'Tough Choices' Ahead to Cover City's Pension Gap

Posted by Toby Sells on Tue, Jan 7, 2014 at 2:00 PM

Memphis City Council members were told that planning for the 2015 budget will not be "business as usual" as the city begins to fill the $709 million gap in the city's pension fund.

City finance director Brian Collins gave council members Tuesday a hypothetical mix of budget cuts and tax increases to fill the gap over the next five years. However, Collins said no new taxes are planned for Mayor A C Wharton's proposed budget for fiscal year 2015.

With that, he said, they'll likely rely heavily on cuts. The city has hired national financial advisory firm PFM Group to take what Collins called an "exhaustive look" at the city's budget to find places to cuts.

As the recession took big bites out of the pension fund, the council needed to contribute more to keep the fund whole. However, as the gap grew, the council kept to the $20 million contribution it had paid for years before the recession.

Collins said the city needs to make $100 million in annual contributions. He suggested ramping up payments over the next five years to get to the $100 million goal. With that, the city would pay $35 million to the fund next year, $50 million the next, $60 million in the next year, up to $80 million and finally to $100 million. This process would help stop the growth in the fund's gap.

The additional $15 million for the fund next year will have to come from somewhere, Collins said, and tough choices are ahead for council members as they plan for next year's budget.

"What is clear is that we cannot continue with business a usual," Collins said. "But I can’t say enough that we‘re not including taxes in the planning for 2015 budget nor are we including tax increases in any contemplated measure for pension reform."

Comments (7)

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While not willing to jump to the typical “Memphis is dying/ is doomed” comment, this nevertheless a huge deal and is one of the many hallmarks of a city that is either stagnant or in decline.

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Posted by barf on 01/07/2014 at 2:19 PM

"Detroit on The Mississippi?" What can you do to attain additional tax payers and growth of city coffers, when we are in a recession? Sure. You cut to the bone, but....someone must think outside the box. Is AC that person? Don't know yet. What we do know, is that there aren't enough big name manufacturing jobs coming in to save us. We must have HOME-GROWN solutions. I've got some ideas, but...I charge for the help. Call me when you really, truly, want to make that change.

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Posted by zebra on 01/07/2014 at 2:53 PM

That's an easy one. Up the amount the muni's pay to MLGW.

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Posted by oldtimeplayer on 01/07/2014 at 3:33 PM

OTP- are you being trying to be facetious or do you really believe that money paid to MLGW can be used to fund the city employee pension plan, fund city employee positions or used to paint city hall a lovely plaid come spring?

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Posted by barf on 01/07/2014 at 7:20 PM


It was just a thought, but, seriously, a study needs to be made on how much the muni's should be paying.

As far a the pension gap, the pension fund is in line with federal pension law. It is also a long term obligation and there are numerous avenues available to get it in line, up to and including reneging on future obligations as some other cities and states have done. I have never condoned this, but, various courts have held that screwing pensioners is perfectly legal.

Detroit made a horrendous deal with wall street on their pension obligations that backfired and instead of being a long term obligation turned into a very short one. There is absolutely no comparision of the two. Detroit also lost over a third of it's population which is not the case here.

Just a raise in the minimum wage nationally would go a long way toward righting the ship of finance in Memphis. Memphis has the most low wage jobs of any city it's size in the U. S.

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Posted by oldtimeplayer on 01/07/2014 at 7:30 PM

Here's what we do....Embrace and pioneer the technology to use compressed natural gas in all vehicles....Start with an aggressive recruiting and training for a conversion mechanics program...convert at least 35% of all the vehicles registered in Shelby county to burn gasoline and compressed natural gas within 5 years...some taxbreaks for converting personal and fleet vehicles would help...Apply the same metric to all vehicles at local government use to include transit buses....

I bet the competition between fuels will result in the lowest energy costs in the nation for operating a motor vehicle,personal or government....MLGW should spearhead this effort,it's the unpolished jewel in the community,capable of providing so much more to everyone,including funds for the pensions....They just built one of the fueling stations recently,6 more in the next 5 years would be a good parallel effort....

As of this writing the cost of CNG(compressed natural gas)is less than half the price of a gallon of gas....$1.46 vs. $3.09...

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Posted by TheBigOno on 01/08/2014 at 1:25 PM

@ TheBigOno

I thought the idea was to cut costs so we could afford to pay for the pension liability. The long run you say? Shoot, we're running a very short race we need 15 extra million for a total of 35 just to stay underfunded.

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Posted by thecatsmeow on 01/08/2014 at 2:09 PM
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