A Business Insider article states, “A generation from now, there may be very few people left that are still receiving pension benefits.” It’s a national reality. Yet some on Addison’s City Council seem to prefer to govern as if we’re still living in the past. Not only are they promoting continuation of a pension, but also providing Cost of Living Allowance (COLA) to those already receiving their pensions.
Funding of an AD HOC COLA for current retirees is one of the critical topics of discussion on the town’s December 13 Council Meeting because the financial impact of this one vote will impact taxpayers well beyond just one year. TMRS (the Texas Municipal Retirement System) took Council members through a 24-page power point presentation at the November 14 Council meeting. However, other than Meier, Wilcox and Hughes, few questions were asked to delve into the complex data of the mechanics of the funding, leaving many residents to question whether the entire council has a full grasp of the impact of their pending decision.
Because facts do matter and because this is such a complex issue, Facts Matter spoke directly with TMRS to clarify exactly how funding 70% of the 2017 AD HOC COLA will impact the Town of Addison (aka—you—the taxpayers). Here are the facts:
- Funds can only be used from the Town’s General Fund—no sales tax or hotel tax funds can be used.
- It will cost the Town of Addison $55,695 in this year’s budget—but that’s not all.
- The same payment of $55,695 is also required each subsequent year for the next 14 years to the tune of $835,425 to fully fund the COLA just for 2017.
- Retirees do not directly receive this money. TRMS puts this money into investments to produce their projected return to pay retirees their COLA.
- TMRS is projecting an actuarial assumed rate on their investment of 6.75%.
- TMRS previously (just last year) projected their return rate to be 7%.
- This COLA would increase the total unfunded liability from $4.5M to $5M.
- If the ROI on TMRS’s investment falls short, Addison taxpayers must come up with the shortage of funds.
- According to TMRS officials, there are 176 people who are retired from Addison and receiving pensions for their years of service as employees of Addison. Some worked as employees in other TMRS funded cities before or after their employment in Addison, thus part of their retirement comes from Addison.
- Additionally, there are 265 “active” employees who currently work for, or have worked for Addison, who are not yet drawing pension benefits.
- The rumor that employees were “promised” a pension and COLA is false. A decision was made years ago that employees would participate in TMRS rather than Social Security. There has never been a promise to fund any COLA increases for retirees.
- Another misunderstanding that needs to be clarified is: The Consumer Price Index used by TMRS to determine COLA is NOT the same CPI used by Social Security for COLAs.
- Social Security recipients received NO COLA in 2016.
- Social Security recipients WILL receive COLA in 2017—however, it will be the smallest in history—0.3%.
Then there are these questions:
Will retiree’s COLAs be paid every year?
How far out will the Council commit the Town to fund COLAs?
Will the Council decide to take TMRS’s alternative of an annual repeating 70% COLA?
If the Council decided to repeat COLA annually, it would cost $24,569,791 over 25 years. That figure equals roughly two-thirds of the Town’s 2016-2017 budget of $35,704,324.
Approving COLA for just 2017 ($55,695 this year, to be repeated for the following 14years)—a total cost of $835,425—would fund one year of starting salaries for approximately 15 police officers or 15 firefighter/paramedics.
Approving COLA for 2017 is not just a $55,695 question! It is a question of committing to spending $835,425 over 15 years, having faith that there will be no decline in Town revenue during any of that period of time and that the economy will remain stable. It is truly kicking the can down the road, intentionally shifting the burden to a future generation to deal with any financial issues that may arise and blindly mortgaging the future.
Addison may not be Dallas nor is its pension plan administered by the same entity. It is however in a similar decision-making period of time. For Addison taxpayers it’s a time to determine whether today’s decisions will be fiscally responsible for Addison’s future or whether you will live with the potential risk of reduced services or higher taxes in order to pay for decisions of the past.
This is not the time for silence. Voice your opinion because this Council votes in less than two weeks.
Photo Courtesy Flickr/Garry Knight
The Facts Matter Website is made possible through the generous donations from Angels of Addison.