watchdog

Monday, November 24, 2008

TRANSPARENCY MEANS HAVING ALL THE INFORMATION BEFORE THE VOTE


Last week I wrote about the stealth tax increase for your solid waste fee which was passed in June 2008 and increased from $19.00 per month to $21.55 per month. I wrote to City Councilman Jim Strickland about this and other ordinances and complained that the agendas published by the City of Memphis mentions certain ordinances but does not give the actual wording of the ordinances. Jim is very good about responding on the issue of transparency and at his instance the City Council staff responded that the full ordinances are published in the Memphis Business Journal. Although I did not know that fact, you will see when looking at the file that they sent (a copy of this which I have attached) that they were published on 5/6/08 and 5/30/08.


While this meets the letter of the law, it does not satisfy the spirit of transparency. If you will look at the attachment you will see that there are three ordinances that affect your pocketbook. Ordinance 5261 raised your solid waste fee to $20.55 from $19.00 per month. Ordinance 5263 asked the property tax rate to be set to $4.01 per $100 (per the Mayor) of assessed value. This was later lowered by cutting the school funding. Ordinance 5264 got a unanimous vote to raise the pensions of City retirees by up to 3% depending on when they retired.


All of this information needs to be readily available to the public at the same time that it is available to the City Council. Just publishing it in the Business Journal and the Daily News is not sufficiently transparent to the tax payers who have to pick up the bills for the garbage and the pension increases. We need all pending ordinances and passed ordinances posted on the City website in advance of their consideration by the City Council and all final passed ordinances posted to a City website archive. The taxpayers need the same information that is provided to their elected representatives in advance of their votes.

Click here to read the ordinances that raised your garbage fee and increased your pension costs and who voted for the increases

Tuesday, November 18, 2008

HOW ARE PENSION FUNDS DOING AMID THIS FINANCIAL MELTDOWN?

Those of you who are invested in the stock market through your 401K’s and other investment accounts have seen them fall drastically during this year, particularly in the last two months. The Dow industrial average is down 22% since September 15th and down 35% year to date.


Well you might get some comfort (maybe not) that the various pension funds for the City of Memphis, Shelby County and the MLGW are also down. I have asked these three organizations for a report on current values and have received two answers and that from Shelby County and the MLGW. I must say that the openness of Shelby County at the direction of Mayor Wharton and the MLGW at the direction of Jerry Collins has been very good. As usual, the City of Memphis, no doubt at the direction of the Mayor, is slow and difficult and I have received nothing to date.


The County and the MLGW reports are attached. Shelby County is reporting through September 30, 2008 down 17.2% YTD and probably another 10% for the month of October which was a bad month for everyone. Down 27% in this market is not bad compared to 35% for the Dow. Their investments seem well diversified and the management fees seem reasonable considering the size of the portfolio. The MLGW report is even better as they are down 12.4% year to date through September and probably another 9 or 10% in October. I have attached both reports.


The only information I have on the City portfolio at this time comes from the 2007 CAFR (Comprehensive Annual Financial Report). I have attached a copy of that report and there are several things that could cause some concern. They had $117 million in collateralized mortgage obligations, $148 million in mortgage backed pool securities, $110 million in real estate and $15 million in high yield bond funds. All of these investment categories took a real hit in the latest meltdown. Hopefully the fund did not but I will report when I get the information.


While I was talking to several County officials about the retirement in general and particularly about the OPEB (Other Post Employment Benefits) unfunded liability, they said that the County was planning a substantial contribution this year in order to begin a trust fund to fund these promises made to retirees. The MLGW set up such a fund in the past but has made no additional contributions since setting up the fund. The City of Memphis has done little in this area to date.


The County has a policy of requiring employees to purchase Medicare part A so that Medicare becomes their primary health insurance when they retire and this cuts the OPEB costs substantially. However a big problem is that many retirees are under the age of 65 and this is one of the big costs for retiree health care. Pension reform, at a minimum, should address this early retirement rule in order to cut costs. 25% of retirees are under the age of 65. Many retirees who are not eligible for Medicare either due to age or not having contributed to Medicare during their working career are eligible because their spouse has Medicare.


My overall impression is that the County and MLGW (under Jerry Collins) are well run. The City of Memphis and the Memphis School System are the problem and badly need budget, personnel and structural reform and a commitment to transparency and openness.


Click here to see the latest update on the Shelby County pension fund


Click here to see the latest update on the MLGW pension fund


Click here to see the structure of the City of Memphis pension fund from the 2007 CAFR. The latest update has not been reported yet to the watchdog

Wednesday, November 12, 2008

PENSION REFORM IN MEMPHIS AND SHELBY COUNTY


With the help of many friends, I am in the process of creating an organization called MEMPHISSHELBYREFORM. The purpose of this organization will be to educate taxpayers in the area of needed reforms in our City and County governments. The only way to slow down or reverse the decline of Memphis and Shelby County is to push for reform in government aimed at the efficient use of our limited tax money.


I will be posting a series of proposed reform ideas and would appreciate your thoughts on them. I have already posted my thoughts on the Memphis School System.


Today I would like to look at our pension system that we have at the City of Memphis. The system in Shelby County government, the MLGW and other governmental agencies is similar.


Our system promises a defined benefit pension payment if you meet certain requirements. In a simplified report I have attached the general outlines of the City of Memphis system. The plan benefits vary depending on when you started, how long you worked and whether you are a policemen or firefighter or a general employee. But generally you can earn a pension up to 72-1/2% of average monthly compensation. The employees contribute to this system which is generally matched by the City of Memphis.


Most private sector employees who work for private for profit companies do not have a defined benefit plan. Rather they generally have a defined contribution plan like a 401K. The difference is that the public pension plan is a legal obligation on the taxpayers of Memphis and Shelby County. This is a huge difference.


What I propose as a reform is that for future employees of the City of Memphis, MLGW and Shelby County we go to a 401K type plan where we are sure of the cost of the plan each year and are not obligating ourselves for a future payment from our tax stream that we may or may not be able to pay. I am not talking about taking anything away from current employees as they would be grandfathered into the current plan.


Another big part of the promises that politicians have made to current public employees concerns the post retirement medical and life insurance benefits where generally the taxpayers pay 70 to 75% of the medical premiums after retirement. This is a huge benefit and unfortunately the politicians have not been funding this promise. The current unfunded liability of Memphis, Shelby County, the MLGW and the Memphis City Schools is $3.125 BILLION DOLLARS. That is BILLION, NOT MILLION. The government is requiring that these organizations put this unfunded liability on their balance sheets starting next year. This huge unfunded debt will make borrowing money much more expensive as the balance sheets will look much different. Realistically, the taxpayers cannot meet this obligation and the politicians are already talking about cutting this benefit which is not a legal obligation.


The whole point of my reform plan is this. Why should the average taxpayers who works in the private business sector offer more to public employees than they are offered in the for profit private sector. Politicians always manage to feather their nest at the tax payers expense. The truth is that all taxes come from a for profit business and without business profits, there would be no money available for any public sector employee.


Click here to read the essential details of the current City of Memphis defined benefit pension plan

Monday, November 10, 2008

HOW TO SAVE OVER $100 MILLION DOLLARS PER YEAR

Change is in the air. Change can be good and change can be bad. I have been advocating change (reform) in local government for years and now that we have a local and national financial crisis, we are going to have to learn to live on less tax money. Therefore we need more efficiency in the delivery of governmental services.

Local politicians have been talking about consolidating our City and County governments for years but nothing has been done. Therefore I started investigating this subject and as a start I have come up with some interesting statistics by comparing on one hand the combined Memphis and Shelby County government employment figures with the already combined figures of Nashville which is called Metro Davidson government. You may remember the ex Mayor of Nashville, (Bill Purcell), who at a Rotary Club meeting stated that he hoped Memphis would never consolidate because he did not want Memphis to be more competitive with Metro Davidson for new residents and new businesses.

The following are some interesting figures.

Population of Memphis and Shelby County                    911438

Population of Metro Davidson                            578698

Total Employees of Memphis and Shelby County             33570    

Total Employees of Metro Davidson                         16000

Employees per 1000 people for Memphis and Shelby County             36.83

Employees per 1000 people for Metro Davidson             27.6

School population of Memphis Schools                        113000

School population of Shelby County Schools                       45000

School population of Metro Davidson                         74733

School employees for City of Memphis                         17000

School employees for Shelby County                         4243

School employees for Metro Davidson                         8361

School employees per 1000 students for City of Memphis             150

School employees per 1000 students for Shelby County             94

School Employees per 1000 students for Metro Davidson             112

It is obvious where one big problem is and it is in the Memphis School System. This over $1 billion dollar taxzilla is nothing but a job factory where education results are secondary to providing employment. If we reduced the school employment to the same ratio employee ratio per student as the Shelby county school system, we could operate with 6328 less school employees. At an average of $45,000 each, this would save $284 million dollars per year. David Pickler (see attached report) reports a difference in cost per student for the Shelby County School system of $1344 less than the City School system. Calculated by this, we could save $151 million by running the City System as efficiently as the County system. He also points out that we definitely do not want to consolidate the well run County School system with the bloated and inefficient City School system. It is obvious that millions could be saved by reforming and cutting the Memphis School System. Reform needs to come to this school system and we need it now. I will report further this week and next on other possible local savings reforms.     



Click here to see what David Pickler has to say about the consequences of consolidating the Shelby County School system with the City of Memphis School System