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Williamsport City Council approved a $4.3 million minimum municipal obligation to meet funding requirements for the city bureaus of Police, Fire and Officers' and Employees' pension funds for 2025.
The state aid for 2024 has not been received but there are guesses based on prior years' of what can be anticipated.
The MMO assumption was done by Mockenhaupt Benefits Group, the actuarial and consulting company for the pension plans using actuarial results from the 2023 valuation and the data from the city provided of employee compensation.
Every year it is left to someone on council to explain how if the city fully funded pensions when they were created years ago it would not have to be paying this money out of the general fund.
"The city is fortunate it is likely to benefit from the state aid of $1.25 million dollars," Councilwoman Liz Miele, chair of the finance committee, said. "But that is still a $2.8 million contribution from the city's general fund."
Over the years, to make up for lost grounds on pensions that the city did not fully fund when they were granted, this is an annual reminder of money that could otherwise be used for hiring more police or for parks maintenance. "If we had properly funded the pensions when they were created years ago," Miele said.
Nevertheless, the city is in "pretty good position" in terms of its pensions compared to many other third-class cities in Pennsylvania, she added.
"Like most other third-class cities in the state we are in no position whatsoever with all our other post-employee benefits, which we are funding on a pay as you go basis," Miele said. "So, " she added, "this is money we could have been putting into that had we fully funded at least one of the two obligations."
To Miele and others on council, this is an example of why city government leadership needs to budget responsibility for the present day but also for future years.
Steps taken to address the issue
For the 2023 valuation, the city council approved decreasing interest rates for police, at 6.7 %, for fire, $6.75 % and for Officers and Employees, 6.75%.
While all of the plans have a "carrying cost of amortization," as each valuation is done a new cost gets booked, Miele made a point the city would have been likely to see a greater decrease in the amount of the MMO if it had not decreased the assumption rate, a point which Sue Trout of Mockenhaupt Benefits Group, agreed.
"The city picked a good moment to do that because it is paying in less into the MMO despite the fact that the city decreased the assumption for the plans," Miele said.
Miele asked Trout if that was something the city should be thinking about doing again.
Trout responded by saying it was too soon to say because the next valuation cycle starts Jan. 1, 2025.
Miele observed there to be a significant decrease shown in the Officers and Employees' pension fund, presuming some of that was related to the loss of River Valley Transit, or the transition of RVT to River Valley Transit Authority.
Trout said that was part of it, but the majority of it was related to the lowering of amortization costs from previous years' MMOs.
In truth, actuarial valuations are done every two years, based on what governs pension plans. The previous MMOs were based on the Jan. 1, 2021 valuation, while this current MMO is based on the Jan. 1, 2023 valuation, she said.
In reality, the city had some significant amortization or carrying costs, she noted. What happens is a fact of real life, as there can be gains and losses, so every valuation shows both a gain and loss.
"We carry amortization costs in a scheduling report over time," Trout said.
Most of it was associated with previous losses in the 2008-2009 recession period and they were carried over for a number of years. "Those have fallen away," she said.
That situation combined with the change in the RVT employees lowered the city cost, she noted.
"It's actually very good news," she said.
Meanwhile, the actuaries start looking at it later in this fiscal year and they are watching what happens in the markets, especially with the Federal Reserve Board dropping interest rates this past Wednesday by half a basis point and with the upcoming presidential election on Nov. 5, which have potential to change the markets.