CINCINNATI - Some City Council members tried to reassure municipal workers who attended a special council meeting Wednesday evening about the city of Cincinnati’s troubled pension system, which is facing major shortfalls in the future.
Mayor Mark Mallory told a crowd of about 100 people, "There is no one here (on council) that wants to see a single retiree go without their benefits."
"We understand this is your life and we do take it seriously," Councilwoman Laure Quinlivan added.
Councilmen Charlie Winburn and Christopher Smitherman called for the special meeting. Winburn, a Republican, and Smitherman, an independent, said they felt stymied from getting answers about the pension system by council's Democratic majority.
Winburn and Smitherman said they've tried to get the issue placed on council's Finance Committee agenda, but are blocked by Vice Mayor Roxanne Qualls and others.
“The retirement system is in crisis and must be addressed,” Smitherman said.
Cincinnati’s $2.1 billion retirement system, which covers current and former municipal employees, has an “unfunded liability” estimated at $728 million.
But Paula Tilsley, executive director of the Cincinnati Retirement System, said its problems are long-term and current retirees shouldn't worry unnecessarily.
"There is no risk in the foreseeable future that retirees won't get their pension checks," Tilsley said.
The pension system covers 4,400 retirees or surviving spouses; there are about 2,900 active employees who pay into the system.
Smitherman, a financial planner, first began warning about pension problems in 2004 during his first council term.
“Each year, (the retirement system) is sending an estimated amount of $200 million in payments to current retirees,” Smitherman said.
“The current value of the pension being only $2 billion and not the needed $3 billion means the pension plan is sending out 10 percent of its value on an annual basis,” he added. “This is not sustainable. The health of a pension is defined as its ability to pay its future obligations not its present obligations. If you accept this definition, the (system) is not solvent.”
The system is funded at a 67 percent level, meaning that its assets do not cover projected future expenses. To be considered financially healthy, a pension system should be funded at a minimum of 80 percent.
Money for the system comes from investment income, along with contributions by employees and government.
Cincinnati’s funding problems stem from multiple causes including poor returns on investments due to the stock market crash in 2007-2008.
Tilsley told council the city's return on investments into the system for 2012 was about 11.9 percent, even though it was estimated only to be 7.5 percent -- a sign the economy is recovering. Still, she added, "We cannot invest our way out of this problem."
Some employees have criticized the city’s investment strategy in recent years, adding officials haven’t contributed enough to the system. Some politicians and residents, however, counter that medical benefits offered to retirees are too generous.
Tilsley noted that retiree benefits were "greatly enhanced" in 2000, while the economy was strong. The action included providing dental and vision benefits, and increasing the death benefit for spouses.
Although other public retirement systems took similar steps at the time, most of those began "tweaking their benefits every few years" as the economy worsened, she added. Cincinnati, however, did not.
Adding to the problem is the growing number of retirees. The system has 50 retirees over the age 100, and "hundreds" of retirees over the age 85, Tilsley said.
Smitherman and Winburn disliked that council rules limited their comments and questions to two rounds of three minutes each. Further, Winburn said he heard a rumor that council's Democratic members told City Manager Milton Dohoney Jr. not to attend the session, and agreed among each other not to ask questions to hasten the meeting's end.
Mallory and others sharply denied the allegations.
"I am not asking questions because, so far, I haven't heard anything we haven't been told before," said Councilman Wendell Young.
Meanwhile, Mallory noted the percentage of the city's payroll set aside to fund the system has grown from about 11 percent in 2006 to 20 percent this year.
"The effort is being made to increase the amount put into the retirement system," the mayor said.
Under a proposal unveiled by Dohoney on Tuesday, part of a $92 million payment the city would receive for contracting its parking services to the Port Authority would be used to increase the city’s contribution.
Part of the money -- $25.8 million – would be placed into a reserve account. It would allow the city to reach a 24 percent contribution in 2014, one year earlier than planned.
Cincinnati is the only city in Ohio that has its own pension system rather than being part of the Public Employees Retirement System (PERS), a statewide pension program.