City Council, June 18, 1996.
A special session of the City Council is held Tuesday, June 18, 1996, at five three o’clock p.m. All the members are present except Councilors Hodge and Rabbitt; and President Barry presides.
DISCUSSION OF DRAFT REPORT OF THE ACTUARIAL STUDY OF THE POLICE AND FIRE DEPARTMENT PENSION PLANS IS TAKEN UP:
Speaking for KPMG Peat Marwick LLP is Robert S. Haws, FSA, Principal.
Mr. Haws distributes the following two documents:
Communication from Robert S. Haws, FSA, Principal, KPMG Peat Marwick, LLP to James E. Doyle, City Council, submitting a "DRAFT OF THE PRELIMINARY RESULTS OF THE JULY 1, 1995 ACTUARIAL VALUATION OF THE CITY OF PAWTUCKET POLICE AND FIREFIGHTERS PENSION PLAN."
Report from KPMG Peat Marwick, LLP, entitled "CITY OF PAWTUCKET, RI, POLICE AND FIREFIGHTERS PENSION PLAN, JULY 1, 1995 ACTUARIAL VALUATION PRELIMINARY RESULTS."
COUNCILOR HODGE ARRIVES AT 5:06 PM.
Mr. Haws discusses the second handout page by page.
He states that if the city uses different assumptions, they would get different results.
Also speaking on this matter is Jack Rahill, Finance Director.
Mr. Rahill passes out the following:
Report from Jack Rahill, Director, Finance Department, entitled "HISTORY OF THE POLICE AND FIRE PENSION PROGRAM FROM FY89 THRU FY96 (5/31/96)."
Mr. Rahill has some concerns about using a 15 year amortization schedule. He questions why 33 added retirees between 1991 and 1995 would cost an additional $10 million dollars in benefits. He believes that number is too high.
Mr. Haws states that it does seem high; however, there could be several reasons for it.
Mr. Rahill questions why they are using 8.25% interest rate on investments, when the Plan has averaged 9.5% return since 1989. Mr. Rahill believes that 8.25% is too low.
Mr. Haws responds that you can’t use the past to estimate the future. The amount is based on economic expectations and the asset allocation by class.
Mr. Rahill believes that a 5.5 estimated increase in compensation each year is too high when they have been averaging around 3%.
Mr. Haws responds that the city can use other assumptions if all agree on them.
Mr. Rahill asks if they would change their assumptions if the history shows they are wrong.
Mr. Haws responds that they could; however, they need to look at all the assumptions being used.
Councilor Vieira asks if the benefit increase is just for base salary or if it includes overtime and other benefits.
Mr. Rahill states that overtime is not included in the pension allocation.
Councilor Cute questions if the study takes into account the percent that people retire at, especially if the city can give 70% to individuals.
Mr. Rahill notes that one of the highest costs to the system was for the 43 to 46 people who retired in 1988 at 70%.
Councilor Cute questions why there is no increase in the asset value between 1990 and 1992 when there was an infusion of $3 million dollars by the city.
Mr. Rahill says that he will look into it.
Councilor Doyle asks Mr. Haws how many studies they do similar to this one.
Mr. Haws responds they do them for about 15 to 20 communities over a three year period and they also do some auditing work, which takes in some of the same work.
Councilor Doyle asks how often they are challenged.
Mr. Haws responds that there is a good amount of give and take.
Council President Barry notes that all pension plans are not fully funded.
Mr. Haws responds that some are fully funded in the private sector, but they are not usually in the public sector.
Council President Barry asks what is needed to be done.
Mr. Haws reviews page five of the second handout which goes over the next steps. He says that once all of the assumptions are determined, they need to do some modeling to see what might happen.
Councilor Moran asks how much time it would take.
Mr. Haws states that it shouldn’t take too much time because he has done a lot of the work already.
Councilor Hodge asks why the report did not include actual figures on present retirees. He is concerned that these assumptions could lead to panic in the community.
Mr. Haws states that he spoke to Councilor Doyle and the Councilor wanted them to review what they had done already.
Councilor Doyle states that he does not think there will be panic.
Councilor Doyle, Council President Barry and Jack Rahill discuss the need to sufficiently fund the budget to ensure the annual payments into the pension plan.
Councilor Hodge responds that since $31 million dollars of the unfunded liability is for active employees and less than 50% of them are eligible to retire within the next eight years, he doesn’t see any need for panic.
Councilor Cute states that since they need to agree on the assumptions for salary increases, interest of assets and other assumptions, she suggests that the Pension Board, the Finance Department, and the Finance Committee get together and discuss it.
Mr. Haws states that he will forward a letter to the Council this week on what the next steps are that need to be done, the timetable for their completion, and the cost.
COUNCILOR BUTLER LEAVES THE CHAMBERS AT 6:31 PM.
THE CHAIR RECOGNIZES COUNCILOR DOYLE.
With majority consent of the Council, the following motion made by Councilor Doyle, seconded by Councilor Hodge is passed on a unanimous voice vote:
The Actuarial Report is LAID ON THE TABLE until the City Council hears back from KPMG Peat Marwick, LLP, on the next steps to be taken, the timetable for completing the steps and the cost.
The following items are READ AND ORDERED FILED:
THE CHAIR RECOGNIZES COUNCILOR VIEIRA.
With majority consent of the Council, Councilor Vieira introduces the following resolution:
Upon motion made by Councilor Vieira, seconded by Councilor Bray, the following resolution is read and passed on a roll call vote, as follows:
Ayes - President Barry, Councilors Bray, Cute, Doyle, Hodge, Moran and Vieira.
Noes - 0.
RESOLUTION CONGRATULATING CERTAIN INDIVIDUALS FOR BEING NOMINATED TO THE TEEN HALL OF FAME.
Upon motion made by Councilor Vieira, seconded by Councilor Bray, the meeting is adjourned at six fifty o’clock p.m.