“Power tends to corrupt. Absolute power corrupts absolutely.”
Lord Acton, British historian.

Crisis Again In Funding City’s Pension Plans--- Therefore, Prop 2 TABOR Is Needed More Than Ever!

Just a few short years ago, mayor Bill White supposedly solved the crisis in the City’s three pension plans---one for police officers, one for firefighters, and one for the civilian workforce. The supposed solution was threefold:

  1. The City employees would take a reduction in their incredibly generous pension and other retirement benefits.
  2. The City would donate to the pension plans its huge note receivable from the Houston Convention Center Hotel Corp. (HCCHC).
  3. The City would issue voter-approved bonds payable, the proceeds from which would fund the then presently accrued liabilities of the pension plans. (A CEO in the private sector probably would be immediately fired by his board of directors for even suggesting this making non-negotiable forever the company’s liability to its employees’ pension plan, by exchanging debt to employees for debt to outsiders.)

So what is the current situation?

  1. The City is now the second largest employer in Harris County.
  2. City employees still have considerably more generous pension and other retirement benefits than the private sector, with the right to retire at a much earlier age than in the private sector. And the average annual earnings of all Houstonians, per the US Census Bureau, is lower than the average annual earnings of City employees, per the City’s financial records.
  3. The HCCHC had a $6.8 million deficiency in assets at June 30, 2005, the date of the City’s last audited financial statements made public. The HCCHC’s “white elephant” convention center hotel in the overbuilt downtown hotel area was financially saved temporarily by the room revenues paid for by FEMA relative to the influx of a large number of Katrina evacuees. So the pension plans should not look to the recently acquired note receivable from the HCCHC to solve their funding problems. City employees should be enraged at receiving this essentially worthless HCCHC note receivable from the City.
  4. According to the City’s June 30, 2005 audited financial statements, the most recent publicly available, the net assets of the City employees’ three pension funds was $6.8 BILLION! In comparison, the City’s net assets were only $4.5 BILLION, with just $2.8 BILLION of that invested in its core mission governmental activities! In other words, the City has a greatly larger net investment in its employees than it has in the City’s infrastructure for the benefit of its citizens! This is so even though a very high percentage of the City employees don’t have enough loyalty to the City to even live within the City limits and help pay for the costs of employing them!
  5. Now to the pension bonds that were to be issued to supposedly help solve the pension-funding crisis. Page XIV-6 of the City’s budget for fiscal 2007 shows that $404 million of the $570 million pension bonds now payable will not be paid until 2031, with $300 million of that not payable until 2034. As a result of that back end loading of the debt, the taxpayers will end up paying the huge sum of $899 million in interest! Did you finance your home with that kind of incredible fiscally irresponsible arrangement? CEOs and CFOs get fired for much less fiscal insanity.
  6. But even more egregious is the fact that, instead of depositing the proceeds of the pension bonds into the employee pension plans’ bank accounts, the mayor is having the proceeds from issuing pension plan bonds dumped into the City’s various coffers to underwrite annual operating expenses. Just in the general fund, pension bond proceeds were used in such manner in these fiscal years in these amounts (millions): $49-2005; $59-2006; and $63-2007. By using pension plan proceeds in this manner to cover shortfalls created by excessive operating expenses, the City TEMPORARILY dodged violating the Prop 2 TABOR revenue cap.
  7. The City is being set up for financial disaster by the double whammy of back loading the debt service on the pension plan bonds and then using the proceeds to underwrite City operating expenses instead of placing the proceeds into the pension plans.
  8. This potential financial disaster is being compounded by the City’s return to under funding the pension plans each year. As of June 30, 2005, date of the City’s latest publicly released audited financial statements, two of the three employee-pension plans were under funded a total of about $357 million. Even with the severe under funding approach, the City still is budgeting the incredible amount of $174.9 million for contributions to the employees’ pension plans in fiscal 2007, a 10.6% increase over the fiscal 2006 contribution of $158.2 million.

With this looming fiscal crisis relative to the City employee pension plans, now it is not the time to leave it up to the politicians to solve the problem, by passing the mayor’s Props G and H! The message about the crisis needs to get out to the voters and let the people, rather than the politicians, decide on the solution!

NOW, MORE THAN EVER, YOU NEED TO VOTE NO TO ALL 8 CITY PROPOSITIONS A THROUGH H!
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