The city of Dallas may need to come up with millions sooner than expected to fix the grossly underfunded police and fire pension system. That鈥檚 after a Travis County court said Thursday the city must move forward with the funding recommendations by the Dallas Police and Fire Pension System.
Under that proposal, the city would need to pay almost $13 million more in 2025 than what Dallas city staff recommended to fix the billions in unfunded pension liabilities. The pension system鈥檚 recommendation costs $419 million more over the 30-year funding period, according to a June city council briefing.
It was risky real estate investments 鈥� made by pension officials 鈥� that almost led to the fund鈥檚 collapse that landed the city in this position to begin with.
The ruling 鈥� although likely to be challenged in a higher court 鈥� comes as the city faces financial issues and significant changes to how local government operates.
鈥淭he city is aware of the court鈥檚 decision. Because the litigation is ongoing, the city has no additional comment at this time,鈥� Nick Starling, a city public information officer, told 四虎影院.
Earlier this year, pension executives sent a letter to state regulators stating the Dallas pension board has 鈥渆xclusive authority to adopt a pension plan.鈥� City officials didn鈥檛 know until May, according to letters obtained by 四虎影院.
In August, the pension system鈥檚 leadership approved the legal action in early August to find out who has the final say in what plan gets adopted.
"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 a press release at the time.
"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.
The main difference between the city and pension system鈥檚 plans are when retirees will get a cost-of-living adjustment (COLA).
The Dallas City Council approved a plan in September that includes a five-year ramp up in contributions into the system to reach 70% funding 鈥� that鈥檚 the legal requirement before the city can pay out a COLA.
That may not be until 2046.
Dallas鈥� plan also includes funding for a 鈥渟tipend鈥� to help retirees bridge the gap until the city is legally allowed to increase their benefits. But when the council voted on the plan, it added a caveat that the stipend would only be paid out on approval by elected officials.
鈥淭he way this has been structured is in a way that takes into account the fact we鈥檝e been sued, by what is supposed to be one of our partners,鈥� Dallas Mayor Eric Johnson said at the time. 鈥淲e want to make sure we are not getting out of line in terms of what we may, or may not be, required to do at some point.鈥�
There has been tension between the pension board and city officials for years over the system鈥檚 issues. And now, despite claiming to be negotiating in good faith, those tensions are still in plain view.
City officials hired a firm to figure out why the fund鈥檚 investments aren鈥檛 yielding more revenue. That firm, led by Dorey Wiley, has been met with significant pushback from some inside City Hall and pension executives.
In August, Wiley briefed the council about the fund鈥檚 investment standings. Pension officials didn鈥檛 agree with that report and said at the time that 鈥渁 lot of the information was omitted from the final report鈥� 鈥� and that the system鈥檚 staff were more than capable of figuring out a funding solution.
And when some council members suggested there should be more eyes on the investments 鈥� pension officials balked.
鈥淲e鈥檝e got an investment consultant, we have a staff working on the portfolio every day, I鈥檓 not sure how adding another person in there is going to provide anything more than is available,鈥� Kelly Gottschalk, the system鈥檚 executive director, said at the time.
Throughout that meeting, pension executives rebutted Wiley鈥檚 presentation 鈥� so much so that one council members addressed it.
鈥淵our body language in defense to these recommendations, when the objective is to try and fix something that none of us had a part of, is confusing to me,鈥� District 3 Council Member Zarin Gracey said. 鈥淵ou ought to want as much help as you can [get].鈥�
Gracey said it was fine for the executives to be defensive 鈥� but the end goal is to fix the fund.
鈥淪o I am encouraging you all, mind the body language,鈥� Gracey said. 鈥淵ou are defending this as if you did it, and that is concerning.鈥�
Thursday's ruling is likely to widen the distance between the city and pension officials. And It is unclear how long the legal battle between the city and pension fund will continue.
But the city must start implementing a plan to fix the system starting in 2025.
Got a tip? Email Nathan Collins at ncollins@kera.org. You can follow Nathan on Twitter .
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