City Hall

Dallas Mayor Mike Rawlings Pulls Out of Lawsuit Against Pension Fund

On Tuesday afternoon Dallas Mayor Mike Rawlings filed a notice of nonsuit in his lawsuit against the Dallas Police and Fire Pension Fund. That means that the mayor, who’d sued the fund as a private citizen in order to stop to fund from making payments he believes could bankrupt the city, is out.

He’s no longer pursuing the lawsuit himself, because the fund and its attorneys have backed him into a procedural corner, he said in a statement:

Last week, the Pension System requested a hearing to attack Mr. Rawlings’ ability to seek injunctive relief in this case. Mr. Rawlings won the hearing, but the Pension System immediately appealed. A procedural device allowed the Pension System to appeal the trial court ruling and to stay the case against Mr. Rawlings and the council members. That action meant that the trial court had no ability to issue an injunction or otherwise stop the Pension System if it attempted to pay out huge sums under the DROP program.

Because DPFP Director Kelly Gottschalk has signaled her intention to recommend between $100 and $280 million in additional withdrawals from deferred retirement option program (DROP) accounts held by Dallas police and fire pensioners. DROP accounts are at the center of the city and fund’s ongoing crisis. The accounts allowed police and firefighters who reached pension eligibility to continue working while depositing their earned pension checks in DROP accounts that guaranteed interest rates of between 8 and 10 percent. As reports have swirled, thanks to the mayor and others, that the fund, and a trio of decades-old police-pay lawsuits could bankrupt the city, pensioners began a run on the DROP bank, withdrawing around $500 million from their accounts in 2016 alone.

The mayor filed his suit in order to stop the withdrawals. So far, he’s had mixed results, stemming the tide of big withdrawals as the fund has successfully paid out smaller, fixed withdrawals to retirees.

Now, with the fund’s board set to vote on allowing more withdrawals on March 9, Rawlings is getting out of the way so that the suit against the fund can be led by the four Dallas City Council members who serve on the DPFP board, because he thinks they have better legal standing to challenge any potential move to allow withdrawals. The City Council voted earlier this month to pay the legal bills for any legal action the board members take against the fund.

“The most expeditious way for the trial court to gain oversight of this matter again, and to put it in a position of being able to grant injunctive relief, was for Mr. Rawlings to immediately withdraw from the lawsuit, procedurally ending the appeal and the stay. That is why Mr. Rawlings has taken that action today,” Mayad writes.

In an interview with the Observer earlier this month, Gottschalk said that she believes that DPFP’s liquid assets can be sold off responsibly to pay off expected DROP withdrawals. Dallas City Council member Philip Kingston, who sits on the fund’s board, has argued that continued DROP withdrawals could quickly threaten the system’s overall liquidity and the monthly payments due to all DPFP retirees.

“What we’re essentially trying to do [with the suit] 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 said earlier this month.
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Stephen Young has written about Dallas news for the Observer since 2014. He's a Dallas native and a graduate of the University of North Texas.
Contact: Stephen Young