The law firm representing Dallas鈥� severely underfunded public safety pension fund said it doesn鈥檛 need city officials鈥� approval before submitting a plan to state regulators to fix the system.
After almost six months of meetings between city officials and pension executives trying to work together on the issue, the city only recently found out.
In a letter obtained by 四虎影院 sent earlier this year to the Texas Pension Review Board鈥檚 top executive, the fund鈥檚 lawyers said both the city and the board鈥檚 reading of legislation guiding the plan was 鈥渆rroneous.鈥�
鈥淭he System鈥檚 board has exclusive authority to adopt a pension plan,鈥� the January letter said. 鈥淣o City approval is contemplated or needed.鈥�
四虎影院 reached out to pension system officials on Saturday afternoon, but did not receive comment by the time of publication.
In another letter obtained by 四虎影院 sent to state regulators on May 10, Dallas City Attorney Tammy Palomino said she 鈥渙nly recently became aware鈥� of the initial correspondence from the Dallas Police and Fire Pension System 鈥� and that its reading of the two state statues is 鈥減lainly incorrect.鈥�
Palomino鈥檚 letter said ultimately the city council has to approve any plan that will be sent to state regulators.
Mayor Pro Tem Tennell Atkins, who chairs the city鈥檚 pension committee, has maintained that both parties need to come together to find a remedy. In a statement to 四虎影院, he agreed with Palomino鈥檚 stance.
鈥淭he taxpayers of Dallas are being expected to fund the Dallas Police and Fire Pension鈥檚 gap and must have a say in this process,鈥� Atkins鈥� office said. 鈥淚t is affirmed by law, as well as the Texas Pension Review Board, who will ultimately be responsible for accepting the funding plan.鈥�
District 9 Council Member Paula Blackmon told 四虎影院 that while elected officials will be keeping their promise to remedy the issue, the city shouldn鈥檛 be just finding out about this after the fact.
鈥淪o much for working together, this was sent in January and we just found out about it a couple of weeks ago,鈥� Blackmon said. 鈥淚t kind of goes to the illusion of working together, or disillusion, right?鈥�
Blackmon said she hoped this wouldn鈥檛 harm the process moving forward and that those involved would admit it was not the best approach. But she also said Dallas taxpayers are the ones who ultimately could get hurt during this process.
鈥淭his is a serious problem and we have to take it seriously,鈥� Blackmon said. 鈥淎ntics and letters and lack of transparency doesn鈥檛 help. We need the best and brightest minds to come to the table and really look at thoughtful solutions.鈥�
Down payment
In the letter sent from Haynes and Boone attorneys to Amy Cardona, the state pension board鈥檚 executive director, the firm said the law is silent when it comes to giving power to the city for final approval.
鈥淚n the interest of fostering a collaborative dialogue about these issues with the [Pension Review Board], the [Dallas Police and Fire Pension System] provides the following statutory analysis,鈥� the letter said.
The 91-page report details the two state statutes that guide how pension systems come up with funding plans with government entities 鈥� like the city of Dallas. The attorney argued that one of the laws 鈥渕akes no provision for adopting or amending a pension plan. Nor does it address how a plan or amendment becomes effective.鈥�
Instead, they said the other provision is what should govern the plan process and was why they concluded the fund could submit a plan on its own without city approval. The letter said the system 鈥渋s confident that a court would agree.鈥�
Palomino said that analysis isn鈥檛 correct and under either code the city council would need to approve the plan.
鈥淚f the two statutes are harmonized, the plan must be approved by city council under the provisions of Chapter 802.20,鈥� Palomino鈥檚 letter said. 鈥淚f the two statutes are irreconcilable, then a plan must still be approved by city council under the provisions of Chapter 802.鈥�
The letter also said if state legislators had intended for one statute to take precedence over the other, 鈥渋t could have said so in 2017, 2021, and 2023, but it did not.鈥�
Blackmon said anyone can approach the state鈥檚 pension review board, but it鈥檚 the city that is ultimately on the hook for cutting the checks to fund the pension system. She equated it to her son asking for help in buying a new car or house.
鈥淎nd he is like 鈥業 want this very expensive thing鈥� but I can鈥檛 afford with helping with that down payment,鈥� Blackmon said. 鈥淪o that鈥檚 what I鈥檓 equating this to鈥ets sit down and have this discussion about what can be done, because at the end of the day the city is going to have to write a check that has to clear.鈥�
Two plans and a concern
Both the pension board and city staff鈥檚 recommendations are fairly close. The goal is to start building back the retirement fund that was on the brink of collapse in 2016 due to risky real estate investments.
The main difference is whether or not to increase police and fire retirees鈥� benefits. City officials call that a cost-of-living adjustment, or COLA.
鈥淣o one is going to have it 100% their way or 100% our way,鈥� Atkins said during a late April Ad Hoc Committee on Pensions meeting. 鈥淏ut we got to come to the conclusion that we are doing the best we can to make sure we are making the right decision.鈥�
City staff say there are several issues standing in the way of increasing benefits 鈥� including paying more in annual contributions 鈥� and that it isn鈥檛 legal until the system is at least 70% funded.
At an April meeting, city officials said that may not happen until 2046 and it would add more than $120 million to the system鈥檚 unfunded liabilities.
As of that meeting, the pension鈥檚 unfunded liabilities have increased more than $160 million. That brings the total to $3.2 billion.
District 12 Council Member Cara Mendelsohn, who has been outspoken about the need to increase retirees benefits, said the lack of a COLA could be hindering recruitment efforts.
鈥淓verything we need to do on this plan has to be formed around that principal of how are we going to keep our officers, how are we going to attract new ones,鈥� Mendelsohn said during the April meeting. 鈥淲e are very close to having a public safety situation. I don鈥檛 want to say crisis, but we are very close.鈥�
But city staff said at the time that while the police department may be falling short of hiring quotas, Dallas Fire Rescue doesn鈥檛 seem to be having that issue. City staff said not being able to hire officers is a nationwide issue 鈥� not just in Dallas.
That board is made up of 11 members 鈥� six of which are appointed by Dallas city officials. Some council members have also raised concerns over the system鈥檚 oversight.
鈥淚t鈥檚 really a false premise because they are absolutely obligated to the fiduciary duty to the [pension] fund,鈥� District 13 Council Member Gay Donnell Willis said during an April meeting. 鈥淏ut the taxpayer is really not represented there.鈥�
A deadline
The plan to fix the system is due to state regulators in November. That leaves just around six months for both pension executives and Dallas city officials to get on the same page.
Earlier this year some officials questioned how the fund was going to rebuild and asked about active investments. As of February the fund still had about 25% of its assets tied up in private investments. Those include an energy fund, natural resources 鈥� and assets in real estate.
Pension officials said the target for private equity is set at 15% for the fund. And while the investment allocations had been around two-thirds of the system鈥檚 portfolio, and officials have managed to liquidate some of those real estate assets over time 鈥� they鈥檙e still hindering the fund.
Got a tip? Email Nathan Collins at ncollins@kera.org. You can follow Nathan on Twitter .
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