HomeMy WebLinkAboutIR 8579 INFORMAL REPORT TO CITY COUNCIL MEMBERS No, 8579
Date: March 11, 2004
CX X To the Mayor and Members of the City Council
Page 1 of 3
SUBJECT: HJR 54 Related to the Fort Worth Employee Retirement System
And Opt-out Election
Overview
During the Government and Neighborhood Relations Committee meeting on March 5, 2004, Brandon
Aghamalian, Sr. Assistant to the City Manager presented to the Committee a briefing on House Joint
Resolution (HJR) 54, the Constitutional Amendment related to public employee pension funds that was
adopted by the Legislature in the 2003 session and later adopted by the voters statewide in September,
2003. Specifically, Mr. Aghamalian discussed the municipal "opt-out" election provision that was
included within HJR 54, which would allow the City of Fort Worth and other cities exclusion From the
requirements of the Constitutional Amendment. The purpose of the briefing was to seek Committee
recommendation on whether to pursue the opt-out election in May as allowed by the law. After the
briefing, the Committee requested two additional pieces of information from staff:
1. Present to the City Council the proposal language as it read on the ballot on September 13,
2003.
2. Present to the City Council supplemental retirement fund financial performance data with
reference to the question: "How often has the fund's return exceeded the 8.5% rate of return
goal, and how often has the return fell short of this goal?"
Both of these items are contained within this Informal Report.
Background
HJR 54 was designed to secure the anticipated pension benefits for public employees in Texas. In
1937, the Texas Supreme Court found that local,government could reduce or eliminate the anticipated
pension benefits of government employees. Comparatively, in the private sector, ERISA (Employee
Retirement Income Security Act) insures the pension rights of employees.
The adopted Constitutional Amendment applies to certain public retirement systems including the City
of Fort Worth's Employee Retirement System. Under the new law, accrued benefits cannot be reduced
or impaired for retirees and active members prior to any proposed change in benefits (i.e. —going
forward basis). If fund balances were insufficient to pay benefits, costs would be the joint responsibility
of the political subdivision and the retirement system.
The law contains a provision whereby a political subdivision may seek an exemption from the
Constitutional Amendment by holding a citywide election on the issue (i.e. — opt-out provision). Under
such an election, Fort Worth voters would be asked to vote for or against exempting the City and its
retirement system from the application of Article 16, Section 66 of the Texas Constitution (HJR 54). This
lection must take place in May of 2004. In order for the City to hold an election on this issue, election
Aw requires that an election order be adopted no later than March 15, 2004. The City Council would
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8579
PATIO 1#6 Date: March 11, 2004
I rr ot
;M)m ) To the Mayor and Members of the City Council
A.
Page 2 of 3
SUBJECT: HJR 54 Related to the Fort Worth Employee Retirement System
rsTa
And Opt-out Election
have to hold a special meeting on March 15, 2004 in order to meet this deadline. The posting of this
special meeting would have to occur no later than Friday, March 12, 2004.
Constitutional Amendment Proposition 15
The Texas voters passed the Constitutional Amendment on September 13, 2003. Listed as
Proposition 15, it appeared on the ballot as follows:
"The constitutional amendment providing that certain benefits under certain local public
retirement systems may not be reduced or impaired."
The statewide election returns were 71.53% "for" and 28.46% "against". In Fort Worth, the measure
passed by 80.93% of the vote.
17und Performance
The Employees' Retirement Fund currently holds $1.36 billion of assets in a diversified portfolio of
investments.
Results from the Fund's most recent actuarial evaluation (October 1, 2002), were presented to City
Council last June. At that time, the Fund's actuarial liabilities were 81.4% funded. However, strong
investment returns have increased the market value of the Fund's assets by more than $330 million.
On a preliminary basis, the Retirement Plan's funding ration has improved to 83.7%. A new actuarial
evaluation is underway, with final results due mid-summer. It is expected to show that the Fund's
actuarial profile has strengthened, in response to these positive investment returns.
The Fund has enjoyed several quarters of strong investment performance, earning 19.28% for FY 2003,
26.6% for calendar 2003, and 13.9% for fiscal 2004 to date. All returns are well in excess of the Fund's
actuarial rate of return assumption of 8.5%.
Over the last decade, the fund has exceeded the 8.5% goal 6 times and has fallen below that rate on 4
occasions for an average rate of return of 9.29%.
Year R.O.R. Year R.O.R.
FY '94 1.14% FY '99 17.02%
FY '95 22.04% FY '00 15.54%
FY '96 14.58% FY '01 (16.34%)
FY '97 26.39% FY '02 (6.16%)
FY '98 Ko) FY '03 19.28%
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8579
040T 4 Date: March 11, 2004
' To the Mayor and Members of the City Council
Page 3 of 3
x
ya,a SUBJECT: HJR 54 Related to the Fort Worth Employee Retirement System
And Opt-out Election
City Council Direction
The City Council is asked whether or not it wishes to initiate the "opt-out" election provision
contained in HJR 54. The election, if held and passed by Fort Worth voters, would exclude Fort
Worth from the provisions of the Constitutional Amendment. Should the City Council wish to call
this election, a special City Council meeting would need to be held on Monday, March 15, 2004 to
adopt an election order calling the election for May 15, 2004. The City Council can chose not to
take action on the issue of the "opt-out" election and no meeting would be necessary. The result
will be to simply allow the new law to take affect.
Should you have any questions or need additional information, please let me know.
*a . s n er
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS