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VOL. 129 | NO. 74 | Wednesday, April 16, 2014

Wharton Outlines $596 Million Budget Plan

By Bill Dries

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Memphis Mayor A C Wharton Jr. warned Tuesday, April 15, that “half measures” in converting city employees to a defined contributions benefits plan would not restore the city’s financial health and resolve an unfunded pension liability of hundreds of millions of dollars.

He also made formal a proposal to have city government retirees begin paying all of the premium for city-provided health care starting January 1. Other options include Medicare coverage or buying health insurance on the open market for retirees.

But after Wharton made his annual budget address to the council, council chairman Jim Strickland and several other council members immediately voiced concerns that a five year ramp up to bring the city’s annual required pension contribution from $20 million to $100 million is too long to wait. And some on the council said Tuesday they could not vote to cut health care coverage for city retirees.

Wharton proposed a $596 million operating budget for the fiscal year that starts July 1. The proposal is $18 million less than the city’s current operating budget.

He also proposed an $83 million capital budget which is $18 million more than the $65 million cap the city has had on capital spending in recent fiscal years.

Wharton’s budget would keep the city property tax rate stable.

The capital budget includes $23 million for a renovation of the Raleigh Springs Mall as a “town center” that would include relocating city government offices and services to the mall’s current footprint. It also includes demolition of some parts of the existing mall.

Preliminary plans by the city call for relocating the current Old Allen police station and Memphis Police traffic precinct to the mall property as well as a public library branch.

Wharton has already sent a set of ordinances to the council that would switch city government new hires and existing city employees with less than 10 years of services to the 401k-like defined contributions plan. Those vested city employees with 10 years or more on the job would remain in the existing defined benefits plan that Wharton argues is a prime driver behind the city’s financial crisis with all city employees included.

The ordinances would undergo three readings and Wharton urged the council to begin voting on them “as soon as possible.”

The health care plan changes for retirees which were first released to retirees last week drew a packed committee room during the council’s executive session.

Retired Memphis Police detective Mike Lee of the Association of City Retired Employees said the plan would cause “chaos” for retirees who would be paying much more for health insurance.

“This is gong to be their whole check,” he told the council. “This ain’t just numbers anymore. … These are real people.”

Memphis Fire Fighters Association President Thomas Malone indicated a city change of that nature could become part of a federal court lawsuit already pending for several years over the 4.6 percent pay cut city employees took several fiscal years ago.

“This is a contract under Tennessee law,” Malone said of the health benefit election form. “We think we have a contract.”

Wharton said the first $15 million toward an increased annual contribution to the city’s pension liability would come from other changes to health care coverage for existing city employees.

He also noted the “sacrifices” city employees had made in past fiscal years.

“I take no pleasure in the sacrifices city employees and retirees are being asked to make,” Wharton added. “I only propose these changes because I am confident that history will show that these difficult choices were the best way to secure the city’s pension and its financial future.”

In other action Tuesday, the council again delayed action on a resolution calling for $1.5 million in city funding for a reroofing and other renovations of the Southbrook Mall in Whitehaven.

Council member Harold Collins withdrew the resolution after the Wharton administration outlined a $6.5 million plan to convert the mall into a “town center” with city government offices being a major tenant of the revitalized property.

Owners of the mall say they don’t agree with the town center concept and want the $1.5 million for the smaller scale renovations.

The money was originally to come from the city’s capital budget. But city attorneys and bond counsel said the capital funding could not be spent on what would be a private use.

City housing and community development director Robert Lipscomb said his larger plan for the town center would incorporate federal funding that could be used for the new roof and repairs to the heating and air conditioning systems.

Meanwhile, council member Myron Lowery unsuccessfully attempted Tuesday to take back the April 1 council vote to abolish the city’s department of weights and measures.

Lowery moved for reconsideration, saying he wanted a one-year transition period to ensure state government would be prepared to take over the duties of making sure scales in retail stores as well as gas pumps accurately reflect prices by weight or amount.

His move for reconsideration lost on 6-7 vote.

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