Revisionist History Regarding the City’s “Fiscal Responsibility”
Posted by Jeff Pruitt - 2/24/10 @ 11:58 pm - Filed Under Featured, Local Politics
I’ve been looking at public pension obligations lately (another post on this coming soon) and it has reminded me how lucky the city was to have the state assume it’s pre-1977 pension obligations. These pensions were massively underfunded with the total liabilities over $90 Million. The city had saved up $20+ million in its general fund to pay down these debts but clearly they were in a precarious situation moving forward.
The state assumed these obligations as part of the property tax reform legislation that city officials continually bitch and moan about. Yes the state reduced the city’s levy by the same amount, BUT the city got to keep it’s $20 million! So that is where the highly touted “fiscally responsible” city got its bankroll from.
It wasn’t because they were particularly wise - quite the opposite. It’s because they were so far in the red regarding their unfunded pension obligations that they had to start saving cash. And then they got a lucky break because the state was stupid enough to come along and assume those obligations without taking any of the banked cash with them. Also, keep in mind that the actuarial assumption for rate of return on these pensions was 6% - think they’ve seen that over the last 3 years? Fat chance. The city would likely be dead broke right now had the state not foolishly saved their bacon…
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Jeff, I think it is much worse than just $90 million. The numbers I saw three years ago was in the $500 million range for pensions prior to 1977. But then it most likely included FWCS which were also taken over by the state.
You state “The city would likely be dead broke right now had the state not foolishly saved their bacon…”, well what is the definition of broke? Is it when future cash flows are insufficient to pay future expenses? Is it when the liabilities exceed assets? In my honest opinion Fort Wayne is broke now. Look at unemployment, business, Grand Wayne, Harrison Square, Police Training Facility, the new white elephant they bought to name a few. Every time you buy infrastructure, the cost of maintaining the infrastructure increases. At some point in time maintaining all these new assets can wipe out all revenues, leaving nothing but brick and mortar and few services.