A consultant hired by Miami’s firefighter and police pension fund dropped a bombshell this week, estimating that Miami taxpayers owe more than $200 million in back-benefits to retirees following an invalidation of controversial recession-era austerity measures.
The NYHart Company’s report — issued just days before a consequential city election — puts a partial price tag to changes set in motion in March by a Florida Supreme Court ruling that struck down pension fund cuts made by city commissioners in 2010.
Following a decision Thursday by the board that governs Miami’s Firefighters’ and Police Officers’ Retirement Trust, fund administrators are now calculating altered retirement benefits for retirees and determining just how much the city will have to put up to pay for it all.
The bill estimated by NYHart in an Oct. 27 actuarial impact report presented Thursday: $213 million.
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If that debt is paid annually over 15 years, it would cost $23 million a year. That’s on top of what the city already pays to keep the fund appropriately funded, which last month cost Miami $50.6 million.
“What we’re doing is we are bringing members that have retired under the changes made in 2010, we are going back and making their retirement benefits as if 2010 had never happened,” said administrator Dania Orta, who hopes to begin paying out altered benefits to retirees in January.
The actions by the pension fund, which follow a series of lower court rulings that have all sided with Miami’s police and fire unions, signal a major reversal of the actions taken by Mayor Tomás Regalado when he took over the city in 2009 and quickly discovered Miami’s finances had been mismanaged and covered. Faced with a dire financial crisis, Regalado’s administration slashed pensions and pay against employees’ wishes in 2010 in order to help close a massive budget hole, sparking a series of lawsuits that alleged the city’s actions were unconstitutional.
$213 million Estimated cost of pension fund changes
$23 million Estimated increase in annual payments to pension fund
Regalado’s staff has pushed back all year against suggestions that March’s Supreme Court ruling overturning those unilateral concessions would suddenly leave the city with a huge bill. But NYHart’s report seems to validate predictions by the city’s unions that hefty obligations are coming in the near future.
The actuarial statement could also complicate a stalemate between Regalado’s outgoing administration and the city’s unions, which have accused the mayor of trying to push the problem off to the next mayor. Both sides are still waiting on Florida’s Public Employees Relations Commission to decide the value of the back-pay owed employees in salary and health benefits, and in the meantime the unions have pressured Regalado to sit down and negotiate a settlement.
“Mayor Regalado did an outstanding job spinning that the city has nothing to worry about when it comes to money owed to the unions,” Fraternal Order of Police president Edward Lugo said in a statement. “I think $213 million isn’t pocket change.”
The fund’s actions come just days ahead of Tuesday’s elections, with the unions backing former Mayor Joe Carollo against Regalado’s son, Tomas N. “Tommy” Regalado, and opposing a $400 million general obligation bond. The bond has been proposed in a way that it will not increase the tax rate for property owners, but the unions have warned voters that they’re also taking on several hundred million dollars in new debt that some have suggested could be paid off through municipal bonds.
Orta said the fund has yet to hear anything from the city’s legal staff or administration, which seemed taken off-guard Friday. She said the board expects to consider how it will seek payments from the city next month.
“I was not aware the pension board believes they can recalculate benefits and start distributing the payments without a final resolution. We’re going to look at this,” said City Manager Daniel Alfonso.
Miami City Attorney Victoria Méndez said her office is examining the fund’s plans to begin paying out new benefits based on the elimination of a $100,000 pension cap and the reversal of changes to pension calculations crafted to make benefits more modest.
If the pension fund actuary is correct, and the city suddenly has a new $23 million bill to contend with each year for an entire generation, presumed mayor-elect Francis Suarez will likely be the one forced to deal with it after election day on Tuesday. He said Friday that he considers it a “significant issue.”
“If the exposure is anywhere near the amounts that are being talked about, that’s enough to bankrupt the city. We have $168 million in reserves,” Suarez said, noting that the unions have consistently won every legal ruling on the issue since March. “It could end up being one of the biggest issues I have to confront as mayor right off the bat.”