1¢ Sales Tax

1¢ Sales Tax
for Police and Fire Pension System

February 3, 2009

On February 3, 2009 citizens of Springfield will consider a new, one-cent sales tax for the sole purpose of funding the Police and Firefighters Pension System. The official language that will appear on the ballot is:

Official Ballot Language

"Shall the City of Springfield impose a sales tax at a rate of one percent solely for the purpose of providing revenues for the Springfield Police and Firefighters Pension System with said tax to sunset upon the earlier of A) Five (5) years from the date of the commencement of collection of this tax or B) the Pension System fund reaching a fully-funded (100%) status as determined by an independent actuarial study conducted for the Pension System Board of Trustees?"

Instructions to voters: If you are in favor of the question, place an "X" in the box opposite "yes." If you are opposed to the question, place an "X" in the box opposite "No."

Additional Elements Proposed to Fund Plan

• The measure is supported by the Police Officer’s & Firefighter’s Retirement System Board of Trustees, the Springfield Police Officers Association and Springfield Firefighters Local 152.

Tax payer be damn we want our pension system funded, no matter what we told you at those earlier meetings. I guess if I were one of them I might feel the same way.

• Latest audit and actuarial information, through October 2008, shows that the Police and Fire Pension System is underfunded by $194 million for its future liability of $295 million.
• The proposed 1-cent sales tax would generate about $40 million a year and would be dedicated exclusively to funding the pension system until it sunsets or the system reaches fully funded status.
• The City of Springfield would increase its annual contribution rate by 1 percent while the tax is in effect, which would account for an additional $240,000 a year from the City’s General Fund. This would be achieved by additional budget reductions.

And hence here is the problem, NO guarantee that this 1% or the 28.88% is going to go into the fund, only the word of city manager Greg Burris. This money has been used for other purposes before so it wouldn't be a first for city to spend it in other areas.

• The City would pledge at least $10 million in revenue from settlements anticipated with telecommunications companies that lost their lawsuit over back taxes owed to the City. This revenue would replace $10 million (in today's dollars) in underfunding by the City during four fiscal years to bring the City’s total contribution commitment up to date according to actuarial recommendations.

Let's see an ordinance voted on and approved for this before the determination is made. I believe council needs to "man up" NOW just in case a settlement is reached prior to the new council being seated.

• Current Police and Fire employees who are part of the original system (active employees hired before July 1, 2006) would increase their pension contribution by an amount to be recommended by the plan’s actuary for 2010 and beyond.

Mandated

• A recommendation is forthcoming on whether new Police and Fire employees should be placed into the statewide LAGERS pension system that covers all other City employees. If that were to occur, the City could close the locally self-funded pension plan to new employees and eventually negate any further future liability for the pension plan.

Except we could be dealing with the same problems in the LAGERS system as well. Wait till the people find out this pension system is funded 100% by the people.

City Manager Greg Burris offers an invitation to community and civic groups to make the sales tax presentation and answer their questions. Any group interested in scheduling a presentation can call 417-864-1006 or e-mail: city@springfieldmo.gov.

For more information, contact: City Manager Greg Burris, 864-1001; Deputy City Manager and Pension Board Chair Evelyn Honea, 864-1001; David Hall, Assistant Fire Chief and Pension Board member, 864-1530; Police Chief Lynn Rowe, 864-1782; or Louise Whall, Director of Public Information, 864-1010.

Burris On Tackling the Pension Issue

I just recently sent off an e-mail inviting Mr. Burris to address the group.

06OCT2008

Burris On Tackling the Pension Issue

City Manager Greg Burris wrote an op-ed piece for the Sunday News-Leader this week, an we're re-printing the article below. Mr. Burris will soon begin to "hit the road" with a presentation about the how and why the Police/Fire pension fund got into trouble and how he will propose turning the situation around. Burris wants to make his case in person whenever possible, and so he's asking community groups who would like to hear more about the situation to contact him. The contact info is in the piece below:

It's been a busy first few weeks in my new position as city manager, and I wanted to take this opportunity to let the community know what we're working on at the city.

First, I want to thank all the people, including our employees, who've been so welcoming and encouraging as I've launched into this new role. It's great to know how many people in the community are rooting for the city's success in both the challenges and aspirations we have for our community.

As promised, I've plunged immediately into working with all the various stakeholders to develop a solution for the underfunded police/fire pension system. The fact that the nation's financial markets fell into crisis during these past few weeks underscores both the necessity and urgency of dealing with this situation as quickly as possible.

I know that no solution will be successful unless we have support from all the constituencies immediately affected by it -- our Public Safety employees and their labor groups, all other city employees, the City Council -- before we ask for your support for a unified solution.

Before too much longer, we'll hit the road with a presentation to explain as succinctly as possible how we got to where we are; what needs to happen to turn the system around; and how we'll propose going about it. If you belong to a civic group, club, church organization or similar group and would like to schedule a presentation in the coming weeks, please call Kathy Hardt in the City Manager's Office at 864-1006 or send an e-mail to: city@springfieldmo.gov.

One of the main issues that remains to be resolved for a long-term solution is how to provide secure pension benefits to new police and fire employees. There are advantages and disadvantages to consider in maintaining the current police-fire pension system, which is relatively small and self-funded, versus moving new employees into the statewide retirement system called LAGERS that covers all of our other employees. To reach a conclusion on that, I've asked our Deputy City Manager Evelyn Honea to chair a group studying that very specific issue and make its recommendation.

A second new task force chaired by Human Resources Director Sheila Maerz will review and update the cities by which Springfield can benchmark itself on measures ranging from employee pay and productivity to the quality of services and amenities important to our community. We think we can learn from the best practices in relevant cities and set standards to which we will aspire.

Many of these types of priorities are appropriately set by the City Council members whom you elect to represent you. Our City Council members are very interested in discussing and updating their priorities and, as promised, we've started working on that. At a recent City Council lunch, we started off with an initial "blue-sky" brainstorming process to bring out all of the issues they'd like to tackle. They covered the gamut of infrastructure needs, defining our core services, making sure our future is sustainable through energy and resource conservation, streamlining our development process, preserving our neighborhoods and more.

Knowing that the resources of both City Council and staff are finite, we'll go back to that big list again on Oct. 28 to start honing down to a set of top priorities that we can focus on accomplishing within three to five years. This long-term strategic plan will provide a template for our budget process and resource allocation along with the core services that remain our strongest commitment.

It's been a busy start, as I knew it would be. I plan to keep you updated on a regular basis and encourage residents to watch for future postings on our CityConnect site at www.springfieldmo.gov. If you have particular questions or topics, you can drop us an e-mail on the Web site as well. I look forward to meeting many more of you in person, as well, at public meetings and events. Thank you again for your warm welcome.

Greg Burris - City Manager for Springfield.

posted by Mike Brothers, Public Information

Solutions to the police fire pension plan

If Mr. Burris truly believes that the citizenry should also have its say into the running of the city then he should take the following suggestions to heart and see how they can be implemented or at least explain why these suggestions are a bad idea.

Dear Mayor and Council Members:

I have written you previously expressing my concern about the ongoing daily cost of the underfunded Police and Fire Pension. This amount is about $ 26,000 per day, a total of about $ 9,750,000 per year after year for as long as this condition exists. The citizen taxpayers of Springfield cannot afford this unnecessary, wasteful situation.

The adversarial relationship that exists between City Council/Management and the Springfield Police Officers Association and the Firefighters Union is unnecessary and unacceptable. The commitments made by the citizens of Springfield to the public safety employees of this city need to be respected by City Council and the City Manager.

Changes made to the Police and Fire Pension Plan by Ordinance #5546 in May, 2006, which created a two-tier plan with reduced benefits for employees hired after June 1, 2006, should be repealed. These changes have created inequity and conflict between veteran employees and new hires, employee turnover, and as a result, increased training costs.

After reviewing a great volume of financial information, attending mutiple meetings with Council, pension board members, and city employee groups, I have come to the conclusion that we must take permanent, definitive action to solve the underfunded status of the Fire and Police Pension Fund. I believe that any proposal that includes providing funding to resolve this problem by even a temporary, dedicated sales tax must be carefully considered. The current economic situation with increasing inflation caused by rising fuel and food prices makes this a dangerous time in which to ask the citizens of Springfield to pay higher taxes. However, I also believe that if all the parties involved are willing to make a few concessions toward a clearly defined approach, then communicate honestly and effectively with the citizens of Springfield, that the citizens will support a permanent solution.

I believe that the following components will accomplish a permanent, long-term solution:

1) A 1% Sales tax proposal should be placed before voters. The proceeds of this tax should be placed directly into the Pension Fund immediately upon receipt from the State of Missouri. This dedicated sales tax should be for a period not to exceed three years.

2) Suspend the collection of the 1/4% Capital Improvement and 1/4% Parks and Recreation Sales Taxes during the three year period when the Pension Fund sales tax is in effect. This will reduce the impact on the taxpayers of Springfield.

3) Repeal Ordinance # 5546 which created the two-tier benefit plan.

4) The City of Springfield must guarantee that the full $ 6,500,000 of underpayments over the last three years will be paid before the 1% Sales Tax becomes effective.

5) The employer contributions to the plan (on a permanent basis) will be equal to or greater than the employee contributions, and will be made in a timely manner corresponding to the normal Federal, FICA, and State Witholding Tax deposit requirements.

6) The lump sum return of investment provisions of the plan will be modified to provide for the return of investment over a period of five to ten years dependent upon the age or circumstances of the recipient.

7) No increases in the benefits provided by the plan will be allowed if the plan is less than 100% funded.

The budget cuts required of all city departments in order to fund the $ 5,200,000 additional contribution to the Police and Fire Pension Fund is only a band-aid on a gapping wound. The changes to the plan made in 2006 were ill advised and not a permanent solution. We need to get the wound stitched closed so that true healing can begin.

Let's bring all involved parties together to achieve a permanent solution to this problem and trust the citizens of Springfield to support our efforts with their financial support.

Fred B. Ellison

Springfield, MO

pension/retirement news

Springfield City Council has approved the budget for the fiscal year beginning July 1, 2008. Cuts of about 7% in the budgets of most departments will allow the City to contribute an extra $5,200,000 to the Police and Fire Pension Plan in the 2008-2009 Fiscal Year. This additional contribution is required by a new state law which mandates that pension contributions must meet the fully required amount at least once every five years. The following table shows the contributions that the City of Springfield has made over the last four years:

	Covered	Actuarial	Employer	Net Pension	Accumulated
Year Ending	Payroll	Requirement	Contribution	Obligation	Obligation
06/30/2005	23,866,000	7,318,828	6,795,690	523,138	523,138
Actual		30.67%	28.47%
06/30/2006	23,747,000	9,850,865	6,831,133	3,019,732	3,542,870
Actual		41.48%	28.77%
06/30/2007	23,864,000	10,345,517	7,388,016	2,957,501	6,500,371
Actual		43.35%	30.96%
06/30/2008	23,500,000	10,751,250	7,775,050	2,976,200	9,476,571
Projected		45.75%	33.09%

As of June 30, 2008, the City of Springfield will have failed to pay $ 9.5 million in required contributions over the last four years, and is faced with having the State of Missouri withhold a portion of its sales tax remittances if the full contribution is not made during the fiscal year beginning July 1st. (The extra $5,200,000 does not cover the total amount of short payments over the last 4 years.)

The retirement benefits that are paid (currently about $15,000,000 per year) come from:

1) Police and Fire Employee Contributions (11% of payroll)

2) City of Springfield (Employer) Contributions (29% of payroll)

3) Investment Income (interest, dividends, capital gains)

4) Liquidation of pension fund assets (if required)

Last year, employee and employer contributions were about $10,000,000 and investment income was about $14,000,000. (The Net Assets of the Plan increased about $9,000,000 in the year ended 06/30/2007.) However, the investment results this year are very poor and may actually result in a net loss for the year and require that assets be liquidated to meet benefit payments.

The obvious fact is that the current budget cuts and extra contribution are only half a band-aid on a much more serious problem. The Police and Fire Pension Plan has a liability of about $280,000,000 for retirement benefits and assets of less than $140,000,000. The funded ratio of the plan as of 06/30/2008 will be less than 50%. The result of this shortage in the Net Assets is that Investment Income is being lost every year that should be available to pay benefits and reduce the required contributions of both the employer (City of Springfield – citizen/taxpayers) and the employees (policemen and firemen).

How much Investment Income is being lost by City Council’s lack of action? Lets do the math.

Under Funded Amount $ 130,000,000

Assumed Rate of Return 7.5%

Earnings Lost: Per Year $ 9,750,000

Per Day $ 26,700

Per Minute $18.55

Per Second $ .31

This $9,750,000 could be better used to hire the additional police and fire employees that were cut from the current budget, and reduce or sunset the Capital Improvement (¼%) or Parks Sales Tax (¼%). The effect of this would be to allow the citizens of Springfield to make the choice where their money will be spent.

Since next year’s budget was passed, the under funded status has cost the citizen/taxpayers of Springfield over $750,000 and this amount increases every day that this problem is allowed to exist.

Contact City Council and let them know that the citizen/taxpayers of Springfield demand leadership and a solution to this problem NOW! Don’t wait another second.

Fred B. Ellison

Missouri Liberty Coalition

1315 N. Broadway Avenue

Springfield, MO 65802

P.S. - Please note that this is not an anonymous character assassination, just the facts.