Thursday November 17, 2011
As required by a plan put into place in 2010, necessitating yearly public reports from SB’s pension fund actuaries and auditors, presentations were made to the City Council on Monday, November 7th. The news from both reports were favorable.
Presentation of the Fiscal Year (FY) 2011 Actuarial Valuation was made by South Burlington Retirement Income Plan (SBRIP) actuaries Annie Voldman and Wayne Braun, of People’s United Bank.
Voldman reported that in response to the growing shortfall discovered last year, the city has taken concrete steps to overcome an $8.169 Million deficit. Plan participation has been amended; a number of city staff are no longer active in the SBRIP, and have been enrolled in the Vermont Municipal Employees Retirement System (VMERS). City employees in the Water Pollution Control group, through collective bargaining, have also moved into the VMERS plan, resulting in some gain. The Public Safety, and Non-Public Safety groups are now both fully funded at well above 100 percent; the figures reported in 2010 were 52 percent and 72 percent respectively.
The biggest step in resolving the financial dilemma was addressed by taking out a large general obligation municipal bond from Merchants Bank in the amount of $8.168 million to fund the plan. This action will ultimately result in significant savings for taxpayers over the next 20 years. In addition, the plan has benefitted from the favorable experience of positive market returns over the past year, resulting in a solid actuarial gain. “This is exactly where we want to be,” stated Voldman.
In a recent statement, City Manager Sandy Miller said, “Going forward the pension system is now fiscally sound, which assures current City employees and retirees their pensions are safe.” He went on to say that, “With the SBRIP now on a sound financial footing the City can continue its efforts to identify and resolve other large financial issues.”
In a preliminary report, the city’s auditor, Ron Smith, of RHR Smith and Co. commended city management for making necessary changes and improvements to 19 of the 23 deficiencies cited in last year’s management letter. Many problems have been addressed or are being addressed now, and policies have been put in place to further protect the City’s finances.
While many positive changes have taken place, the general fund shows an operating deficit of approximately $200,000 for FY 2010/2011. There is still work to do to understand how the inter-fund transactions in the past led to the city operating in a deficit, and how certain funds correlate to the general fund.
Another problematic area still to be addressed is earned sick time, which has been identified as a potential source for quite a large underfunded obligation, possibly well in the millions of dollars. A variety of collective bargaining agreements and personnel policies have entitled employees to accrue sick time which they can then convert into health and dental insurance. This is a complex problem, and the city will have to bear that expense.
Smith pointed out that decisions will have to be made by the City Council to fund or not to fund some of the remaining deficits that have been identified. The auditor said there may be well over a hundred funds and fees to examine on a case by case analysis. He cautioned against hasty decisions, noting that there is good reason to examine all aspects carefully to fine tune a well thought out plan.
Smith will return early in 2012 with a final presentation regarding the audit.
SOURCE: Staff Writer, The Other Paper