Our View

There is good news on the Longboat Key employees’ pension plans. Unfortunately, the good news has nothing to do with the numbers. The annual cost to taxpayers and the unfunded liabilities are still headed for a financial crisis.

But the good news is this:

• The Town Commission is finally getting serious about addressing this issue, albeit at least four years after it should have been.

• And, the Town Commission has a group of citizens poised to help craft a rescue plan. The group’s collective knowledge of pension plans is akin to a deep-veined gold mine.

By now everyone knows the taxpayers in practically every city and county in Florida — if not America — are soon to be burdened with huge tax increases to cover the cost of their public employees’ pension plans.

Longboat Key is especially bad off. We have provided readers with some scary statistics on this subject for years. But let’s hit some of them one more time, just to emphasize the point:

• Longboat taxpayers’ annual cash contributions to the employees’ pension plans have risen from $414,000 in 1999 to $2.8 million in 2010 — a 700% increase.

• Longboat Key taxpayers make the highest percentage contribution to the firefighters’ pension plan compared to 31 other jurisdictions in the Gulf Coast area — 66% of the firefighters’ total payroll. The average nationwide is 35%.

• The annual taxpayers’ contributions to the employees’ pension plans used to make up 5% of the town’s tax revenues in 1999; in 2010 they made up 32% of the town’s tax revenues (click here to view chart).

In fact, any time you see a trend line such as the one at right, with an extreme rise or fall, you know something is badly broken.

No one paid much attention to this, except for former Town Commissioner Randy Clair, former firefighter pension board member Arnold Malasky, current board members Shannon Gault and Gerald Feder and, dare we say, this page. But now that you can’t pick up a daily newspaper or listen to a radio talk jock or watch the talking heads on TV without hearing about pending pension disasters, public officials are at attention.

To this end, we add Longboat Key’s longtime government watchdog, the Longboat Key Public Interest Committee. PIC, to its credit, formed a committee of Longboat Key residents who worked up close and personal with pension plans in their professional lives (see box). In about five two- to three-hour meetings, they examined the town’s pension plans and two weeks ago presented to the Town Commission some easy-to-understand data and recommendations on how to reverse the trends. The recommendations make a lot of sense and are a start.

But here’s the puzzler: After listening to the committee’s presentation and seeing the credentials of the committee members, none of the town commissioners, we’re told, has reached out to the committee members to seek their assistance unraveling this increasingly costly engtanglement.

When the commissioners were trying to decide how to address this pending pension crisis and how often it should meet, Commissioner Bob Siekmann was insistent the commissioners be involved in every meeting that discusses the subject. As Commissioner Hal Lenobel noted: In the end, the Town Commission is responsible for the pension plans.

Be that as it may, none of the commissioners, except perhaps David Brenner, has the experience of the PIC Pension Committee members.

Why waste this valuable resource? We urge the Town Commission to engage the members of the PIC Pension Committee and ask them to devise some serious options to help extricate Longboat Key taxpayers from this increasingly serious and costly dilemma.

PENSION BRAIN TRUST
Here are the members of the Longboat Key Public Interest Committee Pension Committee. They are all residents of Longboat Key:

• Ed Adams — Retired corporate attorney; former managing partner of Frost Brown Todd, Cincinnati; former Chapter 11 lawyer; currently teaches business reorganizations in Russia and Eastern Europe.

• Dick Antoine — Retired as global head of human relations for The Procter & Gamble Co.

• Bill Forcht — Retired as vice president of human resources for the Woolworth Corp., with an emphasis of his time on actuarial, design and administrative aspects of retirement plans.

• Larry Linhart — Former CEO of AmeriLink Corp., Columbus, Ohio, which designs, constructs and maintains fiber optic and cable systems; and former president of the Radio Shack Corp. service program.

• Randy Clair — former town commissioner and former corporate attorney for Amoco Corp. He says his hobby is the town’s retirement plans.

PIC PENSION RECOMMENDATIONS
The Longboat Key Public Interest Committee subcommittee on town pensions made the following recommendations to the Town Commission to reform the town’s employee pension systems:

1) The town does not belong in the “pension administration business” due to its being too expensive and too complicated.

Further, the defined benefit plans impose significant financial risks on the town, and the benefits are unaffordable and unpredictable.

Therefore, the town should transition to defined contribution plans for its employees in place of the current defined benefit plans.

A contribution to a defined contribution plan is a percentage of compensation and therefore is more “budgetable.”

2) The definition of “compensation” in any plan should exclude unused vacation and sick pay.

3) The town should modify its peer review policy on “employee compensation” to reduce the 75% standard to 50% so as not to encourage an upward spiral in those benefits.

4) In the event that defined benefit plans are maintained in the future, the following recommendations are made:

• They apply solely to existing employees and not future employees;

• The age and years of service requirements for normal retirement and early retirement should be extended to minimum requirements of either Florida law or Social Security.

• The plans should provide an offset for a portion of Social Security retirement benefits.

• The town should undertake a program to modify other provisions of the plans to reduce the costs of the plans. For example, the DROP interest rate could be lowered, the COLA could be modiefied, etc.

• The town should adopt a policy of periodic review of all “assumptions” used by the actuary to calculate funding so they are consistent with actual experience of the prior 10 years.

• The town should adopt a policy to fund the plans and a policy of transparency so the taxpayers of Longboat Key may know of the current and future financial obligations imposed by the plans.

Source: PIC Pension Committee

+ $115,00, gets you $1,000,000
To help illustrate how out of whack our public employee pensions are, the Longboat Key Public Interest Committee Pension Committee provided the example of a town firefighter who earns the average salary, including overtime, of $80,900.

He could retire at age 50 after 25 years of service and receive a retirement benefit of $65,000 a year, not counting what he would/could receive from Social Security and any other defined contribution plans from the town.

If you apply the town’s 8% expected annual growth assumption, the firefighter could receive close to $1 million after having contributed only $115,000 to the plan himself.

Nice deal, if you can get it.

+ Bicycles and signs
Bicycle signs? What signs?

What motorist notices any of the 126 bicycle signs on Longboat Key when he has to watch out for so many bicyclists?

Gulf of Mexico Drive is a 45-mph state road. It has a narrow bike lane. Many Longboat Key drivers are elderly and not accustomed to bicyclists.

Seems pretty obvious: Ride at your own risk. Don’t ride here if you’re a novice.

Signs won’t fix anything. Perhaps more public education will. (A job for the bicyclists and public safety officials?)

We support the DOT and residents. GMD is littered with too many signs.

+ How to wipe out the deficit
The United States keeps traveling at light speed toward insolvency, and yet the president produces a budget that proposes to increase spending and the deficit — an arrogant slap in the American voters’ faces.

How bad is this? Nationally recognized economist Ken Mayland of ClearView Economics, in Cleveland, told a group of Tampa CEOs last week to balance the budget in 20 years would require: more than a $100 billion cut in the next fiscal year’s budget; holding U.S. government annual spending to 3.5% growth; and producing 5.5% annual national economic growth.

And the chances of that? he asked his listeners. In unison, they shouted: “Zero!”