Mon March 17, 2014
Cincy Council ready to support federal mediation for pension issue
Cincinnati Council is ready to endorse a process that would let a federal court mediate a solution to the city's underfunded pension problem. The Budget and Finance Committee voted unanimously Monday for an ordinance to make that happen.
The ordinance would let the city manager negotiate a settlement agreement with various parties on a long-term solution to the pension issue. Right now the retirement system is only 61 percent funded and that will only get worse without some action soon.
Current retiree Patrick Ewing was the only person to address the issue during a public hearing. He said he supports the mediation concept.
“I think it’s the right step to take,” Ewing said. “It does no good to point fingers and talk about blame. The past is over, the mistakes have been made. Let’s pick up what’s left and make the most out of it for everybody.”
Besides authorizing mediation, the law calls for a stabilized annual city contribution to the pension system, changing the compound cost of living adjustment for retirees to a simple one, suspending such increases for anywhere from three to five years, and transferring $100 million from the health trust account to the pension trust.
Most of the committee discussion revolved around the city's annual required contribution to the pension system.
Acting City Solicitor Terry Nestor described how that will be negotiated.
“That is something that is palatable to the city for budgetary certainty,” Nestor said. “But also provides certainty to the retirees that the city will always make that contribution and it will not change depending on the vagaries of the market.”
Most of the items up for discussion in mediation have minimums or maximums. The annual contribution does not. A committee vote to amend the ordinance to include them failed.
Council Member Chris Seelbach said the city's contribution should not be lowered.
“The city has an incentive to decrease the ARC contribution because it will help solve the budget deficit this year,” Seelbach said. “To me that’s of great concern because it doesn’t ask the question, is this the best for the city long-term and is it best for retirees?”
Seelbach urged current workers and retirees to push for a higher contribution during the mediation process.
Council Member Kevin Flynn was okay with the plan not giving guidance on how much that should be.
“The goal is to get to a stabilized contribution on the part of the city that protects the long-term health in compliance with state law where we have to be balanced within 30 years,” Flynn said.
Right now the city is contributing 22 percent of its payroll amount to the pension system. Currently it's scheduled to increase to 28 percent in the coming years. But a mediated settlement could reduce it to 14 percent of payroll.
The negotiation process on the pension issue is expected to take 6 to 12 months. The full Council will cast a final vote on mediation Wednesday.