ST. PETE BEACH — Fixing the city's ailing pension plans for general employees, police officers and firefighters could cost property owners a total of a mill in property taxes, spread over the next five years.
Later this summer, the City Commission will decide how — or even whether — to temporarily increase property taxes to bolster the pension plans, which are continuing to drop significantly in value due to the recession's impact on financial markets.
The city's citizen Budget and Finance Review Committee recently recommended the city levy a dedicated property tax of two-tenths of a mill beginning next year.
For each $100,000 of taxable value, property owners would pay an additional $20 a year, or $100 over the next five years, according to the proposal.
The tax, which would raise a total of $467,000, would expire after five years, at which time the pension plans would be 80 percent funded, according to Elaine Trehy, the city's finance director.
In addition to property owners paying more, the committee is also recommending that general city employees contribute an additional $9 to their pensions for every $1,000 they earn in gross salaries. Police contributions would remain unchanged, but firefighter contributions would jump the most — $12 for each $1,000 earned.
The committee also recommended that no new general employees be allowed to join the pension plan, but instead participate in 401K retirement plans.
The 401K plans do not require employee contributions and are completely portable if an employee leaves the city. In contrast, the pension plans require an employee contribution and are not fully vested until an employee has worked for 10 years.
If the City Commission adopts the committee's recommendations, the benefit reduction would have no effect on currently retired employees, but would result in slightly reduced benefits for current employees when they do retire.
"The benefits provided by the (pension) plans are very rich compared to other plans of their type in the state of Florida," the city's pension actuary Alfred L. Williams said in a recent letter to the city.
The proposed increase in employee pension contributions are subject to contract negotiations under way with unions representing the city's general employee, police and fire unions.
Those employees who participate in a 401K retirement plan would not be affected by the changes, which only apply to those employees enrolled in the city's defined benefit pension plans.
The firefighters pension, which currently is 66.6 percent funded, is in the worst shape, according to Williams. The general employee pension is 75.9 percent funded and the police pension is at 70.1 percent.
There are 73 current and 11 retired employees covered by the city's pension plans.
"As recently as Oct. 1, 2003, all three plans were at or above an 80 percent funded status," Williams said, adding that the current status "is largely attributable to unfavorable actuarial experience of the last five years."
In comparison, the Florida Retirement System, which serves many municipal, county and state employees, is currently 90 percent funded and was well over 100 percent funded prior to the market downturn, Trehy said.
St. Pete Beach never joined the state-run retirement plan.
The committee picked the 80 percent funding goal, Trehy said, as a reasonably achievable amount, given the current economic climate. Once financial markets recover, the funding level should increase, she said.
"We don't want to let this get too far underfunded," Trehy said.
If approved, the pension changes — and the proposed property tax increase — would take effect Oct. 1.