What is the Current State of Boca Raton’s Public Service Pension Plans?

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For years, Florida’s municipal pension plans have been under scrutiny with numerous conflicting reports of unfunded pension liabilities. These conflicting reports, politicians, and media use chaotic histrionics to incite fear that cities will not generate enough revenue to cover the costs of public service; a complex subject but one of significant interest to the ultimate taxpayer, the resident.

Let’s take our humble little town of Boca Raton and our four pension plans demanding endless revenue streams. Since 2009, our “General Employees” Pension Plan has been graded an “A” due to a solid 95.72% funding as reported by the Leroy Collins Institute (LCI), a Tallahassee-based think tank. Of note, almost all cities general employee plans are well-funded pension plans with grades of an “A.”

The LCI study included pension plans for Florida’s 100 largest cities. Our Police and Fire plans received grades of “C” and were ranked 53rd among the largest cities.  While the General Executives plan received a grade of “D” and at the bottom 30% of the state. Regrettably, the Boca Raton City Commission and City Manager all but ignored this 2011 independent report by taking zero action to remedy these failing pension plans.

Again in 2014, LCI conducted an updated statewide report on pension progress.  The report concluded that while several issues from the 2009 study had been addressed at the collective bargaining table with some improvements being implemented, overall only limited concessions benefitted the public. In fact, the report clearly identified that all cities elected officials would need to earmark a larger share of municipal budgets to cover pension benefits.

The update covered Boca Raton’s plans for fiscal years 2012 and 2010.  Below are the grade changes:

  • General Employees A and A  (no change since 2009)
  • General Executives C and C  (improvement from D)
  • Police and Fire D and D  (downgrade from a C)

The general executives’ pension plan improved from a “D” to a “C” directly attributable to remedying the funding shortfall. No surprise that top Boca Raton executive staff would ensure their pension plans were fully funded (especially now that the City Manager has announced his upcoming retirement).  But staff and city commissioners ignored the police and fire pension issues which resulted in a “D”; a strong example of a management failure.

Finally, in April of 2015 when markets were low and the S&P 500 total return finished the year up a mere 1.38% the police and fire contracts were signed retroactively from October 1, 2014 thru September 30, 2017.  At the time of signing, Mayor Susan Haynie touted the contracts were the “most meaningful pension reform” that has occurred in the history of the city. The contracts were projected to save approximately $93 million in combined pension obligations over the next 30 years.

Contract concessions were:

Police:

  • 2% annual cost of living raise
  • officers must contribute additional 1.2% or 11.5% toward their pensions
  • retirees max at 77% of the average of their last three years pay before retirement

Fire:

  • 2% annual cost of living raise
  • changes to pension plan to ensure plan is actuarially sound
  • all pensions capped at $100,000 and capped at 90% of last three years pay before retirement (previously no caps)

Today’s pension plans invest not only in stocks, but also in uncorrelated assets such as alternative investments and let’s not forgot fixed income in the form of corporate bonds, treasuries, preferred stocks, etc.  Alternative investment and equities comprise 60% of most pension investments.  Fixed-income are low risk-low reward, equities offer more risk and opportunities for more rewards while alternative investments, which includes hedge funds, range from low-risk to high-risk with rates of return fluctuating widely.

Currently, markets are hitting new highs but predicting results based on the “stock” market would not provide any accurate outcome except by fluke. The shift towards riskier pension investments is a precarious practice and local governments would be wise to take the long view when it comes to pension investing.

The bottom line is: Boca Raton police and fire may be sitting on a ticking time bomb and may look for a citizen bailout in the not too distant future.  An accommodating city council will only hasten that time frame. This is not time to play “kick the can.’

In preparing this article for publication, BocaWatch reached out to Councilman Jeremy Rodgers for comment.  Councilman Rodgers, prior to being elected to the City Council held a seat on the City board overseeing pension issues.  As of ‘press time’, Councilman Rodgers has not responded.

BocaWatch invites Councilman Rodgers to provide further insight into the state of the City’s pension plans and the circumstances in place to protect our residents, the ultimate taxpayer.

8 COMMENTS

  1. Rogers was the only member of the council to vote against the pension “reforms” the last time, right? Somehow he was the only person willing to stand up to and stick it to the public sector unions. Hopefully he has the guts to do it again.

  2. It should be known that the Executive Pensions boosted it’s rating on the backs of the General Employee’s pension

  3. Last time I checked, Councilman Rodgers was never on any of the city pension boards. Also, you should use current facts. You are citing 2010 and 2012 numbers (which I assume is to make your argument stronger rather than just being lazy), which were right after the stock market crash. The Boca pensions are much healthier today than they were back then and the Police and Fire Plan, to my knowledge, is just at 80% funded, which is the bar utilized by most to be considered having a healthy funding level. I say stop pandering and get some actual current facts to comment on. Its a public information, so it isnt hard to get.

  4. I am a very long time resident and usually agree with what you all post but you missed the mark with this one!! In today’s environment that police face, its no wonder why departments nationwide are facing major personnel shortages. And, whats your comments? To reduce their pay and pensions even further! That is really dumb. The police force in Boca is also suffering major shortages and is unable to keep up with the added demand in the city thanks to the ridiculous growth of late. Obviously you dont, but I,for one, support the city’s ability to attract and hire enough qualified police to actually keep us safe.

    • “I am a very long time resident and usually agree with what you all post but you missed the mark with this one!! In today’s environment that police face, its no wonder why departments nationwide are facing major personnel shortages.:”

      We agree with you-Government’s number one responsibility is the safety of its citizens. Keeping police and fire pensions funded properly is an excellent way for the City of Boca Raton to retain competitively talented officers.

      ” And, whats your comments? To reduce their pay and pensions even further! That is really dumb. The police force in Boca is also suffering major shortages and is unable to keep up with the added demand in the city thanks to the ridiculous growth of late”

      Our comments are that in 2015, the police and fire contracts were signed with great concessions. In fact, it was reported by Mayor Haynie that these “historic contracts” will yield $93 million in savings over the next 30 years. Concern is two-fold: 1.) what is the strategic plan for the $93 million to benefit the residents of Boca Raton? 2.) how do these significant concessions affect our future recruitment efforts for officers of both police and fire?

      We are trying to make the public aware that these contracts end on September 30, 2017. So, your comments are vital to the discussion since you perceive and understand the threats our public safety officers face everyday. Making sure policy makers consistently fund pension liabilities regardless of market forces is a worthy task if it means ensuring the retention of our officers. Possibly, just knowing the City is making them a financial priority may go a long way with morale allowing them to focus on their core job.

      If you would forward us the data on police officer shortages, we would appreciate it. At the time of the article, the City’s website only listed one “open” police officer position leading us to believe we were competitive in the marketplace.

      Al Zucaro, Publisher

      • With all due respect, your website is reporting on this….so you should do your due diligence. Do a public records request for the info – or simply ask any cop you see how the staffing levels are. Checking the city website for openings is obviously not the way to gather accurate information.

  5. In response to comments made on BocaWatch’s Pension article:

    1) The Boca pensions are much healthier today than they were back then and the Police and Fire Plan, to my knowledge, is just at 80% funded, which is the bar utilized by most to be considered having a healthy funding level:

    Our data research resulted in Leroy Collins Institute being the best statewide source on “report cards” for pension plans. It is beneficial to know how Boca Raton compared to the other 99 large cities included in the study. However, you are correct there was not an updated study conducted on pension liabilities by LCI-even today.

    We also sourced a March 2016 Brookings Economics Study; “Public Pensions in Flux: Can the Federal Government’s Experiences Inform State Responses?” This source identified municipalities may be funded at 75% or 95% but s understanding the type investment vehicles comprising the portfolio, is equally important. As reported by Brookings, most portfolios include a 60% ratio of potentially “high-risk” Alternative Investments as compared to 40% of low risk instruments. Typically, high risk investments do well in market upticks but an economic downturn places undue financial hardships on City Councils to maintain same levels of funding over the long term.

    2) Stop pandering and get some actual current facts to comment on. Its a public information, so it isn’t hard to get:

    We also used January 2013 Yale School of Management, “Can better accounting avert a pension crisis? Agree this is not as current, but relates specifically to the details set by the Governmental Accounting Standards Board (GASB) required pension liabilities to be included municipal financial statements, effective 2015. The GASB required reporting is a great tool but does not legislate policy makers consistently fund pensions regardless of market shifts.

    In reviewing the City’s 2017 CAFR:

    http://bocaraton.granicus.com/MetaViewer.php?view_id=2&clip_id=1355&meta_id=98154

    the current data on pension liabilities is reported as required within the document. No easy way to determine if the estimations are correct or at the 80% bar you reported is the bar utilized by most to be considered a healthy funding level.

    3) Lastly, Boca Raton police and fire contracts are due to expire on September 30, 2017. These contracts reportedly save the City $93 million over the next 30 years. So, how are we utilizing that $93 million of concessions to benefit the residents of Boca Raton? Did these concession have an impact on our officers resigning to get a more competitive deal? Or we keeping the best talent?

    4) Government has one main goal to protect its citizens and hiring the best competitive talent is equally important to taxpayers as well as the men and women who serve our great city.

    Al Zucaro, Publisher

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