Tension Fund

Concerns about the soundness of the city's retirement fund are buried in a political mud fight

The council opted to replace Rice with one of its own: councilman Bob Stimson. A certified public accountant, Stimson wasted no time in getting to business.

At a January 31 trustees meeting, Stimson asked that the cost-of-living adjustments for retirees be limited to 3 percent, down from 5 percent. The board unanimously passed Stimson's measure, an acquiescence that Larry Duncan sees as an illustration that city employees are the ones losing out in the battle between Ware and Stalnaker.

On January 30, Siegel faxed a message to Suhm proposing a compromise to end the fight, which had been dragging on for eight months. Siegel suggested that the city agree to reduce the projected rate of return to 8.9 percent if the pension trustees would agree to reduce the cost-of-living adjustments allowed to beneficiaries.

So much for the science and precision of actuarial advice.

With momentum on his side in Dallas, Ware still had the pension review board in Austin to contend with. For months, Ware would not even give the panel the report he had commissioned from Siegel.

In addition to Siegel, Ware had retained John Peavy, a professor at Southern Methodist University, as a financial advisor, and a second actuarial firm, Alexander & Alexander Consulting Group, Inc. The Dallas firm had been the losing bidder when the pension trustees originally hired Towers Perrin for the review that started the whole political fracas. In January, Ware assigned a $50,000 contract (later enriched by $35,000) to Alexander & Alexander. The firm's mission: review--and ultimately corroborate--Siegel's findings.

In February, Ware had the consultant reports he wanted, but refused to turn them over to the review board in Austin. Instead, Ware had Sam Lindsay, the city's top lawyer, tell the Austin panel that the reports were not public records because the city was still contemplating its lawsuit against the fund's previous actuaries.

But the trustees' lawyers at Jenkins & Gilchrist put the kibash on that line of reasoning. Jenkins & Gilchrist wrote to the review board saying that its client--the fund--had no problem with the city releasing the reports.

The ensuing correspondence between Lindsay and the trustees' outside counsel showed the bitterness of the whole affair. "I wish you had bothered to share this change in your legal strategy with me at an earlier juncture than this," Lindsay wrote to Jenkins & Gilchrist lawyer Rodney Acker. "The city's credibility has been unnecessarily damaged, and an apology from you is appropriate."

But Jenkins & Gilchrist's Acker offered none. He and his partner, Riva Johnson, had been asking Ware for the reports themselves. "Your letter is a classic," Acker wrote to Lindsay. "The best defense is a good offense."

In a reply letter, Lindsay called Jenkins & Gilchrist's actions on behalf of the pension trustees "despicable...downright false and defamatory."

On February 20, all the players in the Dallas fight--or their representatives--flew to Austin to make their presentations to the review board. The city still had not turned over the reports Ware commissioned, and would not do so until March. But the advisors--Siegel, Peavy, and Alexander & Alexander--went to Austin on the city's behalf. The pension trustees had their actuarial firms present as well. Both sides testified, but the board issued no conclusions after hearing their arguments.

"Overall, the meeting reminded me of stockpiling actuaries like hydrogen bombs during the post-war period," Siegel told Assistant City Manager Suhm in a note sent after the meeting. "More than enough to kill every living thing on earth 10,000 times...I think you are going to have to solve this in Dallas. You have enough input from the experts. Now the political process has to work."

The problem, indeed, ultimately must be worked out in Dallas instead of Austin. The state review board is scheduled to hear more about the Dallas fight on April 10. But both the city manager's office and Stalnaker have expressed a willingness to postpone that hearing if a settlement can be worked out.

The trustees are still negotiating with their previous actuarial firm, trying to reach a settlement without the expense of a lawsuit. A mediation session is scheduled for April 15. Stalnaker says Ware hasn't helped the trustees' position any by running around saying the fund has no problems.

At their next meeting on April 8, the trustees also plan to review the decision to project an 8.25 percent rate of return, and might decide to move that number up. If so, Ware will have effectively won much of what he wanted, and the city's bond ratings will remain untainted. Only time--and the future benefit checks of city pensioners--will tell if Ware was right.

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