Tuesday, December 11, 2018

Mayoral Q&A: Pensions

Mayoral Q&A
Philadelphia voters will go to the polls to select the major-party candidates for mayor May 19. With that in mind, the Inquirer Editorial Board posed seven questions on the issues that will face the city’s next mayor. Responses from candidates — except for Milton Street, whose campaign did not respond to invitations to participate — will be published daily through Friday, with the final one next Sunday.
Pensions
Given the recent failure of the PGW sale, what measures are you prepared to take to help fund the pension plan?
Click on each candidate to see what they have to say.
Tap on each candidate to see what they have to say.
Lynne Abraham
Melissa Murray Bailey
Nelson Diaz
James Kenney
Doug Oliver
Anthony Williams
Lynne abraham
I was the first and only candidate to take on Council and the Council president for failing to hold hearings on the UIL proposal to acquire PGW.
“I was the first and only candidate to take on Council and the Council president for failing to hold hearings on the UIL proposal to acquire PGW. Not one Council member had the courage to move for a hearing. UIL was sent away without fair consideration and so, in the process, the city lost a potential investment of millions of dollars. It was an embarrassment.
As to the future of PGW, I would evaluate the pros and cons of a sale proposal — in the light of day — and make a judgment that serves taxpayers, consumers, and the folks relying on the continued viability of public pensions.
Overall, growth alone will not suffice in funding the pension plan. Given the challenges, there has to be a thorough analysis of the ongoing viability of our current pension plans. Everything needs to be on the table. An example of necessary reform: eliminating the wasteful requirement of mandatory bonuses in any fiscal year in which the city’s pension fund stock pickers outperform their investment objectives.
The sale of city assets, such as PGW and municipal parking facilities, should be pursued. Also, providing a hybrid model for pensions, such as a 401(k), should be considered for future employees.”
For more information, visit lynneabraham.com.
James kenney
Additionally, my administration will look at every dollar that comes above revenue projections, not as an opportunity to spend, but an opportunity to invest in our pension fund.
“The city’s current pension problems have been decades in the making, so it is going to take time, fiscal discipline, and collaboration to continue to dig out of this hole. That starts with negotiating a contract with our municipal unions that is fair both to the taxpayers and our city workers.
It is important to recognize that any changes in the pension dynamic need to be negotiated, not dictated or litigated in order for negotiations to be meaningful and successful. Given the broad and diverse coalition of labor support for my campaign, I believe I’m best positioned to make that happen.
Additionally, my administration will look at every dollar that comes above revenue projections, not as an opportunity to spend, but an opportunity to invest in our pension fund. We cannot expect a healthy pension fund simply by meeting our Minimum Municipal Obligation, the equivalent of a credit-card minimum. We must continue to responsibly overfund our actuarially required contributions when positive economic conditions provide us this flexibility.
Finally, I will convene an independent commission, made up of private-sector leaders, to take a fresh look at how the city manages and engages others to manage its pension fund. The commission will be tasked with evaluating the performance of current professional service providers and making recommendations on both the actuarial and funding aspects of the system. The commission will also evaluate the availability of financially responsible local investment opportunities so that our pension fund dollars can work for Philadelphia’s economy.
Lastly, we will make the pension-fund management system more transparent by requiring regular, timely public reporting to evaluate investment manager performance. We must ensure that those professional service firms we hire to manage our pension funds are doing so responsibly, effectively, and at the lowest cost to the city.”
For more information, visit www.kenney2015.com.
anthony williams
I will push to reduce excessive fees and the pension system’s use of high-risk investment strategies like hedge funds.
“Philadelphia currently spends more on pensions than it spends on the Police Department, and its pension obligations are only 48 percent funded. This places a significant and growing burden on our general fund, as every dollar the city spends on pensions is a dollar it does not spend on public education, filling potholes, or strengthening Licenses and Inspections.
It will take a dedicated revenue stream to accelerate improved funding levels. This will not be achieved through privatization, but rather by unlocking the value of city-owned assets like PGW and the airport through public-private partnerships and joint ventures. I welcome City Council’s engagement in this area, and will work closely with Council and its Special Committee on Energy Opportunities to consider approaches that relieve our pension obligations while pursuing solutions to our broader economic development challenges.
The city can also improve its returns. The Pension Board should be focused on mitigating risk and securing strong returns, not paying exorbitant fees to Wall Street money managers. I will push to reduce excessive fees and the pension system’s use of high-risk investment strategies like hedge funds.
Finally, I also support legislation to require the Pension Board to increase diverse, emerging investment managers across all asset classes. The goal will be to increase relationships with emerging managers of color, as well as women and disabled investment manager participation in the Philadelphia pension system. Research shows that these managers achieve better long-term returns than more established institutions.
As mayor, I will commit to strong pension funding practices, find a dedicated revenue stream to accelerate a path to solvency without raising taxes, end exorbitant fees to Wall Street money managers, and improve long-term returns with diversified fund managers.”
For more information, visit www.anthonyhwilliams.com.
doug oliver
“I am not in favor of privatizing city services and taking jobs away from Philadelphians. I do believe, however, that there are certain situations that necessitate the privatization of city assets.
By way of example, I was a supporter of the sale of PGW as a means to hasten investment in PGW’s infrastructure, provide relief for the pension fund, and establish Philadelphia as an energy hub. At this juncture, we need to consider all available options for funding the pension plan.”
For more information, visit dougoliver2015.com.
nelson diaz
I believe my experience as a member of the board of directors at Exelon has made me uniquely well-suited among the mayoral candidates to address our pension funding problems.
“I believe my experience as a member of the board of directors at Exelon has made me uniquely well-suited among the mayoral candidates to address our pension funding problems.
At Exelon, we also had a pension fund that was significantly underfunded. Our $11 billion fund only had 65 percent of the funding it needed, better than Philadelphia’s 47 percent but still far from ideal. I led our efforts to put the fund on firmer financial footing by hiring our first chief investment officer and appointing an advisory oversight board. We brought in a new class of asset managers, including a significant number of women and minorities across the fund, and in a few short years managed to increase our funding ratio to 85 percent without significant capital infusions.
When I look at the city’s pension fund, I see a system that has consistently missed its growth target and has trailed the performance of the stock market. Over the last decade, including the stock market crash of 2008, the pension fund’s return has run 2.3 percent below the market. It’s disturbing to think that, had we simply purchased index funds and never looked at our investments again, we’d have a better-funded system today.
There is no iron law of investing that requires us to get below-market returns. We must do a better job of fund management to ensure the long-term fiscal health of Philadelphia. I believe that by implementing reforms similar to those I helped manage at Exelon, I can solve a third of our funding gap. For perspective, that’s a similar impact to selling off the airport.
Once the problem has been cut down to size, we’ll buy ourselves enough breathing room to find a measured solution to the remainder of the gap without being stuck in a constant crisis.”
For more information, visit NelsonDiazforMayor.com.
melissa murray bailey
As mayor, I would focus on asset sales and leases to increase the funded level of the pension fund.
The pension fund is the greatest financial puzzle that the city has to solve. To quote from the proposed Five Year Plan:“
“Pension payments in FY16 are projected to total $611.7 million compared with $576.1 million in FY15. While the city’s annual pension contribution has grown by more than 160 percent since FY04, the pension fund’s funded percent has dropped from over 60 percent to under 50 percent.”
Yet, as soon as the next quarter, the pension system will give an extra $62.4 million to retirees (bonus money that the retirees aren’t expecting), enough to pay the starting salaries of almost 1,400 teachers or enough to heat and light schools.
Everyone who is in the pension system needs to understand that under current course and speed, the pension fund will run out. There will not be enough money to make future pension payments unless we act now.
There are two components that need to be addressed. The first is how to get the health of the fund fixed and the second is how to make sure this underfunding doesn’t happen again.
As mayor, I would focus on asset sales and leases to increase the funded level of the pension fund. This would include revisiting the sale of PGW. It would include looking at leasing the airport. I would consider the sale of any city-owned land that doesn’t have an immediate use; as well as the feasibility of selling off land around the stadiums for development. The added bonus of the last two ideas is that they would also generate additional property tax revenue.
To help prevent future underfunding, I would have all new hires go into a hybrid pension plan. This way, the city would have to pay its retirement obligations every pay check. It guarantees the money is there for the employee, as well as making it easier to track the true cost of the workforce.”
For more information, visit www.mmb2015.com.