Ann Arbor voters will be asked in November to remove city administrator from pension board
Ann Arbor voters will be asked in the Nov. 8 general election to approve a city charter amendment changing the makeup of the city's retirement board.
The most notable change is the removal of the city administrator, a move recommended years ago by a blue-ribbon committee that studied the city's pension system.
The question that will go before voters in November maintains nine members on the board, which oversees the city's pension system, but calls for a few changes.
Stephen Rapundalo
Of the current nine-member board, four are elected to their position, two serve by virtue of their city offices and the remaining members are appointed by the City Council.
With the changes, the city administrator no longer would serve on the board but the city's chief financial officer, referred to as the "controller," would continue to serve. The number of citizen trustees appointed by the City Council would increase from three to five.
Meanwhile, the police union would have one trustee elected by its members, and the firefighters union would have one trustee elected by its members. Lastly, the number of trustees elected by general city members, including retirees, would decrease from two to one.
In 2005, a blue ribbon committee formed by the mayor and City Council issued a report recommending changes in the makeup of the board, including removing the city administrator, citing concerns that a majority of the nine board members were direct beneficiaries of the retirement system. The City Council never acted on those recommendations until last week when it voted unanimously to place the charter amendment on the Nov. 8 ballot.
The resolution was sponsored by Council Members Marcia Higgins, Christopher Taylor and Rapundalo. Higgins noted the city’s unions will need to agree to the language as well, even if the charter amendment is approved by voters in November.
Roger Fraser served on the retirement board before retiring as city administrator in April and moving on to a new position with the state. According to an AnnArbor.com analysis, Fraser was eligible to receive a pension worth more than $41,000 annually after his nine-plus years of service, in addition to a year and nine months of military service that was factored in.
Based on a recommendation by Fraser and the retirement board, the City Council voted in January on changes to the city's pension ordinance to establish a "pension adjustment account" to fund future cost-of-living adjustments for city retirees.
Cost-of-living increases were discretionary before, but now retirees, including Fraser, are guaranteed a boost in their pension every July 1, after they've been retired for five years, so long as the pension system is fully funded and meeting financial performance targets.
City officials said in April the pension system was about 90 percent funded after a dive in the financial markets but that it was building back up.
Steve Powers, who currently serves as Marquette County's administrator, is expected to take over as Ann Arbor's city administrator on Sept. 15. Under his negotiated contract with the city, he won't get a city pension, but he will be enrolled in a 401(a) plan where the city will contribute 15 percent of his annual salary each year in which Powers contributes 7.5 percent.
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's e-mail newsletters.
Comments
snapshot
Thu, Aug 25, 2011 : 4:57 a.m.
Why is this board not manned by non union, self interested individuals? This is a classic "fox watching the henhouse" scenario. Appointments by the mayor, police union members, appointments by elected officials of city council, yeah I'm sure the taxpayers best interests are being looked after here. What a joke!
aataxpayer
Tue, Aug 23, 2011 : 11:11 p.m.
This is insane! We need to get public pensions under control immediately eliminate double dipping.
Jack
Tue, Aug 23, 2011 : 9:36 p.m.
For those who don't feel employees have any right to representation on the Pension Bolard: Who would be more interested in having a healthy pension fund? Certainly not outside appointees who are, in essence, political appointments. It was not the pension fund that gave Fraser his salary and benefits. It was the City. It was not the pension fund that gave Neal Berlin (who petitioned to have the vesting period changed from 10 years to 5 years and got it) his pension, albeit he had a contract that did not allow for a pension. It was the City. And it will be the City (your Council representatives) who decide who now has a vote on the pension board if this legislation passes. Expect some more big coups by the already well-paid. The Pension Board and the City are separate entities. The pension fund was hit fairly hard when the City decided to give buyouts to somewhere around 100 employees. Again, that was the City. The Pension Board had no say. My observation has been that Council has very little concern about City employees. I expect that the Pension Fund will now be used for items other than pensions. The City has been dying to get their hands on the Pension Fund for years and years. This would do it, leaving employees out in the cold.
Alan Goldsmith
Tue, Aug 23, 2011 : 5:45 p.m.
"The number of citizen trustees appointed by the City Council would increase from three to five." Great, the Mayor's buddies stacking the pension board. Vote NO!
Roadman
Tue, Aug 23, 2011 : 3:56 p.m.
Wow. ith all he alegations of unerfunding, maybe the Governor should appoint an emergency financial manager who could do a beter job at managing the pension funding.
xmo
Tue, Aug 23, 2011 : 12:23 p.m.
It seems strange to me that the Fire and Police Departments along with two city employees are on this board. Then when the City Council appoints a few more you have a nice majority to vote yourself and other city employees a nice pension. Of course, we know that this would NEVER happen. Just ask ex-city administrator Roger Fraser.
Mr Blue
Tue, Aug 23, 2011 : 12:42 p.m.
Of course you're assuming that public workers are venal and greedy (no more than anyone else). You're also assuming that they don't care bout the city (including it's finances) that they serve. You do know the street definition of what "assume" means, don't you?
OLDTIMER3
Tue, Aug 23, 2011 : 11:52 a.m.
$41,000 retirement anually after only 9 years wow. Most of us work thirty or more years and don't get that much including our entitlement from SS. No wonder our taxes are so high.
Jack
Tue, Aug 23, 2011 : 4:34 p.m.
Carole - Most city employees make nowhere near that pension amount, even after having worked at the city for umpteen years. The $41,000 I assume is the amount Roger Fraser receives in pension, not at all a fair comparison. Mr. Fraser was the highest paid salaried City employee (although there were police and fire employees who made more with their overtime, etc.). He also had a contract with the City that provided him with more benefits than a regular employee would receive. So please doin't jump to conclusions.
Mr Blue
Tue, Aug 23, 2011 : 12:39 p.m.
Most city pensioners (low paid AFSCME) receive far less than Frasers $41k and most worked 25 years or more for it. In this case generalizations are completely unfair.
Goober
Tue, Aug 23, 2011 : 12:36 p.m.
The group making these decisions seems to act as if it is not their money. Oh! That's right. It is not their money. It is our hard earned tax dollars being wasted again.
Carole
Tue, Aug 23, 2011 : 12:05 p.m.
I agree wholeheartedly -- he also gets health insurance I believe. There truly needs to be some changes made in the city's pension plan.
Stephen Lange Ranzini
Tue, Aug 23, 2011 : 11:51 a.m.
@Ryan: Could you please give us an update on how many of the 10 recommendations of the Blue Ribbon Committee have actually been implemented at this time?
Ryan J. Stanton
Tue, Aug 23, 2011 : 11:30 a.m.
The blue ribbon committee's recommendations are being adopted in part. You can download its full report from 2005 here: <a href="http://www.annarbor.com/Blue_Ribbon_pension_2005.pdf">http://www.annarbor.com/Blue_Ribbon_pension_2005.pdf</a> It was recommended that the council adopt requirements for appointees that include professional certifications/degrees and relevant experience to retirement systems (actuarial, investment management, finance). From the report: "Many private sector employers have adopted legislated independence practices. These organizations are held accountable by boards composed of members, with the majority of members legally 'independent' of the organization itself. Most members of such boards are required to have deep technical understanding of the financial and operational underpinnings of the organization. For all of these reasons, the Committee believes that the Retirement System, the beneficiaries, and the City would be better served by a Board composed of three additional independent, qualified professionals who have no vested interest in the Retirement System other than being taxpayers of the City. In addition, the Committee recommends removing the City Administrator as a member of the Board. Furthermore, the Committee recommends periodic rotation of professionals serving the Board to ensure independence of advice and perspective."
golfer
Tue, Aug 23, 2011 : 10:44 a.m.
it took six year to make this happen. makes you think of how so much stuff gets put on the back burner. makes you think how much junk gets moved up. one thing is do not let your engine run after the meetings. might cost you some money!
Stephen Lange Ranzini
Tue, Aug 23, 2011 : 10:39 a.m.
The city's retirement system certainly needs a reform since according to the most recently completed city external audit, it is $215.5 million in the hole. The pension fund is $45.5 million underfunded and the post retirement health care fund is $170 million under funded. It's a shame that a deficit of $215.5 million was allowed to be built up before action was taken. For the details on how the retirement system deficit is calculated, see pages 77 to 79 of the city's audited financial report (called the CAFR) for June 30, 2010 (which is the most recent available) at <a href="http://www.a2gov.org/government/financeadminservices/accounting/Documents/AnnArbor%20CAFR2010.pdf" rel='nofollow'>http://www.a2gov.org/government/financeadminservices/accounting/Documents/AnnArbor%20CAFR2010.pdf</a> The unfunded amount is what is listed as "unfunded actuarial accrued liability" or "UAAL". Of course the future success of this proposed reform is entirely dependent upon the quality and skills of the five citizens the mayor appoints (who will have a majority of the votes on the new board) and city council's willingness to adopt fiscally prudent benefit policies.