A public referendum will be held during the May 22 primary on a proposed 0.4 millage increase on property taxes citywide to help prevent the pension funds for 160 uniformed public safety employees from becoming insolvent, the Pine Bluff City Council decided Thursday.
The council voted 7-1 during a special called meeting Thursday to approve the necessary legislation to put the item on the ballot.
Former fire chief Ray Jacks was one of several retired police officers and firefighters who attended the meeting and urged the aldermen to vote in favor of the items. Jacks spent 50 years with the fire department, 27 of them as fire chief.
“I am very thankful for what they did here,” Jacks said after the vote. “You have to take care of people. You can’t just throw them out.”
The public will vote on whether to raise the millage by 0.2 mills each for both the Firemen’s Pension Fund and the Police Pension Fund. The firemen’s fund has been declared “projected insolvent” by a state board, meaning it will not be able to make payments for another 10 years unless its funding is increased. The police fund is not projected to be insolvent in 10 years but also has funding issues, the council heard from multiple sources Thursday.
Also speaking in favor of the millage increases Thursday were former fire chief Eddie Lunsford, current Battalion Chief Tellis Rushing, current senior police patrolman Larry Dennis, retired police captain Lee Hurd and current Fire Chief Shauwn Howell.
“I want to make sure we do what we can to support them because one day it may be me, and I would hate to think that the current firefighters wouldn’t look out for me,” Howell said.
Don Fox said he spent 33 years with the fire department. When he came down with an illness in 2008, his doctor asked him if it were possible he’d been exposed to toxins.
“I said, ‘Do you know what I did for a living? I was a firefighter for 33 years, back when we didn’t have breathing apparatuses,’” Fox said. “‘The tough man would run into that building and eat that smoke and he’d come out and light up a cigarette, coughing and gagging, but he was a tough man.’”
Retired police captain Kenny Heroman said there were many times in his 23-year career that he or other officers could have taken jobs elsewhere for higher salaries, but they decided to stay in Pine Bluff because they loved what they did.
“But we also hoped that by staying at those lower wages that there was light at the end of the tunnel in the form of those pensions,” Heroman said.
All the speakers said they would be willing to get out and campaign for the millage increase to convince the public.
Alderman Steven Mays cast the lone dissenting vote, citing a campaign promise not to raise taxes. Two of the ordinances technically put the millages in place, although a couple of the other aldermen countered Mays’ position by saying the votes taken by the council to raise the millages won’t go into effect unless the public also approves the increases. The public has the final say. The council vote was just a formality to get it on the ballot, they argued.
“Police and firemen, I’m not against you all,” Mays said to the audience after casting his first ‘no’ vote. “I gave a lot of people my word that I would not support any taxes, and I’m a man of my word.”
The city currently levies for each fund an annual tax of 0.8 mill on the assessed value of real and personnel property in the city. State law allows a maximum amount of 1 mill to be applied to each fund.
The referendum will be held at the same time as the May 22 primary to save money. Calling a stand-alone special election would have cost the city about $60,000, Mayor Carl A. Redus Jr. said.
Improve, not solve the problem
Each year, the state Arkansas Fire and Police Pension Review Board uses actuaries and analysts to assess whether the 144 locally run pension funds that remain operational in the state have the funds to sustain making pension payments to their members for the next 10 years, said David B. Clark, executive director of the review board.
Those funds that are determined not to have enough assets to continue to function for the next 10 years are placed on what the review board calls its “projected insolvent” list.
In December 2011, the city of Pine Bluff and the Firemen’s Pension Fund Board were notified that the firemen’s pension had been placed on the review board’s projected insolvent list.
Clark said that while the police fund is not projected insolvent in the next 10 years, it is still an “underfunded” plan.
“Both pension funds do need an injection of cash coming into the pension funds, which this millage that you’re talking about would certainly be a huge effort toward actually shoring up these pension funds,” Clark said. “It’s not going to be the cure-all, but it’s definitely a step in the right direction.”
Jody Carreiro — an actuary with Osborn, Carreiro and Associates Inc. — provided the financial details on the assessments of both of the funds.
Carreiro said the millage increases would bring in an additional $75,000 annually. Another source of funding will be an increased tax kickback from the state resulting from a 2011 change in law. That will add about $50,000 to $70,000 annually to the funds.
Carreiro crunched the numbers for a variety of scenarios for the fire fund, with the average result indicating that about $450,000 additional funds will be needed annually. Even if the millage passes and the state kickbacks are as high as projected, that still leaves $305,000 that will need to be added annually for the next 30 years to keep the fund solvent.
“At the end of the day, do we need this (the millage increase)?” Alderman George Stepps asked.
“At the end of the day, you need this, plus some,” Carrerio said.
“And at some point, we will need another $300,000,” Alderman Bill Brumett said, to which Redus replied that he hopes the state will help, given that it is such a wide-spread problem with many cities.
Members of the boards also said they are trying to come up with other ways to add to the funding.
Miller pointed out that the members of the pension fund do not get Social Security payments, only pension payments, because of the way the pensions were set up. Also, the fire pension did not include provisions to increase the pension payments over the years to keep pace with cost-of-living increases.
Prior to a 1983 change in state law, local governments managed the pension funds for their uniformed public safety employees. After 1983, newly hired uniformed employees were required to join a state-run plan.
The fire fund has 75 members who are retired and two members who are still working and paying into the fund. The police fund has 83 members, Miller said last week, although some of the numbers mentioned by others during Thursday’s meeting differed slightly. Other speakers said that two of the police members are still working.
The special meeting Thursday was necessary because of a 65-day deadline to get the item prepared for the primary ballot, said Joe Childers, assistant city attorney. The meeting was not held sooner because when the city and the board were formally notified of the projected insolvent listing in December, Childers was under the impression that a public referendum would not be needed to raise the millage. In the past, the millage for the two pension funds has been raised or lowered by council vote, he said.
But in researching, Childers discovered a 2004 Attorney General’s Office opinion stating his position that cities must put millage increases to a public vote.
The boards that oversee the police fund and the fire fund took the formal votes needed Thursday morning so that the items could come before the council Thursday afternoon, Redus said.
Childers’ and Redus’ comments were in response to Mays’ questions about why the problem had not been brought before the council sooner.
Carreiro said the main causes of the problems with the pensions — which are being faced by similar plans across the state and nation — are the low return on investments and the high annual cash payouts required to the members.
Another factor that was mentioned during the discussion was inadequate funding coming in because of the lack of working members who are still contributing to the fund.
The Arkansas Assessment Coordination Department provides an example to calculate how much the proposed 0.4-mill millage increase would mean in added taxes: take the value of the property, multiply its value by the 20 percent assessment level and multiply the result by the increase amount (with 1 mill represented as 0.001, or in this case, 0.4 mill represented as 0.0004). The resulting amount will be the added annual cost to the taxpayer.
So, using an example of a $75,000 house, the taxpayer would owe an additional $6 a year in taxes if both proposed millage increases are approved.
Current Jefferson County school district millage rates include Dollarway at 40.8 mills; Pine Bluff at 41.7 mills; and White Hall at 39.2 mills. The Watson Chapel School District will hold a special election April 10 to determine if the millage rate in that district will increase from 31.8 mills to 36.8 mills.