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Largo looks to police, firefighters for solutions to underfunded pension plan

LARGO — The last few City Commission meetings have drawn larger-than-usual crowds. Patrons of Largo's various recreational offerings — especially Southwest Pool — have petitioned commissioners to raise taxes rather than cut the Recreation, Parks & Arts Department's budget.

Commissioners have largely heeded the pleas. A majority of them have expressed support for a proposed budget calling for a 9.7 percent increase in the property tax rate.

But those recreation-minded residents might want to pay attention to a different series of meetings starting Thursday at City Hall. The gatherings will focus on a growing budget problem that could force tough spending decisions in years to come: Largo's pension fund for police and fire rescue employees.

The pension fund, which provides retirement payments to the city's public safety workers, is in worse shape than ever, thanks to a struggling economy that has caused the fund's investment earnings to plummet. As investment earnings decrease, the city's required annual payments into the fund increase.

Largo paid $4.8 million into the fund this year. To put that into perspective, that is more than the city spent on the pension fund from 1993 through 2003. In 2002, Largo paid nothing, thanks to economic factors that included better-than-expected investment returns.

With that contribution expected to jump to $5.1 million next year, city management is lobbying for changes. Assistant City Manager Henry Schubert has declined to say what he'll ask police and fire employees for at Thursday's 1:30 p.m. meeting, but he has said the city would like changes that would cut $350,000 from the required contribution for next year.

Those changes could include asking employees to increase their salary contribution to the pension fund from the current 5 percent, to increase the minimum service required to reach retirement (now 23 years), or to change the formula for the size of an employee's pension.

The pension plan works like this: An employee earns a 3.25 percent benefit factor for every year of service. So if a police officer retires after 24 years, his benefit factor is 78 percent. The city then takes the average of the three highest annual salaries that officer earned in his last five years on the force. His pension will pay him 78 percent of that average, and he'll get that every year for the rest of his life.

General accounting principles call for a pension plan to be at least 80 percent funded, meaning the city should have 80 cents on hand for every $1 owed to current and former public safety employees. Largo's pension plan has dipped from a high of 123 percent funded in 1999 to 59 percent funded in 2011, with an unfunded liability of $53 million.

Starting Thursday, Schubert will talk to union representatives for both police officers and fire rescue employees about what can be done to improve the pension fund's stability. He said he'd like some short-term changes to achieve the $350,000 in savings for next year, but he'll also have long-term changes in mind to decrease that unfunded liability.

Schubert has his work cut out for him.

Will Newton, bargaining agent for Largo Professional Firefighters, said he's willing to work with city management, but the city shouldn't expect to balance its budget on the backs of public safety workers.

"They promise to work for the city, risk their lives and take wages that aren't as good as those … out in the private sector," Newton said. "We should not look at pensions as though they are a gift."

Will Hobson can be reached at (727) 445-4167 or whobson@tampabay.com. To write a letter to the editor, go to tampabay.com/letters.

Largo looks to police, firefighters for solutions to underfunded pension plan 08/07/12 [Last modified: Tuesday, August 7, 2012 5:37pm]
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