by Tony Rutherford HuntingtonNews.Net Reporter
Finance Committee Will Consider Wolfe's Dire Measures; All State Municipal Pensions Funds May Face Similar Scenario

HUNTINGTON, WV (HNN) – The legislative fix for the City of Huntington (and other state cities) police and fire pension funds contained a  glaring assumption --- the actuarial data was based on 2002 figures. That’s according to Blair Taylor, executive director of the state Municipal Pension Oversight Board. 

When Huntington elected to close its now “legacy” and “re-amortize,” over 40 years, the contribution projections at the time were not accurate.  As a result, the City of Huntington ---- and other WV cities based on Taylor’s observations --- has a $4.5 million shortfall and other cities in the state likely will see higher contributions due to the updated actuarial figures.

Taylor , who started as the Oversight Board’s first director in January 2011, had delivered the grim actuarial pension news does not pinpoint reasons for the million dollar spreads  other than  converting  to the new systems after the legislature passed the bill in November 2010 and inputing WV actuarial figures ,rather than general one's which had been used since 2002. He stated Huntington "got caught in a double bind. They should be able to budget for increases or decreases in future years." However, "millions of dollars that go into the general revenue budget will continue to be a significant portion of the general revenue budget. But, if you know the growth will be marginal or even decline, you will be able to budget for that."

When asked "what the city could have done to prevent this crisis," Taylor responded emphatically, "That's not my call.  Because of my relative newness to the job and because they were the first to go from alternative [funding] to optional [pension funding] , we may see similar things in some of the other plans. I don't know. I have not seen the studies yet."

Taylor did state that the individuals charged with responsibilities of each of the municipal pension plans in the state "should know how their investments are doing. The municipal pension boards are made up of four active firemen (or four active policemen), the mayor and the custodian of the funds, who by law is the treasurer or finance director. They should know how the finances of the plans are doing on a quarterly basis when their investment manager provides data to them.:

He continued, "If they got great gains, that's good. If they have great losses, that's going to affect the materiality level."

Taylor agreed that the custodians of both the police and fire pension funds should have known that the six percent discount rate [on earnings] was not being achieved under the market conditions of the last few years. In his words, "that's a piece of it, sure."

But, he explained that prior to the oversight board establishment "there was no entity that provided [investment] education to the [pension board] members. It is my intention to provide annual training of all board members statewide within the next three months."

However, that’s only a tiny consolation for Mayor Kim Wolfe who proposed “dire measures” for dire circumstances.

Council had passed a resolution for an across the board ten percent reduction; however, Wolfe and his administration believe that would force layoffs in both the police and fire departments. “This is not a plan that comes easily, but I do not want to layoff police and firefighters and jeopardize the safety of the citizens.”

Raising the current city user fee from $3.00 a week to $5.00 a week beginning November 1 drew immediate negative responses from city council members.

Two council members --- Scott Caserta and Jim Ritter --- both made similar statements: They don’t believe the fee can be used to pay monies into the pension fund.

“I understand there is a hole, but we have to follow the law,” said Caserta, who stressed, ‘We cannot raise the user fee to fund the pension fund.”

The user fee is designated for police and fire personnel and paving.

Jim Ritter joined in the “I don’t think it’s legal “ reaction.

The fee’s legality is critical as the $2 increase would make up about $1.7 million dollars. Municipal Service fee increases would generate about $600,000.

Finance Committee Will Consider Wolfe's Dire Measures; All State Municipal Pensions Funds May Face Similar Scenario

After the council meeting, finance director Steve Williams joined the others telling   HNN, “I don’t think the user fee by ordinance can be used for this.” However, he admitted ,  “Certainly , the ordinance can be changed.”

Williams, one of two at-large council members and an investment banker by profession, said, “I’m disappointed that the administration feels that 53% of this is being funded through tax increases,” Williams explained , noting,  “Revenue increases will have to come.”

Finance Committee Will Consider Wolfe's Dire Measures; All State Municipal Pensions Funds May Face Similar Scenario

But, he has qualms about the user fee.

“This is a problem created in the city. I don’t  think we can ask people from outside the city to come in and be paying for the problems that we have.”  He suggested the expansion of the user fee “stretches the bounds of one’s imagination,” adding, “The user fee pays for streets people from the outside were using and pays for police protection.”

Councilman Jim Insco expressed frustration. Referring to the EPA recommended fine, Insco reacted, “It never ceases to amaze me that again tonight we’re hit with another $156,000 that no one knew about until today.” From a brief overlook of the Briefing Summary, Insco “questioned” some of the ways they get to their numbers, which “I’m sure will be explained in the Finance Committee” meeting.

Williams hopes that the Finance Committee will not take long to make decisions. “My hope is that we will walk out of here tomorrow evening with a plan in place.”