by Mike Sharkey
Staff Writer
The decision Monday by the City Council Finance Committee to vote against a bill by a 6-3 vote that would have deferred an actuary pension study may cost the City between $10 million and $15 million, money the City doesn’t have right now.
“We have to do the actuary report using a measuring date of Sept. 30, 2009,” said Finance Chair Stephen Joost. “That means we won’t be able to take into account the market gains this year.”
According to Joost, who is the CFO for Firehouse Subs, the market gains of 15 to 20 percent over the past several months won’t be part of the study that helps determine the City’s obligation to its pension plans.
Joost said if those gains were taken into account, it would save the City millions of dollars in the short run.
“I voted yes to defer the bill,” he said, explaining the market’s current volatility was a major factor. “We also won’t get an accurate picture because we are about to dump another 1,500 employees into the pension plan. We will just have to wait for the dust to settle.”
Finance member Bill Bishop voted against the bill. He said doing an annual actuarial study is the right thing to do.
“I do not think this is a good idea. Our standard operating procedure is annual actuarial studies. The experts agree, the market is not going to get a whole lot better in the next couple of years,” said Bishop.
“The consensus is, if we do the study, it will cost us about $10 million to $15 million. Not long ago, we were all chastised for not funding the pension plans in the 1990s when the market was good. If we don’t do it properly now, we are just pushing our heads in the sand. If the market rebounds, we will be that much better off,” he said.
Council Vice President Jack Webb sits on the Rules Committee, which approved the legislation by a 4-3 vote. Webb warned that the only way to pay for the study was to ask the taxpayers to pony up.
“No one is saying ignore the problem. What I am saying is: will the market correct itself? If we don’t defer this, who will support a millage rate increase to pay for the study? I see no harm in making this one exception,” said Webb. “I support the bill and I encourage my colleagues to do so as well.”
Joost said he can easily see both sides of the argument. However, he approached the bill, and the vote, as would a businessman running a struggling, near bankrupt company.
“To be honest, you can argue it both ways,” said Joost. “It’s a judgment call and Bill Bishop made a lot of good points.
“But, let’s put it out there: we are a year away from a financial crisis. Any way you can lessen the burden by getting at least a 15 percent gain in the market is what we should do. If I was running a company that was running out of cash, the first thing I’d do is defer expenses and lessen my liability,” said Joost.
“I’m approaching it as a business decision. The only way we’ll know if the decision is right is in a year or two,” he said.
The bill goes before the full Council Tuesday.
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