AZ’s Cities Pay, and Pay, and…
Paradise Valley eyes police pension policy creation
By Terrance Thornton – Independent Newsmedia Inc. USA – Updated January 16, 2014
The Town of Paradise Valley is beginning to fully realize the extent its Arizona Public Safety Personnel Retirement System obligations will have on the town’s financial situation over the next several years.
The Town of Paradise Valley has 33 retired police officers collecting a pension totaling, on average, about $45,000 annually.
However, there are only 23 active members contributing to the pension plan along with taxpayer dollars.
Paradise Valley, because of the PSPRS formula, effective July 1, 2014 will pay 62 percent of a police officer’s salary toward his or her state pension plan, which carries a financial obligation of $1.5 million.
In fiscal year 2014-15 police pension obligations account for about 9 percent of the municipality’s operating revenues, which is expected to be about $18 million according to Scott McCarty, Paradise Valley finance director.
The Arizona Public Safety Personnel Retirement System is a 255-member organization that manages the pension plans for public safety personnel entities statewide.
If no action is taken, the Town of Paradise Valley in 10 years could be paying 68 percent of a police officer’s salary to his or her retirement system obligation, town officials estimate.
Paradise Valley Town Council got its first look at pension funding scenarios at its Jan. 9 work session.
“It was an initial overview,” Mr. McCarty said Jan. 13 at Town Hall of learning of pension funding obligations made public last fall.
“It’s going to be up to council to review and decide what we do with this.”
Town staff is expected to be working with the actuary to develop a pension funding policy, which could include new funding measures and annual review of pension funding balance, Mr. McCarty says.
“That’s a policy that we currently don’t have,” he said.
Mr. McCarty says having a pension policy with a defined set of objectives and criteria will allow the town to best address the issue.
According to Mr. McCarty, Paradise Valley has hired Gabriel Roeder Smith & Company to provide actuarial analysis for the municipality’s unique position. The firm presented initial findings at last week’s town council work session.
“We need some more intelligence of what this projection means to us,” he said noting the firm is the actuarial firm who manages the PSPRS fund. “How big of a problem is this?”
A pension funding policy at Paradise Valley may be the first of its kind, Mr. McCarty speculates.
“I am not aware of another city or town doing this,” he said. “We are hoping to take a policy objective approach.”
Paradise Valley Councilman Paul Dembow says the issue has myriad facets — but is “unsustainable” in its present state.
“Being up to speed is not a certain thing for any municipality on this topic. There is no possible way to put a common-sense fix on it.”
Councilman Dembow points out disability coverage — of which 14 of the 33 retired officers are on — brings another level of cost to the town’s rightful obligation.
“I am addressing this from a sustainable aspect,” he said noting his awareness of the serious sacrifice Paradise Valley police officers make for the community he represents.
“The system is unsustainable and if we don’t address it the Town of Paradise Valley is not going to have a police department the way it should be.”
Councilman Dembow says he wants to find a solution that works on both sides — both fair to the brave men and women of the Paradise Valley Police Department and something that is financially sustainable to the Town of Paradise Valley.
“We need to find a sustainable deal for the cities and one that is fair to our police force,” he said.
Paradise Valley Councilman David Sherf says the issues is clearly one that needs to be addressed as the town expects to hire new officers this fiscal year.
“It appears as if the Arizona Constitution does not allow for any changes in pension funding for current public safety personnel, so we may look at alternative ways to fund pensions for new hires that are less costly to the town,” he said in a Jan. 15 written response to e-mailed questions.
Councilman Sherf says he expects some kind of pension funding policy to emerge over the next few months.
“I think we will need to establish a policy dealing with the amount of the unfunded pension liability once we all fully understand the issue,” he pointed out.
“This may include ranges that would be allowed as a percentage of unfunded pension liability as well as what amounts annually may be used from town revenues to reduce any pension liability.”