FORT WORTH -- Retired city employees need 75 percent of their former salaries and must be assured up to 3 percent annual cost-of-living increases if they are to have an adequate retirement, says a consultant's report released Tuesday.
But as city and pension leaders met to begin discussions of retirement funding issues, Mayor Betsy Price put one "not real negotiable" item on the table: The city won't hike its contribution to the Employees' Retirement Fund.
It already contributes 20 percent of its payroll, Price said.
"We simply cannot ask our citizens to put any more in," she said.
At the start of the meeting, though, Price extended an olive branch to a roomful of longtime adversaries who have been at odds over how to ensure that the pension fund is in good condition.
"We don't need a war; we don't need anybody fanning flames ...," Price told the group of about 50 at the Ella Mae Shamblee Library. "We need to move the ball down the middle."
The tensions result from competing interests. Pension leaders want to ensure secure retirements for thousands of Fort Worth employees, including police and firefighters. City Council members, administrators and the mayor have to answer to taxpayers who have had to shore up any shortages in the fund.
The $1.7 billion pension fund has been grappling with ailments similar to those plaguing other defined-benefit retirement plans. Its unfunded liability stands at about $578 million. That is the money it lacks to pay off long-term obligations. After an 11 percent rate of return in the last year, the fund gained some ground. But it still has to "smooth in" losses from the 2008 market crash.
To improve its funding level, the city almost doubled its contributions for several years, among other moves. The city has a say over its contribution levels, but the fund is also supported by employee contributions and by investment returns.
One source of contention has been projections of investment returns.
The city's actuary has called the fund's assumed rate of return "aggressive" and said it exceeds most other state municipal funds, which assume a rate of about 8 percent. A concern is that investment returns will not return to levels achieved before 2000.
But the consultant, William B. Fornia, an actuary with Pension Trustee Advisors of Colorado, said the fund's 8.25 percent assumed annual rate of return and other calculations are "reasonable" and "supportable" in the long term.
The projection is "in the middle of the pack" compared with other pension funds, Fornia said.
But Fornia warned that market volatility could decrease funding in the future.
At present, the fund's unfunded liability could be eliminated in about 19 years -- what's referred to as the amortization period. That's healthy: 30 years is the maximum recommended.
But the fund's amortization period will change next year, he said, and it is very likely that within five years, the amortization period will become "infinite," as before. An infinite amortization period means that the fund can never meet its obligations.
The consultant, who is expected to work with city and pension leaders through the next year, said Price's goal of no taxpayer increases appears doable. But more study is needed, he said.
Fornia also said employees need to be able to maintain their standard of living and purchasing power in retirement, with the adequacy and fairness of pension benefits as key considerations. Employees may need 75 percent of the pay they earned working, plus annual cost-of-living increases, the consultant's report said.
Overall, R. Paul Schrader, also of the consultant firm, said it's important that pension and city leaders agree on which conditions are unacceptable and not "wait until there's a crisis."
Employees and pension leaders said they understand the city's dilemma and obligation to taxpayers. But they emphasized a buzzword of the meeting: fairness.
"We urge you consider changes based on facts and fairness," said Billy Samuel, board chairman of the pension fund.
City and pension fund leaders invited Pension Trustee Advisors to referee sessions in which the two groups could hash out proper benefit structures, pension calculations, long-term projections and other data.
The consultants said they will share best practices. They also released a Fort Worth employee survey that showed mixed views on requirements for certain employees or new ones to have reduced benefits and pay higher contributions. Some pension leaders said this method would unfairly require some employees to "supplement" the retirements of others.
Councilman Sal Espino emphasized that his constituents want to see employees increase their contributions. Employees would have to vote to do so.
"That needs to be on the table," Espino said, "because I do think the expectation from citizens is that the city stepped up and put more skin in the game and employees need to do that."
Price agreed. "There's got to be some personal responsibility as well as the city's share with this."
But others, including two representatives of employee groups, said that the city's contribution increase was a catch-up after years of reduced contributions and that the public must realize that.
If residents knew that, said pension fund board member Kimberly Britton, "they might not be as adamant."
But she added, "Most people know employees are going to have to contribute a little bit more."
The next meeting between city and pension fund leaders is planned for January. "This is the beginning of looking at the pension fund; ... this is not the end," Price said.