Pension Board Overhaul Debate

[Hypestyles]

http://tinyurl.com/yf6dpnk

I wonder how this debate will end up being resolved.. Didn't the Free Press & News last year report on alleged improprieties going on with the Pension Board, and people were upset with them?

[Chuck_MI]

Great. Another 21 people in Detroit out of work maybe.

[LodgeDodger]

The Pension Board is in need of an overhaul. We've been reading about this Board's improprieties for years. Bing is trying to put the funds under the control of some responsible adults.

Until these Boards begin to show some competence, they shouldn't hold such positions of authority.

[Packman41]

Here is a useful link to a summary of what the Free Press has found: http://www.freep.com/article/9999999...heme=PENSION09

After reviewing those articles and remembering that Monica Conyers and Candia Minton were voting members of the pension investment board you hve to wonder why the union members would want to keep the status-quo. What and have their life savings "invested" by professionals when Mon Con and her ilk are available?

So what if they steal, take lavish trips, give insider deals for bribes or invest the funds poorly? You the taxpayer have guaranteed their Cadillac pension plan that is not available to you. They screw up and you pay up. This is a great system!

[Packman41]

Correction: In post #3 I said Kandia was a board member, it actually was DeDan.

Also, in another post someone said, "...great, another 21 people out of work." Well, not technically true. They would have to go back to work. One Free Press article mentioned how a city employee was drawing full salary but NEVER showing up for work because he was attending to "pension board business" flying around the world to investment conferences at resort locations. So you would have to say he needs to go back to his job as the night-duty janitor and quit being an "investment manager" handling millions of $$$.

[Gistok]

Great. Another 21 people in Detroit out of work maybe.

.... they still have their day jobs to fall back on!

[mam2009]

All I have to say is that this a NEW City Council people. I listened online to most of the marathon four hour discussion that the Council had today and heard a lot of intelligent, well thought-out comments and questions from the Council. Not just the emotional "us versus them" rants that we've become accustomed to over the years. I think that they may have nearly convinced Saul Green that this isn't the best and most financially sound decision for the City in the longterm.

Don't get me wrong, there is one member who is always going to rant because that is just what she does, but the rest made me proud. The newspapers and tv news will not report that perspective because its not newsworthy or sexy. But, so far, this seems to be a much more prepared, polished, practical-thinking and professional Council. They're not perfect, but at least they are not an embarrassment at the Council table.

[rjlj]

What do the numbers show? Have the investments been making good returns? Do the current projections support future pension payouts? What is the ratio of what a typical worker puts in versus what they take out? Can this be sustained?

[Locke09]

What do the numbers show? Have the investments been making good returns? Do the current projections support future pension payouts? What is the ratio of what a typical worker puts in versus what they take out? Can this be sustained?

Great question. And one of the few questions that matter.

The City pension fund is 99% funded. This means that basically there are already sufficient assets to handle all obligations for those currently vested in the fund. This means that, despite the losses related to the stock market crisis and the few bad investments [[and they were a small fraction of overall investments) the fund is still in excellent condition. In fact, if you look across the past 5 years or even the past 10 years, you will see how remarkably the fund performs compared to other public and even some private funds.

The crooks who were on the board are gone. The current and former retirees have an opportunity to vote people who are taking advantage of their position off the board. The mayor should help fight for reform of rules or practices that allow those people to abuse their position, not dissolve the board and turn its sizeable asset over to a fund that isn't outperforming the City's fund.

[Brittz]

One has to wonder why the idea was raised to move the money. It makes no sense. A hard look must be given to the elected officials demanding this action be taken.

[Buy American]

Great question. And one of the few questions that matter.

The City pension fund is 99% funded. This means that basically there are already sufficient assets to handle all obligations for those currently vested in the fund. This means that, despite the losses related to the stock market crisis and the few bad investments [[and they were a small fraction of overall investments) the fund is still in excellent condition. In fact, if you look across the past 5 years or even the past 10 years, you will see how remarkably the fund performs compared to other public and even some private funds.

The crooks who were on the board are gone. The current and former retirees have an opportunity to vote people who are taking advantage of their position off the board. The mayor should help fight for reform of rules or practices that allow those people to abuse their position, not dissolve the board and turn its sizeable asset over to a fund that isn't outperforming the City's fund.

Ronald Gracia is one of the biggest looters of the pension fund and one of the biggest opponents of the takeover...as far as I know he is still one of the principal members. He has used the fund as though it's his own personal ATM. Get rid of him and I'll feel better. There must be stricter rules as far as people actually "touching" the money and stricter guidelines for investing.

[Packman41]

One has to wonder why the idea was raised to move the money. It makes no sense. A hard look must be given to the elected officials demanding this action be taken.

It makes plenty of sense. Crooks are still on the board. The FBI has the fund under investigation. Read some of the FREEP investigative reports - go to the link in post #4 above.

There are no "investment guidelines". Because the pension fund is a gov't entity they are EXEMPT from following ERISA guidelines. They are exempt because the thought is that no politician would steal public funds -- yeah right!

The pension fund is not fully funded. Because they are allowed accounting gimmickry a public pension fund is "considered" funded if the taxpayers make the MINIMUM annual payment to the fund - not pay the entire tab. A better example is that you have a credit card bill of $10,000 and the CC company requires a MINIMUM monthly payment of $100. You make that payment on time, but still owe the CC company $9,900. Are you "debt free"? No. But in their realistic, accounting world you can report that you are fully funded. Transparency, NOT.

[Detwa]

Thank you for breaking that down, Packman! I've seen this debate in other places and people always throw up the idea that the pension fund is still "fully funded" and hasn't "lost" any money, so it is fine the way it is. That argument is so ridiculous and misinformed. Look at all of the crooks who have stolen money from DPS over the years, yet they can still make payroll so I guess that means its okay? It's the same irrelevant analogy. Yes, there's still plenty of money there but think of how much more would be there if the last few panels of greedy pigs hadn't been raiding it.

Getting rid of the current pension board members won't change the fact that there are still no rules to govern how they behave, so the next bunch will just do the same thing. It was interesting how the new council members clamored for those prized positions, I'm sure they are already salivating at the trips they are going to take and the documents that will be shred.

I'm amazed at people so willing to overlook fraud and mismanagement in the name of keeping it Black. Mildred Gaddis has folks all in a tizzy about the state taking away control and giving it to the Man. Well maybe if things were done CORRECTLY then it wouldn't be an issue. The pension board, just like DPS, has been ran by criminals for years, now its time to finally make things right.

[artds]

OH NOES!

They're going to take away our right to steal from the pension fund!!!

Oh lord, what ever will we public servants do?!?!

[Buy American]

OH NOES!

They're going to take away our right to steal from the pension fund!!!

Oh lord, what ever will we public servants do?!?!

City employees gave up a lot over the past 70 years in order to have this benefit. They didn't work under the best of conditions at times or have the best of equipment or make the same money as the private sector.
The pension fund was set up by the City of Detroit as a benefit for employees who work for 25-35 years for them. Up to this point in time, the pension fund was administered by competent people who didn't steal from the fund. Now, because of a handful of corrupt thieves, it's under scrutiny. Get rid of the people who think the pension fund is their ATM and it will be fine.

[Locke09]

There are no "investment guidelines". Because the pension fund is a gov't entity they are EXEMPT from following ERISA guidelines. They are exempt because the thought is that no politician would steal public funds -- yeah right!

The pension fund is not fully funded. Because they are allowed accounting gimmickry a public pension fund is "considered" funded if the taxpayers make the MINIMUM annual payment to the fund - not pay the entire tab. A better example is that you have a credit card bill of $10,000 and the CC company requires a MINIMUM monthly payment of $100. You make that payment on time, but still owe the CC company $9,900. Are you "debt free"? No. But in their realistic, accounting world you can report that you are fully funded. Transparency, NOT.

ERISA guidelines are not enforced on public pensions, but most of them follow them voluntarily, because their states have oversight and implement their own guidelines to be consistent with ERISA. Look at the ERISA guidelines and say which ones the City doesn't follow before stating that the city has no guidelines. Besides, if the city has no guidelines, then it means that Michigan has no guidelines. That would also mean that MERS [[the board that Bing wants to handle the City's funds) also has no guidleines, because MERS is also a public pension fund that is subject to Michigan legislation and not subject to ERISA.

There is no slight of hand involved in saying the City's pension is 99% funded. It is. It was 110% funded before the recession. All pensions are required to disclose an accurate % funded, in accordance with the Pension Protection Act. The Act gives private funds 8-10 years to make up shortages and gives public funds 30 years to make up shortages. And here's where it gets interesting.

MERS used to allow participating municipalities to join while funding their obligations at as low as 50%. Now they have raised it to 80% [[still not good enough) and will give them time to make up the difference. So, perhaps the City wants to move to MERS so they can truly start underfunding the pension, which will only put it at more risk and push the obligation off on future taxpayers.

Also, every pension fund that is not 100% funded, and most are not, relies upon the employer continuing to make promised contributions to get it to the 100% mark and keep it there as obligations increase.

Let a person with a strong financial background compare MERS to the City's pension fund and say which one is performing better.

BTW, people are taking advantage of the lax guidelines governing travel and compensation for expenses. That is something the State of Michigan can fix and should fix on behalf of the entire state.

City employees current and retired have invested a significant amount of their own money into the pension system. So they have every right to voice concern over what happens with it.

[Packman41]

City employees current and retired have invested a significant amount of their own money into the pension system. So they have every right to voice concern over what happens with it.[/quote]

Naw, the amout of money you put in is far short of what the taxpayers had to put in and they have NO representation on the pension board. All we get to do is sweep up after your mess and pay for it.

Since you believe "your" pension fund is fully funded then maybe the taxpayers should let you be accountable for your own actions. Let's terminate the pension funds and divide the money up to the participants. Then give you a 401K plan like the State and Oakland County employees have. No more guarantee from the taxpayers - you are on your own, just as nearly everyone else is.

And don't tell me you're ENTITLED to this pension because you worked 25 years or it was "negotiated." Yeah, negotiated at the end of a gun to the taxpayers head.

[artds]

City employees gave up a lot over the past 70 years in order to have this benefit. They didn't work under the best of conditions at times or have the best of equipment or make the same money as the private sector.
The pension fund was set up by the City of Detroit as a benefit for employees who work for 25-35 years for them. Up to this point in time, the pension fund was administered by competent people who didn't steal from the fund. Now, because of a handful of corrupt thieves, it's under scrutiny. Get rid of the people who think the pension fund is their ATM and it will be fine.

...until they're replaced with people just like them

[gnome]

Interesting thread...

A bit of a thread jack, but on the old forum there was a discussion on MonCon and her frequent visits to Clearwater/St. Pete allegedly to look at a real estate deal the Pension Board invested in. IIRC, it was disclosed that the head of the Pension Board also sat on the Board of Directors of the failed real estate venture.

I tried to search the old threads but couldn't find the thread, but the point is that the pension board has not been transparent in their deals and dealings.

Like everything else around here.

[Locke09]

Naw, the amout of money you put in is far short of what the taxpayers had to put in and they have NO representation on the pension board. All we get to do is sweep up after your mess and pay for it.

Since you believe "your" pension fund is fully funded then maybe the taxpayers should let you be accountable for your own actions. Let's terminate the pension funds and divide the money up to the participants. Then give you a 401K plan like the State and Oakland County employees have. No more guarantee from the taxpayers - you are on your own, just as nearly everyone else is.

And don't tell me you're ENTITLED to this pension because you worked 25 years or it was "negotiated." Yeah, negotiated at the end of a gun to the taxpayers head.

Let's go with actual numbers, rather than make assertions that sound authoritative, but are not.

From the 2007 report, posted on the web, in regards to revenue/income: employer contributions were $41,444,808, employee contributions were $19,438,360, income from investments was $609,823,906 [[over half a billion dollars). So, employee contributions are sizeable. Employer contributions are twice what employee contributions are, but are dwarfed by the income made from investment of existing assets. Employer contributions are only 6.5 percent of the annual income, even less when the market is doing well. So yes, I am quite confident.

I'm sorry some people only have 401k's, which were never intended to replace pensions, just supplement them. But there's no reason to be mad at those who do still have them.

Taxpayers do have representation on the pension board, since their elected city council appoints a member to the board, and their elected Mayor appoints a member to the board. Then there is also a community person [[non-government) appointed to the board. You might not like the appointments, but they do have representation.

BTW, I never said I was a city employee. I never mentioned "entitlement" and I never talked about any negotiations or years of service. I called for a comparison of MERS to the City's pension fund. That seems reasonable.

[Locke09]

Has anyone had a chance to compare MERS financial statements to the City of Detroit's retirement system financial statements?

Is anyone as alarmed as I am to find that MERS, by their own report, is only in the 38th percentile among public pension funds?

Is anyone as alarmed as I am that the solvency test for Detroit puts it at 99%, but MERS is only at 50.4%? [[And they both use the same accounting and reporting standards) MERS started out at about 76% solvent in 1998 and has been falling ever since, while the City fund has been increasing in solvency.

MERS appears to be in big trouble and no one is sounding the alarm. But the Bing administration wants MERS to handle the City's pension fund, Taxpayers all over the state should be concerned.

[mam2009]

Locke09,

I love it when data, facts and logical analysis are inserted into a debate rather than emotional rants based primarily on what folks read in the newspaper, see on the evening news or hear a radio talk show host say. That's the DetroitYes! that I really appreciate.

[Packman41]

You mean a "rant" such as the editorial in the April 1 edition of the Detroit News?
http://www.detnews.com/article/20100...uld-save-money

"They lost $2.5 billion of their value, or 30 percent, from June 2007 through December 2008 as a result of market losses and investments that went bad, according to published reports last year. Other pension plans also took a beating during the national recession, but average losses were considerably lower than that.
A Detroit pension board leader has pointed out that the two plans were fully funded prior to the economic downturn and remain 90 percent funded today. But Bing and his associates say they would be about $1.2 billion richer had they been under control of the state retirement system."

Remember, any underfunding or poor investment performance is guaranteed by the taxpayers. There is no real incentive for the pension board members to perform well and the money is subject to their political whims.

[Locke09]

You mean a "rant" such as the editorial in the April 1 edition of the Detroit News?
http://www.detnews.com/article/20100...uld-save-money

"They lost $2.5 billion of their value, or 30 percent, from June 2007 through December 2008 as a result of market losses and investments that went bad, according to published reports last year. Other pension plans also took a beating during the national recession, but average losses were considerably lower than that.
A Detroit pension board leader has pointed out that the two plans were fully funded prior to the economic downturn and remain 90 percent funded today. But Bing and his associates say they would be about $1.2 billion richer had they been under control of the state retirement system."

Remember, any underfunding or poor investment performance is guaranteed by the taxpayers. There is no real incentive for the pension board members to perform well and the money is subject to their political whims.

No, that wasn't a rant. It was just a biased editorial.

Quotes from unnamed officials aside, the financial report says it is 99% funded. If you can't believe Detroit's financial report, you can't believe MERS financial report. They use the same accounting practices and reporting methodology.

The editorial points to one year, that was actually two fiscal years ago. Over a five-year or ten-year period, Detroit outperforms MERS. In the year that Detroit's pensions lost 30%, MERS lost 25%, so no, Detroit's pensions would not have gained more under MERS. Plus, you cannot argue with the fact that MERS reports over the past years shows a steady decline in the percent-funded category [[which points to solvency). Eventually, this shortage will cost future taxpayers in those municipalites that are a part of MERS.

I'm less interested in opinions and feelings than I am with numbers. And I'm very good at knowing when an editorial [[or any other report for that matter) is skewing the information. It is so very obvious. The editorial gives no numbers for MERS. Why is that?

Check the reports for the past five years and tell me they prove me wrong. Bing has not shown how he is going to save $20 million [[the editorial simply quotes Bing, it doesn't provide any facts). Also, other than the one year where all funds were hit hard, Bing should provide information on which years the City has had to make up shortages cause by underperformance of the pension. Surely the public would want to know that piece of information. Rather than just the speculation about what they might have to do if the pension underperforms.

[Locke09]

An addendum to my post above.

In order to show Detroit's pensions losing 30% of their value, someone had to carve out an 18-month period which happens to coincide with the worst 18 months for the stock market. But Detroit reports on July 1 - June 30th basis. So there is actually no year when Detroit lost 30%. Here is the real comparison of Detroit to MERS [[rate of return) for just the last four fiscal year periods:

2008 MERS: -25%, Detroit: -5.8%
2007 MERS: 8.57%, Detroit: 18.1%
2006 MERS: 13.6%, Detroit: 11.8%
2005 MERS: 6.8%, Detroit: 9.8%

Any independent auditor would tell you Detroit's pension plans are doing far better than MERS.