Dallas Police and Fire Pension officials are recommending the city increase its yearly contributions into the system— and to add additional contributions by “monetizing” city assets in order to build back the public safety retirement fund.
Dallas officials have known for years about the first responders pension crisis. The city faces $3.4 billion in unfunded liabilities with a current contribution rate that won’t fully fund the system until 2090. And the plan won’t net sworn employees an increase in benefits for nearly two decades.
But the city must remedy that quickly. According to a briefing at Thursday’s Ad Hoc Committee on Pensions meeting, the public safety pension board must adopt rules that comply with state requirements no later than November 2024.
The unfunded liabilities and need for a plan comes after the fund nearly went bankrupt in 2016. Pension officials cite bad real estate investments and a “run on the bank” as causing the issue. At that time, the fund was at immediate risk of defaulting.
While the system is in better shape than it was eight years ago, the council is still facing what some council members call a simple goal — with a complex solution.
“What we are trying to do is very simple. Uniform employees, when you retire, you will get paid,” Mayor Pro Tem Tennell Atkins said during the meeting. “Simple as that, we are sound financially in the city of Dallas.”
‘Need not wait’
Pension officials briefed the committee on three recommendations they say could stabilize the police and fire fund. The first recommendation is for the city to make additional fixed contributions into the system of $20 million, $40 million and $60 million over the first three years of the plan — what officials call a “phase-in” period.
“And after that it jumps up and stays up and increases over time,” former Dallas Police and Fire Pension Board of Trustees member Rob Walters said during the meeting. “That phase in effect gives the city a real incentive to get busy about assessing the monetization opportunities.”
After that — they recommend city officials use an actuarial determined contribution rate beginning in 2027.
But the main recommendation was for the city to start “monetizing” on city assets.
“The city need not wait on this, the city tomorrow could get underway,” Walters said. “Look at this as an opportunity to monetize some assets and reduce this burden.”
Walters laid out three different scenarios of how contributions would change if the city infused a lump sum of cash into the fund after the first three years of the plan.
“Let’s say the city took advantage of the next 36 months and actually achieved some monetization,” Walters said. “If it were to do a $500 million dollar contribution three years out, you can see how it substantially reduces the amount of incremental contributions the city would have to make.”
A $1 billion dollar infusion into the fund brings down the contribution even more. And a $1.5 billion dollar infusion has even more of an effect, according to Walters.
“This is pretty remarkable,” Walters said. “Not only do you eliminate all of the incremental contributions, you can actually reduce the city’s contributions…up to $20 million dollars reduction on what the city is contributing today, each and every year.”
Walters says the city has multiple opportunities to “control its own destiny” to create a viable pension plan. But that destiny comes with some trade-offs.
‘Focus like a laser’
District 12 Council Member Cara Mendelson said she agreed with some of the recommendations but said the lack of a cost-of-living adjustment would hurt police and fire recruiting and retention efforts.
“You have to be able to attract and retain staff and without a [cost of living adjustment] I don’t think we’re going to do that,” Mendelsohn said.
Walters said during the briefing that the main issue is dealing with the unfunded liabilities and that policy changes can be made after the system is more funded.
“Our recommendation on this is, solve this problem first,” Walters said. “We understand the issues of [cost of living adjustment] and benefits…our recommendation is to focus like a laser on solving this problem.”
Walters recommended the council look into monetization opportunities like city land a release estate, parking and landfill sites, underutilized city facilities and even aviation assets, in order to make a cash infusion into the pension fund.
Mendelsohn also said she believed a phase-in period wasn't necessary — and that the city should start making the actuarially determined contributions immediately.
City officials say they are on track to delivering a final funding plan before the state required deadline. With the recommendations city staff and pension stakeholders will “continue to work with the Ad Hoc Committee on Pensions to finalize and submit a…plan,” a city press release said.
The final plan is due to the Texas Pension Review Board by Fall of 2024.
Got a tip? Email Nathan Collins at ncollins@kera.org. You can follow Nathan on Twitter @nathannotforyou.
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