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home : city news : city news May 24, 2016

9/26/2012 2:13:00 PM
After Three Failed Motions, Council Still Undecided On Pension-Fund Contributions
By Mary Helt Gavin


The Sept. 18 City Council saw no clarification about the amount of money the City will contribute to the police and firefighters pension funds in 2013. Not only were various Council members at odds with the State-required amount, $10.38 million, and their own actuary’s recommendation, $14.2 million, but they could not agree among themselves about a level of funding. Collectively, though not by vote, Council members appear to believe, as do the managers of both pension funds, that the State-required amount is too low. How much more than the State-required $10.38 million the City will contribute for 2013 is still a matter for discussion.

Some Council members, including Mayor Elizabeth Tisdahl, said at the Sept. 10 City Council meeting they believed the $14.24 million recommended by the City’s actuary, Tepfer Consulting, was also too low, since it is $690,000 below last year’s level of $14.92 million. The perception, said those who advocated a higher amount than even the actuary recommended, is that "we’re moving backward" or "not moving forward."

Council members sought unsuccessfully to strike a balance between keeping the contribution low enough so as not to cause either a property tax hike or layoffs at the City and high enough to fund the current pension costs and chip away at the unfunded liability – now pegged at $154 million.

During the citizen comment portion of the meeting, Mike Vasilko said the City "should not raise property taxes or fees."

Jim Young, who was a member of the 2008 Mayor’s Blue Ribbon Committee on Pensions, urged Council members to "maintain at least last year’s level of funding. … Do not decrease [the amount]. … Your children and grandchildren will thank you."

Alderman Ann Rainey, 8th Ward, appeared to be focused more on the present than the future, as she said she opposed upping the contribution from the actuary’s recommendation, because that would [likely] result in an increase in the City’s portion of the property tax bill – about 20 percent of the overall tax bill.

Alderman Donald Wilson, 4th Ward, who supported contributing at last year’s level, said, "It’s the right thing to do. It may not necessarily raise taxes." He told Mr. Tepfer, "I don’t question your math. I don’t question your numbers at all. We have a problem. … I’m interested in aggressive pursuit of solving the problem. We’re acting under a framework constructed by the State of Illinois.

"Seven hundred thousand dollars is a lot of money and it’s not a lot of money. We chose to do things throughout the year – money for parking lots, money for façades – more than $700,000," Ald. Wilson said. He made a motion to fund the pensions at last year’s level.

Arthur Tepfer of Tepfer Consulting said, "I have nothing to say. I have made what I consider to be the appropriate assumptions [on mortality, retirement age and rate of return on investments]. I believe these are attainable goals." He said he did not like the State’s methods of computation or their recommendations because "I believe it will become unaffordable to many municipalities. …"

Mr. Tepfer also threw questions to Council members about their concerns over his recommendation. "What is the policy you’re pursuing?" he asked. Asked whether he felt the assumption of a 7-percent rate of return on investments was solid, he asked, "Why aren’t you challenging the mortality rate?"

Alderman Jane Grover, 7th Ward, said, "It’s hard to know what we’re catching up to. … There’s a feeling that since we’re not funding at last year’s level, we’re going backward." She asked City Manager Wally Bobkiewicz, "How hard is it going to be to find $690,000?"

"We continue to work on the budget; $700,000 is $700,000," said Mr. Bobkiewicz. "We can either raise revenues or cut positions. This is a policy decision for the Council, and I’ll prepare the budget accordingly."

Ald. Rainey said, "I think the problem our actuary is having is ‘Why last year’s number?’ Picking a number out of thin air is not focusing on the facts. Harping on the 7 percent is going to cost us more."

Alderman Melissa Wynne, 3rd Ward, said, "I think this pension problem has to be solved by the State."

"This is what I can offer the City," said Mr. Tepfer: "A way to build up reserves for the current police officers and firefighters, a manageable approach to the budget and intergenerational equity – not passing on costs to future generations."

Ald. Wilson’s motion to match last year’s contributions to the police and firefighters pension funds failed, as did a motion to contribute $200,000 more than the actuary’s recommended amount and a motion to contribute the amount recommended by Tepfer Consulting.

Mr. Bobkiewicz said he would prepare some budget scenarios showing the costs to the City of varying levels of contributions, with the actuary’s amount being the base.







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