Dallas Police and Fire Pension System executives say they want more clarity over who gets the final say in a plan to remedy billions in unfunded liabilities and have approved legal action to get it.
The skirmish over who has that power 鈥� the system or the city 鈥� has been playing out for months.
The board 鈥渁uthorized an action in state court to clarify the process by which DPFP is legally obligated to adopt a plan by November 1, 2024 that meets statutory funding and amortization requirements,鈥� according to a Thursday
"This by no means indicates a departure from working with the City of Dallas,鈥� Nicholas Merrick, chairman of the DPFP Board of Trustees, said in the release.
"However, there is a legitimate and very important disagreement that exists with respect to the interpretation of our statutory mandate. We believe this clarification by the courts is critical to moving forward with a plan for the pension of the City鈥檚 valued first responders,鈥� Merrick continued.
四虎影院 reached out to the city for comment on the recent press release from the pension system, but did not receive comment before this story was published.
四虎影院 also reached out the Dallas Police and Fire Pension System executives to ask if any legal action had been initiated yet. This story will be updated with any comment.
'No City approval...needed'
四虎影院 reported in May that attorneys for the public safety pension system sent a letter to the Texas Pension Review Board鈥檚 top executive saying 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�
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 must approve any plan that will be sent to state regulators.
District 9 Council Member Paula Blackmon told 四虎影院 at the time that, while elected officials will be keeping their promise to remedy the issue, the city shouldn鈥檛 be 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 in May. 鈥淚t kind of goes to the illusion of working together, or disillusion, right?鈥�
When reached for comment about the most recent announcement from pension executives, Blackmon had this to say:
"I don't comment on legal matters," Blackmon told 四虎影院 in a text message. "I guess the courts will figure it out."
Pension executives did not respond to request for comment by 四虎影院 when the May story was published. But, in a statement posted just days after that story was published, officials said they needed to 鈥渃orrect certain inaccuracies.鈥�
In it, they stated that the letter sent to the state鈥檚 pension board was 鈥渁 very scholarly analysis of the conflict between the DPFP statue鈥� and the funding plan as laid out by state law.
鈥淒PFP has stated publicly on numerous occasions that failure to reach an agreement with the City of Dallas almost certainly would result in further legislative action in 2025,鈥� the release said. 鈥淭he disclosure of this letter to the press by the City of Dallas appears to be an attempt by the City to mischaracterize the actual substance of the letter and use it to put DPFP in a bad light.鈥�
Risky investments
The billions in unfunded liabilities come after risky real estate investments nearly destroyed the pension system. In 2017, Texas legislators had to step in to temporarily remedy the situation.
鈥淚 am very proud of the job our Board and Staff have done in managing DPFP鈥檚 investment portfolio,鈥� Merrick said in the press release. 鈥淲hile there has been publicity around some poor investment return numbers, the fact is those are primarily due to decisions regarding private assets that were made more than 15 years ago.鈥�
In June, city officials were briefed on the pension system鈥檚 investment standings.
Dory Wiley is the president and CEO of Commerce Street Investment Management and worked on an initial analysis of the Dallas Police and Fire Pension System鈥檚 investments. Wiley told the city鈥檚 Ad Hoc Committee on Pensions that the fund was performing below average, compared to other systems in Texas.
Wiley said the public safety fund has done a good job with investments in public equity, or stocks. As of June 2023, the fund has received over 8% in returns. That鈥檚 more than other peer cities, according to Wiley鈥檚 presentation.
鈥淏ut having said that, we go to the private equity and then that鈥檚 where the underperformance is,鈥� Wiley said. 鈥淧art of that is legacy assets鈥hey鈥檝e been dealing with them for the last seven years, I know they鈥檙e still dealing with them.鈥�
Both the public safety 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 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�
The plan
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.
The city says that as of January 1, 2023, the public safety pension fund is projected to be fully funded in 82 years, according to a city presentation. The briefing also lays out city staff鈥檚 recommendations to 鈥渙ffer supplemental pay to bridge鈥� the gap until 2046 鈥� when the fund is forecasted to be 70% funded.
That pay is around a 1% increase added to retirees base benefits in 2025. An additional 1% per year could be added as a stipend, assuming the pension fund鈥檚 assets gain positive returns. And the city wants to make sure more oversight over the system is added.
The recommendation is to include a requirement for city approval on 鈥渋tems that substantially increase [the] City鈥檚 liability.鈥� That includes changes to benefits, actuarial assumptions and settling lawsuits.
Right now, the city estimates it will contribute around $11.2 billion over a 30-year period. City officials stated in their briefing presentation that adopting the pension executive鈥檚 recommendations could mean an additional $419 million over those 30 years 鈥� bringing the total price tag to $11.6 billion.
City and pension officials must submit a funding plan to state regulators by Nov. 1.
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