Now that the Longboat Key Town Commission majority has demonstrated its willingness to stand firm and not raise the town’s property-tax rate, it may be a logical leap to conclude the commission is ready and has the fortitude to confront and fix the town’s biggest fiscal challenge — the town’s pension plans.
Millions of dollars are at stake for Longboat Key taxpayers. The commissioners should put this off no longer.
As Government Affairs Columnist Sandy Gilbert clearly explained last week on our “op-ed” page, the town’s three pension plans for a variety of reasons are $25.6 million short of having the funds they’ll need to meet future obligations. Longboat taxpayers are responsible for making that up.
That’s a lot of money.
And while Gilbert noted that, thanks to negotiating between the town and the state actuary, taxpayers will be contributing $2.1 million a year over the next 19 years to the pension plans to wipe out that unfunded liability, the fundamental problem still exists: The town continues to operate with three defined-benefit plans. These are the same plans that bankrupted General Motors and Chrysler.
Unless these plans are discontinued, Longboat taxpayers will remain at risk and will continue to see pension costs rise — especially because of the increasing number of town employees who will become vested.
Let’s put this in more perspective. The numbers and obligations are huge for this little town of 7,340 population.
Altogether, as the accompanying box shows, town employees and the 70 former town employees who are vested are owed and have accumulated $45.3 million in future pension monies. And even though taxpayers have been contributing roughly $1 million in cash a year to the pension funds over the past eight years, that amount, combined with the pension funds’ investments and employees’ contributions, have contributed only half of what has been promised.
More context: On top of this obligation, Longboat taxpayers over the next six years will be paying $9.5 million to pay off additional long-term debt. This includes old water-and-sewer bonds; facilities bonds from nearly a decade ago; and the 2005 beach renourishment bonds. And let’s not forget this past spring Longboat voters approved the issuance of up to $27 million more in bonds to cover the cost of replacing and upgrading the town’s aging water and sewer infrastructure.
There’s one more: With Gov. Charlie Crist’s approval of the Port Dolphin natural-gas pipeline in the Gulf of Mexico, the town is now committed to performing another beach renourishment before 2012 to recover white sand that would otherwise be off limits because of the pipeline. Think of this in the neighborhood of another $15 million and $20 million in bonding.
Add it all up, and you have a debt load far heavier than the town has carried in 20 years.
It sounds alarming. And to a degree it is — even though the entire amount ($83 million) would still only be about 1.5% of the town’s total property value.
But here’s the point: As the saying goes, when in a hole, quit digging. Taxpayers are in a hole with the town’s pension plans. Town commissioners should quit digging. End the defined-benefit plans for all future employees and borrow to fund the unfunded liability.
To view a chart on city pensions, click here.
Currently 1 Response
- I agree. This is an issue that is not going to go away and the Commission needs to get serious about dealing with it. I’m not as enthusiastic as the Observer regarding the Commission’s recent decision to adopt the lower mill rate, however, as the additional funds could have been applied to reducing the underfunded liability on a more rapid basis thus allowing for the alternative of a defined contribution plan to be adopted for future employees. The current plan, which is based on an unsustainable annual return of 8% is simply not viable and is likely to result in even larger funding deficits over the next decade as the gap between investment income and promised benefits increases. A plan for transition needs to be developed that will be sustainable financially for the Town and equitable for current and future employees.
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