Board Members Seek to Place Dallas Police and Fire Pension System in Receivership

Four members of the Dallas City Council, all of whom represent the city on the Dallas Police and Fire Pension Board, intervened in Dallas Mayor Mike Rawlings' ongoing lawsuit against the pension Wednesday afternoon. In their filing, the council members ask that the fund be placed in receivership as it attempts to remain solvent in the face of a $3.6 billion unfunded liability and multiple lawsuits.

"The System is a leaky bucket, with assets that have drained away through mismanagement and irresponsible payouts to members whose overall benefits were not matched to contributions, are not protected by the Constitution, and whose requests for immediate payments in staggering numbers have drained away precious assets," the board members write in their filing. "No responsible party would commit further assets until it is sure that the System is on sound financial footing with a plan for long term solvency. The Board must surrender control of the wellbeing of the members to this Court’s equitable and statutory powers to protect DPFP's trust beneficiaries’ service retirement, disability, and death benefits."

Wednesday's move by Philip Kingston, Scott Griggs, Erik Wilson and Jennifer Gates seemingly became inevitable when the City Council passed a resolution two weeks ago guaranteeing that the city would pay legal fees for the board members should they take an action like they did Wednesday.

The group moved, according to Kingston, because something must be done before the DPFP lifts the gate on payments from deferred retirement option program (DROP) accounts at the end of March. DROP allowed potential retirees to keep working while depositing their pension checks in savings accounts that guaranteed 8 to 10 percent interest. As fears about the fund's long-term health grew last summer, retirees withdrew $500 million from DROP accounts, leading the board to temporarily halt DROP withdrawals.

"What we're essentially trying to do is two things: Stabilize the system so that we can find a fix, and utilize the court to ensure that beneficiaries are treated equitably," Kingston says.

Kingston and his fellow council members argue that allowing any additional DROP withdrawals will immediately threaten the liquidity of the fund, along with base benefit payments to retirees who rely on their pension to cover their daily expenses.

Sam Friar, DPFP's chairman, accused the council members of legal bullying Wednesday afternoon.

"Here they go again. Rather than work collaboratively with state legislators and the pension board to find a long-term solution based on shared sacrifice, the mayor and city officials continue to push a confrontational litigation strategy to get their way," Friar said, blaming the mayor and council rhetoric on the pension for inspiring the run of DROP withdrawals.

Kelly Gottschalk, the fund's executive director, told the Observer last week that the plan DPFP is currently operating under already assumes that retirees with DROP accounts will take all of their money out of the fund.

Rawlings and now the council members' suit seek to stop DROP withdrawals in order to create more time to fix the system's underlying issues.

Gottschalk says the time, 10 years worth, is already there based on DPFP's current assets. "All the numbers that we're running with the 2028 insolvency date for the fund assume that everybody takes their money out between now and the first part of 2019," Gottschalk said. "That's based on selling liquid assets as they're available, not a fire sale."

The next hearing in the lawsuit, which will determine scheduling for the case moving forward, is set for 11:45 a.m. on Friday.