is so concerned with its growing pension problem that it will meet twice a month to discuss the problem until a decision is made to stop the bleeding of the plans’ unfunded liability.
At a special pension workshop Monday, Feb. 7, at Town Hall, the commission heard from its pension attorney, an actuary consultant and residents on how the town’s pension problems should be solved.
The problems have caused town taxpayers’ costs to rise from $830,000 in 2005 to $2.7 million in 2011, for a 225% increase (see box at right).
Unfunded liabilities in all three pension plans have risen from $10.5 million in 2003 to $26.3 million in 2009, for a 150% increase.
And the rising costs aren’t over. Town pension attorney James Linn told the commission that town pension contributions are expected to increase each year for the next three to four years.
“Most governments are facing the same type of challenge, which is the unfunded liabilities that are significantly larger than the normal cost in your three plans,” Linn said.
Three options Linn believes the town has available are closing, freezing or terminating the plans.
Although almost two-dozen Florida cities have closed general employee plans and set up defined contributions for new hires in the last couple of years, Linn said it’s too soon to tell whether those decisions are going to save any money in the near future.
Linn also warned that a hasty decision might not be in the town’s best interest, because the Legislature will most likely be reviewing changes to the Florida Retirement System to save money. The town has the option of entering that system for future employees or creating a defined-contribution plan for them if it terminates its plans.
Other ways to save money are increasing employee contributions to any plan and reducing benefits for new employees.
“But, no matter what you do, you won’t achieve a significant cost-savings until new employees are in the new plan,” Linn said.
Linn also warned that any future pension changes have to be collectively bargained with the police and fire unions. The general employees don’t currently have a union.
No matter what the town decides to do, it’s responsible for funding the current plans for current employees.
“It’s not necessarily a quick process,” Linn said. “Pension plans are long-term negotiations.”
Longboat Key Public Interest Committee Pension Committee Co-Chairman Dick Antoine also made a presentation to the commission, explaining that a group of five residents has been investigating the town’s three pension places since November.
“We understand the town has legal obligations to fund the pension plans for current employees,” Antoine said. “But the path we believe we are on is very concerning.
“We estimate the $2.7 million responsibility to taxpayers today will increase to $4 million to $6 million per year going forward to pay liabilities,” Antoine said. “The bottom line is we are heading toward a financial crisis and town employees and taxpayers face difficult situations going forward.”
Antoine stressed the need to make a decision as soon as possible.
“Every year we wait, this hole gets deeper,” Antoine said.
Committee member Larry Linhart urged the town to get out of the pension business altogether.
“Benefits are unaffordable and unpredictable, therefore the town should transition to defined contribution plans,” Linhart said. “We don’t believe the town belongs in the pension business, because it’s too expensive and too complicated.”
Commissioner David Brenner urged the commission to consider forming a working group of three commissioners to discuss future recommendations for the plan.
But Commissioner Robert Siekmann received consensus for the entire commission to review the pension plans at least twice a month moving forward.
The commission agreed to meet again at 3 p.m. Tuesday, Feb. 22, at Town Hall to discuss the pension issue.
“We all need to be involved with this all the time,” Siekmann said.
Total increase 225%
Currently 2 Responses
- The solution is not difficult. Take the step and freeze the DB pension (give employees 1+ yr notice of the pending change). Get it reflected in the next collective agreement with police and fire (for all current and future employees). The general employees don't have a union so just give them 1 yr notice of the pending change. Then require employee contributions (eg. min 3%, max 8%) that will be matched dollar for dollar by the town. The amt above 8% are amts the town could use to pay towards the DB unfunded liability.
As far as finding out 'who is responsible for this mess' - not sure what that will accomplish (other than years of legal wrangling if you want to try to sue - and probably won't be successful anyway). Just move on and get it done.
Meeting once every 2 weeks seems like such a waste of everyone's time. Pension is long term, what is going to change by meeting so often in the short term.
- When the Union's forensic accounting procedure is completed I am sure we will hear an earful on who is responsible for this mess.
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