Political, legal fight shaping up after Dallas Police and Fire Pension mediation fails
Tristan Hallman, Dallas City Hall Reporter
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City leaders and Dallas Police and Fire Pension System officials fell short of an agreement to save the failing retirement system after hours of mediation this week.
Both sides still have time to bring a single solution to the state Legislature, which must approve any fix. But a pension spokesman said Wednesday that the talks have "all but collapsed," and it's much more likely that the stalemate will mean a political fight and more court battles lie ahead in the dynamic and desperate pension saga.
City officials, who hope to avoid as much taxpayer pain as possible, began to look ahead Wednesday. They'll have the backing of a new coalition of influential civic groups and three former Dallas mayors. And the Dallas City Council, in a resolution passed Wednesday, encouraged its four council members who serve as board trustees to take any legal means necessary to save the system.
Council member Philip Kingston, a pension trustee, said legal action "is not a step the four pension trustees have taken lightly."
"There is a severe problem with the pension, and we need the help of a court, I believe, in order to sort it out," he said.
The resolution, passed unanimously, included scathing criticism of the pension system's current and past administrations.
In a statement sent through spokesman Ed Stewart, pension officials criticized the resolution, pointing out most of the criticisms only pertained to their predecessors.
Kingston said he wasn't interested in looking back. He and other council members are more worried that the pension fund will go on a fire sale of its assets to pay out large lump sums, which would further weaken the system and hurt its ability to pay base benefits. "The blame game is not fixing everybody's monthly check," Kingston said. "I can't pay beneficiaries' monthly check with blame."
Kingston said he and the other three council members who serve as trustees on the 12-member board could ask a judge to take over the plan and ensure that the fund doesn't liquidate its assets to pay out lump sums. Kingston plans to talk to his attorney more to figure out a strategy, but still has some hope that pension officials will change their tune.
Kingston's fellow council members who serve on the pension board were more hesitant to say what exactly they plan to do. The resolution was broadly written and gives them legal protection if they take action to save the fund.
"We're committed to making sure that the life of the pension continues and to not playing a deadly game of financial chicken," said Deputy Mayor Pro Tem Erik Wilson.
Mayor Mike Rawlings already has a personal lawsuit against the pension system that aims to stop the board from paying out any lump-sum withdrawals after retirees yanked more than $500 million out of the $2 billion fund. Rawlings gave his full support to Kingston and the resolution Wednesday.
"This is hard work," Rawlings said. "We, as a council, need to make sure we do everything we can to save this system."
Kingston said Wednesday's resolution probably wouldn't have been necessary if the system had reached an agreement during mediation.
City and pension officials spent hours, morning until night on Monday and Tuesday, trying to reach an agreement with a mediator after talks between the two sides failed. But around 1 a.m. Wednesday, they called it quits.
"We worked really, really hard and did not reach an agreement," said Elizabeth Reich, the city's chief financial officer.
The city's plan to fix the pension was unpalatable for some police and firefighters. The proposal calls for much of the fix to come from reducing future benefit payments to retirees who received guaranteed interest rates of at least 8 percent on their lump-sum accounts.
Pension officials had proposed more modest cuts, paired with a city bailout of about $1 billion, only to have police and firefighters reject them in a vote. That money would have to come from pension obligation bonds, and the city would rather just pay more into the fund than its current annual contribution of more than $120 million a year.
City officials have feared that giving all the money at once would lead to the pension fund immediately paying out lump-sum payments, leaving the fund in its current lousy condition.
And the city wanted to tie in a provision that would protect the city from decades-old police-and-fire pay lawsuits. An unfavorable outcome in those cases could force the city into bankruptcy, which would put the pension in further jeopardy. But many police and firefighters want the two issues separated.
The failure to reach an agreement demoralized police and fire association leaders.
Dallas Fire Fighters Association President Jim McDade was hopeful that a deal could get done despite his belief that parts of the city's plan are "immoral and illegal." After Monday's talks, he heard the two sides were close.
"We went from close to having nothing," McDade said.
Dallas Police Association Vice President Frederick Frazier, who leads the group's political activities, said "it's like the air just went out of the room."
"We were all very hopeful that the system and the city would come to a conclusion," Frazier said. "There is much to blame here on both sides."
Police and firefighter association representatives and pension officials met Wednesday afternoon to figure out their next steps. In their statement, pension leaders said they "will continue to work with Texas legislators on an equitable and legal solution that provides a secure and stable retirement for Dallas' first responders." But legislators will have a new group called Taxpayers for a Fair Pension in their ears. The group, full of civic leaders — who also have deep pockets and political connections — will officially announce a campaign to support the city's plan later this week. Former Dallas mayors Ron Kirk, Laura Miller and Tom Leppert are co-chairing the group.
Numerous Dallas business associations, chambers of commerce and real estate groups have also signed on in fear of higher property taxes to pay off the billions of dollars in promises the pension can't afford to pay.
"We're delivering this call to action because this crisis will affect Dallas residents in the pocketbook for decades to come," Greater Dallas Hispanic Chamber of Commerce President Rick Ortiz said in a statement. "If not resolved, taxpayers could see a property tax hike, and the massive debt obligation will deter funding for key city services and desirable amenities that affect our quality of life."
Frazier said he's trying to get both sides back to the table to reach an agreement. State lawmakers have insisted that all sides find common ground on a single solution.
McDade is hoping new City Manager T.C. Broadnax, who starts his job next week, will be more agreeable than outgoing City Manager A.C. Gonzalez was during negotiations.
But Broadnax will be coming in blind after months of talks and a pension problem years in the making.
"He's going to have to come up to speed on it real quick," McDade said. "We need fresh eyes on this." Access the entire article HERE!