From the inbox:
Mayor Annise Parker
In the face of growing concern about its ability to meet long-term retiree pension obligations, the City of Houston filed a lawsuit today against the Houston Firefighters’ Relief and Retirement Fund (HFRRF), one of three pension systems covering City employees. The lawsuit seeks to enable the City to have the same input on contributions and plan design for HFRRF that it already has with the Houston Police Officers Pension System (HPOPS) and the Houston Municipal Employee Pension System (HMEPS).
“State law that applies only to Houston is unreasonably restricting our ability to protect taxpayers and keep our commitment to secure and sustainable firefighter retirement benefits,” said Mayor Annise Parker. “It is clear from the difficulties experienced by other cities that this is an issue that must be addressed. We have to have the ability to negotiate these benefits at the local level and be able to verify the financial health of HFRRF. We cannot and will not kick the can down the road.”
Through the “meet and confer” process with HPOPS and HMEPS, the City is already able to negotiate employee contributions, retirement ages and benefit levels for police and municipal retirees. In the past, these negotiations have resulted in agreements that have improved the city’s ability to meet its long-term obligations for these two pension systems. Under existing state law, there is no similar process available for the firefighter pension system. Contrary to the laws that apply to other cities, Houston is excluded from the important financial decisions about benefit levels and the contributions to support those benefits for its firefighter retirees. These decisions are made by boards controlled by current and retired firefighters who have an obvious conflict of interest. Several attempts to obtain a legislative cure for this problem have been unsuccessful.
“Litigation is the only remaining option available to the City,” said City Attorney David Feldman. “Instead of Houston determining, or even having a meaningful say about the level of its own contributions to HFRRF, that decision is being made by people likely to benefit from the decision. The City is asking the court to declare unconstitutional the laws that allowed this. The suit also seeks to end the practice of HFRRF using taxpayer money to lobby in favor of such laws.”
Firefighters retiring with 30 years of service are currently eligible for an average initial monthly lifetime annuity of 94 percent of their average pre-retirement salary, plus an average estimate lump sum of approximately $850,000. The value of the average combined benefits for these retirees is estimated to be $1.6 million, which is equal to a lifetime monthly annuity of 197 percent of their average pre-retirement salary.
The City’s lawsuit does not seek any change in benefits being paid to current firefighter retirees, nor would it have any impact on HPOPS or HMEPS.
The press release is here, and a copy of the lawsuit is here. As you might imagine, the HFFRF did not take this lying down. I’ve put a copy of their press release beneath the fold, but here’s a quote:
The leadership of the Houston Firefighters’ Relief and Retirement Fund say the lawsuit filed today by Mayor Parker is nothing more than a power-grab and publicity stunt. The lawsuit is characterized as a political tactic aimed at attacking and hurting elderly and disabled firefighters and their families.
“The Texas constitution and statues that govern our plan have been in place since 1937, and has served our firefighters for over 75 years, and now according to Parker, our plan is all of a sudden unconstitutional,” says pension fund chairman Todd Clark. “Texas legislators have been supportive of our profession and have been the key decision makers in the protection of our plan.”
The Chron story has more reaction from the firefighters, including the president of the HPFFA, who among other things expressed surprise at the timing since the union is currently in negotiations with the city. I’d say if there’s one thing that Mayor Parker and the HFFRF agree on, it’s that the Legislature, in particular the Houston-area delegation, has been squarely on the side of the firefighters all along.
Anyway. The city had previously sued the HFFRF to get more access to their books, and won a ruling a few months later. This is a much bigger can of worms, as the city is seeking to do via the courts what it has been unable to do via the Legislature, which is get more control over how the pension fund operates. If you go back to the interview I did with Mayor Parker before last year’s election, she talked about what she wants the city to get. Skip to 8:54 for the start of the discussion about pensions, and 12:18 for the direct question about what she wants; basically, it’s to allow a defined-contribution option as an alternative for those who want it, and to make annual cost of living adjustments (COLAs) discretionary rather than mandatory. She does allude to some other changes she might pursue specifically for the firefighters’ pension, and I’m quite sure a change to the deferred retirement option (DROP) program would be on that list. You can also listen to the interview I did with Todd Clark and Chris Gonzalez last January if you want the opposing view. These things have all been points of contention for a long time, and in fact COLAs and DROP are both specified in the lawsuit. The city’s argument is that state laws regarding this pension only apply to Houston, and that is unconstitutional. They seek to overturn the Houston-specific laws so that the remaining state laws apply to Houston as well. We’ll see how it goes. Texpatriate has more.
The leadership of the Houston Firefighters’ Relief and Retirement Fund say the lawsuit filed today by Mayor Parker is nothing more than a power-grab and publicity stunt. The lawsuit is characterized as a political tactic aimed at attacking and hurting elderly and disabled firefighters and their families.
“The Texas constitution and statues that govern our plan have been in place since 1937, and has served our firefighters for over 75 years, and now according to Parker, our plan is all of a sudden unconstitutional,” says pension fund chairman Todd Clark. “Texas legislators have been supportive of our profession and have been the key decision makers in the protection of our plan.”
“It’s interesting that the Mayor can finance two lawsuits against the Firefighters’ Pension System but cannot finance the retirement of the men and women of the Houston fire department who are faced with a high degree of danger mixed with life and death decisions in their job in service to this city daily,” says Clark.
This lawsuit is led by the city attorney David Feldman who the last two years has been granted an 83% pay raise. The Mayor and the city attorney belong to the Houston Municipal Employees Pension System. This lawsuit omits their plan, and is specifically designed only to affect the firefighters plan. They don’t want to sue their own pension fund.
Taxpayers only pay approximately one-fifth of the benefits going to firefighters with the other eighty percent coming from the trust and firefighters themselves. Based on the projected payroll for 2012, 2013 and 2014 the City’s contribution to the Fund will be $12.5 million less than the last three years, a savings of $37.5 million.
The Houston Firefighters’ Relief and Retirement Fund has grown in size since being founded 1937. Originally administered by the City of Houston, in 1988 the Board of Trustees started hiring independent staff and exercising more autonomous control. In 1988 the market value of the Fund assets was $468 million. The plan is governed by Texas statute.