story by Ryan Saylor
rsaylor@thecitywire.com
For anyone expecting a solution to the crisis facing the city of Fort Smith's general fund following Thursday's (Nov. 13) first budget meeting, keep waiting.
The nearly four and a half hour meeting touched on all the departments that make up the $48 million general fund operating budget and City Administrator Ray Gosack's proposed budget cuts and revenue enhancements proposed earlier in the week.
While Gosack has proposed fee increases and cuts to various city departments – namely the police and fire departments to the tune of about $1 million – one new funding possibility came from Fire Chief Mike Richards that would assist with the police and fire pension contribution fund, which is projected to go broke in 2019.
Richards said he had notified Gosack of a formula change the city could implement with the pension contribution fund that would free up about $400,000 per year and would help shore up the fund going forward.
Since Jan. 1, 2004, Richards said the city has been using a base multiplier of 3.28 for the pension contribution fund. When the base multiplier was adopted, the city had an $11.863 million balance in its pension contribution fund and was adding $1.346 million annually to the plan. That was before the financial crisis of 2008, when the plan started withdrawing more money than the city was putting in, setting it up for the eventual insolvency projected for 2019.
But Richards said the city has the option to revert back to a base multiplier of 2.94, saving $400,000 that can be put toward shoring up the plan. He said since many on the police and fire departments have worked long enough to have had contributions under both multipliers, the difference in retirement age would not be greatly impacted.
As an example, he said employees who worked an entire career under the 3.28 base multiplier would have to work 30.5 years in order to receive their complete retirement, while those at a 2.98 multiplier would have to work for 34.1 years.
"The difference is somewhere in the middle," he explained.
The funding solution, Richards said, was something that was known by LOPFI administrator David Clark when he met with the Board of Directors earlier this fall about the pension contribution fund shortfall, but was not discussed with city administration until he broached the subject during discussions on possible budget cuts.
Richards said he is not necessarily advocating for the change in base multiplier formulas, but since the state would allow a change and the city is in a financial bind, it is worth considering.
"Knowing the situation we're in, it has to be considered," he said. "I'm not for or against it, but it must be considered."
Richards acknowledged that the change would simply be part of a solution, not the entire solution.
The Board also discussed possible fee increases, with outgoing City Director Philip Merry proposing implementing Gosack's suggestion of a business fee projected to bring in $1.8 million annually, along with other fee increases including franchise fees on home telephone, cable and other services. Merry's collective suggestions, he said, could raise more than $2 million and he proposed finding budget cuts of $400,000 to offset some of the increases. His proposal included no funding cuts, with excess funds intended to fund the pension contribution fund for police and fire. Gosack told the Board that even if it threw $600,000 each year toward the fund, it would only delay insolvency by one year to 2020.
On the other hand, City Director Keith Lau said it was irresponsible to not include possible staff reductions in any budget cut proposals and said his constituents are demanding any fee increases be coupled with "cutting of heads."
Another aspect of the wide-ranging discussion on budgets was the city's self-insured health coverage, which has seen increases in the cost to the city of Fort Smith from the city paying 60% of the cost for employees in 2012 to 68% now.
Fort Smith Director of Human Resources Richard Jones told directors the total is still below the national average of 70%. Director Kevin Settle asked for the city’s costs per employee compared to other cities in the region, but Jones did not have those numbers immediately available.
While it does not appear that city employees will see a pay increase, City Director-Elect Tracy Pennartz pitched the idea of pay raises for city employees while at the same time raising the employees' share of healthcare costs. She said it would benefit the employee long-term due to the retirement benefits the employees would receive through higher base pay, even if the pay increase itself was not seen due to higher health insurance premiums.
The next budget meeting is set for Monday (Nov. 17) at 6 p.m. in the community room of the Fort Smith Police Department. The focus of the meeting will be enterprise funds, with Settle proposing a possible third meeting to address funding solutions on Nov. 20.