Keeping pension promises made to Fort Worth employees and retirees could come at considerable cost to Fort Worth taxpayers, but some City Council members may be willing to take that step.
"We're impacting people's lives," said District 5 Councilwoman Gyna Bivens. "There used to be a day where if you worked you got paid and got a deal called retirement and pension. I know things have changed, but I also know we have to be flexible."
Bivens' remark comes as a task force set up 2 1/2 years ago to fix mounting problems with the city's pension fund continues to work toward some final recommendations. Those won't come until August, but recent reports by three credit rating agencies suggest if changes aren't made to the pension system soon, it will put added pressure on city finances.
Standard & Poor's downgraded by one notch its rating to AA from AA+, with a stable outlook, and Fitch Ratings revised its outlook to negative from stable. Moody's Investors Services for a second year affirmed its lower rating of Aa3 with a negative outlook.
And, Kroll Bond Rating Agency gave the city a rating of AA+ with a stable outlook.
The lower ratings "are wholly attributable to where we sit with respect to the pension," Aaron Bovos, Fort Worth chief financial officer, said. "It becomes increasingly difficult to tell a good story when year after year we haven’t made some improvements or changes."
Low credit ratings means it costs the city more money to borrow money for such things as rebuilding streets and improving parks. Fort Worth voters in May approved a $399.5 million bond program, the largest ever, for a new police facility, animal shelter and community centers. Those bonds will be issued starting in 2019.
"The city's pension burden is high and expected to grow over the near term," Moody's wrote. "We expect that the city's fixed costs will remain elevated, and that pension funding will continue to be a cost pressure."
Since 1990, taxpayers have taken on most of the cost of increases for contributions in the city's pension fund. Over the past 25 years, problems have mounted from questionable benefit decisions, investment losses and unmet assumptions on investment returns.
Mayor Betsy Price said employees and city leaders will be making some difficult decisions, but how those decisions impact the tax rate and the tax liability of its residents "needs serious consideration."
"We have to find an outcome that's fair and equitable for employee groups and our citizens," Price said. "We are in a downward spiral on rating agencies. We can only go on saying we are fixing this so many times before that downward trend takes a huge nose dive that will cost us a significant amount of money."
Although final recommendations on how Fort Worth leaders plan to fix the city's $3 billion pension fund, of which $1.7 billion is unfunded, won't come until August, the Council on Tuesday will vote on a resolution to file a state required notice of possible benefit changes to the Fort Worth Employee Retirement Fund.
Consultants have warned the city's pension fund could run out of money by 2050. The unfunded liability is the amount of benefits promised to thousands of retirees and employees without money to cover it.
Among other things, after adding a one-time, $4 million payment to the pot this year, taxpayers could be looking at adding $8.8 million in each of the next two fiscal years, bringing to nearly $100 million the amount it spends on the pension. The city's fiscal year runs Oct. 1 to Sept. 30.
The amount, however, doesn't come close to the many millions of dollars needed to keep the pension solvent, and City Manager David Cooke has warned that employees, and the police and fire unions, are going to have to give as well.
And everything is on the table.
Scant details are available, but the task force is considering reducing, capping or eliminating cost-of-living adjustments, even for current retirees; eliminating accumulated sick leave from calculating an employee's years of service; and, increasing the retirement age for benefits.
Eliminating cost-of-living adjustments alone would automatically wipe out $400 million in pension liability, Cooke has said.
Pension changes have been made for the different employee groups since 2010, including the elimination of cost-of-living adjustments for new employees. But, in the last decade, taxpayers have upped contributions considerably, while employees have not.
"We have talked about all kinds of different strategies and options," Cooke said. "We're not finished with our work, but we're close to being able to bring recommendations forward."
The city starts its budget process in earnest in August and is tying the pension issue to it. It's during the budget process when the council decides if it will lower the tax rate, currently at 80.5 cents per $100 of assessed valuation. One penny of the rate equals roughly $6 million.
Deciding final recommendations in August, too, give the city time to communicate changes to employees and retirees. They're expected to vote on proposed changes in November, with changes starting in January.
Moreover, if an employee vote is not successful, the city could look to the Legislature to amend the plan. The Texas Legislature meets in 2019.
District 6 Councilman Jungus Jordan said he and colleagues have begun getting emails from retirees and employees suggesting what they should do — and not do.
"I will tell you having lived this for almost 13 years now, my biggest concern is one of the recommendations that we saw in the report, is the for first time ever to my knowledge, that we are talking about changing benefits to existing retirees. That deeply concerns me," Jordan said. "I for one am not looking to affect promises made."