$250M In Borrowing Pitched For Pensions

Thomas Breen photoThe Harp Administration pitched alders on granting permission to borrow up to $250 million this coming fiscal year to help shore up an underfunded city employee pension fund that is struggling to keep up with spiraling unfunded liabilities.

City finance officials argued the net benefits of a one-time cash infusion for the pension fund will far outweigh the costs of adding to the city’s current debt load.

That was one key area of discussion Monday night during the first public hearing about the mayor’s proposed $547 million operating budget and $79 million capital budget for the fiscal year that starts July 1.

The nearly three-hour Board of Alders Finance Committee meeting was held in the aldermanic chambers on the second floor of City Hall.

The hearing, which brought out around 50 alders, city staffers and members of the public, included a dozen public testimonials expressing concern about a budget that proposes to raise taxes by 11 percent, add a net of 11 new municipal staff positions, and increase the Board of Ed’s budget by $5 million.

Click here to read more about the mayor’s proposed budget, and click here to read a long list of citizen concerns, many of which were expressed on Tuesday night.

“Are you joking?” local philanthropist Wendy Hamilton asked about the proposed tax increase during her 10-minute public testimony, echoing a sentiment she expressed at a recent state Department of Transportation hearing about proposed bus fare increases. “Or are you on drugs?”

New Haven residents and budget watchdogs Gary Doyens, Angela Hatley, Ken Joyner, and others each expressed incredulity at the prospect of an increase in property taxes without what they called an adequate appraisal of which city services could be pared back or put on hold.

“Turn this thing down,” Doyens told the alders. “Go back to square one.” 

The proposed budget provision that received the most sustained attention from the alders and the public at the hearing was not the tax increase, but rather Appropriating Ordinance #5.

Described on the 309th page of the budget, the proposed ordinance allows the city to issue up to $250 million in pension obligation bonds next fiscal year to help pay down some of the unfunded liabilities in the City Employee Retirement Fund (CERF).

CERF, along with the Police & Fire Pension Fund (P&F), is one of two defined pension plans that the city pays into each year to cover retirement benefits for city employees. The P&F covers pensions for public safety personnel like police and firefighters; CERF covers pensions for all other unionized city employees.

According to Acting Budget Director Michael Gormany and City Controller Daryl Jones, CERF and P&F are each currently funded at around 40 percent.

According to a June 2016 valuation, CERF had unfunded liabilities of around $306 million and P&F unfunded liabilities of around $398 million.

CERF and P&F were each funded at 60.6 percent in June 2008. That number has decreased precipitously over the past decade as the city has struggled to deposit, invest and earn enough money to keep up with the ever-increasing pool of retirees and beneficiaries.

Jones said that 200 employees are currently eligible for retirement, having worked for the city for 30 or more years. He said another 300 city employees are eligible for retirement through the Rule of 80, which allows one to retire if his or her age and years of service add up to more than 80.

In an attempt to keep the pension funds above water, the new proposed budget calls for the city to invest $21.9 million in CERF and $34.6 million in P&F. Those recommendations are exactly the same as the amounts paid by the city into the pension funds last year.

Looking back just five years, however, year-over-year payments into the two funds are far from flat. Since 2012, annual city payments into CERF have increased by over $5 million and annual city payments into P&F have increased by over $11 million.

During Monday night’s hearing, Gormany and Jones explained that the proposed ordinance allows the city to borrow up to $250 million in pension obligation funds. That money would go directly into CERF, bringing its funding level from around 40 percent up to 85 percent.

They said that this money would go only towards CERF and not to P&F, since the amount required to bring both funds up to around 85 percent would require borrowing half a billion dollars. They considered that too much.

Gormany and Jones said that borrowing money to fund CERF up to 85 percent would help reduce the amount of money that the city has to pay into the pension fund each year.

These annual payments to the pension funds are called ARCs, or annual required contributions. Every two years, the city’s actuaries at the accounting firm Hooker & Holcombe determine how much money the city should invest in its retirement funds by looking at a variety of factors, such as the current amount of money in the pension, the city’s payroll, the number of employees eligible for retirement, and estimated life expectancy.

Gormany and Jones said that there are several beneficial knock-on effects to bumping up CERF’s funding level to 85 percent.

The first is that actuaries and rating agencies would view the fund, and thereby the city, more favorably, recognizing that the city would have significant cash reserves on hand to help cover the costs of current and future pension payouts even in the face of a few off years of lackluster returns on investment. They said that the new funding level would meet the definition of “fully funded,” which actuaries define as 75 percent or higher. 

They also said that the committee that oversees the investment and distribution of CERF funds would have greater flexibility to put more money into alternative investments like private real estate and private debt. Jones said that these types of alternative investments often require longer-term commitments, where the city would not be able to move its money for eight or nine or ten years. But, after that sustained period, Jones said, the city would be looking at returns on investment that are much better than what is possible with a shorter-term fund.

Gormany and Jones said that a higher funding level, more cash on hand, and the ability to make long-term investments would all encourage the city’s actuaries and pension fund committee to set the recommended ARC payments significantly lower than the current rate of $21 million per year. They said that that number would drop to $19 million per year immediately, and that using those savings to help further pay down CERF’s unfunded liabilities would only drive the ARC payments down further.

The risk, they noted, is that borrowing money means incurring more debt.

Gormany and Jones said that borrowing the money would be worthwhile only if the sum of the increased debt service and the new annual ARC payments is less than the current ARC payments.

“I won’t pull that trigger unless we’re below that amount,” Jones said.

Gormany and Jones said that they will not know for sure just how much that sum of debt service and new ARC payments will be until they consult further with actuaries and the board that manages the pension funds.

But, they said, based on the conversations they have had, that equation will likely work out in their favor. They said that borrowing the money would add another line item to the $67 million in debt service that the city already pays each year on money bonded for its capital projects.

This proposal would simply shift some of the pension fund costs from the ARC payments line item in the general fund budget to the debt service line item in the capital fund budget. This shift would hopefully drive down the ARC payments further and further over time as the city sees greater returns on investment and a larger store of capital on hand for the pension fund.

“This is the first I’ve heard about borrowing $250 million to shore up our pension fund,” watchdog Gary Doyens said during his public testimony. He said that the volatility in the stock market meant that the city should not be so confident that it would be able to increase its returns on investment simply by putting more money into the market.

“How can you afford to supply $250 million that they can go out and bond for,” Ken Joyner asked, “when your bond debt now is over $3 billion?”

After the last of the public testimonies, the alders had a chance to express their own skepticism with the proposal to Gormany and Jones.

“This seems like a lot of money to bond,” East Rock Alder Anna Festa said. “I mean, a lot.” She asked just how much money Gormany and Jones were actually proposing that the city borrow, considering that the ordinance set $250 million as a cap, not as a requirement.

Jones said that he is not yet sure, that he would have to work that out with actuaries when the appropriate time came to issue bonds. But, he said, there is precedent for the city bonding for well over $100 million.

“We have to see some numbers and understand the advice of our financial advisers,” Westville Alder Adam Marchand said. “Borrowing that large sum of money would require us as a board to have extreme confidence in the wisdom of that plan, which I am not yet convinced of. But I am willing to be convinced.”

He also said that he is wary of the proposed budget’s claims that various cost-saving initiatives allow the city to flat fund medical benefits in comparison to last year. He was equally incredulous of the city’s expectations that it would receive a $6.1 million increase in voluntary contributions from partners like Yale University and Yale-New Haven Hospital, and that it would come to an agreement with city labor unions to achieve $3.6 million in savings.

“It seems like you have some pretty high bars to hit between now and the April 19 meeting,” he said in reference to the upcoming hearing in which Jones and Gormany will come back before the Finance Committee to answer questions about specific line items in their departments’ budgets.

“There are some pretty bold features to this budget both on the revenue and expenditure side,” he continued. “This body would have to make a recommendation to the full board based in confidence, and having facts, and having faith, more than faith, that it will work. At this point, we don’t know.”

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posted by: robn on March 13, 2018  8:30am

The municipal unions are complicit. They have always had a representative on the pension board which has historically overestimated returns and been complacent about annual underfunding. This is while capturing seats in the state legislature and city BOA to prevent the city from declaring bankruptcy and hoping to soak taxpayers with a scheme like this one.. Its a gigantic game of chicken.

posted by: Peter99 on March 13, 2018  9:09am

First off defined pension plans are a thing of the past. I would immediately go to 401k plans for every newly hired employee in the city. I understand that labor contracts would need to be negotiated as they become due, but that could and should be the city policy. All existing employees would get to retire under the existing plans now in effect by contract, but the bleeding needs to stop ASAP. The granting of defined pension plans to city employees is not sustainable. If some large benefactor like Yale wants to bail the city out that would be great, but the taxpayers are breaking under the burden they are being asked to carry.

posted by: Kevin McCarthy on March 13, 2018  9:10am

This is analogous to refinancing a mortgage.  Sometimes refinancing makes fiscal sense, sometimes it doesn’t. If the BOA authorizes refinancing, it should specify the parameters under which it is implemented.  The BOA might also want to speak directly with bond analysts to get their take.

posted by: OutofTown on March 13, 2018  9:26am

Make the pensions “defined contribution” and not “defined benefit”.  If Connecticut cities don’t stop offering employee benefits that are not supported by tax revenues, and are far superior than private practice, it will not take long before “bankruptcy” enters the conversation.  It worked for General Motors.  You can’t pay what you cannot afford, and bonding does not change that.  Why do citizens let those who stand to benefit make financial decisions for their own interest?  Folks understand simple math and financial inequalities about their personal life—but its forgotten quickly in city government.  Too many in public office who practice robin hood economics.

posted by: Carl Goldfield on March 13, 2018  9:35am

This proposal does not equate to re-financing a mortgage, it is investing on margin.  A recent past article in the NHI seemed to report that the City’s pension funds have had a dismal return during a bull market.  If that is the case-why?  Alternative investments have worked well for Yale but they have David Swensen; we don’t.

posted by: BetweenTwoRocks on March 13, 2018  10:00am

I don’t disagree with Wendy (for once) but asking someone you disagree with if they’re on drugs is no way to win an argument. You just sound like a jerk and cause people to dig in and disagree with you.

Ever heard the term, “You catch more flies with honey than vinegar?” Might be a good lesson.

posted by: wendy1 on March 13, 2018  10:58am

Brevity is the soul of wit.  I spent only 1 min…theme: TAX YALE.  They own us ,now pay for us.

posted by: BevHills730 on March 13, 2018  11:13am

The move from defined benefit pensions to 401k plans is creating a massive retirement crisis for the entire country.  Workers get blamed, even as New Haven taxpayers are annually subsidizing one of the wealthiest Universities in the world.

posted by: robn on March 13, 2018  11:16am

Riffing on CG,

If this city wants a favor from Yale, why don’t they ask them to absorb the pension program into their endowment investment fund….or have it run in parallel by the same managers?

posted by: Esbey on March 13, 2018  11:16am

The borrowing scheme seems like a way to evade a serious discussion of the city’s pension problem. We need serious pension reform. The system is not sustainable and borrowing only hides that fact.

It is not remotely OK that struggling taxpayers are being asked to pay for a 55 year old to retire under the described “rule of 80.”

posted by: Noteworthy on March 13, 2018  11:30am

Hidden Figures Notes:

1. This $250 million scam is poorly advised, researched and those proposing it don’t even fully understand what they’re suggesting and seeking permission to do. This carries extreme risk and the potential “savings” on a cash flow basis is lame.

2. This piece of the budget should be stripped out - researched and proposed as a separate action, fully vetted with a series of public hearings and workshops. This is not something you pull out of your ass and stuff into a 500+ budget on page #309.

3. This plan was intentionally hidden which by itself makes it suspect and the lack of integrity in doing so should scare the hell out of everybody. The mayor and top executives in this city knew about this scheme.

4. It is predicated in no small part of not putting enough money into the generous pensions that are rubber-stamped year after year - and for which the city has insufficiently funded. The amount of budgeted pension funds paid into the fund is only sufficient to equal the amount being paid out which is why the funded percent keeps dropping.

5. Kill this proposal - in part because it was done dishonestly and at the last minute; in part because there is not enough time in the budget process for full vetting and advisory support to a board of lay people without backgrounds in either business or finance.

posted by: THREEFIFTHS on March 13, 2018  11:40am

posted by: Peter99 on March 13, 2018 9:09am

First off defined pension plans are a thing of the past. I would immediately go to 401k plans for every newly hired employee in the city.

The 401k plans are a rip off.

PBS Frontline 2013 The Retirement Gamble

https://youtu.be/DoVlQ25gFl8

ead this book.

Great Wall Street Retirement Scam What THEY Don’t Want You to Know about 401ks, IRA and Other Plans

Look at what this person in the book wrote about his 401K

Back in the 80’s I was making $100,000+ a year.
I funded a 401k like everyone else.
I had half a million bucks when I retired in 1998.
Today I’m almost broke. What happened?

$200k went to taxes; $100k was lost in the market down turn; most of the rest has been spent over the last 12 years. And, I paid between $10,000 and $20,000 in fees to wall street money managers that never told me they were charging my 401k these fees (by law, they didn’t have to tell me).Within a year or so I will have only social security to live on.Had I had the information in this book in 1980 I could have saved thousands in fees.So, keep funding those 401k’s suckers… and wind up like me.I wonder if McDonald’s is hiring?

Also did you know that Ted Benna, who is credited with inventing the 401(k) retirement plan said it fails many Americans.

Part One One.

posted by: Noteworthy on March 13, 2018  11:53am

Hidden Figures Too:

1. This budget document - the spending it proposes along with the 11% tax increase equal to $29,000,000 is rife with conflicted numbers, hidden spending and poor planning. Out of all the budgets I’ve seen in years - this is one of the worst ever.

2. Jason Bartlett gets his $20K raise according to one page - on another page, it says he got it last year while he says in his department of one document - that he’s decreasing his budget by 4%. BS.

3. The mayor projects state funding less than what is currently being proposed by the state.

4. The BOE component - gets $5 million increase with no defined benefit or allocation. What is disclosed is that it appears to be woefully underfunding maintenance of the very expensive schools. If there is 4.2 million square feet - the amount disclosed is a piddly 35 cents a square foot.

5. Despite the state losing billions in taxable income in this last several years, billions in deficits and a growing inability to borrow money - the Harp House has proposed increasing spending, increasing the number of employees and expanding overtime at the police and fire department.

6. The budget funds the cop shop at historic levels - there are almost 500 cops - add layers of management plus more than $4 million of overtime - $360K per month. The NHPD has zero knowledge of how many cops it actually needs. Just more. The OT is out of control.

7. The amount of borrowing - pension scam aside - is very high. The grocery list of purchases is like departments gone wild with a credit card bill they never see. It’s endless.

8. Debt payments are also starting to rise because of the constant refinancings - we’re now into the payments of interest on top of interest.

9. The borrowed money replaces the Scott settlement - a result of poor negotiations and zero financial planning. If the structure of the payout had been altered, this could have been paid out over time. Now we’re screwed.

10. This budget is a disaster.

posted by: THREEFIFTHS on March 13, 2018  12:26pm

Part Two

As I have said before.I have A New York State pension..Take a look at what the pension fund was worth last year.$192.4 Billion
in audited value as of March 31, 2017.Look at what it is worth today.

NYS Common Retirement Fund Cracks $200 Billion
Strong equities helped drive fund in fiscal Q3.

In its third quarter results for fiscal 2018, the New York State Common Retirement Fund returned 4.12%, growing the fund to an estimated $209.1 billion.

“A strong equities market continued to provide solid returns on investments during the last three months of 2017,” New York State Comptroller Thomas P. DiNapoli said in a statement. “Notwithstanding recent volatility, we have welcomed the stock market’s nearly decade-long rise. Our foremost goal will always be to find stable, long-term returns that will continue to provide retirement security for the pension fund’s more than 1 million members, retirees and beneficiaries.”And the City of New York Retirement Fund returned is about the same.

https://www.ai-cio.com/news/nys-common-retirement-fund-cracks-200-billion/

Notice how they did it.

A strong equities market continued to provide solid returns on investments during the last three months of 2017,” New York State Comptroller Thomas P. DiNapoli said in a statement.

They also did it by not loot and under funding the pension fund.

Also by law they can not under fund the pension plan.

I will say it again.Follow this model and you will not have a problem with the pension system

posted by: anonymous on March 13, 2018  12:30pm

Perhaps Yale would purchase the Upper Green for $100 million.  The Upper Green used to have the state capitol building on it, and should be repurposed for something that once again brings tax revenue, density, and/or vitality to the city, such as housing, museums, or office space.

The Green is way too large as is— it’s seven times larger than Union Square in San Francisco, and almost twice the size of Washington Square Park in NYC.

The Lower Green was always meant to be the “public square” in New Haven, not the entire plot.  Sell off the upper part (in a way that saves the churches, of course) and bring in some revenue.

posted by: Noteworthy on March 13, 2018  12:43pm

Hidden Figures Too Too:

1. And the personal PR person to be assigned to the mayor’s office - $50K - and who is supposed to be involved in economic development is a joke.

2. No professional development person with a strong resume is working for this amount - and further - it is an activity for which we have an entire department. This person needs to be working solo in the mayors office? No more creature comforts for the mayor. She has plenty of people who suck up - another one is not necessary.

3. Mayor Harp should just disclose who the BFF is that she wants to fill this slot.

posted by: 1644 on March 13, 2018  12:47pm

Noteworthy:  Regarding state funding, the only proposal out there now is that of the Governor.  Last year, Harp foolishly pretended that all the aid the Governor proposed would come and none of the TRB would be shifted.  If this year, she is actually realistic about state funding, it is good.  At the state level, the budget shortfalls grow larger and larger each year.  There is no reason to think the Governor’s proposal will be enacted.

posted by: opin1 on March 13, 2018  12:48pm

This makes me so angry and sad. I love this city. There is no reason, other than poor decisions, that our city should be in such dire straits.  There have been no bad luck events that caused our downfall.  We haven’t been hit with any natural disasters like New Orleans, California, etc. We haven’t had any major economic losses such as large industries or large employers leaving town. In fact, our largest employers have been thriving for two decades now.

Yale U and Yale Hospital have gone through an extended period of expansion. Look at all the new development that’s brought money to the city through either increasing the grand list and/or large building permit fees: Smilow, 360 State, Yale SOM, Ikea, Alexion/100 College, Corsair, new Yale undergrad colleges, Science Park, Rt 34 corridor, all the new apartments on College and Crown Sts, Novella, Jordan’s Furniture, The Union, Winchester Lofts, Yale grad housing on Broadway, 370 James St, all the national chains that have come to New Haven (Apple, Panera, Shake Shack, Patagonia, LL Bean, etc), Yale school of Music complex, new bio and tech companies, ETC. That’s just off the top of my head, there are so many more, and many more in the pipeline that we are already receiving building fees on. Many other projects didn’t bring direct money to our city budget but brought money and jobs to the area: The Q bridge, Gateway CC, significant affordable housing projects, etc. In so many ways, New Haven is thriving! Yet, we’re going bankrupt.  How did the city survive before this windfall of economic activity? why have we squandered it?

The problem with borrowing is the debt obligations become a bigger part of the budget for next year, and every year after. So if we can’t fund our budget this year, with a robust economy, what makes you think we will be able to in five or ten years when we have to cover all of the usual budget items PLUS increased debt payments?

posted by: opin1 on March 13, 2018  12:49pm

We are the equivalent of a successful doctor, lawyer, or pro athlete who’s gone bankrupt. Stop the borrowing. Stop creating new positions. Stop building new schools. Stop giving huge pensions. Stop raising taxes by double digits. Stop spending more than you have. Just make some hard cuts. Please.

posted by: 1644 on March 13, 2018  1:05pm

Yes, the unions are complicit.  The problem with defined benefit plans is that they are subject to reduction in bankruptcy, usually reducing payouts to a level that can actually be supported by the assets.  If the city borrows to fund the pensions, however,  those who buy the debt, not the pensioners, will get the haircut if the city goes into bankruptcy.  This is largely what happened in Detroit.

As for Swensen managing the assets, forget it.  They city would gripe if he ever lost money, and the mayor couldn’t direct investments to politically favored entities. 

Kevin:  Carl is right.  This is nothing like refinancing.  It is buying on 100% margin, hoping the assets you buy, whether they be stocks or a house, appreciate at a higher rate than the cost of the money you borrow.  A lot of folks speculated in real estate before 2008 got badly burned, and found themselves “underwater” on their houses.  Leverage works both ways.

posted by: THREEFIFTHS on March 13, 2018  1:26pm

posted by: 1644 on March 13, 2018 1:05pm

Yes, the unions are complicit.  The problem with defined benefit plans is that they are subject to reduction in bankruptcy, usually reducing payouts to a level that can actually be supported by the assets.  If the city borrows to fund the pensions, however,  those who buy the debt, not the pensioners, will get the haircut if the city goes into bankruptcy.  This is largely what happened in Detroit.

1) How is the unions complicit

2) This is what happen in Detroit.

Detroit bankruptcy lesson: Underfunded pension funds could trip up other municipalities

As Detroit approaches the one-year anniversary of emerging from the nation’s largest-ever municipal bankruptcy, Michigan Radio is examining one of the lessons learned.One of those teachable moments came in the case’s discussions about pensions. Like many municipalities, Detroit’s pensions were underfunded. “In Detroit the primary problem surrounding the pension plan was not the pension plan itself, but rather the deterioration in the city’s finances,” Brainard said.And that’s the real lesson.To avoid busting the annual budget, instead of cutting services more or raising taxes, municipalities too often shortchange their contributions to pension funds. It’s long-term debt that they say they’ll catch up later when times are better.But many municipalities are finding they’re not catching up.Even after bankruptcy, Detroit still has pension problems. It was projected the return on investments would be 6.75 percent. Instead they’re getting about 5 percent this past year because of the lackluster stock market.

http://michiganradio.org/post/detroit-bankruptcy-lesson-underfunded-pension-funds-could-trip-other-municipalities

So How do you blame the union for what happen?

Part One..

posted by: THREEFIFTHS on March 13, 2018  1:32pm

Part Two

Again if defined benefit plans are so bad.How come the New York state model is working?

Take a look at what the pension fund was worth last year.$192.4 Billion
in audited value as of March 31, 2017.Look at what it is worth today.

NYS Common Retirement Fund Cracks $200 Billion
Strong equities helped drive fund in fiscal Q3.

In its third quarter results for fiscal 2018, the New York State Common Retirement Fund returned 4.12%, growing the fund to an estimated $209.1 billion.

“A strong equities market continued to provide solid returns on investments during the last three months of 2017,” New York State Comptroller Thomas P. DiNapoli said in a statement. “Notwithstanding recent volatility, we have welcomed the stock market’s nearly decade-long rise. Our foremost goal will always be to find stable, long-term returns that will continue to provide retirement security for the pension fund’s more than 1 million members, retirees and beneficiaries.”And the City of New York Retirement Fund returned is about the same.

Follow this model and you will have no problems with your pension Fund.In fact ten new states are starting to follow the New York Model.

posted by: robn on March 13, 2018  1:41pm

3/5,

You suffer under the delusion that the city exists solely to be an employer rather than having employees to provide service to taxpayers. If a city can’t afford to fund pensions, then it shouldn’t be offering them; and municipal unions who know the city cant afford them shouldn’t be bargaining for them. As I wrote, there is deep complicity from municipal unions who have been involved with this in every step.

posted by: opin1 on March 13, 2018  2:41pm

@KM - I don’t think its analogous to refinancing a mortgage. It’s more like we haven’t been paying the mortgage. We’ve been under-funding the pension fund.  To go with your analogy, its like running up credit card debt, then refinancing your mortgage to pay off your credit cards, leaving yourself with a much higher monthly payment in the future. You’re using the credit cards because you’re spending more than you’re bringing in.  It’s irresponsible fiscal management. 

@3/5 I believe others are saying the unions are complicit because the unions used their collective power to win positions in government where they then voted in the interest of unions (rather than their constituents). I believe unions are great and necessary for negotiating with private companies, but they have no place in running government. Its a clear conflict of interest. Unions make sense in order to battle the profit/greed in the private sector, but they shouldn’t exist in the public sector (or if they do exist they shouldn’t be allowed to run for government). What percent of our alders are union-affiliated? what percent of the our residents are union-affiliated?  coincidence?

posted by: THREEFIFTHS on March 13, 2018  2:50pm

posted by: robn on March 13, 2018 1:41pm

3/5,

You suffer under the delusion that the city exists solely to be an employer rather than having employees to provide service to taxpayers. If a city can’t afford to fund pensions, then it shouldn’t be offering them; and municipal unions who know the city cant afford them shouldn’t be bargaining for them. As I wrote, there is deep complicity from municipal unions who have been involved with this in every step.

It is you who are delusion.The mind set of those in the private sector who hate those in the public sector.Just like the private sector have to be an employer so does the public sector..You seem to always duck the question that I put on the table which is how come other cites and states are now using the New York state and New York City Pension Model to run there Pension Funds?Again take a look.

Look at what the pension fund was worth last year.$192.4 Billion
in audited value as of March 31, 2017.

Look at what it is worth today.

NYS Common Retirement Fund Cracks $200 Billion
Strong equities helped drive fund in fiscal Q3.

In its third quarter results for fiscal 2018, the New York State Common Retirement Fund returned 4.12%, growing the fund to an estimated $209.1 billion.

“A strong equities market continued to provide solid returns on investments during the last three months of 2017,” New York State Comptroller Thomas P. DiNapoli said in a statement. “Notwithstanding recent volatility, we have welcomed the stock market’s nearly decade-long rise. Our foremost goal will always be to find stable, long-term returns that will continue to provide retirement security for the pension fund’s more than 1 million members, retirees and beneficiaries.”And the City of New York Retirement Fund returned is about the same.Remember there is no under funding of the pension fund,In fact that is by Law.

My bad.  As I always say. You can tight for the same benefits on you Job or take the test for the public sector jobs.

posted by: Kevin McCarthy on March 13, 2018  2:57pm

Carl, “analogous to” does not mean “the same thing as.” My point is that the desirability of refinancing the pensions will depend on several factors, including its impact on the city’s overall borrowing cost.  I don’t have enough information to make this analysis; I doubt you do.

Clearly, people have a wide range of views on defined benefit vs. defined contribution pensions. But in any case, the majority of the city’s pension costs for the next decade or so will be attributable to current employees who are vested in defined benefit plans.

posted by: THREEFIFTHS on March 13, 2018  3:15pm

posted by: opin1 on March 13, 2018 2:41pm

@3/5 I believe others are saying the unions are complicit because the unions used their collective power to win positions in government where they then voted in the interest of unions (rather than their constituents

If this is the case.Then you need to Blame the people who keep voting them in.Also pension under funding in New haven was a problem before the union got in.How is it the union fault that the city and state does not fund there part of the pension funds.in fact in some states the unions sued for Under funding of the Pension Plan.

Unions Sue Baltimore for Underfunding Pension Plan

Baltimore’s police and firefighters’ unions have filed a lawsuit against the city in federal court, contending that officials “knowingly underfunded” their pension plan over the past decade, ignoring the advice of financial experts hired by the city.

The lawsuit alleges that the actuaries warned pension board members in 2006 that the plan was underfunded and laid out four ways the problem could be averted: an increase in the city’s contributions; a decrease in benefits; an “incredible actuarial experience,” such as many members retiring later or dying younger; or the funds earning “a lot more,” which actuaries said was unlikely, according to the news report. Despite the recommendations, city officials did not boost funding to the plan even though Baltimore had a $61 million surplus that year, the suit says.

https://www.plansponsor.com/unions-sue-baltimore-for-underfunding-pension-plan/

The union in N J even try to do the same thing.But I think thy lost.So do not say the unions are complicit. as far as their collective power to win positions in government.Again that blame goes to the people who keep voting them in.


What percent of our alders are union-affiliated? what percent of the our residents are union-affiliated?  coincidence?

Those residents you talk about could be union memebers on there jobs.So your point?

posted by: FacChec on March 13, 2018  3:33pm

A cursory analysis of the Mayors general fund budget revenue Fy18/19 on page 1-17 shows voluntary payments from Yale Hospital and Yale university, they line item payment are lumped together. In prior years the line items were displayed to show Yale University’s payment of $8M. Yale has not increased its payment ever though they have occupied 300 new dorms. Yale contends that they have paid their 18/19 contributions last year, in other words they pay a year forward, however the city does not reconcile this fact in its revenue projections and the BOA routinely passes this measure every year making the budget automatically out of balance by $8M annually.

Yale pays what it wants to and when it pleases, any attempt to sue Yale is a joke, cut it out!


Appropriation ordinance #5 for $250M is just the new rip…there is also appropriation ordinance #4 for $50M/per routinely approved by the BOA, $628 for master lease payments, $67.2M debt service, $476.6M medical benefits pension P&F 34M pension city employees $21M, self insurance $4.6M Scott Lewis settlement $8.4M x2.(second time around.

In as much as the pension fund unfunded liability is concern, peruse the 2016 auditor’s report on pensions.

From CITY OF NEW HAVEN,
CONNECTICUT
Comprehensive Annual
Financial Report

See page(s) 72 - 75 particularly.

https://www.newhavenct.gov/civicax/filebank/blobdload.aspx?blobid=24926

posted by: TheMadcap on March 13, 2018  3:52pm

The New Haven green is a public gem, let’s not discuss selling it to Yale.

posted by: mailuser1221 on March 13, 2018  4:21pm

https://www.newhavenct.gov/civicax/filebank/blobdload.aspx?BlobID=31537

The CERF plan allows only 2 Union representatives on the Board of Trustees.  The Mayor, Controller and others, whom I believe are appointed by the Mayor.

At best, the Unions can only cast 2 of 7 votes.

posted by: anonymous on March 13, 2018  4:50pm

Madcap, if not Yale, how about a new concert hall, a relocated Long Wharf, a major branch of the Smithsonian National Museum of African American History and Culture, the Museum of Modern Art, a branch of UConn, and some other future institution?  The Upper Green is so big that there would be space for it all.  Or the city could put the land out to bid to add dense commercial, residential, and hotels that would pay tens of millions of dollars in property taxes. You could leave the churches alone and the “public square” (Lower Green) would still be an absolute gem of a public space, easily able to hold 50,000 people for concerts. As is, the space is way too big. Building on the Upper Green is a simple step to solve the budget crisis and improve the city’s public space.

posted by: Noteworthy on March 13, 2018  5:04pm

Hidden Figures and Budget Solutions Notes:

1. To solve a problem, you have to admit a mistake and/or admit there’s a problem. That has not been done by any alder that I know of - and certainly not the mayor. She blames everybody but herself. However, Mayor Harp is the root of the problem along with the sycophants she surrounds herself with who just reinforce what she thinks.

2. The state and the city are at the crossroads of the crisis - solve it and we’re good for many years - keep coming up these financial modeling scams out of Hartford and DC - and we are screwed and face huge tax increases if not bankruptcy. The city is currently carrying a $14 million budget DEFICIT.

3. The school board gave us lip service that it take practical, solid action on its budget - it not only didn’t - it just threw it against the wall with virtually no budget discussion to see what would stick in the BOA deliberations.

4. Specific Steps -

*Freeze hiring except critical employees. No new pet for the mayor.
 
*Use national figures to right size the cop shop - and cut overtime to $50K a week - $2.6 million. The chief should be down to that weekly rate by the end of this fiscal year so he’s ready to make budget next year. There should be monthly overtime reports - who’s getting it and what it’s used for by detail. This should be done starting now.
 
*Cut the school budget by $10 million - unless you force them to get smarter, they never will. Send the demand over with a recommendation that Strong school be halted; that two more schools be closed this year.

*End defined benefits for all new hires. Demand higher co-pays on both pension and health. Get other concessions now.

*Stop refinancing bonds so we’re not paying interest on the interest on these bonds.

*Combine departments where it makes sense.

*Cut capital bonding to $40 million. Approve each bond issue b4 sold.

*Sub-contract youth services.

*Once above is done: Find $15 million more

*Build back reserves.

posted by: MarcoHaven on March 13, 2018  5:06pm

Sometimes the behavior of an “activist” turns more people to the other side. We know someone who does that frequently.

posted by: THREEFIFTHS on March 13, 2018  5:44pm

I saw the Meeting Minutes that mailuser1221 Posted

https://www.newhavenct.gov/civicax/filebank/blobdload.aspx?BlobID=31537

There is noting in these Meeting Minutes about Funding the Pension Fund.but i am working on it.And I will find out.

posted by: KNB on March 13, 2018  5:45pm

Guaranteed Benefits pensions are not bad if they are properly funded and if people are not able to retire before they should.  However. there is no reason for someone to be able to retire with a full pension in their 50s - this is what bankrupted Greece and closer to home Central Falls, Rhode Island.  If you want to retire early - then your pension should be actuarily adjusted downward in the amount that would be sustainable.  Otherwise, you must work until 65 or later to get full benefits. 

Alternative investments are a scam.  Investing in large indexes has far lower costs and better returns than the exotic alternatives run by hedge funds etc.  Yes - the alternatives often report larger gains than indexes - but after fees are removed most of these gains - if not all - disappear. 

Borrowing does not reduce liabilities.  It increases or shifts them.  And, it is unlikely the city can borrow at an interest rate that it can then beat with investments.  This is a shell game - the mayor is proposing.  Of course we will be sold the idea that we can earn a very high rate of return on the money poured into the pensions - but - the reality is that cities rarely meet the targets they set.  The city and workers have an incentive to predict great returns so that the city can put less in the funds and the workers can get more out - the end result is a pension that has only 40% of what it needs.  It is time to lower expectations to realistic levels.  And - it is time to get serious about bringing spending into line.  The city should focus on the most important things and stop doing things that either do not work or are merely pork for various constituents.

Finally - no additional hires should be approved.  This is especially the case with anyone in the Mayor’s office.  Finally, let’s end the security detail - previous mayors did not have one - why does this mayor need one?

posted by: Kevin McCarthy on March 13, 2018  7:24pm

Opin1, the city has clearly underfunded the pension system and that, combined with the mediocre returns it has earned on its investments, is the root of the problem.  But the pensions, like a mortgage, are long-term obligations that the city is contractually required to pay. Sometimes refinancing long-term obligations makes sense, sometimes it doesn’t.

posted by: TheMadcap on March 13, 2018  7:51pm

The size of the green is what makes it special, it allows huge numbers of peope to use it but to also enjoy some personal green space in the middle of downtown. As well, both sides of the green have entirerly different atmospheres from each other. The southern green is a busy atmposhere full of bus stops, farmer markerts, concerts, the arts festival, ect. The northern green is where you can sit and read under a tree. If anything Temple st should he shut down to traffic most of the time to make it more contiguous

posted by: duncanidaho645 on March 13, 2018  9:14pm

There is no incentive for unions to force an underfunded pension system.  When the required contribution by the city is large people start to talk about 401ks.  The city will also have a better case in binding arbitration with a large required contribution versus the ability to pay.

Look at the City of Bristol for an example of pensions done right.  Two of the three pension funds are OVERfunded.  Not sure about all of them, but at least one funds a pension that is more generous than the newer NH pensions, requires a smaller employee contribution, and has a normal retirement age of 55.

http://www.bristolpress.com/BP-Bristol+News/299413/bristols-police-firefighter-pension-funds-among-healthiest-in-nation

posted by: THREEFIFTHS on March 13, 2018  9:44pm

posted by: KNB on March 13, 2018 5:45pm

Guaranteed Benefits pensions are not bad if they are properly funded and if people are not able to retire before they should.

True. But Under the New York State and New York City Pension Model.you can retire early.But .This is what happens when you retire early.

For the full retirement benefit, you must be 62 years old at retirement. You may retire as early as age 55, but you will receive a reduced benefit. Uniformed court officers or peace officers employed by the Unified Court System that have at least 30 years of credit may retire with a full benefit as early as age 55.

Alternative investments are a scam.  Investing in large indexes has far lower costs and better returns than the exotic alternatives run by hedge funds etc.  Yes - the alternatives often report larger gains than indexes - but after fees are removed most of these gains - if not all - disappear

Very True.


The Benefit
If you retire with less than 20 years of service credit, your benefit will equal 1.66 percent of your Final Average Salary (FAS) for each year of service.

With 20 to 30 years of service credit, your benefit will equal 2 percent of your FAS, multiplied by your years of credited service.
For each year of credited service beyond 30 years, you will receive 1.5 percent of your FAS.
Examples:
At age 62, with 19 years of service and an FAS of $35,000:
$35,000 × 1.66% × 19 years =  $11,039 per year or
$920 per month
At age 62, with 20 years of service and an FAS of $35,000:
$35,000 × 2% × 20 years =  $14,000 per year or
$1,167 per month
At age 62, with 31 years of service and an FAS of $35,000:
$35,000 × 2% × 30 years =  $21,000 per year
  plus
$35,000 × 1.5% × 1 year =  $525 per year
=  $21,525 per year or
$1,794 per month

This Pension System Works

https://youtu.be/PMsPZhw9Sg4

Pension Fund Overview

https://www.osc.state.ny.us/pension/snapshot.htm

posted by: denny says on March 14, 2018  3:00am

Does anyone have a concrete way for us taxpayers to fight this budget? Is anyone organizing the taxpayers. I applaud the NHI for covering the topic, but we can’t expect the publicity alone to bring change.  Does anyone have any real practical suggestions on how we can hold the alders accountable?

posted by: Ozzie on March 14, 2018  6:50am

As I’ve stated previously people always blame the unions but this problem didn’t occur over night . The City has underfunded their obligation to the Pension Funds going back to the early days of the Destefano administration and probably into the Daniel’s reign as well. Who told the City to rebuild 38 of the 41 Schools in the City and the throw the balance of the bill on the back of the people who actually pay taxes in this City .
  The City already provides breakfast and lunch to students and now they’re going to provide dinners not to mention the backpack program where they send kids home with food for the weekend.Who pays for that , The Taxpayers not the people on assistance . The City might as well turn some of the Schools into hotels for the homeless while they’re at it seeing they’re open most of the day and night anyway.

posted by: 1644 on March 14, 2018  8:12am

Denny:  One of the problems with representative government is that representatives are highly responsive to special interest groups that show up at meetings for hand-outs, and less responsive to the overall good and taxpayers who do not show up at meetings with the same passion.  Individually, programs like Q House, the Public Health clinics, Freddy Fixer Parade have a small impact on the budget, and a big impact on certain individuals, so it is easy for representatives to support them since, individually, they may not be a big burden, even though collectively they are.  Towns with direct referenda on budgets let the average taxpayer chime in, saying, “It’s just too much’,” but in representative government that doesn’t happen.  So, the best tack is just to call, write, your Alders, go to meetings, and organize your neighbors to do the same.  Being involved in your local ward party committee is good, too, as in a single party town that seems to be where real decisions are made.

posted by: THREEFIFTHS on March 14, 2018  8:27am

posted by: Ozzie on March 14, 2018 6:50am

As I’ve stated previously people always blame the unions but this problem didn’t occur over night . The City has underfunded their obligation to the Pension Funds going back to the early days of the Destefano administration and probably into the Daniel’s reign as well.

Home Run

posted by: duncanidaho645 on March 13, 2018 9:14pm

There is no incentive for unions to force an underfunded pension system

Home Run.


To the Union Haters.Pension Haters Public Sector Worker Haters I leave you with the words of Robin who told me this.

posted by: robn on March 8, 2018 2:52pm
3/5,

Check your sources before posting please. You’ve been pwned.


My Bad. i forgot.New York is one of the states that does not tax your pension like they do in this state.In fact states that do not tax your pension retired workers stay in that state.

Pension Fund Overview

Economic Contributions of Retirees

$11.45 billion in benefits paid
$11.8 billion in economic activity
$1.7 billion in property taxes

Like I said.New York has the best pension model in the country

posted by: THREEFIFTHS on March 14, 2018  8:31am

posted by: denny says on March 14, 2018 3:00am

Does anyone have a concrete way for us taxpayers to fight this budget? Is anyone organizing the taxpayers. I applaud the NHI for covering the topic, but we can’t expect the publicity alone to bring change.  Does anyone have any real practical suggestions on how we can hold the alders accountable?

Yes.It is call proportional representation.in which parties gain seats in proportion to the number of votes cast for them.

posted by: Christopher Schaefer on March 14, 2018  9:24am

When a govt is under the iron grip of a single political Party, inevitably self-preservation will take priority over public service. As long as New Haven residents continue to prioritize their dislike of Donald Trump each Nov by maintaining the one-Party status quo, you can expect the financial crisis of our city and state to continue its downward spiral. “the committee that oversees the investment and distribution of CERF funds would have greater flexibility to put more money into alternative investments like private real estate”—which caused the 2008 economic collapse. But that was 10 years ago, so who cares?

posted by: Peter99 on March 14, 2018  9:24am

Cut out all the taxpayer funded “free stuff” that we pay for so the politicians can get reelected. There is nothing free. Somebody is paying and that somebody is the taxpayer. Start with a zero budget and make each department justify each line item in their budget. Nice thought, but it would actually require work, and the first thing that would go is buying votes from special interest groups who want the “free stuff”.

posted by: robn on March 14, 2018  10:08am

CS,

As long as CT GOP candidates fail to resist their party’s shift towards radicalism, they fail to give moderates/centrists a choice.

posted by: Noteworthy on March 14, 2018  11:34am

Fight Back Notes:

1. Fighting City Hall is largely an exercise in futility. The alders don’t really listen. Most of them take orders from the union; or the mayor - and are incapable of rational let alone complicated thoughts on the budget.

2. Unless big crowds turn out - alders don’t listen.

3. That said - call your alder and call alders in other wards too.

4. Come to the public hearings - there are only two left. You get to talk for 5 minutes each time. lol - I know. They talk for hours, you get minutes but that’s it. That’s actually an improvement - the public used to get just 3 minutes.

posted by: wendy1 on March 14, 2018  11:52am

Hey Marcohaven, I didn’t see you at cityhall.  I caught Tourrettes Syndrome from republicans.

posted by: OutofTown on March 14, 2018  3:19pm

Congrats to Bristol, CT, for being able to fund its obligations.  Unfortunately, New Haven is not in the same position - so it cannot afford the pension obligation.  To ignore this simple realty is tilting at windmills.  You cannot give what you do not have. 

Yes, you can shame, shame, shame public officials for mismanagement.  Perhaps they deserve it too.  Vent and feel better.  But that doesn’t add funds to the city coffers. Live with the reality, and adjust to it.

posted by: Noteworthy on March 14, 2018  3:37pm

Out of Town:

New Haven could pay enough into its pensions, could negotiate better, sustainable deals - they just don’t and choose to be irresponsible. The city has the money. But it would require better choices.

posted by: Christopher Schaefer on March 14, 2018  5:08pm

@robn The CT GOP generally differs from the national GOP on “social value” issues, preferring to not even take a stand on same-sex marriage, abortion, etc. So, in that sense, they’re more aligned with the Libertarian Party. The national GOP’s stand on such issues, as well as gun rights, illegal immigration and mandatory healthcare, have been (or soon will be) eclipsed by CT state law. So the primary issues should be taxes and the budget—not national ideological issues that affect only a small percentage of the population.  Taxes and the budget, as well as the specific services these will or will not provide—thereby defining what your local govt will be—are what impact the vast majority of people. Regardless of who the President happens to be.

posted by: 1644 on March 15, 2018  7:48am

CS to Robn:  I would add that, if one compared the Democrat and Republican budgets from last session,  the Republicans were more generous to the deserving poor, i.e., the disabled, than the Democrats, who cut from support programs for the elderly and disabled to fund UConn, an institution that just spent $5 million to fire its football coach.  Fasano’s priority was to help those who could not support themselves.  Looney’s priority was to ensure that UConn kept its number 18 ranking of state universities by US New & World Report.

  As far as this , its smart pre-bankruptcy planning on the part of the unions.  Overall, at both the local and state levels, retirement ages need to be moved to norms.  Social Security doesn’t start until age 67, so public sector retirement ages need to move toward that age.

posted by: robn on March 15, 2018  8:51am

1644,

Nevertheless, the CTGOP’s gubernatorial candidates have been crackpottish and aligned more with the crackpottish behavior of the national GOP than with traditionally fiscallly conservative and socially liberal CT Yankee Republican. FWIW, looking at this field of candidates and the Dem majority legislatures total takeover by municipal and state unions, if Len Fasano ran for Guv I’d vote for him in a heartbeat ....and I’ve never voted Republican in my life.

posted by: OutofTown on March 15, 2018  9:57am

Noteworthy - Perhaps you are right.  Perhaps there is money to be found.  You have to agree that the money would come from certain department budget cuts.  Money is not laying on the floor, just waiting for someone to pick it up. 

Look towards the budgets for the 3 largest departments, and see if they will agree to cuts.  You have to believe city professionals have already tried it, and failed, so far.  Or, accept things as they are, work on improving, then move on.  City government cannot be funded on wishes and hopes.

posted by: 1644 on March 15, 2018  10:23am

Robn: How are Dave Walker, Handler, Boughton, or Stefanowski crackpots?  All of them are emphasizing fiscal issues.  As a Republican friend said to me a few months ago, “The culture wars are over. We lost.” Visonti isn’t even running as a Republican.  Boucher, who says she will eliminate the state income tax immediately, has gotten no traction.  None of the candidates, R’s or D’s, have put forth any decent plan to get us out of the mess we are in.  They have all just spoken in generalities.

posted by: Noteworthy on March 17, 2018  8:24pm

Out of Town:

You don’t see if city departments will take a cut - you just cut. The largest budgets are education, police and fire. Education should be cut by $10 million - perhaps $15 million with a mandate to consolidate schools as necessary. Police overtime should be cut in half - $2.5 million and a utilization study done to right size this department. The same should be done with the FD. The union’s minimum staffing contract language is bad for taxpayers - we have a department that spends nearly all of its time going on medical calls in fire trucks - transporting nobody. There are plenty of other places to cut to come up with another $10 million. It just has to be done. Chances this will be done: None.