Parkersburg sales tax not an option for pension fix
Parkersburg to consider current year payment options
PARKERSBURG — An additional sales tax to pay the police and fire pension liabilities in Parkersburg is not an option, city officials said on Thursday.
The unfunded liability of the pension funds didn’t meet the threshold that would have allowed using a pension relief tax, Mayor Tom Joyce said.
“It’s not an option,” Joyce said.
That means the city will have to come up with a new source for the more than $2.2 million a year needed to pay to close the existing police and fire pension funds and financially maintain them according to law, Joyce said.
He plans to propose to council that the city acquire the $2.2 million from the unexpended funds at the end of the fiscal year and money from the capital reserve and the rainy day funds.
“That’s going to be the problem,” Parkersburg City Council Finance Committee Chairman John Reed said. “We’re going to have to look at some serious things.”
A plan to fund the extra charges for the current fiscal year by utilizing money from the stabilization and capital reserve funds and more than $1 million carried over from the previous fiscal year will be considered by the Finance Committee on Tuesday.
Without the sales tax — which, if approved, could have started July 1, 2018 — other options presented include putting a levy before voters, raising existing fees and cutting services to generate money going forward.
City Attorney Joe Santer said that while drafting legislation for the 1 percent sales tax dedicated to the pension funds, he discovered a complex provision in the state law allowing it that meant Parkersburg — and almost any other West Virginia city — would be ineligible.
“Your deficiency in the funding had to be 97 percent or greater,” he said.
While Parkersburg’s unfunded liabilities sit at $52,668,000 for current and retired police officers and their beneficiaries and $48,258,000 for the Fire Department, they are 16.24 and 21.35 percent funded, respectively, according to city Finance Director Eric Jiles.
In September, the Finance Committee, with two members absent, recommended closing the existing police and fire pension plans to future hires, which would allow the city to change its payment method. Currently, the city must pay 107 percent of the previous fiscal year’s contribution. Not only is that not enough to cover the annual police pension payouts, but that increase will continue to grow and consume an ever-larger portion of the city budget, officials have said.
Under the new payment plan, the liabilities would be amortized over 33 years. The initial payments would increase, but they are expected to gradually decline over the years.
On Tuesday, the Finance Committee will consider resolutions to close both existing pension funds to new hires. Although that was recommended last month, Santer said he’s asking the committee to vote on them again with language specifically stating current employees, retirees and beneficiaries would still be covered, which was the intention all along.
Closing the fund to new hires will move Parkersburg into the new payment plan, retroactive to the start of the fiscal year. The most recent actuarial report shows the city would need to contribute $6,755,586, while only $4,472,860 was budgeted under the existing setup.
The administration is asking the committee, and eventually council, to make up the additional $2,282,726 by allocating $1,068,024 from the unencumbered fund balance from fiscal year 2017.
The total of funds remaining from the previous fiscal year is $2,285,122, Jiles said. Of that, 51,146 was already appropriated in the current budget and $750,000 was recently earmarked by council for construction of a splash park at the City Park Pool. Another $415,503 would go toward contractual obligations on previous appropriations for which the city remains liable, according to another budget revision on Tuesday’s Finance agenda.
Factors contributing to the fund balance include business and occupation taxes and municipal sales tax revenues coming in over projections by $262,851 and $193,764, respectively, and lower-than-expected expenditures in areas like insurance and landfill charges, according to a memo to council members from Joyce.
Under the administration’s proposal, the remainder of the additional pension funds would come from the full $957,559 balance of the stabilization fund and $256,963 from the capital reserve fund, which currently has a balance of $923,605.
“It is the administration’s position that the issue of the police and fire pension plans are of the utmost significance to the city and its long-term ability to provide basic services,” the memo says.
Joyce said the reason this is being proposed now is because of the open positions in the police and fire departments. Joyce said he can’t in good conscience add new employees to the existing pension funds because that would greatly increase the unfunded liability.
The additional sales tax was favored by Finance Committee members, including Reed, when it came to funding the pension plans going forward. The other proposals from the administration at the September Finance meeting included raising the user, police and fire fees; a voter-approved excess property tax levy; or cutting the amount from city expenditures, which would result in reduced jobs and services.
Reed said the solution will probably need to be a combination of cuts and increases.