PENSION MINUTES SEE THE LIGHT OF DAY

I asked for the City of Memphis pension board minutes for the last year and I recently got them. I will have to compliment Mayor Wharton and the City Attorney's Office for their handling of this request. They sent the files electronically which is a great improvement over the past administration. Congratulations.

In looking through the minutes several things jump out at me. First you have to understand that the pension board is made up mostly of insiders who have a self interest in the results of the board's decisions. Look at the make up in the attached file. There is only one public member representing the interests of the taxpayers who pay for a large portion of these pensions.

I find the following areas of interest.

• Disability retirements, ordinary versus line of duty
  
• Disability retirements in general in most cases are approved and where they are not there are lawyers available to take the matter to court.
  

It appears that line of duty pensions are more generous than ordinary pensions and therefore there is a great interest in getting a line of duty disability pension approved. I have attached a section of the pension ordinance on this subject.

Several other items in the minutes are interesting. Page 29 (Jack Sammons), Page 48 (Keith McGee and W. W. Herenton) and page 56 (Yalanda McFadgon).

Click here to see the City of Memphis pension board minutes for the last year

Click here to see the makeup of the City of Memphis pensioin board
Click here to read the provisions of the City of Memphis pensions plan concerning disability pensions

THE JANUARY 2001 PENSION SCAM

Is there any better example of the games that the political class plays than the attached story from the Commercial Appeal. I talked to Jim Strickland about this story and he only found out about this situation when certain people started retiring who were not in appointed positions when the January 2001 ordinance was revoked in 2004. Scott McCormick wrote the language and it was assumed then that only those who were currently in appointed positions in 2004 would be covered under the January 2001 pension resolution which allowed elected and appointed people to retire after 12 years regardless of age.

What happened? Well it turns out that Sara Hall and certain Herenton administration officials twisted the language and determined that if a civil service employee was later moved to an appointed position after the revocation of the January 2001 ordinance and if they had 12 years or more of service, they could retire regardless age. Some have and more are probably lining up.

It is a disgrace and it points out that the pension system should be changed so that all future employees should be covered by a 401K like the people who make the whole system possible, the taxpayers. It is time for the taxpayers and voters to take back control of the system and their pocketbooks.

 

Click here to read the Commercial Appeal article

 

With all the talk about consolidation panels and school problems, the one clear fact that I have found is BIGGER IS NOT BETTER. The further you move away from the voters, the taxpayers, the parents and students and the more layers of bureaucracy that are involved, the worse are the results. The optimum and the most efficient size of a school district is about 40,000 students.

I have attached several results of studies of school consolidation. My conclusion is that consolidation of government is probably similar. Bigger is not better.

Mike Carpenter responded to the above email to say that no one is considering consolidating the City and County school systems. I would be willing to bet that there is a substantial element that would love to see this happen during any City/County consolidation effort. My point is that consolidation in and of itself may be a bad idea as bigger is not necessarily better. e.g. (our Federal Government). I would even propose that the Memphis City School system would be better if it was broken up into two smaller systems concentrating on neighborhood identities with more parental involvement and smaller and more efficient school administrations. Crazy, maybe, but why not study this option?

Click here to see the history of school consolidation

Click here to see the reality of school consolidation

IS CONSOLIDATION A GOOD IDEA? A PRELIMINARY STUDY!!

With all the talk about possible consolidation in Shelby County and the formation of a consolidation study panel, I decided that the first thing that should be done was to gather information about Metro Shelby, Metro Davidson (Nashville) and Metro Jefferson (Louisville). Little did I know that this would be easier said than done.

I started with the CAFRs (Comprehensive Annual Financial Reports) for Memphis and Shelby County and all the incorporated cities in Shelby County and then attempted to compare them to Metro Davidson (plus their incorporated cities) and Metro Jefferson (plus their incorporated cities). The purpose was to take a broad view and comparison of the three counties and see if there were any possibilities of savings before going down this study path.

I admit that I am not a financial expert but I can read a CAFR. I wanted to concentrate on the broad numbers without getting into the details. I am interested in the population, the overall spending and the major spending items such as police, fire, education and debt payments. If there are areas that stand out as red flags of possible savings, then I would point them out.

What I found was that it is very difficult to get all the information but most of the CAFRs are on line. Metro Jefferson has a very different organization with the state involved in some of the major areas such as courts. I have no doubt made mistakes or left out important points but I would appreciate public comments and corrections. This would be done much better by an independent financial panel and the consolidation panel should consider doing this. Here are my major findings from the CAFRs ending June 30, 2008.

• The population of Metro Shelby (MS) is 906825, Metro Davidson (MD) is626144, Metro Jefferson (MJ) is 713877
  
• Total government spending MS ($3.41 billion), MD ($2.11 billion), MJ ($1.85 billion)
  
• Government and public school employees, MS (38399), MD (19666), MJ (15166)
  
• Annual expenditures per resident MS ($3765), MD ($3380), MJ ($2601)
  
• Public school employees MS (22638), MD (10013), MJ (8048)
  
• Public school students MS (151000), MD (74733), MJ (79931)
  
• Total education expenditures MS ($1.61 billion), MD ($780 million), MJ ($739 million)
  
• Total cost education/student MS ($10704), MD ($10446), MJ ($8777)
  
• Police/Sheriff employees MS (5239), MD (2715), MJ (1680)
  
• Police/Sheriff employees/1000 residents MS (5.77), MD (4.33), MJ (2.35)
  
• Fire Employees MS (1843), MD (1182), MJ (1493)
  
• Fire Employees/1000 residents MS 2.03), MD (1.89), MJ (2.09)
  
• Annual interest on debt MS (125 million), MD ($77 million), MJ ($52 million)
  

The red flags for Metro Shelby are City of Memphis employees which have gone up in ten years while population has gone down. The increase is 1204 employees (6560 to 7774). This is somewhere around $60 to $100 million extra expense. The figures in the Memphis School system are even worse with an increase as shown below.

Memphis City Schools	Year 1998	Year 2008	% difference
number of students K12	109137	103000	-5.60%
number of employees	10693	16500	54%
general fund budget	$550,147,000	$931,966,000	69%
CPI up over 10 years			31%

 

Here we are talking about $200 to $300 million dollars extra.

Another critical item is our OPEB (Other Post Employment Benefits, mainly retiree health care) unfunded liability. It is currently over $3.5 billion dollars for Memphis, Shelby County, MLGW, City and County schools.

Until we address these three big red flags, no consolidation plan will lower our cost of government. Here is a statement in the 2008 Metro Davidson CAFR report.

"Long term liabilities increased by 20.4% due to the issuance of new general obligation debt in excess of principal payments and due to the inclusion of the Government's liability of $137 million for other post employment benefits (OPEB), discussed further under Other Matters below. " The City of Memphis unfunded liability is over $800 million and the Memphis city Schools is over $1.25 billion.

I have attached my spreadsheet mentioned in this report.

 

 

 

 

Click here to see a preliminary spreadsheet comparison of Metro Shelby, Metro Davidson and Metro Jefferson

UNCOVERING HERENTON'S LUMP SUM PENSION PAYOUT

I have been trying for about four weeks to get all the information about Herenton's big lump sum payout from the City of Memphis pension system. Here are the facts as I know them at this point.

• I asked for the formula from which Herenton's lump sum payment was calculated, who furnished it and where is a lump sum payment authorized in the pension ordinance.
  

  I finally got the following answer. "Former Mayor Herenton's lump sum payment was calculated based on Pension Ordinance Sec. 25-1 (1) b. (total amount of his contributions multiplied by a return multiple). This section also authorizes a lump sum payment to participants who retire or terminate employment."
  

• I did some research on this answer and found some interesting information.
  
• I have attached the old section of the pension ordinance which is now numbered 4-4-1 (b) rather than 25-1 (1) b. You will note that the return multiple for 16 years or more has an asterisk (*) in the return multiple column with the note saying "The multiple for years 16 through 20 will be set prior to third reading after a review of actuarial information from the administration."
  
• Then I found that Ordinance #5303 dated 5/19/09 was passed replacing the asterisks with actual return multiple numbers that increased the return from 3.0 to 4.0. I have attached that ordinance.
  

  
   

So these and other questions remain.

• Did the ordinance, which was passed just before Herenton resigned, increase his payout?
  
• Exactly how was his benefit calculated? Was it $126711 times 4 = $506845 and would the actuarial calculation of the old ordinance language been less?
  
• Why are there no minutes of the pension board meeting where this action went down?
  
• The old schedule of years of service and return multiples which was replaced by Ordinance 5303 stated that "The multiple for years 16 through 20 will be set prior to third reading after a review of actuarial information from the administration."
  

  
   

In looking through past City Council agendas, I find that there are many ordinances passed quietly that increase payouts and pensions but there is no requirement that the cost of these changes be calculated in advance. No wonder they did not want me on the pension board. I will be reporting further on this incestuous pension board which quietly increases their pension benefits at the taxpayers' expense.

Click here to read the recently changed pension ordinance increasing the payouts

Click here to read the old pension ordinance chart

November 3, 2009

 

Just in time for Halloween, Mike Ritz sent me this spreadsheet, which I have attached. It shows that $26.5 million dollars in Shelby County taxes are unpaid as of October 22, 2009. They are in five classifications.

• Tennessee Regulatory Commission Taxes
  
• Personalty Taxes
  
• Realty Commercial
  
• Realty Residential
  
• Realty Other
  

The astounding thing is that state law charges interest on delinquent taxes as shown below. Sounds like your Visa bill. It is true that some of these tax debts are in dispute and in the process of appeal. The interest could be as high as 20% or higher.

Tennessee Code Annotated, Section 7-4-204

1. Taxes due and payable that are not remitted to the tax collection official on or before the due dates are delinquent.
   
2. The person owing the taxes shall be liable for interest on any delinquent taxes from the due date at the rate of eight percent (8%) per annum, and, in addition, for a penalty of one percent (1%) for each month or fraction of a month that the taxes are delinquent. The interest and penalties shall become a part of the tax required to be remitted in this chapter.
   

 

Click here to see the top 50 shelby county tax delinquent taxpayers in 5 classifications

A WATCHDOG IN A HENHOUSE FULL OF FOXES

See the attached article from the current Memphis Flyer concerning the following appointment and my work as the Watchdog.

Myron Lowery, the longtime City Council member and temporary Mayor of Memphis after Willie Herenton's resignation, called me in September and asked if I was a member of any board or commission. I said I was not. He then asked if I would like to be and I said that depended on which board or commission. He said "How about the pension board of the City of Memphis". I said that would certainly be interesting.

Myron and I go back a few years and we are friendly. He has met several times with groups such as the effort by John Lunt to get rid of the January 2001 pension resolution and the formation of the Charter Commission. While we do not agree on every issue, I believe his repeated statements that he is for absolute transparency in government, my holy grail as far as politicians go. His performance as Chairman of the Charter Commission was outstanding, fair and balanced, and his grasp of Robert's Rule of Order demonstrated that he knows how to run an orderly and fair meeting.

Well the actual confirmation process for the only citizen member of the Pension Board turned out to be more than interesting. I was told to attend the personnel subcommittee meeting first which I did on September 1. There were a number of other potential appointees there for various jobs and they all sailed through without objection. Then my name came up and I gave a one minute resume of my life. My appointment was moved and then Janice Fullilove jumped up and said that she would like to have the appointment delayed. Harold Collins agreed with Janice but eventually I was approved (3 to 2, Flinn, Strickland and Hedgepeth) as the appointment was subject to a full City Council vote two weeks hence.

On September 15, I showed up at the full City Council meeting dressed in my best sport coat and tie. Most of the meeting was devoted to the effort to get rid of the current City Attorney, Elbert Jefferson. Then a curious thing happened as Allan Wade, the City Council Attorney, opined that the City Charter required seven votes (a majority of the full 13 members rather than a majority of those present and voting) for approval of the motion to get rid of Jefferson. This opinion torpedoed the effort and Jefferson was retained.

Eventually my appointment to the pension board came up and two union members spoke about how my serving on the board would undermine morale, harm widows and children and generally threaten world peace. Barbara Swearengen Ware agreed and I requested a prompt vote so I could return home and continue beating my wife.

A vote did eventually come and somehow I won on a 6 to 5 margin. As I was leaving City Hall, I was called back and told that I lost as Allan Wade said I needed 7 votes, not just a 6 to 5 margin of those present and voting.

In my response to Ware and the union members, I pointed out that I was the only non interested (public) member of the incestuous pension board. I had no authority to change pension rules and I was only one chicken in a henhouse full of seven foxes. Alas, my pleas fell on long pointy deaf ears.

 

 

 

Click here to read the current article in the flyer about the watchdog