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VOL. 129 | NO. 55 | Thursday, March 20, 2014

City Pension Change Outlined for 2015

By Bill Dries

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The administration of Memphis Mayor A C Wharton Jr. made its formal proposal of a “long-term solution” and change in the city’s pension plan to a 401(k) style plan this week with specific terms Wharton has long said would be included.

The start date of the switch of new hires in city government, as well as current city employees with less than 10 years of services, would not be the fiscal year that begins July 1 but instead the fiscal year after that, which begins July 1, 2015.

The set of three ordinances could each be up for the first of three readings as soon as the April 1 council meeting.

HEDGEPETH

Meanwhile, the administration faced pointed questions from council member Reid Hedgepeth about when it will have a specific proposal for making an annual required contribution of approximately $100 million on the city’s unfunded pension liability.

The city currently contributes $20 million annually. And the annual contribution is a separate problem from the overall unfunded pension liability that the switch to a defined contribution plan as proposed is to deal with.

“We need y’all to come down here and tell us here are the efficiencies, here’s what we can live with, here’s what we can cut,” Hedgepeth said. “We’ve got a $50 million to $70 million problem and we need to start coming up with how we are going to pay for it. We know we need to switch plans. We also need to know where we are going to get this money to start funding this thing.”

Wharton has proposed a ramp-up to a $100 million annual contribution over five fiscal years and the Tennessee legislature is considering a bill that would require all cities and local governments to fully fund the annual contribution in a six-year ramp-up with the next fiscal year starting July 1 being a “grace period.”

Upping the annual contribution over five fiscal years would be about $15 million per fiscal year, much of it diverted from city services of some kind, including fire and police services, which make up the bulk of the city’s labor-intensive budget.

“When is the administration going to start showing us concrete ways how to get some of this money?” Hedgepeth asked.

City Chief Administrative Officer George Little said the first ideas could come as early as April 1 council committee sessions.

“Certainly before the full budget is presented,” he added. “The fullest expression of where we believe as an administration … will of course be in the budget that will be presented on the 15th of April.”

The defined contribution proposal would switch 2,428 of the 6,135 city employees to a 401(k) type plan effective July 1, 2015, in which employees would contribute 8 percent of their income into the plan and the city would match that 8 percent.

Vested city employees with 10 or more years of service and city government retirees remain in the current defined benefits pension plan. For the vested city employees still on the job, they continue to contribute to that plan at the 6 percent rate.

Also Tuesday, the council delayed a vote on third and final reading of the ordinance by council member Lee Harris to expand the city’s prevailing wage standard to city contracts starting at the $50,000 level.

Council member Wanda Halbert called for the delay to the next council meeting to look over last-minute amendments to the ordinance suggested by the City Attorney’s office. Council member Bill Morrison said he also wants to see some figures on how much in additional cost the broader use of the standard will mean for city government.

A fireworks wholesale and distribution center planned development in the Airport Industrial Park was dropped Tuesday before it could be voted on. No word if it might be back some time later. The development had the approval of the Land Use Control Board and the local Office of Planning and Development.

The council also approved accepting $22,376 in private grant funds to hire a consultant to set up a “railroad quiet zone” along the Norfolk Southern railway line that runs from South Memphis to East Memphis along the Poplar Avenue corridor.

The consultant would take a look at the 23 rail crossings and pick three to four contiguous crossings where trains would not be required to sound their horns four times. The waiving of the federal standards would also involve physical changes to the crossings to make them safer.

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