Police, Firefighter Pension Costs Pose Challenge for City

Add rising costs of police and fire fighter pensions to the list of persistent financial burdens plaguing the New Port Richey city government.

Chad Whetstone, a manager in the audit firm the city uses, highlighted the costs Tuesday night when he presented City Council a preliminary report on the city finances and predictions for five years into the future.

“As we project out into the future what the city’s obligations will be to these two funds, the trends are not working in favor of the city,” said Whetstone, a partner in Carr, Riggs and Ingram.

New Port Richey’s firefighter pension fund has in “a very short period of time gone from an overfunded plan to an underfunded plan,” Whetstone said.

In 2008, the pension fund’s assets were valued higher than its liabilities. At the end of fiscal year 2010, the most recent year for which data was available in the audit, liabilities totaled $11.3 million, dwarfing assets by $1.5 million.

The police officers’ pension fund isn’t any healthier. The fund’s liabilities totaled $20 million at the end of 2010, about $4.5 million more than its assets. That continued a trend of costs tallying higher than assets over the years.

Combined, pension costs of fire fighters, police and general city employees on the state retirement system could equal 24.2 percent of all the city’s expenses in fiscal year 2017. They cost 12.7 percent in the current year.

A debt-plagued redevelopment fund is also a major drain on the city’s funds. Also painful are declining property values and issues like a stormwater utility fund that could wrack up a significant deficit.

The redevelopment fund (called the Community Redevelopment Agency) is $21 million in debt, according to Whetstone. The CRA’s annual debt service on the fund is $2.05 million, which covers three bond notes. The payments mature in 2025.

The CRA is projected to be out of cash in fiscal year 2014, at risk of generating  an $83,000-deficit and will need to pull money from the general fund and other sources.

That’s the year when the city budget situation gets “very serious, very quickly if no action is taken,” according to a memo from City Finance Director Douglas Haag.

Over the five-year period calculated by the auditor, the city general fund, which pays for most city services, including police and fire, is projected to lose a total of $9.3 million. The city’s unassigned fund balance deficit is projected to total $7.9 milion over the same period.

Earlier this month, by 10 percent to slim spending plans in the coming fiscal year. City officials are also planning on proposing $400,000 in cuts for our current fiscal year.

The City Council didn’t take any official action Tuesday night, but it discussed ways to address the problem and pondered future meetings with the auditor.

City Hopes to Avoid Financial Emergency

According to a memo from Haag, if the city doesn’t reach certain financial goals within about 24 months, the auditor is required by state law to notify the state authorities that the city has met at least one of the conditions qualifying for filing of a “Statement of Determination of Financial Emergency.”

In cases where municipalities are determined to be in financial emergency, the state government can step into assist in resolving the situation. That can include having oversight over the city budget decisions and operations.

Whetstone said after the meeting to Patch that’s a possibility that’s “remote” but the city needs to start now on righting the ship. Deputy mayor Rob Marlowe chimed in that it’s not something the city wants.  

City Manager John Schneiger said he doesn’t anticipate that measure becoming a reality at this point.

”I do believe there are a number of things that can happen between now and then, or will happen between now and then, that will forestall that,” he said.

During the meeting Council member Bill Phillips, who took his seat on the council Tuesday following his election, asked Whetstone:

“Did you see any rays of sunshine?” 

"Before we can understand the solution, we have to understand the problems," Whetstone replied. "It's going to take a lot of creativity, a lot of ingenuity and a lot of hard work."