The Pine Bluff City Council will hold a special called meeting Thursday during which aldermen will consider calling a special election on a proposed 0.4 millage increase on property taxes citywide to help prevent the pension funds from becoming insolvent for 160 uniformed public safety employees.
The council will meet at 2 p.m. Thursday in council chambers at the civic complex.
Prior to a 1983 change in state law, local governments managed the pension funds for their uniformed public safety employees. Since 1983, new uniformed hires have been required to join the Arkansas Local Police and Fire Retirement System, a state-run pension program.
Each year, the state Arkansas Fire and Police Pension Review Board uses accountants and actuaries 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 was notified that its Firemen’s Pension Fund had been placed on the review board’s projected insolvent list. Clark said there are eight pension funds across the state that are currently on the list.
City Finance Director Steve Miller said the proposal that will come before the city council on Thursday is an attempt to address the problem.
“The millage increase is a step we’re taking to add revenue to the fund,” Miller said.
Although only the Firemen’s Pension Fund has been added to the projected insolvent list, Miller said there is also concern about the city’s other pension fund, the Police Officer’s Pension Fund.
“The police fund is underfunded as well, just not underfunded to the point of the fire fund,” Miller said.
The city currently levies an annual tax of 0.8 mill on the assessed value of real and personnel property in the city to fund the Police Officer’s Pension Fund and it also levies 0.8 mill annually to fund the Firemen’s Pension fund. State law allows a maximum amount of 1 mill to be applied. The proposed ordinances would raise the current Pine Bluff millage rate to the state maximum for both funds.
The proposal is broken down into four pieces of proposed legislation for the council to consider. There are two proposed ordinances — one for the Police Officer’s Pension Fund and one for the Firemen’s Pension Fund — that would, if approved, put the council’s stamp of approval on the proposed millage increases. The other two proposed ordinances — one for each fund — would call a special election in order for voters to consider whether to approve the millage increases.
The date for the proposed special election was left blank on the proposed legislation, but Miller said the goal is to hold the referendums at the same time as the May 22 primary, to prevent the public from shouldering the extra cost of a stand-alone special election.
Thursday’s special meeting is necessary in order to meet the deadline for preparing the items to appear on the ballot on May 22. The next regular council meeting on March 19 would have been too late, Miller said.
Miller said 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 retired members.
Miller said part of what’s causing the problem of inadequate funding coming into the funds is the lack of working members who are still contributing to the fund. Another issue is that the investment packages for the funds are not bringing in as much as they have in the past because of the ongoing issues associated with the recession.
Clark agreed about both factors being part of the challenge for similar pension funds across the state. Clark said the primary sources of funding for the pension funds are employee contributions, employer contributions, millages and transfers from the general fund.
“It’s pretty basic Money in, money out,” Clark said.
In dealing with other local governments experiencing similar issues, Clark said millage increases have been one of the main ways to address the problem.
“The primary function has been to increase the millage,” Clark said. “There really isn’t another mechanism other than seeing if the investments are appropriate, and in other places where we’ve looked at the investments to see if there are opportunities there, that has not been the case. There wasn’t much else to do.”
Miller said that Clark, as well as an actuary with detailed knowledge on the issue, are expected to be in attendance at the special meeting Thursday and be available to participate in the discussion and answer questions.
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.