Anniston faces $1 million funding gap for police and fire pension plan
by Paige Rentz
Aug 02, 2013 | 4124 views |  0 comments | 66 66 recommendations | email to a friend | print
Anniston's move last year to shore up a retirement fund for police officers and firefighters may have fallen short, city officials learned Thursday. Meanwhile, shoppers in the city haven't spent as much as expected this year, limiting what Anniston earned from a new sales tax intended to help shore up the fund.

Officials say the fund is in no danger of running out of money any time soon, and no cuts are planned to retirees’ checks. But the city will likely have to pay more than it expected — possibly more than $1 million over the next 14 months — to keep the pension fund from shrinking, and that may limit other projects the city had hoped to pay for with the tax.

Chad Little, who helps oversee the fund, recommended at a meeting of its board Thursday that the city pay $3.1 million into the fund for the current fiscal year. Danny McCullars, the city's finance director and a member of the pension fund board, said the city had only planned to pay $2.7 million.

The board voted Thursday to change the timing of Little’s recommendations so in future years, the city will know its required contribution before the start of the fiscal year rather than halfway through.

Little said the city’s obligation for the fiscal year that begins Oct. 1 will likely be about $3.5 million. As he’s prepared preliminary budget figures, McCullars budgeted $2.7 million for the coming year as well. Together, the shortfall amounts to more than $1 million in additional payments for the city by Sept. 30, 2014.

When the city brokered a fix for the system that shrank the pension checks of future retirees, many officers and firefighters retired because working longer wouldn’t increase their benefits under the new plan. Because the employee contribution is based on percentage of pay, retirement of higher-salary employees means overall that contribution will likely be less and the city’s will go up.

“We expected it, but the effect of it was impossible to predict until things settled down,” McCullars said.

Little said the deficiency has grown to $7.4 million, due mainly to a state law that capped contributions by both employees and the city. The fund, McCullars said, needed higher contributions to keep up, building a deficit over time. The $7.4 million will be divided up into yearly payments of about $800,000 for the city over 15 years. The $3.1 million payment Little recommends should keep the fund on track to recover.

McCullars said the penny sales tax increase passed by the council last year to shore up the fund as well as to provide money for education and economic development was not clearly dedicated to these causes in any specific proportions, making it difficult to determine how to split the projected $4 million in revenue.

The City Council approved a compromise last year that increased contributions and cut benefits for retirees as well as increased the city’s contribution to the plan. The plan was also approved by the state Legislature. Before the compromise was reached last year, the retirement fund was projected to go broke in 2025.

Of the $4 million in sales tax the city expects to collect this fiscal year, $1.7 million was allocated to retirement fund, bringing the city’s total contribution to $2.7 million. The remainder of the new sales tax revenue has not been officially allocated.

“The complicating factor is if more money is needed on top of the $1.7 million, then you cut into these other monies that potentially go into education or economic development,” McCullars said.

The budget for the coming year is tight and how the city proceeds will depend on where these payments fit on the City Council’s priority list, McCullars said. Technically, he added, the city is obligated to make the actuary’s recommended payments by the state law, but politically, he said, it depends on other factors.

“This all boils down to ‘Is this a bill the taxpayers can tote?’” McCullars said. “Or should we be back at the negotiating table trying to find the sweet spot on benefits and city contributions?”

Sgt. Gregg Poole, a firefighter who sits on the board, said as he reads the legislation, the contribution is variable and the city is obligated to make up the difference.

Poole said the board needs “to let the wheels on this thing get going in the right direction ... and make sure it’s doing what it’s supposed to do.”

Staff writer Paige Rentz: 256-235-3564. On Twitter @PRentz_Star.
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