Fort Worth

Fort Worth is proposing a tax cut. Why a $1.6 billion pension fix could mess it up

The city is proposing dropping the property tax rate by 2 cents in this year’s budget.

But most homeowners who saw a jump in their appraisals are likely to see their taxes go up.

The proposal would drop the tax rate from 80.5 cents per $100 valuation to 78.5 cents per $100 valuation. The owner of a home valued at $200,000 with a homestead exemption would pay $1,256.

The cut is needed, said City Manager David Cooke, to compete with other cities in attracting new businesses.

But sticking to that 2-cent tax cut won’t be easy while trying to fix the Fort Worth Employees’ Retirement Fund.

“If you spend money to fix the pension, it’s a dollar you can’t spend to fix a pothole; it’s a dollar you can’t spend to hire another police officer and it’s a dollar that can’t go to a pay increase,” Cooke said.

Each penny of the tax rate is worth about $6.2 million to the city’s budget, Cooke said.

If nothing is done to fix the city’s $1.6 billion projected shortfall, the retirement fund could run out of money by 2048, Cooke said.

The city manager’s proposal would add about $48 million to the fund through increased contributions from the city and employees and changes to eligibility and benefits.

The city would kick in another 3 percent (nearly $14 million) to the retirement fund with employees upping their contributions by 2.3 percent (roughly $10.3 million.) Employees’ contributions would be based on whether they were hired before or after 2011, the last time benefits were changed.

Police and fire would contribute higher amounts under the proposal. Police would also pay more to retain the provision that officers could retire after 25 years of service regardless of their age. For general employees and firefighters, there would be a minimum retirement age of 55 .

But the most contentious part of the change — eliminating the cost of living adjustment for many retirees — is already getting strong opposition from employee groups.

The cost of living adjustment would be left in place for retirees who worked 25 years. The first $20,300 would be eligible for the COLA.

If an employee didn’t work for the city for 25 years, there would be no cost of living adjustment going forward.

The changes to eligibility and retirement benefits would account for about $23 million of the proposed pension fix.

“We want our employees to still have their pension yet we want this city robust enough to stay attractive to businesses and homeowners,” said Fort Worth Mayor Betsy Price.

Last year, the city’s general obligation bonds were downgraded for the second straight year by Moody’s, one of the nation’s three credit rating agencies. That makes the cost of borrowing money higher, which could mean taxpayers pay more.

“We were told by rating agencies if we have specific plan to fix the pension they won’t downgrade us again this year,” Price said.

Already, the representatives of police and general employees have voiced opposition to the cuts to retirees benefits.

“Our position has always been that reaching back and cutting earned benefits is not the moral solution,” Manny Ramirez of the Fort Worth Police Officers Association said in a statement. “Our members signed up to perform a job that takes an extraordinary toll on their physical and mental health. The job is already tough and, considering the political climate, it is getting tougher. The officers once found solace in the promises that our city leaders made them, now they question that security.”

Taxpayers and those paying for city services paid $89.9 million toward the pension in 2017, according to Star-Telegram archives. Employees contributed $35.1 million, for a total of $125 million, or about 28.6 percent of the city’s payroll. The employee groups have different benefits but all city employee pensions are paid from one fund.

Marsha Anderson, president of the Coalition of Retired Employees and a member of the Fort Worth Employees Retirement Board of Trustees, said longtime retirees on the lower income level will have trouble making ends meet.

“It’s going to be horrendously problematic,” Anderson said. “Many retirees have to make a choice of getting medication or making a mortgage.”

The City Council is scheduled to vote on a pension fix on Sept. 18, the same day the budget is set to be approved.

If council members approve a pension fix, there would be an employee vote on raising contributions in November. That vote would require half the total number of employees to vote in favor of the changes — not just a majority of those who vote.

If that vote fails, the city could consider going to Austin for a legislative fix next spring as Dallas and Houston have done successfully.

Any change to the cost of living adjustment could also lead to legal action.

“I think any recommendation that impacts the COLA we’re going to get a lawsuit and we’re prepared for that,” Cooke said.

Besides the issue of the pension looming over this year’s budget, the city’s massive population gains make it hard to cut the tax rate further. The growth brings in additional revenue but also a demand for more infrastructure and services, Price said.

“You really can’t cut more because of the growth,” Price said. “Most of our revenue coming in is in the new growth and we have to deliver services to all those new people.”

This report contains information from the Star-Telegram archives.

Bill Hanna: 817-390-7698, @ fwhanna
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