By JAMES MITCHELL
Sunday Times Newspapers
LINCOLN PARK – City officials were of the opinion that – given its recent supervision by a state-appointed emergency manager and current receivership – the conventional formula for upfront retirement benefits didn’t apply to the still-struggling municipal budget.
On April 20, Wayne County Circuit Court Judge Bryan Levy agreed, and denied a request for the city to come up with $500,000 that the Municipal Employees Retirement System of Michigan had asked for last month.
Mayor Thomas Karnes said the decision allows city officials and MERS representatives to find a mutually agreeable solution, best done outside of a court room.
“It doesn’t mean that our obligation goes away,” Karnes said. “We’re still going to have to pay what is owed. The MERS folks wanted more up front, but we’ll be working with them to get a payment system that’s good for both sides.”
Last month MERS filed a motion seeking more than $500,000 from the city to shore up long-underfunded – and underpaying – pension funds. The employee organization – which manages pension funding systems for municipal workers – asked the court to order city officials to impose a special assessment tax on homeowners to cover the cost.
City officials said they had been paying more toward the fund than is being taken out to compensate pensioners, and that the formula had been put in place during the oversight period of Emergency Manager Brad Coulter.
“There was a plan that had been developed by the emergency manager to fund pensions at a certain level for the next three years,” Karnes said.
While MERS asked for a court order requiring the city to provide more to the fund, City Manager Matt Coppler and Attorney Ed Zelenak argued that the requirement was invalid due to the city’s recent critical finances.
“That was proven when they went to the hearing,” Karnes said. “Obviously MERS was a little scared because of our condition.”
Although the city does not have the resources to provide a large, upfront payment, negotiations held under emergency management had put in place a plan to restore pension funding at appropriate levels.
Last year the city paid $1 million toward previous underpayments when it increased its annual pension contribution to $3.1 million, up from the previous year’s $2.1 million. Coulter’s plan was to bring the pension reserve up from being just 20 percent funded up to at least 50 percent.
Last year the city prepared its first positive budget in several years, and remains on track to have eliminated a $5 million deficit, avoid any further layoffs and be out of receivership within 18 months.
Karnes said the court ruling allows both the city and MERS to continue negotiations toward a restored pension system.
“We want our pensioners to receive their money, obviously,” Karnes said. “Our goal is to get the pensions funded at a reasonable level. That’s what MERS is working for and what we’re all working toward.”
(James Mitchell can be reached at firstname.lastname@example.org.)