That means Anniston’s 165 retired police officers and firefighters will stop receiving pension paychecks and the nearly 180 working employees won’t ever receive retirement money if the city and the fund’s board of trustees can’t figure out how to fix it.
“Otherwise, we have nothing. It’s disheartening,” Anniston police Capt. Richard Smith said.
The problem with the retirement fund, at its most basic level, boils down to simple math: The amount the fund pays out each year exceeds the amount of money coming in, Lt. Wayne Willis, the police representative on the board of trustees, said.
That imbalance has gone on for nearly a decade, according to Smith, a former board member. And that, police officials say, is because of the fund’s faulty set-up.
Anniston’s retirement plan was a good one for the retirees, at least at first. Currently, retirees draw 3 percent of their paychecks for every three years they work; for example, a firefighter who retires after 30 years draws 90 percent of his annual working pay. Anniston police and firefighters don’t pay into Social Security, making the fund their sole source of retirement.
Under the plan, set out in state law, police officers and firefighters contribute from their paychecks 10 percent of the fund’s obligation to retirees, and the city contributes another 10 percent, Willis said. Another 7 percent of the obligation is covered by a city tax on public utilities. It’s expected that returns on the fund’s investments will cover the remaining 73 percent.
Because both benefits and contributions from both the city and employees are defined by law, neither the contributions nor the benefits fluctuate based on the economy.
“The market fluctuates, and there has to be some fluctuation,” Willis said.
And because the dismal economy has kept the retirement fund’s investments from growing like they used to, retirees have been getting paid from the fund’s principal. That means eventually the fund will reach zero, meaning it would eventually have to stop sending pension checks.
What the police call the fund’s inevitable set-up problems weren’t readily apparent, officials within the department said, because, for years, the returns from investing in the stock market made up the difference.
“The investments through the ’90s were fantastic, but when the bubble burst, it left the fund broken,” Willis said.
Anniston City Clerk Alan Atkinson, the fund secretary, said the retirement system took its biggest hit in fiscal year 2008, losing nearly $5 million.
In September 2007, the fund had $27.3 million, Atkinson said. One year later, there was only $22.9 million, the city clerk’s records show.
Currently, Atkinson said, fund levels are right at $21 million.
And by 2025 the fund will be depleted if something isn’t done, or if the stock market doesn’t turn around dramatically, officials said.
“If we don’t change our plan by 2025, the fund will be broke, and there will no longer be any retirement,” Willis said. “It’s serious and it’s scary.”
Police officials place some of the blame of the fund’s impending insolvency squarely on the shoulders of city leaders.
Smith served on the fund’s board of trustees from 1998 until last year. He said the board has been urging City Council members to work with the police and fire departments on approaching the state legislature to adjust the terms of the fund for nearly as long.
“We’ve known about this (the fund’s future depletion) for about 10 years; every year we advised the city we needed to do something, but they wouldn’t listen,” Smith said.
Willis said that since January 2010, when he joined the board, which comprises a police representative, a firefighter representative and a retiree, he’s experienced similar frustrations.
“We’ve invited the city to the table may times, and they just don’t seem interested,” he said. “For this to work, we really all have to come together.”
And that might happen soon, Willis said.
Willis noted that Mayor Gene Robinson, City Manager Don Hoyt and Finance Director Danny McCullars recently attended a work session about the fund. The board has invited City Council members to attend a future one set for either March 21 or March 24.
Council members Ben Little, David Dawson and John Spain all said they are concerned about the fund.
But while Dawson and Spain, a former police officer, said they are willing to sit down with the fund’s board to talk about options, Little said he believes it’s the sole responsibility of the police and fire departments to come up with a solution.
“My suggestion is for them to go to the legislators themselves … or they go back to the citizens to ask the citizens to put a tax on the citizens, but they will have to do that,” Little said. “I, as a city councilman, am not in the mood to vote on a tax to a fund they lost money on.”
Little said he doesn’t know what a work session with the council will do, because “we met with them once before … we don’t have the money to negotiate anything with them.”
Still, Dawson and Spain said they’re willing to attend such a work session.
“Somewhere there has to be a solution that does the least harm to police and fire, the city government, and the citizens of the community,” Spain said in an e-mail statement. “I will be very active to find that best solution for all the stakeholders.”
“I think that’s what we’ve got to do, listen to experts talk about options to keep it solvent and keep it going,” Dawson said.
Willis said the actuary for the fund has helped the police and fire departments figure out two basic options to keep it solvent, both of which will call for compromises from the departments and the city.
The first plan is to transfer the locally-managed fund’s $21 million into the Retirement Systems of Alabama, the state pension fund that all other city employees are on. Buying into the state system for the nearly 345 retired and working police and firefighters would cost the city about $1 million a year for 30 years, Hoyt said.
The police, firefighters and retirees would take about 15 percent cuts in retirement benefits, Willis said.
The second plan involves the city paying $5 million into the fund this year, and a similar figure for a series of following years, while employees would contribute 12 percent to the fund rather than the current 10, Willis said. And the benefits for retirees would be 2.5 percent per three years rather than 3 percent.
“The employees are willing to compromise, pay more, have lower multipliers, whatever it takes to make it work,” Smith said. “We’re willing to take losses or to work at it.”
And Hoyt said that the city should be equally as willing to make the fund work.
“They (the city) should’ve addressed it a decade ago or more … the longer we wait to address it, the harder it is to catch up,” Hoyt said. “But it would behoove the members of the police and fire retirement system to reach a consensus with the council on how to proceed.”
But Little said he doesn’t feel that the fund is the city’s problem.
“You can’t ask the city to replenish what you gambled on,” he said.
But police officials pointed out the retirement fund is mandatory for all officers and firefighters and is part of a benefits-package promise made to those employees when they’re hired.
“When I was hired on here, I was told, ‘here is what you’re going to get,’” Smith said. “The city of Anniston told me that.”
Attempts to reach Councilman Herbert Palmore, Mayor Gene Robinson and Anniston fire Chief Bill Fincher on Tuesday were unsuccessful.
Contact Star Staff Writer Cameron Steele at 256-235-3562.