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VOL. 128 | NO. 193 | Thursday, October 3, 2013

City Pension Crisis Meets Sanitation Overhaul

By Bill Dries

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The city’s looming pension liability crisis and the proposed solution to it intersected Tuesday, Oct. 1, with a plan to overhaul city sanitation services and, in the process, provide a pension supplement to sanitation workers.

The result was that the Memphis City Council delayed until December a final vote on hiking the monthly city solid waste fee to $25.05, the rate it was at prior to the July 1 start of the new fiscal year.

The council’s consensus to delay the vote came from different viewpoints and different motivations.

Council member Janis Fullilove wanted the pension supplement added to the final vote on the ordinance; council member Harold Collins didn’t want the link.

“I would prefer that it all be disconnected,” Collins said. “I don’t believe we ought to be voting for a fee increase on taxpayers when it triggers so many things.”

Still others on the council questioned whether a rate hike ordinance could legally include a pension supplement.

And that didn’t even take into account the council’s ongoing argument about whether the supplement is or is not a pension plan. Beyond that argument is the political heat that council members are already taking from other city employees who are questioning why they wouldn’t get such a supplement.

Meanwhile, Memphis Mayor A C Wharton Jr.’s administration insists the supplement is a separate issue from the fee hike but that the hike is a first step toward the supplement.

The fee would fund the purchase of new vehicles for the sanitation department to replace vehicles that are in some cases 17 and 18 years old. It would also go toward making the first of several purchases of new garbage carts.

With those two purchases, sanitation services would move to add 100 stops per garbage route per day, a plan worked out in an agreement between the administration and the American Federation of State, County and Municipal Employees, the union representing sanitation workers.

“The rates are for the equipment and the efficiencies … basically to modernize the operation. That should yield savings,” city Chief Administrative Officer George Little said.

The savings from what Little termed the “sweat equity” of the workers would fund the pension supplement; if the savings don’t amount to enough for the supplement, capped at $1,000 a month, then the city would not be liable for the money.

However, some on the council say that politically the city would have a hard time walking away and not finding the money in some way to make good on the obligation, even if it is not legally bound.

“You don’t know what you’re getting when you’re asking the citizens to pay more.”

– Shea Flinn, City Council member

Council member Shea Flinn called the solid waste fee ordinance a “Rorschach test.”

“You don’t know what you’re getting when you’re asking the citizens to pay more,” he said. “The idea that you can delink these just because of the legal designation – to the workers that have been paying into the pension system and aren’t getting the supplemental retirement package, that’s not going to fly with them. … That’s going to create problems with the big pension issue we’re having.”

The big pension issue is the concern by Tennessee comptroller Justin Wilson about the city paying a dropping percentage of just less than three-quarters of its pension liability on an annual basis since 2009. Wilson’s office could order the city to take certain actions, and there are rumors that there may be state legislation next year mandating such actions.

The administration’s report by Pricewaterhouse Coopers puts the annual fix for that unfunded liability at an additional $60 million to $80 million a year. That’s money that has to come from some part of the city budget in some form, meaning a sea change in budget priorities and possibly changes to the city’s pension plan for current employees – vested or unvested.

The city’s municipal unions are reviewing the numbers and assumptions, a process that will probably take a month. Wharton’s administration will wait on the review before making its proposal to the council.

“My assumption is we are months away from that point,” said council budget committee chairman Jim Strickland.

The council also got its first look Tuesday in committee at bond issuance resolutions up for a vote at the Oct. 15 council session that would issue $225 million refunding bonds to restructure the city’s debt on earlier general obligation bonds.

The action is not the larger debt restructuring outlined by Wharton earlier this year and is also mentioned in the state comptroller’s report critical of city finances.

But Strickland said it is still significant because it would push more debt into future years and doesn’t have the savings the larger restructuring has in it.

“I want to know what it does to our interest rate and what it does to our total debt,” he said. “They told me that the debt would not increase.”

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