“NO!” to City Retiree Bonus Payouts.

Danville City Council will start the process on paying a bonus to City of Danville retirees on the pension plan during Tuesday’s meeting.

It’s tough to have to say it, but SouthsideCentral is strongly against this action.

Here’s the Council Letter that will be dealt with on this coming Tuesday…

CL- 952 New Business Item #: E.
City Council Regular Meeting
Meeting Date: 08/19/2014
Subject: Retiree Pay Bonus
From: Joseph C. King
COUNCIL ACTION
Business Meetings: 08/19/2014 – First Reading
09/02/2014 – Final Adoption – Public Hearing
SUMMARY
City Council has determined that a bonus payment is to be issued to qualified municipal retirees. The associated costs will be as much as $450,000. The accompanying Ordinance amending the FY 2105 budget to expend up to $450,000 from the General Fund unassigned balance and authorizing payment of retiree bonuses is presented for first reading. Two readings of the Ordinance are required. If approved, a certain amount of work will be required to compute bonuses and test the system before payments can be issued. It is expected that bonus payments would be incorporated into retirement checks issued this November. Retirees will be properly informed.
BACKGROUND
City Code Chapter 32 governing the Employees’ Retirement System does not provide post-retirement cost-of-living increases or bonuses to retirees. However, in accordance with Council’s Financial Policies, lump-sum pension bonuses of up to one-half of the retiree’s normal monthly benefit amount that do not increase the retiree’s base pension payment may be appropriated by City Council from current operating revenues. The stated criteria required for consideration of such bonuses has been met. They include:

The cumulative inflation growth since the most recent pay adjustment for retirees as measured by the “All Urban Consumers Consumer Price Index” (CPI-U) has been at least 5%;
The Retirement System’s funded status for the prior fiscal year is at least 90% (as calculated by dividing actuarial value of assets by the accrued liability as of the appropriate valuation date);
The City’s contribution to fund the normal cost of the pension plan, as a percent of payroll, for the budgetary period under review is no more than 12%; and
Operating revenues from applicable funds are available to cover the cost.

RECOMMENDATION
Having expressed its intent to grant eligible retires a bonus in accordance with its adopted Financial Policies, it is recommended that City Council approve the accompanying Ordinance to authorize and finance said bonuses.

As stated above in the letter, city retirees on the retirement system don’t get cost-of-living increases or annual bonuses. They get a certain amount per month for the rest of their lives. I’ve published a complete list of those payouts for all city retirees. As you can see, that list is quite top-heavy with 170 people pulling in over $2,000 per month.  When you get down to the bottom of the list, there’s really not that much money being paid out.

These payouts are guaranteed for life thanks to strong money management by the pension fund committee.  These types of pension funds simply don’t exist in today’s world for the majority of people. It’s almost a luxury now to have this type of guaranteed payout, so I don’t have much of a problem with the lack of cost of living adjustments for these people. The retirement fund payouts weren’t designed to be the sole income source for retirees.

The city retirees deserve their pensions as they were promised to them. One half of one month’s payout for most of these people will be a nice “present”, but it’s not going to do much for any individual in the long run. I’d have no problem if this bonus payout was being taken out of the retirement fund account like their regular monthly payments are, because that money has been set aside and can’t be touched for regular city business. During council discussion on this issue, they found out to use the retirement fund money to pay the retiree bonuses would require the pension fund to have to be re-analyzed for adequate funding levels. That would cost a lot of money, but would be doable. The new plan is to leave the retirement fund untouched and to take this proposed bonus money from the city’s general fund. I’ve got a serious problem with that.

The city is already on the ultimate hook to repay US Green Energy’s Tobacco Commission grants if the business defaults. Things aren’t looking good for USGE. Web Parts, so that’s well over $1,000,000 right there. Web Parts is a complete Job Bust and there’s another million dollars. Macerata Wheels” Same, for $600,000. This list has a serious potential to grow and the City of Danville and their general fund will be likely paying those bills. Danville’s already had to pay $400,000+ for that idiotic unused railway spur to Swedwood and more payments are going to be forced out.  The City Manager & City Council would regain economic development credibility if they simply came forward and admitted the true negative payback potential of these Job Busts. Folks, that money’s going to come from the taxpayers in one form or another. Yes, it will happen.

I’ve got lots of friends who are city retirees and I understand their desire for something extra as a bonus. With these impending financial calamities (not to mention a Utility Fund that’s millions in the negative). now is not the time for it. Paying out up to $450,000 to city retirees out of the city’s general fund would be a beautiful gesture to the city retirees, but a horrible example of financial irresponsibility to the taxpayers of Danville.

SouthsideCentral is STRONGLY OPPOSED to this Danville City Council proposal based on the city’s current financial issues and impending payouts due to Job Bust failures. We strongly urge you to contact councilmembers and express your opposition to this financially irresponsible ordinance.