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Endorsement watch: The bonds

Endorsement season has officially begun.

The key referendum, Proposition A, is a solution to Houston’s potentially disastrous pension problem. A complex deal ushered through the Texas Legislature by Mayor Sylvester Turner would reduce the $8.2 billion unfunded pension burden now carried by Houston taxpayers to $5.2 billion. Union leaders representing police officers and municipal employees have agreed to sacrifice benefits worth roughly $1.8 billion. But the whole arrangement depends upon voters approving a $1 billion bond issuance, 1 of 5 city bonds on the ballot.

The pension bond wouldn’t raise taxes, nor would it increase the public debt. Houston already owes this money to its retired employees; this deal will take care of a debt that’s already on the books. The bonds will be paid off over the course of three decades. By coincidence, this happens to be a good time for the city to borrow money. This is like refinancing your mortgage when interest rates are low.

On the other hand, Turner bluntly and accurately told the Chronicle’s editorial board, if the pension obligation bonds go down, “it’s worse than the financial impact of Harvey.” Before this deal was struck, our city government was staring at the grim prospect of laying off more than 2,000 employees, about 10 percent of its workforce, a cut that would almost certainly impact police and firefighters.

[…]

Meanwhile, four other bond proposals would pay for facilities and equipment at everything from police and fire stations to city parks and libraries. At a time when our police officers are driving around in cars that are more than a decade old, we voters need to pass these capital improvement bonds.

The campaign for the bonds is underway, and I do expect them to pass. But this is a weird year, and turnout is going to be well below what we’re used to – and we ain’t used to particularly robust turnout – so anything can happen. The big task in this election for all campaigns is just making sure people know they need to go vote. If you’re reading this site, you already know that much. I say vote for the bonds as well, for all the reasons the Chron gives.

House passes pension reform bill

One step closer, though there are still issues to be worked out.

Mayor Sylvester Turner

The Texas House gave early approval Monday to a bill that would reform Houston’s three problematic pension funds, which have caused financial woes and spurred political battles for years.

The 112-28 vote for Senate Bill 2190 came after lawmakers made some key changes to the bill, including a provision that could let the firefighter pension fund bear a smaller burden for shoring up billions in shortfalls.

But State Rep. Dan Flynn, R-Canton, who authored the House version of the bill, worried that the Senate may not like the changes.

“This is an amendment that could very well derail the bill,” Flynn said Monday from the House floor.

[…]

State Rep. Dan Huberty, R-Houston, successfully got his House colleagues to amend the bill so that the firefighter pension fund has an opportunity to lower what its members give up in order to help close a large funding gap.

For months, city and state leaders have accused the firefighter pension fund of withholding actuarial data that would prove it could shore up its shortfall with fewer cuts to members’ benefit features. In the absence of such data, city leaders and state lawmakers put together SB 2190 and a House companion — authored by Flynn — that the firefighters opposed.

Keller said the retirement system wants to protect individual members’ information and has offered the city data under licensing agreements that included confidentiality provisions. He said he was surprised that became an issue on the House floor considering all firefighter salary information goes through City Hall.

“They know what each of us makes,” he said. “There’s nothing surprising in our data we hold.”

Huberty’s amendment will give the firefighter fund a deadline to provide the data to the city. It passed 90-42 over the objections of Flynn, who said the firefighter fund had months to help reach a compromise and that such a change could sink the bill when it goes back to the Senate.

“At this point it’s really too late to change the critical aspects of this bill,” Flynn said.

Flynn could have brought his House bill to the floor but chose instead to have a vote on the Senate version. I’m guessing he thought it might be easier to get it through, as if it had been passed unamended that would have been it. It will now go through a conference committee, so we’ll see what the final version says. At this point, I’d say it’s looking pretty good for passage, though it remains to be seen who will wind up being less happy about it than they were going in. The city’s press release is here, and the preliminary Chron story is here. I’ll link to the full story in an update.

UPDATE: Here is the full Chron story.

Pension reform bill passes House committee

Two for two.

Mayor Sylvester Turner

Houston’s pension reform bill will now move to the floor of each legislative chamber after a Texas House committee joined its Senate counterparts in passing the measure 6-1 Wednesday.

With Rep. Roberto Alonzo, D-Dallas, opposed, the pensions committee adopted House Bill 43, which will now head to a scheduling committee to be set for its next hearing.

“I am thankful to the committee members and Chairman Dan Flynn,” Mayor Sylvester Turner said in a prepared statement, referencing the Dallas-area Republican who oversees pension discussions. “Our solution continues to make historic progress in Austin. I am happy to see that our state lawmakers understand how important this is to Houston’s future. We are going to keep up the pressure until our plan becomes law.”

Houston Republican Sen. Joan Huffman’s committee passed the bill last month by a similar margin of 7-1. The main difference between the bills is that Huffman’s version seeks a referendum on pension bonds such as the $1 billion in bonds that are a key part of the reform package; the House version does not include that language.

See here and here for the background. The easy passage in the House committee, coupled with the passage of the Huffman bill in the full Senate, bodes well for the reform effort despite the opposition from the firefighters. Assuming HB43 does pass the full House, either it will need to go through the Senate or Sen. Huffman’s SB2190 will have to pass the House. The matter of whether or not to require a vote on the pension obligation bonds will be worked out one way or the other, and then we’ll go from there.

Firefighters will oppose pension reform bill

So it goes.

Mayor Sylvester Turner

Hopes that Houston’s firefighter pension board might agree to a compromise set of benefit reforms and end their opposition to Mayor Sylvester Turner’s landmark reform package proved too optimistic, after the two sides passed a Thursday deadline without a deal.

It remains unclear what effect counting the firefighters as confirmed foes will have on the bills now working their way through both chambers of the Legislature.

The Houston Firefighters Relief and Retirement Fund had joined police and municipal worker groups in backing preliminary terms last fall, but did not join their counterparts in agreeing to final legislative language.

Fire pension board chairman David Keller reopened the door to an agreement in testimony before a state House committee on Monday, saying recent talks with Sen. Joan Huffman – the Houston Republican whose committee approved the reform proposal last week – had been productive and that he was “hopeful” his board could agree.

Keller acknowledged he verbally agreed to a compromise Turner offered that included more than the estimated $800 million in benefit reductions the board had approved last October but less than the nearly $1 billion in cuts currently reflected in the legislation.

After the final numbers were crunched, however, Keller said the proposal cut too deep.

Things had looked more positive for consensus earlier in the week, but these things happen. I feel like we have come along far enough that success is more likely than failure, but failure is always an option. The question I have at this point is if the Senate version of the bill makes it through, will the firefighters oppose the pension obligation bond issue, in hopes of scuttling the deal by whatever means they can? This is the part of requiring a vote that makes me nervous, precisely because it’s another opportunity for people who don’t like this plan for whatever the reason to kill it. But first we need a bill to pass in the House. Look for the arguments made by opponents there as a preview of what we may get in November.

House hearing for pension bill

Another step in the process.

Mayor Sylvester Turner

Houston’s pension reform plan got its first hearing Monday in the state House, where rows and rows of current and retired firefighters appeared to voice opposition to the plan.

Municipal and police leaders testified in support, however, as did representatives of the Greater Houston Partnership and, of course, Mayor Sylvester Turner, who spent most of his first year in office negotiating the package.

“It is not the perfect pension bill, because, quite frankly, I don’t know if you can get the perfect pension bill, but it is a very good bill for all parties concerned,” Turner said at the hearing.

Even the opposition of the firefighters was tempered somewhat by the testimony of their pension fund chairman, David Keller.

He said a series of talks since the bill cleared a Senate committee by a 7-1 vote last week have produced “great movement” in better aligning the current proposal to the general terms Keller’s board approved last October, before negotiations lagged and his group failed to reach agreement with the city on final legislative language. Disputes over sharing information led the city to propose deeper cuts than initially had been agreed to; Keller said those issues have been resolved in the last week.

Rep. Dan Huberty, a Houston Republican, said he had even heard Monday morning from some firefighters who seemed to be in support of the bill. Keller said that was not quite right, but he was “hopeful” his board might ultimately wind up in agreement.

“Firefighters are not immovable,” Keller said. “We heard loud and clear that we should not expect status quo, and we did not expect status quo.”

That’s decidedly less contentious than the firefighters’ previous statement, so that’s good. No one has to love this bill, but everyone has to be able to live with it. The House bill (HB43 by Rep. Dan Flynn, who is the Chair of the Pensions Committee) differs from the Senate bill in that it does not require a vote on the pension obligation bonds. Hard to say at this point which version will prevail, but I’d expect both will have some changes made before all is said and done. HB43 was left pending in committee, so it’s not ready to advance to the House floor just yet.

Pension reform bill passes Senate committee

A major step forward.

Mayor Sylvester Turner

Houston’s pension reform plan cleared a state Senate committee in its initial hearing at the Capitol on Monday, despite the fact that all those who testified – including Mayor Sylvester Turner – opposed at least some portion of the omnibus package.

Retirees were concerned about benefit cuts. Some conservatives said the only path to true reform wold be to move new hires into defined contribution plans similar to 401(k)s, which the bill does not do. Firefighters, who never agreed to final language with the city, are opposed in part because the legislation would cut their benefits by what the state Pension Review Board estimates to be $970 million, up from about $800 million the firefighters agreed to in approving initial reform terms last fall.

Turner says those deeper cuts are to ensure the city gets the savings it needs in spite of the fire pension not providing comprehensive data to predict future costs; fire leaders say an ongoing lawsuit prevents them from complying. For his part, Turner – along with the city’s police and municipal worker groups – opposes the bill as written because Sen. Joan Huffman, R-Houston, added a requirement that the public vote on pension bonds that are a key piece of the proposal; the mayor has called the clause a “poison pill.” Ultimately, city officials hope the provision could be excised at some point in the legislative process. Turner also listed seven technical changes he wants that he said appear to be drafting errors in the bill; Huffman took no issue with those, but defended her decision to call for a public vote on the pension bonds.

The provision is a pet project of another Houston Republican, Sen. Paul Bettencourt, whose standalone bill to require a vote on any Texas municipality’s pension bonds also passed the committee on Monday.

“It’s important that voters have input,” Huffman said, adding that she believes voters would approve, that she would campaign for the bonds’ passage, and that the underlying math of the proposal would work without the bonds.

See here for the background, and here for the Mayor’s press release. The Huffman bill is SB2190; the House companion bill, which will have its hearing next Monday, is HB43. You know I’m not philosophically opposed to voting on the pension bonds, but as I said before, elections have winners and losers. I’ll be very interested to see who joins Mayor Turner and Sen. Huffman in campaigning for that bond issue to win, and who will join with the sore losers in campaigning for it to fail.

No one ever said pension reform was going to be easy

The firefighters’ pension fund isn’t happy with the way things are going.

Mayor Sylvester Turner

The plan to reform the City of Houston’s pension system is running into opposition from the Houston Firefighters’ Relief and Retirement Fund (HFRRF).

In a recent letter sent to its members, the HFRRF criticized Houston Mayor Sylvester Turner for ending the negotiations on the final version of the pension reform bill, which is being drafted in the Texas Legislature.

Turner has told the staff working on the bill’s final version to roughly match the terms for the firefighters to those that the Police pension fund has agreed to.

The HFRRF says it will oppose that option.

David Keller, the HFRRF’s chairman, notes that some of the adjustments firefighters wanted to see in the bill included “changes to the cost of living adjustments.”

“It would include changes to the deferred retirement option funding, it would change age of retirement for new hires,” Keller adds.

The Mayor said last week the unwillingness of the firefighters to fully abide by the terms he is proposing, for instance, increasing employee payroll contributions, would result in bigger benefit cuts than they tentatively agreed to last fall.

The Chron adds on.

Turner had said at last Wednesday’s City Council meeting that he was making good on earlier hints that the fire pension trustees’ failure to agree to reform terms would see the fund receive deeper benefit cuts than it had tentatively agreed to last fall. Turner said he had instructed legislative attorneys drafting the bill to roughly match the firefighters’ terms to those agreed to by the police pension.

“Our mayor, the former state legislator, has decided to use the insider’s game of the legislative process to pursue his own one-sided plan,” Houston Firefighters Relief and Retirement Fund chairman David Keller wrote in a letter to members released late Friday. “If the mayor’s plan for us is the version we last saw or worse, we will absolutely oppose it.”

In explaining his reason for breaking off negotiations this week, Turner had said that Keller’s board had not provided comprehensive data on plan participants to enable the city to accurately predict future costs under the reform plan. As a result, Turner said, the city was forced to propose deeper cuts to ensure the originally projected cost savings are achieved.

“Even in this message, there is no indication they are going to provide the data we have asked for repeatedly,” Turner said Friday evening, responding to Keller’s letter. “Without those numbers, we are unable to verify the cost of the reforms they have offered. I have been very patient throughout this entire process, but the time has come to move forward, and I am doing so in the best interest of the city.”

The do-nothing option has always been fine for the HFRRF, because the city has no control over how much it pays in, which includes cost of living adjustments. That’s always been the main sticking point, and was the focus of reform efforts by Mayors Parker and White, as well as the reason why their relationship with the firefighters was rocky. I don’t blame the firefighters for defending their position, but from the city’s perspective there’s no path to reining in costs that doesn’t include some control over COLAs. This has always been the fight, and it will continue to be the fight, probably even after a reform bill is passed, whenever that may be.

Year Two for Mayor Turner

Year One was busy, but a lot of what was done this year depends on what happens next year.

Mayor Sylvester Turner

Tasked last year with distinguishing himself from a crowded field of mayoral candidates, Sylvester Turner styled himself as a progressive with expansive policy goals.

He pledged to boost wages, improve educational opportunities and implement a new road repair job training program, stressing that Houston’s future depends on pairing such initiatives with core services improvements.

“I am bullish on Houston,” Turner would repeat, radiating optimism in the face of a tight budget and looming pension crisis.

A year into office, however, the mayor has set aside much of that to-do list in favor of an ambitious but moderate “back to basics” approach.

Pension reform – a topic he shied away from on the campaign circuit – now is the linchpin in Turner’s two-year plan, and he is loath to discuss much else.

That focus has paid off in the form of a reform package that he says will eliminate the underfunding of Houston’s three retirement systems in 30 years and limit the city’s exposure to market downturns.

Crucially, the plan has received buy-in from the fire, police and municipal pension boards, as well as praise from experts.

“When you look at where we were on Jan. 1, 2016, on pensions and look at where we are today,” Turner said recently, “there is no question that we have come a long, long way from where we started.”

The deal now must earn approval from the Texas Legislature, which controls Houston’s pension systems.

[…]

If Turner is successful, however, he intends to spend his political capital – earned, principally, from pension reform and closing this year’s $160 million budget gap – on campaigning to lift Houston’s limit on property tax collections.

The voter-approved revenue cap was instituted in 2004 and limits the increase in the city’s annual property tax collections to the combined rates of inflation and population growth, or 4.5 percent, whichever is lower.

Turner is not shy about pitching projects he would take on, absent the revenue cap, such as expanding the Houston Police Department by 540 officers by 2020. This plan may take on even more urgency, as HPD has seen a sharp spike in the number of officers filing papers indicating they plan to retire in the first half of 2017.

“We need more police officers. We need more equipment. We need more EMS units. We need more training,” Turner said in September, after a southwest Houston shooting wounded nine. “You can’t keep lowering the property tax rate because of this revenue cap and expect the city to be fully equipped with all of the assets that are needed.”

I’m pretty sure there’s more than one person on Team Turner who is grinding their teeth at the “back to basics” usage, since that was very much not Turner’s campaign slogan. Be that as it may, the general formulation is correct. Turner spent a lot of time this year working on a pension deal, and what he does next is tied to his success at getting the necessary legislation passed to implement that deal. And if he is successful, then the rest of 2017 will largely be focused on amending the revenue cap. If he can get both of those things done, then the sky is the limit and anything he wants to do is on the table. If not, it isn’t fatal, but it does leave him stuck. How much time can he spend on other things if he still needs to work on getting these things done? I’m sure he’d rather not have to find out.

How likely is Turner to get the pension legislation through? I have no idea, but if there’s anyone in a position to do it, it’s Turner. This is one of those times when experience really matters. No guarantees, because the Lege doesn’t work that way, but if anyone knows how to navigate these waters, it’s Turner. I should note that the pension bills aren’t the only thing on the city’s legislative wish list for 2017. Most of the specific items are pretty narrow and wonky, but the overriding principles laid out in the first few pages will keep the lobbying team busy, primarily I fear on defense. But if you want to know what the city does and doesn’t want from Austin next year, there’s your reference guide.

One more thing:

[Bill] King, last year’s mayoral runner-up, said he is considering challenging Turner, depending on his health and how pension reform plays out.

“If he ends up not solving the pension problem – which he promised he would do – then I think somebody needs to step in and save the city from going bankrupt,” King said.

King, who would like to see Houston switch from defined benefit to defined contribution plans similar to 401(k)s, has gotten under the skin of Turner and his staff by sending regular email blasts criticizing the city, including on inauguration day, and holding occasional press conferences.

“The campaign is over, and the total focus should be on meeting the needs of all Houstonians in their moment of crisis,” the mayor tweeted in April, after King criticized the city’s flood response.

I get those emails, too. You can probably guess what my level of interest in them is. King is certainly able to be the next Ben Hall if he wants to – he’s got the money for it, and apparently the lack of anything better to do. The question is, what has Turner done so far to lose anyone’s support? Based on how things have gone so far, I’d say not much. But hey, keep hope alive.

Council ratifies Turner’s pension plan

From the inbox:

Mayor Sylvester Turner

Mayor Sylvester Turner

On a 16-1 vote, Houston City Council has endorsed Mayor Sylvester Turner’s historic package of pension reforms. The vote clears the way for the City to move forward in partnership with the pension systems to seek legislative approval of the reforms.

“I am bubbling over on the inside,” said Mayor Turner. “I am thankful to everyone who has helped get us to this point. That includes City Council, the pension systems, our City employees and many others. This plan is historic, transformative and budget neutral. We are solving our pension problem permanent and we are doing it without needed a tax rate increase. There is no other plan out there offering the same benefits. The Houston solution can be the model for other cities with similar challenges.”

The police, fire and municipal pension systems all signed off on the package of reforms prior to today’s City Council vote, marking the first time that the City and all of the pension groups have been united.

The plan immediately reduces the City’s nearly $8 billion pension debt by over 30 percent and then sets a 30-year fixed payoff schedule for the remaining $5.3 billion of debt. This immediate reduction is accomplished through a combination of benefits changes that include scaling back cost-of-living adjustments, higher employee payroll contributions and phasing out of the Deferred Retirement Option Program, known as DROP, which allows employees to accept retirement benefits while continuing to work for the City. In return for the concessions, the City has agreed to issue $1 billion in Pension Obligation Bonds to make up for years of prior underfunding of the pension systems.

“It is a big deal that employees have agreed to these benefit changes,” said Turner. “I know this has not been easy, and I thank each of them for their patience, understanding and service. This plan will provide stable and sustainable retirements at an affordable cost to the taxpayers who foot the bill. Retirees won’t have to worry if the check will be there.”

Moving forward, predictions about the anticipated performance of pension system investments will be based on a more conservative seven percent assumed rate of return. If there are market changes that cause costs to exceed pre-agreed limits, there is a mechanism to force additional changes in benefits to bring everything back in line. A requirement that both sides share information will ensure compliance with the required 30-year payoff schedule.

State Senator Joan Huffman and State Representative Dan Flynn are expected to carry the Houston pension legislation. Bill filing for the 2017 legislative session begins mid-November 2016.

See here and here for the background. CM Mike Knox was the lone No vote, saying he couldn’t support it without there already being a bill written. The Chron story fills in a few details.

Turner secured the political chip of a prompt and lopsided endorsement by using an impassioned speech to persuade Councilman Michael Kubosh to remove his “tag,” a parliamentary maneuver that would have delayed the vote. Kubosh had said he initially tagged the measure at the request state Sen. Paul Bettencourt, a Houston Republican who has called for a delay until more information was available on the reform plan.

“Either you all are going to represent the people of the city of Houston or – I’m going to borrow your term Councilmember Kubosh – are you going to represent political interests? I stand with the people of the city of Houston,” Turner said. “I was voted (in) to represent their interests, not some party affiliation or some political interest or somebody who wants to be mayor.”

Turner’s comments plainly were directed at Bill King, who was runner-up in last year’s mayoral race and who joined Bettencourt at his news conference. The duo said the detailed reform proposals were public for too short a time and too vague to be properly vetted, particularly a key “corridor” provision that would force benefit cuts in the future if a market downturn led the city’s payments to increase above a specified threshold.

King and Bettencourt say the city should switch new hires to retirement savings plans similar to 401(k)s, but acknowledged a well-written “corridor” provision could offer the same benefits to the city.

[…]

Most council members, however, referenced the briefings they had received on the plan and echoed Turner’s point that no public speaker in the six weeks since the reform outline was first announced had appeared before City Council to criticize it.

“I want to make sure the public understands we have been briefed, and it wasn’t a 24-hour-ago briefing,” Councilwoman Brenda Stardig said.

Councilman Dave Martin, like Stardig, a conservative, offered even stronger comments.

“I did not vote for you. I did not support you. I’m supporting you 100 percent on this,” Martin told Turner. “I think it’s ridiculous for people to criticize this plan. It’s been transparent; it’s been thorough. We’ve been diligent. We don’t need any more information. Maybe the state does, but do your homework.”

Yeah. Just as a reminder, the Kinder Institute has analyzed the plan, so we are not operating in an information vacuum here. I’m sure if Sen. Bettencourt had called the Mayor’s office and asked for a briefing, he’d have gotten it. But it’s easier to preen than it is to prep, so here we are. My guess is we’ll see bills get pre-filed for this, probably in November, so we’ll know soon enough what that will look like. The next question is who will support it and who will try to kill it. The games have just begun.

Pension deal approved by firefighters

It’s a big deal, though it’s hardly a done deal yet.

Mayor Sylvester Turner

Mayor Sylvester Turner

For the first time ever, the Houston firefighters’ pension board agreed Monday to accept benefit cuts for current workers and retirees, potentially paving the way for a solution to a 15-year-old crisis that has threatened to bust budgets and weaken the city’s financial stability.

By a 7-2 vote, the firefighters panel joined the police and municipal pension boards in agreeing to give up some benefits in exchange for certainty in a complex deal that would eliminate underfunding of Houston’s three retirement systems in 30 years.

The reform package, which Mayor Sylvester Turner heralded as a “historic turning point,” heads to City Council for approval on Wednesday, then to the Legislature, which controls city workers’ retirement benefits.

Although passage of the reform in Austin is far from a foregone conclusion, Turner was optimistic the deal would survive any legislative turbulence.

“For the first time ever, all three pension systems have been willing to work with the city in a very productive manner. We’re all on the same page and moving forward as a united front,” Turner said at a press conference. “We are closer than ever to solving what no one else has been able to solve over the last 15-plus years. The finish line is certainly within reach.”

The mayor’s declarations were firmer than those of fire pension chairman David Keller.

“I think it substantially moves it forward, but there’s still a lot of road to go,” Keller said. “It’s certainly no end. It’s kind of a beginning.”

A statement released by the fire fund after the vote called the agreement a “non-binding framework,” and no trustees elected by active or retired firefighters appeared at Turner’s press conference.

See here for the background. There’s a lot of talk later in the story about maybe filing a lawsuit over this – by Andy Taylor, of course, who has never turned down a possible payday – but the more immediate concern is about ensuring a bill passes through the Lege to ratify this. I have been of the opinion that if the city made a deal with the pension funds, the Lege will be willing to ratify it. That was under the assumption that none of the stakeholders would lobby against it, which may not be the case here. For now, though, I’ll stick with what I said up front – this is a big deal. Now it’s on Mayor Turner and the city’s lobbyists to finish it. The Mayor’s press release is here, and an easy-to-read executive summary of the changes to all three plans is here. The Urban Edge has more.

Pension deal takes a step forward

Not quite there yet, but getting close.

Mayor Sylvester Turner

Mayor Sylvester Turner

Houston’s police and municipal pension boards have agreed to a landmark reform package produced over months of intensive negotiations at City Hall, and Mayor Sylvester Turner hopes the firefighters fund will follow suit with a vote Monday.

The pending proposal, which puts Houston the closest it has come to solving a 15-year crisis that has contributed to recent credit downgrades and threatens to bust the city budget, would eliminate Houston’s pension underfunding in 30 years and avoid more than $2.5 billion in future costs by reducing benefits.

It would also limit the city’s exposure to future market downturns by assuming more realistic investment returns, and calls for issuing $1 billion in bonds to help close the funding gap.

The deal also includes a hotly debated provision that would require future benefit reductions or higher worker contributions if a market downturn or other factors drive the city’s contributions above a specified cap.

The next step is to take the agreement to Austin in the form of legislation, as city workers’ pension benefits are enshrined in state statute.

“We all recognize that the course we were on was going to be destructive for everyone,” Turner said, making a rare appearance at a City Council committee discussing the reforms Thursday morning. “We all had to recognize there were going to be some changes. We tried to strike a balance. Under this plan there is certainty for all employees that there’s a retirement system they can count on that is reliable and sustainable, and we do not have to have this system be a political football year after year. I wish at the end of the day we didn’t have to make any changes at all, but that would be naive and unrealistic.”

Police and municipal pension officials declined comment.

Fire pension chairman David Keller said he can see his board’s vote Monday being decided by one member, or by a wide margin.

“I wish I had a crystal ball on this, but I really don’t know. It’s just hard to gauge what the outcome would be,” he said. “We’re proceeding with a great deal of caution.”

If Keller’s board rejects the deal, city officials say it’s not clear precisely what would happen, but sources close to the talks said the mayor has made clear to the firefighters fund that intransigence on a mutually agreed deal could result in the city writing less generous terms into the legislation on the fire trustees’ behalf.

[…]

Houston Retired Firefighters Association president Nick Salem said his group accepts changes must occur, but is troubled by one of the several dozen benefit tweaks: A change that would reduce annual cost-of-living adjustments for firefighters who retired before 1997, prior to the generous benefit increases that first caused pension costs to skyrocket after 2001.

About 600 of Salem’s 3,100 members fall into that category, and he said many are near the poverty line. Retired Houston firefighters do not received Social Security benefits.

“We don’t want to get in a big fight and kill this whole deal with the city because we want a deal with the city, but we’re having severe issues with this,” Salem said. “Some retirees are living on $1,000 a month. We’re not against the deal, but we’re against this one particular part. We’re trying to figure out what we’re going to do about it.”

See here, here, and here for the background. The firefighters have always been the main challenge here, as they have the most to give up and the strongest starting position. Let’s just say there will be a lot less turbulence, here and in Austin, over the next six to eight months if they ratify the deal on Monday.

Kinder Institute analyzes Mayor Turner’s pension reform plan

From the inbox:

Mayor Sylvester Turner

Mayor Sylvester Turner

Rice University’s Kinder Institute has done the preliminary math on Mayor Sylvester Turner’s historic pension reform plan and determined the numbers appear to add up if all of the components are implemented as envisioned. The institute is one of several agencies to analyze the mayor’s proposal since it was unveiled last week.

“I welcome scrutiny of this plan by experts because it helps address the unfounded arguments being made by others who have no financial background,” said Mayor Turner. “There is no doubt this plan relies on a complex package of reforms. Without implementation of each piece, we will not achieve the anticipated results. Thankfully, the pension systems are sharing more data than ever before and are committed to continue working on information sharing so we can manage costs going forward.”

According to Kinder Institute Director Bill Fulton, the mandatory cost containment provision in the mayor’s plan, if executed properly and consistently over time, could provide a way for both sides to share in the upside and sacrifice when times are tough. Fulton said the plan outline seemed to show “shared sacrifice” on the part of both the city and its workers.

[…]

The Kinder Institute did the initial analysis in a blog post the day of Mayor Turner’s announcement based only on information that is publicly available. Mayor Turner did not request the analysis. A more detailed analysis is expected later.

The Kinder Institute’s analysis can be found here: Kinder Institute Pension Analysis.

Here’s that URL again, and more on the pension deal itself can be found here and here. The KI piece basically says that if everything works out as planned and envisioned, then the long-term funding gap can be erased. If you’re thinking that’s a pretty big “if”, you’re right, but the bottom line remains that the plan is plausible. Some legislation will need to be passed next year – I have no idea what Plan B is if that fails to happen – and before we get to the point of writing a bill and finding a sponsor, we need buy-in from the firefighters. That’s a non-trivial amount of work to be done, but at least there is a roadmap that may be used by all the vehicles in the procession.

More on the pension deal

The full version of the Chron story adds a lot of detail.

Mayor Sylvester Turner

Mayor Sylvester Turner

Under the tentative deal, the funds would assume more realistic investment returns – 7 percent rather than 8 percent to 8.5 percent – and would recognize all recent market losses on their books at once. The city also would erase the plans’ underfunding within 30 years and make its full annual payment to all three funds.

These changes would help ensure the pension problem does not linger for decades to come, but they first make the hole deeper, increasing the underfunding to $7.7 billion.

To dig back out of the hole created by more realistic funding calculations, Turner asked the funds to reduce benefits enough to slash the underfunding by roughly a third, or $2.5 billion. That would put the unfunded liability at about $5.2 billion.

Turner stressed that he has left it up to each pension fund to decide how precisely to adjust benefits to achieve those cost reductions.

However, he said there is no way to achieve meaningful reform without reducing annual cost-of-living increases for retirees, workers and new hires, and changing the city’s deferred option retirement program, or DROP, which lets current workers eligible for retirement stay on the job and earn a salary while accruing the pension payments they would have received in retirement, with interest.

He also said employees would need to contribute more of their paychecks toward their pensions.

To further reduce the funding gap, Turner plans to issue at least $1 billion in bonds and invest three quarters of the money into the police pension fund and the remaining quarter into the municipal pension fund. The idea, common among governments with pension shortfalls but also deeply controversial among finance experts, is that the city would pay less interest on these so-called pension obligation bonds – say, between 3 percent and 4.5 percent – than it would pay at the pensions’ new 7 percent assumed rate of return.

Turner said this would lower the city’s pension payments so that the combination of funding retiree benefits, paying down past underfunding and paying down the pension bonds would cost the city the same amount it is paying today.

Arnold Foundation pension expert Josh McGee said he thinks the plan is a step in the right direction, but he worried about issuing so much in pension bonds.

“Pension obligation bonds are troubling, especially pension obligation bonds of this size, $1 billion,” McGee said.

If the interest the city must pay on the bonds exceeds the investment returns on their proceeds, McGee said, “you could end up in a situation where you cost the city more than if you’d just paid the money into the pension plan over time.”

The Government Finance Officers Association and the Society of Actuaries both oppose the use of pension obligation bonds.

Houston still has roughly $600 million in pension debt outstanding from former Mayor Bill White’s 2004 reforms that sought to shore up the funding while cutting benefits for new hires.

See here for yesterday’s post. We are still awaiting the specifics, and just because there is a plan doesn’t mean it will work out the way we want it to. The contingencies for when things don’t go as expected will be crucial. This is still a big step forward, one that has been very elusive in the past. I look forward to the council discussion when Mayor Turner brings it all to them. Campos has more.

Mayor Turner announces pension fund deal

From the inbox:

Mayor Sylvester Turner

Mayor Sylvester Turner

Negotiators for the City, the Houston Police Officers’ Pension System, the Houston Firefighters’ Relief and Retirement Fund and the Houston Municipal Employees Pension System have developed Preliminary Points of Understanding on a structural approach to long term, sustainable, defined benefit pension reform. Detailed formal plans continue to be developed and will need to be presented to the governing bodies of the three pension systems, City Council and the state legislature for approval.

“This reform accomplishes the objectives I set at the beginning of this process,” said Mayor Sylvester Turner. “The plan I am outlining today immediately reduces and later eliminates the unfunded pension liability, controls costs going forward, allows us to retain employees and allows us to present to the state legislature a much more united front. It is a budget neutral, 30-year fixed payoff plan that includes significant cost avoidance from what the City would need to pay in the absence of reform. No other plan does this and takes the issue off the table permanently. We will have fully funded, secure, sustainable and affordable defined benefit pension plans that our employees can rely on and our taxpayers will find fiscally responsible.”

With implementation of the changes, the City’s unfunded pension liability immediately drops by $2.5 billion and continues dropping for the next 30 years, at which time it will be paid off. This approach replaces the present practice of restructuring the liability every year with a 30-year closed amortization model that is a pension best practice and a requirement of the City’s financial policies. Just like a fixed rate consumer mortgage, the liability will be paid off at the end of 30 years.

To substantially reduce risk related to market performance and in keeping with the national trend for pension systems, the assumed rate of return on pension investments will be reduced to 7%.

To further stabilize the pension funds, the City will be required to make the full annual contribution to all three pension systems. Payroll contribution rates will be fixed over the 30-year period, providing more predictable budgeting. The proposal cuts the City’s annual obligation to a manageable level and, most important, is budget-neutral while significantly reducing what the City would need to pay to cover the full annual contribution without reforms.

The plan also employs $1 billion in pension obligation bonds for funds that have not received the full annual required contribution from the City in recent years. This will increase the City’s debt, but earnings from pension investments are anticipated to more than offset the borrowing costs.

To ensure the City does not find itself in the same place again, there is a cost-management component. If future market changes cause costs to exceed specified limits, the City and the pension systems will return to the negotiating table to work out adjustments to bring costs back in line. Mayor Turner characterizes this as a cost management corridor that contains a thermostat that must be kept at a set temperature. The thermostat concept is the only point on which all of the parties lack unity. The police and municipal pension systems have gotten comfortable with it, but the firefighter pension system has not, so far. Talks are continuing.

“These points of preliminary understanding are historic in nature because of how impactful they are,” said Mayor Turner. “I have discussed them with numerous stakeholders and key members of the state legislature. The response has been very positive. To my knowledge, no other city in the nation has crafted a plan that addresses the problem in quite the same way. We have a way to solve our pension issues for good, and our approach can serve as a model for other cities.”

There will be changes in employee benefits. They are different for each pension system but, basically, will affect one or more of the following: cost of living adjustments, future benefit accrual rates and the DROP program. More details will be forthcoming once the finer points of negotiation are finalized and the governing bodies of the pension systems consider these agreements.

“These changes are being made in a manner that minimizes the impact on the thousands of police, fire and municipal workers eligible to retire today,” said Turner. “We must retain these employees to continue to serve the residents of this city. I appreciate the pension system representatives who have recognized the status quo must change and have been willing to move away from previously held fixed and non-negotiable positions. The pension systems have also shared more data than ever before and are committed to continue working on the right way to share the data we need to manage our costs going forward. There is still much work to be done, and I know there will be disagreements along the way, but we have come so far since we first began talking seven months ago.”

Mayor Turner has never wavered from his promise to accomplish pension reform while still maintaining defined benefit plans. However, he did have his financial analysts study implementation of defined contribution plans. They found that option would increase immediate costs and provide no financial relief for at least 30 years.

This contribution from City employees is step one of the shared sacrifice model Mayor Turner is asking everyone to help with. He does not expect City employees to shoulder the entire burden. Once pensions are fixed, he intends to ask voters to repeal the revenue cap that handicaps the City’s ability to keep up with the needs of a growing population. No other governmental body in the state has such a restraint.

“I took this job knowing that our City faced difficult public policy challenges,” said Turner. “I promised pothole repairs in record time, and we delivered. We followed that achievement by closing Houston’s biggest budget gap since the Great Recession. We delivered a budget built on sustainable, recurring improvements, and it was adopted by City Council unanimously and in record time. Now, we bring you a solution to Houston’s pension challenge that meets the needs of our City, its employees and its taxpayers. To all concerned, I say you can trust this solution to deliver on our promise of pensions that protect our employees’ retirement security while remaining affordable and sustainable for the City and its taxpayers”

The proposed pension reforms announced today have been discussed with numerous stakeholders and key members of the state legislature with very positive results.

The annoucement of the press conference for this came out just after midnight last night. ABC’s Miya Shay posted news of it on Facebook a couple of hours before then. The actual press release shown above hit may mailbox at 3:45 PM. As the Chron story notes, representatives of the police and municipal employees’ pension funds were there, but no one from the firefighters’ pension fund was in attendance. This press release, which I received maybe ten minutes after the one above, explains why:

The Houston Firefighters’ Relief and Retirement Fund (“the Fund”) is continuing to work with the City of Houston, but as yet, no agreement has yet been reached on adjustments to the Fund’s current plan “We have discussed economic changes that would fit within the guidelines set forth by the Mayor. We have also presented issues that are important to us. However, no resolution has been made,” says David Keller, the Fund’s Chairman.

“This has been a challenging process for numerous and various reasons along the way. The HFRRF became the strongest of the three Houston pension funds and one of the most successful in the State by careful deliberation and due diligence. We have been applying the same approach here. Every adjustment proposed was considered based on the impact it would have on the various populations of the membership.”

The Fund began discussions with the City of Houston with the purpose of helping to shape reforms rather than having them imposed by the Legislature. It is the Fund’s goal to resolve issues with no threat to the earned benefits to Houston firefighters. The Fund believes these benefits are part of the total compensation of its members.

The statutes that govern the Fund are thorough and reasonable, employing a sound formula that determines contributions and solid funding. The Fund is one of the best funded public pension plans in the State of Texas. The City of Houston pays only about 20% of the cost of benefits going to retired firefighters with the remaining 80% or so coming from the Fund’s investments over the long term of the Fund’s existence and the firefighters’ own contributions to the Fund.

Still a few things to be worked out, I guess. Even without that, there are still plenty of details to be filled in about how this will work and what legislation will be needed to enable it. As for the pension obligation bonds, Mayor White floated some of them while in office. It would be nice to know whether the experts think that was a good idea or not. In this case, interest rates are sure to be lower than they were then, and this time there will be an overall plan in place for paying down the long-term liability. If this is everything Mayor Turner claims it is, and if all three funds and the Legislature are on board, it’s a huge win and a big item to cross off his to-do list. As always, the devil is in the details, and we’re waiting on those. But it sure does sound promising.

Pension reform update

Things are happening.

Mayor Sylvester Turner

Mayor Sylvester Turner

Longtime firefighters pension fund chairman Todd Clark has retired from the department and resigned his post, a move City Hall observers interpret as perhaps the clearest sign yet that Mayor Sylvester Turner’s push for pension reform may succeed.

The municipal pension also is in upheaval, having bought out former director Rhonda Smith’s contract for nearly $438,700 and replaced her with David Long, a controversial figure who played a central role in the 2001 benefit changes that created the city’s pension funding shortfall, a gap that has now reached $5.6 billion.

The mayor last week sidestepped questions about whether Clark or Smith’s departures were harbingers of reform, saying the results of his negotiations matter more than who is at the table. Though sources with knowledge of the talks say they have intensified in recent months, Turner gave a cautious assessment of his progress.

“We’re having conversations, and I think the conversations have been constructive,” Turner said. “This is not an easy subject matter, and I’m under no illusions. I mean, it’s hard. It’s hard. Since 2002, no previous mayor has resolved it, especially on a long-term basis. But we shall see. I’ll take it one day at a time.”

[…]

Sources with knowledge of the talks said Clark was upset when he put forward a reform proposal earlier this year that went further than any of his previous offers, only to have Turner seek further changes.

Seeking more optimistic news from Austin, Clark then met with state Sen. Joan Huffman, R-Houston. But the sources said Clark came away from that discussion having concluded that hoping for the best in Austin during next year’s legislative session would be even riskier.

Confronted with the choice of agreeing to unpalatable changes or risking an even less palatable outcome in Austin, the sources said, Clark chose to step down.

Huffman said she learned of Clark’s retirement, which came shortly after their meeting, only when he announced it publicly. But Huffman said in her meetings with all three pension boards she has urged them to strike a deal with Turner.

“I’ve made it clear to them that I strongly urge them to sit down and to work this out, that the politics-as-usual was not going to work and that it was only fair to their members and to their people that are going to retire one day that this system be sound,” Huffman said. “I was firm about it and will continue to be firm about it, because they have to work it out.”

Huffman said she has tried to act as an arbiter, saying she would prefer the funds “fix what they have” rather than switching to a 401(k)-style system abhorred by workers as much as it is loved by some conservative lawmakers.

“There is a feeling that there will be good-faith efforts to get something done. The tough part, of course, is always bringing along the membership of these groups,” she said. “I understand that’s the tough part, but they need to, given the facts – and the facts are that the system is unsustainable. It hurts to fix it, but it would hurt a lot more if the system were to collapse.”

Todd Clark was a strong defender of the status quo for the HFRRF, so his departure could indeed be an indicator of how the wind is blowing these days. That probably suggests that the firefighters themselves are – ready for? resigned to? some other verb? – change as well. Mayor Turner seems to keep things like this close to his vest, so we’ll know more when he’s ready to make an announcement. In the meantime, this is your Conventional Wisdom Update for the week.

Pension progress report

Our favorite subject, back in the news.

Mayor Sylvester Turner

Mayor Sylvester Turner

Mayor Sylvester Turner and the leaders of the city’s three pension boards made clear to a visiting group of state lawmakers on Monday that they agree a fix to the city’s growing pension burden must be found, perhaps by the mayor’s deadline of year’s end.

The state House committee on pensions set up camp at City Hall Monday to hear testimony from the mayor, his rival in last fall’s mayoral contest, Bill King, city workers and various pension experts about the challenges presented by Houston’s retiree benefits.

[…]

The chairs of the municipal (Sherry Mose), police (Terry Bratton) and fire (Todd Clark) pension boards all stressed their commitments to continuing to work with Turner in the coming months.
Even Clark, who rarely missed an opportunity to accuse former mayor Annise Parker of “attacking firefighters,” struck a conciliatory tone.

“We will continue the dialogue going forward, and we do believe by the end of the year we will have an agreement,” Clark said. “We agree that the city should be healthy and we’re willing to do our part.”

Granted, the pensions’ leaders pushed back a bit. Municipal and police leaders stressed that the city must be forced to meet its obligations, since the city’s failure to make its full payments has helped create those plans’ poor funding levels.

Both also stressed that they already have sacrificed by cutting benefits for new hires, with Mose saying, “Reform plus time equals success.” Bratton, for his part, pointedly noted that firefighters have not been similarly accommodating. Clark declined comment on that.

Clark, for his part, noted that firefighter retirement costs amount to only a few percentage points of the $2.3 billion general fund budget.

In general, however, it was clear the pension boards planned, at least publicly, to embrace “change” at the hearing.

“We see this as an opportunity. We really don’t want to come back in 2019,” Bratton said. “Our members have worried too long about the most important benefit they have and it’s time to allow them peace of mind in knowing that their benefits are secure and the plan is sustainable.”

There are plenty of people of varying degrees of trustworthiness out there who are happy to get into the gory details of this and tell us all just how DOOMED, DOOMED we are, so I’ll leave that to them. What I know is that politically speaking, Mayor Turner has staked an awful lot on his ability to get the pension funds to agree to some fundamental changes to help ease Houston’s short-term fiscal problems while ensuring the long-term future of these funds that will then be ratified by the Legislature. This is obviously a very narrow and perilous path to walk, though just getting everyone to the table to talk was a big achievement. I don’t want to say that Mayor Turner’s term in office will be judged a success or failure depending on the outcome of all this, but I think it’s fair to say that a significant part of his grade is riding on it. We’ll see what we get later this year.

Police officers’ pension fund speaks up

The firefighters’ pension fund is the one that gets all the attention, but it’s not the only one the city is responsible for. The Houston Police Officers Pension System (HPOPS) has sent a letter to the city reminding it that they have a deal that restricts what the city can request from the Legislature.

Police pension leaders, in a March 11 letter to Mayor Annise Parker and City Council members, asked for documents proving that city officials are complying with a provision of the 12-year deal, approved in 2011, that requires the city to join the fund in opposing legislation that would affect the terms of the agreement.

The letter named no particular official, but it would be hard to miss the recent actions – and accompanying press releases – of mayoral candidates and City Councilmen Steve Costello and Oliver Pennington, who back a bill filed by Rep. Jim Murphy, R-Houston, that would grant the city local authority over its three pension plans. Today, the plans are controlled in Austin, where lawmakers have stymied repeated attempts at reform. The rising cost of pensions has caused stress at City Hall for more than a decade; Houston is paying $353 million into its pensions this fiscal year, almost twice what it spends on trash pickup, parks and libraries combined.

In writing the mayor, police pension officials also sought a meeting, which they got Friday morning. City Attorney Donna Edmundson said the gathering was cordial and brief, and served simply to confirm that pension leaders and the Parker administration view the agreement similarly and will thus jointly oppose Murphy’s bill, despite the mayor having sought related legislation in years past.

The key, Edmundson said, is that when the agreement refers to “the city” it refers to the executive branch – in this case, the mayor, her top staff and legislative coordinators – and not individual council members in the legislative branch.

“Council member Costello has gone to Austin. But in those trips to Austin, he’s not representing the city of Houston, and they just wanted to be clear on that and make sure we’re on the same page,” Edmundson said. “We can’t stop an individual from going to Austin and expressing his or her views or the views of his or her constituents. They have a First Amendment right.”

Police pension representatives confirmed Edmundson’s characterizations, but declined further comment.

On the fund’s website, however, chairman Terry Bratton on Friday posted that he had met with Parker and that their plans aligned.

“The agreement provides that the city and HPOPS (Houston Police Officers’ Pension System) will work together to oppose bills adversely impacting HPOPS. The mayor is aware of the provision and intends to honor the contract,” Bratton wrote.

Just a reminder that there’s more than one dimension to the pension issue, and that if you think Mayor Parker should be supporting Rep. Murphy’s bill, the 2011 agreement with HPOPS – which as the story notes, both CMs Costello and Pennington voted for – says she cannot. Mayoral candidates Costello and Pennington are free to do what they want, but that agreement with HPOPS will bind them going forward if one of them gets elected.

Meanwhile, the chair of the firefighters’ pension fund sent a letter to the Chronicle to point out a few things regarding the recent deal.

Regarding “Missed chances” (Page B8, Friday), last August, during a special subcommittee meeting of the Houston City Council’s Budget and Fiscal Affairs Committee, several members of City Council challenged the board of the Houston Firefighters’ Relief and Retirement Fund (HFRRF) to develop an alternative proposal to Mayor Annise Parker’s plan for newly hired firefighters.

In response to this challenge, HFRRF developed a proposal that addressed several issues. Primarily, it maintained the hard-earned and promised benefits of our active and retired firefighters. Additionally, it addressed the City’s contributions needs during the next three fiscal years and avoids costly litigation for all the parties.

Throughout the months of August and September, members of the HFRRF board, including myself, and staff members personally met with almost all members of the City Council and reviewed our proposal.

During these meetings, each of these members were advised that HFRRF was participating in discussions with the mayor about the proposal. Most members expressed encouragement that we had voluntarily engaged in a discussion with the mayor and hoped that some form of agreement might be reached.

Over the next several months, we participated in many meetings in the mayor’s office. Included in these meetings were the mayor, her staff and some members of Council. The mayor also attended two public board meetings at the HFRRF office.

Traditionally, when two parties attempt to come to mutually agreeable terms, each side receives some benefit for their considerations to the other party.

I believe that both the HFRRF and the mayor recognize that the result of this agreement is a reasonable solution, and it addressed the challenge initiated during the August subcommittee meeting.

Todd Clark, chairman of HFRRF

Here’s a post about that Council meeting in August. Looking for that also reminded me that news of the deal was first reported in September. Clearly, a lot of people, myself included, had forgotten about that. The deal that was agreed to this month doesn’t look all that different from what was proposed six months ago. People may not like the deal, but no one can say they didn’t know about it.

City sues HFRRF again

From the inbox:

Mayor Annise Parker

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.

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