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WILKES-BARRE — The proposed sale of the sewer system looms large in solving the city’s financial problems and the board in charge of the pensions delayed making changes to the underfunded plans until next year when more information should be available to aid in its decision.
By holding off until its Feb. 12 meeting, the Aggregated Pension Fund Board bought time to allow the new administration to weigh in and wait to see if a deal goes through that could pour millions of dollars into the five plans and prevent the state from declaring Wilkes-Barre financially distressed under Act 47
The combined plans for nonuniformed employees and retired and active police and firefighters are in danger of falling below the 50% funding ratio and Jason Fine, a senior principal with the city’s actuary Korn Ferry, provided a list of recommendations to boost the percentage higher and prevent a state takeover.
“So to avoid that, really the plans need money,” Fine said.
Fine explained that the Minimum Municipal Obligation the city is required to contribute into the plans would rise to $9.9 million in 2021 from $7.1 million in 2020 with the recommended changes such as, reducing the rate of return to 7.75% from 8%, using a different method to calculate salary growth, changing the retirement age and modifying the mortality data for public sector government government employees.
The state provides annual contributions that would reduce the MMO, but nonetheless, the city would still have to increase its funding, Fine noted.
After the estimated $2.8 million contribution increase, the MMO should level off in future years if the recommendations are approved, Fine added.
City Controller Darren Snyder motioned for a vote to approve the changes, saying he and the other board members have a duty to protect the plan and it’s up to the administration to find ways to fund it. But he ran into opposition from others who had concerns about the city being able to make the higher MMO contribution.
If the city can’t make it, it’s put off with interest added onto it, Fine said.
“Darren, I understand what you’re saying and I understand why you’re advocating it, but does it make sense if we can’t meet it?” asked City Clerk Jim Ryan
“You’re going to pay it,” responded Snyder. “And how you decide how we’re going to pay it is the decision put in front of us right now.”
Firefighter Mark Lear urged cooperation.
“To tell you the truth our back is against the wall. But it seems like the easy way out is the infusion of cash,” Lear said.
Like Ryan, Lear was concerned that the fee added to a missed MMO was counterproductive to the efforts to fix the pension problems. “That’s getting us no place,” Lear said.
Replying to a question from Lear about how much of an infusion it would take to get the MMO to a reasonable $5 million to $6 million annual payment, Fine gave an estimate of $20 million.
After Snyder’s motion failed for lack of a second by a board member, City Administrator Rick Gazenski provided a little more detail about the sale proposed by outgoing Mayor Tony George.
Two bids were received and they range from $20 million to $75 million, Gazenski said. City council is scheduled to meet in an executive session before its work session on Nov. 19 and hear details from Public Financial Management, the adviser hired to develop a plan to strengthen the city’s finances. The monetization of the sewer system asset was a PFM recommendation.
PFM will make a presentation on the proposed sale during the work session and council’s public meeting at 6 p.m. on Nov. 21 in City Hall.
Mayor-elect George Brown, who was invited to the closed door executive session, sat in on the board’s meeting. He was offered the opportunity to comment.
As for the state calling the shots under Act 47, Brown said, “That’s the last thing I want to happen.”
Because he was hearing it the pension details for the first time, Brown acknowledged he couldn’t offer any suggestions.
“This is going to take a lot of thought and a lot of collective work together, but this is very disturbing,” Brown said,