In a December meeting of the Dallas Mayor’s Ad Hoc Committee on Pensions, a new solution to the Dallas Police And Fire Pension fund’s $3 billion deficit was suggested: monetize the city’s real estate assets.
It’s one of numerous ideas that has been floated since the deficit came to light in 2015. Other suggestions include issuing bonds, using sales tax revenues, changing employee contribution levels, and evaluating the annual allocation from the city. If gaming is legalized in the 2025 Texas legislative session, that could bring another stream of tax revenue, officials pointed out.
Former Dallas Police and Fire Pension Board member Rob Walters encouraged city leaders to “be nimble” when it comes to ensuring that uniformed retirees get the payments they earned.
A major blow to the Dallas Police and Fire Pension deficit came from more than $1 billion in ill-advised real estate investments, Walters said.
“We have studied this at great length,” he said. “The best cities and the best practices … look for opportunities that take assets that reside on a balance sheet and get them onto the income statement … The city has lots of real estate assets that it could look at to potentially monetize not only for the benefit of this fund but so that it creates less imposition, less burden on the general fund going forward.”
Walters specifically referenced parking and landfill assets and underutilized city facilities.
“The city need not wait on this,” he said. “The city, tomorrow, could get underway, and in the inimitable phrase of [former Chicago Mayor] Rahm Emanuel and others, let’s not let a crisis go wasted here.”
View the Dec. 14 discussion on financial alternatives led by Walters and a presentation on the Dallas Employees Retirement Fund by Executive Director Cheryl Alston and Deputy Executive Director David Etheridge.
The two-hour committee meeting can be viewed here.
The Ad Hoc Committee on Pensions meets again at 3 p.m. Jan. 11.
City Releases Statement on Dallas Police and Fire Pension System
In a Dec. 14 press release, city officials said solutions to fully fund the Dallas Police and Fire Pension System over 30 years were provided by a “third-party actuarial firm.”
It sounds like good news, but it appears the City Council and Pension System board have a long way to go toward reaching a plan on which they both agree.
“Gathering advice from experts in pension funds and investments is another step in the right direction,” Mayor Pro Tem Tennell Atkins said in the press release. “Our due diligence will ensure the financial integrity of the Dallas Police and Fire Pension System and the Employees’ Retirement Fund. We remain committed to finding a solution without compromising our ability to meet the existing and future needs of our city and all its residents.”
A “funding soundness restoration plan” is scheduled for submission to the Texas Pension Review Board by Fall 2024, said Dallas Chief Financial Officer Jack Ireland.
Action must be taken by September 2025 to participate in a 30-year amortization, Etheridge said.
“If we miss that date, it becomes a risk and an increased cost to the city, as the amortization would go down to 25 years,” he said.
Alston and Etheridge did not submit a request for bond funds but proposed increasing the employee contribution, eliminating a 36 percent maximum contribution cap, and allowing language so the City Council can add an “infusion of capital” so the contribution rate is adjustable later. Such changes must be approved by the pension board, the Dallas City Council, and the voters. Alston requested the measure be placed on a May ballot in order to meet the pending deadlines.
Funding The Dallas Police And Fire Pension Plan
House Bill 3158 was passed in 2017 as a response to the Dallas Police and Fire Pension’s financial challenges, said Bill Quinn, former chair of the DPFP.
“It was just putting a tourniquet on the bleeding and stopping the bleeding when we really needed a long-term solution,” he said.
Walters pointed out that the recommendations of former board members, along with input from John Stephens, who serves on the Economic Development Corporation board president, represent the interests of the city’s police officers and firefighters.
Ireland said the city’s finance office would bring the pension funding plan before the City Council for approval.
“It would be a priority for us in the same way we ensure that we fund our debt service every year,” he said. “We would hope it would be funded with new revenue. New construction alone has brought in $20 million a year. That type of revenue would help us fund this type of increase. It may result in us not being able to do some enhancements like crisis intervention or offender re-entry … because this would be a priority.”
Ultimately, what the City Council wants to do is simple, Mayor Pro Tem Atkins said.
“Uniformed employees, when you retire, you will get paid,” he said. “It’s as simple as that .. You are safe with the City of Dallas. We are going to do everything in our power to make sure Dallas is the best place to work.”
